Questions & Answers (Q&A)

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Harold Averkamp, CPA, MBA

All 1047 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 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 is the difference between FIFO and LIFO?

The difference between FIFO and LIFO results from the order in which changing unit costs are removed from inventory and become the cost of goods sold. When the unit costs have increased, LIFO will result in a larger cost of goods sold… Read More.

What is the difference between adjusting entries and correcting entries?

Generally, adjusting entries are required every accounting period so that a company's financial statements reflect the accrual method of accounting. It is typical for the adjusting entries to be dated as of the last day of the accounting period and to include… 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.

What is the difference between inventory and the cost of goods sold?

Inventory for a retailer or distributor is the merchandise that was purchased and has not yet been sold to customers. For a manufacturer, inventory consists of raw materials, packaging materials, work-in-process, and the finished goods that are owned and on hand. Inventory… Read More.

What is the difference between the current ratio and the quick ratio?

The current ratio is the proportion (or quotient or fraction) of the amount of current assets divided by the amount of current liabilities. The quick ratio (or the acid test ratio) is the proportion of 1) only the most liquid current assets… Read More.