Top 100 Accountng Inerview Questons & Answers 1) Why did you selec accountng as your profession?
Well, I was quite good in accounng throughout but in my masters, when I got disncon I decided to adopt this feld as a proession. ) !o you have any professional professional e"perience of his #eld?
Yes, I have worked as an accountant at two dierent places. $) !id you use accountng applicatons a your previous co%panies or prefer woring %anually??
Yes, I have used !dvanced "usiness #oluons and !$% !ccounng #o&ware in my previous 'obs. ') (an you na%e any oher accountng applicaton?
Yes, I am amiliar with ()ram #o&ware, *inancial *orce, $icroso& !ccounng +roessional, $icroso& ynamics !- and $icroso& #mall "usiness *inancials. ) Which accountng applicaton you prefer %os and why?
I think all are good though but $icroso& !ccounng +roessional is best because it oers reliable and ast processing o accounng transacons that saves me and increases profciency. *) Wha is he a++reviaton for he accountng accountng er%s de+i and credi?
ebit abbreviaon is dr/ and credit abbreviaon is cr/. ,) -ow %any ypes of +usiness ransactons are here in accountng?
0here are two types o transacons in accounng i.e. revenue and capital. .)
Wha is +alance shee?
It is a statement that states states all the liabilies and assets o the company at certain point. /)
-ave you ever heard a+ou T! wha i is?
Yes, 0# abbreviates 0a1 educon at #ource. 10)
In +alance shee where do you show T!?
It is shown on the assets secon, right a&er the head current cur rent asset. 11)
!o you have any idea a+ou ervice Ta" or 2"cise?
It is a kind o hidden ta1 that is included in the service provided by the service provider and paid by the service receiver. 1)
!o you hin here is any di3erence di3erence +eween +eween inactve and dor%an accouns?
Yes, both are dierent terms in accounng. Inacve accounts means that accounts have been closed and will not be used in uture as well. While, dormant accounts are those that are not unconal today but may be used in uture.
1$)
Wha is ally accountng?
It is the so&ware used or accounng in small business and shops or managing roune accounng transacons. 1')
-ow can you de#ne depar%enal accountng?
It is a type o accounng in which separate account is created or departments. It is managed separately as well as shown independently in the balance sheet. 1) !e#ne #cttous asses?
0hese are the assets that cannot be shown or touch. *icous assets can only be elt such as good will, rights etc. 1*) 4y saying perpeual perpeual or periodic invenory invenory syse%5 syse%5 wha do we we %ean?
In the frst one i.e. the perpetual inventory system, system, the accounts are ad'usted on connual basis. In the periodic inventory system, the accounts are ad'usted periodically. 1,) In accountng accountng how do you de#ne pre%ises? pre%ises?
+remises reer to f1ed assets that are shown in the balance sheet. 1.) In accountng accountng 6AT 6AT a++reviaes wha?
2!0 2!0 means mea ns 2alue !dded ! dded 0a1. 1/) !o you possess any nowledge nowledge a+ou accountng sandards? sandards?
Yes, as per my knowledge there are total 33 accounng standards published so ar by I(!I. 0he purpose o these standards is to implement same policies and pracces in any country. country. 0) Wha is I(AI?
It is the abbreviaon o Instute o (hartered !ccountants in India.
1) -ow can can you e"plain he +asic accountng e7uaton?
We know that accounng is all about assets, liabilies and capital. 0hereore, 0hereore, the accounng equaon is4 !ssets 5 6iabilies 7 8wners %quity. ) !e#ne 2"ecutve accountng?
It is a type o accounng that is specifcally designed or the business that oers services to users. $) !e#ne 8u+lic accountng?
+ublic accounng oers audits and (+!s to review company fnancial records to ensure accountability. accountability. It is or general public. ') Wha is a (8A? (8A?
1$)
Wha is ally accountng?
It is the so&ware used or accounng in small business and shops or managing roune accounng transacons. 1')
-ow can you de#ne depar%enal accountng?
It is a type o accounng in which separate account is created or departments. It is managed separately as well as shown independently in the balance sheet. 1) !e#ne #cttous asses?
0hese are the assets that cannot be shown or touch. *icous assets can only be elt such as good will, rights etc. 1*) 4y saying perpeual perpeual or periodic invenory invenory syse%5 syse%5 wha do we we %ean?
In the frst one i.e. the perpetual inventory system, system, the accounts are ad'usted on connual basis. In the periodic inventory system, the accounts are ad'usted periodically. 1,) In accountng accountng how do you de#ne pre%ises? pre%ises?
+remises reer to f1ed assets that are shown in the balance sheet. 1.) In accountng accountng 6AT 6AT a++reviaes wha?
2!0 2!0 means mea ns 2alue !dded ! dded 0a1. 1/) !o you possess any nowledge nowledge a+ou accountng sandards? sandards?
Yes, as per my knowledge there are total 33 accounng standards published so ar by I(!I. 0he purpose o these standards is to implement same policies and pracces in any country. country. 0) Wha is I(AI?
It is the abbreviaon o Instute o (hartered !ccountants in India.
1) -ow can can you e"plain he +asic accountng e7uaton?
We know that accounng is all about assets, liabilies and capital. 0hereore, 0hereore, the accounng equaon is4 !ssets 5 6iabilies 7 8wners %quity. ) !e#ne 2"ecutve accountng?
It is a type o accounng that is specifcally designed or the business that oers services to users. $) !e#ne 8u+lic accountng?
+ublic accounng oers audits and (+!s to review company fnancial records to ensure accountability. accountability. It is or general public. ') Wha is a (8A? (8A?
(+! stands or (erfed +ublic !ccountant. 0o become a (+!, one should have to do many other qualifcaons as well. It is a qualifcaon with 9:; hour requirement< it means that one should complete 9:; credit hours at any accredited university. ) Wha do you hin is +an reconciliaton reconciliaton sae%en? sae%en?
! reconciliaon statement statement is prepared when the passbook balance diers rom the cashbook balance. *) !i3erentae !i3erentae 8u+lic 8u+lic and and 8rivae 8rivae Accountng? Accountng?
+ublic accounng is a type o accounng that is done by one company or another company. company. +rivate accounng is done or your own company. ,) Wha is pro9ec i%ple%enaton? i%ple%enaton?
+ro'ect implementaon involves si1 steps in total such as4
Ideny =eed
)enerate and #creen Ideas
(onduct *easible #tudy
evelop the +ro'ect
Implement the +ro'ect
(ontrol the +ro'ect
.) !o you hin Accountng Accountng andards andards are %andaory %andaory and why?
Yes, I do believe that accounng standards play play a very important role to prepare good quality and accurate fnancial reports. It ensures reliability and relevance in fnancial reports. /) (an you na%e di3eren di3eren +ranches +ranches of of accountng? accountng?
0here are three branches o accounng named as *inancial !ccounng/, !ccounng/, $anagement !ccounng/ and (ost !ccounng/. $0) !i3erentae !i3erentae Accountng and Auditng?
!ccounng is all about recording daily business acvies while auding is the checking that whether all these events have been noted down correctly or not. $1) !e#ne dual aspec er% in accountng?
!s the name implies, the t he dual aspect concept states that every transacon t ransacon has two sides. *or e1ample, when you buy something, you give the cash and get the thing. #imilarly # imilarly,, when you sale something, you lose the thing and gets the money. #o this ge>ng and losing is basically two aspects o every transacon. $) Wha do we %ean +y purchase purchase reurn in accountng? accountng?
It is the term introduced in the records or every deecve or unsasactory good returned back to its supplier.
$$) !e#ne he er% %aerial facs in accountng?
$aterial acts are the bills or any document that becomes the base o every account book. It means that all those documents, on which account book is prepared, are called material acts. $') -ave you ever prepared :I repors and wha are hese?
Yes, I have prepared ew $I# reports during my previous 'obs. $I# reports are created to ideny the e?ciency o any department o a company. $) !e#ne co%pany;s paya+le cycle?
It is the me required by the company to pay all its account payables. $*) !e#ne reail +aning?
It is a type o banking that involves a retail client. 0hese clients are the normal people and not any organi@aonal customers. $,) -ow %uch %ahe%atcs nowledge is necessary or re7uired in accountng?
=ot much knowledge but basic mathemacal background is required in accounng or operaons like addion, subtracon, mulplicaon and division. $.) !e#ne +ills receiva+le?
!ll types o e1change bills, bonds and other securies owned by a merchant that is payable to him are said as bills receivable. $/) !e#ne depreciaton and is ypes?
"y depreciaon we mean that a value o an asset is decreasing as it is in use. It has two types such as #traight 6ine $ethod/ and WriAen own 2alue $ethod/. '0) !i3erentae +eween consignor and consignee?
(onsigner is the owner o the goods or you can say he is the person who delivers the goods to the consignee. 0he consignee is the person who receives the goods. '1) !e#ne +alancing in accountng?
"alancing means to equate both sides o the 0Baccount i.e. the debit and credit sides o a 0Baccount must be equalCbalanced. ') -ow %uch satstcs nowledge is necessary or re7uired in accountng?
You must be very good at stascs i you want to do well in accounng. 8therwise, with minimum knowledge you cannot manage your day to day transacons eecvely in accounng. '$) !e#ne crap value in accountng?
It is the residual value o an asset. 0he residual value is the value that any asset holds a&er its esmated lie me. '') !e#ne :arginal (os?
#uppose you have to produce an addional unit o output. 0he esmated cost o addional inputs to produce that output is actually the marginal cost. ') !e#ne 8arttoning in accountng?
It is a kind o groups made on the basis o same responses by a system. '*) !i3erentae +eween provision and reserve?
+rovisions are the liabilies or the ancipated items such as depreciaon. You can say provisions are e1penses. Deserves are the profts o any company and a part o that proft is placed back to the business to keep it sustainable in tough mes o a company. ',) !e#ne <3se accountng?
8set accounng is one that decreases the net amount o another account to create a net balance. '.) !e#ne overhead in er%s of accountng?
It is the indirect e1penditure o a company such as salaries, rent dues etc. '/) !e#ne rade +ills?
We know that all types o transacons need to be documented. 0he trade bills are the documents, generated against each transacon. 0) !e#ne fair value accountng?
!s per air value accounng, a company has to show the value o all o its assets in terms o price on balance sheet on which that asset can be sold. 1) 2"plain wha is co%pound 9ournal enry?
! compound 'ournal entry is 'ust like other accounng entry where there is more than one debit, more than one credit, or more than one o both debits and credits. It is essenally a combinaon o several simple 'ournal entries. ) Wha are he accountng evens ha are fre7uenly involved in co%pound enries?
0he accounng events that are requently involved in compound entries are<
Decord mulple line items in a supplier invoice that address to dierent e1penses
Decord all bank deducons associated to a bank reconciliaon
Decord all deducon and payments related to a payroll
Decord the account receivable and sales ta1es related to a customer invoice
$) :enton he ypes of accouns involved in dou+le enry +oo=eeping?
ouble entry bookBkeeping involves fve types o accounts,
Income accounts
%1pense accounts
!sset accounts
6iability accounts
(apital accounts
') :enton wha are he rules for de+i and credi for di3eren accouns o increase he a%oun in your +usiness accouns?
0he rules or debit and credit or dierent accounts,
for a capial accoun , you credit to increase it and debit to decrease it
for an asse accoun , you debit to increase it and credit to decrease it
for a lia+iliy accoun , you credit to increase it and debit to decrease it
for an e"pense accoun , you debit to increase it, and credit to decrease it
for an inco%e accoun , you credit to increase it and debit to decrease it
) >is ou he ages of !ou+le 2nry yse%?
Decording o transacons in the 'ournal
+osng o 'ournal entry in to the respecve ledger accounts and then preparing a trial balance
+reparing fnal accounts and closing o books o accounts
*) :enton wha is he disadvanage of dou+le enry syse%?
0he disadvantage o double entry system,
I there is any compensatory errors, it is di?cult to fnd out by this system
0his system needs more clerical labour
It is di?cult to fnd the errors i the errors are in the transacons recorded in the books
It is not preerable to disclose all the inormaon o a transacon, which is not properly recorded in the 'ournal
,) :enton wha is eneral ledger accoun?
0he )eneral ledger account is an account where the company records all the inormaon or its various e1penses and income types into separate accounts. #uch that all the debits and credits pertaining to that parcular type o transacon can be entered in one place and kept balanced. .) Wha is he general classi#caton of accouns ha usually ledger accoun involve?
0he general classifcaon o accounts that usually ledger account involves are
!ssetsB (ash, !ccounts Deceivable
6iabiliesB !ccounts +ayable, 6oans +ayable
#tockholdersE equityB (ommon #tock
8perang revenuesB Devenues through #ales
8perang e1pensesB Dent %1pense, #alaries %1pense
=onBoperang revenues and gainsB Investment Income, gain on isposal o %quipment
=onBoperang revenues and lossesB Interest %1pense, 6oss on isposal o %quipment
/) :enton wha are hings will no +e included in +an reconciliaton sae%en?
In a bank reconciliaon statement, ollowing thing can be e1cluded.
irect payments made by bank not entered in (ash book
(heques deposited but not cleared
(heques dishonoured not recorded in cash book
Wrong debits given by bank
"ank (harges or Interst debited by bank
"anks direct payment not entered in (ash book
*0) @nder he accrual +asis of accountng when revenues are repored in he accountng period?
When service or goods have been delivered, then revenues are reported in the accounng period. *1) @nder wha ype of accoun does he unearned revenues fall?
0he unearned revenues alls under 6iability/ account. *) :enton wheher he accoun (ashB will +e credied or de+ied when a co%pany pays a +ill?
0he account (ash/ will be credited when a company pays a bill. *$) :enton wha is asses %inus lia+ilites?
!ssets minus liabilies is equal to ownersE equity or stockholders equity. *') 2nries o revenues accouns such as ervice Cevenues are usually?
%ntries to revenues accounts such as #ervice Devenues usually goes into credit side. *) 2"plain wha is he di3erence +eween accu%ulaed depreciaton and depreciaton e"pense?
0he dierence between accumulated depreciaon and depreciaon e1pense is that
Accu%ulaed depreciaton 4 It is the total amount o depreciaon that has been taken on a
companyEs assets up to the date o the balance sheet
!epreciaton e"pense 4 It is the amount o depreciaon that is reported on the income
statement. "asically, it is the amount that corresponds only to the period o me indicated in the heading o the income statement. **) >is ou so%e of he e"a%ples for lia+iliy accouns?
#ome o the e1amples or liability accounts
!ccounts +ayable
!ccrued %1penses
#hortBterm 6oans +ayable
Fnearned or eerred Devenues
Installment 6oans +ayable
(urrent +oron o 6ongBterm ebt
$ortgage 6oans +ayable
*,) 2"plain how you can ad9us e nries ino accoun?
0o ad'ust entries into account, you can sort entries into fve categories.
!ccrued e1penses4 %1penses have been incurred but t he vendors invoices are not generated or processed yet !ccrued revenues4 Devenues have been earned but the sales invoices are not generated or processed yet
eerred revenues4 $oney was received in advance o having been paid or earned
eerred e1penses4 $oney was paid or a uture e1pense
epreciaon e1pense4 !n asset purchased in one period must be allocated to e1pense in each o the accounng periods o the assetEs useul lie
*.) 2"plain wha a deferred asse is and give an e"a%ple?
! deerred asset reers to a deerred debit or a deerred charge. !n e1ample o a deerred charge is bond issue costs. 0hese costs involves all o the ees or charges that an organi@aon incurs in order to register and issue bonds. 0his ees are paid in a near me when the bonds are issued but it will not be e1pensed at that me. */) :enton wha is 4an Ceconciliaton?
! bank reconciliaon is a process done by a company to ensure that the companyEs records Gcheck register, balance sheet, general ledger account, etc.H are correct and that the bankEs records are also correct.
,0) :enton wha is deposi in ransiB?
! deposit in transit is a checks and cash that have been received and recorded by an enty, but which have not yet been entered in the records o the bank where the unds are deposited. ,1) 2"plain wha is an over accrual?
!n over accrual is a condion where the esmate or an accrual 'ournal entry is too high. 0his esmate may apply to an accrual o e1pense or revenue. ,) :enton wha is accoun receiva+le?
! short term amounts due rom buyers to a seller, who have purchased goods or services rom the seller on credit is reerred as account receivable. ,$) 2"plain wha are he actvites ha includes in (ash Dlow ae%en?
0he cash ow statement showcase the cash generated and used during the year or months. 2arious acvies that are involved or the (ash *low are
8perang acvies J business acvies accounng to cash
Invesng acvies J sale and purchase o equipment or property
*inancial acviesB purchase o stock and own bonds
#upplemental inormaonB e1change o signifcant items that donEt involve cash
,') :enton wha happens o co%pany;s (ash AccounB if i +orrows %oney fro% he +an +y signing a noe paya+le?
ue to double entry, the cash account/ will increase as such the liability account increases. ,) :enton which accoun is responsi+le for ineres paya+le?
!ccount which is responsible or aected by the interest payable is (urrent liability account/ ,*) :enton wha is reversing 9ournal enries?
Deversing 'ournal entries are entries made at the beginning o an accounng period to cancel out the ad'usng 'ournal entries made at the end o the previous accounng period. ,,) :enton where do generally accruals appear on he +alance shee?
!ccrued e1penses usually tend to be e1tremely shortBterm. #o you would record them within the current liabilies secon/ o the balance sheet. ,.) >is ou so%e of he accrued e"penses and he accouns in which you would record he%?
Wage accrual is entered with a credit to the wages payable account/
Interest accrual is entered with a credit to the interest payable account/
+ayroll ta1 accrual is entered with a credit to the payroll ta1es payable account/
,/) !eferred a"aton is a par of which e7uiy?
eerred ta1aon is a part o ownerEs equity. .0) :enton wha does he inves%en of personal asses +y he owner will do?
0he investment o personal assets by the owner will increase total assets and increase ownerEs equity. .1) Wha is he e7uaton for Acid=Tes Cato in accountng?
0he equaon or !cidB0est Dao in accounng
!cidB0est Dao 5 G(urrent assets J InventoryH C (urrent 6iabilies
.) >is ou hings ha fall under inangi+le asse?
0hings that all under intangible asset are,
+atents
(opyrights
0rademarks
"rand names
omain names, and so on.
.$) :enton wha is rial +alance in accountng?
In accounng, trial balance is an accounng report that lists the balances in each o an organi@aonEs general ledger accounts. 0his is done at the end o posng 'ournal entry to ensure that there are no posng errors. .') Where a cash discoun should +e recorded in 9ournal enry?
! cash discount should be recorded in 'ournal entry as a reducon o e1pense in cash account/. .) :enton why so%e asse accouns have a credi +alance?
#ome asset accounts have a credit balance due to ollowing reasons,
Deceiving and posng an amount that was higher than the recorded receivable
%1penses occurred aster than the agreed upon p repayments
!n error caused by posng an amount to a wrong account
0he amount o checks wriAen e1ceeded the posive amount in the (ash account
(onnuing to amor@e or depreciate an asset a&er its balance has reached @ero
.*) !e#ne wha is 4ad de+ e"pense?
! "ad debt e1pense is the amount o an account receivable that is considered to =80 be collecble.
.,) 2"plain wha is he :aser Accoun?
! $aster !ccount has subsidiary accounts. ! master account receivable could be anything, it could be account receivable or various individual receivable accounts. ..) :enton in which accoun does he unpresened che7ue will ge recorded?
0he unpresented cheque will get recorded as a credit to the cash account in the companyEs )eneral ledger. ./) Wha nowledge should #nancial accounan have?
! cerfed fnancial accountant should have knowledge about
!ccounng principles and pracces
Deporng and analysis o fnancial data
!uding pracces and principles
!ccount management
"udgets
#o&ware knowledge dealing with !ccounng
Knowledge o relevant laws, codes and regulaons
/0) Wha are he hree facors ha can a3ec your cash Eow and +usiness pro#a+iliy?
0he three actors that can aect your cash ow and business proft includes
(ash Eows fro% investng actvitesF It includes shares, bonds, physical property, machineries,
etc.
(ash Eows fro% operatng actvitesF It does not include cash received rom other sources like
investments
(ash Eow fro% #nancing actvitesF It includes any acvies that involves dividend payments
that the company made to its shareholders, any money that includes stock to the public, any money borrowed rom the lender etc. in other words, it is a report that tells the frm about the money borrowed and paid out in order to fnance its acvies. /1) 2"plain wha is accrual accountng?
!ccrual !ccounng is a method or measuring the perormance and posion o the company by idenying economic events regardless o when cash transacon happened. In this method, revenue is compared with the e1penditures, at the me in which the transacon happens rather than when the payment is made. /) 2"plain he er% accoun paya+le?
!ccount payable is reerred as the amount company owes to its suppliers, its employees, and its partners. In other words, it is the basic cost levied on the company to run business process that is outstanding. !ccount payable or one company may be account receivable or another frm or company. /$) 2"plain he %eaning of long=er% noes paya+le is or long er% lia+ilites?
6ongBterm notes payable or liabilies are reerred or that loan that are not supposed to due or more than a year. 0hese are the loans rom banks or fnancial instuon that are secured against various assets on the balance sheet, such as inventories. /') :enton wha is he di3erence +eween depreciaton and a%ortGaton?
(apital e1penses are either depreciated or amor@ed based upon the type o asset. !epreciaton
A%ortGaton
epreciate means to lose value o an asset due to their usage, wear and tear, outdated, etc.
epreciaon cost is calculated in terms o tangible assets like urniture, plant L machinery, building, etc.
0he purpose o calculang depreciaon costs recovery
0he easiest way to calculate depreciaon is to know the loss o value o an asset over its lie.
*or e1ample, a car worth M3;,;;; has esmated the lieme o 9; years a&er that it will have no value in the market. 0he cost or loss in value throughout this 9; years is known as depreciaon 2arious method or depreciaon includes straight line depreciaon, declining balance method, group depreciaon method, unit o meCproducon depreciaon method, etc.
!mor@e means to write o or pay the debt over a period o me. !mor@aon can be or loans, or it can be or Intangible assets !mor@aon cost is calculated in terms o intangible assets like goodwill, trademark, loans, patents, etc. 0he purpose o calculang amor@aon is also or cost recovery !mor@aon calculates the amount spent a&er the intangible assets throughout the lie or that asset *or e1ample, +harmaceucal (ompany spent MN; million dollars on a drug patent with a useul lie o N; years. 0he amor@aon value or that company will be M9 million each year 2arious method or amor@aon is negave amor@aon, @oning amor@aon, business amor@aon, etc.
/) :enton wha does #nancial sae%en of he co%pany includes?
*inancial statement o the company includes various inormaon like
"alance #heet G !ssets, liabilies, and equityH
Income statement G +roft or 6oss statementH
%quity statement
(ash ow statement
/*) 2"plain wha is woring capial?
Working capital is a fnancial metric that calculates the resources available to the company to fnance its dayBtoBday operaons. It is typically calculated by deducng current liabilies rom current assets. /,) 2"plain wha is ledger?
! ledger can be reerred as an accounng book that keeps the record o 'ournal e ntries in a chronological order to individual accounts. 0he process o recording this 'ournal entries is known as posng. /.) :enton he ypes of ledger?
0here are three types o ledger
)eneral ledger
ebtors ledger
(reditors ledger
//) 2"plain wha is AA8?
)!!+ means enerally Acceped Accountng 8rinciple < it is a ramework o accounng, standards, procedures L rules determined by the proessional accounng industry and pracced by publicly traded F.# companies all over the F.#.!. 100) 2"plain wha is dou+le=enry accountng? 2"plain wih an e"a%ple?
ouble entry accounng is an accounng system that requires recording business transacon or event in at least two accounts. It is the same concept o accounng, where every debit account should be matched with a credit account. *or e1ample, i a company takes a loan rom a bank, it receives cash as an asset but at the same me it creates a liability on a company. 0his single entry will aect both accounts, the asse accouns and the lia+ilites accouns , such entry is reerred as double entry accounng. 101) 2"plain wha does he sandard 9ournal enry includes?
! standard 'ournal entry includes, date o business transacon, name o the accounts aected, amounts to be debited or credited and a brie descripon o the event. 10) 2"plain wha is lia+ilites and wha all does include in curren lia+ilites?
6iability can be defned as an obligaon towards another company or party. It may consist o delivering goods, rendering services or paying money. 0hey are the opposite o assets, and it may include
!ccount payable
Interest and dividend payable
"onds payable
(onsumer deposits
Deserves or ederal ta1es
#hort term loans
10$) :enton in si%ple er%s wha is he di3erence +eween Asse e7uiy and lia+ilites?
AsseF What fnancial instute GbankH or people owe you
>ia+ilitesF It is something you owe people or organi@aon
27uiyF It is something you own, or e1ample, the amount o your house loan you paid o
21 Accountancy Interview Questions and Answers - Freshers, Experienced
Commerce >> 21 Accountancy Interview Questions and Answers - Freshers, Experienced
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Exp#ain each rea# account and nomina# account with examp#es$ %ea# Account is an account o& assets and 'ia(i#ities$ )ypes o& %ea# account Furniture Account 'and Account *achinery Account +ui#din! Account oodwi## Account atents )rade *ar.s Account$ Nomina# Account is an account o& incomes or expenses$ )ypes o& Nomina# account /a#ary Account, Commission aid0%eceived Account, )e#ephone Expenses Account, a!es Account, rintin! /tationery Account, Interest aid0%eceived Account$
hat is the di&&erence (etween mercanti#e system and cash system o& accountin! In mercanti#e system, expenses are considered as expenses durin! the period to which they pertain$ /imi#ar#y, incomes are considered to (e incomes durin! the period to which they pertain$ )his system o& accountin! is considered to (e more idea#$ 3n the
hand, in cash system, expenses are considered to (e expenses on#y when they are paid &or and the incomes are considered to (e income when they are actua##y received$ )his system o& accountin! is main#y used (y the or!ani4ations esta(#ished not &or earnin! the pro&its$
hat are the accountin! concepts Accountin! concepts are the (asic assumptions on which the process o& accountin! is (ased$
Fo##owin! are the accountin! concepts +usiness Entity Concept 5ua# Aspect Concept oin! Concern Concept Accountin! eriod Concept Cost Concept *oney *easurement Concept *atchin! Concept
hat is owner6s e7uity 8ow wi## you ca#cu#ate it 3wner6s e7uity, a#so .nown as capita# o& the (usiness is the c#aim o& the owner o& the (usiness a!ainst the assets o& the (usiness$ 3wner6s e7uity is ca#cu#ated (y su(tractin! e7uity o& creditors &rom the tota# e7uity$
hat is dou(#e entry +oo..eepin! hat are its ru#es 5ou(#e entry (oo..eepin! &o##ows the princip#e accordin! to which every de(it has a correspondin! credit9 hence tota# o& a## de(its is a#ways e7ua# to the tota# o& a## credits$ In this system, one account is de(ited and at the same time another account is credited (y the simi#ar amount$
Fo##owin! are the ru#es &or di&&erent account
For ersona# Accounts : 5e(it the receiver, Credit the !iver$ For %ea# Account : 5e(it what comes in, Credit what !oes out$ For Nomina# Account : 5e(it a## the expenses, Credit a## the incomes$
hat is (an. reconci#iation statement hat are the steps to prepare it +an. reconci#iation statement is a statement prepared at periodica# interva#s, with a view to indicated the items which cause disa!reement (etween the (a#ances as per the (an. co#umns o& the cash (oo. and the (an. pass (oo. on any !iven date$
Fo##ow the (e#ow steps to prepare a (an. reconci#iation statement )a.e the (a#ance either as per cash (oo. or as per pass (oo. as a startin! point$ Compare the items appearin! in the (an. co#umn o& the cash (oo. with the item appearin! in the (an. pass (oo.$ )ic. o&& the items in the pass (oo. with the entries in the cash (oo.$ A #ist o& untic.ed items either in cash (oo. or pass (oo. wi## (e &ound$ Add or deduct items &rom the (a#ance which has (een ta.en as a startin! point$ )he resu#tant &i!ure wi## (e the (a#ance as shown (y the pass (oo. or vice versa$
hat are the reasons &or the di&&erence in the (a#ances as shown (y the cash (oo. and the pass (oo. o
Che7ues deposited into the (an. (ut not yet co##ected and credited$
o
Che7ues issued (ut not yet presented &or payment$
o
+an. Char!es$
o
Amount co##ected or credited (y (an. on standin! instructions$
o
Amount paid or de(ited (y the (an. on standin! instructions$
o
Interest credited (y (an.$
o
Interest de(ited (y (an. on overdra&t$
o
5irect payment (y customers into the (an. account$
o
5ishonour o& che7ues or (i##s$
o
Errors in recordin! o& transactions (y either the &irm or the (an.$
hat is the ad;ustment entries made whi#e preparin! the &ina# accounts &rom the )ria# +a#ance o
C#osin! /toc.
o
5epreciation
o
3utstandin! Expenses
o
repaid Expenses
o
Accrued Income
o
Income received in advance
o
+ad 5e(its
o
rovision &or 5ou(t&u# 5e(ts
o
rovision &or 5iscount on 5e(tors
o
Interest on Capita#
o
5rawin!s
o
5e&erred %evenue Expenditure ritten o&&
o
A(norma# 'oss due to &ire etc$
o
oods distri(uted as &ree samp#es
o
oods sent on approva# (asis
o
Commission paya(#e to the mana!er
hat is de(it note and credit note hat is the di&&erence (etween them 5e(it note is an intimation sent to a person dea#in! with the (usiness that his account is (ein! de(ited &or the purpose indicated therein$ It is a note made out with a car(on dup#icate$ )he ori!ina# one is sent to the party to whom the !oods are returned and the dup#icate copy is .ept &or o&&ice record$ Credit note is an intimation sent to a person dea#in! with the (usiness that his account is (ein! credited &or the purpose indicated therein$
hat is the di&&erence (etween Cash discount and )rade
discount o
Cash discount is an a##owance made (y retai#ers to the customers &or prompt payment$ 3n the other hand, trade discount is an a##owance made (y the who#esa#er dea#er to retai#ers o&& the cata#o!ue or invoice price$ )his a##owance is made (etween purchasers and se##ers en!a!ed in the same c#ass o& trade$
o
Cash discount is a#ways a##owed or received when payment is made$ )rade discount ena(#es the retai#ers to se## the products to customers at cata#o!ue or price #ist issued (y the who#esa#er$
o
Cash discount is an a##owance in addition to the trade discount made (y the se##er to the (uyer$
o
Cash discount is recorded in account (oo.s whi#e trade discount is not shown separate#y$
o
)he main purpose o& a##owin! trade discount is to ena(#e the retai#ers to se## the !oods at #ist price whi#e the purpose o& providin! cash discount is prompt payment (y the de(tor to the creditor$
hat items are inc#uded in ro&it and 'oss account o
/a#aries
o
%ent
o
%ates and )axes
o
Interest
o
Commission
o
)rade Expenses
o
rintin! and /tationery
o
Advertisement
o
Carria!e out, &rei!ht out, carria!e out
o
%epairs
o
)rave##in! expenses
o
/amp#es
o
5epreciation
o
Apprentice premium
o
'i&e insurance premium
o
Insurance premium
o
Income tax
o
Interest on capita# and drawin!s
o
'oss or !ain on asset so#d
o
5iscount received and a##owed
o
)rade discount
hat is the di&&erence (etween a tria# (a#ance and a (a#ance sheet o
)ria# (a#ance is a #ist o& (a#ances &rom the #ed!er account whi#e (a#ance sheet is a statement o& assets and #ia(i#ities$
o
)ria# (a#ance contains (a#ances o& a## persona#, rea# and nomina# accounts, whi#e (a#ance sheet contains (a#ances o& on#y those persona# and rea# accounts which represent assets and #ia(i#ities$
o
)ria# (a#ance is prepared (e&ore preparation o& tradin! and pro&it and #oss account, whi#e (a#ance sheet is prepared a&ter the preparation o& tradin! and pro&it and #oss account$
o
)ria# (a#ance is prepared to chec. the arithmetica# accuracy o& postin! into #ed!er whi#e (a#ance sheet is prepared to indicate the &inancia# position o& the (usiness on a particu#ar date$
o
5e(t and credit (a#ances are shown side (y side whi#e (a#ance sheet is prepared on a ) &orm (asis, the #e&t hand side showin! #ia(i#ities whi#e ri!ht hand side representin! assets$
o
C#osin! stoc. does not appear in the tria# (a#ance whi#e it is shown on the assets side o& (a#ance sheet$
hat is Contin!ent 'ia(i#ities Contin!ent #ia(i#ity is an o(#i!ation, re#atin! to a past transaction or other event or condition, that may arise in conse7uence, as a &uture event now deemed possi(#e (ut
not pro(a(#e$ )hus such #ia(i#ities as may arise in &uture are ca##ed contin!ent #ia(i#ities$ For examp#e: !uarantee to a (an. &or #oan advanced to a third party, possi(#e pena#ties, &ines and pena#ties paya(#e to the !overnment or income tax authorities etc$ Future #osses &rom natura# ca#amities are not contin!ent #ia(i#ities$ )hey are not recorded in (oo.s o& account$ )hey do not appear on the #ia(i#ities side o& the (a#ance sheet$ )hey are shown (y way o& a &ootnote at the (ottom o& the (a#ance sheet$
Exp#ain convention o& materia#ity )his convention proposes that whi#e accountin! &or the various transactions, on#y those transactions wi## (e considered which have materia# impact on pro&ita(i#ity or &inancia# status o& the or!ani4ation and other insi!ni&icant transactions wi## (e i!nore$ In .eepin! with the princip#e o& materia#ity, unimportant items are either #et out or mer!ed with other items$ /ometimes, such items are shown as &ootnotes or in parentheses accordin! to their re#ative importance$
hat are the important terms used in (a#ance sheet Assets Current assets and &ixed assets )an!i(#e assets and Intan!i(#e assets E7uity is a c#aim which can (e en&orced a!ainst the assets o& the &irm in the court$ )hus e7uity re&ers to a c#aim he#d (y An owner on#y, A creditor on#y, An owner and the creditor (oth$ 'ia(i#ity Current 'ia(i#ity 'on! term 'ia(i#ity or &ixed 'ia(i#ities Contin!ent 'ia(i#ities
hat is 5e&erred %evenue Expenditure ive some
examp#es$ 5e&erred %evenue Expenditure is a type o& expenditure which does not resu#t into the ac7uisition o& any &ixed asset and the (ene&its &rom such expenditure is not received durin! the period which they are paid &or$ For examp#e - Initia# Advertisement Expenditure, %esearch and deve#opment Expenditure, re#iminary Expenses$
5e&ine )ria# +a#ance$ hat are the main characteristics and uses o& a tria# (a#ance )ria# (a#ance is a #ist o& a## (a#ances standin! on the #ed!er accounts o& a &irm at any !iven time$
Fo##owin! are the main characteristics o& a tria# (a#ance$ It is a statement prepared in a ta(u#ar &orm$ It has two co#umns: one &or de(it (a#ances and another &or credit (a#ances$ C#osin! (a#ances as shown (y #ed!er accounts are shown in the statement$ It is not an account (ut on#y a statement o& (a#ances$ It is prepared on the (asis o& (a#anced accounts$ It is a method o& veri&yin! the arithmetica# accuracy o& entries made in the #ed!er$ It he#ps in preparation o& )radin! account, ro&it 'oss account and +a#ance /heet at the end o& the period which exhi(it the &inancia# position o& the &irm$
hat are the common errors in accountin! hat steps wi## you &o##ow to #ocate errors Fo##owin! are the common errors in accountin!: Errors o& 3mission Errors o& Commission Errors o& rincip#e
Compensatin! Error )o #ocate the errors in the tria# (a#ance &o##ow the (e#ow steps: Chec. the tota# o& a## the su(sidiary (oo.s, cash (oo. and tria# (a#ance$ Ensure that a## the openin! (a#ances have (een correct#y (rou!ht &orward in the current year6s (oo.s o& account$ Ensure that a## the #ed!er accounts have (een proper#y (a#anced and the (a#ances o& a## the #ed!er accounts have (een re&#ected in the )ria# +a#ance$ )he di&&erence in tria# (a#ance shou#d (e ha#ved to #ocate such errors$ I& the di&&erence in the tria# (a#ance is divisi(#e (y < without any reminder, it may indicate the transposition or transp#acement o& the amounts$ )he tria# (a#ance o& the current year can (e compared with the tria# (a#ance o& the previous year to #ocate certain hi!h#i!htin! error$
hat is the re#ation (etween ;ourna# and #ed!er o
)he ;ourna# is the (oo. o& &irst entry whereas the #ed!er is the (oo. o& second entry$
o
)he ;ourna# as a (oo. o& source entry ordinari#y has !reater wei!ht as #e!a# evidence than the #ed!er$
o
)he ;ourna# is the (oo. &or chrono#o!ica# record whereas the #ed!er is the (oo. &or ana#ytica# record$
o
)he unit o& c#assi&ication o& data within the ;ourna# is the transaction9 in the #ed!er the unit o& c#assi&ication o& data within the #ed!er is the account$
o
)he process o& recordin! in the ;ourna# is ca##ed ;ourna#i4in!, the process o& recordin! in the #ed!er is ca##ed postin!$
'ist down the errors which a&&ect )ria# +a#ance and errors which do not a&&ect )ria# +a#ance$ Errors which a&&ect the a!reement o& tria# (a#ance: ron! tota#in! o& su(sidiary (oo.s$ ostin! on the wron! side o& an account
3mission o& postin! an amount in the #ed!er ostin! o& wron! amount Error in (a#ancin! Errors which do not a&&ect the a!reement o& tria# (a#ance: Error o& rincip#e Errors o& 3mission Errors o& Commission %ecordin! o& wron! amount in the (oo.s o& prime entry or su(sidiary (oo.s$ Compensatin! Errors$ 1$ hat are the di&&erent (ranches o& accountin! 2$ hat is the di&&erence (etween cost accountin!, &inancia# accountin! and mana!eria# accountin! =$ hat is the di&&erence (etween (oo. .eepin! and accountin! $ hat are the important terms which are used in accountin! ?$ hat is persona# account, rea# account and nomina# account @$ Exp#ain dua# aspect concept in accountin! $ hat is the di&&erence (etween mercanti#e system and accrua# system o& accountin! B$ hat are (i##s receiva(#e and (i##s paya(#e <$ hat are the accountin! concepts Exp#ain each o& them$ 1$ hat are the accountin! princip#es 11$ hat is owner6s e7uity 8ow wi## you ca#cu#ate it 12$ hat are the ru#es o& 5e(it and Credit 1=$ hat do you understand (y the term assets and #ia(i#ities 1$ hat is dou(#e entry (oo. .eepin! 1?$ hat is (an. reconci#iation statement hat are the steps to ca#cu#ate it 1@$ hat is overhead in accountin! terms 1$ hat is the di&&erence (etween cash &#ow and &und &#ow statements 1B$ hat is de(it note and credit note hat is the di&&erence (etween them 1<$ hat are the !o#den ru#es o& accountin! 2$ hat is an ad;ustin! ;ourna# entry 21$ hat is de&erred account 22$ Exp#ain Accountin! 11 2=$ hat are accountin! entities
2$ hat is the rovision hat is the Entry &or rovision 2?$ hat is the Importance o& accountin! standards 2@$ hat are the &unctions o& accountin! 2$ hat is Contin!ent 'ia(i#ities 2B$ hy Accountin! is important in (usiness 2<$ hat are the &our c#assi&ications o& +ad and 5ou(t&u# 5e(ts as per the context o& the +an. =$ hat is an operative accounts =1$ hat is the di&&erence (etween Accounts and Finance =2$ hat is F+) DFrin!e +ene&it )ax ==$ hat is the re#ationship (etween (oo..eepin! and accountin! =$ hy does the accountin! e7uation have to (a#ance =?$ hat is the di&&erence (etween accountin! and (oo..eepin! =@$ hat is accountin! period =$ hat is an accountin! #oss =B$ hat is an EA in accountin! =<$ hat is the so&tware app#ications used &or accounts receiva(#e $ hat is inventory mana!ement 1$ hat do you mean (y or.in! Capita# 2$ 5e&ine (oo. va#ue as app#ied to accountin! =$ hat are the (asic assumptions in accountin! $ hat is accountin! norma#i4ation ?$ hat are the various items &a## under (a#ance sheet @$ hat is the di&&erence (etween cash (asis and accrua# (asis (a#ance sheet $ 8ow do you pass a ;ourna# entry &or purchase order in (oo.s o& account B$ hat do you understand (y Contin!ent #ia(i#ity <$ 8ow to prepare &unds &#ow statement ?$ hat is !ross pro&it mar!in ?1$ hat is accountin! report ?2$ hat are the di&&erent .inds o& *I/ reports ?=$ hat is meant (y appropriation ?$ hat do you understand (y inter company sett#ement ??$ hat is the meanin! o& )5/ 8ow it is char!ed
Common Finance Interview Questions (and Answers) The WSP Blog > IB Interview Tips
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With the start of a new academic year, we now that !nance interviews are again at the forefront of many of yo"r minds# $ver the ne%t few months, we&ll 'e p"'lishing most fre("ently ased technical !nance interview ("estions and answers across a variety of topics ) acco"nting *in this iss"e+, val"ation, corporate !nance ) to get yo" prepared#
Before we get to acco"nting ("estions, here are some interview 'est practices to eep in mind when getting ready for the 'ig day# 1# Be prepared for technical ("estions# any st"dents erroneo"sly 'elieve that if they are not !nance-'"siness ma.ors, then technical ("estions do not apply to them# $n the contrary, interviewers want to 'e ass"red that st"dents going into the !eld are committed to the wor they&ll 'e doing for the ne%t few years, especially as many !nance !rms will devote considera'le reso"rces to mentor and develop their new employees# 2# $ne recr"iter we&ve spoen to said /while we do not e%pect li'eral arts ma.ors to have a deep mastery of highly technical concepts, we do e%pect them to "nderstand the 'asic acco"nting and !nance concepts as they relate to investment 'aning# Someone who can&t answer 'asic ("estions lie 0wal me thro"gh a C& has not s"3ciently prepared for the interview, in my opinion4# 5# 6nother added, /$nce a nowledge gap is identi!ed, it&s typically very di3c"lt to reverse the direction of the interview#4 7# 8eep each of yo"r answers limited to 2 min"tes# 9onger answers may lose an interviewer, while giving them additional amm"nition to go after yo" with more complicated ("estion on the same topic# :# It&s o to say /I don&t now4 a few times d"ring the interview# If interviewers thin that yo"&re maing "p answers, they&ll contin"e pro'ing yo" f"rther, which will lead to more creative answers, which will lead to more complicated ("estions and a slow reali;ation 'y yo" that interviewer nows that yo" don&t really now# This will 'e followed 'y "ncomforta'le silence# 6nd no .o' o
Now, on to Accounting Questions 6cco"nting is the lang"age of '"siness, so don&t "nderestimate the importance of acco"nting ("estions# Some are easy, some are more challenging, '"t of all of them allow interviewers to ga"ge yo"r nowledge level witho"t the need to as more comple% val"ation-!nance
("estions#Below we have selected most common acco"nting ("estions yo" sho"ld e%pect to see d"ring the recr"iting process# = Why do capital e%pendit"res increase assets *PP?@+, while other cash o"tAows, lie paying salary, ta%es, etc#, do not create any asset, and instead instantly create an e%pense on the income statement that red"ces e("ity via retained earnings 6 Capital e%pendit"res are capitali;ed 'eca"se of the timing of their estimated 'ene!ts ) the lemonade stand will 'ene!t the !rm for many years# The employees& wor, on the other hand, 'ene!ts the period in which the wages are generated only and sho"ld 'e e%pensed then# This is what di
ention capital e%pendit"res, asset sales, p"rchase of intangi'le assets, and p"rchase-sale of investment sec"rities to arrive at cash Aow from investing activities# ention rep"rchase-iss"ance of de't and e("ity and paying o"t dividends to arrive at cash Aow from !nancing activities# 6dding cash Aows from operations, cash Aows from investments, and cash Aows from !nancing gets yo" to total change of cash# Beginningofperiod cash 'alance pl"s change in cash allows yo" to arrive at endofperiod cash 'alance#
= What is woring capital 6 Woring capital is de!ned as c"rrent assets min"s c"rrent lia'ilitiesD it tells the !nancial statement "ser how m"ch cash is tied "p in the '"siness thro"gh items s"ch as receiva'les and inventories and also how m"ch cash is going to 'e needed to pay o< short term o'ligations in the ne%t 12 months# = Is it possi'le for a company to show positive cash Aows '"t 'e in grave tro"'le 6 6'sol"tely# Two e%amples involve "ns"staina'le improvements in woring capital *a company is selling o< inventory and delaying paya'les+, and another e%ample involves lac of reven"es going forward#in the pipeline = Eow is it possi'le for a company to show positive net income '"t go 'anr"pt 6 Two e%amples incl"de deterioration of woring capital *i#e# increasing acco"nts receiva'le, lowering acco"nts paya'le+, and !nancial shenanigans# = I '"y a piece of e("ipment, wal me thro"gh the impact on the 5 !nancial statements# 6 Initially, there is no impact *income statement+D cash goes down, while PP?@ goes "p *'alance sheet+, and the p"rchase of PP?@ is a cash o"tAow *cash Aow statement+ $ver the life of the asset depreciation red"ces net income *income statement+D PP?@ goes down 'y depreciation, while retained earnings go down *'alance sheet+D and depreciation is added 'ac *'eca"se it is a
noncash e%pense that red"ced net income+ in the cash from operations section *cash Aow statement+# = Why are increases in acco"nts receiva'le a cash red"ction on the cash Aow statement 6 Since o"r cash Aow statement starts with net income, an increase in acco"nts receiva'le is an ad."stment to net income to reAect the fact that the company never act"ally received those f"nds# = Eow is the income statement lined to the 'alance sheet 6 Fet income Aows into retained earnings# = What is goodwill 6 Goodwill is an asset that capt"res e%cess of the p"rchase price over fair maret val"e of an ac("ired '"siness# 9et&s wal thro"gh the following e%ample 6c("irer '"ys Target for H:m in cash# Target has 1 asset PP@ with 'oo val"e of H1, de't of H:m, and e("ity of H:m J 'oo val"e *69+ of H:m#
6c("irer records cash decline of H: to !nance ac("isition 6c("irer&s PP?@ increases 'y H1m 6c("irer&s de't increases 'y H:m 6c("irer records goodwill of H7:m
= What is a deferred ta% lia'ility and why might one 'e created 6 eferred ta% lia'ility is a ta% e%pense amo"nt reported on a company&s income statement that is not act"ally paid to the IKS in that time period, '"t is e%pected to 'e paid in the f"t"re# It arises 'eca"se when a
