Questions & Answers (Q&A)

Harold Averkamp, CPA, MBA

All 1,051 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 (1,051)

What is the cash flow statement?

The cash flow statement is one of the main financial statements of a business or a nonprofit entity. (It is also known as the statement of cash flows.) The cash flow statement reports a company's major sources and uses of cash during… Read More.

What are debits and credits?

Debits and credits are terms used in accounting and bookkeeping (and have been used for centuries). They are a key part of the double entry system, which means that every business transaction will affect a minimum of two accounts. One of the… Read More.

What is the difference between periodic and perpetual inventory systems?

The difference between the periodic and perpetual inventory systems involves the general ledger account Inventory. In a periodic system the account Inventory will: have a constant balance (the ending balance from the previous period) not include the cost of purchases (they are… Read More.

What is the difference between a nominal account and a real account?

The difference between a nominal account and a real account has to do with the balances in the accounts at the end of the accounting year: The balance in a nominal account is closed at the end of the accounting year. As… Read More.

What is a fixed expense?

A fixed expense is an expense that will be the same total amount regardless of changes in the amount of sales, production, or some other activity. For example, a retailer's monthly rent expense of $2,000 is a fixed expense because it will… Read More.

What are nonmanufacturing overhead costs?

Nonmanufacturing overhead costs are the business expenses that are outside of a company's manufacturing operations. These are often referred to as the selling, general and administrative (SG&A) expenses plus the company's interest expense. Examples of the nonmanufacturing overhead costs include the salaries… Read More.

What are accounting principles?

Accounting principles are the common rules that must be followed when preparing financial statements that will be distributed to people outside of the company (or other organization). The accounting principles include the basic underlying guidelines and assumptions such as the cost principle,… Read More.

What is the difference between prime costs and conversion costs?

The difference between prime costs and conversion costs involves the three cost categories associated with manufacturing a product: direct materials direct labor and manufacturing overhead (also known as factory overhead, production overhead, burden, indirect product costs, etc.) Prime costs are the two… Read More.

What is a variable expense?

An expense is a variable expense when its total amount changes in proportion to the change in sales, production, or some other activity. To illustrate a variable expense, let's assume that a website business sells a product and requires that the customer… Read More.

What is the difference between break-even point and payback period?

Break-even point is the volume of sales or services that will result in no net income or net loss on a company's income statement. In other words, the break-even point focuses on the revenues needed to equal exactly all of the expenses… Read More.