Questions & Answers (Q&A)

Harold Averkamp, CPA, MBA

All 1,070 questions have been answered personally by Harold Averkamp, CPA, MBA. Harold is the sole-author of all the instructional content found on
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Q&A Archive (1,070)

What is a general ledger?

A general ledger is a grouping of perhaps hundreds of accounts that are used to sort and store information from a company's business transactions. The general ledger is organized as follows: balance sheet accounts (assets, liabilities, equity), and income statement accounts (revenues,… Read More.

What are sales discounts?

Sales discounts (if offered by sellers) reduce the amounts owed to the sellers of products, when the buyers pay within the stated discount periods. To illustrate a sales discount let's assume that a manufacturer sells $900 of products and its credit terms… Read More.

What are turnover ratios?

In accounting, turnover ratios are the financial ratios in which an annual income statement amount is divided by the average balance of an asset (or group of assets) throughout the year. Turnover ratios include: accounts receivable turnover ratio inventory turnover ratio total… Read More.

What are sundry expenses?

In accounting and bookkeeping, sundry expenses are expenses that are small in amount and do not occur often. Since these items are not significant, a company might use one general ledger account with the title Sundry Expenses for recording the debit amounts.… Read More.

What is a predetermined overhead rate?

A predetermined overhead rate is often an annual rate for assigning or allocating indirect manufacturing costs to the goods it produces. Manufacturing overhead is allocated to products for various reasons including compliance with U.S. accounting principles and income tax regulations. A predetermined… Read More.

What are gross sales?

Gross sales are the amounts a company earned and recorded from the sales of its products (and perhaps its services). The amounts originate from the company's sales invoices but the total will be adjusted to the accrual basis at the end of… Read More.

Why do we charge depreciation?

We charge depreciation because most of the long-lived assets used in a business have 1) a significant cost, and 2) they will be useful only for a limited number of years. The matching principle (a basic underlying accounting principle) requires that the… Read More.

What are accounting ratios?

Accounting ratios (also known as financial ratios) are considered to be part of financial statement analysis. Accounting ratios usually relate one financial statement amount to another. For example, the inventory turnover ratio divides a company's cost of goods sold for a recent… Read More.

What are departmental overhead rates?

Departmental overhead rates are used by many manufacturers instead of using a single, plant-wide overhead rate. The reason for departmental overhead rates is that a manufacturer is likely to produce many diverse products which use different processes (each of which has different… Read More.

What are production costs?

In managerial accounting and cost accounting, production costs are the direct materials, direct labor, and manufacturing overhead used to manufacture products. The production costs are also referred to as manufacturing costs, product costs, a manufacturer's inventoriable costs, or the costs occurring in… Read More.