When a manufacturing company purchases raw materials or component parts to be used in manufacturing finished goods,these costs are initially debited to:

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Raw Materials Inventory is the account used to record the cost of raw materials or component parts when they are purchased and before they are used in manufacturing finished goods. This allows for accurate tracking of the cost of goods sold and the raw materials used in production. Once the raw materials are used in production, their cost is transferred to Work in Progress (WIP) inventory.

When a Manufacturing Company Purchases Raw Materials or Component Parts