Question

Question: In a job order costing system, what records serve as a subsidiary ledger for Work in Process Inventory? For Finished Goods Inventory?

Short answer

Answer

A subsidiary ledger account is a depositing account for direct material, direct labor, and applicable factory overhead during production. When a job is concluded, the job cost sheet is finished and moved from the file of ongoing jobs to the file of completed jobs awaiting delivery to consumers.

Step-by-step solution

Meaning of Work-in-Process

Work in progress refers to items that have been partially completed but are still in the manufacturing process. These objects are in-between locales or separate workstations and are primarily undergoing a certain procedure in the manufacturing cycle.

Explaining recording subsidiary ledger for Work in Process Inventory and Finished Goods Inventory

A subsidiary ledger account is assigned to each job. This account is the depositing account (which totals all increases and decreases) for applied factory overhead, direct material, and direct labor during production. A subsidiary ledger comprised of the job cost sheets for all active jobs is managed by the general ledger's Work in Process Inventory account.

When a project is done, the job cost sheet is finished, and the job is transferred from ongoing jobs to the file of completed jobs waiting to be delivered to clients. The Finished Goods Inventory account manages this latter file, which functions as a supplementary ledger. In this fashion, management and staff have access to the direct and indirect costs of any job or job lot at any moment.