Final answer:
In process costing, a separate work in process account is kept for each processing department or stage to track costs and production activities until the product moves to the next stage or finished goods inventory.
Step-by-step explanation:
In process costing, a separate work in process (WIP) account is maintained for each processing department or stage rather than for each individual job. This accounting method is typically used in industries where goods are produced in a continuous process, such as chemicals or textiles. The separate WIP accounts are necessary because each department may have different production activities, costs, and completion rates for the part-processed products.
In other words, products pass through various stages of production and each stage has its own WIP account. For instance, in the manufacture of paint, one department might mix the raw materials, another might fill the paint into cans, and a third might label and package the cans. Each of these departments would have its own WIP account, which tracks the costs of direct materials, labor, and overhead until the products are transferred to the next department or to finished goods inventory.