 Hello in this lecture we will define finished goods inventory. According to fundamental accounting principles Wild 22nd edition the definition of finished goods inventory is account that controls the finished goods files which act as a subsidiary ledger of the inventory account in which costs of finished goods that are ready for sale are recorded. Support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems PDF files and more like QuickBooks backup files when applicable. So once again click the link below for a free month membership to our website and all the content on it. When we are considering that the finished goods inventory we are typically thinking about a manufacturing company because if we were thinking about a company that just purchases and sells inventory then we would just have one account called inventory. If we manufacture the inventory then we may still only have one account on the balance sheet called inventory. However we are probably going to track multiple accounts on the trial balance related to inventory as that inventory moves through the process of the production of that inventory meaning we could have in our trial balance a raw materials inventory the work in process the finished goods the factory overhead once the inventory has been completed that is when it will be in the finished goods account that is when it's being ready for sale that's when it's closest to what it would be for a company that just purchases and sells inventory meaning that if we sold the inventory we would reduce the finished goods just as we would for a company that purchases and sells inventory and record the related expense of cost of goods sold therefore in a manufacturing process we're still going to have a general ledger backing up all the inventory accounts for example we have the raw materials general ledger showing activity by date that will back up the raw materials on the trial balance we have the work in process once that inventory is in process of work here's the general ledger here's the trial balance then it's going to move to the and we also have factory overhead those items we couldn't apply directly to the job being backed up here those accounts will ultimately finish in the finished goods moving to the finished goods as the items are completed so here's our finished goods account in the general ledger here it is on the trial balance once these goods are then sold from the finished goods items they would move from finished goods to the cost of goods sold and of course we would record the related sales the related revenue and the related cash or accounts receivable at the time of sale