What types of subsidiary ledgers are used in manufacturing companies (Part II)?

2. Inventory subsidiary ledger

Inventory subsidiary ledger provides information about inventory stock on hand. Inventory subsidiary ledgers may present information about raw materials, work in process, or finished goods such as part number, part description, part location, quantity on hand, unit cost, extended cost, and so on.

Most manufacturing companies have three types of inventory: raw materials, work in process, and finished goods. A fourth type – spare parts – is considered part of inventory, but normally does not become part of finished goods directly. Inventory subsidiary ledgers can be separately prepared for different inventory types, or a single inventory subsidiary ledger can include information about all inventory types. It is also important to note that some inventory types may have information specific to it only. For example, work in process and finished goods may include information about inventory overhead while raw materials will not have such information.

Inventory subsidiary ledgers should be reconciled to related general ledger accounts on a regular basis. This is especially true for inventory accounts because inventory is a significant account balance for a manufacturing company and there is a large volume of inventory transactions.

An example of inventory subsidiary ledger for raw materials is presented below (note that companies can have different information included in raw materials subsidiary ledger):

Part #

Part
Location

Quantity
On Hand

Unit Cost

Extended
Cost

29029-1A

AA121

20

20.39

407.80

29029-1A

AA122

189

12.98

2,453.22

291029

AB234

72

100.00

7,200.00

A29037

AC321

1

389.1

$389.10

…

…

…

…

…

       

290,102.87

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