Top 128 Accounting Interview Questions with Answers

Q1: Tell me about yourself!

I’m an AI developed to assist with a variety of topics, including accounting, finance,
and general knowledge. I can provide explanations, answer questions, and offer
insights based on the information available up to my last update.
Q2: What are the different types of accounting?
1. Financial Accounting: Focuses on reporting financial information to
external users.
2. Managerial Accounting: Involves internal management and decision-
making processes.
3. Cost Accounting: Analyzes costs associated with producing goods.
4. Tax Accounting: Focuses on tax-related issues and compliance.
5. Forensic Accounting: Investigates financial discrepancies and fraud.
Q3: Which accounting platforms have you worked on? Which one do you
prefer the most?
Common platforms include QuickBooks, Tally, SAP, and Oracle. Preferences vary
based on user needs; for example, QuickBooks is favored for small businesses due
to its user-friendly interface.
Q4: What is working capital?
Working capital is the difference between a company’s current assets and current
liabilities. It measures a company's short-term liquidity and operational efficiency.
Q5: Give a suggestion to improve the company’s working capital flow.
Implementing better inventory management techniques can improve working
capital flow by reducing excess stock and freeing up cash.
Q6: How do you maintain accounting accuracy?
To maintain accuracy, regularly reconcile accounts, implement internal controls, and
conduct audits. Using accounting software can also minimize human error.
Q7: Since you mentioned that MS Excel is your favorite, please give us
three cases where Excel will make your life easier.
1. Data Analysis: Using pivot tables to summarize large data sets.
2. Budgeting: Creating and managing budgets with formulas for automatic
calculations.
 3. Financial Modeling: Building complex financial models to forecast future
performance.
Q8: What is TDS? Where do you show TDS on a balance sheet?
TDS (Tax Deducted at Source) is a tax collected at the source of income. On the
balance sheet, TDS can be shown under "Current Assets" as a receivable or
deducted from tax liabilities.
Q9: What is the difference between ‘accounts payable (AP)’ and ‘accounts
receivable (AR)’?
AP refers to the money a company owes to suppliers for goods/services received,
while AR refers to the money owed to the company by customers for goods/services
provided.
Q10: What is the difference between a trial balance and a balance sheet?
A trial balance is a summary of all ledger accounts to ensure that debits equal
credits, while a balance sheet is a financial statement that reports a company's
assets, liabilities, and equity at a specific point in time.
Q11: Is it possible for a company to show positive cash flows and still be in
grave trouble?
Yes, a company can have positive cash flows but face issues like high debt,
declining sales, or poor profitability, which can indicate financial trouble.
Q12: What are the common mistakes in accounting?
Common mistakes include incorrect data entry, failing to reconcile accounts,
misunderstanding accounting principles, and not keeping thorough documentation.
Q13: What is the difference between inactive and dormant accounts?
Inactive accounts have had no transactions for a specified period, while dormant
accounts have been inactive for an extended time and may be subject to regulatory
actions.
Q14: Are you familiar with the Accounting Standards? How many
accounting standards are there in India?
Yes, in India, there are 32 Accounting Standards (AS) issued by the Institute of
Chartered Accountants of India (ICAI).
Q15: Why do you think Accounting Standards are mandatory?
Accounting Standards ensure consistency, reliability, and transparency in financial
reporting, which helps stakeholders make informed decisions.
Q16: If our organization has three bank accounts for processing payments,
what is the minimum number of ledgers it needs?
The minimum number of ledgers would be three, one for each bank account.
Q17: What are some of the ways to estimate bad debts?
Methods include historical data analysis, aging analysis, and percentage of sales
method.
Q18: What is deferred tax liability?
Deferred tax liability is a tax that has been accrued but not yet paid, often due to
timing differences between accounting income and taxable income.
Q19: What is a deferred tax asset, and how is the value created?
A deferred tax asset represents taxes that have been paid or carried forward but not
yet recognized in the profit and loss statement. It is created when tax deductions or
credits are available in future periods.
Q20: What is the equation for Acid-Test Ratio in accounting?
The Acid-Test Ratio = (Current Assets - Inventories) / Current Liabilities. It measures
a company's ability to meet short-term obligations without relying on inventory
sales.
Q21: Name some popular accounting applications.
Popular applications include QuickBooks, Tally, FreshBooks, Xero, and Sage.
Q22: Which accounting application do you like the most and why?
QuickBooks is often preferred for its user-friendly interface and robust features,
making it suitable for small to medium-sized businesses.
Q23: What is a bank reconciliation statement?
A bank reconciliation statement is a document that compares a company’s cash
balance on its books to the cash balance reported by the bank, ensuring accuracy.
Q24: What is tally accounting?
Tally is an accounting software widely used for bookkeeping, inventory
management, and financial reporting, especially in India.
Q25: What are fictitious assets?
Fictitious assets are non-physical assets that do not have intrinsic value but are
recorded on the balance sheet, such as deferred expenses and losses.
Q26: Can you explain the basic accounting equation?
The basic accounting equation is: Assets = Liabilities + Equity. It shows that a
company's resources are financed by debts and shareholders' equity.
Q27: What is CMM?
CMM stands for Capability Maturity Model, a framework used to assess and improve
processes in software development and other industries.
Q28: What is the meaning of purchase return in accounting?
A purchase return is a transaction where a buyer returns goods to the supplier,
reducing the amount owed and affecting inventory levels.
Q29: What is retail banking?
Retail banking involves providing financial services to individual consumers rather
than businesses, including savings accounts, loans, and mortgages.
Q30: What is offset accounting?
Offset accounting refers to the practice of balancing out or offsetting accounts
against each other to accurately reflect financial positions, such as offsetting
accounts payable with accounts receivable.
Q31: What are trade bills?
Trade bills are financial instruments used in trade transactions that represent a
promise to pay a specified amount at a future date, usually arising from credit sales.
Q32: Describe in one sentence the meaning of fair value accounting.
Fair value accounting measures assets and liabilities at their current market value
rather than historical cost, reflecting what they would sell for in an open market.
Q33: What happens to the cash which is collected from the customers but
not recorded as revenue?
Cash collected but not recorded as revenue is typically treated as a liability until the
revenue is recognized, often classified as unearned revenue or deferred income.
Q34: How important is documentation when it comes to accounting?
Documentation is crucial in accounting as it provides evidence for transactions,
supports financial reporting, and ensures compliance with regulations.
Q35: What is an MIS report, have you prepared any?
An MIS (Management Information System) report provides data analysis to support
decision-making processes within an organization; yes, I can assist in preparing
them by organizing relevant data.
Q36: What do you mean by the company’s payable cycle?
The payable cycle refers to the time it takes for a company to pay its suppliers after
receiving goods or services, typically measured in days.
Q37: What is Scrap Value in accounting?
Scrap value is the estimated residual value of an asset at the end of its useful life
after depreciation, often representing the amount recoverable upon disposal.
Q38: Which account is responsible for interest payable?
The "Interest Payable" account is a liability account responsible for recording
interest that has accrued but has not yet been paid.
Q39: What is the departmental accounting system?
A departmental accounting system tracks financial transactions and performance
for different departments within an organization, allowing for better financial
analysis and management.
Q40: What is a perpetual inventory system?
A perpetual inventory system continuously updates inventory records for each
transaction, providing real-time information on stock levels.
Q41: What do you mean when you say that you have negative working
capital?
Negative working capital occurs when a company's current liabilities exceed its
current assets, indicating potential liquidity issues.
Q42: What are the major constraints that can hamper relevant and reliable
financial statements?
Major constraints include lack of accurate data, poor internal controls, insufficient
documentation, and external pressures affecting reporting practices.
Q43: Tell me the golden rules of accounting, just mention the statements.
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.
Q44: Please elaborate on what this statement means – “Debit the
Receiver, Credit the Giver”.
This rule implies that in a transaction, the person or entity receiving value (the
receiver) should be debited, while the person or entity providing value (the giver)
should be credited, ensuring the accounting equation remains balanced.
Q45: Any idea what is ICAI?
ICAI stands for the Institute of Chartered Accountants of India, the statutory body
responsible for regulating the profession of chartered accountants in India.
Q46: Give some examples of fixed assets that you record in the balance
sheet.
Examples of fixed assets include buildings, machinery, vehicles, and land.
Q47: What is Executive Accounting?
Executive accounting focuses on providing financial information and analysis to
support the strategic decision-making of senior management.
Q48: What are bills receivable?
Bills receivable are written promises from customers to pay a specific amount at a
future date, representing amounts owed to the company.
Q49: Define Balancing.
Balancing refers to ensuring that total debits equal total credits in accounting
records, maintaining the integrity of financial statements.
Q50: What is Marginal Cost?
Marginal cost is the additional cost incurred when producing one more unit of a
product, calculated by taking the change in total cost divided by the change in
quantity.
Q51: What are Trade Bills? (Duplicate)
Trade bills, as previously stated, are financial instruments that represent a promise
to pay a specified amount at a future date arising from credit sales.
Q52: Can you define the term Material Facts?
Material facts are information that could influence the decision-making of
stakeholders and must be disclosed in financial statements.
Q53: What are the different stages of the Double Entry System?
The stages include:
1. Recording: Initial entry of transactions.
2. Classifying: Grouping transactions into accounts.
3. Summarizing: Preparing trial balances and financial statements.
4. Interpreting: Analyzing financial statements for decision-making.
Q54: What are the disadvantages of a Double Entry System?
Disadvantages include complexity, higher costs of implementation, and the need for
skilled personnel to maintain accurate records.
Q55: What are Assets Minus Liabilities?
Assets minus liabilities represent a company's equity or net worth, indicating the
residual interest of the owners after all obligations are settled.
Q56: What is GAAP?
GAAP (Generally Accepted Accounting Principles) is a set of accounting standards
and guidelines used for financial reporting in the U.S. to ensure consistency and
transparency.
Q57: Can you tell me some examples of liability accounts?
Examples of liability accounts include accounts payable, notes payable, accrued
expenses, and long-term debt.
Q58: What is the difference between accounts receivable and deferred
revenue?
Accounts receivable represents money owed to a company for goods/services
delivered, while deferred revenue represents payments received for services/goods
not yet delivered.
Q59: Where should you record a cash discount in a journal entry?
A cash discount is recorded as a reduction in revenue when payment is received,
typically in the journal entry as a debit to the sales account and a credit to cash.
Q60: What is a compound journal entry?
A compound journal entry involves more than two accounts, recording multiple
debits and/or credits in a single entry.
Q61: What is the dual aspect term?
The dual aspect term refers to the principle that every financial transaction affects
at least two accounts, maintaining the accounting equation (Assets = Liabilities +
Equity).
Q62: Define depreciation.
Depreciation is the systematic allocation of the cost of a tangible asset over its
useful life, reflecting wear and tear or reduction in value.
Q63: What are the different types of depreciation?
Common types of depreciation include:
1. Straight-Line Depreciation
2. Declining Balance Depreciation
3. Units of Production Depreciation
Q64: What is the difference between the consignor and consignee?
The consignor is the party that sends goods for sale, while the consignee is the
party that receives the goods and sells them on behalf of the consignor.
Q65: Define Partitioning.
Partitioning in accounting refers to dividing financial information into segments or
categories for clearer analysis and reporting.
Q66: Differentiate between Provision and Reserve.
Provisions are amounts set aside for specific liabilities that are uncertain in timing or
amount, while reserves are retained earnings set aside for future use or
contingencies.
Q67: What is an over-accrual?
An over-accrual occurs when expenses or liabilities are recorded at amounts greater
than what is actually owed, potentially leading to inaccurate financial statements.
Q68: What is reversing journal entries?
Reversing journal entries are made at the beginning of a new accounting period to
negate the effects of certain adjusting entries from the previous period.
Q69: Name some intangible assets.
Examples of intangible assets include patents, trademarks, copyrights, goodwill,
and software.
Q70: What is a Bad debt expense?
Bad debt expense represents the estimated uncollectible amounts from accounts
receivable, reflecting losses from customers who are unable to pay their debts.
Q71: When do you capitalize rather than expense a purchase?
You capitalize a purchase when it is expected to provide future economic benefits
over a period longer than one year, typically for assets like property, equipment, or
machinery.
Q72: When does goodwill increase?
Goodwill increases when a company acquires another business for more than the
fair value of its net identifiable assets, often due to brand reputation, customer
loyalty, or other intangible factors.
Q73: What are Revenue Recognition and Matching Principles?
Revenue recognition is the accounting principle that dictates when revenue should
be recognized in the financial statements, while the matching principle states that
expenses should be matched to the revenues they help generate within the same
accounting period.
Q74: Name different accounting concepts.
1. Going Concern
2. Accrual Basis
3. Consistency
4. Prudence
5. Economic Entity
 6. Time Period
7. Monetary Unit
Q75: What is the owner’s equity?
Owner's equity is the residual interest in the assets of a company after deducting
liabilities, representing the owner's stake in the business.
Q76: What is a debit note?
A debit note is a document issued by a buyer to a seller, indicating a return of goods
or a request for a credit against an invoice.
Q77: What is a credit note?
A credit note is a document issued by a seller to a buyer, indicating a reduction in
the amount owed, often due to returned goods or overbilling.
Q78: Explain Contingent Liabilities.
Contingent liabilities are potential obligations that may arise depending on the
outcome of uncertain future events, such as lawsuits or warranty claims.
Q79: What is GST?
GST (Goods and Services Tax) is a comprehensive indirect tax on the supply of
goods and services, replacing multiple previous taxes in many countries, aimed at
streamlining the taxation system.
Q80: Can you name some common errors in accounting?
1. Data Entry Errors
2. Misclassification of Accounts
3. Incorrect Journal Entries
4. Failure to Reconcile Accounts
5. Ignoring Adjusting Entries
Q81: What is project implementation?
Project implementation involves executing the project plan, coordinating resources,
and monitoring progress to achieve project goals within the set timeframe and
budget.
Q82: What are the various stages of project implementation?
1. Initiation
2. Planning
3. Execution
4. Monitoring and Controlling
 5. Closure
Q83: Are you in favor of having accounting standards?
Yes, accounting standards are essential for ensuring consistency, reliability, and
transparency in financial reporting, which aids stakeholders in making informed
decisions.
Q84: What do you mean by Amortization and also mention its journal
entry?
Amortization is the gradual reduction of an intangible asset's value over time. The
journal entry typically involves a debit to the amortization expense account and a
credit to the intangible asset account.
Q85: What is the importance of financial forecasting?
Financial forecasting helps organizations predict future financial outcomes, aiding in
strategic planning, budgeting, and resource allocation.
Q86: How does depreciation affect financial statements?
Depreciation reduces taxable income and net income on the income statement,
while also decreasing the asset value on the balance sheet over time.
Q87: What is cash flow management?
Cash flow management involves monitoring, analyzing, and optimizing the inflows
and outflows of cash to ensure a business can meet its financial obligations.
Q88: What are the types of budgets?
1. Operating Budget
2. Capital Budget
3. Cash Flow Budget
4. Static Budget
5. Flexible Budget
Q89: Can you explain the term "accrual accounting"?
Accrual accounting recognizes revenues and expenses when they are incurred,
regardless of when cash is actually exchanged, providing a more accurate financial
picture.
Q90: What is the purpose of a trial balance?
The trial balance serves to verify that total debits equal total credits in the
accounting records, helping to identify errors in the ledger accounts.
Q91: How do you prepare a cash flow statement?
To prepare a cash flow statement, categorize cash flows into operating, investing,
and financing activities, then reconcile net income with cash changes by adjusting
for non-cash items and changes in working capital.
Q92: What is the difference between fixed costs and variable costs?
Fixed costs remain constant regardless of production levels (e.g., rent), while
variable costs fluctuate with production volume (e.g., raw materials).
Q93: What are the key financial statements?
1. Income Statement
2. Balance Sheet
3. Cash Flow Statement
Q94: How do you assess a company's financial health?
Assess a company's financial health by analyzing key financial ratios, trends in
revenues and profits, cash flow, and overall balance sheet strength.
Q95: What is the role of a financial analyst?
A financial analyst evaluates financial data, forecasts business performance,
conducts market research, and provides insights to support investment and
business decisions.
Q96: How do you calculate return on investment (ROI)?
ROI is calculated using the formula: ROI = (Net Profit / Cost of Investment) ×
100%.
Q97: What is the significance of working capital management?
Effective working capital management ensures a company has sufficient liquidity to
meet short-term obligations and supports ongoing operational needs.
Q98: What are some techniques for cost reduction?
1. Process Improvement
2. Negotiating Supplier Contracts
3. Energy Efficiency Initiatives
4. Outsourcing Non-Core Activities
5. Inventory Management Optimization
Q99: Explain the term "liquidity" in finance.
Liquidity refers to the ease with which an asset can be converted into cash without
affecting its market price, crucial for meeting short-term financial obligations.
Q100: What is a business plan?
A business plan is a formal document that outlines a company's goals, strategies,
market analysis, financial projections, and operational plans for achieving success.
Q101: What are the key components of a business plan?
1. Executive Summary
2. Company Description
3. Market Analysis
4. Organization and Management
5. Marketing Strategy
6. Funding Request
7. Financial Projections
8. Appendices
Q102: What is the difference between qualitative and quantitative
analysis?
Qualitative analysis focuses on non-numerical factors, such as opinions and market
trends, while quantitative analysis involves numerical data and statistical methods.
Q103: What are the benefits of budgeting?
Benefits of budgeting include improved financial planning, better resource
allocation, performance measurement, and enhanced financial control.
Q104: Explain the concept of variance analysis.
Variance analysis compares actual financial performance against budgeted figures
to identify discrepancies, enabling management to understand the causes of
variances and make informed decisions.
Q105: What is financial leverage?
Financial leverage refers to the use of borrowed funds to amplify potential returns
on investment, but it also increases financial risk.
Q106: How do interest rates affect investment decisions?
Higher interest rates generally discourage borrowing and investing, while lower
rates make borrowing cheaper, encouraging investment and spending.
Q107: What are the different sources of business financing?
1. Equity Financing
2. Debt Financing
3. Venture Capital
4. Grants and Subsidies
 5. Crowdfunding
Q108: Explain the term "market risk."
Market risk is the potential for financial loss due to changes in market conditions,
including fluctuations in stock prices, interest rates, and exchange rates.
Q109: What is the significance of cash reserves for a business?
Cash reserves provide a financial cushion for unexpected expenses, support
liquidity needs, and enhance a company's ability to invest in opportunities or
weather downturns.
Q110: How do you define profit margin?
Profit margin is the percentage of revenue that remains as profit after all expenses
are deducted, calculated as (Net Income / Revenue) × 100%.
Q111: What are the factors that affect pricing strategies?
Factors include production costs, market demand, competition, consumer behavior,
and economic conditions.
Q112: What is market segmentation?
Market segmentation involves dividing a broad target market into smaller, more
defined groups based on characteristics like demographics, behaviors, or
preferences to tailor marketing efforts.
Q113: Explain the concept of economies of scale.
Economies of scale occur when the cost per unit of production decreases as the
scale of production increases, leading to greater efficiency and lower costs.
Q114: What is the difference between a merger and an acquisition?
A merger is the combining of two companies into one entity, while an acquisition is
when one company purchases another, taking control of its assets and operations.
Q115: How do you evaluate the performance of a company?
Evaluate performance using financial ratios, profitability metrics, revenue growth,
market share, and operational efficiency indicators.
Q116: What is the role of regulatory agencies in finance?
Regulatory agencies oversee financial markets and institutions to ensure
transparency, protect investors, maintain fair markets, and enforce compliance with
laws and regulations.
Q117: Explain the importance of ethics in accounting.
Ethics in accounting is crucial for maintaining trust, credibility, and transparency in
financial reporting, which supports informed decision-making by stakeholders.
Q118: What are the major challenges in financial management?
Challenges include managing cash flow, budgeting and forecasting, maintaining
compliance, risk management, and adapting to market changes.
Q119: What is the impact of globalization on accounting practices?
Globalization leads to increased complexity in accounting due to differing
regulations, standards, and practices across countries, requiring greater adherence
to international accounting standards.
Q120: How do you approach risk management in finance?
Approach risk management by identifying potential risks, assessing their impact,
implementing mitigation strategies, and regularly monitoring and reviewing risk
exposure.
Q121: What is an audit, and why is it important?
An audit is an independent examination of financial statements to ensure accuracy
and compliance with accounting standards, important for maintaining transparency
and trust.
Q122: What are the different types of audits?
1. Internal Audit
2. External Audit
3. Compliance Audit
4. Operational Audit
5. Forensic Audit
Q123: Explain the term "return on equity (ROE)."
Return on equity (ROE) measures a company's profitability relative to shareholders'
equity, calculated as (Net Income / Shareholders' Equity) × 100%.
Q124: What is the difference between public and private companies?
Public companies are listed on stock exchanges and can raise capital by selling
shares to the public, while private companies are owned by a small group of
investors and do not publicly trade their shares.
Q125: What are financial derivatives?
Financial derivatives are contracts whose value is derived from the performance of
underlying assets, such as stocks, bonds, or commodities, used for hedging or
speculation.
Q126: How do you assess investment opportunities?
Assess investment opportunities by analyzing financial metrics, market conditions,
risks, potential returns, and alignment with strategic goals.
Q127: What is the importance of maintaining accurate financial records?
Accurate financial records ensure compliance with regulations, facilitate informed
decision-making, support audits, and provide insights into financial performance.
Q128: Describe Cost Object with an example.
A cost object is any item for which costs are measured and assigned, such as a
product, department, or project. For example, the cost of manufacturing a specific
model of a car would be a cost object.