Business Accountant

If you are looking for a job as accounts executive, account assistant or accounts manager, you will find these interview questions on business accounting helpful for your next job role.

Q.1 How do you calculate the net profit margin of a business?

Net profit margin is calculated by dividing net income by total revenue and expressing it as a percentage. It measures profitability.

Report This Question

Q.2 What is the difference between cash accounting and accrual accounting?

Cash accounting records transactions when cash is exchanged, while accrual accounting records transactions when they occur, regardless of cash flow.

Report This Question

Q.3 Explain the concept of working capital in accounting.

Working capital is the difference between a company's current assets and current liabilities, representing its short-term liquidity.

Report This Question

Q.4 How does accounts payable differ from accounts receivable?

Accounts payable are amounts a business owes to suppliers, while accounts receivable are amounts customers owe the business.

Report This Question

Q.5 What is the role of a general ledger in accounting?

A general ledger is the central accounting record that contains all financial transactions, organized by accounts.

Report This Question

Q.6 Describe the purpose of financial statements in accounting.

Financial statements summarize a company's financial performance, position, and cash flows, providing insights for decision-making.

Report This Question

Q.7 How do you calculate the debt-to-equity ratio of a business?

The debt-to-equity ratio is calculated by dividing total liabilities by total equity, representing the company's leverage or financial risk.

Report This Question

Q.8 Explain the concept of cash flow statement in accounting.

A cash flow statement tracks the inflow and outflow of cash during a specific period, categorizing it into operating, investing, and financing activities.

Report This Question

Q.9 What is the purpose of a trial balance in accounting?

A trial balance lists all account balances to ensure that debits equal credits, serving as a preliminary check for accuracy before preparing financial statements.

Report This Question

Q.10 How do you record a journal entry for an accounts receivable collection?

Debit Cash (or Bank) and credit Accounts Receivable to reflect the collection of money from a customer.

Report This Question

Q.11 What is the role of the chart of accounts in accounting?

The chart of accounts is a list of all accounts used by a business, providing a structured framework for recording financial transactions.

Report This Question

Q.12 How do you calculate the return on investment (ROI) for a business project?

ROI is calculated by subtracting the project's initial cost from the final value and dividing it by the initial cost, expressed as a percentage.

Report This Question

Q.13 Explain the concept of accruals in accounting.

Accruals are unrecorded revenue or expenses that have occurred but have not been paid or received yet, requiring adjustment entries.

Report This Question

Q.14 How do you calculate the current ratio of a business?

The current ratio is calculated by dividing current assets by current liabilities, measuring a company's ability to meet short-term obligations.

Report This Question

Q.15 Give examples of real and nominal accounts.

Real account is primarily an account of assets and liabilities, such as land account, building account, etc. On the other hand a nominal account is an account of income and expenses such as salary account, wages account, etc.

Report This Question

Q.16 What is the purpose of financial forecasting in accounting?

Financial forecasting involves predicting future financial performance to assist in planning, budgeting, and decision-making.

Report This Question

Q.17 What are the ways to maintain accounting accuracy?

One of the most important activity for an organization is to maintain the accuracy of an organisation’s accounting. There are different tools and resources that can be used to limit any potential errors and thereby rectify quickly if any errors do arise.

Report This Question

Q.18 How do you calculate the gross profit margin of a business?

Gross profit margin is calculated by subtracting the cost of goods sold (COGS) from total revenue and expressing it as a percentage.

Report This Question

Q.19 Is it possible for an organization to show positive cash flow and still be in trouble?

Yes it is possible, if it shows an unsustainable improvement in the working capital and involves lack of revenue moving forward in the pipeline.

Report This Question

Q.20 Explain the concept of tax accounting and its importance.

Tax accounting focuses on preparing and filing tax returns accurately to comply with tax laws and regulations while minimizing tax liability.

Report This Question

Q.21 What are the most common errors in accounting?

Some of the most common errors in accounting are – Errors of omission, Errors of commission, Errors of principle and Compensating errors.

Report This Question

Q.22 What is a journal entry, and how is it recorded in accounting?

A journal entry records a financial transaction, typically with a debit entry on one account and a corresponding credit entry on another account.

Report This Question

Q.23 Give the difference between inactive and dormant account?

Inactive accounts are those accounts that have been closed and will not be used in the future. On the other hand dormant accounts are not currently functional but can be used in the future.

Report This Question

Q.24 How do you calculate the break-even point for a business?

The break-even point is calculated by dividing fixed costs by the contribution margin (sales price minus variable costs).

Report This Question

Q.25 Are accounting standards mandatory?

Accounting Standards play a key role in preparing a good and accurate financial report. Since accounting ensures reliability and relevance in the financial reports.

Report This Question

Q.26 Describe the difference between fixed costs and variable costs in accounting.

Fixed costs remain constant regardless of production or sales volume, while variable costs change with production or sales.

Report This Question

Q.27 How is the financial health of a business assessed using the quick ratio?

The quick ratio assesses liquidity by dividing current assets minus inventory by current liabilities, providing a more stringent measure of short-term solvency.

Report This Question

Q.28 Explain the concept of amortization in accounting.

Amortization spreads the cost of intangible assets, like patents or trademarks, over their useful life, reflecting their gradual consumption.

Report This Question

Q.29 How do you calculate the contribution margin ratio for a product?

The contribution margin ratio is calculated by dividing the contribution margin (sales price minus variable costs) by total sales revenue, expressed as a percentage.

Report This Question

Q.30 Describe the purpose of cost accounting in business operations.

Cost accounting analyzes and allocates costs to products or services, helping determine profitability and make pricing decisions.

Report This Question

Q.31 What is the significance of the time value of money in accounting?

The time value of money recognizes that the value of money changes over time due to factors like inflation and interest rates, impacting financial decisions.

Report This Question

Q.32 Explain the concept of inventory turnover and its importance.

Inventory turnover measures how quickly a company sells its inventory, reflecting operational efficiency and inventory management effectiveness.

Report This Question

Q.33 How can a business calculate the depreciation expense for an asset?

Depreciation expense can be calculated using methods like straight-line depreciation, declining balance depreciation, or units-of-production depreciation.

Report This Question

Q.34 What are retained earnings, and how do they impact a company's financial statements?

Retained earnings represent the cumulative profits a company has retained over time. They impact the balance sheet's equity section and can be reinvested or distributed as dividends.

Report This Question

Q.35 How does the FIFO (First-In, First-Out) inventory costing method work?

FIFO assumes that the first items added to inventory are the first items sold, valuing ending inventory at the most recent costs.

Report This Question

Q.36 What is the role of an audit trail in accounting software?

An audit trail records all changes and transactions, providing a complete history of financial data for transparency and accountability.

Report This Question

Q.37 How do you handle depreciation recapture in tax accounting?

Depreciation recapture occurs when selling an asset for more than its book value; the excess is subject to taxation at a specific rate.

Report This Question

Q.38 Explain the concept of financial ratios and their significance in financial analysis.

Financial ratios are used to assess a company's financial health and performance, providing insights into liquidity, profitability, and solvency.

Report This Question

Q.39 How do you calculate the debt ratio of a business?

The debt ratio is calculated by dividing total liabilities by total assets, measuring a company's leverage or financial risk.

Report This Question

Q.40 What is the role of cost of goods sold (COGS) in income statements?

COGS represents the direct costs of producing goods or services sold during a specific period and is subtracted from revenue to calculate gross profit.

Report This Question

Q.41 Describe the concept of accounting ethics and its importance.

Accounting ethics involve adhering to principles of integrity, objectivity, confidentiality, and professional behavior to maintain public trust.

Report This Question

Q.42 How do you record the sale of goods or services on credit in accounting?

Record the sale with a debit to Accounts Receivable and a credit to Sales Revenue, recognizing the revenue while showing the amount owed by the customer.

Report This Question

Q.43 What is the role of a cost allocation method in cost accounting?

Cost allocation assigns indirect costs to specific cost centers or products based on a systematic method, facilitating accurate cost analysis.

Report This Question

Q.44 Explain the concept of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) in financial analysis.

EBITDA represents a company's operating performance by excluding interest, taxes, and non-cash expenses, providing a clearer view of profitability.

Report This Question

Q.45 How do you calculate the payback period for an investment?

The payback period is calculated by dividing the initial investment by the annual cash flow, representing the time required to recover the investment.

Report This Question

Q.46 What are the key components of a cash flow statement in accounting?

A cash flow statement includes cash flows from operating, investing, and financing activities, providing insights into a company's cash position.

Report This Question

Q.47 How do you handle financial statements' presentation and disclosure requirements?

Ensure that financial statements follow accounting standards, are accurate, and provide sufficient disclosures to aid users' understanding.

Report This Question

Q.48 What is the significance of the cost of capital in financial decision-making?

The cost of capital represents the return expected by investors, guiding investment decisions and determining if a project is financially viable.

Report This Question

Q.49 Explain the concept of budgeting in financial management.

Budgeting involves planning and allocating financial resources to achieve specific goals, monitor performance, and control expenses.

Report This Question

Q.50 How do you calculate the return on assets (ROA) for a company?

ROA is calculated by dividing net income by average total assets, measuring how efficiently a company uses its assets to generate profits.

Report This Question

Q.51 What is the role of a financial statement audit in business operations?

A financial statement audit assesses the accuracy and reliability of financial statements, providing assurance to stakeholders.

Report This Question

Q.52 Describe the concept of cost behavior in cost accounting.

Cost behavior categorizes costs as fixed, variable, semi-variable, or step costs, helping understand cost changes with varying levels of production or activity.

Report This Question

Q.53 How can a business manage its working capital effectively?

Manage working capital by optimizing inventory levels, collecting accounts receivable promptly, and negotiating favorable credit terms with suppliers.

Report This Question

Q.54 What motivates you to excel in the field of business accountancy?

Personal motivation may include a passion for financial analysis, the drive for accuracy, and the satisfaction of helping businesses make informed decisions.

Report This Question

Q.55 In GST, against which liability is the balance in electronic credit ledger be utilised?

It can be used against: Output tax payable or Interest or Penalty

Report This Question

Q.56 What you will do if by mistake IGST is paid instead of CGST/SGST?

We will remit the tax again and claim refund for earlier payment.

Report This Question

Q.57 What you will do if by mistake GST is paid under wrong GSTIN?

We will pay again under right GSTIN and claim refund for earlier payment.

Report This Question

Q.58 What can be verified by auditing the Balance sheet?

We can verify assets, liabilities and income-expense accounts by auditing the Balance sheet

Report This Question

Q.59 List the account to which cost of goods sold on hire purchase, is transferred

It is transferred to trading account.

Report This Question

Q.60 If the company pays royalty on sale, then which account will be debited

Profit and loss account will be debited if royalty is paid on sale.

Report This Question

Q.61 Which account will be debited if cash sent by branch office is not received by the head office by end of the year?

Cash-in-transit account will be debited if cash sent by branch office is not received by the head office by end of the year

Report This Question

Q.62 In GST, where should the books needs to be maintained?

As per GST, books should be maintained at principal place of business as listed in the Certificate of Registration of the company.

Report This Question

Q.63 How should accounts be maintained for GST filing?

Accounts can be in manual or electronic form or both as well.

Report This Question

Q.64 Who can audit accounts and GST filing if the company's turnover exceeds the prescribed limit in a financial year?

In case, company's turnover exceeds the prescribed limit in a financial year, either Chartered Accountant or Cost Accountant can audit.

Report This Question

Q.65 Which report will be impacted if inventory increases by Rs. 1,000/-?

The balance sheet and cash flow statement will be impacted.

Report This Question

Q.66 Does the income statement be impacted if inventory increases by Rs. 1,000/-

There will be no impact on the income statement if inventory increases by Rs. 1,000/-

Report This Question

Q.67 What do you know about negative working capital?

Negative working capital refers to the situation if current liabilities exceed the current assets. Retailers, grocery stores have negative working capital as they generate lots of cash before paying the supplier's bill. Cash-only business with high turnover usually has negative working capital.

Report This Question

Q.68 Which single financial statement will give the health of the company?

The cash flow statement is the single financial statement which should be used as it shows amount of cash being generated.

Report This Question

Q.69 Differentiate amongst deferred revenue and accounts receivable.

Both deferred revenue and accounts receivable are different though sounds similar. The main difference is whether goods or service has been provided to customer or not, in case of deferred revenue it is not provided and is the cash received from customers. Whereas, for accounts receivable goods/services have been provided and is the cash owing from customers for them.

Report This Question

Q.70 Which type of account does outstanding Wages belongs to?

Personal Account

Report This Question

Q.71 How will manage a difficult customer?

Customers are essential for revenue and profits; a difficult customer management involves connecting with them to addressing their issue, listening to them and having clear communication without bias.

Report This Question

Q.72 How will you manage conflict with other departments of the company?

Conflicts in a company need to be analyzed for its root cause and meeting with other party/ department based on facts and figures should be taken for resolution. Depending upon their concerns, future transactions can be negotiated and clarified.

Report This Question

Q.73 How will you address high pressure delivery due to financial year closure?

A financial year closure is a yearly exercise and pressure can be reduced by reconciling every three months with branches and departments. Further, bank and tax reconciliation be done every month end.

Report This Question

Q.74 If i present you with a statement:– “Debit the Receiver, Credit the Giver," what does it means?

So, this is one of the most frequently asked accounting interview questions. Your reply should be – This principle is used in respect to the personal accounts. If a person is giving any amount either in cash or by cheque to an organization, it becomes an inflow and thus that person must be credited in the books of accounts. Therefore, when an organization received the money or cheque, it needs to credit the person who is paying and debit the organization

Report This Question

Q.75 What is the minimum number of ledgers an Organization needs, If the organisation has three bank accounts for processing payments?

I'd say, three ledgers for each account for proper accounting and reconciliation processes.

Report This Question

Q.76 To estimate bad debts, what are some of the ways?

Percentage of outstanding accounts, aging analysis and percentage of credit sales, are some of the well known ways of estimating the bad debts.

Report This Question

Q.77 Can you answer what is a deferred tax liability?

Yes, The situation where a company is in condition to pay more tax in the future due to current transactions, is signified as Differed tax liability.

Report This Question

Q.78 Please explain what is a deferred tax asset and how is the value created?

A deferred tax asset is when the tax amount has been paid or has been carried forward but has still not been recognized in the income statement. The value is created by taking the difference between the book income and the taxable income

Report This Question

Q.79 Please define the term Material Facts?

Yes, The documents such as: vouchers, bills, debit and credit notes, or receipts, etc. are considered as material facts. They serve as the base of every account book.

Report This Question

Q.80 Lets consider the Double Entry System, what are the different stages of it?

There are three different stages of double entry system, which are – 1.) Recording transactions in the accounting systems 2.) Preparing a trial balance in respective ledger accounts 3.) Preparing final documents and closing the books of accounts

Report This Question

Q.81 Are there any disadvantages of a Double Entry Systems?

Yes, there a few disadvantages when it comes to Double Entry Systems: Difficult to find the errors, especially when transactions are recorded in the books And extensive clerical labor is required, in case of any error One can’t disclose all the information of a transaction, which is not properly recorded in the journal

Report This Question

Q.82 What is GAAP?

Generally Accepted Accounting Principles (GAAP) abbreviated as GAAP, is issued by the Institute of Chartered Accountants of India (ICAI) and the provisions of the Companies Act, 1956. It is a cluster of accounting standards and common industry usage, and it is used by organizations to: Record their financial information properly Summarize accounting records into financial statements Disclose information whenever required

Report This Question

Q.83 Can you tell me some examples for liability accounts?

Yes, there are some popular examples of liability accounts: Accounts Payable Accrued Expenses Bonds Payable Customer Deposits Income Taxes Payable Instalment Loans Payable Interest Payable Lawsuits Payable Mortgage Loans Payable Notes Payable Salaries Payable Warranty Liability

Report This Question

Q.84 Name the most preferred accounting application by you and why?

I think all are good though, but Microsoft Accounting Professional is best because it offers reliable and fast processing of accounting transactions that saves time and increases proficiency. It helps with financial analysis as well.

Report This Question

Q.85 Do you know anything regarding GST?

Yes, As the definition says the GST stands for Goods and Service Tax. It's an indirect tax other than the income tax. It charges on the value of the service or product sold to a customer. The customer/clients pay the GST, and the seller deposits the GST with the government. Some countries around the Globe have sales, service tax with works more or less the same as GST.

Report This Question

Q.86 What is tally accounting?

It is an accounting software used by small business and shops to manage routine accounting transactions.

Report This Question

Q.87 What are fictitious assets?

Fictitious assets are intangible assets and their benefit is derived over a longer period, for example good will, rights, deferred revenue expenditure, miscellaneous expenses, preliminary expenses, and accumulated loss, among others.

Report This Question

Q.88 Is there any difference between inactive and dormant accounts?

Yes, both are different terms in accounting. The accounts have been closed and will not be used in the future as well are known to be as Inactive accounts. While on the other hand the dormant accounts are those that are not functional today but may be used in the future.

Report This Question

Q.89 Differentiate between Accounting and Auditing?

Accounting is all about recording daily business activities while on the other hand auditing is all about checking that whether all these events have been noted down correctly or not.

Report This Question

Q.90 Please define dual aspect term in accounting?

The dual aspect concept states that every transaction has two sides as implied by its name. For example, when you buy something, its a give and take of cash and the commodity. Similarly, when you sell something, you lose the possession of that thing and receive money in return. So this gaining and losing are basically the two aspects of every transaction.

Report This Question

Q.91 Have you ever Prepared any MIS reports, if yes then what are they?

Yes, During my previous jobs, I 'have prepared a few MIS reports. MIS reports are created to identify the efficiency of any department of a company or an organization.

Report This Question

Q.92 Can you explain the basic accounting equation?

Ans. Yes, since we know that accounting is all about assets, liabilities and capital. Hence, its equation can be summarized as: "Assets = Liabilities + Owners Equity."

Report This Question

Q.93 Can you tell what is working capital?

The Working capital can be defined as current assets minus current liabilities. In banking, working capital is normally defined more narrowly as current assets less current liabilities.

Report This Question

Q.94 Who has the authority to remove the first auditor before the expiry of term?

The shareholders in a general meeting

Report This Question

Q.95 Who regulates the money circulation in India?

RBI

Report This Question

Q.96 Who will settle the greivances of customers of a bank?

Ombuds Men

Report This Question

Q.97 When did the Indian Banking Act came into force?

1949

Report This Question

Q.98 The cost of erection of an old machine will be posted in the credit side of which account?

Cash Account

Report This Question

Q.99 What is business accountancy, and why is it important for businesses?

Business accountancy involves tracking financial transactions, managing budgets, and providing insights for informed decision-making. It's essential for financial stability and growth.

Report This Question

Q.100 Explain the difference between financial accounting and managerial accounting.

Financial accounting focuses on reporting to external stakeholders, while managerial accounting is for internal decision-making and planning.

Report This Question

Q.101 What are the fundamental accounting principles (GAAP)?

GAAP principles include the accrual basis, consistency, materiality, and the principle of conservatism, among others.

Report This Question

Q.102 Describe the basic accounting equation.

The basic accounting equation is Assets = Liabilities + Equity, representing the balance between what a business owns and owes.

Report This Question

Q.103 What is the purpose of a balance sheet in accounting?

A balance sheet provides a snapshot of a company's financial position, showing assets, liabilities, and equity at a specific point in time.

Report This Question

Q.104 How does an income statement differ from a balance sheet?

An income statement shows a company's profitability over a period by detailing revenues, expenses, and net income, whereas a balance sheet presents financial position.

Report This Question

Q.105 Explain the concept of double-entry accounting.

Double-entry accounting ensures that every financial transaction has equal debit and credit entries, maintaining the accounting equation's balance.

Report This Question

Q.106 What is depreciation, and why is it important in accounting?

Depreciation allocates the cost of tangible assets over their useful life, reflecting their gradual reduction in value. It's important for accurate financial reporting.

Report This Question