When products are completed, which account is decreased?

When products are completed, the Work In Process account is decreased. This account represents the costs associated with products that are still in the production phase, including direct materials, direct labor, and manufacturing overhead. As products move from the Work In Process stage to being completed, these costs are transferred out of Work In Process and into the Finished Goods account, which records the costs of products that are completed and available for sale.

The decrease in the Work In Process account reflects the movement of these costs to the Finished Goods account and signifies that the production process is complete for those items, making them ready for sale. This transfer is a fundamental aspect of the cost accounting cycle, demonstrating how costs flow through the different stages of production.

Understanding this process is crucial for tracking inventory and managing costs effectively within a business, which is a key focus in managerial accounting.