60+ Fund Accountant Interview Questions and Answers

Journal entry for prepaid rent paid at beginning and end of month affecting net worth.

• Debit prepaid rent account for the full amount paid at the beginning of the month

• Credit cash account for the same amount

• At the end of the month, debit rent expense account for the portion of rent used during the month

• Credit prepaid rent account for the same amount

• The entry at the end of the month affects the net worth as it reduces the prepaid rent asset and increases the rent expense

• Example...read more

The entry for share purchased today credited into demat on T+2 is a debit to the cash account and a credit to the demat account.

• Debit cash account

• Credit demat account

• Occurs on T+2

• Reflects purchase of shares

The share price has an impact on the issue of dividends as it affects the dividend yield and the amount of cash paid out to shareholders.

• Share price affects the dividend yield, which is calculated by dividing the annual dividend per share by the share price.

• A higher share price reduces the dividend yield, making the stock less attractive to income-seeking investors.

• Share price also affects the amount of cash paid out as dividends. A higher share price may result in a lower di...read more

State Street Corporation is a leading financial services company known for its global presence and expertise in asset management and custody services.

• State Street Corporation is one of the largest custodian banks in the world, providing services to institutional investors and asset managers.

• The company has a strong global presence with offices in over 100 locations worldwide.

• State Street is known for its expertise in asset management, offering a wide range of investment solut...read more

Assets are resources owned by a company, while liabilities are obligations or debts. They have subcategories and formulas to determine their values.

• Assets are economic resources that provide future benefits to a company, such as cash, inventory, or property.

• Liabilities are obligations or debts that a company owes to external parties, such as loans or accounts payable.

• Subcategories of assets include current assets (e.g., cash, accounts receivable) and non-current assets (e.g.,...read more

Fund Accountant interview questions on hedge funds, IRR formula, and journal entries for accrual and prepaid.

• Hedge fund is an investment fund that pools capital from accredited individuals or institutional investors and invests in a variety of assets.

• IRR (Internal Rate of Return) is a metric used to measure the profitability of an investment. Formula: NPV = 0 = CF0 + CF1 / (1 + IRR) + CF2 / (1 + IRR)^2 + ... + CFn / (1 + IRR)^n

• Journal entry for accrual: Debit expense account,...read more

RBI increases Repo rate to control inflation by reducing money supply and increasing cost of borrowing.

• Repo rate is the rate at which RBI lends money to commercial banks.

• When RBI increases Repo rate, it becomes expensive for banks to borrow money from RBI.

• Banks then increase their lending rates to customers, which reduces borrowing and spending.

• This reduces money supply in the economy, which helps in controlling inflation.

• For example, if inflation is high, RBI may increase Re...read more

Management fees and performance fees are charges levied by investment managers for managing funds and achieving certain performance benchmarks.

• Management fees are ongoing charges that cover the cost of managing the fund, including administrative expenses, research, and investment management.

• Performance fees are additional charges based on the fund's performance relative to a benchmark or a predetermined hurdle rate.

• Management fees are typically calculated as a percentage of t...read more

Capstock refers to the total value of a company's outstanding shares of stock.

• Capstock is the market value of a company's equity capital.

• It represents the total value of all the company's shares of stock.

• Capstock can be calculated by multiplying the current market price per share by the total number of outstanding shares.

• It is an important metric for investors and analysts to assess the overall value of a company.

• Subscription refers to the process of purchasing new shares of ...read more

NAV calculation is the process of determining the net asset value of a fund, which represents the value per share/unit.

• NAV is calculated by subtracting the fund's liabilities from its assets.

• Assets include investments, cash, and receivables, while liabilities include expenses and payables.

• NAV = (Total Assets - Total Liabilities) / Total Shares/Units Outstanding.

• NAV is typically calculated on a daily basis for mutual funds and other investment vehicles.

• Example: If a fund has $...read more

Accounting rules are guidelines and principles that govern the recording and reporting of financial transactions.

• Accounting rules ensure consistency and accuracy in financial reporting.

• They provide a framework for recording and classifying transactions.

• Modern accounting rules are often based on international standards, such as the International Financial Reporting Standards (IFRS) or the Generally Accepted Accounting Principles (GAAP) in the United States.

• Traditional accounti...read more

GAV stands for Gross Asset Value, which represents the total value of all assets in a fund. NAV stands for Net Asset Value, which is the value of a fund's assets after deducting liabilities.

• GAV is the total value of all assets in a fund, including both realized and unrealized gains or losses.

• NAV is the value of a fund's assets after deducting liabilities, such as management fees, operating expenses, and accrued expenses.

• GAV is calculated by adding up the market value of all i...read more

Mutual funds are open to all investors, while hedge funds are only open to accredited investors.

• Mutual funds are regulated by the SEC, while hedge funds are not.

• Mutual funds are more diversified, while hedge funds are more focused on specific strategies.

• Mutual funds have lower fees, while hedge funds have higher fees and require larger minimum investments.

• Mutual funds are required to disclose their holdings regularly, while hedge funds are not.

• Examples of mutual funds include...read more

Corporate action refers to any event initiated by a publicly traded company that impacts its shareholders.

• Corporate actions can include stock splits, dividends, mergers and acquisitions, rights issues, and spin-offs.

• Stock split: When a company divides its existing shares into multiple shares, e.g., 2-for-1 split.

• Dividends: Distribution of a portion of a company's earnings to its shareholders.

• Mergers and acquisitions: When two companies combine or one company acquires another....read more

Futures are the riskiest among options, futures, and forwards.

• Futures involve a higher degree of leverage and are traded on margin, which increases the risk.

• Futures contracts have a fixed expiration date, which can lead to unexpected losses if the market moves against the position.

• Options and forwards offer more flexibility and can be used to hedge risk, while futures are primarily used for speculation.

• For example, if an investor buys a futures contract for crude oil at $50 p...read more

Capstock can affect the NAV by impacting the valuation of the fund's investments.

• Capstock refers to the capitalization of a stock, which is the total value of a company's outstanding shares.

• If a fund holds capstocks that experience a significant increase or decrease in value, it can impact the Net Asset Value (NAV) of the fund.

• An increase in the value of capstocks held by a fund can lead to an increase in the NAV, as the overall value of the fund's investments rises.

• Conversel...read more

Yes, hedge funds operate in India.

• Hedge funds have been operating in India since the early 2000s.

• The Securities and Exchange Board of India (SEBI) regulates hedge funds in India.

• Some examples of hedge funds operating in India are AQR Capital Management, Bridgewater Associates, and DE Shaw.

• Hedge funds in India primarily invest in equities, fixed income, and derivatives.

Swaps, equities, bonds, MBS, RMBS, CMBS, ETFs, and valuations are all financial instruments used in investment management.

• Swaps are agreements between two parties to exchange cash flows based on a notional amount.

• Equities are ownership shares in a company.

• Bonds are debt securities issued by companies or governments.

• MBS, RMBS, and CMBS are types of mortgage-backed securities.

• ETFs are exchange-traded funds that track an index or a basket of assets.

• Valuations are the process of ...read more

Yes, I have extensive knowledge of MS-Excel.

• I am proficient in using Excel for financial analysis and reporting.

• I have experience in creating complex financial models using Excel.

• I am skilled in using Excel functions such as VLOOKUP, SUMIF, and Pivot Tables.

• I have used Excel to prepare financial statements and reconcile accounts.

• I am comfortable working with large data sets in Excel and have experience in data analysis.

Equity represents ownership in a company and can be affected by stock splits, dividends, right issues, and bonus issues.

• Equity represents ownership in a company, giving shareholders a claim on assets and earnings.

• Stock splits increase the number of shares outstanding while decreasing the share price proportionally.

• Dividends are payments made by a company to its shareholders from its profits.

• Right issues allow existing shareholders to purchase additional shares at a discounted...read more

Dividend is a portion of a company's profits paid to shareholders. Bonus is an additional payment to shareholders. Split is dividing existing shares into multiple shares. NAV is the value of a fund's assets minus liabilities.

• Dividend is a distribution of a portion of a company's profits to its shareholders

• Bonus is an additional payment made to shareholders, often as a reward for holding shares for a certain period of time

• Split is when a company divides its existing shares int...read more

DR and CR are abbreviations for debit and credit, which are used in accounting to record financial transactions. Ledger is a book that contains all the accounts, while subledger is a subsidiary ledger that provides more detailed information for specific accounts.

• DR stands for debit, which represents an increase in assets or a decrease in liabilities or equity.

• CR stands for credit, which represents a decrease in assets or an increase in liabilities or equity.

• Ledger is a book t...read more

Derivatives are financial instruments whose value is derived from an underlying asset or group of assets.

• Derivatives can be used for hedging, speculation, or arbitrage.

• Common types of derivatives include options, futures, forwards, and swaps.

• Options give the holder the right, but not the obligation, to buy or sell an asset at a specified price before a certain date.

• Futures are contracts to buy or sell an asset at a future date for a price agreed upon today.

• Forwards are simila...read more

Fund accounting is a specialized form of accounting used by organizations that manage funds or investments.

• It focuses on tracking and reporting the financial activities of specific funds or investment portfolios.

• It involves recording and reconciling transactions, calculating net asset values, and preparing financial statements.

• Fund accountants ensure compliance with regulatory requirements and provide accurate and timely financial information to stakeholders.

• Examples of organ...read more

ABS/MBS securities are financial instruments that represent a pool of underlying assets such as mortgages or loans.

• ABS stands for Asset-Backed Securities and MBS stands for Mortgage-Backed Securities.

• These securities are created by pooling together similar types of assets and then selling them to investors.

• Investors receive payments based on the cash flows generated by the underlying assets.

• ABS/MBS securities played a significant role in the 2008 financial crisis.

• Examples of ...read more

Management fees are fees paid by investors to the fund manager for managing the fund's investments. Performance fees are fees paid based on the fund's performance.

• Management fees are typically calculated as a percentage of the fund's assets under management.

• Performance fees are usually calculated as a percentage of the fund's profits above a certain benchmark.

• Management fees are paid regardless of the fund's performance, while performance fees are contingent on the fund outpe...read more

Equity is ownership in a company, while a bond is a debt instrument issued by a company or government.

• Equity represents ownership in a company and gives shareholders the right to vote and receive dividends.

• Bonds are debt instruments where the issuer borrows money from investors and promises to repay the principal with interest.

• Equity holders have a higher risk and potential for higher returns compared to bondholders.

• Examples of equity include common stock, while examples of b...read more