100+ Accounting Interview Questions & Answers for All Levels

Prepare for your accounting interview with this extensive guide featuring 100+ questions and answers covering fundamental and advanced concepts. From basic accounting principles (debit/credit, double-entry bookkeeping, the accounting equation) to more complex topics like GAAP, depreciation methods, taxation (TDS, GST), financial statement analysis, and key ratios (acid-test ratio), this resource equips you with the knowledge needed to excel. We cover popular accounting software (QuickBooks, Tally, Sage), accounting practices, common errors, and career-related questions. Whether you're a recent graduate or an experienced professional, this comprehensive guide will boost your confidence and help you land your dream accounting job. Topics include working capital, accounts payable/receivable, bad debts, different types of assets and liabilities, and various accounting branches (financial, management, cost accounting).

Most Asked Accounting Interview Questions and Answers

What is Financial Accounting?

Financial accounting involves summarizing and compiling financial data to create reports like income statements and balance sheets for management, lenders, suppliers, and other stakeholders.

Popular Accounting Software

Some well-known accounting software packages include:

  • Tally
  • FreeAgent
  • FreshBooks
  • Sage 50cloud
  • Zoho Books

Essential Skills for an Accountant

Key skills for accountants include:

  • Strong analytical skills
  • Organized work style
  • Excellent mathematical abilities
  • Proficiency with accounting technology

Types of Business Transactions

Accounting recognizes two main types of business transactions:

  • Revenue Transactions
  • Capital Transactions

What is TDS?

TDS (Tax Deduction at Source) is a tax collected by a company from an employee's earnings. It's shown in the assets section of the balance sheet, typically under current assets.

Real and Nominal Accounts

Real Accounts: Represent assets and liabilities (e.g., land, buildings). Nominal Accounts: Represent income and expenses (e.g., salaries, wages).

Accounting Platforms and Preferences

I've worked with QuickBooks, Microsoft Dynamics GP, Tally, FreeAgent, FreshBooks, Sage 50cloud, and Zoho Books. My favorite is Tally.

Working Capital

Working capital is calculated as current assets minus current liabilities; it represents the funds available for day-to-day operations.

Double-Entry Bookkeeping

Double-entry bookkeeping ensures that every debit entry has a corresponding credit entry, maintaining the accounting equation (Debits = Credits).

Tally Accounting

Tally is accounting software commonly used by small businesses for routine accounting tasks.

Departmental Accounting

Departmental accounting tracks financial information separately for each department within a company.

Abbreviations for Credit and Debit

The abbreviations for credit and debit are "cr" and "dr," respectively.

Inactive vs. Dormant Accounts

Inactive accounts are permanently closed. Dormant accounts are temporarily inactive but might be used again in the future.

Maintaining Accounting Accuracy

Maintaining accuracy is crucial to prevent financial losses. Various tools and techniques help minimize errors.

Accounts Payable (AP) vs. Accounts Receivable (AR)

Accounts Payable (AP) Accounts Receivable (AR)
Amount owed to vendors for goods or services purchased on credit (liability). Amount owed to the company by customers for goods or services sold on credit (asset).

Trial Balance vs. Balance Sheet

Trial Balance Balance Sheet
Lists all ledger account balances to check for arithmetic accuracy. Shows a company's assets, liabilities, and equity at a specific point in time.

Common Accounting Errors

Common errors include errors of omission, errors of commission, errors of principle, and compensating errors.

Importance of Accounting Standards

Accounting standards are mandatory to ensure the reliability and relevance of financial reports.

Estimating Bad Debts

Methods for estimating bad debts include aging analysis, percentage of outstanding accounts, and percentage of credit sales.

Deferred Tax Asset

A deferred tax asset represents a tax payment made or carried forward but not yet reflected in the income statement. Its value is the difference between book income and taxable income.

Acid-Test Ratio

Formula

Acid-test ratio = (Current Assets - Inventory) / Current Liabilities

Basic Accounting Equation

Formula

Assets = Liabilities + Owner's Equity

Branches of Accounting

The main branches of accounting are cost accounting, financial accounting, and management accounting.

Goods and Services Tax (GST)

GST is an indirect tax on the sale of goods and services. The seller collects it from the buyer and remits it to the government.

Bank Reconciliation Statement (BRS)

A BRS compares a company's bank records with its own records to identify discrepancies.

Fictitious Assets

Fictitious assets are intangible assets with benefits spread over a long period (e.g., goodwill, preliminary expenses).

Purchase Return

A purchase return occurs when a buyer returns goods to the seller due to defects or dissatisfaction.

Retail Banking

Retail banking (or consumer banking) serves individual customers through local bank branches.

Trade Bills

Trade bills are documents created for each transaction, serving as evidence in the documentation process.

Scrap Value

Scrap value is the residual value of an asset after its useful life.

Three Golden Rules of Accounting

  1. Debit what comes in, credit what goes out.
  2. Debit the receiver, credit the giver.
  3. Debit all expenses and losses, credit all incomes and gains.

Premises in Accounting

In accounting, "premises" refers to fixed assets listed on the balance sheet.

Offset Accounting

Offset accounting cancels out an accounting entry with an equal but opposite entry to reduce the net balance of another account.

Fair Value Accounting

Fair value accounting records assets at their current market value.

Company's Payable Cycle

The company's payable cycle is the time it takes to pay all accounts payable.

"Debit the Receiver, Credit the Giver" Explained

This golden rule applies to personal accounts. The receiver is debited, and the giver is credited.

ICAI (Institute of Chartered Accountants of India)

ICAI is a statutory body regulating chartered accountants in India.

Executive Accounting

Executive accounting is a term frequently used in finance, advertising, and public relations, primarily for service-based businesses.

Bills Receivable

Bills receivable represent the payments a company expects to receive from its customers.

Balancing in Accounting

Balancing ensures that the debit and credit sides of an account are equal.

Marginal Cost

Marginal cost is the change in total cost resulting from producing one additional unit of output.

Material Facts in Accounting

Material facts are supporting documents like vouchers, bills, and receipts that form the basis of accounting records.

Stages of the Double-Entry System

  1. Recording transactions.
  2. Preparing a trial balance.
  3. Preparing final statements and closing the books.

Drawbacks of the Double-Entry System

  • Difficult to find errors.
  • Requires significant effort to correct errors.
  • May not capture all transaction details if not properly recorded initially.

GAAP (Generally Accepted Accounting Principles)

GAAP, issued by the ICAI and governed by the Companies Act, 1956, provides guidelines for recording financial information, preparing financial statements, and disclosing information. Organizations use GAAP to ensure consistency and accuracy in their financial reporting.

Examples of Liability Accounts

  • Accounts Payable
  • Accrued Expenses
  • Bonds Payable
  • Customer Deposits
  • Income Taxes Payable
  • Installment Loans Payable
  • Interest Payable
  • Lawsuits Payable
  • Mortgage Loans Payable
  • Notes Payable
  • Salaries Payable
  • Warranty Liability

Compound Journal Entry

A compound journal entry affects more than two accounts (multiple debits and/or credits).

Depreciation

Depreciation reflects the decrease in an asset's value over time. Common methods include the straight-line method and the written-down value method.

Examples of Intangible Assets

  • Patents
  • Copyrights
  • Trademarks
  • Brand names
  • Domain names

Increasing Goodwill

Goodwill increases when a company acquires another for a price exceeding the fair value of its assets.

Bad Debt Expense

Bad debt expense represents uncollectible accounts receivable.

Revenue Recognition and Matching Principles

Revenue Recognition Principle: Revenue is recognized when earned, regardless of when payment is received. Matching Principle: Expenses are reported when the related revenues are earned.

Accounting Concepts

  • Accounting Period Concept
  • Business Entity Concept
  • Cost Concept
  • Dual Aspect Concept
  • Going Concern Concept
  • Matching Concept
  • Money Measurement Concept

Owner's Equity

Owner's equity represents the owner's claim on the business's assets. It's calculated as total assets minus total liabilities.

Components of Owner's Equity

  • Capital (Common Stock)
  • Retained Earnings (beginning balance, profits, less dividends, plus capital contributions)

Debit Note/Debit Memorandum

A debit note requests a credit note from a buyer, typically when goods are returned.

Credit Note

A credit note is issued to a buyer whose account is credited due to returned goods.

Contingent Liabilities

Contingent liabilities are potential liabilities that may or may not materialize depending on future events.

Project Implementation in Accounting

Project implementation is the phase where accounting plans are executed and monitored.

Steps in Project Implementation

  1. Need Identification
  2. Idea Generation and Screening
  3. Feasibility Study
  4. Project Development
  5. Project Implementation
  6. Project Control

Usage of Accounting Standards

Accounting standards ensure high-quality, accurate reporting and reliable financial statements.

Accounting Information System (AIS)

An AIS is a computer-based system for tracking accounting activities, processing data, and generating reports to aid decision-making.

Choosing Accounting as a Career

Answers will vary, but a strong response should highlight relevant skills, interest in the field, and career aspirations.

MIS Report

An MIS (Management Information System) report provides data on departmental efficiency.

Departmental Accounting System

A departmental accounting system tracks financial information for each department separately.

Perpetual Inventory System

A perpetual inventory system tracks inventory levels in real-time using technology.

Cash Collected but Not Recorded as Revenue

Cash collected but not yet earned as revenue is recorded as "Deferred Revenue" as a liability.

Negative Working Capital

Negative working capital occurs when current liabilities exceed current assets.

Constraints on Relevant and Reliable Financial Statements

  • Delays in reporting can lead to irrelevant information.
  • A lack of balance between the costs and benefits of reporting.

Constraints on Financial Statement Quality

  • Lack of balance between qualitative characteristics (e.g., relevance vs. reliability).
  • Lack of clarity in presenting a true and fair view.

VAT (Value Added Tax)

VAT is a consumption tax levied at each stage of a product's supply chain, from production to sale.

Number of Accounting Standards Published by ICAI

The ICAI has published 33 accounting standards to promote consistent accounting practices.

CPA (Certified Public Accountant)

A CPA is a designation requiring significant education and experience (typically 150 credit hours from an accredited university).

Public vs. Private Accounting

Public Accounting Private Accounting
Provides accounting services to other companies. Works within a single company.

Dual Aspect Concept

The dual aspect concept states that every transaction has two sides: a debit and a credit. For example, a purchase involves giving cash and receiving goods.

Consignor vs. Consignee

The consignor is the owner of goods who ships them to a consignee, who receives the goods.

Importance of Statistics in Accounting

A basic understanding of statistics is beneficial for effective accounting practices and managing daily transactions.

Additional Interview Resources

This section lists additional interview resources, not related to accounting:

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