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Example of a Bookkeeping Entry for Inventory Transactions

Inventory Transactions


If your business produces products instead of services, you have to deal with inventory in your bookkeeping. The first type of inventory to produce a product is raw materials inventory -- the materials you use to manufacture your product.

After the inventory leaves the raw materials phase, it is transferred to work in process inventory. That is the second entry in the table.

The last phase of product production is finished goods. The last entry in the table shows the journal entry when the inventory leaves work in process and moves to finished goods. All of these journal entries should be made in your Inventory Journals for all of your products that you manufacture.

Here is the scenario. You buy $100 in raw materials to manufacture your product. Here is the bookkeeping entries you should use as the inventory moves through the manufacturing process all the way to finished goods:

Journal Entries for Inventory - 9/20/2010

Raw Materials Inventory$100.00
Accounts Payable$100.00
Work in Process Inventory$100.00
Raw Material Inventory$100.00
Finished Goods Inventory$100.00
Work in Process Inventory$100.00
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