How to Record the Transfer of Semi-Finished Goods Between Two Company Factories
Moving work-in-process inventory from Factory A (Assembly) to Factory B (Finishing) for the next stage of manufacturing.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| WIP: Factory B (Finishing) | Asset (+) | 5,000.00 | - |
| WIP: Factory A (Assembly) | Asset (-) | - | 5,000.00 |
💡 Accountant's Note
This tracks the physical location of value within the company's internal supply chain.
Practitioner & Systems Framework
💻 ERP Architecture
Inter-plant WIP transfers are internal movements within the same legal entity — no revenue or profit is recognized. The transfer is at cost (the accumulated WIP cost at Factory A). Maintain separate WIP accounts by factory or cost center to track the production value in each location. For group consolidation purposes, if the factories are in separate legal entities, the transfer creates an intercompany receivable/payable (and any intercompany profit on the transfer must be eliminated on consolidation — see manufacturing-intercompany-profit-elimination). Use a transfer document (internal delivery order or production transfer form) to authorize and record the transfer.
⚠️ Audit Flags
Auditors confirm that inter-plant transfers are at cost (not a marked-up transfer price, which would create intercompany profit). If the two factories are separate legal entities, the intercompany profit must be eliminated in consolidation. The transfer documentation must evidence the physical movement of goods — transfers recorded without physical movement inflate inventory at the destination while failing to reduce it at the source.
📄 Required Documentation
Internal production transfer order (approved by both plants), WIP quantity and cost at Factory A before transfer, Factory B WIP receipt confirmation, WIP account debit (Factory B) and credit (Factory A), transfer pricing documentation (if separate legal entities), physical goods movement record, and intercompany profit elimination entry (for group consolidation).
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.