This is the third month, I am reading and reviewing the accounting questions whose answered was given by Respected Harold Averkamp, CPA, MBA during June 2010. Read also quick review of questions answered during May 2010 at here.
What is a deferred asset?
Ans. Professor explained that deferred asset means the deferred expenditures whose payment will be given in near future. So, we will not show it in profit and loss account as expenses but we show this cost in balance sheet. One of the example is Bond issue cost which is not paid by company.
What are byproducts?
Ans. Byproduct which is also known as by product, is the product whose value can be appeared from main product. At the point where we can separate main product from its byproduct, will be the split off point. When we do its accounting treatment, we can add cost after split off point in main product's cost and also show its sale revenue in general revenue of goods.
What is a/c?
Ans. A/c is short form of account which is generally used in accounting when we transfer journal entries in ledger.
Why doesn't the balance sheet equal the post-closing trial balance?
Ans. Prof. Harold AverKamp narrated that the main reason of this is depreciation. Trial balance shows accumulated depreciation in credit side and all assets are shown in debit side without deducting depreciation. So, post closing trial balance total will be shown more than what is being shown by balance sheet because balance sheet deducts the amount of depreciation from total value of particular fixed asset.
I think, there are many other reasons like adjustments of provision for doubtful debts and many others also effect on balance sheet. So, it does not match the post-closing trial balance.5th Question
What are conversion costs?
Ans. Direct labor costs + manufacturing overhead costs