Raw materials inventory
In one sentenceMaterials the factory bought to use in production that have not yet been issued to it, such as flour in a bakery or steel in a metal workshop.
Simply put
A raw material stays in this inventory until it is issued to production with an issue note, and its cost then moves to work in progress.
Monitoring it matters, because a shortage of one material can stop the whole production line.
Worked example
A bakery started the month with raw materials worth 30,000 SAR, bought 200,000 SAR, and had 40,000 SAR left at month end.
Opening materials30,000 SAR
+ Purchases200,000 SAR
− Closing materials40,000 SAR
Materials used in production30,000 + 200,000 − 40,000 = 190,000 SAR
Formula: Opening + purchases − closing
Don't confuse it with
Finished goods inventoryRaw materials are the inputs of production, while finished goods are its outputs ready for sale.