Here are commonly asked basic and advanced accounting interview questions and answers for fresher as well as experienced candidates to get their dream job.
Accounting is chosen as a profession because:
Skills needed to work as an accountant are:
Microsoft Accounting Professional is an accounting application that offers reliable and fast processing of accounting transactions. It also helps with financial analysis.
The debit abbreviation is “dr” and credit abbreviation is “cr”.
There are two types of transactions in accounting, i.e., revenue and capital.
It is a statement that states all the liabilities and assets of the company at a certain point.
TDS stands for Tax Deduction at Source. It is introduced to collect text from the company from where the employee income is generated.
TDS is shown on the assets section, right after the head current asset.
GST stands for Goods and Service Tax. It’s an indirect tax other than the income tax. It charges on the value of the service or product sold to a customer. The customer/clients pay the GST, and the seller deposits the GST with the government. Some countries have sales, service tax with works more or less the same as GST.
Yes, both are different terms in accounting. Inactive accounts mean that accounts have been closed and will not be used in the future as well. Dormant accounts are those that are not functional today but may be used in the future.
It is the software used for accounting in small business and shops for managing routine accounting transactions.
Departmental accounting is a type of accounting in which a separate account is created for departments. It is managed separately as well, as shown independently in the balance sheet.
These are the assets that cannot be shown or touch. Fictitious assets can only be felt, such as goodwill, rights, etc.
In the perpetual inventory system, the accounts are adjusted on a continual basis. In this inventory system, the accounts are changed periodically.
Premises refers to fixed assets that are shown in the balance sheet.
The abbreviation of VAT is Value Added Tax.
There is a total of 33 accounting standards published by ICAI. The purpose of these standards is to implement the same policies and practices in any country.
ICAI the abbreviation of the Institute of Chartered Accountants in India.
Accounting is all about assets, liabilities, and capital. Therefore, the accounting equation is:
Assets = Liabilities + Owners Equity.
Executive accounting is a type of accounting that is specifically designed for a business that offers services to users.
Public accounting offers audits and CPAs to review company financial records to ensure accountability. It is for the general public.
CPA stands for Certified Public Accountant. To become a CPA, one should have to do many other qualifications as well. It is a qualification with a 150-hour requirement. It means that one should complete 150 credit hours at an accredited university.
A reconciliation statement is prepared when the passbook balance differs from the cash book balance.
Public accounting is a type of accounting that is done by one company for another company. Private accounting is done for your own company.
Project implementation involves six steps in total, such as:
Accounting standards are mandatory because:
There are three branches of accounting:
Accounting is all about recording daily business activities. Auditing is the checking whether all these events have been noted down correctly or not.
As the name implies, the dual aspect concept states that every transaction has two sides. For example, when you buy something, you give the cash and get the thing. Similarly, when you sell something, you lose the thing and get the money. So this getting and losing are two aspects of every transaction.
Purchase return is a term used to record every defective or unsatisfactory product returned to its supplier.
Material facts are the bills or any document that becomes the base of every account book. It means that all those documents, on which account book is prepared, are called material facts.
MIS reports are created to identify the efficiency of any department of a company.
It is the time required by the company to pay all its account payables.
Retail banking is a type of banking that involves a retail client. These clients are normal people and not any organizational customers.
Not much knowledge, but the basic mathematical background is required in accounting for operations like addition, subtraction, multiplication, and division.
All types of exchange bills, bonds, and other securities owned by a merchant that is payable to him are said as bills receivable.
Depreciation can be defined as the value of an asset that is decreasing as it is in use. It has two types, such as:
Consigner is the owner of the goods, or you can say he is the person who delivers the goods to the consignee. The consignee is the person who receives the goods.
Balancing means to equate both sides of the account, i.e., the debit and credit sides of an account must be equal/balanced.
You must be very good at statistics if you want to do well in accounting. Otherwise, with minimum knowledge, you cannot manage your day to day transactions effectively in accounting.
It is the residual value of an asset. The residual value is the value that any asset holds after its estimated lifetime.
Marginal cost is defined as an increase or decrease in the cost of producing units or serving customers.
It is a kind of group made based on the same responses by a system.
Provisions are the liabilities or the anticipated items, such as depreciation. In contrast, Reserves are the profits of any company, placed back to the business to keep it sustainable in tough times of a company.
Offset accounting is one that decreases the net amount of another account to create a net balance.
It is the indirect expenditure of a company such as salaries, rent dues, etc.
The trade bills are accounting documents generated against each transaction.
Fair value is the measurement of liabilities and assets according to the current value of the market. It shows the estimated price at which any assets are sold. Liability shows third party transactions under the current condition of the market.
A compound journal entry is just like other accounting entries where there is more than one debit, more than one credit, or more than one of both debits and credits. It is essentially a combination of several simple journal entries.
The accounting events that are frequently involved in compound entries are:
Double-entry book-keeping includes five types of accounts:
The rules for debit and credit for different accounts are:
The stages of the double-entry system are:
The disadvantages of the double-entry system are:
The general ledger account is an account used to record all the information. It can be expenses and income types that are recorded into separate accounts.
In this account debits and credits, transactions are entered in one place and kept balanced.
The general classification of accounts that usually ledger account involves are:
Things will not be included in a bank reconciliation statement are:
Revenues are reported in the accounting period when service or goods have been delivered.
Important cost controlling techniques are:
The account “Cash” will be credited when a company pays a bill.
Assets minus liabilities are defined as:
Assets minus liabilities = owners' equity / stockholder's equity.
The three basic elements of cost are 1) Material, 2) Labour, and 3) Expenses.
The difference between accumulated depreciation and depreciation expense is that:
Accumulated depreciation is the total amount of depreciation that has been taken on a company’s assets up to the date of the balance sheet.
Depreciation expense is the amount of depreciation that is reported on the income statement.
Some of the examples of liability accounts are:
Entries can be adjusted into account by sorting entries into five categories:
A deferred asset refers to a deferred debit or a deferred charge. An example of a deferred charge is bond issue costs. These costs involve all of the fees or charges that an organization incurs to register and issue bonds.
These fees are paid in a near time when the bonds are issued, but it will not be expensed at that time.
A bank reconciliation is a process done by a company. It ensures that the company’s records are correct and that the bank’s records are also correct. These records can be check register, balance sheet, a general ledger account, etc.
A deposit in transit is a check or cash that has been received and recorded by an entity. It should not yet been entered in the records of the bank where the funds are deposited.
An over accrual is a condition where the estimate for an accrual journal entry is too high. This estimate may apply to the accrual of expense or revenue.
A short term amounts due from buyers to a seller, who have purchased goods or services from the seller on credit is referred to as account receivable.
The cash flow statement showcase the cash generated and used during the year or months. Various activities that are involved for the cash flow are
Due to double entry, the “cash account” will increase as such the liability account increases.
The account which is responsible or affected by the interest payable is “Current liability account.”
Reversing journal entries are entries made at the beginning of an accounting period to cancel out the adjusting journal entries. These entries are made at the end of the previous accounting period.
Accrued expenses usually tend to be extremely short-term. So you would record them within the “current liabilities section” of the balance sheet.
Accrued expenses and the accounts are:
Wage accrual is entered with a credit to the “wages payable account.”
Interest accrual is entered with a credit to the “interest payable account.”
Payroll tax accrual is entered with a credit to the “payroll taxes payable account.”
Deferred taxation is a part of the owner’s equity.
Journal is a book that is maintained regularly for recording various financial entries.
The equation for Acid-Test Ratio in accounting
Acid-Test Ratio = (Current assets - Inventory) / Current Liabilities
Things that fall under intangible asset are:
In accounting, the trial balance is an accounting report that lists the balances in each of an organization’s general ledger accounts. This is done at the end of the posting journal entry to ensure that there are no posting errors.
A cash discount should be recorded in a journal entry as a reduction of expense in a cash account.
Some asset accounts have a credit balance due to:
A Bad debt expense is the amount of an account receivable that is considered to NOT be collectible.
A master account has subsidiary accounts. A master account receivable could be anything, it can be account receivable for various individual receivable accounts.
The unpresented cheque will get recorded as a credit to the cash account in the company’s General ledger.
A certified financial accountant should have knowledge about:
The three factors that can affect your cash flow and business profit include:
Accrual Accounting is a method for measuring the performance and position of the company by identifying economic events.
In this method, revenue is compared with the expenditures at the time in which the transaction occurs rather than when the payment is made.
Account payable is referred to as the amount the company owes to its suppliers, its employees, and its partners. In other words, it is the basic cost levied on the company to run a business process that is outstanding.
Account payable for one company may be account receivable for another firm or company.
Long-term notes payable or liabilities are referred for that loan that is not supposed to due for more than a year.
These are the loans from banks or financial institution that are secured against various assets on the balance sheet, such as inventories.
The difference between depreciation and amortization is:
| Depreciation | Amortization |
|---|---|
| Depreciate means to lose the value of an asset due to its usage, wear, and tear, outdated, etc. | Amortize means to write off or pay the debt over a period of time. Amortization can be for loans, or it can be for Intangible assets. |
| The depreciation cost is calculated in terms of tangible assets like furniture, plant & machinery, building, etc. | Amortization cost is calculated in terms of intangible assets like goodwill, trademark, loans, patents, etc. |
| The purpose of calculating depreciation costs recovery | The purpose of calculating amortization is also for cost recovery |
| The easiest or better way to calculate depreciation is to know the loss of value of an asset over its life. | Amortization calculates the amount spent after the intangible assets throughout the life for that asset. |
| For example, a car worth $30,000 has estimated the lifetime of 10 years after that, it will have no value in the market. The cost or loss in value throughout these 10 years is known as depreciation | For example, Pharmaceutical Company spent $20 million dollars on a drug patent with a useful life of 20 years. The amortization value for that company will be $1 million each year |
| Various method for depreciation includes straight-line depreciation, declining balance method, group depreciation method, unit of time/production depreciation method, etc. | Various method for amortization is negative amortization, zoning amortization, business amortization, etc. |
Financial statement of the company includes various information like:
Working capital is a financial metric that calculates the resources available to the company to finance its day-to-day operations. It is typically calculated by deducting current liabilities from current assets.
A ledger can be referred to as an accounting book that keeps the record of journal entries in chronological order to individual accounts. The process of recording this journal entries is known as posting.
There are three types of ledger
GAAP means Generally Accepted Accounting Principle; it is a framework of accounting, standards, procedures & rules determined by the professional accounting industry and practiced by publicly traded U.S companies all over the U.S.A.
Double-entry accounting is an accounting system that requires recording business transactions or events in at least two accounts. It is the same concept of accounting, where every debit account should be matched with a credit account.
For example, if a company takes a loan from a bank, it receives cash as an asset, but at the same time, it creates a liability for a company.
This single entry will affect both accounts, the asset accounts, and the liabilities accounts. It is referred to as double-entry accounting.
A standard journal entry includes, date of the business transaction, the name of the accounts affected, amounts to be debited or credited, and a brief description of the event.
Liability can be defined as an obligation towards another company or party. It may consist of delivering goods, rendering services, or paying money. They are the opposite of assets, and it may include:
Asset describes what financial institute (bank) or people owe.
Liabilities is something you owe people or organization.
Equity is something you own, for example, the amount of your house loan you paid off.
A nominal account is a type of account that contains income and expenses. For example, wages account, salary account, etc.
Double-entry bookkeeping is a principle of accounting where every debit entry has a corresponding credit. Therefore, the total debt is equal to the total credit.
| Trail Balance | Balance Sheet |
|---|---|
| A trial balance is basically a list of balances in the ledger account. | A balance sheet is a statement that shows the liabilities, equity, and assets, of organization. |
| Trail balance is used to check the arithmetical accuracy in recording and posting. | The balance sheet is used to ascertain its financial position on a particular date. |
| Account Payable | Account Receivable |
|---|---|
| It is the amount an organization owes to purchase services or goods on credit. | It is the amount collected by a company because of the selling of goods or services on credit. |
| Accounts payables are liabilities. | Accounts receivables are assets. |
The most common errors in accounting are:
Famous accounting applications are:
Four types of special journals are:
Accounting transactions refer to the execution of the user program that contains a list of actions.
Creative accounting is a practice to create a picture that is not technically correct from the perspective of the intended user.
Accounting normalization is a process of removing items from the statement of income or balance sheet. Once the normalization process is done, the result shows the future earning capacity of the buyer.
The normative theory is a theory that prescribes how the accounting process should be done.
Computerized accounting is a method in which financial information is collected, processed, and summarized into financial reports.
The purpose of this accounting is to provide information used for decision making. It can be viewed as a process that converts data into helpful information.
Accounting ethics is a field of applied judgments, ethics, and the study of moral values.
Vouching is a process of checking the voucher authentication maintain by the management using respective supportive documents.
The full form of EA is Enrolled, Agent. It is a tax advisor who has unlimited practice rights. EA represents as a taxpayer and collects and audits, financial transactions.
The term payroll is defined as a list of employees who get paid by the organization. It refers to the money employer pays to their employees.
The Payroll source documents are timesheets of the employee.
Ratio analysis is the analysis of various goods in the business financial statement.
A non-performing asset is an account of borrower, that has been classified by a financial institution or bank. It should be as per guidelines given by RBI.
Various methods of calculating depreciation are:
Fixed asset are assets which are tangible in nature. It is not used to sell in the near future and from which future benefits are derived.
BEP or Break Event Point can be defined as a situation in which the company neither gets profit nor no loss. It involves the activity in which total revenues equal total costs.
The cost sheet is a cost statement of product for a specific period of time. It contains direct and indirect expenses involved in producing a product.
A chargeback is a process in the industry where wholesaler request amount, which is the difference between the price of manufacture and wholesaler.
CMMI stands for Capability Maturity Model Integration. It is an approach to improve the organization’s approach to get the essential elements of the process.
Candidate can answer this question as:
CMM is a standard for measuring the maturity of a company’s software development processes. It is judged by IT service providers to deliver high-quality software.
The cost sheet contains both direct and indirect expenses incurred in producing any product. The classifying the expenses incurred based on administration, office, distribution, and selling overheads.
Invoice is a statement that contains:
Candidate can answer the question of interviewer like, the difference between internal audit and statutory audit is:
| Internal audit | Statutory audit |
|---|---|
| An internal audit is an inspection conducted by the internal auditors of the organization. | A statutory audit is an inspection conducted by the external auditors. |
| It is not mandatory for the company. | It is mandatory for the company. |
The main difference between Billable and Non-billable Expenses is:
Billable expenses are the expenses incurred by the seller on behalf of the customer in performing service or duties.
Non-billable expenses are the expenses incurred by the seller for carrying out responsibilities.
The abbreviation of WCC is Working Capital Cycle.
These interview questions will also help in your viva(orals)
