Stock, WIP, Finished Goods & Raw Materials: Codes 1001-1004

A business that makes things rather than just resells them usually needs more than one stock code, because material sitting in a warehouse, a part-built product on the factory floor, and a finished item ready to ship are all worth different things and at different stages of risk.

The four codes, and what each one holds

Code 1001 — Stock is the general stock holding account, used where a business doesn't need to split stock further by production stage — typically a simple resale business buying finished goods and selling them on unchanged.

Code 1004 — Raw Materials records materials bought in but not yet used in production — the earliest stage of the stock cycle.

Code 1002 — Work in Progress records partly-completed goods — materials that have entered production but aren't yet finished or saleable.

Code 1003 — Finished Goods records completed items ready for sale, the final stage before a sale moves the value out of stock entirely. All four are Current Assets codes and normally carry a debit balance.

A worked example

Say a small furniture maker buys £5,000 of timber, and by the month end has used £2,000 of it on chairs still being assembled, with £1,500 worth of chairs fully built and boxed ready to sell.

Raw Materials (code 1004): £3,000 remaining — the £5,000 bought, less the £2,000 moved into production.

Work in Progress (code 1002): £2,000 — materials and labour tied up in the unfinished chairs.

Finished Goods (code 1003): £1,500 — the value of completed chairs not yet sold.

Why this matters day to day

Splitting stock this way gives a much clearer picture of where money is tied up — a pile of raw materials is far more liquid than an unfinished, unsaleable work-in-progress batch, even though both show up as assets. Getting the split wrong, or leaving everything sitting in one general stock code, makes it harder to spot a production bottleneck or an inflated stock valuation at year end.