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.

Read more – What is Accounting?

This article lists some of the most frequently asked accounting interview questions and answers that can help you crack your next accounting interview.

Top Accounting Interview Questions and Answers –

Q1. Tell me 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.

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Q2. What are the different types of accounting?

Ans. Different types of accounting are –

Financial AccountingThis 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 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, of 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.

 

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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 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 utilising the software’s built-in reports. 

Q4. What is working capital?

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.

 

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 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.

 

Q6. 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:

  1. Identify revenue streams
  2. Keep a close eye on invoices and receipts
  3. Prepare tax returns to avoid penalty
  4. Prepare financial statements
  5. Keep tabs on deductible expenses

 

Q7. 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:

  1. Excel saves a lot of time. Automating repetitive and predictable tasks  with macros is one example. This allows one to format, filter and analyse vast sets of data within seconds.
  2. Excel is highly customisable. 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.   
  3. Excel is convenient in comparing financial datasets. It helps one in tracking financial records and see from which source the cash flow is generating.

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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.

 

Q9. What is the difference between ‘accounts payable (AP)’ and ‘accounts receivable (AR)’?

Ans.

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. 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.

 

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.

 

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 which are closed and will not be used in the future. Dormant accounts are not currently functional but may be used in the future.

 

Q14. Are you familiar with the Accounting Standards? How many accounting standards are there in India? [Frequently asked accounting interview question]

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).

 

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. 

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Q16. 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.

 

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.

 

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.

 

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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 recognized in the income statement. The value is created by taking the difference between the book income and the taxable income.

 

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

 

Q21. 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.

 

Q22. Which accounting application 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.

 

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.

 

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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.

 

Q25. What are fictitious assets?

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.

 

You can also consider taking up courses & certifications like:

Cost Accounting Courses
• IFRS Courses
• GAAP Courses
• Business Accounting Courses
• ACCA Courses
• GST Courses
• Capital Budgeting Courses

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. 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.

 

Q28. 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.

 

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.

 

Q30. 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.

 

Q31. 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.

 

Q32. 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 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.

 

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.

 

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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.

 

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.

 

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.

 

Q38. Which account is responsible for interest payable?

Ans. The current liability account is responsible for interest payable.

 

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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 as 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:

  1. Delay, which leads to irrelevant information
  2. No balance between costs and benefits
  3. No balance between the qualitative characteristics
  4. No clarity in true and fair view presentation

 

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Q43. Tell me the golden rules of accounting, just mention the statements.

Ans. There are 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, 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 in India.

 

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Q46. What do you mean by premises?

Ans. Premises refer to fixed assets presented on a balance sheet.

 

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, 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.

 

Q49. Define Balancing.

Ans. Balancing means equating or balancing both the debit and credit sides of a T-account.

 

Time For Accounting Interview Question Quiz

accounting-interview-quiz

The right answer is the balance sheet.

The right answer is the 2nd option – the income statement will be impacted.

The right answer is -Cash flow statement.

The right answer is the Quick Ratio.

 

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?

Ans. Yes, these are the documents such as vouchers, bills, debit and credit notes, or receipts, etc. They serve as the base of every account book.

 

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.

  • 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. Assets Minus Liabilities stand for an 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. 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

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.

Q59. 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.

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. Depreciation refers to the decreasing value of any asset that is in use.

 

Q63. What are the different types of depreciation?

Ans. Depreciation is of two types –

  1. Straight Line Method
  2. Written Down Value Method

 

Q64. What is the difference between the consignor and consignee?

Ans. 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.

 

Q66. Differentiate between Provision and Reserve.

Ans.

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.

 

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
  • Copyrights
  • Trademarks
  • Brand names
  • Domain names

 

Q70. What is 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.

 

Q71. 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.

 

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.

 

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 companies to report an expense on its income statement the time the related revenues are earned. It is associated with the accrual basis of accounting.

 

Q74. 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

 

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.

 

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

 

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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.

Below is the journal entry for amortization:

Debit Credit
Amortization expense x~xx
Accumulated amortization xxx

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.

 

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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
Accounts Payable 50,000
Accounts Receivable 20,000
Cash 4,50,000
Merchandise inventory 6,620
Land 60,000
Unearned revenue 10,000
Salaries payable 32,000
Common Stocks 15,000
Prepaid Rent for Office 15,000
Supplies 20,000
Retained Earnings 25,000

 

 

 

Later other transactions that took place in 2019 are:

    1. Paid salaries payable from 2018.
    2. As of March 2019, the petty cash expense made was Rs 10,000.
    3. Advanced payment made for the company’s car which was on lease Rs, 1,00,000 on May 1, 2019.
    4. Paid office rent in advance Rs. 25,000 on May 3, 2019.
    5. Supplies purchased for Rs. 10,000 on the account.
    6. During the year, purchased 20 CCTV cameras for Rs. 20,000 for cash.
    7. Sold 103 CCTV cameras for Rs. 42,000 (calculate the cost of goods sold using FIFO method)
    8. Accounts payable was Rs. 30,000
    9. Petty cash replenished and the receipts included office supply expenses – Rs. 2,000, miscellaneous Rs. 7,000. Currency left Rs.1000
    10. Billed Fixing services for Rs 10,000 for the year.
    11. The salaries paid were Rs. 30,000 in cash
    12. Accounts receivable were Rs. 60,000
    13. Ad and marketing expense Rs. 6,000
    14. Utility expense paid Rs. 5,000
    15. 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 is mentioned we will consider Land as the only fixed assets:

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
  • Supplies
  • Account Receivables

 

Q89. 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)

 

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 which 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

 

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Q92. 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.

 

Q93. What are the different types of liquidity ratios in accounting?

Ans. Basically, there are five different types of ratios in accounting:

  1. 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
  1. Net-Working Capital Ratio
    It articulates that whether or not a company has sufficient funds to carry out short term operations. It is calculated by – Current Asset – Current Liabilities
  2. 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
  3. Super-Quick Ratio
    Super Quick Ratio = (Cash + Marketable Securities) / Current Liabilities
  4. 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.

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. 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 the vertical analysis and horizontal analysis.

  1. 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
    • Depreciation
    • Interest
    • Earnings Before Tax (EBT)
    • Tax
    • Net earnings
  1. 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:

 

Q97. What is Section 209(4A) in The Companies Act, 1956?

Ans. 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 of the Current Year Ending is – March 2020 then, the company needs to store the accounts and vouchers for the following years:

March 2019, 2018, 2017,……, to 2012

 

Q98. Which latest accounting trends you think are prevailing in 2021? [one of  the most frequently asked accounting interview questions]

Ans. Below are some of the latest accounting trends:

  1. 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.
  1. 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.

 

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.

 

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.

 

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.

 

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 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 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.

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, licence 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, 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. 

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 about 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. 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. 

Q112. 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

Q113. 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. 

Q114. 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

 

 

Q115. 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. 

Q116. 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. 

 

Q117. 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

  1. Out-of-period revenues are used for recording inflated revenue. 
  2. To show earnings, the cost of repairs are used as fixed assets.
  3. Liabilities are not present in the balance sheet. 
  4. Sometimes, expenses also can be shown as earnings when they are recategorised as company reserves. 

To detect fraud, I follow these preventive measures:

  1. First, I understand the organisation’s financial reporting process. 
  2. I also select journal entries for testing.
  3. Interview individuals directly who have been involved in the financial reporting process. 

Q118. 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:

  1. I lay out the time-sensitive tasks first and complete them.
  2. I can multitask without hampering the quality of another project at hand. 
  3. 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. 
  4. I use time-tracking apps for each project. 

Q119. 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 account 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. 

Q120. Name at least five different types of accounts in double-entry bookkeeping. 

Ans. The five main types of accounts used are:

  1. Liability Account – When a company owes money to other businesses and will pay at a later date, it uses a liability account. 
  2. Capital Account – A capital account determines the net worth over a specific period, commonly during a year. These accounts include the shareholder’s equity. 
  3. 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. 
  4. 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. 
  5. Asset Account – It refers to any cash or goods a company owns. 

Q121. 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. 

 

Q122. Why are financial projections required in accounting?

Ans. 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:

  1. Income Statement projection – It includes expenses, revenues, total income (Revenue – Expenses), income tax and net income over a particular period. 
  2. Cash flow projection – It includes cash revenues and cash disbursements. 
  3. 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:

  1. With a financial projection, it is convenient for investors to know a business will operate. 
  2. A financial projection can predict potential risks in business operations much before. 
  3. A business can prepare a clear budget with a financial projection. 

Also, explore Risk Management courses

The Parting Note

Going through the above accounting interview questions will probably have given you an idea of the type of accounting interview questions that are asked during an accounting interview. These will also help you to freshen up your accounting knowledge.

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FAQs for Accounting 

1.Who is an accountant?

Ans. An accountant is a professional who maintains and interprets the financial records of an organization. Such a finance professional is responsible for a wide range of finance-related tasks. Some of the main types of accountants are:

  1. Certified Public Accountant
  2. Management Accountant
  3. Government Accountant
  4. Cost Accountant
  5. Project Accountant

2. How can I learn accounting without an accounting background?

Ans.

1. Learn how to read and analyze financial statements

2. Become familiar with creating spreadsheets

3. Read books on accounting

4. Take an online accounting course

5. Focus on real-world application of financial accounting principles and equations

6. Network with other accounting professionals

3. How should I prepare for an accountant interview?

Ans.

1. Know why you want to be an accountant

2. Brush up on the basics

3. Be prepared with a story, about a time you solved some major technical problems

4. Cite specific examples, talk about some of the projects where you excelled at

5. Demonstrate your value

6. Be prepared with specific questions to show that you are engaged, thoughtful and detail-oriented

7. Reach before time

8. Research the company well

9. Be confident

4. Why should I become an accountant?

Ans.

1. You don’t need to have a math degree

2. Employment opportunities are 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

5. Which popular accounting tools I must be aware of?

Ans. Some of the popular accounting tools are –

1. Sage Accounting

2. FreshBooks

3. QuickBooks Online

4. Xero

5. Sage 300

6. Sighted

7. WagePoint

8. TSheets

9. Gusto

10. SurePayroll

11. Expensify

12. Neat

6. Should I go for ACCA, CFA, CPA, IFRS, CIMA, FRM or other accounting/ finance certifications?

Ans. All are useful to fast-track your career in accounting and finance. You can find these courses online, offered by Coursera, edX, Udemy and more. Some of these online courses are also accredited by top universities.

7. What is the basic eligibility to become an accountant?

Ans. 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 such as Accounts, Economics and Mathematics.

8. What is the average salary of an accountant in India?

Ans. The average base salary of an accountant in India is around Rs.2,49,509 per year (according to Payscale). It increases exponentially with a few years of experience.

9. How long does it take to complete an online accounting course?

Ans. It depends on the course provider and the specialisation. In general, some take about 6 months, while others can take a year.

10. What are the common mistakes in accounting?

Ans.

1. Mixing personal accounts with that of the company

2. Little communication between the company and the accountant

3. Not keeping a backup

4. Misallocated resources

5. Not saving the receipts

6. Performing manual accounting

7. Not keeping the accounting books up to date

 

11. Should I complete an e-GST course or a Microsoft Excel course to become an accountant?

Ans. Both are good. Doing an Excel course will help you apply formulae, and tables for calculations. An e-GST course will train you on composition schemes, taxes, and filings, etc. Together they would give an edge to your career.

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