 In this presentation, we will take a look at some of the differences within the balance sheet for a manufacturer, a company that produces inventory compared to a company that just purchases and sells inventory or a service company. And clearly, the difference is going to be related to inventory. So the major difference support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources, such as Excel practice problems, PDF files, and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it for a manufacturer's balance sheet to a service company, for example, would be that we're going to have inventory on the balance sheet. That inventory will be reported as an asset on the balance sheet, typically a current asset. Now when we go from a company that just purchases and sells inventory to a company that actually manufactures produces makes the inventory, then the inventory could be broken out to components, we're going to have raw materials inventory, we're going to have work in process inventory, we're going to have finished goods inventory. Now these may be grouped on the balance sheet in different ways within inventory be broken out into sub categories of raw materials, work in process or finished goods, or be consolidated in some way. But we're going to have to contend with these components of inventory, as we go through the production process, these are going to be balanced sheet accounts that we're going to have to track and work through as we track the inventory, you can imagine the physical flow of the inventory going through these inventory cycles. So if we make inventory, for example, we're going to have raw materials, if we make guitars, those raw materials would think be things like the wood for the guitar, the wood would then be transferred to the work in process, work in process is still inventory, but we can't sell it yet because it's in process. So this is the inventory that we're making, the wood has started to be converted to a guitar, but it's not there yet, it still has value, it's still inventory. But of course, these two components of inventory are things that we cannot yet sell. Within work in process, you can also imagine not just the raw materials as we see here, but we're going to include other things in that work in process, which is going to include the direct labor and the overhead. So as you think of these three components of inventory, it's often easy to start to think, well, the raw material went here, and then it changed to work in process, and then we finished it, and it went to finished goods. As we go through that process, we're going to emphasize the fact that it's not just the raw materials that are being here in work in process, it's going to include the direct labor and the overhead within that process. And then that's going to be converted to the finished goods. So once we're done, then we can sell the guitar, it's ready to be sold, we can put it on the market here, it'll be within finished goods that we can then sell. After it's sold then, of course, it can move to cost of goods sold on the income statement, as we would for a normal type of company, a merchandising company that would just purchase and sell goods. So once it's in the finished goods state, then we're in a similar state as we would be for a merchandiser ready to sell that. The next step, of course, would be that sale. The next step would be us recording the expense in the form of cost of goods sold.