Work in progress is the value of partially completed work or unbilled services a business has performed but not yet invoiced, recorded as an asset.
Work in progress represents effort already expended but not yet billed or completed, partially finished manufactured goods, or unbilled hours on a professional engagement. Under accrual accounting it is carried as an asset, reflecting value the business has created but not yet turned into a receivable.
WIP matters for accurate period profit: recognising the value of work done, and its associated costs, in the right period prevents distorting results. Professional firms (law, accounting, engineering) and contractors watch WIP closely, since a large unbilled WIP balance ties up cash and can mask collection risk.
An engineering firm has performed $40,000 of work on a project but not yet invoiced it at month-end. That $40,000 is recorded as work in progress, an asset, so the month's results reflect the value created.
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