Accounts Payable Interview Questions & Answers: Mastering AP Processes & Procedures

Ace your Accounts Payable interview with this comprehensive guide! This resource provides in-depth answers to frequently asked AP interview questions, covering core concepts like what constitutes accounts payable, understanding TDS (Tax Deducted at Source), and the step-by-step accounts payable process. Learn about key differences between debenture holders and preference shareholders, how to handle non-PO invoices, and the importance of MIS reporting in AP. We also explore crucial topics like open item management, wire transfers, and the relevance of STPI (Software Technology Parks of India) knowledge in accounts payable. This guide also covers tax concepts like FBT (Fringe Benefits Tax), the three-way match process, trade discounts, early payment discounts, and the relationship between consignors and consignees. Prepare for your interview with confidence!

Most Asked Accounts Payable Interview Questions

What is Accounts Payable (AP)?

Accounts payable (AP) represents a company's short-term liabilities—the amounts owed to vendors for goods and services purchased on credit. These are typically debts that need to be paid within a specific timeframe to avoid penalties. For example, a restaurant might owe money to a food supplier for ingredients purchased on credit. This is considered a trade payable and is part of the accounts payable.

What is TDS (Tax Deducted at Source)?

TDS is a tax deducted directly from payments made to individuals or businesses. The payer (deductor) deducts the tax and remits it to the government. There are different TDS rates for salaried employees and contractors/professionals, often based on income levels and tax brackets set by the government.

Steps Before Approving an Invoice

1. Verify the invoice details for accuracy and completeness.
2. If using a workflow system, obtain necessary approvals.
3. Create the accounting entry after invoice approval.

Debenture Holder vs. Preference Shareholder

Non-PO Invoice

A non-PO invoice is an invoice issued without a corresponding purchase order. It usually requires additional approval before payment processing.

Accounts Payable Processes

1. Purchase Requisition
2. Purchase Order
3. Goods Receipt
4. Goods Inspection
5. Invoice Receipt and Verification
6. Payment Release
7. Payment
8. Reconciliation

Main MIS Reports for Accounts Departments

Management Information Systems (MIS) reports help management make informed decisions. Common reports include employee details, salary structures, new hires, employee departures, attrition rates, and various financial analyses. The format can vary, but often includes spreadsheets and tables summarizing key data points.

Types of Assets

Assets are broadly classified into current assets (easily converted to cash) and fixed assets (long-term assets).

What are Liabilities?

Liabilities are a company's financial obligations; amounts owed to others. They represent debts or obligations that need to be settled by transferring economic benefits like money or goods.

Debit Balance and Recovery

A debit balance indicates that a supplier owes money to the company. Recovery methods include issuing a credit memo (for future transactions with the same supplier) or requesting a refund/check directly from the supplier.

Defining a Good Supplier

A good supplier is reliable, meets deadlines and specifications, and maintains clear communication.

Open Item Management

Open item management tracks outstanding items in a system, preventing archiving until all items are cleared.

Wire Transfer

A wire transfer is a fast, electronic method for transferring funds between bank accounts.

IFA (Institute of Financial Accountants)

The IFA is a UK-based professional body for financial accountants.

STPI (Software Technology Parks of India)

STPI is an Indian organization that promotes software exports and provides support to the software industry.

Importance of STPI Knowledge in Accounts Payable

Knowledge of STPI (Software Technology Parks of India) is crucial because some software exporters receive tax exemptions. Accounts payable needs to track vendors based on their STPI location, as different STPI locations may have varying regulations.

FBT (Fringe Benefits Tax)

FBT is a tax on non-cash benefits provided to employees by their employers. For example, company cars or subsidized meals are fringe benefits. FBT is calculated as a percentage of the cost of the benefit and is separate from income tax.

Examples of Fringe Benefits

Common fringe benefits include:

• Telephone reimbursements
• Employer contributions to superannuation funds
• Tuition assistance
• Health insurance
• Childcare reimbursements
• Subsidized cafeterias
• Free transportation
• Employee discounts
• Employee stock options

Three-Way Match Process

A three-way match verifies invoice accuracy by matching it against the purchase order and goods received report. This helps prevent errors and fraud.

Trade Discount

A trade discount is a price reduction offered by a manufacturer or wholesaler to retailers or other wholesalers, usually based on the quantity purchased. The main benefit is to encourage bulk purchasing and increase sales volume.

Consignor vs. Consignee

Early Payment Discount

An early payment discount incentivizes buyers to pay invoices before the due date by offering a price reduction.

Additional Interview Resources

This section lists additional interview resources, not related to accounts payable:

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