Week 3 – DQ2 - Job Order and Process Costing - ACC206 - Principles of Accounting II Tutorial - AUJob Order and Process Costing. Manufacturers use three inventory accounts. Name each one and explain what costs each contain.The manufacturer creates a product from raw materials by adding direct labor and manufacturing overhead. Because at any point in time products are at various stages of completion, manufacturers have three inventory accounts: Raw materials, Work in process, and Finished goods. Raw materials inventory account - Raw material purchases are recorded in the raw material inventory account if the perpetual inventory method is used, or the raw materials purchases account if the periodic inventory method is used. For example, using the periodic inventory method, the purchase of $750 of raw materials onaccount is recorded as an increase (debit) to raw materials purchases and an increase (credit) to accounts payable. Work in progress inventory account - That part of a manufacturer's inventory that is in the production process and has not yet been completed and transferred to the finished goods inventory. This account contains the cost of the direct material, direct labor, and factory overhead placed into the products on the factory floor. A manufacturer must disclose in its financial statements the cost of its work-in-process as well as the cost of finished goods and materials on hand. Finished goods inventory account - represents a current asset in the balance sheet. The income statement shows both beginning finished goods and ending finished goods only if cost of goods sold is calculated. When goods that were in process are completed, the entry is to debit finished goods and credit work-in process. When merchandise is sold, the entry is to debit cost of goods sold and credit finished goods. The difference between the sales and cost of goods sold is the gross