If same item is used in both R&D and production, do I need to create two separate items since they are for different expense accounts?

How do you plan to take them out of inventory? Do you use Departments of R&D and Production?

we have separate department. Ideally each department keeps track of their own inventory.

You don’t need separate expenses accounts for tracking inventory. Each Department could have their own Location which will allow stock counts and allocations. When inventory is expensed the IA would use the same expense account with Department entered on the transaction. Maybe?