40+ Interview Questions and Answers

Capital transactions involve long-term investments while revenue transactions involve short-term gains.

• Capital transactions involve the purchase or sale of long-term assets such as property, plant, and equipment.

• Revenue transactions involve the sale of goods or services in the normal course of business.

• Capital transactions affect the balance sheet while revenue transactions affect the income statement.

• Examples of capital transactions include the purchase of a building or mach...read more

The three important financial statements are the income statement, balance sheet, and cash flow statement.

• The income statement shows a company's revenue and expenses over a period of time.

• The balance sheet shows a company's assets, liabilities, and equity at a specific point in time.

• The cash flow statement shows a company's inflows and outflows of cash over a period of time.

• These statements are important for investors, creditors, and management to understand a company's finan...read more

Profit and loss account is a financial statement that shows a company's revenues, expenses, and net income or loss for a specific period.

• It is also known as income statement or statement of operations.

• It shows the company's financial performance over a specific period of time.

• Revenues are the income generated by the company, while expenses are the costs incurred to generate that income.

• Net income or loss is the difference between revenues and expenses.

• It helps in evaluating t...read more

The 7 types of journals are Sales, Purchases, Cash Receipts, Cash Disbursements, General, Payroll, and Non-Cash Adjusting.

• Sales Journal records all sales transactions

• Purchases Journal records all purchases transactions

• Cash Receipts Journal records all cash received transactions

• Cash Disbursements Journal records all cash paid transactions

• General Journal records all other transactions not recorded in the above journals

• Payroll Journal records all payroll transactions

• Non-Cash Adj...read more

There are three types of accounts: personal, real, and nominal.

• Personal accounts are related to individuals or organizations, such as customers or suppliers.

• Real accounts are related to assets and liabilities, such as buildings or loans.

• Nominal accounts are related to income and expenses, such as salaries or rent.

• Each type of account has a different role in the accounting process.

• The classification of accounts helps in the preparation of financial statements.

The 5 basic accounting principles are: revenue recognition, matching principle, cost principle, full disclosure principle, and objectivity principle.

• Revenue recognition: recognizing revenue when it is earned, not when payment is received

• Matching principle: matching expenses with the revenue they generate

• Cost principle: recording assets at their original cost

• Full disclosure principle: disclosing all relevant information in financial statements

• Objectivity principle: using objec...read more

The 2 types of accounts are personal and business accounts.

• Personal accounts are related to individuals and include accounts like savings, checking, and credit card accounts.

• Business accounts are related to companies and include accounts like accounts payable, accounts receivable, and inventory accounts.

To explain a complicated accounting process to a team and report it, use simple language, visuals, examples, and encourage questions.

• Break down the process into smaller steps

• Use simple language and avoid jargon

• Create visuals like flowcharts or diagrams to aid understanding

• Provide real-life examples to illustrate the process

• Encourage team members to ask questions for clarification

Transactions should be recorded accurately and timely to ensure financial statements are reliable.

• Use a double-entry accounting system

• Record transactions in the appropriate accounts

• Ensure transactions are properly classified and coded

• Maintain supporting documentation for all transactions

• Reconcile accounts regularly to ensure accuracy

• Record transactions in a timely manner

• Ensure transactions are properly authorized

• Use accounting software to streamline the process

• Perform regular...read more

A journal is a record of financial transactions categorized into different types such as sales, purchases, and cash receipts.

• A journal is a book of original entry where transactions are first recorded.

• There are different types of journals such as sales journal, purchases journal, cash receipts journal, and cash disbursements journal.

• Sales journal records all credit sales transactions.

• Purchases journal records all credit purchases transactions.

• Cash receipts journal records all...read more

Financial accounting types include managerial accounting, tax accounting, and auditing.

• Managerial accounting focuses on internal financial information for decision-making

• Tax accounting deals with tax laws and regulations

• Auditing involves examining financial records for accuracy and compliance

• Other types include cost accounting, forensic accounting, and government accounting

A trial balance is a list of all the accounts in the general ledger with their debit or credit balances.

• Prepared at the end of an accounting period

• Used to ensure that the total of all debits equals the total of all credits

• Helps in identifying errors in the accounting records

• If the trial balance doesn't balance, it indicates that there is an error in the accounting records

• Does not guarantee that the accounting records are error-free

A journal or diary is a record of daily events, thoughts, and feelings.

• A journal or diary is a personal record of one's life experiences.

• It can be used to track progress towards goals or reflect on past experiences.

• Entries can include thoughts, feelings, and observations about the world around us.

• Some people use journals to work through difficult emotions or to practice gratitude.

• Examples of journals include bullet journals, gratitude journals, and travel journals.

Basic accounting refers to the fundamental principles and practices of recording, analyzing, and reporting financial transactions.

• Recording financial transactions in journals and ledgers

• Preparing financial statements such as balance sheet, income statement, and cash flow statement

• Analyzing financial data to make informed business decisions

• Maintaining accurate and up-to-date records of financial transactions

• Following generally accepted accounting principles (GAAP) and accounti...read more

The three main types of accounts are assets, liabilities, and equity.

• Assets are resources owned by the company, such as cash, inventory, and property.

• Liabilities are debts owed by the company, such as loans and accounts payable.

• Equity represents the residual interest in the assets of the company after liabilities are deducted, such as retained earnings and stockholder's equity.

The accounting cycle is a series of steps that a company follows to record and report its financial transactions.

• The cycle starts with identifying and analyzing transactions

• Then, the transactions are recorded in the journal

• The journal entries are then posted to the ledger

• An unadjusted trial balance is prepared to ensure the debits and credits are equal

• Adjusting entries are made to update accounts for accruals and deferrals

• An adjusted trial balance is prepared to ensure the ac...read more

Tally account is a software used for accounting and financial management.

• Tally account is a popular accounting software used by businesses to manage their financial transactions.

• It helps in maintaining records of sales, purchases, inventory, and financial statements.

• Tally account also provides features like payroll management, tax compliance, and invoicing.

• It is widely used in India and other countries for its user-friendly interface and easy accessibility.

• Tally account can b...read more

Trading account is a financial statement that shows the gross profit or loss of a business from buying and selling goods.

• It is a part of the final accounts of a business

• It shows the direct expenses and indirect expenses related to buying and selling goods

• It includes opening and closing stock, purchases, sales, and returns

• The gross profit or loss is transferred to the profit and loss account

The three types of accounts are assets, liabilities, and equity.

• Assets are resources owned by a company, such as cash, inventory, and property.

• Liabilities are debts owed by a company, such as loans and accounts payable.

• Equity represents the residual interest in the assets of a company after liabilities are deducted, such as retained earnings and common stock.

The accounting year varies depending on the company's fiscal year.

• The accounting year can start on any date depending on the company's fiscal year

• For example, a company with a fiscal year starting on January 1st will have an accounting year starting on the same date

• However, a company with a fiscal year starting on July 1st will have an accounting year starting on the same date

Accounting is the process of recording, classifying, and summarizing financial transactions to provide information that is useful in making business decisions.

• Accounting involves recording financial transactions such as sales, purchases, and payments.

• It also involves classifying these transactions into categories such as assets, liabilities, and equity.

• Finally, accounting involves summarizing this information in financial statements such as balance sheets and income statement...read more

Tally Prime is a software used for accounting purposes.

• Tally Prime is used for recording financial transactions, managing accounts, and generating reports.

• It helps in maintaining inventory, tracking expenses, and preparing balance sheets.

• Users can also create invoices, manage payroll, and file GST returns using Tally Prime.

• The software offers features like multi-currency support, bank reconciliation, and budgeting tools.

Accrued income is income that has been earned but not yet received or recorded in the accounting books.

• Accrued income is recognized as a current asset on the balance sheet.

• It is recorded through an adjusting entry at the end of an accounting period.

• Examples of accrued income include interest on investments, rent, and services rendered but not yet billed.

• Accrued income is important for accurate financial reporting and forecasting.

Assets can be classified into tangible and intangible assets.

• Tangible assets include physical assets like property, plant, and equipment.

• Intangible assets include non-physical assets like patents, trademarks, and goodwill.

• Current assets are those that can be converted into cash within a year, such as inventory and accounts receivable.

• Non-current assets are those that cannot be easily converted into cash, such as long-term investments and property.

• Financial assets include stoc...read more

There are various types of taxes such as income tax, sales tax, property tax, excise tax, and more.

• Income tax is a tax on the income earned by an individual or business.

• Sales tax is a tax on the sale of goods and services.

• Property tax is a tax on the value of property owned by an individual or business.

• Excise tax is a tax on specific goods such as alcohol, tobacco, and gasoline.

• Other types of taxes include estate tax, gift tax, and payroll tax.

• Tax laws and rates vary by count...read more

Journal class is a categorization of transactions based on their nature and purpose.

• Journal class helps in organizing and analyzing financial transactions.

• It is used to group similar transactions together for reporting purposes.

• Examples of journal classes include sales, purchases, payroll, and general ledger.

• Each journal class has its own set of rules and procedures for recording transactions.

Trial balance is a list of all the general ledger accounts and their balances at a specific point in time.

• Prepared at the end of an accounting period

• Used to ensure that the total debits equal the total credits

• Identifies errors in the accounting records

• Does not guarantee that the financial statements are accurate

• Example: If the company has $10,000 in cash, the trial balance will show a debit balance of $10,000 in the cash account

Journal class value refers to the type of transaction recorded in a journal entry.

• Journal class value is used to categorize transactions in a journal entry.

• It helps in identifying the nature of the transaction such as sales, purchases, expenses, etc.

• Examples of journal class values include SALES, PURCHASES, EXPENSES, CASH, etc.

Journal class types are categories used to classify journal entries based on their purpose.

• Journal class types include revenue, expense, asset, liability, equity, and contra accounts.

• Revenue journal entries record income earned by the business.

• Expense journal entries record expenses incurred by the business.

• Asset journal entries record the acquisition or disposal of assets.

• Liability journal entries record the incurrence or payment of debts.

• Equity journal entries record change...read more

GAAP stands for Generally Accepted Accounting Principles.

• GAAP is a set of guidelines and standards for financial accounting and reporting.

• It ensures consistency and transparency in financial reporting.

• GAAP is used by companies to prepare their financial statements.

• It is also used by auditors to evaluate the accuracy of financial statements.

• Examples of GAAP include the matching principle, revenue recognition principle, and the going concern principle.

Accounts refer to financial records that track the transactions of a business or individual.

• Accounts are used to keep track of income, expenses, assets, and liabilities.

• They are typically organized into categories such as revenue, cost of goods sold, and operating expenses.

• Examples of accounts include cash, accounts receivable, accounts payable, and inventory.

• The purpose of accounts is to provide a clear picture of the financial health of a business or individual.

• They are use...read more

A journal is a record of financial transactions in chronological order.

• It is used to keep track of all financial transactions of a business.

• It includes details such as date, description, and amount of each transaction.

• There are different types of journals such as sales journal, purchase journal, and general journal.

• Journals are used to create financial statements and reports.

• Example: A sales journal would record all sales transactions made by a business.

I am proficient in using popular accounting software such as QuickBooks, Xero, and Sage.

• QuickBooks

• Xero

• Sage

Bookkeeping is the process of recording and organizing financial transactions of a business.

• It involves keeping track of all financial transactions such as sales, purchases, receipts, and payments.

• Bookkeeping helps in preparing financial statements such as balance sheets, income statements, and cash flow statements.

• It is important for businesses to maintain accurate and up-to-date bookkeeping records for tax purposes and to make informed financial decisions.

• Bookkeeping can be...read more

Journal entries are records of financial transactions in chronological order, showing the debit and credit amounts for each transaction.

• Journal entries are used to record business transactions in the accounting system.

• Each journal entry includes a date, accounts affected, amounts debited and credited, and a brief description.

• Debits and credits must always balance in a journal entry.

• Example: A company pays rent for the month, the journal entry would debit Rent Expense and cred...read more

Financial statements are documents that provide information about a company's financial performance and position.

• Financial statements include the income statement, balance sheet, and cash flow statement.

• The income statement shows a company's revenues, expenses, and profits over a specific period of time.

• The balance sheet provides a snapshot of a company's assets, liabilities, and equity at a specific point in time.

• The cash flow statement shows how cash is generated and used b...read more

Golden rules of accounting are basic principles that guide the recording of financial transactions.

• The first golden rule is the rule of debit and credit, which states that for every debit entry, there must be a corresponding credit entry.

• The second golden rule is the rule of assets and liabilities, which states that all assets must be recorded on the debit side and all liabilities on the credit side.

• The third golden rule is the rule of income and expenses, which states that a...read more

Balance sheet different - explain why

• There could be various reasons for a balance sheet to be different such as changes in assets, liabilities, equity, or accounting methods

• It could also be due to errors in recording or reporting financial transactions

• It is important to identify the reason for the difference and make necessary adjustments to ensure accuracy

• For example, if there was a change in accounting method, it should be disclosed in the notes to the financial statements

NPV can be found using various methods such as discounted cash flow, payback period, and profitability index.

• Calculate NPV by discounting future cash flows back to present value using a discount rate.

• Use payback period method to determine how long it takes to recoup the initial investment.

• Calculate profitability index by dividing the present value of future cash flows by the initial investment.

• Consider using Excel or financial calculators for accurate calculations.