Inventory consumed at a subcontractor is accounted for in the same way as production within a manufacturer,
When inventory is issued and received, financial postings occur within an External WIP account, thus providing visibility of the production value at the subcontractor.
As per SAP Business One rules, accounts can be set at Warehouse, Item Group, and Item level or by using Advanced G/L Account Determination,
At the appropriate level (implementation decision) for the WIP Inventory and Inventory Variance Account, set the account codes for External WIP and WIP Variance.
Expense Account has to be set up for Service Items.