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Harold Averkamp, CPA, MBA

All 964 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

What is an overdraft?

An overdraft usually refers to a checking account where the amount of checks presented to the bank for payment exceeds the amount on deposit. When this occurs we say that the checking account customer has overdrawn its account. The overdraft means that… Read More.

What is a noncurrent asset?

A noncurrent asset is an asset that is not likely to turn to unrestricted cash within one year of the balance sheet date. (This assumes that the company has an operating cycle of less than one year.) A noncurrent asset is also… Read More.

What is the materials usage variance?

The materials usage variance, which is also referred to as the materials quantity variance, is associated with a standard costing system. The materials usage variance results when a company uses more or less than the standard quantity of materials (input) that should… Read More.

What accounting entry is made when a company receives an order for its goods or services?

If money is not received with a customer's order, there will be no accounting entry when the order is received. (However, there could be an entry into the company's computer system for scheduling the work, planning for the materials to be on… Read More.

Why is inventory turnover important?

Inventory turnover is important because a company often has a significant amount of money tied up in its inventory. If the items in inventory do not get sold, the company's money will not become available to pay its employees, suppliers, lenders, etc.… Read More.

Why is income received in advance a liability?

Under the accrual method of accounting, income that is received in advance is a liability because the company that received the money has not yet earned it and it has an obligation (a liability) to deliver the related goods or services in… Read More.

Should a cash discount be recorded as a reduction to an expense?

Yes, a cash discount should be a reduction to an expense. After all, accountants define cost as the cash amount (or cash equivalent amount) at the time of the transaction. To illustrate, let's assume that your company receives marketing consulting services and… Read More.

Why do manufacturers use standard costs?

One reason for a manufacturer to use standard costs is to plan carefully what its costs will be for the upcoming budgeting year and to then compare the actual costs with those planned costs. If the actual costs are similar to the… Read More.

How do I determine the cost of missing inventory?

The approximate cost of missing inventory is the difference between 1) the cost of the inventory that is actually on hand, and 2) the cost of the inventory that should be on hand based on the company's records. If the company uses… Read More.

How can I learn bookkeeping at a low cost?

You can use the Internet to learn bookkeeping at a low cost. For example, you can read clear explanations of debits and credits, adjusting entries, financial statements, bank reconciliation, payroll accounting and more at no cost on You will also find… Read More.