what are raw materials 
raw materials are materials or substances used in the primary production or manufacturing of goods raw materials are commodities that are bought and sold on commodities exchanges worldwide businesses buy and sell raw materials in the factor market because raw materials are factors of production investopedia nez riazunderstanding raw materialsraw materials are used in a multitude of products and can take many different forms raw materials are the input goods or inventory that a company needs to manufacture its products for example the steel used to manufacture vehicles would be a raw material for an automobile manufacturer for manufacturing companies raw materials inventory requires detailed budgeting and a special framework for accounting on the balance sheet and income statement raw materials are often related to natural resources for this reason manufacturing companies may be at the disposal of mother nature regarding the availability to secure raw materials in the same light manufacturing companies may not want to directly invest in extracting the raw materials for example consider how a company that relies on oil or plastics often does not own the drilling rig that extracts the raw materials from the group examples of raw materials include steel oil corn grain gasoline lumber forest resources plastic natural gas coal and minerals accounting for raw materialsmanufacturing companies take special steps to account for raw materials inventory this includes three distinct inventory classifications on their balance sheet compared to just one for non manufacturers the current assets portion of the balance sheet represents the assets that are likely to be used up in less than one year and include all inventory including raw materials inventory should be valued at its comprehensive cost this means its value includes shipping storage and preparation the typical journal entries in an accrual accounting system for the initial purchases of raw materials inventory include a credit to cash and a debit to inventory debiting inventory increases current assets and crediting cash will reduce cash assets by the inventory amount 