The inventory ledger

An inventory ledger is a document or computer record that tracks inventory transactions. The total of all transactions listed in this ledger should match the total for the corresponding account in the general ledger.  There are several variations on this ledger concept, which are:

  • Perpetual inventory ledger. This ledger incorporates every change to an inventory item, so the recorded inventory balance should always match the cost and/or quantity on hand. This ledger maintains a beginning balance, against which are netted all receipts and uses of inventory. This type of ledger is typically maintained at the individual unit level, especially when only tracking inventory quantities. It may also be maintained at an aggregate level, usually when tracking the entire cost of a company's total inventory asset. This approach works best in an environment where there is a considerable investment in inventory, and the inventory turns over regularly.
  • Periodic inventory ledger. This ledger is periodically updated by purchases of the inventory asset and by physical counts. Since physical counts are relatively uncommon, the accuracy of this ledger will lag behind that of the actual unit counts and valuation of the inventory. This approach works best in an environment where there is little inventory turnover and only a small investment in inventory.
  • Cost-based inventory ledger. This ledger compiles the costs of inventory items, and so uses as inputs the prices paid to suppliers and other costs incurred to acquire and/or transform inventory. This ledger can be used in either the perpetual or periodic inventory formats.
  • Unit-based inventory ledger. This ledger compiles the unit counts of inventory items, and so uses as inputs received quantities, units scrapped, units transferred to production, units shipped, and so forth. This ledger is most likely to be used in a perpetual inventory format.

Depending upon the type of usage, an inventory ledger can be considered a subsidiary ledger of the general ledger. However, if only unit counts are being tracked, this ledger has no association with the general ledger; instead, it is more likely to be linked to a warehouse management system that monitors on-hand and incoming unit counts.

Similar Terms

A concept similar to the inventory ledger is the stores ledger, which is used to track raw materials and production supplies.

Related Courses

Accounting for Inventory 
How to Audit Inventory