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Harold Averkamp, CPA, MBA

All 993 questions have been answered personally by Harold Averkamp, CPA, MBA. Harold is the sole-author of all the instructional content found on AccountingCoach.com.
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Q&A Archive

What is a debit balance?

In accounting, a debit balance is the ending amount found on the left side of a general ledger account or subsidiary ledger account. A debit balance is normal and expected for the following accounts: Asset accounts such as Cash, Accounts Receivable, Inventory,… Read More.

What is a journal entry?

In manual accounting or bookkeeping systems, business transactions are first recorded in a journal...hence the term journal entry. A manual journal entry that is recorded in a company's general journal will consist of the following: the appropriate date the amount(s) and account(s)… Read More.

What is net income?

In business, net income is the positive result of 1) revenues and gains minus 2) expenses and losses. A negative result is referred to as net loss. (Please note that some gains and losses are not included in the calculation of net… Read More.

What is a fixed cost?

A fixed cost is one that does not change in total within a reasonable range of activity. For example, the rent for a production facility is a fixed cost if the rent will not change when there are reasonable changes in the… Read More.

What is bad debts expense?

Bad debts expense often refers to the loss that a company experiences because it sold goods or provided services and did not require immediate payment. The loss occurs when the customer does not pay the amount owed. In other words, bad debts… Read More.

What is interest payable?

Interest payable is the interest expense that has been incurred (has already occurred) but has not been paid as of the date of the balance sheet. (The interest payable amount does not include the interest for the periods of time which follow… Read More.

What is a liability account?

A liability account is a general ledger account in which a company records its debt, obligations, customer deposits and customer prepayments, certain deferred income taxes, etc. that are the result of a past transaction. Common liability accounts under the accrual method of… Read More.

What is working capital?

Working capital is the amount of a company's current assets minus the amount of its current liabilities. For example, if a company's balance sheet dated June 30 reports total current assets of $323,000 and total current liabilities of $310,000 the company's working… Read More.

What is a long-term asset?

A long-term asset is an asset that will not turn into cash or be consumed within one year of the date shown in the heading of the balance sheet. (If a company has an operating cycle that is longer than one year,… Read More.

What are balance sheet accounts?

Balance sheet accounts are one of two types of general ledger accounts. (Income statement accounts make up the other type.) Balance sheet accounts are used to sort and store transactions involving assets, liabilities, and owner's or stockholders' equity. Examples of a corporation's… Read More.