Nowadays, preparing for technical accounting interview questions is essential due to the intense competition in accounting. Employers are demanding candidates who possess both theoretical and practical skills in real-world applications. In this article, you can explore the interview ideas with us. We will guide you to become a perfect candidate for the accounting jobs by giving you top technical accounting interview questions and answers.
What are the Technical Accounting Questions for Interview?
Accounting technical questions for interview are the preparation before the interview. With the help of these questions, you can easily understand and evaluate the concept of the financial report, audit strategies, and analytical skills. Preparing these questions can boost your confidence for the interview, with the help of which you can easily crack the interview without getting any paid PDF.
Benefits of Preparing Technical Accounting Interview Questions and Answers
There are many benefits of Technical accounting interview questions and answers, some of which are given below:
- Builds Technical Confidence: After preparing the Accounting interview Questions, you clarify your doubts and feel confident about the accounting.
- Enhances Your speed: Testing your capability to answer the Questions of Technical questions accounting interview enhances your accuracy and speed.
- Improves Analytical Thinking: These questions often include some scenarios, having practice over those questions builds your problem-solving skills.
- Solve Tricky topics: Employer demands for employees who have complex knowledge and who can explain accounting concepts clearly. Practicing these questions builds your ability to communicate with an interviewer fluently.
- Saves Time: A structured set of Questions provided to you for the interview preparation improves your interview flow. You do not have to search for different jobs because of the lack of information and skills.
100 Technical Accounting Interview Questions and Answers
Q1: What are the Different Types of Accounting?
Answer: There are five types of accounting given below:
- Financial accounting: Involves recording accounts and providing reports on business transactions.
- Administrative Accounting: It works on the administrative aspects of the company, which is used for forecasting and planning the actions and resources that are to be used.
- Tax Accounting: Tax accounting works on the reports related to taxes.
- Cost accounting: Cost accounting and financial accounting are similar but cost accounting involves analyzing the unit costs of production and sales, as well as the production process that the company carries out.
- Management accounting: Management accounting work is to record all the financial information of the business, with the help of which you can make short and long-term decisions.
Q2: How are Cash Accounting and Accrual Accounting Different?
Answer: In Cash accounting and accrual accounting, first one is calculated only when the cash changes hands. Accurual accountancy gives you a broader view of financial performance. It is calculated when the revenue of the company is earned and the expenses when incurred, without cash movement.
Q3: What do you Understand By EBITDA?
Answer: EBITDA removes non-operational expenses to calculate operating performance. EBITDA reports is used by companies and investors so that they can compare profitability without the influence of accounting methods.
Q4: Define the Matching Principle?
Answer: The matching accounting principle requires that when revenues are generated expenses should be recorded in the same period. which ensures an accurate measurement of profit.
Q5. Explain the Difference Between a Capital Lease and an Operating Lease
Answer: Capital leases transfer ownership, like benefits as well as risks. Operating leases are treated like rental agreements. Both types require the recognition of right-of-use assets and lease liabilities.
Q6: What is Deferred Revenue? Give an example
Answer: Deferred revenue is a type of revenue in which the money is collected before delivering goods or services. Deferred revenue is a type of liability to the company until the company fulfills the obligation. For example, subscription payments are paid in advance.
Q7: What is Goodwill and when is it Recorded?
Answer: Goodwill is an intangible asset that a company has. This represents the excess value of a business beyond its identifiable net assets. Goodwill represents the brand value and customer relationship, that how strong the relationship is between the company and its clients. It is recorded when a company acquires another for more than the fair value of its net assets.
Q9. Explain the Difference Between LIFO and FIFO?
Answer: LIFO stands for Last In First Out means the new inventory is sold first.
FIFO stands for First In First Out, which means the selling of the old inventory is prioritized. This results in higher profit during inflation.
Q10. Describe the Five Main Steps of ASC 606
Answer: The five main steps of ASC 606 are identifying the contract, obligations, price, allocating and recognizing revenue.
Q11. When do you Think Revenue is Recognized?
Answer: Revenue is recognized when a company completes its task by providing goods and services to a customer.
Q12. What do you Understand by Performance Obligation?
Answer: A performance obligation is nothing but a promise to a customer in a contract to transfer goods and services.
Q13. What is Refund Liability?
Answer: Refund liability means the financial obligations of the company to return a customer’s payment for goods or services that are expected to be returned.
Q14. What is variable Consideration in Accounting? Give an Example
Answer: The variable consideration is an amount in a contract that can be changed depending on future events, for example, incentives and discounts.
Q15. Differentiate Between Principal and Agent
Answer:
- Principal: The principal is responsible for providing the goods and services, as it is the primary party.
- Agent: The Agent’s work is to perform tasks on behalf of the principal. It does not control goods and services before transferring them to the customer.
Q16. Discuss the Two Main Types of Leases
Answer:
- Operating Lease: An Operating lease is a short-term agreement that is used without ownership transfer.
- Finance lease: A Finance lease is a long-term agreement where the lessee holds the risk and benefit.
Q17. Define the ROU Asset with an Example
Answer: ROU stands for the Right to Use asset, which represents a company’s leased assets that they can use, such as a building or equipment, for the lease term.
Q18. What are Executory costs?
Answer: Executory costs are related to the ongoing assets maintenance, insurance, and taxes of the asset that are not included in the minimum lease payments.
Q19: What do you Understand by the Lease Incentives?
Answer: The benefits that are given to the lessee (tenant or customer) from the lessor (landlord or dealership).
Q20: How will you Explain GAAP?
Answer: GAAP is the set of accounting rules and norms that is used for financial reporting.
Q21: Define the Accounting Equation Briefly
Answer: The accounting equation is Assets are equal to the sum of the liabilities and Equity.
Q22: What do you Know About the Three Financial Statements?
Answer: The three main financial statements are:
- Income Statement: It covers the profit and loss of the business.
- Balance Sheet: It is the reason behind calculating the overall assets, liabilities, and equity.
- Cash Flow Statement: Refers to cash inflows and outflows in a business.
Q23: What do you Understand by Double-Entry Bookkeeping?
Answer: Double-entry Bookkeeping is a process in which recorded financial transactions are entered into at least two different accounts. With an equal and opposite debit and credit for each entry.
Q24: What would you do if an Expense Incurred Today But Paid Next Month?
Answer: I would record it as a liability in the sheet and add it as an expense for the current period.
Q25: How do you Record If a Company had Provided the Product, but the Customer has Not Paid Yet?
Answer: If the company has delivered the goods and the customer has not paid yet then it will record it as an account receivable and the revenue under the accrual method.
Q26: Define Revenue Recognition & How Should it be Recorded?
Answer: Revenue recognition decides when and how a company will record revenue in its financial statements. Revenue should always be recorded when earned not when the cash is received.
Q27: What do you Understand by the Consistency Principle?
Answer: The consistency principle stands for being consistent in using the same accounting method every time.
Q28: What is Impairment? Give One Example
Answer: Impairment is the permanent loss in the recoverable amount of an asset below its original amount due to wear and tear or lack of demand. For example, a machine is worth $20000 after the time this machine loses its demand, and the current value of this machine is $10000.
Q29: Explain the Weighted Average Method
Answer: It is the method used to calculate the cost per unit of the inventory by averaging the cost of all units available for sale during a period.
Q30: Define the Term Capitalization
Answer: Capitalization is the term used when a cost is recorded as an asset on the balance sheet instead of being recorded as an expense on the income sheet, because it can provide future benefit.
Q31: The Impairment Test is Used for? Give One Example
Answer: The impairment test is used to compare whether the carrying amount of an asset is higher than its recoverable amount. For example, a machine you bought for $9000 and after the time its recoverable amount becomes $1000. An impairment loss of $8,000 is recognized.
Q32: Define the Term Component Depreciation with an Example?
Answer: The term component depreciation is used when the depreciation of a machine is divided into its components or parts. For example:
- A machine part is $1000 with a useful life of 5years.
- It has another part of $3000 with a useful life of 3 years.
- A Part with $1000 cost with a useful life of 2years.
These all parts have their own depreciated value, and it will be noted differently.
Q33: What is the Difference Between Current and Long-Term Liabilities?
Answer: Current liabilities are those liabilities of the business that are to be paid within one year and long-term liabilities are those liabilities that can be paid after one year.
Q34: What do you Know About Contingent Liability?
Answer: Contingent liability refers to the possibility that depends on the future event outcome.
Q35 What do you Know About Contingent Liability Recognition?
Answer: Contingent liability recognition refers to the recording of a contingent liability in a company’s financial statements.
Q36: Define a Stock Split
Answer: A stock split is the method used by the company in which the company divide its existing shares into more shares to make each share more affordable without changing the total value of the company.
Q37: How would you Define the Term Consolidation?
Answer: When a company combines the financial statements of the main company and its subsidiary company in a single statement, it is called consolidation. A parent company should consolidate a subsidiary when it has more than 50 percent control over it.
Q38: What is the Full Form of NCI?
Answer: The NCI stands for Non-controlling interest.
Q39: Walk me Through Working Capital?
Answer: It measures the liquidity of a company to check whether it can pay off its current liabilities using its current assets.
Q40: Which Accounting Software do you Prefer the Most?
Answer: Accounting software is used according to the user’s needs. If a user is having a small business, then they can go for QuickBooks for payroll management, track inventory, etc.
Q41: How to Maintain Accounting Accuracy?
Answer: Accounting accuracy can be maintained by following some steps. such as keeping a close eye on invoices and receipts, preparing tax returns to avoid penalties and preparing financial statements. You can use tools for accounting accuracy, such as using MS Excel, you can limit your errors in accounting.
Q42: Walk me Through TDS & Where do you Show TDS on a Balance Sheet?
Answer: TDS stands for Tax Deduction at Source. This is a concept that aims to collect tax at every source of income. It is shown in the asset section right after the heading current assets.
Q43. What is the Difference Between a Trial Balance and a Balance Sheet?
Answer:
A trial balance is the list of all balances in a ledger account, which is used in recording and posting to check arithmetical accuracy. A balance sheet is used to check a company’s financial position on a particular date. It includes assets, liabilities and equity.
Q44: Discuss Some Common Mistakes in Accounting
Answer: Some common mistakes include little communication between the company and the accountant, not having a backup of the data, not allocating resources correctly, not performing automatic accounting, not separating personal accounts from the company, and not keeping the accounting books up to date.
Q45: How does Depreciation Affect the Cash Flow System?
Answer: Depreciation affect cash flow, it is the main cause of an increase in operating, as depreciation reduces accounting profit.
Depreciation is not a cash expense, but it is still reduced by the net income on the income statement. It shows the percentage of fixed asset cost along with their life. Depreciation is the reason behind the increase in operating cash flow, as depreciation reduces accounting profit.
Q46: What is Drawing in Accounting?
Answer: Drawings in an accounting are the money that a business owner uses for personal use from the business. It is not included in business expenses, so it is not shown in the income statement.
Q47: CTA in Accounting?
Answer: CTA in accounting means Cumulative Translations Adjustments, which helps companies to manage their financial statements and shows the real impact of converting the foreign transaction currency and exchange rates.
Q48: Does an Executor have to Show Accounting to Beneficiaries?
Answer: Yes, the executor has to show the accounting to the beneficiaries as it is granted by the court, but the beneficiary has to write a request to the executor.
Q49: What is the Meaning of the Remittance in Accounting?
Answer: In accounting, a remittance is the transfer of money to complete a business transaction such as a customer paying for goods or services.
Q50: What is an Encumbrance in Accounting?
Answer: One of the budget control methods is encumbrance in accounting, which is used to ensure that the money is set aside for future financial expenses and commitments.
Q51: Which Degree is Needed for Accounting?
Answer: A bachelor’s degree in accounting such as BBA, BSC, CPA or a related field is required for the accounting field, like finance, business law, taxation is typically needed for an accountant career.
Q52: Fund Administration vs Fund Accounting
Answer: The Fund Administrator performs the back-office financial paperwork processing, and the Fund accounting is a specialized accounting method used by government entities to track financial resources.
Q53: Financial Accounting vs Management Accounting
Answer: In Financial accounting and management accounting, financial accounting focus on historical financial reporting, external reporting and follows GAAP. Other one focus on internal decision making, budgeting and performance.
Q54: What is the Relevance of Accounting?
Answer: Relevance of Accounting helps you track your business performance and make informed decisions by recording financial transactions of your company. You can analyse your company’s downturn and make different strategies by having these records.
Q55: Explain the Concept/ Relation of Risk and Return?
Answer: Risk and return walk together. Higher risk investment gives you greater returns, but also can give you larger losses. As same low-risk investment gives you lower returns. Before an investment, investor have to find a balance between risk and return that meets their financial goals and risk tolerance.
Q56: Give an Overview of Par Value.
Answer: Par value is also known as face value. It is the legal minimum value assigned to a share of stock or a bond.
Q57: What is a Closing Entry?
Answer: Closing entries are made at the end of the accounting period. Closing entries transfer the temporary accounts like revenue, expense and dividends into permanent accounts like retained earnings.
Q58: What do you Understand by Adjusting Entry?
Answer: An adjusting entry is a journal entry made at the end of the accounting period to update account balances and financial statements, reflecting revenue and expenses that have occurred but have not yet been recorded.
Q59: Give me an Overview of the ERP System
Answer: ERP stands for Enterprise Resource Planning. An ERP system is a set of applications that automate core business processes, helping companies to eliminate data duplication.
Q60: Give Me an Overview of Materiality With an Example
Answer: Materiality is the decision-making process of which information is important enough to matter. For example, a company that makes $50 million a year would not consider losing $10 to be significant, which will be considered not material and losing $500,000 is important so it will be considered material.
Q61. What do you Understand by a Contra Account?
Answer: A contra account is a registered account with a balance that offsets the normal balance of a related account reducing its net value on a financial statement. This helps in providing more clearer vision of the company’s finances by showing the original value of the account.
Q62: What are the Different Types of Accounts?
Answer: There are three different types of accounts, which are personal, real and nominal accounts.
Q63: What is Depreciation & Why is it Calculated?
Answer: Depreciation is considered as reduced value of a fixed asset because of its wear and tear, accident, damage, passage of time, etc., over its useful life. Fixed assest depreciation represents the decrease in the value of an asset due to its usage. It is calculated to know the actual value or the current value of an asset.
Q64: What are the Common Methods of Depreciation?
Answer: The common methods of depreciation include the straight line method, decline balance method, and units of production method.
Q65: Give a Difference Between the Balance Sheet and the Income Statement
Answer: In balance sheet and income statement, balance sheet is a financial statement that shows a company’s assets, liabilities and equity at a specific point in time. An income statement shows a company’s profit and loss by showing revenue, expenses, and profits over a specific period.
Q66: Tell me the Difference Between Accounts Receivable and Accounts Payable
Answer: Accounts receivable are the money owed to a company by its customers. Accounts payable are the pending money that is to be paid by the company to the suppliers.
Q67: Give Me an Overview of the Journal Entry
Answer: Recording of the financial transaction in the accounting system is known as the journal entry, which shows the credit and debit accounts.
Q68: What does the Term Ledger Mean?
Answer: A ledger is a book or digital record where all the financial transactions are categorized by accounts.
Q69: What is the Importance of the Financial Statements?
Answer: Financial statements are the information provider of the company’s financial performance that gives the overall financial health of the company, from which stakeholders can make decisions.
Q70: What do You Know About Prepaid Expenses
Answer: The prepayment for the goods that will be received in the future is called prepaid expenses. Prepaid expenses are recorded as an asset in the balance sheet until they are used.
Q71: Explain the Concept of the Trial Balance
Answer: A trial balance is used to ensure the balance between the total debits and the credits. A trial balance makes sure that the total debits are equal to the total credits which indicates that the book is balanced.
Q72: Is There Any Difference Between the Gross and Net Income?
Answer: Yes, Gross Income and Net Income are both different. Deduction of the cost of goods from the total revenue shows the Gross Income, while Net Income is the profit after all expenses, including tax and interest, have been deducted.
Q73: Give an Overview of the Fiscal Year
Answer: The fiscal year does not depend on the regular calendar, it is the 12-month period that is used by businesses for accounting purposes, which may or may not align with the regular calendar year.
Q74: Explain the Difference Between Tangible and Intangible Assets
Answer: Yes there is a huge difference between tangible and intangible assets.
- Tangible assets are those assets that are physically available such as machinery, land, etc.
- Intangible assets are non physical assets such as brand value, goodwill.
Q75: Discuss About Financial Ratio
Answer: Financial ratios are calculations that are used to evaluate a company’s performance, liquidity and solvency using financial statements.
Q76: Explain Liquidity and Solvency Briefly
Answer: The company’s ability to meet short-term obligations is called Liquidity and the Long-term obligations are considered solvency
Q77: Give an Overview of the Term Liability
Answer: Liability is something a company has to pay to someone else, such as payments or goods that arise from past events and the company has to settle in the future.
Q78: Define the Term Budget in Accounting
Answer: A budget refers to the financial planning of the company that includes expenses and income for a specific period of time.
Q79: Explain the Variance Analysis Process
Answer: Variance analysis is the process of analyzing the difference between actual and budgeted figures and finding the reason behind the variance.
Q80: Give me a Brief Detail About the Concept of Conservatism in Accounting
Answer: The concept of conservatism is the accounting principle that requires recording expenses and liabilities as soon as possible, but not recording revenues until they are assured.
Q81: Give Me an Overview of the Classified Balance Sheet
Answer: A classified balance sheet makes a category of the assets, liabilities and equity into the subcategories, for example current and non-current.
Q82: Explain briefly About Fair Value Accounting
Answer: Fair value accounting means measuring assets and liabilities at their current market value not by their historical market cost.
Q83: Give an Overview of Cost Accounting
Answer: Cost accounting is the process of recording, classifying and analyzing costs associated with a company’s product to aid management decision-making.
Q84: Give me a Brief Detail of Break-Even Point
Answer: The break even point is the level of sales at which there is no profit or loss left at which total revenue equals total costs.
Q85: Tell me the Formula for Calculating the Cost of Goods Sold
Answer: Cost of Goods Sold is calculated by adding the beginning inventory to the purchases during the period and subtracting the ending inventory from it.
Q86: Define the Term Standard Cost
Answer: Standard cost is the cost of the manufacturing product which is predetermined and variance analysis compares standard cost to actual cost to evaluate performance.
Q87: Do you Know the Steps of Preparing a Cost Sheet?
Answer: The cost sheet preparation steps contain determining direct costs, direct labour costs, direct expenses and allocating overheads to determine the total cost of production. These steps are used in preparing a cost
Q88: Tell the Difference Between Internal and External Auditing
Answer: Internal auditing is conducted to evaluate internal controls and operations within an organization. It is conducted by the employees. External auditing is performed by the auditors to provide an opinion on the financial statements.
Q89: What do you Understand by the Audit Assertion?
Answer: Claims that are made by the management based on the accuracy and completeness of the financial statements for example include existence, completeness, valuation and rights and obligations.
Q90: If the Cash Which is Collected from the Customers is Not Yet Recorded as Revenue, then What will Happen to it?
Answer: The cash will eventually go to the deferred revenue on the balance sheet as a liability if the revenue has not been earned yet.
Q91: What is a Management Letter in Auditing?
Answer: A management letter is given by the auditors to the company’s management, highlighting its weaknesses and the areas where the company has to improve.
Q92: Can you Explain the Difference Between Tax Evasion and Tax Avoidance?
Answer: Tax evasion is the illegal process which includes deliberately misrepresentation the financial information to reduce the tax liability, so that the organization does not have to pay the tax liability or they have to pay reduced tax. While tax avoidance is totally legal, it involves using tax laws to minimize tax obligations.
Q93: Explain the VAT in Brief
Answer: VAT stands for value added tax. It is a consumption tax which is applied on the value added to goods or services at each stage of production.
Q94: Give me an Example of Direct and Indirect Taxes with Explaining Them
Answer: Direct taxes are the taxes which are directly paid by the individual to the government for example, income tax or property tax. Indirect taxes are those taxes which have in between a mediator means taxes are collected by intermediatores for example, sales tax.
Q95: What do you know About Tax Planning?
Answer: Tax planning involves the strategies through which you can minimize tax liabilities through deductions, credits and exemptions, without breaking tax law.
Q96: How will you Calculate Income Tax for a Corporation?
Answer: Corporate income tax is calculated based on taxable income. The formula for calculating corporate income tax is (gross income – allowable deductions) * applicable corporate tax rate
Q97: Explain the Difference Between Tax Credits and Tax Deductions
Answer: Tax credits reduce the amount of tax owed directly. Tax deduction reduces taxable income, which indirectly affects the bill by reducing it.
Q98: What do you Understand by the Term Capital Gained Tax?
Answer: Capital gain is taxed on the profit and gain. This tax is applied only to the gain that we earn on the sales of an asset.
Q99: Explain the Different Types of Audit Opinions
Answer: There are mainly four types of audit opinions, which include unqualified, adverse and disclaimer of opinion.
Q100: What do you Know About the Importance of SOX Compliance?
Answer: SOX stands for Sarbanes-Oxley Act compliance are the rules and regulations that public companies must follow to ensure accuracy in financial reporting and to prevent fraud.
Conclusion
Preparing for the interview questions before the job interview helps you build your confidence. Technical Accounting Interview Questions and Answers must be short and clear so that you can read the answer in short and understand what the actual concept is. With the help of these accounting interview questions and answers, you can easily impress the interviewer by giving short and crisp answers without exaggerating.