A manufacturing business would hold the following stocks at the beginning and end of each financial year: raw materials, finished goods, and work-in-progress. An overview of how to account for these stocks is given below.
Accounted for when calculating the cost of raw materials used in the manufacturing statement.
These goods are ready for sale. They are accounted for in the trading account when calculating the cost of goods sold.
These are goods that have been partially processed. At the time of annual stocktaking, they are neither in the form of raw materials nor the finished product.
Work-in-progress is also known as work-in-process or partly-finished goods. The accounting treatment of this type of stock is explained in our article on work-in-progress.