Before goods are sold, their costs are accumulated in which inventory account?

Before goods are sold, their costs are accumulated in which inventory account?

• A. Finished Goods Inventory
• B. Raw Materials Inventory
• C. Wages Payable
• D. Selling Expenses

Answer: (A)

In manufacturing, costs flow through different inventory accounts as items move from input to completion. Raw materials inventory holds the basic inputs not yet used, work-in-process tracks items in production, and finished goods inventory holds completed items that are ready for sale but not yet sold. The phrase “before goods are sold” points to this stage where production is complete but the sale hasn’t occurred yet, so the costs are carried in finished goods inventory. When a sale happens, those costs move to cost of goods sold. The other options don’t fit: raw materials are before production, work-in-process is for items still being made, and wages payable and selling expenses are not inventories.

In manufacturing, costs flow through different inventory accounts as items move from input to completion. Raw materials inventory holds the basic inputs not yet used, work-in-process tracks items in production, and finished goods inventory holds completed items that are ready for sale but not yet sold. The phrase “before goods are sold” points to this stage where production is complete but the sale hasn’t occurred yet, so the costs are carried in finished goods inventory. When a sale happens, those costs move to cost of goods sold. The other options don’t fit: raw materials are before production, work-in-process is for items still being made, and wages payable and selling expenses are not inventories.