Final answer:
Merchandising companies often have a single inventory category for resale goods, while manufacturing companies maintain multiple accounts reflecting raw materials, work-in-progress, and finished goods to manage production and optimize costs.
Step-by-step explanation:
Yes, both merchandising companies and manufacturing companies typically maintain multiple inventory accounts, although the specific types and number of accounts can vary depending on the complexity of the company's operations. Merchandising companies, like bookstores or Amazon, generally have a single category for inventory since they are reselling goods they purchase. Their inventory consists of the finished products ready for sale to customers.
In contrast, manufacturing companies require more detailed inventory accounting due to the nature of their operations, which involve multiple stages of production. They often have separate accounts for raw materials, work-in-progress (WIP), and finished goods. Raw materials inventory contains costs for materials that have not yet been used in production. Work-in-progress accounts for goods that are in the process of being manufactured but are not yet complete. Finally, the finished goods inventory reflects the cost of completed products available for sale.
The distinction between these accounts is crucial for accurately reporting the financial position of the company and for the management of production and sales operations. Monitoring the levels of each type of inventory helps in understanding the production flow, managing costs, and optimizing the supply chain.