1. What Is Financial Accounting?
Financial accounting gathers and summarizes financial data to prepare financial reports such as balance sheet and income statement for the organization’s management, investors, lenders, suppliers, tax authorities, and other stakeholders.
2. Why did you select accounting as your profession?
Well, I was quite good in accounting throughout but in my masters, when I got distinction I decided to adopt this field as a profession.
3. Do you have any professional experience of this field?
Yes, I have worked as an accountant at two different places.
4. Did you use accounting applications at your previous companies or prefer working manually??
Yes, I have used Advanced Business Solutions and AME Accounting Software in my previous jobs.
5. Can you name any other accounting application?
Yes, I am familiar with CGram Software, Financial Force, Microsoft Accounting Professional, Microsoft Dynamics AX and Microsoft Small Business Financials.
6. Which accounting application you prefer most 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.
7. What is the abbreviation for the accounting terms debit and credit?
Debit abbreviation is “dr” and credit abbreviation is “cr”.
8. How many types of business transactions are there in accounting?
There are two types of transactions in accounting i.e. revenue and capital.
9. What Are Financial Statements? Name The Major Financial Statements?
The Financial statements are the reports that result from the process of accounting which allow the interested parties to evaluate the profitability and the solvency of the business. The major financial statements are:
- Profit and Loss Account
- Balance sheet
- Cash Flow statement.
10. What Is The Difference Between Balance Sheet And Profit & Loss Account?
The balance sheet is one of the most important financial statements of a company. It is reported to investors at least once per year. It may also be presented quarterly, semiannually or monthly. The balance sheet provides information on what the company owns (its assets), what it owes (its liabilities), and the value of the business to its stockholders (the shareholders’ equity). The name, balance sheet, is derived from the fact that these accounts must always be in balance. Assets must always equal the sum of liabilities and shareholders’ equity.
A company’s income statement/profit and loss account statement is a record of its earnings or losses for a given period. It shows all of the money a company earned (revenues) and all of the money a company spent (expenses) during this period. It also accounts for the effects of some basic accounting principles such as depreciation. The income statement is important for investors because it’s the basic measuring stick of profitability. A company with little or no income has little or no money to pass on to its investors in the form of dividends. If a company continues to record losses for a sustained period, it could go bankrupt. In such a case, both bond and stock investors could lose some or all of their investment. On the other hand, a company that realizes large profits will have more money to pass on to its investors.
11. What Are The Principal Qualitative Characteristics Of Financial Statements?
The principle characteristics of financial statements are the attributes that make the information provided in the financial statements useful to the users. The principle qualitative characteristics are
- Understandability: They should be readily understandable to the users. For this purpose users are deemed to have reasonable knowledge of business and economic activities.
- Relevance: To be useful information must be relevant to the decision-making needs of the users.
- Reliability: Information is said to be reliable when it is free from errors, bias and can be depended upon by the users to represent faithfully, which it purports to represent.
- Comparability: Users must be able to compare the financial statements of an enterprise through time in order to identify trends in its financial position and performance.
12 . What Is Meant By The Quality Of Financial Reporting? What Is Conservatism, And How Does It Affect The Quality Of Earnings?
The quality of financial reporting refers to how close the financial statements are to economic reality. The closer the financial statements are to economic reality, the higher is the quality of financial reporting. The less that management uses discretionary means to manipulate earnings, the higher the quality of financial reporting. Conservatism means that management should take great care not to overstate assets and revenues and not to understate liabilities and expenses. The more conservative management is in making accounting judgments, the higher will be the quality of financial reporting.
13. What Are The Major Constraints On Relevant And Reliable Financial Statements?
The major constraints on relevant and reliable financial statements are:
- Timeliness: If there is undue delay information becomes irrelevant.
- Balance between cost and benefit: The benefits derived from information should exceed the cost of providing it.
- Balance between the various qualitative characteristics: In practice it has become necessary to achieve an appropriate balance between the qualitative characteristics.
- True and fair view presentation: There is no clarity in the term true and fair view as required by the Companies Act. The conceptual framework does not discuss this.
14. Define dual aspect term in accounting?
As the name implies, the dual aspect concept states that every transaction has two sides. For example, when you buy something, you give the cash and get the thing. Similarly, when you sale something, you lose the thing and gets the money. So this getting and losing is basically two aspects of every transaction.
15. What do we mean by purchase return in accounting?
It is the term introduced in the records for every defective or unsatisfactory good returned back to its supplier.
16. Define the term material facts in accounting?
Material facts are the bills or any document that becomes the base of every account book. It means that all those documents, on which account book is prepared, are called material facts.
17. Have you ever prepared MIS reports and what are these?
Yes, I have prepared few MIS reports during my previous jobs. MIS reports are created to identify the efficiency of any department of a company.
18. Define company’s payable cycle?
It is the time required by the company to pay all its account payables.
19. Define retail banking?
It is a type of banking that involves a retail client. These clients are the normal people and not any organizational customers.
20. How much mathematics knowledge is necessary or required in accounting?
Not much knowledge but basic mathematical background is required in accounting for operations like addition, subtraction, multiplication and division.
21. Define bills receivable?
All types of exchange bills, bonds and other securities owned by a merchant that is payable to him are said as bills receivable.
22. Define depreciation and its types?
By depreciation we mean that a value of an asset is decreasing as it is in use. It has two types such as “Straight Line Method” and “Written Down Value Method”.
23. Differentiate between consignor and consignee?
Consigner is the owner of the goods or you can say he is the person who delivers the goods to the consignee. The consignee is the person who receives the goods.
24. Define balancing in accounting?
Balancing means to equate both sides of the T-account i.e. the debit and credit sides of a T-account must be equal/balanced.
25. How much statistics knowledge is necessary or required in accounting?
You must be very good at statistics if you want to do well in accounting. Otherwise, with minimum knowledge you cannot manage your day to day transactions effectively in accounting.
26. Define Scrap value in accounting?
It is the residual value of an asset. The residual value is the value that any asset holds after its estimated life time.
27. Define Marginal Cost?
Suppose you have to produce an additional unit of output. The estimated cost of additional inputs to produce that output is actually the marginal cost.
28. Define Partitioning in accounting?
It is a kind of groups made on the basis of same responses by a system.
29. Differentiate between provision and reserve?
Provisions are the liabilities or the anticipated items such as depreciation. You can say provisions are expenses. Reserves are the profits of any company and a part of that profit is placed back to the business to keep it sustainable in tough times of a company.
30. Define Offset accounting?
Offset accounting is one that decreases the net amount of another account to create a net balance.