Accounting Interview Questions with Answers Set 4

Categories: Accountancy

What are the different types of liquidity ratios in accounting?

Basically, there are five different types of ratios in accounting:

Current Ratio

The higher the company has current ratio, the better is the company’s strength to handle short-term financial issues. It is calculated by – Current ratio = Current Asset/ Current Liabilities

Net-Working Capital Ratio

It articulates whether or not a company has sufficient funds to carry out short-term operations. It is calculated by – Current Asset – Current Liabilities

Quick ratio

The quick ratio is also known as the acid test ratio or liquid ratio which illustrates the company’s short-term liquidity to meet any short-term obligations. If the quick ratio is below 1:1, the company is not in a good state to handle short-term debts. Quick ratio = Liquid Assets / Current Liabilities

Super-Quick Ratio

Super Quick Ratio = (Cash + Marketable Securities) / Current Liabilities

The operating Cash Flow ratio

It is calculated by dividing cash flow from operations with current liabilities. It is observed that a sound operating cash flow ratio makes the firm’s liquidity position better.


What is the Accounting Information System (AIS)?

This is a frequently asked accounting interview question thus you should know everything about AIS.

AIS is a computer-based method used for tracking accounting activity and involves – collecting, storing, processing, organizing, and summarizing accounting data and transactions. It also helps in cumulating financial transactions and essential financial reports, which helps stakeholders in decision making. Using AIS for storing and processing financial data helps in the following tasks:

Measure the financial performance

Evaluate the finances of the company and compare it with the previous period to draw a conclusion

Avoid any miss-handling of data

Connects Information Technology with GAAP principles



What do you mean by tangible real accounts and intangible real accounts?

 To answer this accounting interview question, give a brief explanation and highlight with examples.

Tangible Real Account – Those assets which can be touched and have a physical existence are defined as tangible real accounts.

Example – Machinery A/c, Vehicle A/c, Building A/c

Journal Entry –

Debit what comes in

Credit what goes out

Intangible real account – Those assets which have some monetary values but can’t be touched are referred to as intangible real accounts.

Example – Goodwill, Patents, Copyrights

Journal Entry –

Debit what comes in

Credit what goes out



How to perform an income statement analysis?

 The income statement is the company’s core financial statement highlighting the profits and losses of the company. It involves:

All revenues – expenses (both operating and non-operating activities)

To analyze this statement, financial analysts consider vertical analysis and horizontal analysis.

Vertical analysis:

It involves comparing the up and down of the income statement to the revenue (in percentage). The key metrics involved are:

Cost of Goods Sold (COGS)

Gross profits

Depreciation

Interest

Earnings Before Tax (EBT)

Tax

Net earnings

Horizontal analysis

It involves comparing the year-over-year (YoY) change of each line in the income statement. To perform this analysis:

Take the value in Period N and

Divide it by value in Period N-1

Subtract the value by 1 (gives the percent change)



What is Section 209(4A) in The Companies Act, 1956?

 This is a common accounting interview question for beginners as well as experts. Emphasise on your knowledge as much as you can here. Section 209(4A) in The Companies Act, 1956 states that:

Every company must preserve the books of accounts, together with the vouchers relevant to any entry in such books of account, in good order, relating to a period of not less than 8 years immediately preceding the current year.

So of the Current Year Ending is – March 2020 then, the company needs to store the accounts and vouchers for the following years:

March 2019, 2018, 2017,……, to 2012



Which latest accounting trends do you think are prevailing in 2021 and continuing in 2022?

This accounting interview question is for beginners and experts. For professionals in the field, keeping track of trends is crucial. Below are some of the latest accounting trends:

Increased dependency on cloud

Companies are now using cloud computing as a technology for tracking – tracking inventory, sales, and expenses. A report by Accounting Age suggests that 78% of small businesses will rely solely on cloud technology and 67% of accountants say that cloud technology will make their role easier.

Automated data entry

As per the Practice of Now 2020 survey, nearly two-thirds of accountants consider automation of processes, workflows, and payments the biggest challenge that will impact accountancy in the next 12 months. That’s why a lot of companies have started depending upon automation software as they are efficient and reduce the chances of error or loss of entry.



Explain real and nominal accounts with examples.

 A real account is an account of assets and liabilities. E.g. land account, building account, etc.

A nominal account is an account of income and expenses. E.g. salary account, wages account, etc.


What is double-entry bookkeeping? What are the rules associated with it?

Double-entry bookkeeping is an accounting principle where every debit has a corresponding credit. Thus, the total debit amount is always equal to the total credit. In this system, when one account is debited then another account gets credited at the same time.



Briefly explain the procurement process.

 The procurement process begins with a purchase request for a particular apartment. This is then verified and approved. Based on the purchase request, a purchase order is created for the items already purchased. In this step, it is the responsibility of the facilities and administrative team to verify rates, delivery milestones, place of delivery, supplier payment terms, contractual obligations, etc., and then issue a purchase order to the supplier. The seller will accept the purchase order.



Why do you want to join this company?

 Interviewers want to know that you’re genuinely interested in working for their organization. To give a thorough answer, research the company’s website to learn more about its goals, mission, and work environment. Choose one or two things that you like the most and explain why they make you want to work for the company.



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