Accounting Interview Questions and Answers

1. State the three main types of accounts?

There are three main types of account i.e. real, nominal, and personal.

1. Real: All assets in business either tangible or intangible classify as real

accounts
2. Nominal: All accounts are related to expenses & losses or incomes & gains
fall under this category.
3. Personal: Accounts related to the entity, or person or any legal body, etc.
2. Can you define some common errors in accounting?

Simply answer it on point like the common errors in accounting are an error of
commission, an error of principle, the error of omission and compensating error.

3. Name some important terms used in the balance sheet?

Some of the important terms used in the balance sheet are:

Assets:

• Current assets and fixed assets

• Tangible assets and Intangible assets
Liability:

• Current Liability
• Contingent Liabilities
• Fixed Liabilities
Equity:

It is a claim which can be prescribed against the assets of the firm in the court. It
refers to a claim held by Owner, creditor, owner and the creditor both.

4. What is the abbreviation for the accounting terms debit and credit?
The abbreviation for debit is “dr” and for credit is “cr”.

5. How many types of business transactions are there in accounting?

There are two types of transactions:

• Revenue
• Capital
6. What is tally accounting?

It is the software used for accounting in small business and shops for managing
routine accounting transactions.

7. What is VAT in accounting?

VAT is defined as Value Added Tax.

8. Define departmental accounting?

It is a type of accounting in which a separate account is created for departments.

It is managed solely as well as shown independently in the balance sheet.

9. Explain the basic accounting equation?

As we all know that accounting is all about assets, liabilities and capital. So the basic
accounting equation will formulate like

Assets= Liabilities+ Owners Equity.

10. What is Project Implementation?

Project Implementation involves six steps which are:

• Identify Need
• Generate and screen ideas
• Conduct a Feasible study
• Develop the Project
• Implement the project
• Control the project
11. State different branches of accounting?

There are three different branches of accounting:

• Management Accounting
• Financial Accounting
• Cost Accounting
12. Define the term material facts in accounting?

Material facts are the bills or any document that becomes the base of every
account book. In simple words, it refers to all those documents, on which account
book is prepared known as material facts.

13. What do you understand by company’s payable cycle?

It refers to the time required by the company to pay all its account payables

14. Define Scrap value in accounting?

It is the residual value of an asset. The residual value is the value that any asset
holds after its predicted lifetime.

15. What is working capital?

Working capital is defined as current assets less current liabilities. In banking,

working capital is determined more narrowly as current assets (excluding cash)
less current liabilities (excluding interest-bearing debt).

Accounting Interview Questions & Answers

1. What do you mean by financial accounting?

Financial accounting refers to summarizing and gathering financial data plan to
arrange financial reports such as income statement, the balance sheet for the
organization’s management lenders, suppliers and other stakeholders.

2. Define the skills that are needed for an accountant job role?
Skills required to work as an accountant are:
 • Prepared work style
• Excellent at math’s
• Ability for technology
• Strong analytical skills

3. Name some accounting software?

Some of the accounting software:

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

4. How many types of business transactions are there in accounting?

There are two types of business transaction:

• Revenue
• Capital

5. Define TDS? And where it is shown in the balance sheet?

TDS stands for Tax Deduction at Source. It is introduced to gather text from the
company from where the employee profits are generated. It is shown on the
assets part, right after the current head asset.

6. What do you mean by Tally Accounting?

It is the software utilized for accounting in small shops and business for running
routine accounting transactions.

7. Explain Departmental Accounting?

Departmental accounting is a kind of accounting in which a divided account is
created for departments. It is managed and shown separately in the balance
sheet.

8. Tell me the abbreviation for the accounting terms credit and debit?
The abbreviation term used for credit and debit are “dr” and “cr”

9. State the difference between inactive and dormant accounts?

Inactive accounts are the accounts that have been closed and will not be used
further, whereas dormant accounts are those that are not efficient today but may
be used in the future.

10. Define working capital?

Working capital is planned as current assets minus current liabilities, which is
used in day to day trading.

11. How do you maintain accounting accuracy?

Maintaining the correctness of an organization’s accounting is a significant
activity as it can result in an immense loss. There are different tools and resources
which can be used to bound the potential for errors to sneak in and address
quickly if any errors do occur.

12. Differentiate between accounts payable and accounts receivable?

The main difference between accounts payable and receivable are:

• Accounts payable: The amount a company owes because it purchased

goods or services on credit from a supplier or vendor. Also, accounts
payable are liabilities
• Accounts Receivable: The amount a company has the right to collect
because it sold goods or services on credit to a customer. Also, accounts
receivable are assets.

13. Tell me some common errors in accounting?

The standard errors in accounting are: errors of commission, errors of principle,
errors of omission and compensating error.

14. Why do you think accounting standards are necessary?

Accounting Standards play a significant role in preparing an excellent and precise
financial report. It ensures dependability and significance in financial reports.

15. What are some of the ways to estimate bad debts?

Some of the admired ways of estimating bad debts are ageing analysis,
percentage of outstanding accounts and percentage of credit sales.

16. Define deferred tax asset and how is the value created?
A deferred tax asset is when the tax amount has been paid or carried forward but
has still not been documented in the income statement. The value is shaped by
taking the dissimilarity between the book income and the taxable income.

17. What is the equation for the Acid test ratio in accounting?
The equation for the acid test ratio in accounting is:

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

18. Name some popular accounting applications?

Some of the popular accounting applications are:

• Microsoft accounting professional

• CGram Software
• Financial Force
• Microsoft Dynamics AX

19. Can you explain the basic accounting equation?

Accounting is all about liabilities, assets and capital. Hence, its equation can be
summarized as:

Assets= Liabilities + Owners Equity

20. Name the different branches of accounting?

The three different branches of accounting are:

• Cost Accounting
• Financial Accounting
• Management Accounting

21. Define retail Banking?

Retail banking includes a retail client, where particular customers use local
branches of better commercial banks.

22. What do you mean by trade bills?

These are the bills generated against every transaction. It is a part of the
documentation process for all kinds of transactions.

23. What is the scrap value in accounting?

Scrap value is the remaining value of an asset that any asset holds after its
predictable lifetime.

24. Do you know about the golden rules of accounting?

There are three golden rules in accounting:
 • Debit what comes in, credit what goes away
• Debit the receiver, credit the giver
• Debit all expenses and losses, credit all incomes and gains

25. What are the premises?

Premises refer to fixed assets obtainable on a balance sheet.

So, these are some of the top accounting interview questions & answers
for accounting jobs; candidates need to prepare well and get the job in hand
easily.

1. Define what is a balance sheet?

A balance sheet is a statement consisting of all the assets, liabilities, and capital of a company
at certain point.

2. What does Tally accounting mean?

Tally accounting is an ERP software that is used by small as well as large businesses for
business functionalities like accounting, finance, inventory, payroll, etc.

3. What is the difference between capital and revenue transaction?

Accounting involves two types of business transactions-capital and revenue. Revenue
transaction refers to the transactions relating to the day to day activities. A capital
transaction refers to the transaction for long term objective such as the purchase of a fixed
asset.

4. What is the meaning of working capital?

Working capital refers to the value of current assets minus current liabilities that are used in
day-to-day trading.

5. What is the meaning of premises in terms of accounting?

In terms of accounting, the word premises refer to the number of fixed assets that are shown
in the balance sheet.

6. What is VAT?
VAT stands for value added tax. It is a type of consumption tax placed on a product’s sales
price. It stands for the price of ‘value added’ on the product in its production stage.

7. What is the basic accounting equation?

Accounting is all about measuring the assets, capital, and liabilities of a business. Therefore,
the basic accounting equation is:

Assets = Liabilities + Owners Equity

8. How are accounting and auditing different?
Accounting and auditing are two different terms. Accounting means recording the daily
financial activities of a business, whereas, auditing is checking whether these events are
noted correctly or not.

9. What is retail banking?

Retail banking means carrying out financial transactions with a retail client and not any
other business or organizational customers.

10. What are trade bills?

Trade bills are simply the documents generated against each transaction.

11. What is double entry bookkeeping and what are its rules?
Double entry bookkeeping follows the principle by which every debit has a corresponding
credit due to which the value of the debit is equal to the total of all credits. This simply means
that when one account is debited at the same time another account is credited by the similar
account.

Rules followed
• In the case of personal account: debit the receiver and credit the giver

• In the case of real account: debit is what comes in and credit is what goes out

• In the case of nominal account: debit all the expenses and credit all the incomes

12. What is debit and credit note?

Debit note is nothing but an intimation note sent to an individual dealing with the business
stating that his account will be debited for the purpose indicated therein. Whereas, credit
note is an intimation note sent to an individual dealing with the business stating that his
account will be credited for the purpose indicated therein.

13. Can you name the different branches of accounting?

Different branches of accounting are:

• Financial accounting

• Management accounting

• Cost accounting

14. What does the term dual aspect mean in terms of accounting?
The term dual aspect means every transaction that you carry out has two aspects, i.e., it
affects two accounts in their respective opposite sides. For example, to make a purchase, you
have to give cash in exchange for the product or service you avail and when you sell
something you get the money in exchange for the sale you make. So in short, losing and
receiving money are the two aspects of a financial transaction. Therefore, the transaction
should be recorded in two places.

The concept of duality in terms of fundamental accounting equation is:

Assets = Liabilities + Capital

15. Name the accounting events that are a part of compound entries?
A compound journal entry is an accounting entry in which there is more than one debit,
more than one credit, or more than one of both debits and credits. Accounting events that
generally involve compound journal entries are:

• Different expenses related to diverse line items in a supplier invoice

• Payroll related deduction and payments

• Overall bank deductions related to bank reconciliation

• Customer invoice related financial receivable and sales tax

16. What is inactive and dormant account?

Inactive accounts are the accounts that are closed and will not be used anytime in the future.
Dormant accounts are accounts that are not functional but can be used in the future.

17. What are fictitious assets?

Fictitious assets are assets that cannot be shown or touched, but can only be felt such as
rights, good will, etc.

18. What is the meaning of the general ledger account?

The general ledger is a type of account that a company maintains for recording information
of a specific type of transaction such as assets, liabilities, gains, losses, equities, etc. In short,
these accounts are maintained for recording all type of transactions that are aggregated in
the income statement and balance sheet.

19. What are balance sheet accounts?

Known as permanent accounts, balance sheet accounts are type of accounts in which the
balance is not closed in the end of financial year and is carried forward to the next
accounting year.

20. What is marginal cost?

Marginal cost is the estimated cost of additional inputs that are required to produce the
output. The cost is calculated by dividing the total cost change by the difference in product
output. This simply states the increase and decrease in the total cost of the product due to
the production of one extra unit in the product.

21. What is the meaning of the term overhead in accounting?

In terms of accounting, overhead means the value of indirect expenditures of a company i.e.
the rent dues, salaries, etc.

22. How many accounting standards are there in India and are you familiar with each?
Possible answer:
There are over 41 accounting standards in India and I am familiar with them. These
standards are set by the Accounting Standard Board (ABS).

23. What does deferred tax liability stand for?

It stands for the fact that a company will be required to pay more tax in the future due to its
transactions in the current period.

24. What are the accounting applications you have used?

Possible answer 1:
I have experience in using Microsoft Accounting Professional, Microsoft Small Business
Financials, Financial Force, etc.
Possible answer 2:
To improve accuracy and simply the calculation process, I have previously worked on
software such as Tally, Zoho Books, Microsoft Accounting Professional and others.

25. What is GST?

It is good and service tax; a type of indirect tax that is charged by the seller to the customer
on the value of the goods or service availed. GST was implemented in India on 1st July 2017.
This type of tax has replaced all the previously existing indirect taxes in India.

26. What is bank reconciliation?

It is a process done by companies to ensure that their records i.e. the balance sheet, general
ledger account details, etc. are in accordance with the bank's records.

27. What are different financial constraints that can have an impact on the company's
financial statements?
Some examples of financial contraints are:

• Zero balance between benefits and costs incurred

• Qualitative characteristics having no or zero balance

• Having no clarity between true and fair view presentation

• Too much of delay leading to irrelevant information

28. What is the meaning of GAAP?

GAAP stands for Generally Accepted Accounting Principles that are issued by the Institute of
Chartered Accountants of India (ICAI) and the provisions of the Companies Act, 1956. The
principles are general accounting standards that are followed by the companies to
summarize their accounting records into financial statements and record the company's
financial information accurately.

29. In your view, what are the concepts/terms that an accountant should have good
knowledge of?
Possible answer:
An accountant should have good knowledge of the following:
• Analyzing and reporting financial data
• Budget planning
• Account management
• Basic accounting principles and practices
• Knowledge of financial rules and regulations
• Knowledge of various accounting software's

30. What is cost objective and why is it done?

Cost objective is the process of recording all the cost incurred by the company in running the
usual business. This is done to ascertain the cost of loss and profit ratio of the company and
to find ways to control the cost.

31. What is a liability account?

It is a general ledger account of a company that records its obligations, debt, customer
prepayments, deferred income taxes, etc. that are a result of the past transactions done by
the company.

Accounting HR Interview Questions and Answers

32. How do you ensure your work is error free?

Possible answer:
When I am in an extremely difficult situation, I am always open to ask for suggestions from
my team members. I have a habit of reviewing everything before I send out the files on email
or show it to my seniors. I make use of software as well as calculators to ensure I am doing
the task correctly.

33. What drew you to choose accountancy as a profession?

Possible answer 1:
Accountants are in great demand with opportunities across all sectors and industries, and
even in different parts of the world. I feel it is a very challenging yet exciting job profile.
Moreover, I have always been interested in numbers and problem-solving tasks.
Possible answer 2:
Accountancy is not just about numbers; it also helps an individual develop his
communication, leadership and problem-solving skills. It highly satisfies me as I do not just
learn things on a professional level, but also on a personal level.

34. Why should we hire you?

Possible answer 1:
The position that you are hiring for suits me the best. I am sure that with the skills that I
bring to the table, I would help the company grow as I have a proven track record of
managing the company’s finances effectively.
Possible answer 2:
I possess the required qualification and skills for this job. I am a pro with numbers and
accounting software. I also have good analytical skills, besides being good at mathematics,
which I believe are important for an accountant.
Check out detailed article on How to answer 'Why should I hire you?'

35. Do you prefer to work alone or as a team?

Possible answer 1:
I like working in a team as I think two minds can do the job in a better way than one. I also
like brainstorming and collaborating with my colleagues.
Possible answer 2:
I really enjoy collaborating with a team and brainstorming ideas, but I can work
independently too to get things done. For the most part, I do prefer working alone as I think
it helps me work faster and meet the deadlines.

36. Do you have any questions for us?

You can ask general questions about the company culture or specific questions related to
your profile. Some of the sample questions to ask:

• What accounting softwares are used in the company?

• What are the main projects the team is working on currently?
• What are the existing challenges of the accounts department?
• How often are the financial review meetings conducted?
• What are the next steps in the interviewing process?
Check out some more questions to ask in an interview.

Tips for answering accounting interview questions

Let us take a look at some important tips to answer accounting interview questions.

• Accounting standards: Before the interview, ensure you are aware of all the basic
accounting standards as knowing them is a basic requirement that a company has even
when recruiting a fresher.
• Accounting software: Today all the companies, big or small, make use of accounting
software for a speedy and reliable process. Hence, it is important that you are well
aware of how to use various accounting applications.
• Narrate your experience: Utilize stories or your previous work experience to tell the
employer about how you have helped your previous company reduce costs or gone out
of your way to advise the management.
• Be well prepared: Apart from preparing for the common interview questions, do
some company research and read the job description carefully to understand if you meet
the basic requirement of the tasks/skills required to get hired by the company.
 • Comprehension: Listen to all the questions carefully before answering. Don’t jump on
to answering before actually understanding what the recruiter is trying to question you
on.
1. What are the different types of accounting?

There are two main types of accounting: financial and managerial. Financial
accounting primarily deals with reviewing and reporting transaction
information, while managerial accounting is much broader, looking at a
company’s financial health and future.

However, you can also discuss some other specialties within accounting.
For example, cost accountants focus on production and sales costs,
typically for industrial companies. Tax accountants, on the other hand,
handle registering, preparing, and filing tax returns and tax payments.

2. Define and explain the three financial statements.

The three types of financial statements are balance sheets, income

statements, and cash flow statements. These statements are a big part of
every accountant’s job — reading and interpreting or creating them.

Your answer should include the purpose of each statement and what each
statement shows. For example:

• Balance sheets show liabilities, assets, and shareholder equity.

A balance sheet shows a company’s financial position at a
given moment. Assets should be equal to liabilities and
shareholder equity, or, in other words, balanced.
• Income statements are typically quarterly or annual reports
that break down a company’s operations. This statement
shows a company’s revenue, expenses, and taxes, resulting in
the net income or profit.
• Cash flow statements show a more detailed overview of a
company’s incoming and outgoing cash than the income
statement. This statement is useful for determining if a
company can continue paying its bills and invest in growth
down the line.
3. What is the difference between accounts payable and accounts
receivable?

Accounts receivable are assets — the company will collect this money in
exchange for already sold goods or services. Accounts payable are
liabilities — the company owes this money to someone else for goods or
services.

4. When would you capitalize a purchase, rather than expense it?

Generally speaking, expensing is used if the company will consume the

purchase immediately — it’s not an investment. Purchases that will be
consumed over a longer period of time should be capitalized.

For example. if the company will use the purchase for more than a year or
two, such as a company car or a new piece of machinery, it should be
capitalized. Immediate expenses, like employee salaries or paper for the
office printer, should be expensed.

5. What are some ways to reduce human error in the accounting department?

There is no right or wrong way to answer this question. You can focus on
specific skills that can help the team prevent inaccuracies, such
as attention to detail, time management, and organization.

You can also focus on the software you found useful for catching or
preventing errors or ways you’ve automated certain tasks to keep
everything accurate. Additionally, you can discuss the key areas to pay
attention to, such as invoices, receipts, and tax documents.

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6. What is the accounting equation?

The accounting equation is a core principle of accounting. It states that a

company’s liabilities and equity are equal to its assets. The accounting
equation also relates to the balance sheet, which shows a company’s
assets, liabilities, and equity.

7. Define EBITDA and how it relates to accounting.

EBITDA stands for earnings before interest, taxes, depreciation, and

amortization. EBITDA is a measure of a company’s financial health because
it gives insight into how well a company can generate money.

While every accountant should be familiar with EBITDA, it is crucial for

certified management accountants (CMAs) since they deal primarily with
the health and future performance of a company.

8. What is working capital?

Working capital is a company’s current assets minus current liabilities.

Working capital is a company’s money to use for day-to-day operations.

9. How would you determine if a company can afford its short-term

commitments?

The best way to determine a company’s ability to cover short-term

commitments is by using the current ratio. The current ratio involves
dividing the company’s current assets by current liabilities. This ratio is
sometimes referred to as the working capital ratio because it determines
how much of the company’s liabilities will be covered by current assets.

10. What is PP&E, and how do you record it?

PP&E stands for property, plant, and equipment, or a company’s physical,

long-term assets, such as buildings, furniture, and vehicles. PP&E is
recorded on the balance sheet. You should account for any depreciation
and consider any capital put into these assets, such as additions or
upgrades.
11. What is the difference between deferred revenue and accounts
receivable?

Deferred revenue is money the company has received but has not earned.
For example, imagine a client pre-pays for their driveway to be repaved.
Their payment is counted as deferred revenue until the company fulfills
the service and repaves the driveway.

Accounts receivable is the opposite — this is money the company is owed

for services already provided. If a company repaves a customer’s driveway
but the customer hasn’t paid for it, yet, the due payment counts toward
accounts receivable until the invoice is fulfilled.

12. How would a large purchase, such as a new piece of machinery, affect the
three financial statements?

To fully answer this question, you’ll need to ask for further information
about how the machinery was financed, when the machinery was
purchased, and whether the answer should be for the time of purchase or
for a later date.

If a company purchases a $5,000 piece of machinery on credit, that is a

$5,000 liability and a $5,000 asset. The machinery’s value should be
added to the company’s PP&E on balance sheets, the cost of the
machinery is an expense on income sheets, and the transaction is
recorded on cash flow statements. Additionally, the machinery’s
depreciation will affect all of the company’s financial statements.

13. Describe the difference between accrual accounting and cash

accounting.

The accrual basis of accounting means money is counted even if the cash
hasn’t been received yet. For example, if a company allows for deferred
payments, the promised or owed money will still be counted even if it
won’t be collected until a later date.

Cash basis accounting only counts money once it has been received. So, if
a company uses deferred payment plans, the money for those services will
not be counted as revenue until it has been received by the company.