Accountants are vital to the business. They carry lots of responsibility on their shoulders. If you’re looking to establish a career in the accounting field it will be beneficial for you to know the . The industry is full of terminology and acronyms, and it's challenging for a conventional hire manager or a layperson to grasp accounting basics.
These questions should be part of your interview to help determine your professional and accounting expertise. In addition, if you're applying for a job in accounting, you're likely to be given these questions or similar. This means you're getting a glimpse of the interview here. This allows you to think about your questions and plan. So, this article is helpful to both the job seeker and the interviewer.
Did You Know?
Nearly 3 lakh chartered accountants serves as finance guides in a country with 125 million citizens and 6.8 billion taxpayers in 2017-18. There is only 2.82 lac CAs, with only 1.25 lac practising full-time. This makes just 44% of the entire strength.
Interview Questions Related to Accounting
Here are some top solved questions related to accounting; let’s have a look at these.
What is Accounting, and the Reason It is Used?
Accounting is recording the financial transactions and searching, sorting and complicated and presenting the results in various reports for corporations and businesses. Accounting aids the business in assessing how the company's finances are performing the business and assisting the industry by understanding the numbers such as net profits. Read more to know basic accounting questions and their solutions, and how they are used for.
Accounting is used for:
- To keep a log of financial records
- To keep track of transactions
- For reporting/analysing the financial information for management
- To conduct internal audits
- To provide advice on matters of taxation.
What are the Five Fundamental Accounting Fundamentals?
Five accounting principles are
Revenue Recognition Principle
Historical Cost Principle
Full Disclosure Principle
What is the Importance of Documentation in Accounting?
The accounting staff of any business is responsible for presenting an accurate and fair picture of the company's managers and shareholders of the business. Documentation is crucial when it comes to accounting. The correct documentation must be maintained and checked to ensure that a valid audit trail is created and justified when necessary.
What are Accounting Standards?
To better understand and deal with accounts related interview questions, one must know the accounting standards. Every business must follow certain guidelines to maintain the books of account to make financial statements significant, statutorily compliant, and comparable. They're more of a set of rules to be adhered to so that the financial statements of various companies are prepared according to the same principles.
Therefore, those who use financial statements are aware of the assumptions that underlie the financial statements and can quickly compare financial statements between industries and companies.
What is a Fixed Asset Register?
Fixed asset registers are a register or document that keeps track of the organisation's fixed asset. It is maintained over time, and it contains details on the assets written off or sold.
- Date of acquisition for an asset
- The most important information to include in the FAR include:
- Cost of acquisition
- Cumulative depreciation up to date
- Rate of depreciation
- Depreciation amount for the current time
- If applicable, the date of transfer
- The selling price of the asset
- Location of the asset (in case there are multiple locations for business, the location of the asset is crucial)
- Asset identification number (a specific asset identification number must be assigned to each asset to facilitate tracking). This is particularly helpful in cases where assets are greater than one (like laptops).
What is the Importance of Reconciliations in the Accounting Field?
If we talk about some common accounting questions, reconciliation is an absolute requirement in accounting. A set of data should be matched or reconciled with the other so that records are up-to-date quickly. It is also helpful to verify whether any inaccuracy or error is published in the books.
Vital reconciliations include reconciling bank accounts, Vendor reconciliation, intercompany reconciliations and reconciliations between companies. Additionally, internal reconciliations must also be conducted. This includes quantity reconciliation of closed stock, cost of goods sold, sales reconciliations, etc.
What is a Business Transaction in Accounting?
Among the top accounting interview questions with answers, you should have proper knowledge about business transactions. An enterprise transaction directly affects a company's financial position, or we can say it's something that results in a change in the company's accountability, assets, and/or equity. Anything that does not affect the business's financial performance is not recorded in the accounting system. The business transactions are registered in a specific register type (journal).
What is the Importance of Accuracy in Accounting?
- Provides information on managing an effective control over cash within any type of business.
- Assists in the preparation of financial statements in a short time and precisely
- Greatly aids in assessing the company's financial health at any given point in time.
- It's a precise measure of the business's performance concerning projections made in the business plan.
- Keeps track of the expenses incurred by staff and staff's performance.
- Quickly identifies areas that may be problematic and also provides a solution to fix the issue in its place.
- Helps us calculate how much tax we need to pay.
- It's completely in compliance with tax obligations.
What’s the Goal of the Financial Statement?
It provides information on the financial health of the company.
- It provides a comprehensive view of the value of the assets, such as inventory, accounts receivables, fixed assets, cash balances, and so on.
- It also assesses the solvency of a business. A business is considered solvent when its assets are greater than its business liabilities.
- Also, it shows how much debt the company owes all its creditors.
- It also reveals whether the company is either trading too much or under-trading.
What is Working Capital?
Working capital is a measure of a company's capacity to look at whether it can pay for its debts with its current assets or if it is unable to pay. Working capital is a crucial assessment of financial health.
What are PPE and Accounting?
PPE refers to Property Plant, Equipment and Property, and these fixed assets are long-term and essential to business and cannot be readily liquidated. The total value of PP&E can vary from extremely low to exorbitantly excessively high compared to total assets.
What are the Four Different Kinds of PPE?
- High Visibility Clothing
- Eye Protection
- Hand Protection
- Foot Protection
What are the Different Types of Adjustments in Accounting?
In the accounting industry, There are four types of adjustments to accounts.
- Accrued revenues
- Deferred revenue
- Accrued expenses
- Deferred costs
What Exactly is GAAP When It Comes to Accounting?
GAAP refers to the common set of accounting principles, procedures, and guidelines that companies and their accountants must follow when creating financial statements. GAAP can be described as a blend of standards authoritatively determined by the policy committees and the commonly accepted methods for accounting and reporting data.
What are the Four Principles of GAAP?
The four principles that comprise GAAP are Disclosure, Cost, Matching, and Revenue.
Cost Principle: The principle mentions that all value that is disclosed and listed is the cost of acquiring the asset and not an actual fair value.
Matching Principle: The "matching" principle states that the expenses on the financial statement must be in line with the income. Accounting professionals must record the cost of spending in their financial statements when the product is sold but not when the work is completed or issued an invoice.
Disclosure principle: "Disclosure" principle states that vital details to form an informed judgment about the company's financial condition must be disclosed until the amount needed to obtain that information is comprehensible.
Revenue principle: The "revenue" principle affirms that every revenue earned must be reported once it has been achieved and earned, but not always when the actual cash is received. This is also known as accrual accounting.
How Does Accumulated Depreciation Differ From Depreciation Expense?
Accumulated depreciation is the sum of depreciation paid to a company's asset when the company's balance report. Depreciation expense refers to the depreciation amount recorded as income on your statement. In essence, it's the amount related to the period stated in the report's title.
Define What a Deferred Investment is and Provide an Example?
A deferred asset is a deferred debit or deferred charge. A good instance of deferred expense is the cost of bond issues. The costs include all the costs or fees an organisation has to pay to issue bonds and register. The fees are paid at an upcoming time after bonds are issued. However, they are not charged at the time of issue.
What is the Meaning of Accrual Accounting?
Accrual Accounting is an approach to measuring the performance and standing of a company by identifying financial events, regardless of the time the cash transaction occurred. This method allows you to examine the revenue against the expenses when the transaction takes place instead of when the transaction is completed.
Questions Related to Business Startup
What Kind of Business Should I Start?
Choosing a business in a subject you are already knowledgeable about will provide the least amount of resistance to beginning a business, even if it is not always a simple route.
Consider any company you establish as an investment in your own human capital. You could make money by working for someone else, but you've decided that starting your own business will provide you with the best return.
Is It Possible to Operate a Business From Home?
It is dependent on the type of business you want to create. If you demand a physical storefront, the answer is a resounding no. Home is a possible choice if you're doing work that doesn't require a physical location for clients or consumers to see you, such as an online business or one where you meet clients in the field. It is an ideal way to save money and also ensure there aren’t any licensing restrictions in the place.
How Much Money Do You Require to Start a Business?
Initially, it's a good idea to estimate your first-year expenses and how long it will take you to break even. Many failed entrepreneurs have taken out loans or home equity lines of credit only to discover that they weren't enough and had to start bootstrapping their businesses. Conduct a cost analysis to avoid this easily avoidable hassle.
Should I Start One Company Or Several?
Dan Martell, a business owner of Maple Butter, advises that starting multiple companies diversifies your resources. Even if you have several business concepts, start with one and keep it simple. You can diversify later, but for now, the goal is to make one as steady and profitable as possible.
Questions about Setting Up and Managing Your Books
What is Book Keeping, and What Are the Most Important Activities in Book Keeping?
The process of keeping full records of financial transactions and updating them regularly is known as bookkeeping.
The 4 essential steps of the bookkeeping process are mentioned below.
1) Examining financial activities and allocating them to appropriate accounts
2) Develop unique journal entries that both debit as well as credit the correct accounts.
3) Entering transactions into ledger accounts
4) At the conclusion of each accounting period, make adjustments to the entries.
Also, know more about bookkeeping and the difference between bookkeeping and accounting in detail.
What are the Examples of Bookkeeping?
- Keeping track of all financial transactions
- Taking care of bank feeds
- balancing the company's bank accounts
- Taking care of payroll and accounts receivable and payable
- Creating financial statements and reports
- Assisting with the preparation of tax returns
- Streamlining chores with technology
How Do You Manage Your Books?
Here are five helpful hints for keeping track of your finances.
1. Organize all of your business records.
2. Make use of software to speed up procedures.
3. Find a bookkeeping/accounting software that suits your needs.
4. Hire a bookkeeper in your area.
5. Don't wait until the last minute to do your bookkeeping.
The mere act of preparing for an interview by preparing the most commonly asked accounts related interview questions and answers won't help if the candidate does not know about other disciplinary procedures. It's a challenge for both the interviewer and interviewee because the role of an accountant is huge.
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