Table of contents

FIFO WIP Entry Method

Last modified 08:05, 24 Apr 2017
Table of contents

The FIFO (first in first out) method allocates amounts against the WIP entries incurred first, with the earliest entry at the head of the queue. This is illustrated in the table below where the invoice amount of $1,000 is allocated against the oldest entries until all of the $1,000 is allocated, with the remaining WIP entries being carried forward.

Date

Employee

Amount

Allocation

WIP Entry Balance

30-11-05

Tom

100.00

100.00

0.00

01-12-05

Dick

200.00

200.00

0.00

02-12-05

Harry

300.00

300.00

0.00

03-12-05

Tom

400.00

400.00

0.00

04-12-05

Dick

500.00

0.00

500.00

04-12-05

INVOICE 122

-1,000.00

 

 

Bill  

1,000.00

 

Write off

0.00

 

Closing WIP

500.00

 

Advantages

The major advantage of this method is that it is very clean and simple to manage your WIP. It will not lead to the situation outlined with the pro-rata method whereby the practice needs to clean out WIP entries with small values.

Disadvantages

The disadvantage of the FIFO method is that if the practice determines the invoice amount at the assignment level rather than the employee level, employee recoverability can be impacted. If employee recoverability is important, we would recommend billing at the employee level in which case the FIFO method will manage the WIP entries cleanly and simply while maintaining your reporting requirements.

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