Accounting Interview Questions with Answers Set 2
Categories: Accountancy
Are you in favor of having accounting standards?
I believe that accounting standards contribute to high quality and accurate reporting and ensure reliable financial statements.
What do you mean by Amortization and also mention its journal entry?
Amortization is an accounting concept that is used to gradually write off the cost. Through amortization, over a period of time, one can allocate the cost of any intangible asset. Also, it can be done to repay any loan principal. However, those assets which have an indefinite life like Goodwill can not be amortized.
What is the total value of cash in the above transactions?
Ans. Here is the total calculation of cash:
All Cash Transactions and balances:
Actual Cash = 4,50,000
Salaries payable = 32,000
Company’s car lease = 1,00,000
Office rent = 25,000
CCTV purchase = 20,000
Accounts payable = 30,000
Petty cash = 10,000
Petty cash replenished = 7,000 + 2000
Balance petty cash = 1000
Salaries paid = 30,000
Accounts receivable = 60,000
Ad and marketing expense = 6,000
Utility expense = 5,000
Dividend paid = 15,000
Hence as per the nature, here is the actual calculation of cash:
4,50,000 – 32,000 – 1,00,000 – 25,000 – 20,000 – 30,000 – (10,000 – 1,000) – 1,000 + 60,000 – 5,000 – 15,000 = 2,73,000
What is the total value of accounts receivable in the above transactions?
All entries related to accounts receivable:
Accounts receivable = 20,000
Income from selling CCTV camera = 42,000
Billed Fixing services = 10,000
Accounts receivable = 60,000
Hence, here is the total calculation of accounts receivable:
20,000 + 42,000 + 10,000 + 60,000 = 1,32,000
What is the value of the total fixed assets?
As no other assets apart from land are mentioned we will consider Land as the only fixed asset:
Value of Fixed Asset:
Land = 60,000
What will all be included in current assets?
We will include the following things:
Closing inventory
Bank and cash value
Supplies
Account Receivables
What will be included in the Owner’s equity?
We will include the following things in owners equity:
Capital (Common Stocks)
Retained earnings (balance at the beginning of the year, profits for the current year, less dividend paid, capital contributed during the year if any)
What will be included in the Current Liabilities?
Under the current liabilities, we will include the amount for creditors/payables which is 10,000 in the above case.
What do you mean by Days Payable Outstanding (DPO)?
DPO or Days Payable Outstanding refers to the average number of days that ideally a company takes to clear its credit purchase in regards to the outstanding suppliers. Most of the time, DPO is a monthly task for a business, however, each month the day of clearing the outstanding payment might differ, hence the average is taken out to estimate the payment period.
Below is the formula for calculating DPO:
Closing accounts payable / Purchase per day Or (Average accounts payable / COGS) X Number of days
Find out the DPO in the below query.
Average accounts payable in June50,000
Cost of Goods sold in June5,00,000
As the month of June has 30 days the DPO will be:
(50,000/5,00,000)*30 = 3 days
Hence, the DPO in the above situation is 3 days. This states that a company takes 3 days on average to clear all its pending invoices.