Information about Raw Material

Raw Material is Raw Material and material. Raw Materials generally refer to products from mining and agriculture, forestry, animal husbandry, and fishery; materials generally refer to Raw Materials that have undergone some processing. Raw Material refers to various Raw Materials and main materials, auxiliary materials, fuels, spare parts for repairs, packaging materials, purchased semi-finished products, etc. Raw Material is an important part of the inventory of an enterprise. It has many varieties and specifications. To strengthen the management and accounting of Raw Materials, it needs to be scientifically classified.

Here is the content list:

• Raw Material Accounting

• Direct vs Indirect Raw Material

Raw Material Accounting

Manufacturing companies take special measures to calculate Raw Material inventories. This includes three different inventory classifications on the balance sheet, rather than just one for non-manufacturers. The current assets section of the balance sheet refers to assets that are likely to be used up within one year, including Raw Material inventory, work in progress, and finished goods. All inventories, including Raw Material inventories, are stated at their combined cost. This means that its value includes transportation, storage, and preparation. A typical journal entry for an initial purchase of Raw Material inventory in an accrual accounting system includes a cash credit and an inventory debit. Debiting inventory increases current assets, and crediting cash decreases cash assets by the amount of inventory. When a company uses Raw Material inventory in production, it transfers it from Raw Material inventory to WIP inventory. When a company completes its work-in-progress item, it adds finished goods to the finished goods inventory, making it ready for sale.

Direct vs Indirect Raw Material

In some cases, Raw Material can be divided into direct and indirect. Whether Raw Material is direct or indirect will affect where it is reported on the balance sheet and how it is spent on the income statement. Direct Raw Material is a material that a company uses directly to manufacture finished products. Immediate Raw Material is placed in current assets and is charged to the cost of goods sold on the income statement. Manufacturing companies must also do more with non-manufacturing companies to create more detailed cost of sales expense reports. Direct Raw Material is often considered a variable cost because the quantity used depends on the quantity produced. Indirect Raw Materials are not part of the final product but are integrated into the production process. Indirect Raw Material will be recorded as a long-term asset. They can fall into several categories of long-term assets, including sales, general and management, or property, plant, and equipment. Long-term assets typically follow a depreciation schedule, allowing them to be paid out over time to match the income they help generate. For indirect Raw Materials, the depreciation period will generally be shorter than for other long-term assets.

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