Series -6 - Personalized replies to the questions that can be asked in Interviews for Accounts & Finance Role.

Hello everyone!! Welcome back to the TAX DESTINATION blog.Thanks for your continuous support & tremendous response to our blogs. Check out the Previous series if you haven't read the same where we have given questions that can be asked in HR Round & Technical Round for Audit Role

In this series, we would like to give questions that can be asked in the Accounts & Finance Role

Questions  that can be asked in Accounts Profile

Basic Questions:

01. What is the use and purpose of Excel Pivot Table, VLOOKUP, HLOOKUP?

Pivot Table is an interactive way to quickly summarize large amounts of data. It is used to summarize, sort, reorganise, and group. It allows us to extract the significance from a large, detailed data set.

VLOOKUP: It is a function that makes Excel search for a certain value in a column, to return a value from a different column in the same row.

HLOOKUP: Stands for Horizontal Lookup. It is a function that makes Excel search for a certain value in a row, in order to return a value from a different row in the same column.

02. Definition, Difference and Journal entry of - (Mandatory Ques-any one)?

i. Provision & Contingent Liability

JE for Provision:

Expense A/c…. Dr

To Provision A/c…. Cr

JE for Contingent Liability:

Cash A/c…. Dr

To Accrued Liability A/c…Cr

ii. Accrued Payable & Accrued Expenses

iii. Prepaid Expenses

Prepaid expenses are future expenses that are paid in advance. On the balance sheet, prepaid expenses are first recorded as an asset. After the benefits of the assets are realized over time, the amount is then recorded as an expense.

JE

Prepaid Rent….. Dr

To Cash…… Cr

iv. Dividend

Dividends are payments a company makes to share profits with its stockholders. They're paid on a regular basis, and they are one of the ways investors earn a return from investing in a stock.

On Declaration :

Retained Earnings…Dr

To Dividend payable… Cr

On Payment:

Dividend Payable…Dr

To Cash…Cr

v. Bad Debts and Provision for doubtful debts

vi. Return on Capital and Return of Capital

vii. Contingencies and Reserves

viii. Deferred tax asset and liabilities

ix. Depreciation and Impairment

x. Accumulated Depreciation: 

Accumulated depreciation is the total amount of the depreciation expenditure allocated to a particular asset since the asset was used. It is a contra asset account, i.e. a negative asset account that offsets the balance in the asset account with which it is usually linked. The accumulated balance of depreciation increases over time, adding the amount of the depreciation expense recorded during the current period.

03. IND AS -115,116,16 or respective AS (if you haven’t study INDAS-Study respective AS) -Mandatory ques on one of them (Just go through concepts, understand difference between AS and INDAS- In-depth study not required)

03. What is schedule III?

Schedule III provides the format of financial statements of companies complying with the Accounting Standards and Ind AS.

04. Accounting Concepts such as Going Concern concept and Prudence Concept

Going Concern Concept: Going concern concept is one of the accounting principles that states that a business entity will continue running its operations in the foreseeable future and will not be liquidated or forced to discontinue operations for any reason.

Prudence Concept: Prudence concept is a concept that has been put in place to ensure that the person who is making the financial statements makes sure that the assets and income are not overstated to make sure the company is not overvalued

05. What are the Golden Rules of Accounting? What are the different types of Accounts (Real, Nominal and Personal)?

Golden Rules of Accounting:

1 Debit The Receiver, Credit The Giver

2 Debit What Comes In, Credit What Goes Out 

3 Debit All Expenses And Losses, Credit All Incomes And Gains

Different types of Accounts: 

Personal: Personal Accounts are the ones that are related to individuals, companies, firms, groups of associations etc. Eg Veer’s A/c, Kapoor Pvt Ltd, Prepaid Expenses A/c etc.

Real: Real Accounts are the ones that are related to properties, assets or possessions. Real Accounts can be of two types: Tangible Real Accounts and Intangible Real accounts. Eg Machinery A/c, trademarks, goodwill etc.

 

Nominal: Nominal Accounts relate to income, expenses, losses or gains. These include Wages A/c, Salary A/c, Rent A/c etc.

06. What is CFS? Components of CFS? What is the treatment of depreciation in CFS? 

•  A cash flow statement (CFS) is a financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company. 

•  The CFS measures how well a company manages its cash position, meaning how well the company generates cash. 

• The CFS complements the balance sheet and the income statement

•  The main components of the CFS are cash from three areas: operating activities, investing activities, and financing activities. 

•  The two methods of calculating cash flow are the direct method and the indirect method. 

• Depreciation is a non-cash expense and needs to be added back to the cash flow statement in the operating activities section, alongside other expenses such as amortization and depletion.

07. What are the steps of the accounting cycle?

1)  General Ledger Cycle: The eight steps of the accounting cycle include the following

•      Identify transactions
•      Record transactions into a journal
•      Posting
•      Unadjusted trial balance
•      Worksheet
•      Adjusting Journal Entries
•      Financial Statements
•      Closing of books

 

2) Depreciation concept and Entries: 

     A method of allocating the cost of a tangible asset over its useful life is known as Depreciation, usually, businesses depreciate long-term assets for both tax and accounting purposes.

     The basic journal entry for depreciation is to debit the Depreciation Expense account (which appears in the income statement) and credit the Accumulated Depreciation account (which appears in the balance sheet as a contra account that reduces the amount of fixed assets)

       

3)   Provision for Bad Debts: 

     The provision for doubtful debts is the estimated amount of bad debt that will arise from accounts receivables that have been issued but not yet collected. It is identical to the allowance for doubtful accounts. Here, the expense is recognized for probable bad debts because as soon as invoices are issued to customers rather than waiting several months to find out exactly which invoices turned out to be uncollectible. Thus, the net impact of the provision for doubtful debts is to accelerate the recognition of bad debts into earlier reporting periods.

 

4) Deferred Revenue concept and accounting entries:

      This concept speaks about any money received in advance for products or services that are going to be performed in the future. Rent payments received in advance or annual subscription payments received at the beginning of the year are common examples of deferred revenue. 

    When we receive the money, we will debit it to our cash account because the           amount of cash our business has increased. And, we will credit our deferred         revenue account because the amount of deferred revenue is increasing.

 

5)     Three way matching concept: 

      This concept speaks about the process of comparing the purchase order; the goods receipt note and the supplier's invoice before approving a supplier's invoice for payment. It helps in determining whether the invoice should be paid partly or in its entirety.

 

6)   Bank Reconciliation concept: 

     Bank reconciliation is the process of matching the balances in an entity’s accounting records for a Bank account to the corresponding information on a bank statement. A bank reconciliation should be done at regular intervals for all bank accounts, to ensure that a company's cash records are accurate.

 

7) What is accumulated depreciation,Whether it is an asset or liability? How to present in the balance sheet. 

     Accumulated depreciation is the total amount of the depreciation expense allocated to a particular asset since the asset was used. Accumulated depreciation is an Asset. 

     Accumulated depreciation is recorded as a credit–offsetting the asset whereas Fixed assets are recorded as debit on the balance sheet.

 

8)     Salary Entry:

   Gross Salary Account        Dr.

      To TDS A/c….Cr

      To Cash Account / Salary payable    Cr. 

 

9)   What are operating Expense: 

     Operating expense include rent, equipment, inventory cost, Marketing, 

     payroll, Insurance and fund allocated with research and development.

 

10) Manufacturing expense both definition and example: 

     Manufacturing costs are the costs of materials plus the costs to convert the materials into products. All manufacturing costs must be assigned to the units produced in order for a company's external financial statements to comply with U.S. GAAP.

 

     Example:  Direct labour, Direct materials, Manufacturing overheads.

 

11)  Accrued Expense: 

     Accrued expenses are an expense that is recognized in the books even before it is been paid. This is also known as accrued liabilities.

     Example:  Cost of future customer warranty.

 

12) Prepaid Expense: 

     These are future expenses that are paid in advance and hence recognized initially as an asset. 

     Example: Prepaid rent.

13)  Month Close: 

     Businesses perform a month-end close to keep accounting data organized and ensure all transactions for the month are accounted for.  

     Month close is a step followed in an entity to record, reconcile, and review             accounting information.

 

14) Steps in Month Close :

Record daily operational financial transactions

Reconcile accounting system modules and subsidiary ledgers.

Record monthly journal entries.

Reconcile balance sheet accounts.

Review revenue and expense accounts.

Prepare financial statements.

Management review.

Close accounting systems for the month.

 

15) What is AP Ageing: 

 

     An accounts payable ageing report is a vital accounting document that outlines the due dates of the bills and invoices a business needs to pay.

 

16) Definition of AP And AR:

Accounts payable are amounts due to vendors or suppliers for goods or services 

received that have not yet been paid for.

Accounts receivable (AR) is the balance of money due to a firm for goods or 

services delivered or used but not yet paid for by customers. 

 

17) What is an Asset: 

     An asset is a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit.

18) What is Liability: 

     Liability is something a person or company owes, usually a sum of money. ... Recorded on the right side of the balance sheet, liabilities include loans, accounts payable.

 

19)  Entries for 

Accrued Expense:

 Interest Expense   Dr.

 To Interest Payable  Cr.

Deferred revenue:

  Bank A/c               Dr.

  To Rental Income A/c  Cr.

 

20) Adjustment Entry to Stale Cheque :

Cash     A/c                                                      Dr

To Miscellaneous income/ Accounts payable      Cr

 

21) Golden rules Of Accounting

Real Account:

Debit what comes in

Credit what goes out 

Nominal Account:

Debit all the Expense/ lose

Credit all incomes/ gains

Personal Account:

Debit the receiver

Credit the giver.

 

22) Accounting Assumptions:

The three main Accounting assumptions are going concern, consistency, and accrual basis.

 

23) Methods of Depreciation and examples: 

     There are four methods for depreciation: straight line, declining balance, sum-of-the-years' digits, and units of production.

Straight Line Method: Under the SLM, equal depreciation expense is charged in each period of the asset’s useful life minus Salvage.

Example: King Fisher Air, Inc. purchased an aeroplane 200 million. It is expected to last10 years and salvage value of 10 million. The Depreciation rate would be 10% on the cost every year.

Diminishing balance Method: Diminishing refers to reduction, Hence the diminishing method refers to the reduction or declining method.

Example: King Fisher Air, Inc. purchased an aeroplane 200 million. It is expected to last10 years and salvage value of 10 million. The Depreciation rate would be 10% on the cost every year

1 Year Depreciation, Formula says= ( Netbook value- residual value)* depreciation rate

 (200million-10million)*10%=19 million

2 year Depreciation, = 171 million * 10%= 171.million

24) What is cost of goods sold and how to calculate it:

     COGS refers to the direct costs of producing the goods sold by a company. This amount includes the cost of the materials and labor directly used to create the good. It excludes indirect expenses, such as distribution costs and sales force costs.

COGS = Beginning Inventory + Purchases During the Period – Ending Inventory

25) What is Gross margin and How to calculate it: 

Gross margin is company net revenue minus Cost of goods sold.

Gross margin= Revenue- COGS/ Revenue.

26) What is unbilled revenue:  

     Revenue that has been earned by a company or individual but not yet recorded on their accounts.

 

27) Cash Concept vs Accrual concept: 

     The main difference between accrual and cash basis accounting lies in the timing of when revenue and expenses are recognized. The cash method is immediate recognition of revenue and expenses, while the accrual method focuses on anticipated revenue and expenses.

28) AS-9: Revenue recognition: 

     As per AS-9, revenue is the gross inflow of cash, receivables or other consideration arising in the course of the ordinary activities of an enterprise from the sale of goods, from the rendering of services, and from the use by others of enterprise resources yielding interest, royalties and dividends.

 

29) Contingent Asset and Liability:

A contingent liability is a liability or a potential loss that may occur in the future depending on the outcome of a specific event.

A contingent asset is a potential economic benefit that is dependent on future events out of a company's control.

30)  Purchase Entry: 

Purchase A/c   Dr

CGST A/c     Dr

SGST A/c     Dr

    To Party/cash Cr

 

31) Fixed assets accounting entries:

Purchase Entry:

Furniture A/c    Dr

To vendor A/c   Cr

 

Depreciation Entry

Depreciation A/c Dr

To Accumulated Depreciation A/c Cr

  

Profit on Sale of Fixed Asset:

Bank A/c       Dr

To Gain on sale of furniture A/c Cr

To Furniture A/c                           Cr

            Loss on Sale of Fixed Asset:

            Loss on Sale of furniture   Dr

            Bank A/c                            Dr

            To Furniture                      Cr

32) Additions and Deletions:

  

33) Sale Entry:

Bank/ Party A/c     Dr

To Sale                    Cr

To CGST                 Cr

To SGST                 Cr

 

34) Definition of Provision: 

      A present obligation of company arising from past events, the settlement of which is expected to result in an outflow of resources embodying economic benefits.

 

35) Intercompany elimination: 

     This is the process that a parent company goes through in order to remove transactions between subsidiary companies in a group. Parent companies complete intercompany eliminations when they're preparing consolidated financial statements.

 

36) The distinction between a reserve and a provision: 

     A reserve is an appropriation of profits for a specific purpose. The most common reserve is a capital reserve, where funds are set aside to purchase fixed assets. A provision is the amount of an expense or reduction in the value of an asset that an entity elects to recognize now in its accounting system before it has precise information about the exact amount of the expense or asset reduction. For example, an entity routinely records provisions for bad debts, sales allowances, and inventory obsolescence. 

 

37) Important areas in the Invoice for recording: 

     Name of the seller, Name of our company, Accounting period, Invoice number, Particulars of goods sold, Particulars of tax, Total amount due, Due date for payment(Agreement).

 

38) When depreciation for an asset is calculated- When an asset is put to use.

 

39) If an invoice is received date of last year – 

       We will check for any accruals for that is accounted.

 

40) What is GL and what is Sub GL- 

     Simply headings for a group of accounts is GL and Accounts in that group are called sub GL. For example, Finance cost is GL and various interest accounts are called Sub GL.

 

41) Salary entry When TDS, PF, ESI are given.