What are the basic accounting questions asked in interview?
When preparing for an accounting interview, it’s essential to be well-versed in the fundamental accounting principles and concepts. Interviewers often ask a set of basic accounting questions to assess your knowledge and understanding of the field. In this article, we will discuss some of the most common basic accounting questions that you might encounter during your interview.
1. What is the difference between assets, liabilities, and equity?
This question is a fundamental test of your understanding of the accounting equation. You should be able to explain that assets are resources owned by the company, liabilities are obligations owed by the company, and equity represents the owner’s investment in the business.
2. Can you explain the concept of accrual accounting?
Accrual accounting is a key principle in accounting, which records revenues and expenses when they are earned or incurred, regardless of when the cash is received or paid. You should be able to explain that this method provides a more accurate representation of the company’s financial position and performance.
3. What is the purpose of a trial balance?
A trial balance is a list of all the accounts and their balances in the general ledger. Its purpose is to ensure that the total debits equal the total credits, helping to identify any errors in the accounting records.
4. How do you calculate depreciation?
Depreciation is the allocation of the cost of an asset over its useful life. You should be able to explain the different methods of depreciation, such as straight-line, declining balance, and units of production, and provide an example of how to calculate depreciation using any of these methods.
5. What is the difference between a journal entry and a ledger?
A journal entry is the initial recording of a transaction in the general journal, while a ledger is a book that contains all the accounts used in the accounting system. You should be able to explain that journal entries are posted to the respective accounts in the ledger, and that the ledger is used to prepare financial statements.
6. Can you explain the purpose of a balance sheet?
A balance sheet is a financial statement that shows the company’s assets, liabilities, and equity at a specific point in time. It provides a snapshot of the company’s financial position and helps investors, creditors, and other stakeholders assess its financial health.
7. What is the difference between a direct and indirect method of preparing the cash flow statement?
The cash flow statement shows the inflow and outflow of cash from the company’s operating, investing, and financing activities. You should be able to explain that the direct method focuses on cash receipts and payments, while the indirect method adjusts net income for non-cash expenses and revenues to calculate cash flow from operating activities.
By understanding and being able to answer these basic accounting questions, you will demonstrate your knowledge and preparedness for an accounting role. Good luck with your interview!
