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That's not how I would describe it, but yes.
Calibre itself doesn't really have the concept of collections. What you are doing is deciding what piece of metadata in the library that you are going to use to create a collection. This could be existing metadata such as tags or series name, or it could be custom column you create just for this purpose.
The collections column in the device view just shows what collections the books are in on the device. It does include some virtual collections that are defined by status of the books on the device. So, "Im_reading" is for books that have been opened but not finished. And "Finished" (or "Read", can't remember which is used) is for books that have been finished.
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