Financial Accounting Answer Key

[Vita Wanberg]

Unlocksuccess in your accounting interview with comprehensive answers to commonly asked 128 questions. From financial statements to tax regulations, gain the confidence to impress employers with your expertise. Prepare for your next accounting interview with our essential guide and showcase your accounting prowess like a true professional.

Ans. This is a general interview question. But since you are sitting for an accounting interview, you must craft an answer highlighting your professional accounting background. Mention your educational journey in finance, your experience (if any) working at an accounting firm, your milestones, and your strengths.

First, provide a basic introduction of yourself. Then you can bring in your experience in the field. You can talk about your years of experience working as an accountant for a specific industry and which areas of accounting were your primary focus areas.

If you are applying for a fresher accounting job, you can mention favourite subjects in accounting and how you have gained expertise in them with good marks in your college or certifications you have taken.

It is important for both freshers and experienced to discuss their educational qualifications. Mainly, it helps the recruiter understand the context of your background a little better. Apart from your university degree, having one or two accounting certifications in a specific area can boost your employability.

I possess a strong analytical mindset and exceptional attention to detail, which enable me to identify discrepancies and resolve financial issues efficiently. I am proficient in using accounting software like [software names], and I have a solid understanding of generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS).

You can also get first-hand experience by using one of the software through included projects in accounting software courses and get the know-how. We have a list of some great courses for you, including QuickBooks Online Essential Training on LinkedIn Learning, QuickBooks Online & Start to Finish on Udemy, etc.

My preferred platform is QuickBooks. I have used it extensively in my previous role and found it user-friendly, efficient, and well-suited for small to medium-sized businesses. It has robust reporting capabilities and seamless integration with other software.

It is important to assure the recruiter of your adaptability and eagerness to learn and utilise any accounting platform required for the role. Your experience with multiple platforms has equipped you with the skills to grasp and effectively work with different systems quickly.

Ans. In my opinion, the stock on hand can be the key to improving the working capital of the company. Of all the components of working capital, the stock is something we can control. We can pressure our debtors to pay us instantly, but we cannot have direct control over them because they are separate legal entities and, in the end, they are the ones who give us business.

We may tend to delay payments from our suppliers, but it ruins business relationships and hinders goodwill in the industry. Also, if we delay payments, they may not supply goods in the future. Maintaining liquidity in the form of funds in the bank can help the flow of working capital, but it comes at an opportunity cost.

With all of this in mind, I personally believe that inventory management can be of great help in improving the working capital of the company. Over-stock should be avoided and stock turnover rates should be high.

This is one of the generic interview questions for accounts professionals. It is also important from the point of view of B.Com interview questions. There are industries that work with negative working capital, such as electronic commerce, telecommunications, etc. So do some research on working capital before answering.

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A person liable to make specified payments to another person must deduct tax at source and remit it to the Central Government. The deductee, from whose income TDS has been deducted, can claim the credit based on Form 26AS or the TDS certificate issued by the deductor.

TDS rates are specified in the relevant provisions of the Income Tax Act or the First Schedule to the Finance Act. For payments to non-resident individuals, rates specified under Double Taxation Avoidance Agreements (DTAA) are considered.

A trial balance is a statement that lists all the general ledger accounts with their respective debit and credit balances at the end of an accounting period. Its main purpose is to ensure that the total debits equal the total credits, which helps in detecting errors or discrepancies in the accounting records. The trial balance is typically prepared before the financial statements are finalized, and it serves as an intermediate step in the accounting process.

In general, when referring to positive cash flows, a company receives more money than spending. But that does not define the financial stability of the company always. There can be uncertain situations even when there are positive cash flows but the company may still not be stable or successful.

Ans. Inactive accounts are closed and are not to be used in the future. Dormant accounts are not currently functional but may be used in the future. This is the basic difference you want to highlight in the accounting interview answer.

Inactivity in such a case may arise due to various reasons. It could be either that accounts opened were for specific projects and have concluded. Or, accounts that were previously active but have not been used for an extended period.

The definition of dormancy may vary depending on local regulations, but it is generally characterised by an account not having any transactions for a considerable duration. In some jurisdictions, specific timeframes, such as 12 months or more, might be used to classify an account as dormant.

Inactive accounts might clutter the chart of accounts. That affects the financial analysis. Companies should regularly review their accounts and consider closing unnecessary inactive accounts to maintain accurate financial records.

Dormant accounts may require special treatment in accordance with local laws or accounting standards. In some jurisdictions, these accounts might be subject to escheatment, where unclaimed funds are transferred to the state or relevant authority after a certain period of dormancy.

Yes, I am familiar with the Accounting Standards, which are a set of principles and guidelines that govern the preparation and presentation of financial statements. These standards play a crucial role in ensuring consistency and transparency in financial reporting.

As of my last knowledge update, there are 29 accounting standards in India, which are issued by the Institute of Chartered Accountants of India (ICAI). These standards cover various aspects of financial reporting, including revenue recognition, inventory valuation, fixed assets, and presentation of financial statements, among others.

Gain a deeper understanding of accounting principles and practices, enrol to accounting programmes from the top colleges, explore online accounting courses, and make a career in this highly rewarding field.

The percentage of outstanding accounts method estimates bad debts by applying a predetermined bad debt percentage to the total outstanding accounts receivable balance. This percentage is typically based on historical data or industry standards. The formula used is:

This method considers the entire balance of outstanding accounts, regardless of the age of individual receivables. While it offers a straightforward approach, it assumes a uniform risk of default across all accounts.

The aging analysis method categorises accounts receivable based on the length of time they have been outstanding. It then applies different bad debt percentages to each age category, reflecting the likelihood of collection for older accounts. The formula used for each category is:

This method provides a more nuanced estimation, considering the specific age of each receivable. Older accounts are assigned higher bad debt percentages, recognizing the increased risk of non-payment as debts age.

I would describe deferred tax liability as something that represents the income tax obligation that a company is likely to face in the future. This could happen due to temporary differences between the financial accounting treatment and the tax treatment of certain items.

When a company prepares its financial statements, it follows accounting principles and standards that may differ from the rules used by tax authorities for calculating taxable income. These differences give rise to temporary timing discrepancies in recognising revenues, expenses, gains, or losses for financial reporting purposes compared to tax purposes.

Let me also tell you when deferred tax liability arises. It happens when the taxable income calculated for tax purposes is expected to exceed the taxable income reported in the financial statements in future periods.

Further, I would like to add that the accounting treatment of deferred tax liability involves recognising it on the balance sheet as a liability. It is measured based on the enacted tax rates or tax laws that will be applicable in the periods when the temporary differences are expected to reverse.

A deferred tax asset represents a potential future tax benefit for a company. It arises due to temporary timing differences between the financial accounting treatment and the tax treatment of certain items. This results in lower taxable income reported for tax purposes when you compare to the income in the financial statements.

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