Dictionary / Factor Ledger
What does Factor Ledger mean in accounting?
Quick definition
Inventory & costingA subsidiary ledger containing such operating costs of a manufacturing establishment as materials, labor, and factory overhead. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
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Examples
Materials, labor, and plant power in one book
You run a small vinyl window plant. On March 3, a vinyl supplier bills $2,760 of extrusions, shop payroll that week is $1,490, and the utility bills $385 for the plant. You post the extrusions to materials, the wages to labor, and the power bill to factory overhead in the factor ledger, the subsidiary ledger of those shop operating costs; the general ledger only shows one controlling account total for factory cost. In QuickBooks Online, a Factory class or a group of shop cost accounts stands in for that book. Open the factor ledger and you should see all three classes, not a single P&L materials line.
A receivable buyer's list is not this ledger
You run a wholesale lighting distributor with no plant. On August 19 you sell $12,900 of customer invoices to a factor and title the list of those invoices factor ledger. That list tracks a receivable buyer; this term is the old factory cost subsidiary, and factor here means factory, not invoice factoring. You have no manufacturing materials, labor, or factory overhead to post, so you do not open a factor ledger. Keep the sold invoices on a due-from-factor receivable, and do not build a shop cost book for a warehouse that does not make product.
Why it matters
You only open a factor ledger if you manufacture and keep a subsidiary ledger of shop operating costs: materials, labor, and factory overhead. You post to it whenever those three classes hit the plant, and you reconcile it to the general ledger controlling account at month-end; a reseller or a service shop almost never needs one. Factor here is the old word for factory, not a company that buys your invoices. Treat this book as that receivable buyer's register and you will hunt for factored accounts receivable instead of shop cost; treat it as a cost ledger of job pages and you will look for one account per job instead of the three factory cost classes this subsidiary holds.
Keep learning
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What is Factor Ledger in bookkeeping?
A subsidiary ledger containing such operating costs of a manufacturing establishment as materials, labor, and factory overhead.
When should I use Factor Ledger?
Use Factor Ledger when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Factor Ledger?
Factor Ledger is used for factor ledger entries, while F.O.B covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.