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.

Real-world examples across industries

Manufacturing

A furniture maker buys £6,000 of timber into 1004 (Raw Materials), then issues £2,500 of it to the workshop floor for a batch of chairs mid-assembly — a debit of £2,500 to 1002 (Work in Progress) and a credit of £2,500 to 1004, moving the value from one stage to the next without touching the P&L or involving VAT, since it's simply an internal stock revaluation. Once £1,800 worth of that batch is complete, boxed and ready to sell, it moves again: debit £1,800 to 1003 (Finished Goods), credit £1,800 to 1002. At month end that leaves £3,500 of unused timber, £700 of part-built chairs and £1,800 of finished stock — three separate figures giving a far clearer picture than one lumped stock total.

Retail and wholesale

A homeware wholesaler buys £9,000 of finished stock from its overseas manufacturer, ready to sell on unchanged — no raw materials, no work in progress, no production process to speak of. The whole delivery goes straight into 1001 (Stock): a debit of £9,000 to 1001 and a credit of £9,000 to 2100 (Creditors Control Account). Codes 1002-1004 sit unused in a business like this, since there's nothing partly made to track — everything bought in already arrives in its final saleable form.

Construction

A building contractor rarely holds a meaningful raw materials balance at all, since site materials are usually bought for one job and expensed straight to cost of sales within days rather than sitting on the balance sheet as stock. What it does carry is work in progress: the cost of work carried out on site but not yet certified or invoiced. A contractor with £18,400 of labour, subcontractor and material cost incurred on an unfinished phase of a job at month end holds that value in 1002 (Work in Progress) rather than 1004, assessed against a quantity surveyor's certificate rather than a physical stock count — and it stays there until the work is certified and can be invoiced to the client.

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.