What is the difference between the standard cost of material specified and actual cost of material consumed?

The difference between the standard cost of direct materials specified for production and the actual cost of direct materials used in production is known as Direct Material Cost Variance. Material Cost Variance gives an idea of how much more or less cost has been incurred when compared with the standard cost. Thus, Variance Analysis is an important tool to keep a tab on the deviations from the standard set by a company.

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Material Cost Variance Formula
Material Cost Variance Formula
Material Price Variance
Material Price Variance Formula
Material Usage Variance
Material Usage Variance Formula
Frequently Asked Questions (FAQs)
Sample Standards Table
Direct Materials Purchased: Standard Cost and Price Variance
Examples of Standard Cost of Materials and Price Variance
January 2021
February 2021
January 2021
February 2021
January 2021
February 2021
What To Do With Variance Amounts

Material Cost Variance Formula

Formula for Material Cost Variance = Standard Cost – Actual Cost

Material Cost Variance can be due to less purchase price being paid than the standard or because of a change in the quantity of material used. Thus, Material Cost Variance consists of two components: Material Price Variance and Material Usage Variance.

Material Cost Variance Formula

Standard Cost – Actual Cost

In other words, (Standard Quantity x Standard Price) – (Actual Quantity x Actual Price)

= (200 x 10) – (150 x 8)

= 800 (F)

Favorable, since the actual cost is less than the standard cost. If the actual cost is more than the standard cost, the result is Adverse (A).

MCV= MPV + MUV

= 300 (F) +500 (F)

= 800 (F)

Let us first understand the meaning of Material Price Variance.

Material Price Variance

Material Price Variance is the difference between the standard price and the actual price for the actual quantity of materials used for production. The cause for material price variance can be many, including changes in prices, poor purchasing procedures, deficiencies in price negotiation, etc.

Material Price Variance Formula

The calculation of Material Price Variance using the following formula is as follows:

MPV = (Standard Price – Actual Price) x Actual Quantity

Let us understand this formula with the help of an example.

	Standard	Actual
Price	$ 10 per kg.	$ 8 per kg.
Quantity	200 kgs.	150 kgs.

Here, the Material Price Variance can be calculated as follows:

MPV = (10 – 8) x 150

= 300 (F)

Here (F) stands for favorable. The variance is favorable because the actual price is less than the standard price. In cases where the actual price is more than the standard price, the result is (A), which means adverse.

For a quick calculation, refer to Material Price Variance Calculator

Let us now understand the meaning of Material Usage Variance.

Material Usage Variance

Material Usage Variance is the difference between the standard quantity specified for actual production and the actual quantity used at the standard purchase price. There can be many reasons for material usage variance, including the use of sub-standard or defective products, pilferage, wastage, differences in material quality, etc.

Material Usage Variance Formula

MUV = (Standard Quantity – Actual Quantity) x Standard Price

With the help of the above example, let us now calculate Material Usage Variance.

MUV = (200 – 150) x 10

= 500 (F)

The result is Favorable since the standard quantity is more than the actual quantity. In cases where the actual quantity is more than the standard quantity, the result is in (A), which means Adverse.

Keep reading Direct Materials Quantity / Usage / Volume Variance

Conclusion

Material Cost Variance is composed of Material Price Variance and Material Usage Variance. This means Material Cost Variance = Material Price Variance + Material Usage Variance. We can confirm and cross-check this equation with the help of our example.

Refer to Material Yield Variance and Material Mix Variance.

Frequently Asked Questions (FAQs)

What is material cost variance?

Material cost variance is the difference between the standard cost of direct material and the actual cost of direct material used in production.

What is the formula of material price variance?

MPV = (Standard Price – Actual Price) x Actual Quantity

How is material usage variance calculated?

The formula for calculating the material usage variance is:
MUV = (Standard Quantity – Actual Quantity) x Standard Price.

Variance Analysis: Meaning, Classification and Computation [Source]
4 Major Types of Variance Analysis | Cost Accountancy [Source]

Flexible Budget VarianceMaterial VarianceVariances

Standard costing is an important subtopic of cost accounting. Historically, standard costs have been associated with a manufacturing company's costs of direct materials, direct labor, and manufacturing overhead.

Rather than assigning the actual costs of direct materials, direct labor, and manufacturing overhead to a product, some manufacturers assign the expected or standard costs. This means that a manufacturer's inventories and cost of goods sold will begin with amounts that reflect the standard costs, not the actual costs, of a product. Since a manufacturer must pay its suppliers and employees the actual costs, there are almost always differences between the actual costs and the standard costs, and the differences are noted as variances.

NOTE:
Standard costs can also be thought of as:

Planned costs

Expected costs

Budgeted costs

"Should be" costs

Benchmark costs

Standard costing (and the related variances) is a valuable management tool. If a variance arises, it tells management that the actual manufacturing costs are different from the standard costs. Management can then direct its attention to the cause of the differences from the planned amounts.

If we assume that a company uses the perpetual inventory system and that it carries all of its inventory accounts at standard cost (including Direct Materials Inventory or Stores), then the standard cost of a finished product is the sum of the standard costs of these inputs:

Direct materials
Direct labor
Manufacturing overhead
1. Variable manufacturing overhead
2. Fixed manufacturing overhead

Usually there will be two variances computed for each input:

Since the calculation of variances can be difficult, we developed several business forms (for PRO members) to help you get started and to understand what the variances tell us. Learn more about AccountingCoach PRO.

Note: Our Guide to Managerial & Cost Accounting is designed to deepen your understanding of topics such as product costing, overhead cost allocations, estimating cost behavior, costs for decision making, and more. It is only available when you join AccountingCoach PRO.

Sample Standards Table

Let's assume that your Uncle Pete runs a retail outlet that sells denim aprons in two sizes. Pete suggests that you get into the manufacturing side of the business, so on January 1, 2021, you start up an apron production company called DenimWorks. Using the best information at hand, the two of you compile the following information to establish the standard costs for 2021:

Standards Table for DenimWorks

The aprons are easy to produce, and no apron is ever left unfinished at the end of any given day. This means that DenimWorks will never have work-in-process inventory at the end of an accounting period.

When we make the journal entries for completed aprons, we'll use an account called Inventory-FG which means Finished Goods Inventory. We'll also be using the account Direct Materials Inventory or Raw Materials Inventory or Stores. Most manufacturers will also have an account entitled Work-in-Process Inventory, which is commonly referred to as WIP Inventory.

Direct Materials Purchased: Standard Cost and Price Variance

Direct materials are the raw materials that are directly traceable to a product. In your apron business the main direct material is the denim. (In a food manufacturer's business the direct materials are the ingredients such as flour and sugar; in an automobile assembly plant, the direct materials are the cars' component parts).

DenimWorks purchases its denim from a local supplier with terms of net 30 days, FOB destination. This means that title to the denim passes from the supplier to DenimWorks when DenimWorks receives the material. When the denim arrives, DenimWorks will record the denim received in its Direct Materials Inventory at the standard cost of $3 per yard (see the standards table above) and will record a liability for the actual cost of the material received. Any difference between the standard cost of the material and the actual cost of the material received is recorded as a purchase price variance.

Examples of Standard Cost of Materials and Price Variance

Let's assume that on January 2, 2021, DenimWorks ordered 1,000 yards of denim at $2.90 per yard. On January 8, DenimWorks receives the 1,000 yards of denim and the supplier's invoice for the actual cost of $2,900. On January 8, DenimWorks becomes the owner of the material and has a liability to its supplier. On January 8, DenimWorks' Direct Materials Inventory is increased by the standard cost of $3,000 (1,000 yards of denim at the standard cost of $3 per yard), Accounts Payable is credited for $2,900 (the actual amount owed to the supplier), and the difference of $100 is credited to Direct Materials Price Variance. Putting this information in a general journal entry looks like this:

The $100 credit to the Direct Materials Price Variance account indicates that the company is experiencing actual costs that are more favorable than the planned, standard costs.

In February, DenimWorks orders 3,000 yards of denim at $3.05 per yard. On March 1, DenimWorks receives the 3,000 yards of denim and the supplier's invoice for $9,150 due in 30 days. On March 1, the Direct Materials Inventory account is increased by the standard cost of $9,000 (3,000 yards at the standard cost of $3 per yard), Accounts Payable is credited for $9,150 (the actual cost of the denim), and the difference of $150 is debited to Direct Materials Price Variance as an unfavorable price variance:

After the March 1 transaction is posted, the Direct Materials Price Variance account shows a debit balance of $50 (the $100 credit on January 8 combined with the $150 debit on March 1). A debit balance in any variance account means it is unfavorable. It means that the actual costs are higher than the standard costs and the company's profit will be $50 less than planned unless some action is taken.

On June 1 your company receives an additional 3,000 yards of denim at an actual cost of $2.92 per yard for a total of $8,760 due in 30 days. The entry is:

Direct Materials Inventory is debited for the standard cost of $9,000 (3,000 yards at $3 per yard), Accounts Payable is credited for the actual amount owed, and the difference of $240 is credited to Direct Materials Price Variance. The $240 variance is favorable since the company paid $0.08 per yard less than the standard cost per yard x the 3,000 yards of denim.

NOTE:
A debit to a variance account indicates unfavorable.
A credit to a variance account indicates favorable.

After this transaction is recorded, the Direct Materials Price Variance account shows a credit balance of $190. A credit balance in a variance account is always favorable. In other words, your company's profit will be $190 greater than planned due to the lower than expected cost of direct materials.

Note that the entire price variance pertaining to all of the direct materials received was recorded immediately (as opposed to waiting until the materials were used).

We will discuss later how to handle the balances in the variance accounts under the heading What To Do With Variance Amounts.

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In a standard costing system, the costs of production, inventories, and the cost of goods sold are initially recorded using the standard costs. In the case of direct materials, it means the standard quantity of direct materials that should have been used to make the good output. If the manufacturer uses more direct materials than the standard quantity of materials for the products actually manufactured, the company will have an unfavorable direct materials usage variance. If the quantity of direct materials actually used is less than the standard quantity for the products produced, the company will have a favorable usage variance. The amount of a favorable and unfavorable variance is recorded in a general ledger account Direct Materials Usage Variance. (Alternative account titles include Direct Materials Quantity Variance or Direct Materials Efficiency Variance.) We will demonstrate this variance with the following information.

January 2021

In order to calculate the direct materials usage (or quantity) variance, we start with the number of acceptable units of products that have been manufactured—also known as the good output. At DenimWorks this is the number of good aprons physically produced. If DenimWorks produces 100 large aprons and 60 small aprons during January, the production and the finished goods inventory will begin with the cost of the direct materials that should have been used to make those aprons. Any difference will be a variance.

Note:

We are not determining the quantity of aprons that DenimWorks should have made. Rather, we are determining whether the 100 large aprons and 60 small aprons that were actually manufactured were produced efficiently. In the case of direct materials, we want to determine whether or not the company used the proper amount of denim to make the 160 aprons that were actually produced. (For the purposes of calculating the direct materials usage variance, it doesn't matter whether DenimWorks had a goal to produce 100 aprons, 200 aprons, or 250 aprons. The direct materials usage variance is computed for the actual number of aprons produced.)

Standard costs are sometimes referred to as the "should be costs." DenimWorks should be using 278 yards of denim to make 100 large aprons and 60 small aprons as shown in the following table.

We determine the total standard cost of the denim that should have been used to make the 160 aprons by multiplying the standard quantity of denim (278 yards) by the standard cost of a yard of denim ($3 per yard):

An inventory account (such as F.G. Inventory or Work-in-Process) is debited for $834; this is the standard cost of the direct materials component in the aprons manufactured in January 2021.

The Direct Materials Inventory account is reduced by the standard cost of the denim that was removed from the direct materials inventory. Let's assume that the actual quantity of denim removed from the direct materials inventory and used to make the aprons in January was 290 yards. Because Direct Materials Inventory reports the standard cost of the actual materials on hand, we reduce the account balance by $870 (290 yards used $3 standard cost per yard). After removing 290 yards of materials, the balance in the Direct Materials Inventory account as of January 31 is $2,130 (710 yards x $3 standard cost per yard).

The Direct Materials Usage Variance is: [the standard quantity of material that should have been used to make the good output minus the actual quantity of material used] X the standard cost per yard.

In our example, DenimWorks should have used 278 yards of material to make 100 large aprons and 60 small aprons. Because the company actually used 290 yards of denim, we say that DenimWorks did not operate efficiently. When we multiply the additional 12 yards times the standard cost of $3 per yard, the result is an unfavorable direct materials usage variance of $36.

For the remainder of our explanation, we will use a common format for calculating variances. The amounts for each column are computed in the order indicated in the headings.

Direct Materials Usage/Quantity/Efficiency Variance Analysis

The journal entry for the direct materials used for the January production is:

February 2021

Let's assume that in February 2021 DenimWorks produces 200 large aprons and 100 small aprons and that 520 yards of denim are actually used. From this information we can compute the following:

Let's put the February 2021 information into our format:

Direct Materials Usage (or Quantity) Variance Analysis

The journal entry for the direct materials used for the February production is:

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Direct labor refers to the work done by employees who work directly on the goods being produced. (Indirect labor refers to the employees who work in the production area, but do not work directly on the products. An example of indirect labor is the employees who set up or maintain the equipment.)

Unlike direct materials (which are obtained prior to being used) direct labor is obtained and used at the same time. This means that for the given good output, we can compute the following at the same time (when goods are produced):

Standard direct labor cost
Direct labor rate variance
Direct labor efficiency variance

January 2021

Let's begin by determining the standard cost of direct labor for the good output produced in January 2021:

Assuming that the actual direct labor in January adds up to 50 hours and the actual hourly rate of pay (including payroll taxes) is $9 per hour, our analysis will look like this:

Direct Labor Variance Analysis for January 2021:

In January, the direct labor efficiency variance (#3 in the above analysis) is unfavorable because the company actually used 50 hours of direct labor, which is 8 hours more than the standard quantity of 42 hours allowed for the good output. The additional 8 hours multiplied by the standard rate of $10 results in an unfavorable direct labor efficiency variance of $80. (The direct labor efficiency variance could also be referred to as the direct labor quantity variance or usage variance.)

Note that DenimWorks paid $9 per hour for labor when the standard rate is $10 per hour. This $1 difference is multiplied by the 50 actual hours, resulting in a $50 favorable direct labor rate variance. (The direct labor rate variance could be referred to as the direct labor price variance.)

The journal entry for the direct labor used in the January production is:

February 2021

In February DenimWorks manufactured 200 large aprons and 100 small aprons. The standard cost of direct labor and the variances for the February 2021 output is computed next.

If we assume that the actual labor hours in February add up to 75 and the hourly rate of pay (including payroll taxes) is $11 per hour, the total equals $825. The analysis for February 2021 looks like this:

Direct Labor Variance Analysis for February 2021:

Notice that for February's good output, the total actual labor costs amounted to $825 and the total standard cost of direct labor amounted to $800. This unfavorable difference of $25 agrees to the sum of the two labor variances:

The journal entry for the direct labor used in the February production is:

Later in Part 6 we will discuss what to do with the balances in the direct labor variance accounts under the heading What To Do With Variance Amounts.

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Manufacturing overhead costs refer to the costs within a manufacturing facility other than direct materials and direct labor. Manufacturing overhead includes items such as indirect labor, indirect materials, utilities, quality control, material handling, and depreciation on the manufacturing equipment and facilities, and more.

Variable manufacturing overhead costs will increase in total as output increases. An example is the cost of the electricity needed to operate the machines that cut and sew the denim. Another example is the cost of the manufacturing supplies (such as needles and thread) that increase when production increases. We will assume that these variable manufacturing overhead costs fluctuate in response to the number of direct labor hours. Recall the following information in our Standards Table in Part 1.

January 2021

Let's begin by determining the standard cost of variable manufacturing overhead for DenimWorks' good output in January 2021:

Recall that there were 50 actual direct labor hours in January. Now let's assume that the actual cost for the variable manufacturing overhead (electricity and manufacturing supplies) during January was $90.

Based on the above information, our analysis will look like this:

Variable Manufacturing Overhead Analysis for January 2021:

Notice that for the good output produced in January, the actual cost of variable manufacturing overhead was $90 and the total standard cost of variable manufacturing overhead cost for the good output was $84. This unfavorable difference of $6 agrees to the sum of the two variances:

Variable Manufacturing Overhead Efficiency Variance

As our analysis shows, DenimWorks did not produce the good output efficiently since it used 50 actual direct labor hours instead of the 42 standard direct labor hours.

It is assumed that the additional 8 hours caused the company to use additional electricity and supplies. Measured at the originally estimated rate of $2 per direct labor hour, this amounts to $16 (8 hours x $2). As a result, this is an unfavorable variable manufacturing overhead efficiency variance.

Variable Manufacturing Overhead Spending Variance

In our previous analysis, item 2 shows that based on the 50 direct labor hours actually used, electricity and supplies could cost $100 (50 hours x $2 per hour) instead of the standard cost of $84. However, the actual cost of the electricity and supplies was $90, not $100. This $10 favorable variance indicates that the company did not spend the planned $2 per direct labor hour. (Perhaps electricity rates were lower than the rates anticipated when the standard costs were established.)

Actual variable manufacturing overhead costs are debited to overhead cost accounts. The credits are made to accounts such as Accounts Payable. For example:

Another entry records how the overhead costs were assigned to the product based on the standard costs:

Our analysis and the journal entries illustrate that DenimWorks had actual variable manufacturing overhead of $90, but only $84 (the standard amount) was applied to the products. The $6 difference is "explained" by the two variances:

February 2021

Recall that in February 2021 the company produced 200 large aprons and 100 small aprons. With that information we can compute the standard cost of variable manufacturing overhead for February 2021:

Given that there were 75 actual direct labor hours in February and assuming that the actual cost for the variable manufacturing overhead in February was $156, our analysis is:

Variable Manufacturing Overhead Analysis for February 2021:

The favorable difference between the actual cost of $156 and the standard cost of $160 agrees with the sum of the following two variances:

Actual variable manufacturing overhead costs are debited to overhead cost accounts. The credits are made to accounts such as Accounts Payable. For example:

Another entry records how these overheads were assigned to the product:

As our analysis notes above and as these entries illustrate, even though DenimWorks had actual variable manufacturing overhead of $156, the standard amount of $160 was applied to the products. Accountants might say that for the month of February 2021, the company overapplied variable manufacturing overhead.

We will discuss how to report the balances in the variance accounts under the heading What To Do With Variance Amounts.

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Fixed manufacturing overhead costs remain the same in total even though the production volume increased by a modest amount. For example, the property tax on a large manufacturing facility might be $50,000 per year and it arrives as one tax bill in December. The amount of the property tax bill did not depend on the number of units produced or the number of machine hours that the plant operated. A few of the many examples of fixed manufacturing overhead costs include the depreciation or rent on production facilities; salaries of production managers and maintenance supervisors; and professional memberships and training for managers in the manufacturing area. Although the fixed manufacturing overhead costs present themselves as large monthly or annual expenses, they are part of each product's cost.

DenimWorks has two fixed manufacturing overhead costs:

A portion of these fixed manufacturing overhead costs must be allocated to each apron produced. This is known as absorption costing and it explains why some accountants say that each product must "absorb" a portion of the fixed manufacturing overhead costs.

A simple way to assign or allocate the fixed costs is to base it on things such as direct labor hours, machine hours, or pounds of direct material. Accountants realize that this is simplistic; they know that overhead costs are caused by many different factors. Nonetheless, we will assign the fixed manufacturing overhead costs to the aprons by using the direct labor hours.

Establishing a Predetermined Rate

Companies typically establish a standard fixed manufacturing overhead rate prior to the start of the year and then use that rate for the entire year. Let's assume it is December 2020 and DenimWorks is developing the standard fixed manufacturing overhead rate for use in 2021. As mentioned above, we will assign the fixed manufacturing overhead on the basis of direct labor hours.

Step 1.

Estimate the fixed manufacturing overhead costs for the year 2021.

We indicated above that the fixed manufacturing overhead costs are the rents of $700 per month, or $8,400 for the year 2021.

Step 2.

Estimate the total number of standard direct labor hours that are needed to manufacture your products during 2021.

We can estimate the direct labor hours from the information given earlier (and repeated here):

Step 3.

Compute the standard fixed manufacturing rate to be used in 2021.

Note:

One reason a company develops a predetermined annual rate is to have a uniform rate for all months. If the company used monthly rates, the rate would be high in the months when few units are produced (monthly fixed costs of $700 ÷ 100 units produced = $7 per unit) and low when many units are produced (monthly fixed costs of $700 ÷ 350 units = $2 per unit).

Fixed Manufacturing Overhead Budget Variance

The difference between the actual amount of fixed manufacturing overhead and the estimated amount (the amount budgeted when setting the overhead rate prior to the start of the year) is known as the fixed manufacturing overhead budget variance.

In our example, we budgeted the annual fixed manufacturing overhead at $8,400 (monthly rents of $700 x 12 months). If DenimWorks pays more than $8,400 for the year, there is an unfavorable budget variance; if the company pays less than $8,400 for the year, there is a favorable budget variance.

Fixed Manufacturing Overhead Volume Variance

Recall that the fixed manufacturing overhead costs (such as the large amount of rent paid at the start of every month) must be assigned to the aprons produced. In other words, each apron must absorb a small portion of the fixed manufacturing overhead costs. At DenimWorks, the fixed manufacturing overhead is assigned to the good output by multiplying the standard rate by the standard hours of direct labor in each apron. Hopefully, by the end of the year there will be enough good aprons produced to absorb all of the fixed manufacturing overhead costs.

The fixed manufacturing overhead volume variance is the difference between the amount of fixed manufacturing overhead budgeted to the amount that was applied to (or absorbed by) the good output. If the amount applied is less than the amount budgeted, there is an unfavorable volume variance. This means there was not enough good output to absorb the budgeted amount of fixed manufacturing overhead. If the amount applied to the good output is greater than the budgeted amount of fixed manufacturing overhead, the fixed manufacturing overhead volume variance is favorable.

Illustration of Fixed Manufacturing Overhead Variances for 2021

Let's assume that in 2021 DenimWorks manufactures (has actual good output of) 5,300 large aprons and 2,600 small aprons. Let's also assume that the actual fixed manufacturing overhead costs for the year are $8,700. As we calculated earlier, the standard fixed manufacturing overhead rate is $4 per standard direct labor hour.

We begin by determining the fixed manufacturing overhead applied to (or absorbed by) the good output produced in the year 2021. Recall that we apply the overhead costs to the aprons by using the standard amount of direct labor hours.

Our analysis looks like this:

Fixed Manufacturing Overhead Analysis for the Year 2021:

This analysis shows that the actual fixed manufacturing overhead costs are $8,700 and the fixed manufacturing overhead costs applied to the good output are $8,440. This unfavorable difference of $260 agrees to the sum of the two variances:

The actual fixed manufacturing overhead costs are debited to overhead cost accounts. The credits are made to accounts such as Accounts Payable or Cash. For example:

Another entry records how these overheads are assigned to the product:

We will discuss how to report the balances in the variance accounts under the heading What To Do With Variance Amounts.

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If the direct labor is not efficient when producing the good output, there will be an unfavorable labor efficiency variance. That inefficiency will likely cause additional variable manufacturing overhead which will result in an unfavorable variable manufacturing overhead efficiency variance. If the inefficiencies are significant, the company might not be able to produce enough good output to absorb the planned fixed manufacturing overhead costs. This in turn can also cause an unfavorable fixed manufacturing overhead volume variance.

We will pursue the interdependence of variances in the following examples.

Example 1

Assume your company's standard cost for denim is $3 per yard, but you buy some denim at a bargain price of $2.50 per yard. For each yard of denim purchased, DenimWorks reports a favorable direct materials price variance of $0.50.

Let's also assume that the quality of the low-cost denim ends up being slightly lower than the quality to which your company is accustomed. This lesser quality denim causes the production to be a bit slower as workers spend additional time working around flaws in the material. In addition to this decline in productivity, you also find that some of the denim is of such poor quality that it has to be discarded. Further, some of the finished aprons don't pass the final inspection due to occasional defects not detected as the aprons were made.

You get the picture. If the favorable $0.50 per yard price variance correlates with lower quality, that denim was no bargain. The $0.50 per yard favorable variance may be more than offset by the following unfavorable quantity variances:

Direct material usage variance
Direct labor efficiency variance
Variable manufacturing overhead efficiency variance

Keep in mind that the standard cost is the cost allowed on the good output. Putting material, labor, and manufacturing overhead costs into products that will not end up as good output will likely result in unfavorable variances.

Example 2

Let's assume that you decide to hire an unskilled worker for $9 per hour instead of a skilled worker for the standard cost of $15 per hour. Although the unskilled worker will create a favorable direct labor rate variance of $6 per hour, you may see significant unfavorable variances such as a direct material usage variance, a direct labor efficiency variance, a variable manufacturing overhead efficiency variance, and possibly a fixed manufacturing overhead volume variance.

These two examples highlight what experienced managers know: you need to look at more than price. A low cost for an inferior input is no bargain if it results in costly inefficiencies.

What To Do With Variance Amounts

Throughout our explanation of standard costing we showed you how to calculate the variances. In the case of direct materials and direct labor, the variances were recorded in specific general ledger accounts. The manufacturing overhead variances were the differences between the accounts containing the actual costs and the accounts containing the applied costs. Now we'll discuss what we do with those variance amounts.

Direct Materials Price Variance

Let's begin by assuming that the account Direct Materials Price Variance has a debit balance of $3,500 at the end of the accounting year resulting from one purchase:

Because of the cost principle, the financial statements for DenimWorks report the company's actual cost. If none of the direct materials purchased in this journal entry was used in production (all of the direct materials remain in the direct materials inventory), the company's balance sheet must report the direct materials inventory at $13,500. In other words, the balance sheet will report the standard cost of $10,000 plus the price variance of $3,500.

If all of the materials were used in making products, and all of the products have been sold, the $3,500 price variance is added to the company's standard cost of goods sold.

If 20% of the materials remain in the direct materials inventory and 80% of the materials are in the finished goods that have been sold, then $700 of the price variance (20% of $3,500) is added to the standard cost of the direct materials inventory, $2,800 (80% of $3,500) is added to the standard cost of goods sold.

Now let's assume the direct materials are in various stages of use:

20% have not been used yet
5% are in work-in-process
15% are in finished goods on hand
60% are in finished goods that have been sold

We need to assign or allocate the unfavorable $3,500 direct materials price variance to the four places where the direct materials are now located. Since the $3,500 is an unfavorable amount, the following amounts are added to the standard costs:

Accounting professionals have a materiality guideline which allows a company to make an exception to an accounting principle if the amount in question is insignificant. (For example, a large company may report amounts to the nearest $1,000 on its financial statements, or an inexpensive item like a wastebasket can be expensed immediately instead of being depreciated over its useful life.) This means that if the total variance of $3,500 shown above is a very, very small amount relative to the company's net income, the company can assign the entire $3,500 to the cost of goods sold instead of allocating some of the amount to the inventories.

If the balance in the Direct Materials Price Variance account is a credit balance of $3,500 (instead of a debit balance) the procedure and discussion would be the same, except that the standard costs would be reduced instead of increased.

Direct Materials Usage Variance

Let's assume that the Direct Materials Usage Variance account has a debit balance of $2,000 at the end of the accounting year. A debit balance is an unfavorable balance resulting from more direct materials being used than the standard amount allowed for the good output.

The first question to ask is "Why do we have this unfavorable variance of $2,000?" If it was caused by errors and/or inefficiencies, it cannot be assigned to the inventory. Errors and inefficiencies are never considered to be assets; therefore, the entire amount must be expensed immediately.

On the other hand, if the unfavorable $2,000 variance is the result of an unrealistic standard for the quantity of direct materials needed, then we should allocate the $2,000 variance to wherever the standard costs of direct materials are now located. If 90% of the related direct materials have been sold and 10% are in the finished goods inventory, then the $2,000 should be allocated and added to the standard direct material costs as follows:

If $2,000 is an insignificant amount relative to a company's net income, the entire $2,000 unfavorable variance can be added to the cost of goods sold. This is permissible because of the materiality guideline.

If the $2,000 balance is a credit balance, the variance is favorable. This means that the actual direct materials used were less than the standard quantity of materials called for by the good output. We should allocate this $2,000 to wherever those direct materials are physically located. However, if $2,000 is an insignificant amount, the materiality guideline allows for the entire $2,000 to be deducted from the cost of goods sold on the income statement.

Other Variances

The examples above follow these guidelines:

If the variance amount is very small (insignificant relative to the company's net income), simply put the entire amount on the income statement. If the insignificant variance amount is unfavorable, increase the cost of goods sold—thereby reducing net income. If the insignificant variance amount is favorable, decrease the cost of goods sold—thereby increasing net income.
If the variance is unfavorable, significant in amount, and results from mistakes or inefficiencies, the variance amount can never be added to any inventory or asset account. These unfavorable variance amounts go directly to the income statement and reduce the company's net income.
If the variance is unfavorable, significant in amount, and results from the standard costs not being realistic, allocate the variance to the company's inventory accounts and cost of goods sold. The allocation should be based on the location of the inputs from which the variances arose.
If the variance amount is favorable and significant in amount, allocate the variance to the company's inventories and its cost of goods sold.

The following table will serve as a guide for reporting variances that are significant in amount:

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You should consider our materials to be an introduction to selected accounting and bookkeeping topics, and realize that some complexities (including differences between financial statement reporting and income tax reporting) are not presented. Therefore, always consult with accounting and tax professionals for assistance with your specific circumstances.

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I stumbled across the website for AccountingCoach, and I am glad I did. I have always enjoyed bookkeeping, but I have never been formally trained. After receiving and reviewing the material with AccountingCoach PRO I can honestly say this is the best product I have ever purchased. The lifetime membership is worth the cost. The courses are set up for the beginner to the most advanced and is written in a very clear format. I would recommend AccountingCoach to anyone wanting to learn, or take a refresher course on accounting and bookkeeping.
-Jewell B.

I can't say enough good things about AccountingCoach. As an economist working in corporate tax, I needed to learn how to interpret accounting data quickly in order to succeed in my job. I've been an active user since around 2008, and over the years I've realized it's the only accounting resource I need. Thank you, AccountingCoach!
-Denise G.

I am truly grateful to AccountingCoach who has not only been a lifeline, but has been a rescuer on numerous occasions. I appreciate the in-depth explanations, concepts and even links to obtain additional information, especially when going through an on-the-job crunch period with close deadlines. I highly recommend AccountingCoach to everyone. Those in large or small companies, business owners, and all levels of educational studies, will find AccountingCoach a great go-to source!
-Pat W.

Basically, ridiculous. The amount of information you can get from this site, business forms, dictionaries, flashcards, videos... It's not only a steal for the price, I even feel bad! What Harold and his staff have created is the terror of any institution that teaches accounting. AccountingCoach has become my accounting reference guide for everything and I'm sure anyone who starts to dig a little bit will find this site more than useful. You will get exposure to multiple topics, from simple common-sense things to complex and advanced accounting subjects. Best part? There's no limit to how many times you can come back and review it, because this isn't a paid semester for college, but a life-time membership! It's incredible - no rush, no hassle, no stress, no '30-days membership' offer, no pre-determined way to take a course. You learn at your own pace, the topics you decide, whatever you need help with, and it's all there for you, available 24/7. To conclude, I want to thank AccountingCoach in general for the amazing product they run; you won't find anything this good, I believe, in the market. I've yet to find a fault, so keep it up, guys!
-Jean C.

AccountingCoach PRO is an exceptional service. It not only provides all the essential material to succeed in learning accounting and finance, but also explains all the relevant details that make the difference when you need to understand the complexity of accounting systems. As a communication trainer and business coach, I had to pick up the language of accounting in no time in order to communicate more effectively with my clients. This website's benefits have exceeded my expectations. Many thanks for your great support.
-Theirry F.

Going to college to learn accounting isn't an option for me. I'm a single mother of three. I am a self-taught bookkeeper thanks to AccountingCoach. I do taxes for businesses. One of the businesses I do bookkeeping & accounting for was recently audited. Thanks to AccountingCoach PRO, I showed the state auditor a thing or two. I have been complimented on my business practices by several people. I have had business owners tell me that bookkeepers/accountants do not comprehend or understand accounting concepts, which they went to college for years to learn, as well as I do. AccountingCoach PRO has made it possible for me to further my career, making a higher income. I have to turn clients away, because I simply do not have the time to assist them. Thank you AccountingCoach!
-Anonymous

I discovered AccountingCoach while I was teaching an Accounting 1 class at the college I work at and provided the website to my students to supplement their learning experience. I know it made a difference! I am a Small Business Development Center adviser and workshop presenter and I provide the AccountingCoach website to my clients and workshop attendees to help them learn accounting. AccountingCoach is a great resource for small business people!
-Ida C.

I was interested in getting my finances under control. I was advised to track my expenses but I had no background in accounting. I wanted to do proper record keeping and not just of expenses, but my wealth. I came across many tutorials online. The most comprehensive tutorials were those of AccountingCoach. After being able to quickly learn, I decided to go PRO to have access to additional learning tools. I love the quizzes, they help me determine if I truly understand the material. After 1 year, I know enough about accounting to manage my finances and grow my wealth. Going PRO is one of the best investments I've made. Thank you AccountingCoach!
-Alex L.

The lifetime PRO membership is indeed one of the smartest purchases I've ever made. I have used it all as a refresher course, as a study guide, and reference to my current client issues. The extraordinarily clear and engaging explanations make self-study possible for anyone with an interest in accounting. I simply can't recommend it enough. Thank you AccountingCoach.
-Donald R.

Getting a lifetime PRO membership at AccountingCoach was one of the best investments I have ever made in the field of accounting and finance. AccountingCoach makes accounting concepts and principles easy to understand and I have learned a great deal from using AccountingCoach in the last few years. I am a licensed tax preparer and I took accounting courses many ages ago. Having 24/7 access to a well-organized set of materials on a wide range of topics on accounting and bookkeeping has been very valuable to me. It has helped me stay up-to-date with my knowledge and understanding of modern-day accounting concepts, and as a result, better digest and dissect financial statements given to me by my business clients. Thank you, AccountingCoach.
-J.C.

I registered for AccountingCoach PRO to help me with basic accounting information for some MBA coursework I am pursuing. It turned out to be a lot more than that! In its clear, yet comprehensive manner, AccountingCoach provides foundational materials, sample exams, study notes, visual aids, and dictionary terms. If you have any need for assistance with all things accounting, AccountingCoach should be your first stop. I highly recommend it to everyone wanting to understand accounting in more depth.
-David T.

I have been using AccountingCoach in my bookkeeping business for a few years now and love it! There are times when I need an answer to some accounting situation that baffles me and I have always been able to find the answers I need on your website. I particularly like the clear and concise way the materials are presented so I can quickly get results.
-Cheryl N.

AccountingCoach has been a God-send to me for years! When I got thrown into a bookkeeping position many years ago I floundered terribly until I stumbled upon AccountingCoach.com. I can't say enough about how thorough and detailed the website is with lessons, quizzes, tests, tons of downloads, guides, and handy cheat sheets. After only a few weeks on the website I had gained the skills and confidence I needed to become competent at and comfortable with my job. When I realized I loved bookkeeping I decided to enhance my knowledge even further with a college accounting course, and I must say in all honesty, it paled in comparison to what I was learning on AccountingCoach.com. Although I've been in bookkeeping many years now, there is always something for me to learn on AccountingCoach.com and I devote several hours every week to getting on the site to refresh my skills or to learn something new. This is a rare company in that it is devoted not only to teaching accounting and bookkeeping in easy-to-understand terms, but also to exceptional customer service! Thank you AccountingCoach for your genuine approach to all you do!
-Terri L.

"Accounting is not my strong suit. The AccountingCoach is the best source I know of that can walk me through the basics in a way that gives me confidence. It's always available 24/7. Can't say enough good things about it. Highly recommend it." -Tony C.

I was looking out for an online accounting course after a gap of 25 years. Luckily, I came across AccountingCoach. The very first visit to this site made me feel very comfortable. I felt as though it was made just for me. Very soon I enrolled myself as a PRO member. Now that I am able to access the entire site like the seminars, exams, crosswords and many many more interesting ways to learn accounting, my knowledge in accounting has deepened. I can confidently say to people who are new to this field, or who are trying for a refresher course like me, this is THE WEBSITE for you. It's a well-structured program, the most difficult accounting concepts have been explained in a very crystal clear fashion with beautiful real-life examples. Thanks to Mr Harold Averkamp and his dedicated team for sharing their deep insight.
-Sunita P.

The PRO membership is great ROI. For those who are looking to learn accounting, this is one of greatest accounting courses you'll ever find online.
-Karam T.

AccountingCoach helps me tremendously. I always find-up-to date the financial and accounting information needed. As I move into the next phase of my work life and career, AccountingCoach PRO will be an essential tool as I move from employee to business owner. Thank you for this very valuable tool which continues to evolve and grow.
-Diane J.

Thank you for being my reference book as I complete my accounting degree. I had no experience in accounting or bookkeeping before completing this degree and understandably I was in over my head! All the way over in New Zealand I came across your website, subscribed, hoping I may learn even a couple of things and have ended up using your website as my main reference tool. The quizzes, question and answer pages, the entire website is so user friendly and I know it will see me through to the completion of my degree. I can't thank you enough, please keep up the fantastic work!!!
-K.H.

I own a bookkeeping and tax business and I use AccountingCoach to train my bookkeepers. The value far exceeds the cost!
-Wendi

I currently teach Bookkeeping at one of the colleges in New York City. Being a member of AccountingCoach PRO has helped me tremendously. There is always something new to learn and teach. The price is very affordable. I have always encouraged my students to join the site. I'm glad to say that some have and they have really benefited from what AccountingCoach PRO has to offer.
-Marcia S.

I have been a member of AccountingCoach for many years now. I value the content and the easy-to-grasp manner in which the material is always explained. Many times I read the material here before studying it in my accounting book. I love AccountingCoach! They are very honorable as well. My membership continues to be valid after all these years. If I email them with questions about my membership or password or whatever else, they are always prompt to assist. I wish I had been a student of the founder of the site. He must have been a really wonderful professor!!! Thanks for putting all the work to create and maintain the site. You guys are the best!!
-Licia B.

Thank you AccountingCoach, you have helped me over the last 8 years of study and guided me to my dream job of becoming an accountant. I've answered and explained all the hard questions that I needed to get me where I am today and I certainly couldn't have done it without you! I will continue to use AccountingCoach PRO for the rest of my career. You are the best.
-Gillian L.

AccountingCoach PRO membership has assisted me in keeping my accounting and bookkeeping skills sharp over the years. My bookkeeping business has benefited greatly. The membership pricing is very reasonable and the information is easy to understand and apply. It has helped me explain difficult accounting concepts to many of my clients.
-Manch K.

AccountingCoach helped me during the times I had trouble remembering accounting concepts. It is a very useful website encompassing a broad area of accounting and finance. Definitely the best go-to place for accountants like me. Thank you so much!
-Cynthia A.

As a European I studied the accounting system used in my particular country. I always wondered how accounting was done in the U.S. AccountingCoach has taught me everything I wanted to know. I've learned a lot about the terminology and the differences between accounting methods from the other side of the pond.
-Pedro R.

I strongly believe that AccountingCoach is the best education program from a practical accounting point of view. Every tool like the accounting dictionary, crossword puzzles, word scrambles (I love it!) and so on explains difficult technical words with the most proper and simplest words Visual learning programs and Q&A archives are especially effective for non-native English speakers to understand current and practical usage methods of accounting terms.
-Ishino K.

Right after graduating from university and getting my bachelor's degree in accountancy, I didn't manage to land a job in the accounting field, instead I got a job in banking. While the pay was a little bit higher than what many other fresh graduates would get in the accounting field, I didn't particularly enjoy what I was doing. So I decided to give what I was most interested in to begin with another shot. Unfortunately, I wasn't feeling very confident in my ability and knowledge in accounting because there was a particularly long lapse of time where I wasn't exposed to accounting. Thankfully I discovered this website, which explains the basics of what you need to know about accounting in a very concise and rather layman way. I also really appreciate that the administrator of the website tries to improve and add more content to the site instead of stagnating after getting my money. I can definitely recommend this site if you need to refresh yourself with accounting, or even just to help you with your study if you're still in the process of getting your degree.
-Leonard L.

I am so impressed by AccountingCoach. I happened to stumble upon it when I was checking for an explanation on impairment. Ever since then my life has become uncomplicated and all these accounting books thrown out the window. It truly is the best! I could not believe it? I run my own accounting, bookkeeping practice and I am still today amazed about the way they have simplified things! I love it! Job well done to the team at AccountingCoach! I am your biggest fan! Thanks so much.
-Eleanor M.

I am a Granny of 67 years old, a South African National, studying for an undergraduate degree in Accounting. Coming across AccountingCoach was the best gift I ever received throughout my education pursuits. AccountingCoach is pleasantly user-friendly and a great study tool for senior citizens and those who study part time because of their busy work schedules. Even South African University students who are presently facing funding challenges in South Africa can use AccountingCoach as a study tool. Thank you.
-Jane N.

I am an experienced businessman now semi-retired and I guest lecture to senior managers in major UK companies and at academic institutions including some internationally famous business schools on topics such as Business Performance Measurement; Business Decision-Taking; and Assessing and Managing Risk. Although I understand business finance well, I never trained as an accountant. But to maintain high credibility when delivering my courses I need to be aware of and keep up to date with certain key international accounting standards and current accounting definitions and practices. I have found AccountingCoach to be an excellent way to do this and fantastic value for money.
-Ray O.

I am a small business accountant and tax preparer. A lot of my clients are do-it-yourself bookkeepers for their small business. Most of them, if not all, use bookkeeping software to keep track of their business. Although software programs are great at what they do and are "easy" for the user, the double entry accounting method is still occurring in the background. Accounting concepts and terms are not "easily" explained to a small business owner who doesn't understand why reports look the way they do. To help them, I always direct them to AccountingCoach to learn the concepts and terms. The tutorials, glossary, and web topics are presented in the best way that anyone can understand accounting. It's the best source on the web!
-Kathleen F.

Just want to let you know that I have learned so much from AccountingCoach PRO. I have had so many issues resolved simply by referring to AccountingCoach PRO when it comes to doing my everyday bookkeeping work. I am so glad that I discovered you and look forward to referring to this website a lot in the future...keep up the great work.
-Peggy M.

I teach Accounting and this is the first website I give my students. I too, purchased the lifetime membership because it is a valuable resource for them and for anyone desiring to learn and understand Accounting. I even do the crossword puzzles, word scrambles, etc. to keep my skills sharp! Plus, it's fun! It's a challenge to keep my lectures interesting, and AccountingCoach helps tremendously. Thanks!
-Crystal C.

I love, love, love your website, it has helped me to succeed in all the bookkeeping I have done off and on throughout the years. Whenever I had doubts I could easily access the website and find my answers quick and I love the videos. Very educational, accurate and reliable. The lifetime unlimited access was one of the best investments I have ever made a few years ago! Makes learning fun and I would suggest this to others in a heartbeat, business owners, employees won't be disappointed. Even those who do occasional bookkeeping will definitely be satisfied with any membership purchase. Thank you AccountingCoach for all that you have helped me with!!! Amazing site!!
-Brenda L.

I am not an accountant, nor a bookkeeper, but I need to be aware of what's happening financially. Being able to consult AccountingCoach on a specific topic relating to our books has been a tremendous help to me. I very much appreciate your service!
-Brian P.

I don't have enough words to express how great the AccountingCoach is. I have been using it since the first day I became a member and it's incredibly good.
-Manny S.

AccountingCoach assisted me with training my team on the profit and loss statements. It helped me put the 'why' behind the terminology used. I would highly recommend AccountingCoach as a good resource for all levels of users!
-Carolyn C.

AccountingCoach has helped me a lot with my work as a manager. It has given me confidence in reading and looking at spreadsheets and budgets as well as giving me the tools to interpret our financial status and forecast future expectations at my work. A great idea to have it readily available for all of us managers and professionals that need to brush up on their accounting knowledge or learn to enhance their professional standings and job status. Thank you for the videos and cheat sheets, as I appreciate a great effort on your part to all of us that need to learn and revise their accounting and finance information and knowledge.
-Samih B.

I bought a small Accounting, Bookkeeping & Payroll business and had very little knowledge of accounting principles and felt I was way over my head. I was looking online for free training or help with just the basics. After a few website that did not help, I found AccountingCoach and signed up and it has helped me a great deal! I am not sure if my business would be as successful if I did not pick up the lessons so easily. AccountingCoach really makes learning easy and interesting, which is hard to do when it comes to accounting. I have recommended it to friends & family and I will continue to do so. Thank you AccountingCoach!!!
-Jennifer L.

As a high school accounting teacher I have used the resources on AccountingCoach PRO to enhance my understanding of accounting concepts and make my explanation of concepts clearer for my students. I recommend AccountingCoach PRO to students pursuing higher level accounting after high school and to anyone teaching accounting classes---the money spent on this resource will be one of the best investments in professional development you'll make in your career.
-Sharon M.

The PRO membership allows me to provide great explanations to my coworkers who are not versed in accounting without me spending a lot of time finding examples they may understand. I use my membership to review topics that I don't use very often and it has been one of the best investments I've made for my work and it costs less than my Accounting textbook!
-John B.

AccountingCoach has helped tremendously while I was studying for accounting and I strongly believe that my grade would not have been in the 90's had it not been for the AccountingCoach. I will always keep the AccountingCoach in my favourites list even though I have completed my courses as I will no doubt make reference to it when I second-guess myself. It has helped with all aspects of accounting from the very beginning to the very end. Whomever decided to create AccountingCoach was a genius because it is designed in a way that anyone from an amateur to a PRO can follow along. I recommend it to everyone. It has become my new limb. Cannot boast enough about it. Well worth it.
-Tammy

Becoming a member of AccountingCoach was hands down a great decision for me. I have been in bookkeeping for over 16 years and all the training I had was from the CPA that I worked for. While I felt I had a good foundation and years of experience, once I took the leap and branched out with my own bookkeeping practice I felt the need to brush up on my skills. AccountingCoach actually not only helped me brush up on my knowledge, but has helped me pinpoint my strengths and weaknesses which allowed me to focus on those areas that I was lacking knowledge. It was also a great boost to see how much knowledge I already had. I think it was a great investment and I love knowing that when I second-guess myself I can easily log in and review the information needed. Worth every penny!
-Judith G.

Thank you AccountingCoach! As an auditor, I frequently encounter government and private financial transactions that I vaguely remember from my college years. The information and ease of finding the right accounting procedures to those instances has been an enormous help to me in my job. This has definitely been a good decision to be a member.
-Enrique E.

I came across AccountingCoach some years ago and since then it has been my go-to solution for all and any problems or issues that arise in my day-to-day work. Whenever I come across a situation I have not faced before I sign in, read up on the related data, of which there is plenty, and solve another problem. I think of AccountingCoach as my personal library where I can look up information on any aspect of my business. My clients are always impressed with the results I provide. Thank you AccountingCoach.
-Joseph C.

I started using AccountingCoach when I found myself unemployed and looking to brush up on my cost accounting skills. It was a wonderful tool and I found it easy to use and contained all the information I would need to get familiar with the topic, all while not having to go back to my college books or my CPA review materials. It is affordably priced and well worth investing in. I am now employed and the materials I studied helped me to prepare for questions I received in the interview process regarding topics I needed to brush up on.
-Karen B.

In my roles as a business owner, member of senior management teams and as a business consultant, I frequently deal with accounting-related issues. While I have a solid grasp of a wide range of accounting practices and methods, I still find that there are times when I want to refresh or investigate aspects of accounting that I either seldom visit or have not had the opportunity to work with. When those circumstances arise, I turn to AccountingCoach which I find covers not only a wide range of topics but usually in enough depth and detail that you can use it almost like a condensed primer on any given topic. The information and examples are complete enough that I find I can apply what is shown to the task at hand and have the result be equal to what I would get from an accounting professional. It is not an exaggeration to state that it has saved both time and cost on numerous occasions. Highly recommended!
-James F.

Living in a small tourist rural town, there are limited choices in the job market. I knew if I bumped up my skills, I would become eligible for a bookkeeping position locally. AccountingCoach has helped me do that. Such a small investment for a HUGE return. Thank you so much for making this available!
-Pam P.

I would like to say thank you very much for your support. I am a student of Accounting at George Mason University in Virginia. I found your website some time ago, and I have been a PRO member ever since. From the moment I found AccountingCoach, I recognize the value, quality and effort of your work. Currently, I am taking Financial Accounting. I confess I was scared because it has been awhile since I took accounting classes. Thankfully, AccountingCoach helps me to not just refresh my mind on basic accounting terminology, but also helps me to understand new terminology in plain English.
-Desire S.

I found AccountingCoach online about 2 years ago. It has helped me tremendously to brush up on knowledge and information about accounting that I don't have time to go to school for. I have been an accountant for many years and don't plan on going back to college at this point; I have a Bachelor’s degree already. I use AccountingCoach to study for a job in accounting if I am not familiar with the work or to understand something like cash flow statements when prepping for a job interview. Recently, I used the online exams extensively to study for a city accounting job; with great success. Thank you Harold!
-Mary B.

I have been using AccountingCoach in my bookkeeping business for a few years now and love it! There are times when I need an answer to some accounting situation that baffles me and always have been able to find the answers I need on your website. I particularly like the clear and concise way the material is presented so I can quickly get results.
-Cheryl N..

I enrolled in an accounting course online. I was sent textbooks and a workbook in the mail and that was it. I was on my own to figure out the rest. It was difficult trying to match the course and workbook together to do the lessons and exercises and the explanations left too many gaps and questions. I knew I needed extra support. I stumbled upon AccountingCoach in an internet search and from the little I was able to read, I gained a far better understanding than the college-level textbook I had been studying for months. I signed up for PRO and it got even better. I'm able to do more exercises and gain extra studying tools and more detailed explanations to ensure my understanding of the accounting process. Truthfully, I've learned more through the AccountingCoach Pro than the college textbook and it cost sooo much less! It has been a life saver. I don't think I could have continued without it. Thank you for creating such an amazing experience and giving me the confidence I needed to keep working towards my goal.
-Crystal C.

AccountingCoach is a simply fantastic self-learning source. The way it explains various accounting concepts in such a simple and self explanatory manner is really commendable. Being an engineering student, with no past accounting background, AccountingCoach has been a great saviour in my MBA accounting module. The Balance Sheets, Statement of Cash Flows, and Income Statement all have been explained very beautifully. Thank you AccountingCoach. Keep up the good work.
-Amber A.