Question

List the three inventory accounts used by manufacturing companies, and describe each.

Short answer

The three inventory accounts are the raw material inventory, work-in-process inventory, and finished goods inventory.

Step-by-step solution

Definition of Inventory

The inventory is defined as the goods which are ready to sell or the raw material which can be used for production.

Three inventory accounts

The three inventory accounts used by manufacturing companies are as follows:

Raw Material Inventory (RM): It includes all the materials which can be used to make a product.

Work-in-Process Inventory (WIP): It includes all the goods which are in the manufacturing process which are not yet completed.

Finished Goods Inventory (FG): It includes all the goods which are completed but not yet sold to the customers.