Basic Accounting Interview Questions and Answers
Basic Accounting Interview Questions and AnswersThis section covers commonly asked and basic level Accounting Interview questions and answers. The types of questions covered are knowledge based, behavioral, situational and experience based. You can also find interesting examples with the questions, as required.
Who are these Basic Accounting Interview Questions useful for?Conceptual and general questions will be very useful for graduates, beginners and junior level professionals interviewing for the role of staff accountant, junior accountant, senior accountant, general accountant, accounting, accounts assistant, accountant executive, accounts executive etc.
Basic Accounting interview questions topicsThis section covers Basic Accounting topics like - financial statements, double entry booking, income, expense, auditing, assets, liability, working capital, Debt Capital, equity Capital etc.
1. What are the three most important financial statements?The key components of the financial statements are the Income Statement, Balance Sheet, and Statement of Cash Flows.
Income statement - It shows the revenues and expenses of a business and it is used to assess profitability. Basically, it shows the performance of the business.
Balance sheet - It shows the financial position of a business. It has three sections: assets, liabilities, and shareholders equity where Assets = Liabilities + Shareholders Equity
Statement of cash flows - The cash flow statement displays the change in cash per period and it also shows beginning balance and ending balance of cash.
2. What is double entry booking, what are the rules associated with it?Double entry booking keeping is an accounting principle where every debit has a corresponding credit. Thus, the total debit is always equal to the total credit. In this system, when one account is debited then another account gets credited at the same time.
3. What is a deferred expense?The term "deferred expense" refers to a payment that has been made, but has not yet been consumed. It is recorded as an asset until the goods or services are consumed.
Deferred expenses are also known as prepaid expenses because payment for goods and services are made in advance, but have not been used.
4. What is accrued income?Accrued income is an amount that has been earned, but not yet received.
Accrued income can be the earning generated from an investment but yet to receive.
Suppose a company provided their services to the customer and customer agreed to pay but not yet paid then the payment regarding those services will be treated as accrued income.
5. What is accrued expense?Accrued expense or accrued liability is an expense which has been incurred but not yet paid.
Expenses (such as wages, salaries, and utility charges) which are incurred but for which no payment is made during an accounting period.
6. Differentiate accounting and auditing.Accounting involves handling the daily financial transactions for the company.
An audit involves the review of the accounting books of the company.
Accounting is a daily process, whereas an audit is usually conducted annually or quarterly.
Accounting is compiled by the employees of the company, while an audit is done by an independent body.
7. What are fictitious assets?"Fictitious" means “not true” or "imaginary". The fictitious assets are not actually assets of the company though it is shown in the assets side of the balance sheet.
Fictitious assets are basically expenses or losses which are not completely written off during one accounting period.
It is generally appear in the asset side of the balance sheet and is written off to the P&L a/c by decreasing its value in the Balance Sheet.
8. What is working capital?Working capital is current assets less current liabilities. It is money available to a company for day-to-day operations. When assets are more than liabilities, it is said to be positive working capital which indicates that a company is able to pay off its short-term liabilities almost immediately.