Last Updated on August 21, 2023 by Sravan
Facing an interview will be easy if you practice reading more and more accounting questions. Here, in the article “12 Accounting Questions for Students to Crack Interviews easily,” we tried to cover some important questions which contain both Basic level and Top level accounting questions.
You can consider reading all the questions which would help you to crack the interviews with a lot more confidence.
1. Explain the difference between a Trial balance and a Balance sheet?
Trial balance (TB) is a statement that represents the balances of all Ledgers in one place. In short, Trial balance is like a Tree and all the Ledgers will be its Branches.
A trial balance will be prepared to ensure that all the Debit and Credit aspects of the transactions on any particular day are matching with each other.
It means, all the Debit balances of Ledger accounts should be equal to all the Credit balances of Ledger accounts.
The Major reason to prepare a Balance Sheet is to know the Financial position of the business enterprise at a specific point of time. i.e. 31st March of every year.
Balance Sheet normally consists of
By preparing the Balance sheet, one can easily find
– How much Bank balance does the business have?
– How much value of debts the company needs to clear off?
– How much value has the Assets depreciated over a period?
– How much Current liabilities are to be cleared off by the end of 31st March?
– Which has more value either Current assets or Current liabilities etc.,?
2. Name Real and Nominal Accounts with Examples.
– Real Account includes transactions relating to “Properties & Assets”. I.e. A business enterprise that owns it depending upon the physical existence it has been classified into.
Eg: Land, Plant & Machinery, Vehicles, Computers, etc.,
Rule:- Debit “what comes in”
Credit “what goes out”
Nominal accounts include transactions relating to “Expenses or Losses” and “Incomes or Gains”.
– Salary account (Expense)
– Electricity account (Expense)
– Advertisement Account (Expense)
– Loss on Sale of Machinery (Loss)
– Income from Investment (Income)
– Gain on Sale of Car (Gain) etc.
Rule: Debit “All Expenses & Losses”
Credit “All Incomes & Gains”
3. What is the difference between Trial balance and General ledger balance?
A Trial Balance is a statement prepared at the end of the financial year to identify the debit or credit balances of all ledger accounts.
It is prepared to ensure that there are no unbalanced journal entries in the accounting system. Otherwise, it would be impossible to generate accurate Financial statements.
The trial balance is just a report which is derived from the general ledger.
A General Ledger is a summary of detailed account-wise business transactions comprising all accounts recorded through the Journal. The Ledger is also known as the “Principal book of accounts”.
Ledger is one of the main sources of information that will be used by financial accountants when they are investigating accounts.
The general ledger is considered to be a database of information about accounting transactions,
4. What do you know about Working capital?
- Working capital is calculated as a Difference between a company’s Current Assets and Current Liabilities.
In Simple, the Excess of Current assets over Current liabilities is “Working Capital”.
I.e. Working Capital = Current Assets Less Current Liabilities.
- It indicates the Short-term position of the organization.
- Working capital will be used by the businesses for Day-to-Day business activities and also it represents the Liquidity of the business.
5. What is Negative Working Capital Mean?
A Company’s Working capital may be either Positive or Negative.
When Current Assets > Current Liabilities? Positive Working Capital
When Current Assets < Current Liabilities? Negative Working Capital
Current Assets = Rs.5,75,000/- (Stock + Debtors + Accounts Receivables + Cash)
Current Liabilities = Rs.6,25,000/- (Creditors + Accounts Payables + Cash)
Since the Current liabilities (Rs.6,25,000/-) are more than the Current Assets (Rs.5,75,000/-), the business has a “Negative Working Capital” of Rs.50,000/-
6. What does a Negative Cash balance mean?
Cash is a “Current Asset”, by rule it will have a “Debit balance”. i.e. Positive cash balance.
But there may be a chance that the Cash balance might have the Negative balance
i.e. Credit balance in Cash general ledger.
Eg: Cash at Bank – (Rs.15,000)
There are a few reasons for Negative cash balance for the businesses are:
Recording more Cash expense entries than receipts.
Cash Receipts – Rs.1,00,000/-
Cash Payments – Rs.1,20,000/-
Difference – Rs. 20,000/-
It means You have a Cash book balance of Rs.1,00,000/- but you made cash payment entries for Rs.1,20,000/-. It may be due to Non-recording / Missed recording of Cash Receipts or Payment transactions wrongly posted to the Cash ledger account.
7. What do you do if the Ledger is not tallied?
If a Ledger is not tallied, it means the total value of the Debit and the Credit balances are not equal. It shows that there is something wrong with the transactions. Therefore, the accountants need to have a thorough check on the amounts entered on both the debit and credit sides individually to find out any discrepancies/differences.
8. Are you familiar with the Indian Accounting Standards (Ind AS) ? How many accounting standards are there in India?
Accounting Standards help & set certain guidelines in bringing uniformity to the entire accounting. These standards will set the same rules for the treatment of accounting transactions.
Due to that, all the companies will record the transactions similarly, and also the finances will also reflect in the same manner.
In India, the Institute of Chartered Accountants of India (ICAI) board sets the accounting standards (AS). The Indian Accounting Standards (Ind AS), as mentioned under section 133 of the Companies Act 2013, have been formulated considering the Indian economic & legal environment.
Accounting Standards (AS) are accounting principles published by world-governing accounting bodies
Now, there are 41 types of Accounting Standards in India.
9. Difference between Fictitious assets & Intangible Assets?
Fictitious Assets are assets which has no physical/tangible existence but are represented as actual cash expenditure while preparing financial statements. They are a part of Intangible Assets.
Fictitious Assets are the expenses which are incurred in running a business. These assets will be shown as an “Asset” on the Balance Sheet.
No resale value – Since these items are expenses incurred in running the company, the business cannot recover them. So, these expenses have no realizable value.
Amortization – The recognition of these expenses is delayed and deferred to future accounting periods. They are not accounted for in a single year but get spread over multiple years.
Examples of Fictitious Assets are:
– Preliminary Expenditures
– Discount on the issue of shares
– Loss on the issue of debentures
Intangible assets do not have a physical existence, but they still add value by generating revenue for the business. Intangible assets have a Resale value.
Examples of Intangible Assets are
Trademarks, Patents, Copyright, Goodwill etc.,
10. What is TDS? Where do you show TDS on a balance sheet?
TDS means “Tax deducted at Source”.
It is a form of a collection of tax by the Deductor from the source of income generation only from the Deductee.
Eg: TDS deducted from the employee by the employer
As per the rules of the Income Tax, any company or person who is making a payment is required to deduct tax at the source if the payment exceeds certain threshold limits.
Eg: Salary, Commission, Rent, Bank Interest, Professional fees, etc.
In TDS there are two parties.
One is the Deductor i.e the person who collects the tax in the form of TDS and deposits to the Central government (Company) and the Other is Deductee, which is a person who is liable to pay TDS (Employee).
Treatment (In the books of Deductor)
TDS is to be shown under “Current Liabilities” in the Balance sheet
Logic: The Deductor collected the tax and he is liable to pay to the government.
11. Where should you record a Cash discount in a journal entry?
A cash discount is a discount allowed by the seller of the goods to the buyer. It is normally allowed to collect any pending cash collections. It is an expense for the seller and an income for the buyer.
The cash discount will be debited to the “Statement of Profit and Loss account” in the books of the Seller as an “Expense” and credited in the books of the buyer.
12. Differentiate between Provision and Reserve?
The term “Reserve” refers to a sum or percentage of the profit that a company retains or keeps aside from the earned profits at the end of a financial year towards meeting future contingencies that may occur.
In short, a reserve is an appropriation of profit or accumulated profit to strengthen the financial position of a business. These reserves can be for a general purpose or a specific purpose. It is created for Unknown liability.
The reserve will be shown under “Equity & Liabilities “ under the Share Capital.
1. General Reserves like Workmen compensation fund, Investment fluctuation fund, etc.,
2. Capital Reserves etc.,
Provision is an amount that is kept aside to meet the expected loss/expense.
The provision refers to an amount that is also kept aside from a company’s profit in order to cover probable expenses arising in the future or a possible reduction in the value of an asset. Creating provisions is mandatory.
A reserve will be created when the profits are available but a Provision will be created irrespective of the profits for the business. It is created for known liabilities.
Provisions will be shown on the “Debit side of Statement of Profit and Loss account” along with Expenses.
– Provisions are provisions for doubtful debts,
– Provision for taxation, provision for repairs and renewals and
– Provision for depreciation.
I hope you understood the “12 Accounting Questions for Students to Crack Interviews easily” concept.
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Author is a Qualified CMA with rich industry experience for more than 6 years. He is an All India Ranker (AIR-101) in CMA and also a Semi-Qualified Chartered Accountant having a quite good experience in teaching the subjects of Accounting and Costing to the commerce aspirants.