Accounting Interview Questions and answers are very important for the fresher one who wants to get a job easily in the field of accounting line. As we know that you must be a graduate with a commerce stream or if not then should have knowledge of accounting, income tax, GST, and much more. If you have perfect knowledge then nobody can stop you from getting a perfect job. But after all, some people are not comfortable and not able to qualify for job interviews. In this post, we will try to cover all important accounting interview questions and answers which can help you to crack an interview.
Contents of this post
What are the categories of Accounting?
These are the categories of accounting for the accounting field and accounting professions-
- Financial Accounting
- Managerial Accounting
- Cost Accounting
- Auditing
- Tax Accounting
- Accounting information systems
- Forensic Accounting
- Public Accounting
- Governmental Accounting
What are the types of accounting professions or posts?
These are the list types of accounting professions or posts and levels for which as a fresher or experienced, you are facing interviews-
- Financial Accounting
- Managerial Accounting
- Cost accounting
- Auditing
- Tax accounting
- Accounting information systems
- Forensic Accounting
- Public accounting
- Governmental accounting
- Accounting Assistant
- Junior Accountant
- Accounting Clerk
- Accounting intern
- Accounting trainee
- Bookkeeper
- Staff Accountant
- Accountant
- Staff Accountant
- Accounting Analyst
- Accounting Specialist
- Tax accountant
- Financial Accountant
- financial analyst
- Accounts payable manager
- Accounts receivable manager
- Audit manager
- Accounting supervisor
- Director of Accounting
- Accounting Controller
- Comptroller
- Financial Controller
- Vice President of Accounting
- Vice president of finance
- Chief accounting officer
- Chief financial officer
What are the tips to crack accounting interviews?
- Research the Company – Firstly, learn as much as possible about the company. For example, its history, vision, and business objectives. This is the first step you should take towards preparing for an interview. By doing so, you will be able to confidently answer questions about the company and the job role, which will show that you are enthusiastic about being a part of their company. This is something that your potential employers will love.
- Be Punctual – Don’t be late for the interview, as it can be very detrimental to your first impression. Well begun is half done, arrive 10-15 minutes prior to the scheduled time. Most people get rejected even before they attend the interview, so have your route and method of travel well-planned.
- Be calm and exude confidence – The first thing to keep in mind is how well you perform in an interview ultimately depends on how you present yourself. No matter how anxious and nervous you are, always appear confident. Being anxious conveys that you will be unable to handle work pressure. Self-confidence is one trait that can help you achieve anything in life, and that includes cracking your dream interview.
- Be well-dressed – This is one of the most underrated pieces of advice that exists. A tip to create a great first impression, dress to impress. Wear crisply ironed clothes that are tailored to fit. Wear clean attire and put on a good cologne. But don’t overdress. Dress appropriately depending on whether it is a startup, medium-sized company, or MNC.
- Brush Up on The Basics – It doesn’t matter if you’re a fresher or an experienced professional, you can surely expect certain textbook questions that will test your knowledge.
- Analyze the job description – Read the job description carefully and align your answer according to the requirement. Know the key focus areas of the job requirement and this might tilt the scale for you. Also, speak about how you can benefit them in the long run and how your skills can expertise fit their requirement.
- Have a USP – As a potential employee, you need to have something unique that sets you apart from the others. Whether it is your skills, confidence, talent or hard-working nature is up to you. If you don’t intrigue them, remember that there are plenty of fish in the sea and someone else will take your dream job.
- Think of interesting answers to common questions – Have an interesting answer to common questions like “why should I hire you?”, “tell me about yourself”, “Why should we choose you”, and “What are your strengths and weaknesses”. Tell your story in less than 60 seconds and avoid talking about the job, tell them something about yourself that isn’t there in your resume. Also, make a list of such potential questions and prepare for them in advance.
- Answer to the point – Good communication skills can go a long way in impressing the interviewer. Don’t digress from the question, only answer as much as you know. And if you don’t know the answer to the question, be honest and accept it. This creates a good impression and shows a willingness to accept and learn. Also, maintain clarity in speech, take your time and speak slowly.
- Conclude the interview on a positive note – Lastly, conclude the interview on a positive note. Thank the interviewer and ask for feedback, no matter how the interview goes. This will show your interest in the job and positive attitude.
What are the top accounting interview questions?
There is no one important question for interviews because an interviewer can ask any question that he feels is good to ask. It depends on you and the post level for which, you are going to face an interview. So it will be better if you have perfect knowledge for the related post or levels. But after all, it has been observed that there some questions are the same and asked in many times of interviews. And that list of top accounting interview questions and answers is given below-
Tell me something about yourself!
Ans. The employer’s intention is none other than to break the ice and get to know you a little better to steer the conversation in the direction you want. Without a doubt, this is why it is so important. In your answer, you must give examples of circumstances and moments in your life that led you to the accounting field. Were you the treasurer of your soccer team when you were a child? Have you saved for months to buy a car? Anything goes to make a positive first impression.
What are the three main types of accounts?
They are Real, Personal, and Nominal but wait… if don’t want to sound artificial and stand out from the crowd then make sure you are explaining your answer in brief (one line about each is ideal)
Real – All assets in business either tangible or intangible classify as real accounts.
Personal – Accounts related to a person, entity, or any legal body, etc. are called personal accounts.
Nominal – All accounts related to expenses & losses or incomes & gains fall under this category.
What are the three Golden Rules of Accounting? (under important accounting interview questions)
three gold bricks are used for the golden rules of accounting first things first this is the most basic yet the easiest one to be taken for granted, know this well.
In bookkeeping, three golden rules of accounting are,
- Personal Account – Debit the receiver, Credit the giver
- Real Account – Debit what comes in, Credit what goes out
- Nominal Account – Debit all expenses & losses, Credit all incomes & gains
What is Amortization?
Accounting and Finance Interview Questions and Topics – Accounting Capital Amortization is only done for Intangible assets, unlike depreciation which is for tangible assets. Reduction in value by prorating the cost of an intangible asset over multiple accounting periods is called amortization.
Example – A small-sized technology company Unreal Corp. spends 500,000 on R&D which is expected to sustain for 5 years so it may decide to amortize this & show 1,00,000 each year for 5 years in the financial statements.
Why is Closing Stock not Shown in Trial Balance?
Not all goods purchased in beginning & during the accounting period are sold until the end of that period, this results in a remainder balance known as closing stock.
Closing stock is a part of purchases & the trial balance already includes purchases, hence if the closing stock is shown as a separate item it will double count and result in an error.
Example – Purchases for a period = 60,000, Closing Stock (remainder out of purchases) = 10,000, if both of these items are separately shown inside the trial balance the effect will double up & trial balance will error out.
This one also stands tall among top finance and accounting interview questions asked in technical rounds by hiring managers.
What are the three main Financial Statements?
This is another very common question asked in finance and accounting interviews, especially with entry-level roles. Three main financial statements are Income statements, Balance Sheets, and Cash Flow statements.
Again, follow the i.e. to add one brief statement to each one of them, but don’t over-talk it will only make you vulnerable to more questions.
Income Statement – It presents a summarized view of revenue, income, profit, and loss of a particular accounting period.
Balance Sheet – B/S would show them as on-date assets, liabilities & capital position of a business.
Cash Flow Statement – It shows the movement of cash and cash equivalents for a business during an accounting period.
What is Capital, type of account & where is it shown in the financial statements?
Also called net worth or owner’s equity, capital is the money brought in by the owner of the business as an investment to start the operations. Capital is a Personal Account as it belongs to an individual or a firm (owner).
Capital is shown on the liability side of a balance sheet.
What are Fictitious Assets?
Bind this to your memory fictitious assets are not assets they are fake or deceptive they are actually expenses & losses which for some reason couldn’t be written off during the accounting period incurred. They are written off in multiple future accounting periods.
Examples – Preliminary expenses, promotional expenses of a business, discount allowed on the issue of shares, the loss incurred on the issue of debentures, etc.
Fictitious assets are shown in the balance sheet on the asset side.
What are the different types of accounting?
Ans. Different types of accounting are given below-
Financial Accounting – This branch of accounting records, summarises, and reports the business transactions that take place over a time period in an organization. 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 fulfillment 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.
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 and which one you liked the most.
Show you have a good understanding of the accounting platform you use. You can further specify what type of businesses use them. Generally, small and growing enterprises use the affordable plan of QuickBooks Online for creating invoices, tracking expenses, and utilizing the software’s built-in reports.
What is working capital? (under important accounting interview questions)
Ans. 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.
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 answer is generic. There are industries that work with negative working capital, such as electronic commerce, telecommunications, etc. So do some research on working capital before answering.
How do you maintain accounting accuracy?
Ans. 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 favorite 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
Since you mentioned that MS Excel is your favorite, please give us three cases where Excel will make your life easier.
Mention these three advantages for this common accounting interview question.
- Excel saves a lot of time. Automating repetitive and predictable tasks with macros is one example. This allows one to format, filter and analyze vast sets of data within seconds.
- Excel is highly customizable. Accountants need to create reports with tables and charts in excel. The same can be re-used for creating other reports without having to use or create new templates.
- And excel is convenient for comparing financial datasets. It helps one in tracking financial records and seeing from which source the cash flow is generating.
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.
What is the difference between ‘accounts payable (AP)’ and ‘accounts receivable (AR)’?
Ans. Difference between Account Payable or Account Receivable-
Accounts Payable
The amount a company owes because it purchased goods or services on credit from a vendor or supplier. Accounts payable are liabilities.
Accounts Receivable
The amount a company has the right to collect because it sold goods or services on credit to a customer.
Accounts receivable are assets.
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 the assets, liabilities, and equity of a company and is used to ascertain its financial position on a particular date.
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.
What are the common mistakes in accounting? (under important accounting interview questions)
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
What is the difference between inactive and dormant accounts?
Ans. Inactive accounts are which are closed and will not be used in the future. Dormant accounts are not currently functional but may be used in the future.
Are you familiar with the Accounting Standards? How many accounting standards are there in India?
Ans. Even if you’ve never worked as an accountant before, it is essential that you show knowledge of International Accounting Standards. Although it is true that this is such an extensive subject that it is impossible to know it by heart, before the interview you should have studied the most recent changes to be prepared to talk about them.
There are currently 41 Accounting Standards that are usually issued by the International Accounting Standards Board (IASB).
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 organization’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?
If our organization has three bank accounts for processing payments, what is the minimum number of ledgers it needs?
Ans.Three ledgers for each account for proper accounting and reconciliation processes.
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.
What is deferred tax liability?
Ans. Deferred tax liability signifies that a company may pay more tax in the future due to current transactions.
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 recognized in the income statement. The value is created by taking the difference between the book income and the taxable income.
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
Name some popular accounting applications.
Ans. I am familiar with accounting apps like CGram Software, Financial Force, Microsoft Accounting Professional, Microsoft Dynamics AX, and Microsoft Small Business Financials.
Which accounting application do you like the most and why?
Ans. I find Microsoft Accounting Professional the best as it offers reliable and fast processing of accounting transactions, thereby saving time and increasing proficiency.
What is a bank reconciliation statement? (under important accounting interview questions)
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.
Read More – Executive Programme in Banking and Financial Sector
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. And It is used for all kinds of accounting-related activities including recording financial transactions, generating statements of liabilities and assets, and other analytical purposes.
What are fictitious assets? (under important accounting interview questions)
Ans. 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:
- IFRS Courses
- GAAP Courses
- ACCA Courses
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.
What is CMM?
Ans. The capability Maturity Model (CMM) is a document that provides a model and six elements of infrastructure used for measuring the effectiveness and capability of an organization’s finance process.
What is the meaning of purchase return in accounting?
Ans. 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.
What is retail banking?
Ans. Retail banking or consumer banking involves a retail client, where individual customers use local branches of larger commercial banks.
What is offset accounting?
Ans. Offset accounting is the process of canceling an accounting entry with an equal but opposite entry. It decreases the net amount of another account to create a net balance.
What are the trade bills?
Ans. These are the bills generated against each transaction. It is a part of the documentation procedure for all types of transactions. This is one of the most frequently asked accounting interview questions.
What is fair value accounting?
Ans. As per fair value accounting, a company has to show the value of all of its assets in terms of the price on the balance sheet on which that asset can be sold. Do elaborate on the answer to this accounting interview question.
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.
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.
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.
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.
What is Scrap Value in accounting?
Ans. Scrap Value is the residual value of an asset that any asset holds after its estimated lifetime.
Which account is responsible for interest payable?
Ans. The current liability account is responsible for interest payable.
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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.
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.
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
- And No clarity in true and fair view presentation
- Support this accounting interview question with relevant examples.
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
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.
Any idea what is ICAI?
Ans. Of course, it is the abbreviation of the Institute of Chartered Accountants in India.
Give some examples of fixed assets that you record on 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 organization requires.
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.
What are the bills receivable? (under important accounting interview questions)
Ans. Bills receivable are the proceeds or payments, which a merchant or a company will be receiving from its customers.
When replying to accounting interview questions, be very specific, and don’t talk about generic stuff.
Define Balancing.
Ans. Balancing means equating or balancing both the debit and credit sides of a T-account.
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
Can you tell me some examples of liability accounts? (under important accounting interview questions)
Ans. Some popular examples of liability accounts are –
- Accounts Payable
- Accrued Expenses
- Bonds Payable
- Customer Deposits
- Income Taxes Payable
- Installment Loans Payable
- Interest Payable
- Lawsuits Payable
- Mortgage Loans Payable
- Notes Payable
- Salaries Payable
- Warranty Liability
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.
Where should you record a cash discount in a journal entry?
Ans. A cash discount should be recorded as a reduction of expenses in a cash account.
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.
What is the dual aspect term? (under important accounting interview questions)
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.
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.
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)
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.
Define Partitioning?
Ans. Partitioning refers to the division/subdivision/grouping/regrouping of financial transactions in a given financial year.
Differentiate between Provision and Reserve?
Ans. For this accounting interview question, try to keep your answer brief but 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.
What is an over-accrual?
Ans. It is a situation where the estimate for accrual journal entries is very high, and this may apply to the accrual of revenue or expense.
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.
Name some intangible assets. (under important accounting interview questions)
Ans. Intangible assets include –
- Patents
- Copyrights
- Trademarks
- Brand names
- Domain names
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.
When do you capitalize rather than expense a purchase?
Ans. 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.
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.
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.
Name different accounting concepts.
Ans. The most popular accounting concepts are –
- Accounting Period Concept
- Business Entity Concept
- Cost Concept
- Dual Aspect Concept
- Going Concern Concept
- Matching Concept
- Money Measurement Concept
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.
What is a debit note? (under important accounting interview questions)
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.
What is a credit note? (under important accounting interview questions)
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.
Explain Contingent Liabilities.
Ans. Contingent Liabilities are potential obligations that may or may not become actual liabilities. 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.
What is GST? (under important accounting interview questions)
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.
Can you name some common errors in accounting?
Ans. Some common accounting errors are –
- Error of omission
- Error of commission
- An error of original entry
- An error of the accounting principle
- Compensating error
- An error of entry reversal
- Error of duplication
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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.
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
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.
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
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
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
What will all be included in current assets?
Ans. We will include the following things:
- Closing inventory
- Bank and cash value
- Supplies
- Account Receivables
What will be included in the Owner’s equity?
Ans. We will include the following things in owners 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)
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.
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
Or
(Average accounts payable / COGS) X Number of days
Find out the DPO in the below query.
Ans.
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.
What are the different types of liquidity ratios in accounting?
Basically, there are five different types of ratios in accounting:
Current Ratio
The higher the company has current ratio, the better 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 by 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.
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 them with the previous period to draw a conclusion
Avoid any miss-handling of data
Connects Information Technology with GAAP principles
What do you mean by tangible real accounts and intangible real accounts?
Ans. To answer this accounting interview question, 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 value 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
Which latest accounting trends do you think are prevailing in 2021 and continuing in 2022?
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
As per the Practice of Now 2020 survey, nearly 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
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.
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.
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.
Why do you want to join this company? (under important accounting interview questions)
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.
Where do you see yourself in five years? (under important accounting interview questions)
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.
Share a stressful situation that you have been a part of and how you have handled the situation.
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.
Have you ever helped your company to save money or use its available financial resources effectively?
Ans. Explain 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.
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 this question, 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.
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.
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 organization 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.
You can also add that a company should maintain an IT asset register maintenance in order to avoid compliance-related penalties.
How would you calculate the debt-to-equity ratio?
The debt-to-equity ratio is the percentage of an organization’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 the organization’s risk.
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.
What are the 4 main standard requirements of IFRS?
Ans. This is a general accounting interview question. To answer, just memorize 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
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.
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.
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
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.
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.
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.
Which skills do you consider important as an accounting professional when you are working remotely?
Ans. Your answer to this 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.
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 behaviors and fraud monitoring/prevention methods are important. For instance, say,
I know some of the most common fraudulent behaviors 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 recategorized as company reserves.
To detect fraud, I follow these preventive measures:
First, I understand the organization’s financial reporting process.
I also select journal entries for testing.
Interview individuals directly who have been involved in the financial reporting process.
How do you manage deadlines with multiple accounting projects?
Ans. This accounting interview question is for the experienced who know how to prioritize 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.
What exactly is double-entry? How are transactions recorded in such an accounting system?
Ans. This is a very common accounting interview question for accountants of 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.
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.
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.
All the Accounting questions and answers are taken as per the source of https://www.naukri.com/
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An Accountant, GSTP, GST blogger, Website Creator, SEO Builder & Co-founder of the website https://gstportalindia.in for the help of GST Taxpayers of India. Having a perfect accounting experience of more than 10 years in a Private Ltd Company.