Unlock success in your accounting interview with comprehensive answers to commonly asked 128 questions. From financial statements to tax regulations, gain the confidence to impress employers with your expertise. Prepare for your next accounting interview with our essential guide and showcase your accounting prowess like a true professional.
Accounting is an evergreen profession, with a consistent demand for skilled accountants across different domains. It can be a great career option for those with a flair for numbers and spreadsheets. To grow in your career as an accountant, you would need to have a solid understanding of the principles of finance, accountancy, and other related topics. If you are planning to attend an accountant interview and are looking for the most popular accounting interview questions then you have landed the right place. We will also cover basic accounting questions for interview for freshers with answers.
This article lists some of the most frequently asked accounting interview questions and answers that can help you crack your next accounting interview. Do remember that you need to have knowledge related to accounting basics for interview rounds.
Top Accounting Interview Questions and Answers
Q1. Tell me about yourself!
Ans. This is a general interview question. But since you are sitting for an accounting interview, you must craft an answer highlighting your professional accounting background. Mention your educational journey in finance, your experience (if any) working at an accounting firm, your milestones, and your strengths.
Make a note of how you can answer this question.
First, provide a basic introduction of yourself. Then you can bring in your experience in the field. You can talk about your years of experience working as an accountant for a specific industry and which areas of accounting were your primary focus areas.
If you are applying for a fresher accounting job, you can mention favourite subjects in accounting and how you have gained expertise in them with good marks in your college or certifications you have taken.
It is important for both freshers and experienced to discuss their educational qualifications. Mainly, it helps the recruiter understand the context of your background a little better. Apart from your university degree, having one or two accounting certifications in a specific area can boost your employability.
Discuss your professional milestones. Maybe it was streamlining the company’s budgeting process. Or it could be about preparing extensive reports that everyone in the team could understand clearly.
Along with that, it may also help to discuss which accounting software you may be comfortable using.
Lastly, talk about your career goals and possibly try to show those goals will align with the company.
“Sure, my name is [Your Name], and I have been working as an accountant for [number of years] with a focus on [mention any specific areas of expertise or industries you have experience in]
I earned my Bachelor’s degree in Accounting from [University Name], where I developed a strong foundation in financial management, auditing, and taxation. Additionally, I hold [certification name], which demonstrates my commitment to staying up-to-date with industry best practices.
In my previous role at [Company Name], I was responsible for managing the financial statements and preparing detailed reports for executive review. I also played a crucial role in streamlining the company’s budgeting process, resulting in a 20% reduction in overhead costs. Prior to that, I worked at [Company Name], where I gained extensive experience in conducting internal audits and ensuring compliance with regulatory requirements.
I possess a strong analytical mindset and exceptional attention to detail, which enable me to identify discrepancies and resolve financial issues efficiently. I am proficient in using accounting software like [software names], and I have a solid understanding of generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS).
In the long term, I aim to further develop my financial analysis expertise and eventually progress into a managerial role. I am particularly excited about the opportunity to join your esteemed organisation, as I believe it would provide me with the right platform to contribute my skills and continue growing as an accounting professional.”
|Popular Accounting and Finance Courses||Popular Investing Courses|
|Popular Banking Courses||Popular Insurance Courses|
Q2. What are the different types of accounting?
Ans. Different types of accounting are –
- Financial Accounting – This branch of accounting records, summarises and reports the business transactions that take place over a time period in an organisation. It is required in both the private and public sectors.
- Administrative Accounting – Administrative accounting is focused on the administrative aspects of the company and is used above all to assess the fulfilment of the established objectives and improve the implemented strategy. It is very useful for making forecasts and planning the actions and resources to be used.
- Tax Accounting -Tax accounting helps to register and prepare reports related to tax returns to the public treasury and payment of taxes.
- Cost Accounting – This type of accounting is more focused on companies of an industrial nature. It helps to make a detailed analysis of the unit costs of production, sales, and, in general, the production process that the company carries out.
- Management Accounting – Management accounting has a broader vision than cost accounting since it records all the economic and financial information of the company to be able to make short-term and long-term decisions.
Q3. Which accounting platforms have you worked on? Which one do you prefer the most?
Ans. Describe the accounting platforms (QuickBooks, Microsoft Dynamic GP, etc.) that you have worked with.
This is one of the important interview questions and answers for accountants. So consider the following tips while preparing for it.
- Show you have a good understanding of the accounting platform you use. Try not to mention those platforms you have not worked with before.
- You can further specify what type of businesses use them. For example, you can mention that small and growing enterprises use the affordable plan of QuickBooks Online for creating invoices, tracking expenses and utilising the software’s built-in reports.
- It is best to avoid solely stating personal preferences. Focus on the platform’s strengths and how it aligns with your work style or the needs of the organisation.
You can also get first-hand experience by using one of the software through included projects in accounting software courses and get the know-how. We have a list of some great courses for you, including QuickBooks Online Essential Training on LinkedIn Learning, QuickBooks Online & Start to Finish on Udemy, etc.
“I have experience working with several accounting platforms, including Xero, QuickBooks, and FreshBooks. Each of these platforms has its strengths and benefits.
My preferred platform is QuickBooks. I have used it extensively in my previous role and found it user-friendly, efficient, and well-suited for small to medium-sized businesses. It has robust reporting capabilities and seamless integration with other software.
That makes it an excellent tool for managing financial data effectively. That being said, I am adaptable and open to working with any accounting platform required for the role. My experience has equipped me with the skills to learn and utilise different systems effectively quickly.”
While answering, provide specific reasons for your preference, such as its robust reporting capabilities and seamless integration with other software.
It is important to assure the recruiter of your adaptability and eagerness to learn and utilise any accounting platform required for the role. Your experience with multiple platforms has equipped you with the skills to grasp and effectively work with different systems quickly.
By conveying your expertise in accounting platforms and your willingness to adapt, you will demonstrate your suitability for the position and commitment to contributing effectively to the organisation’s success.
Q4. What is working capital?
Ans. This is one of the basic accounts questions for interview. You can simply state its definition or give an example to further elaborate. Working capital is calculated as current assets minus current liabilities, which is used in day-to-day trading. In a simple accounting scheme, the concept of working capital focuses on the capital resources that a given company can count on in the short term to operate. These resources owned by the company are the cash, the portfolio of financial products, and other investments made by the company.
Q5. Give a suggestion to improve the company’s working capital flow.
Ans. In my opinion, the stock on hand can be the key to improving the working capital of the company. Of all the components of working capital, the stock is something we can control. We can pressure our debtors to pay us instantly, but we cannot have direct control over them because they are separate legal entities and, in the end, they are the ones who give us business.
We may tend to delay payments from our suppliers, but it ruins business relationships and hinders goodwill in the industry. Also, if we delay payments, they may not supply goods in the future. Maintaining liquidity in the form of funds in the bank can help the flow of working capital, but it comes at an opportunity cost.
With all of this in mind, I personally believe that inventory management can be of great help in improving the working capital of the company. Over-stock should be avoided and stock turnover rates should be high.
This is one of the generic interview questions for accounts professionals. It is also important from the point of view of bcom interview questions. There are industries that work with negative working capital, such as electronic commerce, telecommunications, etc. So do some research on working capital before answering.
Q6. How do you maintain accounting accuracy?
Ans. This is among the most basic accounting questions that employers ask all levels of candidates. Focus on mentioning the importance of keeping up with accuracy at all times and the tools you know how to use.
An example of answering a general accounting interview question like this one is given below.
Maintaining the accuracy of an organization’s accounting is an important activity as it can result in a huge loss. There are various tools and resources which can be used to limit the potential for errors to creep in and address them quickly if any errors do arise. My favourite is MS Excel.
Some of the most common ways of maintaining accuracy in accounting are:
- Identify revenue streams
- Keep a close eye on invoices and receipts
- Prepare tax returns to avoid penalty
- Prepare financial statements
- Keep tabs on deductible expenses
Q7. Since you mentioned that MS Excel is your favourite, please give us three cases where Excel will make your life easier.
Ans. This is a common accounting interview question.
While MS Excel has many advantages, it is easy to miss the main points regarding its use with company finances.
So, before answering, consider the following tips.
- Focus on how Excel can streamline processes, save time, and improve accuracy in the accounting context.
- Discuss practical examples demonstrating how Excel has made a difference in your previous accounting work or how it can enhance specific accounting tasks.
- Do not forget to mention formulas, data manipulation, and customisability.
“As an accounting professional, I find MS Excel an indispensable tool for streamlining various tasks. Here are three cases I can think of.
Financial Data Analysis
Excel’s powerful data analysis tools, such as pivot tables and charts, simplify organising and interpreting financial data. With pivot tables, I can quickly summarise large sets of financial information, generate reports, and gain valuable insights into the company’s financial performance.
Excel also has good charting capabilities that enable me to present data visually. Because of that, stakeholders have been able to understand complex financial trends and patterns.
Budgeting and Forecasting
Creating budgets and forecasts is a fundamental aspect of accounting. I can perform complex calculations and projections using Excel’s built-in formulas and functions. For example, spreadsheets make it easy to calculate NPV (Net Present Value), IRR (Internal Rate of Return), etc.
Excel’s flexibility also allows me to adapt the budget as circumstances change. It ensures that financial planning remains accurate and up-to-date.
Financial Reporting Automation
Excel’s automation features help me save considerable time in generating financial reports. I can input new data through predefined formulas and Excel will automatically update the entire report accordingly. This automation minimises the risk of manual errors and ensures that reports are consistently formatted and accurate. I also like the ability to link data from other sources, such as accounting software or databases, further streamlines the reporting process.
Read more in MS Excel:
Most Useful Excel Formulas | Min Max Functions in Excel | Average Functions in Excel | Introduction to MS Excel | Financial Modelling in Excel | MS Excel interview questions | Sum Function in Excel | Trim Function in Excel | Pivot Table in Excel | Percentage in Excel | Vlookup in Excel | Median Function in Excel | Types of Charts in Excel | Count Function in Excel | MS Excel Vs. Google Sheet | Remove Duplicates in Excel | Create Graph in Excel
Q8. What is TDS? Where do you show TDS on a balance sheet?
Ans. TDS (Tax Deducted at Source) is a concept aimed at collecting tax at every source of income. In a balance sheet, it is shown in the assets section, right after the head current asset.
Here are some important tips to consider while answering this accounting interview question.
- Give an example of how money is deducted at the source.
- Briefly explain the implication of TDS.
- Discuss why TDS does not show on the balance sheet itself. For example, the TDS amount that is withheld from various payments is recorded as a current liability until it is paid to the government. This is done to ensure that the company segregates the TDS amount and fulfils its obligation of remitting it to the government promptly. Once the TDS is paid to the government, it is no longer recorded as a liability on the balance sheet.
“A person liable to make specified payments to another person must deduct tax at source and remit it to the Central Government. The deductee, from whose income TDS has been deducted, can claim the credit based on Form 26AS or the TDS certificate issued by the deductor.
TDS rates are specified in the relevant provisions of the Income Tax Act or the First Schedule to the Finance Act. For payments to non-resident individuals, rates specified under Double Taxation Avoidance Agreements (DTAA) are considered.
Let’s consider a scenario where a company in India pays its employee a monthly salary of ₹50,000, and the applicable TDS rate for salary payments is 10%. The company is required to deduct TDS from the salary and remit it to the Indian government on behalf of the employee.
Calculation of TDS:
Salary Amount: ₹50,000
TDS Rate: 10%
TDS Amount: ₹5,000 (10% of ₹50,000)
The company will deduct ₹5,000 as TDS from the employee’s salary and remit this amount to the government. As a result, the employee will receive a net salary of ₹45,000 (₹50,000 – ₹5,000) after TDS deduction.
The TDS amount of ₹5,000 withheld by the company will be reported as a liability on its balance sheet until it is paid to the Indian government. This ensures that the company fulfils its obligation of remitting the TDS amount promptly.
The employee will also receive a TDS certificate (Form 16) from the company as proof of tax deduction. This certificate is important for the employee to file their income tax return and claim credit for the TDS deducted from their salary.”
Q9. What is the difference between ‘accounts payable (AP)’ and ‘accounts receivable (AR)’?
Ans. For this basic accounts payable interview question, you can refer to the table below.
|Accounts Payable||Accounts Receivable|
|The amount a company owes because it purchased goods or services on credit from a vendor or supplier.||The amount a company has the right to collect because it sold goods or services on credit to a customer.|
|Accounts payable are liabilities.||Accounts receivable are assets.|
Q10. What is the difference between a trial balance and a balance sheet?
Ans. This is a basic accounting interview question. For the answer, mention that a trial balance is the list of all balances in a ledger account and is used to check the arithmetical accuracy in recording and posting. A balance sheet, on the other hand, is a statement that shows a company’s assets, liabilities, and equity and is used to ascertain its financial position on a particular date.
“A trial balance and a balance sheet are both essential components of the accounting process, but they serve different purposes and are prepared at different stages of the accounting cycle.
A trial balance is a statement that lists all the general ledger accounts with their respective debit and credit balances at the end of an accounting period. Its main purpose is to ensure that the total debits equal the total credits, which helps in detecting errors or discrepancies in the accounting records. The trial balance is typically prepared before the financial statements are finalized, and it serves as an intermediate step in the accounting process.
On the other hand, a balance sheet is one of the primary financial statements that provide a snapshot of a company’s financial position at a specific point in time. It presents the company’s assets, liabilities, and shareholders’ equity. The balance sheet is prepared after all adjusting entries and closing entries have been made to the accounts. It is a reflection of the company’s financial health, as it shows what the company owns (assets), what it owes (liabilities), and the residual interest of the owners (equity).
The key difference between a trial balance and a balance sheet lies in their timing, content, and purpose. The trial balance is prepared during the accounting period, mainly to check for accuracy and completeness of the ledger balances, while the balance sheet is prepared at the end of the accounting period to present the company’s financial position. The trial balance includes all ledger accounts and their balances, while the balance sheet consolidates these balances into the respective categories of assets, liabilities, and equity.”
Q11. Is it possible for a company to show positive cash flows and still be in grave trouble?
Ans. Yes, if it shows an unsustainable improvement in working capital and involves a lack of revenue going forward in the pipeline.
In general, when referring to positive cash flows, a company receives more money than spending. But that does not define the financial stability of the company always. There can be uncertain situations even when there are positive cash flows but the company may still not be stable or successful.
Some situations are as follows.
- High Debts – A company may have significant debt. Even if the cash flow is positive, the company may only pay the debts and not invest in growth or operational activities.
- Decline in the Future Market – The company’s industry may be going through a change which can be impossible to survive in the long run. The positive cash flows at the moment may be surplus, but that is not a guarantee for the future.
- Legal Issues – If a company has fines or lawsuits, positive cash flow will not be of any help. There will be financial repercussions.
Although positive cash flows are a positive indicator, they should be evaluated in conjunction with other factors to determine the overall financial position of a company. Factors such as profitability, debt levels, liquidity, market conditions, and long-term sustainability should be considered to assess a company’s financial health comprehensively. Positive cash flows alone do not guarantee a company’s financial stability, and it is important to analyze the broader financial context to identify any potential risks or challenges.
Q12. What are the common mistakes in accounting?
Ans. This is one of the most frequently asked accounting interview questions.
The most common mistakes in accounting are –
- Mixing personal accounts with that of the company
- Little communication between the company and the accountant
- Not keeping a backup
- Misallocated resources
- Not saving the receipts
- Performing manual accounting
- Not keeping the accounting books up to date
Q13. What is the difference between inactive and dormant accounts?
Ans. Inactive accounts are closed and are not to be used in the future. Dormant accounts are not currently functional but may be used in the future. This is the basic difference you want to highlight in the accounting interview answer.
Use some of these tips for answering this question.
- Mention specific criteria or conditions that must be met for an account to be considered inactive or dormant.
- Discuss the implications of having inactive and dormant accounts in the financial records.
“In accounting, inactive and dormant accounts are two distinct terms used to describe the status of certain accounts, and they have specific characteristics that set them apart.
An inactive account refers to an account that has had no financial transactions or activities over a specific period. But it still remains open and is not officially closed or classified as dormant.
Inactivity in such a case may arise due to various reasons. It could be either that accounts opened were for specific projects and have concluded. Or, accounts that were previously active but have not been used for an extended period.
A dormant account, on the other hand, is an account that has remained inactive for an extended period and has little to no financial activity.
The definition of dormancy may vary depending on local regulations, but it is generally characterised by an account not having any transactions for a considerable duration. In some jurisdictions, specific timeframes, such as 12 months or more, might be used to classify an account as dormant.
The key difference between inactive and dormant accounts lies in their level of inactivity and the treatment they receive.
Inactive accounts have experienced no activity for a certain period but remain open and may be reactivated with a transaction.
Dormant accounts, on the other hand, are considered more inactive, often for an extended period. They may be subject to specific regulations or procedures set forth by the governing authorities.
Having both inactive and dormant accounts in the financial records can impact financial reporting and management decisions.
Inactive accounts might clutter the chart of accounts. That affects the financial analysis. Companies should regularly review their accounts and consider closing unnecessary inactive accounts to maintain accurate financial records.
Dormant accounts may require special treatment in accordance with local laws or accounting standards. In some jurisdictions, these accounts might be subject to escheatment, where unclaimed funds are transferred to the state or relevant authority after a certain period of dormancy.
Q14. Are you familiar with the Accounting Standards? How many accounting standards are there in India? [Frequently asked accounting interview question]
Ans. The Institute of Chartered Accountants of India (ICAI) recommends the Accounting Standards in India. Known as the Indian Accounting Standards or IND – AS, they come under section 133 of the Companies Act 2013. Accounting Standards keep getting revised. As of the latest update (February 2022) on the ICAI website, there are 29 of them.
While these are the essentials to mention, here are tips to follow.
- Mention the extent of your familiarity and any specific standards you have worked with.
- If you have experience with the Accounting Standards, highlight any specific standards you have worked with and briefly mention your experience in applying them.
- If you are not familiar with them or are unsure about the number of standards in India, it is best to admit that and express your willingness to learn and stay updated on relevant accounting practices.
“Yes, I am familiar with the Accounting Standards, which are a set of principles and guidelines that govern the preparation and presentation of financial statements. These standards play a crucial role in ensuring consistency and transparency in financial reporting.
As of my last knowledge update, there are 29 accounting standards in India, which are issued by the Institute of Chartered Accountants of India (ICAI). These standards cover various aspects of financial reporting, including revenue recognition, inventory valuation, fixed assets, and presentation of financial statements, among others.
In my previous role, I had the opportunity to work with several of these accounting standards. That was Accounting Standard (AS) 16 – Borrowing Costs, which include interest and other costs related to borrowing funds.”
Q15. Why do you think Accounting Standards are mandatory?
Ans. Accounting Standards play an important role in preparing a good and accurate financial report. It ensures reliability and relevance in financial reports.
Every organisation’s financial documents are created as per Accounting Standards. The uniformity allows one to compare its market position against others who follow the same mandatory principles. As a common methodology exists, there remains no room for misrepresentation.
Check Out >> IFRS vs GAAP: Which is suited for you?
Q16. If our organization has three bank accounts for processing payments, what is the minimum number of ledgers it needs?
Ans. In this case, there is a requirement of three ledgers for each account for proper accounting and reconciliation processes.
For this accounting interview question, here are some tips.
- Prepare why the three ledgers are needed as the minimum requirements.
- You may briefly describe the meaning of ledger – a book or electronic record that contains individual accounts used to record transactions.
- Discuss the types of transactions and accounts that need to be recorded for the three bank accounts.
“In order to accurately record the transactions related to the three bank accounts for payment processing, the minimum number of ledgers required will depend on the specific types of accounts involved in the organization’s accounting system.
At a minimum, the organization will need three separate ledgers, each dedicated to recording the transactions for one of the bank accounts. For example:
Bank Account 1 Ledger: This ledger will contain accounts related to transactions associated with Bank Account 1. It may include a ‘Cash’ account to record deposits and withdrawals, a ‘Bank Account 1’ account to track the balance, and any other relevant accounts.
Bank Account 2 Ledger: Similarly, this ledger will capture transactions specific to Bank Account 2. It will have accounts like ‘Cash’ for tracking cash movements, a ‘Bank Account 2’ account to monitor the balance, and other relevant accounts.
Bank Account 3 Ledger: The third ledger will focus on transactions involving Bank Account 3. It will encompass accounts such as ‘Cash’ for recording cash transactions, a ‘Bank Account 3’ account to monitor the balance, and any other accounts relevant to this particular bank account.”
Q17. What are some of the ways to estimate bad debts?
Ans. Some of the popular ways of estimating bad debts are – the percentage of outstanding accounts, aging analysis, and percentage of credit sales.
Don’t forget to provide good examples for this accounting related question to give your recruiter the idea that you actually know the subject in depth.
Here are some more important aspects to you must remember while answering this question.
- Elaborate on how each method works and the rationale behind using it.
- Describe the importance of estimating bad debts accurately to reflect a more realistic financial position and facilitate sound decision-making.
“While there are many other ways to estimate bad debts, here are the ones I know.
Percentage of Outstanding Accounts Method
The percentage of outstanding accounts method estimates bad debts by applying a predetermined bad debt percentage to the total outstanding accounts receivable balance. This percentage is typically based on historical data or industry standards. The formula used is:
Bad Debts Estimate = Outstanding Accounts Receivable Balance * Bad Debt Percentage
This method considers the entire balance of outstanding accounts, regardless of the age of individual receivables. While it offers a straightforward approach, it assumes a uniform risk of default across all accounts.
Aging Analysis Method
The aging analysis method categorises accounts receivable based on the length of time they have been outstanding. It then applies different bad debt percentages to each age category, reflecting the likelihood of collection for older accounts. The formula used for each category is:
Bad Debts Estimate for an Age Category = Outstanding Receivables in the Category * Bad Debt Percentage for the Category
This method provides a more nuanced estimation, considering the specific age of each receivable. Older accounts are assigned higher bad debt percentages, recognizing the increased risk of non-payment as debts age.
Percentage of Credit Sales Method
The percentage of credit sales method estimates bad debts by applying a predetermined bad debt percentage to the total credit sales made during a specific period. The formula used is:
Bad Debts Estimate = Total Credit Sales * Bad Debt Percentage
This method links the estimation of bad debts to the volume of credit sales, assuming that a certain proportion of credit sales will eventually become uncollectible.”
Q18. What is deferred tax liability?
Ans. Deferred tax liability signifies that a company may pay more tax in the future due to current transactions.
Find some more tips to answer this accounting interview question below.
- Just do not end the answer with a basic definition. That should be good to know, but your potential employer may be looking for more.
- You can highlight the temporary timing differences that give rise to such liabilities in financial reporting.
- Also discuss on how deferred tax liabilities are recognised, measured, and presented in the financial statements.
“I would describe deferred tax liability as something that represents the income tax obligation that a company is likely to face in the future. This could happen due to temporary differences between the financial accounting treatment and the tax treatment of certain items.
When a company prepares its financial statements, it follows accounting principles and standards that may differ from the rules used by tax authorities for calculating taxable income. These differences give rise to temporary timing discrepancies in recognising revenues, expenses, gains, or losses for financial reporting purposes compared to tax purposes.
Let me also tell you when deferred tax liability arises. It happens when the taxable income calculated for tax purposes is expected to exceed the taxable income reported in the financial statements in future periods.
Now, that represents the amount of additional tax that the company will have to pay in the future when these temporary differences reverse and are ultimately taxed at the applicable tax rates.
Further, I would like to add that the accounting treatment of deferred tax liability involves recognising it on the balance sheet as a liability. It is measured based on the enacted tax rates or tax laws that will be applicable in the periods when the temporary differences are expected to reverse.
When these differences gradually resolve over time, the deferred tax liability decreases. Then the corresponding tax expense is recognised in the income statement.”
Q19. What is a deferred tax asset and how is the value created?
Ans. A deferred tax asset is when the tax amount has been paid or has been carried forward but has still not been recognised in the income statement. The value is created by taking the difference between the book income and the taxable income.
Now this should be the base of your elaborate answer. You can add more value to the answer using these tips.
- You could describe how deferred tax assets are created and recognised.
- Preferably, talk about accounting treatment and the conditions that allow their recognition.
“A deferred tax asset represents a potential future tax benefit for a company. It arises due to temporary timing differences between the financial accounting treatment and the tax treatment of certain items. This results in lower taxable income reported for tax purposes when you compare to the income in the financial statements.
The creation of a deferred tax asset is based on the principle of conservatism in accounting. It ensures that a company does not overstate its financial position.
When temporary differences lead to lower taxable income in the current period, the company may not be able to utilise the entire tax benefit immediately.
This can carry forward the excess amount as a deferred tax asset to offset future tax liabilities when these temporary differences reverse and create taxable income.
Coming to, on how the value of a deferred tax asset is created, it happens when the amount of deductible expenses or tax credits exceeds the taxable income reported in the financial statements. This difference represents the future tax benefits that the company will be able to realise. This in turn reduces the company’s future tax burden and enhances its financial position.”
Q20. What is the equation for Acid-Test Ratio in accounting?
Ans. The equation for Acid-Test Ratio in accounting
Acid-Test Ratio = (Current assets – Inventory) / Current Liabilities
While this may seem as an easy answer, there is a chance of follow-up questions. For that, you can use these tips.
- Describe the relevant components of the equation.
- Discuss how these components help in measuring a company’s ability to meet its short-term financial obligations.
- Provide examples throughout the answer.
“It is a financial metric used in accounting to evaluate a company’s short-term liquidity and ability to pay off its current liabilities without relying on the sale of inventory. It is also known as Quick Ratio.
Let me define the components of the equation – Acid-Test Ratio = (Current assets – Inventory) / Current Liabilities
These are the company’s assets. They are expected to be converted into cash or used up within the next operating cycle or one year. A few common examples include cash, marketable securities, accounts receivable, and short-term investments.
This represents the value of the company’s stock of goods or raw materials that are held for production or resale. Since inventory may not always be quickly converted into cash, it is excluded from the quick assets used in this ratio.
These are the company’s short-term obligations that are due within the next operating cycle or one year, whichever is longer. Some examples include accounts payable, short-term debt, and accrued expenses.”
Q21. Name some popular accounting applications.
Ans. Businesses and individuals widely use several popular accounting applications to manage their financial records efficiently.
As you should mention only the ones you are familiar with, there are some things to consider while answering this question for the accounting interview.
- Briefly mention key features or functionalities that make each application stand out.
- Try to mention the accounting applications that are cloud-based as well as desktop-based to cater to different preferences and needs.
“I am familiar with accounting apps like Zoho Books, Xero, Wave, and Sage Intacct. I can tell which are useful for what due to my education (and on-the-job training).
QuickBooks: A comprehensive accounting software widely popular among small and medium-sized businesses. It offers various features like invoicing, expense tracking, bank reconciliation, and financial reporting.
Xero: A cloud-based accounting solution known for its user-friendly interface and real-time collaboration features. Xero is suitable for small businesses and offers bank connections, payroll, and inventory management tools.
Wave: A free accounting software designed for freelancers, entrepreneurs, and small business owners. Wave provides features like invoicing, expense tracking, and receipt scanning.
FreshBooks: Primarily targeted at self-employed professionals and small business owners, FreshBooks offers invoicing, time tracking, expense management, and client management functionalities.
Sage Intacct: Geared towards mid-sized and enterprise-level businesses, Sage Intacct is a cloud-based accounting system with advanced financial management features, multi-entity capabilities, and robust reporting options.
Zoho Books: Part of the Zoho suite of business applications, Zoho Books is known for its integration capabilities and affordability. It offers invoicing, expense tracking, inventory management, and multi-currency support.
NetSuite: A cloud-based ERP (Enterprise Resource Planning) solution that includes comprehensive accounting functionality along with other modules like inventory, CRM, and e-commerce.
SAP Business One: An ERP system designed for small and mid-sized businesses, SAP Business One offers accounting features integrated with other business processes like sales, purchasing, and inventory management.”
Q22. Which accounting application do you like the most and why?
Ans. This is the best time to narrow down your experience or hands-on learning of your preferred accounting app.
Before answering, please review these important tips to give your recruiter exactly what they need.
- Provide specific reasons why you like the chosen accounting application.
- Mention its features, user-friendliness, efficiency, or any other aspect that stands out to you.
- If you have personal experience using the preferred accounting application, share it briefly to add credibility to your choice.
“The accounting application I like the most is QuickBooks. There are several reasons why I find QuickBooks to be an excellent choice for businesses.
1. It has a user-friendly interface that makes it easy for accounting professionals and non-accounting users to navigate the software. The layout is intuitive, and the menu options are well-organized. This makes accessing various features and functionalities simple.
2. The software offers various accounting features, including invoicing, expense tracking, bank reconciliation, financial reporting, and payroll management. This comprehensive suite of tools allows businesses to efficiently manage their financial records and stay on top of their finances.
3. It caters to businesses of all sizes, from freelancers and startups to large enterprises. It can adapt to a growing business’s changing needs and complexities, making it a versatile solution.
4. This software integrates seamlessly with various third-party applications, such as payment gateways, e-commerce platforms, and CRM systems. This integration capability streamlines data flow between different business processes and enhances efficiency.
5. It offers a cloud-based version, which allows users to access their financial data from anywhere with an internet connection. This cloud-based functionality is particularly valuable for remote teams or businesses with multiple locations.
6. It has a large user community, with numerous online forums, tutorials, and resources available. This extensive support network makes finding solutions to common issues easier and learning new tips and tricks.
Let me briefly talk about my personal experience with QuickBooks. The software’s ease of use and robust features significantly improved our financial management processes and streamlined our reporting tasks. Generating accurate financial reports and monitoring cash flow in real time was particularly beneficial for informed decision-making.”
Q23. What is a bank reconciliation statement?
Ans. A bank reconciliation statement or BRS is a form that allows individuals to compare their personal bank account records to that of the bank. BRS is prepared when the passbook balance differs from the cashbook balance.
Now this is a typical answer. What you should do here is elaborate on it. Follow these tips before moving on to the sample answer.
- Explain how a bank reconciliation statement helps identify discrepancies between a company’s accounting records and the bank statement.
- You could further describe the steps involved in preparing a bank reconciliation statement and the key components included in the statement.
“The main purpose of a bank reconciliation statement is to identify and rectify discrepancies between the cash balance shown in the company’s books and the balance reported by the bank. These discrepancies may arise due to various reasons, such as outstanding checks, deposits in transit, bank fees, or errors in recording transactions.
The process of preparing a bank reconciliation statement involves the following.
- Obtain the latest bank statement from the financial institution and collect the company’s cash balance as recorded in the general ledger.
- Compare each transaction recorded in the bank statement with the corresponding entry in the company’s cash account. Identify any differences or discrepancies.
- Outstanding checks, which have been issued but not yet cashed by the recipients, and deposits in transit, which have been made but have not yet been credited by the bank, are the common items causing discrepancies.
- Make adjustments for outstanding checks and deposits in transit to reconcile the cash balance between the bank statement and the company’s records.
- Account for any bank fees, service charges, or interest earned that may not have been recorded in the company’s books.
- After making all necessary adjustments, update the company’s cash balance to match the reconciled amount.
- Summarise the adjustments made during the reconciliation process in a formal document known as the bank reconciliation statement.
A bank reconciliation statement is a critical control mechanism for a company’s financial management. It helps ensure the accuracy and integrity of financial records by detecting errors, unauthorised transactions, or fraudulent activities.
Additionally, a properly reconciled bank statement aids in providing a more accurate depiction of the company’s actual cash position, which is crucial for making informed financial decisions and maintaining financial stability.”
Q24. What is tally accounting?
Ans. It is accounting software used by small businesses and shops to manage routine accounting transactions. It is a popular accounting software created by Tally Solutions. It is used for all kinds of accounting-related activities including recording of financial transactions, generating statements of liabilities and assets, and other analytical purposes.
Basic accounting questions for interview, like this one, are to test your hands-on knowledge of tools. So craft your answers that show how much you know about the features.
Q25. What are fictitious assets?
Ans. This is one of the basic questions of accounting. Fictitious assets are intangible assets and their benefit is derived over a longer period, for example, goodwill, rights, deferred revenue expenditure, miscellaneous expenses, preliminary expenses, and accumulated loss, among others.
To excel in the accounting interview round, you may also consider taking up courses in the following subjects:
Q26. Can you explain the basic accounting equation?
Ans. Yes, since we know that accounting is all about assets, liabilities, and capital. Hence, its equation can be summarized as:
Assets = Liabilities + Owners Equity.
Q27. What is CMM?
Ans. CMM or Capability Maturity Model is based on the Carnegie Mellon Software Engineering Institute Capability Maturity Model. It is primarily associated with software development processes and used in project management. But they are benchmarks to be understood when it comes to highlighting the maturity of the financial progress in an organisation.
Below are some more tips to answer this accounting question.
- Mention why CMM is important in the accounting domain and its impact on improving processes.
- Explain what the framework includes.
“The CMM framework has several interconnected elements which can help in knowing the organisation’s accounting progress.
- Maturity Levels: Initial, Managed, Defined Level, Quantitatively Managed Level, Optimising Level.
- Key Process Areas: To identify all the related activities cluster that together help achieve a set of goals.
- Goals: The goals represent the conditions that must be met for the key process area to be successfully implemented in a lasting and effective manner. The achievement of these goals indicates the organisation’s established capability at that maturity level. The goals define each key process area’s scope, boundaries, and purpose.
- Common Features: These features can be classified into five types: commitment to performing, ability to perform, performed activities, measurement and analysis, and verification of implementation.
- Key Practices: The key practices outline the fundamental elements of infrastructure and practice that significantly contribute to the successful implementation and institutionalisation of the respective area.
Here are some of the main benefits of CMM.
- CMM encourages the establishment of standardised accounting processes and practices. This is to reduce the chances of errors and improve overall consistency.
- By identifying inefficiencies in accounting workflows, organisations can streamline processes and achieve higher levels of efficiency in financial operations.
- CMM emphasises the importance of robust internal controls, leading to better risk management and increased compliance with accounting standards and regulations.
- CMM promotes a culture of continuous improvement, encouraging organisations to regularly assess and optimise their accounting processes to adapt to changing business needs.”
Q28. What is the meaning of purchase return in accounting?
As the name suggests, a purchase return is a transaction where the buyer of merchandise, inventory or fixed assets returns these defective or unsatisfactory products back to the seller.
Follow these important tips for answering.
- Describe the common scenarios that lead to purchase returns, such as damaged goods, wrong shipments, or overstocking.
- Emphasise the role of purchase return in financial transactions.
- Mention how purchase returns are recorded in the accounting books and the impact on financial statements.
“Purchase returns occur in various scenarios. This could happen when the received goods are damaged during transit, not as per the specifications. It could also happen when the buyer is overstocked and needs to return excess inventory. In these situations, the buyer initiates the return process by notifying the seller about the problem and seeking authorisation for the return.
The accounting treatment for purchase returns involves adjusting the financial records to account for the returned goods accurately.
If the purchase return results in a cash refund or a credit note, additional journal entries would be made accordingly.
Purchase return is a critical concept in accounting, as it ensures the accuracy of financial records and reflects the reality of the business’s transactions. Properly accounting for purchase returns helps in maintaining transparency and reliability in financial reporting, which is essential for making informed business decisions and building trust with stakeholders.”
Q29. What is retail banking?
Ans. Retail banking or consumer banking involves a retail client, where individual customers use local branches of larger commercial banks.
If you want to prepare more banking-related concepts for commonly asked accountant job interview questions and answers, read these blogs.
Q30. What is offset accounting?
Ans. Offset accounting is the process of cancelling an accounting entry with an equal but opposite entry. It decreases the net amount of another account to create a net balance.
Q31. What are the trade bills?
These are the bills generated against each transaction. It is a part of the documentation procedure for all types of transactions.
It is important to describe the importance of trade bills in accounting too.
“Technically, trade bills are defined as essential elements in the field of accounting that represent the credit transactions between businesses for the sale and purchase of goods or services.
Based on my understanding, there are many important benefits.
- Trade bills enable businesses to offer credit to customers, promoting sales by allowing them to purchase goods or services with a promise to pay at a later date. This credit facility strengthens customer relationships and enhances sales opportunities.
- Trade bills influence a company’s cash flow by representing pending payments from customers and outstanding payments to suppliers. Proper management of trade bills is crucial to maintaining a healthy cash flow and liquidity position.
- Trade bills form a part of a company’s working capital management. Efficient management of trade receivables and payables ensures that the company has adequate funds to meet its short-term obligations and invest in business growth.
- Accurate accounting and reporting of trade bills are vital for preparing financial statements, such as the balance sheet, income statement, and cash flow statement. These financial reports provide valuable insights into a company’s financial health and performance.”
Q32. Describe in one sentence the meaning of fair value accounting.
Ans. As per fair value accounting, a company has to show the value of all of its assets in terms of price on the balance sheet on which that asset can be sold.
Q33. What happens to the cash, which is collected from the customers but not recorded as revenue?
Ans. It goes into “Deferred Revenue” on the balance sheet as a liability if no revenue has been earned yet.
While this is a very simplistic answer, you can enrich it following these methods.
- Address the situation where cash has been collected from customers but not yet recorded as revenue in the accounting records.
- You should describe how this unrecorded cash is handled in the accounting process and the implications it may have on financial statements.
“Let me first describe a scenario.
When cash is collected from customers but not yet recorded as revenue in the accounting records, it creates a situation where there is unrecorded cash inflow in the business.
So how should an accountant fix that?
In such cases, the unrecorded cash is typically considered as “Unearned Revenue” or “Deferred Revenue.” Unearned revenue represents the cash received from customers for goods or services that have not yet been delivered or fully rendered. Instead of recognising this cash as revenue immediately, it is recorded as a liability on the balance sheet.
As the goods or services are delivered, and the revenue can be recognised, the unearned deferred revenue is gradually reduced. Then the corresponding amount is transferred to the revenue account. This process is typically done using adjusting entries at the end of an accounting period.”
Q34. How important is documentation when it comes to accounting?
Ans. I believe that the accounting team of any company has a responsibility to present a true and fair view to the shareholders and management of the company. The accounting team is like the watchdog of the organization.
That is why documentation becomes very important in accounting. Appropriate documentation must be verified so that an adequate audit trail is maintained and justified when necessary.
Q35. What is an MIS report, have you prepared any?
Ans. Yes, I have prepared MIS reports. It is an acronym for Management Information System, and this report is generated to identify the efficiency of any department of a company.
Check out MIS Executive interview questions too!
Q36. What do you mean by the company’s payable cycle?
Ans. It is the time required by the company to pay all its account payables.
Apart from this understanding, it is important to define this in the context of financial management, which will be helpful when preparing for ap interview questions.
You could describe the process step-by-step, from invoice processing to supplier payment.
Also discuss the payable cycle in managing the company’s cash flow, working capital, and vendor relationships.
“The company’s payable cycle refers to the series of activities involved in managing and processing payments to suppliers for goods or services received. It represents the time frame between the acquisition of goods or services and the actual payment made to the suppliers.
Let me also explain how it works.
The payable cycle starts with the company’s purchase of goods or services from suppliers on credit. After receiving the goods or services, the company verifies the accuracy and quality of the delivered items. An invoice is generated by the supplier, indicating the amount owed and the payment terms.
The company then reviews and approves the invoice for payment. Depending on the agreed-upon credit terms, the payment is scheduled for a specific period, such as 30 days or 60 days. During this time, the company’s accounts payable department maintains a record of outstanding payables, keeping track of due dates and ensuring timely payments.
The company’s payable cycle impacts the company’s cash flow by influencing the timing of cash outflows for payments. It also provides valuable data for financial planning and budgeting.”
Q37. What is Scrap Value in accounting?
Ans. Scrap Value is the residual value of an asset that any asset holds after its estimated lifetime.
So what else should you take care of while answering this basic question on accounting?
- Mention the formula to discuss how scrap value is recorded and accounted for in the financial statements.
- You could explain the importance of it in financial reporting.
“Scrap value refers to the estimated worth of an asset at the end of its useful life or after it has been fully depreciated. In accounting, it represents the amount that a company expects to receive from selling or disposing of the asset at the end of its productive life.
I can also tell you how to calculate the scrap value.
The formula for calculating depreciation with scrap value is:
Depreciation Expense = (Initial Cost – Scrap Value) / Useful Life
For example, if you purchase a machine for INR 10,000 with a useful life of 5 years and a scrap value of INR 1,000, the annual depreciation expense would be (10,000 – 1,000) / 5 = INR 1,800 per year.
Scrap value is important in accounting as it affects the calculation of depreciation expense and the subsequent financial reporting. Accurate estimation of scrap value is crucial for determining the actual cost of using the asset over its useful life.
It also helps in making informed decisions about whether to retain or dispose of an asset, considering its potential residual value.”
Q38. Which account is responsible for interest payable?
The current liabilities section of the balance sheet holds the record of the interest payable.
Now you must enrich the answer in the following ways.
- Describe how interest payable arises in company transactions.
- Show how interest payable is recorded in the accounting books.
“Interest payable is the amount of interest that a company owes but has not yet paid to its lenders or creditors. It arises from borrowing money through loans, bonds, or other debt instruments, where the company has an obligation to pay interest to the lender based on the agreed-upon interest rate and payment schedule.
The interest expense is recognised in the income statement when a company incurs interest on its outstanding debt. The balance sheet records the corresponding interest payable as a current liability.
Interest payable, being a current liability, is crucial for financial reporting and assessing the company’s short-term obligations. It is expected to be settled within a relatively short period, usually one year or the operating cycle, whichever is longer. Proper management of interest payable helps evaluate the company’s liquidity and short-term debt obligations. This influences financial decisions related to cash flow management and working capital.”
Prepare for Top Financial Analyst Interview Questions
Q39. What is the departmental accounting system?
Ans. It is a type of accounting information system that records all the financial information and activities of the department. This financial information can be used to check the profitability and efficiency of every department.
Q40. What is a perpetual inventory system?
Ans. Perpetual inventory is a methodology that involves recording the sale or purchase of inventory immediately using enterprise asset management software and computerized point-of-sale systems.
Q41. What do you mean when you say that you have negative working capital?
Ans. When a company’s current liabilities exceed its current assets, it is named negative working capital. It is a common terminology in certain industries like retail and restaurant businesses.
Q42. What are the major constraints that can hamper relevant and reliable financial statements?
Ans. Here are some of the major constraints:
- Delay, which leads to irrelevant information
- No balance between costs and benefits
- No balance between the qualitative characteristics
- No clarity in true and fair view presentation
Support this accounting interview question with relevant examples.
Explore More – What is Corporate Finance?
Q43. Tell me the golden rules of accounting, just mention the statements.
Ans. This accounting interview question tests your professional view of the subject. You can mention by elaborating this accounting interview answer on the three golden rules of accounting.
- Debit the receiver, credit the giver
- Debit what comes in, credit what goes out
- Debit all expenses and losses, credit all incomes and gains
Q44. Please elaborate on what this statement means – “Debit the Receiver, Credit the Giver”.
Ans. So, this is among the most frequently asked accounting interview questions. Your reply should be –
This principle is used in the case of personal accounts. If a person is giving any amount either in cash or by cheque to an organization, it becomes an inflow and thus, that person must be credited in the books of accounts. Therefore, when an organization received the money or cheque, it needs to credit the person who is paying and debit the organization.
Q45. Any idea what is ICAI?
Ans. Of course, it is the abbreviation of the Institute of Chartered Accountants of India. But this is typically not expected for this accounts related questions asked in interview.
Some key elements to add to this basic accounting interview question.
- Besides the abbreviation of ICAI, describe its importance to an accounting professional in India.
- Also, briefly highlight what ICAI contributes to accounting benchmarks in the country.
“ICAI or the Institute of Chartered Accountants of India is an authorised accounting body that is responsible for regulating the Chartered Accountant profession as well as the overall accounting profession in the country.
It has formulated the Indian Accounting Standards (Ind-AS) that are followed by almost all organisations in India.
This body also provides continuing education digitally in various business subjects. One can go for ICAI courses.”
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Q46. Give some examples of fixed assets that you record in the balance sheet?
Ans. To answer this accounting interview question, you need to specify your understanding of the concept. Before jumping straight to the answer, you may want to define fixed assets first. A brief intro such as – fixed assets are those which are not consumed in one fiscal year, will ensure the recruiter that you mean these are long-term assets. You can further mention that these assets are recorded in the asset section of the balance sheet.
Some typical examples of fixed assets are automobiles, furniture, office, or any equipment an organisation requires.
Q47. What is Executive Accounting?
Ans. Executive Accounting is specifically designed for service-based businesses. This term is popular in finance, advertising, and public relations businesses.
Q48. What are the bills receivable?
Ans. Bills receivable are the proceeds or payments a merchant or company will receive from its customers in the future.
Check out these additional tips to answer this important accounting interview question.
- You could highlight which parties are involved in bills receivable.
- There is a fixed timeline that both parties must agree to. You must tell that.
- Describe how it is recorded in the accounting books.
“I would like to describe that bills receivable is a written promise that a company receives from its customers or other parties for the amount owed. These bills are legally binding and entitle the company to receive payment from the debtor on a specified future date.
There are two parties involved in bills receivable. The issuer (the company) and the acceptor (the customer or debtor). The company issues the bill, while the customer accepts the bill.
Bills receivable have a specific maturity or due date, indicating when the payment is expected. This due date can be short-term (e.g., 30, 60, or 90 days) or long-term, depending on the terms of the bill.”
Q49. Define Balancing.
Ans. Balancing means equating or balancing both the debit and credit sides of a T-account. Ideally, you can mention the parts of a T-account and even provide examples for this accounts interview question.
Q50. What is Marginal Cost?
Ans. If there is an increase in the number of units produced, the total cost of output is changed. Marginal cost is that change in the cost of an additional unit of output.
Q51. What are Trade Bills?
Ans. Every transaction is documented and the trade bills are those documents, generated against each transaction.
Q52. Can you define the term Material Facts?
Yes, these are the documents such as vouchers, bills, debit and credit notes, receipts, etc. They serve as the base of every account book.
Here are some additional tips you should use while discussing your answer.
- Mention that this term falls under the materiality convention of accounting. (You could also elaborate on the four conventions of accounting – conservatism, consistency, disclosure, and materiality.)
- Give an example explaining what happens when material facts are not stated clearly.
“Material facts, in the context of accounting and financial reporting, refer to information or events that could significantly influence the economic decisions of users of financial statements.
These facts are deemed “material” only when their omission or misrepresentation would likely affect the judgments or decisions made by stakeholders.
If relevant material information is not disclosed, stakeholders may make uninformed decisions. That would lead to potential financial risks and adverse consequences for both the company and its stakeholders.
Allow me to give an example of the importance of material facts.
Let’s consider a hypothetical scenario involving a publicly traded company, XYZ Inc. The company recently faced a significant product recall due to safety concerns. But, in their financial statements and public disclosures, XYZ Inc. did not clearly state the material facts related to the recall.
Now when it comes to financial reporting, investors and stakeholders may not be aware of the potential financial impact of the recall on the company’s revenue, expenses, and future profitability.
The lack of clear disclosure about the product recall could erode trust in XYZ Inc. among its investors, customers, and other stakeholders.”
Q53. What are the different stages of the Double Entry System?
Ans. There are three different stages of the double-entry system, which are –
- Recording transactions in the accounting systems
- Preparing a trial balance in respective ledger accounts
- Preparing final documents and closing the books of accounts
Q54. What are the disadvantages of a Double Entry System?
Ans. This is a question on basic journal entries for interview:
- Difficult to find the errors, especially when transactions are recorded in the books
- In case of any error, extensive clerical labor is required
- You can’t disclose all the information of a transaction, which is not properly recorded in the journal
Q55. What are Assets Minus Liabilities?
Ans. Both assets and liabilities are important elements of a balance sheet.
Assets minus Liabilities is often used in the Financial Accounting System (FAS) process. It is part of the basic accounting equation, but has a formula like this one.
Assets – Liabilities = Net Assets.
In this answer,
- Describe what is an asset, liabilities, and net assets.
- Discuss the reason why net assets are important in a company’s accounting.
“Based on the formula (Assets – Liabilities = Net Assets), let me describe what assets, liabilities, and net assets are.
An asset is an economic resource. It is owned or controlled by an individual, organisation, or entity. This has the potential to provide future economic benefits. Overall, they are the valuable resources that a company possesses and can use to generate revenue or provide services.
Some examples of assets are cash, accounts receivable, inventory, property, plant, equipment, patents, trademarks, and investments.
Liabilities represent the claims of creditors against the company’s assets. They reflect the company’s obligations to repay borrowed funds, fulfil contracts, or settle outstanding obligations.
A few examples of liabilities are accounts payable, loans, bonds, and salaries payable.
Net Assets represent the ownership claim of the company’s shareholders on the company’s assets, also known as owner’s or a stockholder’s equity”
Q56. What is GAAP?
Ans. GAAP is the abbreviation for Generally Accepted Accounting Principles (GAAP) issued by the Institute of Chartered Accountants of India (ICAI) and the provisions of the Companies Act, 1956. It is a cluster of accounting standards and common industry usage, and it is used by organizations to:
- Record their financial information properly
- Summarize accounting records into financial statements
- Disclose information whenever required
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Q57. Can you tell me some examples of liability accounts?
Ans. These are basic accounting concepts that you should explain.
|Accounts Payable||Unpaid debts to suppliers or creditors for goods or services received.|
|Accrued Expenses||Expenses incurred but not yet paid or recorded in the accounting books.|
|Bonds Payable||Long-term debt securities issued by a company to raise funds from investors.|
|Customer Deposits||Advance payments made by customers for goods or services to be delivered in the future.|
|Income Taxes Payable||Taxes owed to the government based on the company’s taxable income.|
|Installment Loans Payable||Long-term loans paid in regular installments over a specified period.|
|Interest Payable||Unpaid interest on borrowed funds or debts.|
|Lawsuits Payable||Liabilities arising from pending legal actions or settlements|
|Mortgage Loans Payable||Long-term loans secured by real estate property.|
|Notes Payable||Short-term or long-term written promises to repay borrowed funds.|
|Salaries Payable||Wages owed to employees but not yet paid at the end of an accounting period.|
|Warranty Liability||Obligations to cover potential costs of repairs or replacements for products under warranty.|
Q58. What is the difference between accounts receivable and deferred revenue?
Ans. Accounts receivable is yet-to-be received cash from products or services that are already sold/delivered to customers, whereas, deferred revenue is the cash received from customers for services or goods not yet delivered.
You could further highlight the nature of the transactions that give rise to accounts receivable and deferred revenue.
Enrich this answer by mentioning that the accounts receivable arise from credit sales, where a company allows customers to make purchases without immediate payment. Deferred revenue, in contrast, arises when a company receives payment from customers before fulfilling its obligation to provide goods or services.
Q59. Where should you record a cash discount in a journal entry?
Ans. A cash discount should be recorded in the “Accounts Receivable” or “Accounts Payable” account, depending on whether the company is offering or receiving the discount. Additionally, it should be recorded in a separate “Sales Discounts” or “Purchase Discounts” account to track the discounts separately from the main accounts.
You could also discuss the importance of recording a cash discount. Mention clearly that properly recording cash discounts in journal entries ensures accurate financial reporting and transparency. It also allows businesses to analyse the effectiveness of discount offerings in improving cash flow and incentivising early payment from customers.
Q60. What is a compound journal entry?
Ans. A compound journal entry is just like other accounting entries; the only difference is that it affects more than two account heads. The compound journal entry has one debit, more than one credit, or more than one of both debits and credits.
Q61. What is the dual aspect term?
Ans. The dual aspect suggests that every business transaction requires double-entry bookkeeping. This can be understood with the example- If you purchase anything, you give the cash and receive the stuff, and when you sell anything, you lose the stuff and earn the money. This defines the aspects of every transaction.
Q62. Define depreciation.
Ans. This is one of the most basic accounting questions for an interview. You can just mention that depreciation refers to the decreasing value of any asset that is in use. It is necessary for calculating a business’s net income in every accounting period.
Do provide examples to elaborate on this accounting interview answer.
Q63. What are the different types of depreciation?
Ans. This is a follow-up to the previous accounting interview question. Mention the following, common depreciation methods.
- Straight Line Depreciation
- Double Declining Balance
- Units of Production
- Discounted Cash Flow
All these methods have similar inputs as variables.
- Useful Life – This refers to a period when the asset remains an economical option for a business. Beyond this time, the asset is not useful.
- Salvage Value – This refers to the asset’s value after the useful value. A business can sell it for a reduced price.
- Total Cost of Asset – It is the inclusive cost of taxes, shipping and others.
To support this accounting interview answer, you can highlight how they are calculated.
The formula for Straight Line Depreciation over a year is
Total Cost of Asset – Salvage Value (estimated) / Useful life of an Asset = Depreciation Expense (Annual)
The formula for calculating Double Declining Balance is
(Total Cost of Asset – Salvage Value (estimated) / Useful life of an Asset) x 2 = Depreciation Expense (Annual)
Q64. What is the difference between the consignor and consignee?
Ans. This is a very simple accounting interview question. Just mention the following.
Consigner – S/he is the shipper of the goods
Consignee – S/he is the recipient of the goods.
Q65. Define Partitioning.
Ans. Partitioning refers to the division/subdivision/grouping/regrouping of financial transactions in a given financial year.
Ideally, do broaden the scope of this basic accounting concept.
Try the following ways. We will also elaborate on the tips below.
- Describe the purpose or significance of partitioning in accounting or financial contexts.
- Mention how partitioning is applied or used in specific accounting or financial scenarios.
The purpose of partitioning is to break down financial information into meaningful subsets. This helps identify trends, assess performance, and make more informed business decisions.
The applications of partitioning are as follows.
- In cost accounting, partitioning helps allocate costs to specific cost centers or cost objects.
- For publicly traded companies, partitioning assists in preparing segment-wise financial reports.
- In financial statement preparation, partitioning is used to categorise assets, liabilities, and equity into current and non-current components.
- Partitioning cash flows into operating, investing, and financing activities helps assess the company’s cash generation, capital investments, and financial position.
- Financial ratios often require partitioning specific financial data to calculate key performance indicators.
Q66. Differentiate between Provision and Reserve.
Ans. For such direct accounting interview questions, try to keep your answer to the point.
Provisions – This refers to keeping the money for a given liability. In short, EXPENSES.
Reserves – Refers to retaining some amount from the profit for future use. In short, PROFITS.
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Q67. What is an over-accrual?
Ans. It is a situation where the estimate for accrual journal entry is very high, and this may apply to the accrual of revenue or expense.
Some tips to improve this answer and impress your accounting firm recruiter.
- Describe how an over-accrual occurs and its impact on financial statements.
- Mention the actions taken to rectify an over-accrual and ensure accurate financial reporting.
“An over-accrual is an accounting error that occurs when a company records an expense or liability in excess of the actual amount that should have been recognised.
This is how an over-accrual occurs.
Over-accruals typically arise due to estimates made by the company to match revenues and expenses accurately. In accrual accounting, expenses are recognised when incurred, regardless of cash payment. If the actual expense turns out to be lower than the estimated accrual, an over-accrual occurs.
To rectify an over-accrual, the company must make adjusting entries in the accounting records. The following steps are typically taken:
- The first step is to identify the specific expense or liability that was over-accrued and determine the correct amount.
- An adjusting entry is made to reverse the over-accrued amount from the accounts, reducing the expense or liability to the correct amount.
- A new entry is made to record the actual expense or liability based on the correct information.”
Q68. What is reversing journal entries?
Ans. Reversing entries refer to the journal entries that are made when an accounting period starts. These entries reverse or cancel the adjusting journal entries that were made at the end of the previous accounting period.
Q69. Name some intangible assets.
Ans. Intangible assets include –
- Patents – Patents are exclusive rights granted to inventors by a government for a specified period, allowing them to prevent others from making, using, or selling their inventions without permission.
- Copyrights – Copyrights ensure that authors and artists retain control over their works and can monetise them through licensing and other means.
- Trademarks – Trademarks are distinctive signs, symbols, words, phrases, or logos used by businesses to identify and distinguish their goods or services from others in the marketplace.
- Brand names – Brand names are unique names or titles that identify a company, product, or service in the market.
- Domain names – Domain names are unique addresses used to identify websites on the internet. They provide a user-friendly way for individuals to access websites and serve as an online identity for businesses.
Q70. What is a Bad debt expense?
Ans. Bad debt expense is asset accounts receivable of a company and is considered to be uncollectible accounts expense or doubtful accounts expense.
You can mention more in this accounting interview question.
For example, if there is a follow-up question, you may need to expand on the nature of bad debt expense and the circumstances under which it arises.
The recruiter may also want to know how bad debt expense is exactly recorded in the accounting books, or if it has any impact on financial statements.
Mention in this way, then.
Companies often offer credit to customers, allowing them to purchase goods or services on credit with an agreement to pay later. While most customers pay their dues on time, some may default on their payments for various reasons, such as financial difficulties, bankruptcy, or disputes. The amount deemed uncollectible is recognised as bad debt expense.
The estimated uncollectible amount is recorded as an expense by creating an “Allowance for Doubtful Accounts”. Suppose a specific customer account is confirmed to be uncollectible. In that case, it is written off as a bad debt from both accounts receivable and the “Allowance for Doubtful Accounts” to maintain the accuracy of the accounting records.
Further, the income statement reports bad debt expense as an operating expense, reducing the reported net income. On the balance sheet, the “Allowance for Doubtful Accounts” reduces the accounts receivable, indicating the estimated uncollectible portion.
Q71. When do you capitalize rather than expense a purchase?
Ans. This is one of the most common situation-based, accounts interview questions. Mention that an item’s cost is capitalized if it is expected to be consumed by the company over a long period. This way, their economic value does not depreciate.
Q72. When does goodwill increase?
Ans. Goodwill can be increased through the acquisition of another company as a subsidiary, by paying more than the fair value of its tangible and intangible assets.
For this accounting interview question, you could further highlight how goodwill is treated in accounting.
Mention that to calculate the goodwill, the acquiring company subtracts the fair value of the target company’s identifiable net assets (tangible assets, identifiable intangible assets, and liabilities) from the purchase price. The resulting excess is recognised as goodwill.
Goodwill is not amortized like other intangible assets but is subject to an annual impairment test to assess its value.
You can also say how goodwill helps measure the company’s value. Investors and stakeholders use goodwill to assess the success of mergers and acquisitions, as it indicates the perceived value of the target company’s intangible assets and potential future growth opportunities.
Q73. What are Revenue Recognition and Matching Principles?
Ans. Revenue Recognition Principle – This principle suggests that the revenue should be recognized and recorded when it is realized and earned, no matter when the amount has been paid.
Matching Principle – This principle dictates the company to report an expense on its income statement at the time the related revenues are earned. It is associated with the accrual basis of accounting.
Q74. Name different accounting concepts.
Ans. In this question on some basic accounting concepts, explain the concept briefly. It is recommended to not just name them.
- Accounting Period Concept: Financial activities of a business are divided into specific time periods for reporting and analysis purposes.
- Business Entity Concept: The business’s financial transactions and affairs are separate and distinct from those of its owners or stakeholders.
- Cost Concept: Assets are recorded at their historical cost rather than their current market value.
- Dual Aspect Concept: Every transaction has two aspects – a debit and a credit – affecting different accounts in the accounting equation.
- Going Concern Concept: Assumes that the business will continue to operate and meet its obligations for the foreseeable future.
- Matching Concept: Expenses should be matched with the revenues they generate in the same accounting period to determine net income accurately.
- Money Measurement Concept: Only transactions and events that can be expressed in monetary terms are recorded in the accounting system.
Q75. What is the owner’s equity?
Ans. The owner’s equity is a business owner’s claim against the assets of the business. It is also called the capital of the business and is calculated by subtracting the equity of creditors from the total equity.
Owner’s equity is a critical indicator of the financial health and stability of the business. It shows the owner’s financial interest in the company and their stake in the assets. Positive owner’s equity implies that the business has more assets than liabilities, while negative owner’s equity suggests that the business owes more to creditors than its total assets.
Q76. What is a debit note?
Ans. A debit note or debit memorandum is a commercial document sent to a seller, by a buyer, formally requesting a credit note. The original document is sent to the party to whom the goods are being returned and the duplicate copy is kept for office record.
Q77. What is a credit note?
Ans. A credit note is a receipt given to a buyer who has returned a product, by the seller/shop. This intimation suggests that the buyer’s account is being credited for the purpose indicated.
Q78. Explain Contingent Liabilities.
Ans. Contingent Liabilities are potential obligations that may or may not become an actual liability. They may or may not be incurred by an entity, based on the outcome of an uncertain future event, e.g. – If an ex-employee of an ABC company sues it for gender discrimination for any particular sum, the company has a contingent liability. In case the company is found guilty, it will have a liability, and if it is not found guilty, the company will not have an actual liability.
Q79. What is GST?
Ans. GST or Goods and Service Tax is an indirect tax charged on the value of the service or product sold to a customer. Here the consumers pay the tax to the seller, who thereby deposits the GST to the government.
Q80. Can you name some common errors in accounting?
Ans. Some common accounting errors are –
- Error of omission
- Error of commission
- Error of original entry
- Error of accounting principle
- Compensating error
- Error of entry reversal
- Error of duplication
Make sure to explain these errors in detail.
Read More – Top SAS Interview Questions and Answers
Q81. What is project implementation?
Ans. Project implementation is a phase when the plans and visions come into reality. This includes carrying out the tasks to deliver the outputs and monitor the related progress.
Q82. What are the various stages of project implementation?
Ans. There are six steps involved in project implementation, which are –
- Identifying need
- Generating and screening ideas
- Conducting a feasibility study
- Developing the project
- Implementing the project
- Controlling the project
Q83. Are you in favor of having accounting standards?
Ans. I believe that accounting standards contribute to high quality and accurate reporting and ensure reliable financial statements.
Q84. What do you mean by Amortization and also mention its journal entry?
Ans. Amortization is an accounting concept that is used to gradually write off the cost. Through amortization, over a period of time, one can allocate the cost of any intangible asset. Also, it can be done to repay any loan principal. However, those assets which have an indefinite life like Goodwill can not be amortized.
Also read the difference between depreciation and amortization to explain this answer such accounts basic questions better, providing your overall knowledge of the
Below is the journal entry for amortization:
The concept of amortization in accounting is different from depreciation. The major point of difference between amortization and depreciation is their usage. Amortization works for intangible assets whereas depreciation works for tangible assets. Also, unlike depreciation, amortization has no salvage value. Another key difference between both is that depreciation can be implemented using both the straight-line method and accelerated method but amortization is implemented through the straight-line method.
Using the below transactions solve the practical accounting questions:
Firm’s Name – ABC Ltd. which is 10 years old firm on December 31, 2018. As of January 01, 2019, below are the trial balance entries
|Transactions/entries||Amount in INR|
|Prepaid Rent for Office||15,000|
Later other transactions that took place in 2019 are:
- Paid salaries payable from 2018.
- As of March 2019, the petty cash expense made was Rs 10,000.
- Advanced payment made for the company’s car which was on lease Rs, 1,00,000 on May 1, 2019.
- Paid office rent in advance Rs. 25,000 on May 3, 2019.
- Supplies purchased for Rs. 10,000 on the account.
- During the year, purchased 20 CCTV cameras for Rs. 20,000 for cash.
- Sold 103 CCTV cameras for Rs. 42,000 (calculate the cost of goods sold using FIFO method)
- Accounts payable was Rs. 30,000
- Petty cash replenished and the receipts included office supply expenses – Rs. 2,000, miscellaneous Rs. 7,000. Currency left Rs.1000
- Billed Fixing services for Rs 10,000 for the year.
- The salaries paid were Rs. 30,000 in cash
- Accounts receivable were Rs. 60,000
- Ad and marketing expense Rs. 6,000
- Utility expense paid Rs. 5,000
- The dividend paid to the shareholders was Rs. 15,000.
Q85. What is the total value of cash in the above transactions?
Ans. Here is the total calculation of cash:
All Cash Transactions and balances:
- Actual Cash = 4,50,000
- Salaries payable = 32,000
- Company’s car lease = 1,00,000
- Office rent = 25,000
- CCTV purchase = 20,000
- Accounts payable = 30,000
- Petty cash = 10,000
- Petty cash replenished = 7,000 + 2000
- Balance petty cash = 1000
- Salaries paid = 30,000
- Accounts receivable = 60,000
- Ad and marketing expense = 6,000
- Utility expense = 5,000
- Dividend paid = 15,000
Hence as per the nature, here is the actual calculation of cash:
4,50,000 – 32,000 – 1,00,000 – 25,000 – 20,000 – 30,000 – (10,000 – 1,000) – 1,000 + 60,000 – 5,000 – 15,000 = 2,73,000
Q86. What is the total value of accounts receivable in the above transactions?
Ans. All entries related to accounts receivable:
- Accounts receivable = 20,000
- Income from selling CCTV camera = 42,000
- Billed Fixing services = 10,000
- Accounts receivable = 60,000
Hence, here is the total calculation of accounts receivable:
20,000 + 42,000 + 10,000 + 60,000 = 1,32,000
Q87. What is the value of the total fixed assets?
Ans. As no other assets apart from land are mentioned we will consider Land as the only fixed asset:
Value of Fixed Asset:
Land = 60,000
Q88. What will all be included in current assets?
Ans. We will include the following things:
- Closing inventory
- Bank and cash value
- Account Receivables
Q89. What will be included in the Owner’s equity?
Ans. We will include the following things in owner’s equity:
- Capital (Common Stocks)
- Retained earnings (balance at the beginning of the year, profits for the current year, less dividend paid, capital contributed during the year if any)
Q90. What will be included in the Current Liabilities?
Ans. Under the current liabilities, we will include the amount for creditors/payables which is 10,000 in the above case.
Q91. What do you mean by Days Payable Outstanding (DPO)?
Ans. DPO or Days Payable Outstanding refers to the average number of days that ideally a company takes to clear its credit purchase in regards to the outstanding suppliers. Most of the time, DPO is a monthly task for a business, however, each month the day of clearing the outstanding payment might differ, hence the average is taken out to estimate the payment period.
Below is the formula for calculating DPO:
Closing accounts payable / Purchase per day
(Average accounts payable / COGS) X Number of days
Q92. Find out the DPO in the below query.
|Average accounts payable in June||50,000|
|Cost of Goods sold in June||5,00,000|
As the month of June has 30 days the DPO will be:
(50,000/5,00,000)*30 = 3 days
Hence, the DPO in the above situation is 3 days. This states that a company takes 3 days on average to clear all its pending invoices.
Q93. What are the different types of liquidity ratios in accounting?
Ans. Basically, there are five different types of ratios in accounting:
- Current Ratio
The higher the company has current ratio, the better is the company’s strength to handle short-term financial issues. It is calculated by – Current ratio = Current Asset/ Current Liabilities
- Net-Working Capital Ratio
It articulates whether or not a company has sufficient funds to carry out short-term operations. It is calculated by – Current Asset – Current Liabilities
- Quick ratio
The quick ratio is also known as the acid test ratio or liquid ratio which illustrates the company’s short-term liquidity to meet any short-term obligations. If the quick ratio is below 1:1, the company is not in a good state to handle short-term debts. Quick ratio = Liquid Assets / Current Liabilities
- Super-Quick Ratio
Super Quick Ratio = (Cash + Marketable Securities) / Current Liabilities
- The operating Cash Flow ratio
It is calculated by dividing cash flow from operations with current liabilities. It is observed that a sound operating cash flow ratio makes the firm’s liquidity position better.
Here cash flow from operations will generally include:
All revenues from operations + Non-cash based expenses – Non-cash based revenue
Whereas Current Liabilities will include:
Balance payments, creditors, provisions, short term loans, etc.
Q94. What is the Accounting Information System (AIS)?
Ans. This is a frequently asked accounting interview question thus you should know everything about AIS.
AIS is a computer-based method used for tracking accounting activity and involves – collecting, storing, processing, organizing, and summarizing accounting data and transactions. It also helps in cumulating financial transactions and essential financial reports, which helps stakeholders in decision making. Using AIS for storing and processing financial data helps in the following tasks:
- Measure the financial performance
- Evaluate the finances of the company and compare it with the previous period to draw a conclusion
- Avoid any miss-handling of data
- Connects Information Technology with GAAP principles
Q95. What do you mean by tangible real accounts and intangible real accounts?
Ans. To answer such types of accounting interview questions, give a brief explanation and highlight with examples.
Tangible Real Account – Those assets which can be touched and have a physical existence are defined as tangible real accounts.
Example – Machinery A/c, Vehicle A/c, Building A/c
Journal Entry –
- Debit what comes in
- Credit what goes out
Intangible real account – Those assets which have some monetary values but can’t be touched are referred to as intangible real accounts.
Example – Goodwill, Patents, Copyrights
Journal Entry –
- Debit what comes in
- Credit what goes out
Q96. How to perform an income statement analysis?
Ans. This is one of the important technical accounting interview questions. Mention that the income statement is the company’s core financial statement highlighting the profits and losses of the company. It involves:
All revenues – expenses (both operating and non-operating activities)
To analyze this statement, financial analysts consider vertical analysis and horizontal analysis.
- Vertical analysis:
It involves comparing the up and down of the income statement to the revenue (in percentage). The key metrics involved are:
- Cost of Goods Sold (COGS)
- Gross profits
- Earnings Before Tax (EBT)
- Net earnings
- Horizontal analysis
It involves comparing the year-over-year (YoY) change of each line in the income statement. To perform this analysis:
- Take the value in Period N and
- Divide it by value in Period N-1
- Subtract the value by 1 (gives the percent change)
To learn more about how to conduct a financial analysis you can consider taking the following courses:
- Financial Analysis Fundamentals by CFI
- Valuation and Financial Analysis For Startups Specialization by Coursera
Q97. What is Section 209(4A) in The Companies Act, 1956?
Ans. This is among the common accounting interview questions for beginners as well as experts. Emphasise on your knowledge as much as you can here. Section 209(4A) in The Companies Act, 1956 states that:
Every company must preserve the books of accounts, together with the vouchers relevant to any entry in such books of account, in good order, relating to a period of not less than 8 years immediately preceding the current year.
So if the Current Year Ending is – March 2023 then, the company needs to store the accounts and vouchers for the following years:
March 2022, 2021, 2020,……, to 2015
Q98. Which latest accounting trends do you think are continuing in 2023? [one of the most frequently asked accounting interview questions]
Ans. This accounting interview question is for beginners and experts. For professionals in the field, keeping track of trends is crucial. Below are some of the latest accounting trends:
Increased dependency on cloud
Companies are now using cloud computing as a technology for tracking – tracking inventory, sales, and expenses. A report by Accounting Age suggests that 78% of small businesses will rely solely on cloud technology and 67% of accountants say that cloud technology will make their role easier.
Automated data entry
More than two-thirds of accountants consider automation of processes, workflows, and payments the biggest challenge that will impact accountancy in the next 12 months. That’s why a lot of companies have started depending upon automation software as they are efficient and reduce the chances of error or loss of entry.
For this interview question on accounting trends, try mentioning some more. Some of the other trends that are catching up this year are
- Data analytics for risk management and forecasting
- Use of ERP
- Blockchain technology adoption
Q99. Explain real and nominal accounts with examples.
Ans. A real account is an account of assets and liabilities. E.g. land account, building account, etc.
A nominal account is an account of income and expenses. E.g. salary account, wages account, etc.
Q100. What is double-entry bookkeeping? What are the rules associated with it?
Ans. Double-entry bookkeeping is an accounting principle where every debit has a corresponding credit. Thus, the total debit amount is always equal to the total credit. In this system, when one account is debited then another account gets credited at the same time.
Q101. Briefly explain the procurement process.
Ans. The procurement process begins with a purchase request for a particular apartment. This is then verified and approved. Based on the purchase request, a purchase order is created for the items already purchased. In this step, it is the responsibility of the facilities and administrative team to verify rates, delivery milestones, place of delivery, supplier payment terms, contractual obligations, etc., and then issue a purchase order to the supplier. The seller will accept the purchase order.
The key to getting the answer to this accounting interview question right is to make it elaborate.
Q102. Why do you want to join this company?
Ans. Interviewers want to know that you’re genuinely interested in working for their organization. To give a thorough answer, research the company’s website to learn more about its goals, mission, and work environment. Choose one or two things that you like the most, and explain why they make you want to work for the company. But consider it strictly as related to any of your accountant job interview questions and answers.
For example, you can show how your experience in the domain can bring a positive change in the organisation.
Q103. Where do you see yourself in five years?
Ans. It is a question that interviewers ask in all sectors, but in accounting, it takes on special relevance. Without a doubt, this is the perfect time to show your ambition. Therefore, try to give a modest and truthful answer in which you highlight your desire to occupy a position in the company to boost your career and serve as a key point in your career. It is ideal that you mention your strengths and weaknesses, and how you are motivated to turn your weaknesses into strengths in your career.
Q104. Share a stressful situation that you have been a part of and how you have handled the situation.
Ans. In the field of accounting and finance, you are constantly under pressure. It’s not a job to be taken lightly, which is why interviewers ask such basic accounting interview questions, just to assess your composure in times of stress. Be careful to bring up a really stressful situation and don’t worry about the work pressure they have faced on a day-to-day basis, as no one wants to hire someone who can’t handle work pressure.
Also, be realistic about the stressful situation you mention. You shouldn’t sound fake. The situation can be one of employee fraud, massive damage to the company due to natural calamities, scrutiny of the income tax of years when you were not even part of the organization, etc.
Q105. Have you ever helped your company to save money or use their available financial resources effectively?
Ans. Explain in this accounting interview question, that if you have proposed an idea that has affected the company’s finances positively. Tell how you have optimized the process and how you came to such a decision through a historical data review.
Q106. How do you minimize the risk of making mistakes in your work?
Ans. As an accountant, you would need to showcase the highest degree of excellence, since even the smallest error can lead to chaos. When answering such basic accounting interview questions, emphasize that you are in charge of reviewing the work several times before sending it and that you have a system of pros and cons that leads you to make decisions. Do not hesitate to give an example of some occasion in which you detected an error through the double control formula.
Q107. How does OPEX differ from Capital Expenses?
Ans. OPEX is the abbreviation for operating expenses that refers to the costs a company incurs on a regular basis. But just don’t limit your response to this definition. Give numerous examples ranging from utilities, insurance, license fees, and inventory costs to property taxes.
Capital Expenses are the other costs associated with a business investment that promises benefits in the future. Some examples are real estate, upgrading furniture or exteriors of property for higher appreciation, etc.
After a brief explanation of the two, do mention that generally, capital expenses are higher than operating expenses and how these two are taxed differently.
Q108. Tell us about the importance and benefits of fixed asset register maintenance
Ans. You already know that any investment that generates income is a fixed asset. It can be property, workplace equipment, or similar.
So you can say, a fixed asset register helps a company maintain accurate accounting information for future decision-making.
Apart from that, a fixed asset register can be managed with simple spreadsheet software such as Microsoft Excel, or when the organisation is expanding, it can be easily integrated into proper accounting software. Even for a small enterprise, it can make it simpler to calculate annual depreciation.
For this accounts interview question, You can also add that a company should maintain an IT asset register maintenance in order to avoid compliance-related penalties.
Q109. How would you calculate the debt-to-equity ratio?
Ans. The debt-to-equity ratio is the percentage of an organisation’s debt in relation to its shareholder’s equity.
The best response would be to show your prospective employer how it is calculated through the formula:
Debt-to-equity = Total debt/Shareholder’s Equity
To add some competitive advantage, you can also mention that the higher the ratio, the higher is the organisation’s risk.
Q110. Briefly explain IFRS and why it is necessary for accounting.
Ans. IFRS stands for International Financial Reporting Standards. So, highlight your response with how this accounting framework has been issued by the International Accounting Standards Board to set common global standards.
Coming to its significance, mention that IFRS makes international capital transactions convenient through the maintenance of balance sheets and statements of profits and losses.
Overall, this framework supplements transparency, efficiency and accountability. You can further expand on these points through relevant examples.
Q111. What are the 4 main standard requirements of IFRS?
Ans. This is a general accounting interview question. To answer, just memorise the following four basic IFRS requirements that are derived from important principles such as transparency, relevance, trustability and similitude.
- Financial Position Statement
- Income Statement
- Equity Changes Statement
- Cash Flows Statement
Q112. What is IASB?
Ans. As this is another textbook accounting interview question, simply mention that IASB stands for International Accounting Standards Board. Also mention that this privately operated body creates and sanctions IFRS and is controlled by IFRS Foundation.
Q113. How do you bridge the gap when you are trying to make an individual with no accounting knowledge grasp complex accounting concepts?
Ans. Here the recruiter is gauging your communication skills.
Try giving an in-depth answer to this question. To provide strategic advice, you can highlight that you don’t use figures and accounting terms, which will show that you are trying to understand their pain points.
When you can say that you simplify the technical terms through anecdotes or analogies, it only shows you are clear with the accounting concepts.
Another appropriate response would be that you choose to write summaries and/or use PPTs for non-accounting professionals across different departments. This displays your patience and teamwork.
Q114. How do you calculate Earnings Per Share?
Ans. Earnings Per Share or EPS is the amount that the shareholder will earn from the earnings of the company. It is calculated by the following formula:
EPS = (Net Income – Preferred Dividends)/Average outstanding common shares
Q115. Why does a company require different budgeting methods? Name the most important ones.
Ans. Calculating a company’s budget through efficient budgeting methods prevents future bankruptcy.
Activity-based, zero-based, incremental and value proposition are the four main types of budgeting methods. It would be ideal if you explain these four through examples.
Q116. What are the main differences between US GAAP and Indian GAAP?
Ans. Indian GAAP follows the accounting standards of the Institute of Chartered Accountants of India (ICAI), while US GAAP follows the Financial Accounting Standards Board (FASB).
You can further highlight the technical differences between the two based on the table below:
|Indian GAAP||US GAAP|
|Investment & Marketable securities||The income statement only recognises the unrealised depreciation on Available-For-Sale securities||Appreciation and depreciation fall under Other Comprehensive Income|
|Format of financial statements||Follows Companies Act of 1956 under presentation requirements of Schedule VI||No specific format|
|Depreciation||Based on rates prescribed in the Companies Act, 1956||Tentative period of an asset|
|Subsidiary Accounts Consolidation||Not mandatory||It is mandatory|
Q117. Name some of the Enterprise Resource Planning systems you have used.
Ans. Small companies hardly use ERP systems. If your previous job was in one, you can be completely honest that you are willing to learn about ERP systems. Also refer to Enterprise Resource Planning, our in-depth beginner’s guide.
Further reading on ERP.
However, if you are experienced with Microsoft Dynamics GP or any other Enterprise Resource Planning system, mention how you were using it. This will help your employer understand how much more you need to know about them.
Q118. Which skills do you consider important as an accounting professional when you are working remotely?
Ans. Your answer to this accounting interview question will determine your soft skills.
Since the work environment currently remains unpredictable, you need to highlight how you can work around this issue productively.
Showing adaptability, the ability to take on new challenges and diplomatic teamwork are among the most desirable characteristics for accounting professionals of any level.
Q119. Name some common ways of identifying fraudulent entries.
Ans. With this accounting interview question for senior-level positions, the employer wants to know how attentive the candidate is to journal entries and ledgers. Awareness of different types of fraud behaviours and fraud monitoring/prevention methods are important. For instance, say,
I know some of the most common fraudulent behaviours such as
- Out-of-period revenues are used for recording inflated revenue.
- To show earnings, the cost of repairs is used as fixed assets.
- Liabilities are not present on the balance sheet.
- Sometimes, expenses also can be shown as earnings when they are recategorised as company reserves.
To detect fraud, I follow these preventive measures:
- First, I understand the organisation’s financial reporting process.
- I also select journal entries for testing.
- Interview individuals directly who have been involved in the financial reporting process.
Q120. How do you manage deadlines with multiple accounting projects?
Ans. This accounting interview question is for the experienced who know how to prioritise their work. You can mention the following:
- I lay out the time-sensitive tasks first and complete them.
- I can multitask without hampering the quality of another project at hand.
- I identify repeatable tasks such as sales proposals and client billing and turn them into the standard operating procedure (SOP). So each time I do these, I don’t have to start from scratch.
- I use time-tracking apps for each project.
Q121. What exactly is double-entry? How are transactions recorded in such an accounting system?
Ans. This is an example of general accounting interview questions for all levels.
Double entry is one of the oldest accounting systems. It simply means that for every accounting entry there is a corresponding entry into a different account. In this system, all transactions are recorded as credits and debits. This bookkeeping method relies on the fundamental accounting equation –
Assets = Liabilities + Equity of the Shareholder
To explain how it works, you can give this example:
Suppose, ABC Company purchases Rs.5000 worth of office supplies by paying cash upfront. In this case, ABC Company’s asset account is required to increase by Rs.5000, while cash will need to decrease by Rs.5000. The asset account will be debited, while the cash amount will be credited. Here, the debit amount is always equal to the credit amount.
Q122. Name at least five different types of accounts in double-entry bookkeeping.
Ans. The five main types of accounts used are:
- Liability Account – When a company owes money to other businesses and will pay at a later date, it uses a liability account.
- Capital Account – A capital account determines the net worth over a specific period, commonly during a year. These accounts include the shareholder’s equity.
- Expense Account – This type of account includes a company’s daily operation costs. The costs can be for money spent on advertising or other expenses that are administrative in nature.
- Income Account – This account shows what a company has earned over a specific period. It records the sources where the money originates from as well as the revenue gained for the sale of products/services.
- Asset Account – It refers to any cash or goods a company owns.
Prepare such accountant interview questions and answers in a way that your answers don’t come across as too brief. Elaborate with real-life situations.
Q123. What differentiates contingent liability from bad debts?
Ans. This accounting interview question is asked to understand whether you are well aware of the difference between very similar concepts.
Contingent liability is not recorded on a balance sheet. It is simply the result of a record that may not occur. On the other hand, bad debt is recorded at the same time when there is a sale.
Q124. Why are financial projections required in accounting?
Ans. This is how you should answer such important account interview questions.
A financial projection is necessary for managing any business, be it, small, medium or large. It shows forecasts on financial estimates including revenues and financial statements’ expenses. It takes into account the analysis of historical data and predicts different factors in the market outside a business. Typically financial projections include the following:
- Income Statement projection – It includes expenses, revenues, total income (Revenue – Expenses), income tax and net income over a particular period.
- Cash flow projection – It includes cash revenues and cash disbursements.
- Balance Sheet projection – The balance sheet determines a business’s net worth. It includes assets, liabilities and equity.
If you are a senior accountant candidate, support this accounting interview question with the importance of financial projections such as:
- With a financial projection, it is convenient for investors to know a business will operate.
- A financial projection can predict potential risks in business operations much before.
- A business can prepare a clear budget with a financial projection.
Also, explore Risk Management courses
Q125. What is included in a journal entry?
Ans. A journal entry can have multiple data elements, as it records every business transaction in the journal ledger or subsidiary ledger. The common elements in a journal entry are divided across five columns in an Excel spreadsheet.
- Column 1 has the date of transaction
- Column 2 has the record of any business transaction
- Column 3 has the folio or reference number
- Column 4 has the debit amount
- Column 4 has the credit amount
Also read: What is a journal in accounting?
Q126. What are the main types of journal entries?
Ans. This is one of the important interview questions for accountants. You can mention that there are 6 types of journal entries.
- Compound Journal Entry
- Adjusting Journal Entry
- Opening Journal Entry
- Closing Journal Entry
- Reversing Journal Entry
- Transfer Journal Entry
Try to explain all these types of journal entries with relatable examples.
Q127. Explain a drawing account in a journal entry and how it differs from an expense account.
Ans. A drawing account tracks all the money and assets that are withdrawn from a business. Generally, this money is withdrawn by the owners/proprietors of the business for personal purposes. This account shows the reduction of the money the business has. On the other hand, an expense account records the expense of the business and is not for personal use.
Read more: Drawing in accounting
Q128. Describe Cost Object with an example.
Ans. A cost object is an item that the business measures separately. The item here refers to a product, department, customer, or anything that costs the business. By calculating cost objects, the business can determine its operational or output-related costs and assess if they are cost-efficient. Cost objects also help in preparing annual reports.
A basic example of a cost object could be a marketing department of a company. The expenses of creating campaigns digitally or offline, staffing requirements, office space and supplies for the marketing team are common. Based on that, the company can set a price strategy for the product that is going to be commercialised.
The Parting Note
Going through the above must have given you an idea of the type of accounting interview questions that are asked across all levels of experience. These detailed answers to 128 accounting interview questions should also help freshen up your domain knowledge.
What is an accountant?
An accountant is a professional responsible to maintain and interpret financial records of an organization. Accountants are largely responsible for a wide range of finance-related task. There are three main types of accountants - public accountants, management accountants, and government accountants.
How can I learn accounting without an accounting background?
To learn financial accounting, you should - a. Learn how to read and analyze financial statements b. Become familiar with creating spreadsheets c. Read books on accounting d. Take an online accounting course e. Focus on real-world application of financial accounting principles and equations f. Network with other accounting professionals
How should I prepare for an accountant interview?
a. Know why you want to be an accountant b. Brush up on the basics c. Be prepared with a story, about a time you solved some major technical problems d. Cite specific examples, talk about some of projects where you excelled e. Demonstrate your value f. Be prepared with specific questions to show that you are engaged, thoughtful and detail-oriented g. Reach before time h. Research the company well i. Be confident
Why should I become an accountant?
We give you some valid reasons why should you become an accountant - 1. You don't need to have a math degree 2. Employment opportunities available across different industries 3. It's more about advice than number crunching 4. You can become an entrepreneur and even work for charity 5. Accountants are in demand, always 6. It's (almost) recession-proof
Which popular accounting tools I must be aware of?
Some of the popular accounting tools are - a. Sage Accounting b. FreshBooks c. QuickBooks Online d. Xero e. Sage 300 f. Sighted g. WagePoint h. TSheets i. Gusto j. SurePayroll k. Expensify l. Neat
Which is the best online institute for ACCA, CFA, CPA, IFRS, CIMA, FRM and other accounting/ finance certifications?
There are many institutes that offer these certifications. For instance, you can take up ACCA Diploma in IFRS Course.
What is the basic eligibility to become an accountant?
There is no specific educational requirement to become an accountant. However, if you consider seeking admission to any undergraduate accounting course, you should have completed your 10+2 or equivalent with subjects like Accounts, Economics and Mathematics.
What is the average salary of an accountant in India?
The average base salary of an accountant in India is around u20b9249,369 / year (according to Payscale)
How long does it to take to complete an accounting course?
An online accounting course usually takes 6 months - 1 year to complete.
What are the common mistakes in accounting?
The most common mistakes in accounting are - a. Mixing personal accounts with that of the company b. Little communication between the company and the accountant c. Not keeping a backup d. Misallocated resources e. Not saving the receipts f. Performing manual accounting g. Not keeping the accounting books up to date
Should I complete an e-GST course or a Microsoft Excel course to become an accountant?
Honestly, both are good. Doing them will help you learn accounting principles in Excel, apply formulae, and tables for calculations. E-GST will train you on composition schemes, taxes, and filings, etc. This would give an edge to your career.
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