Top Accounting Interview Questions Answers for Entry Level

What are the different types of accounting?

Different types of accounting are – Financial Accounting – This type of accounting records information related to the financial status of the company. Administrative Accounting – Administrative accounting is focused on the administrative aspects of the company and is used above all to assess the fulfillment of the established objectives and improve the implemented strategy. It is very useful for making forecasts and planning the actions and resources to be used.

Tax Accounting -Tax accounting helps to register and prepare reports related to tax returns to the public treasury and payment of taxes.

Cost accounting – This type of accounting is more focused on companies of an industrial nature. It helps to make a detailed analysis of the unit costs of production, sales, and, in general, of the production process that the company carries out.

Management Accounting – It has a broader vision than cost accounting since it records all the economic and financial information of the company to be able to make short-term and long-term decisions.

Explain real and nominal accounts with examples.

A real account is an account of assets and liabilities. E.g. land account, building account, etc.

A nominal account is an account of income and expenses. E.g. salary accounts, wages account, etc.

Which accounting platforms have you worked on? Which one do you prefer the most?

Describe the accounting platforms (QuickBooks, Microsoft Dynamic GP, etc.) that you have worked with and which one you liked the most.

What is double-entry bookkeeping? What are the rules associated with it?

Double-entry bookkeeping is an accounting principle where every debit has a corresponding credit. Thus, the total debit amount is always equal to the total credit. In this system, when one account is debited then another account gets credited at the same time.

What is working capital?

Working capital is calculated as current assets minus current liabilities, which is used in day-to-day trading.

In a simple accounting scheme, the concept of working capital focuses on the capital resources that a given company can count on in the short term to operate. These resources owned by the company are the cash, the portfolio of financial products, and other investments made by the company.

How do you maintain accounting accuracy?

Maintaining the accuracy of an organization’s accounting is an important activity as it can result in a huge loss. There are various tools and resources which can be used to limit the potential for errors to creep in and address them quickly if any errors do arise.

What is TDS? Where do you show TDS on a balance sheet?

TDS (Tax Deducted at Source) is a concept aimed at collecting tax at every source of income. In a balance sheet, it is shown in the assets section, right after the head current asset.

What is the difference between ‘accounts payable (AP)’ and ‘accounts receivable (AR)’?

Accounts Payable Accounts Receivable

The amount a company owes because it purchased goods or services on credit from a vendor or supplier. The amount a company has the right to collect because it sold goods or services on credit to a customer.

Accounts payable are liabilities. Accounts receivable are assets.

Define Balancing.

Balancing means equating or balancing both the debit and credit sides of a T-account.

Time For Accounting Interview Question Quiz

Accounting-interview-quiz

The right answer is the balance sheet.

The right answer is the 2nd option – the income statement will be impacted.

The right answer is -Cash flow statement.

The right answer is the Quick Ratio.

What are Revenue Recognition and Matching Principles?

Revenue Recognition Principle – This principle suggests that the revenue should be recognized and recorded when it is realized and earned, no matter when the amount has been paid.

Matching Principle – This principle dictates the companies to report an expense on its income statement the time the related revenues are earned. It is associated with the accrual basis of accounting

Explain Contingent Liabilities.

Contingent Liabilities are potential obligations that may or may not become an actual liability. They may or may not be incurred by an entity, based on the outcome of an uncertain future event, e.g. – If an ex-employee of an ABC company sues it for gender discrimination for any particular sum, the company has a contingent liability. In case the company is found guilty, it will have a liability, and if it is not found guilty, the company will not have an actual liability.

What do you mean by Amortization and also mention its journal entry?

Amortization is an accounting concept that is used to gradually write off the cost. Through amortization, over a period of time, one can allocate the cost of any intangible asset. Also, it can be done to repay any loan principal. However, those assets which have an indefinite life like Goodwill cannot be amortized.

Below is the journal entry for amortization:

Debit Credit

Amortization expense

Accumulated amortization

The concept of amortization in accounting is different from depreciation. The major point of difference between amortization and depreciation is their usage. Amortization works for intangible assets whereas depreciation works for tangible assets. Also, unlike depreciation, amortization has no salvage value. Another key difference between both is that depreciation can be implemented using both the straight-line method and accelerated method but amortization is implemented through the straight-line method.

Using the below transactions solve the practical accounting questions:

Firm’s Name – ABC Ltd. which is 10 years old firm on December 31, 2018. As of January 01, 2019, below are the trial balance entries

Transactions/entries Amount in INR

Accounts Payable 50,000

Accounts Receivable 20,000

Cash 4, 50,000

Merchandise inventory 6,620

Land 60,000

Unearned revenue 10,000

Salaries payable 32,000

Common Stocks 15,000

Prepaid Rent for Office 15,000

Supplies 20,000

Retained Earnings 25,000

Later other transactions that took place in 2019 are:

Paid salaries payable from 2018.

As of March 2019, the petty cash expense made was Rs 10,000.

Advanced payment made for the company’s car which was on lease Rs, 1, 00,000 on May 1, 2019.

Paid office rent in advance Rs. 25,000 on May 3, 2019.

Supplies purchased for Rs. 10,000 on the account.

During the year, purchased 20 CCTV cameras for Rs. 20,000 for cash.

Sold 103 CCTV cameras for Rs. 42,000 (calculate the cost of goods sold using FIFO method)

Accounts payable was Rs. 30,000

Petty cash replenished and the receipts included office supply expenses – Rs. 2,000, miscellaneous Rs. 7,000. Currency left Rs.1000

Billed Fixing services for Rs 10,000 for the year.

The salaries paid were Rs. 30,000 in cash

Accounts receivable were Rs. 60,000

Ad and marketing expense Rs. 6,000

Utility expense paid Rs. 5,000

The dividend paid to the shareholders was Rs. 15,000.

What is the total value of cash in the above transactions?

Here is the total calculation of cash:

All Cash Transactions and balances:

Actual Cash = 4, 50,000

Salaries payable = 32,000

Company’s car lease = 1, 00,000

Office rent = 25,000

CCTV purchase = 20,000

Accounts payable = 30,000

Petty cash = 10,000

Petty cash replenished = 7,000 + 2000

Balance petty cash = 1000

Salaries paid = 30,000

Accounts receivable = 60,000

Ad and marketing expense = 6,000

Utility expense = 5,000

Dividend paid = 15,000

Hence as per the nature, here is the actual calculation of cash:

4, 50,000 – 32,000 – 1, 00,000 – 25,000 – 20,000 – 30,000 – (10,000 – 1,000) – 1,000 + 60,000 – 5,000 – 15,000 = 2,73,000

What do you mean by Days Payable Outstanding (DPO)?

DPO or Days Payable Outstanding refers to the average number of days which ideally a company takes to clear its credit purchase in regards to the outstanding suppliers. Most of the time, DPO is a monthly task for a business, however, each month the day of clearing the outstanding payment might differ, hence the average is taken out to estimate the payment period.

Below is the formula for calculating DPO:

Closing accounts payable / Purchase per day

(Average accounts payable / COGS) X Number of days

What are the different types of liquidity ratios in accounting?

Basically, there are five different types of ratios in accounting:

Current Ratio

The higher the company has a current ratio, the better is the company’s strength to handle short term financial issues. It is calculated by – Current ratio = Current Asset/ Current Liabilities

Net-Working Capital Ratio

It articulates that whether or not a company has sufficient funds to carry out short term operations. It is calculated by – Current Asset – Current Liabilities

Quick ratio

The quick ratio is also known as the acid test ratio or liquid ratio which illustrates the company’s short-term liquidity to meet any short-term obligations. If the quick ratio is below 1:1, the company is not in a good state to handle short term debts. Quick ratio = Liquid Assets / Current Liabilities

Super-Quick Ratio

Super Quick Ratio = (Cash + Marketable Securities) / Current Liabilities

The operating Cash Flow ratio

It is calculated by dividing cash flow from operations with current liabilities. It is observed that a sound operating cash flow ratio makes the firm’s liquidity position better.

Here cash flow from operations will generally include:

All revenues from operations + Non-cash based expenses – Non-cash based revenue

Whereas Current Liabilities will include:

Balance payments, creditors, provisions, short term loans, etc.

What is the Accounting Information System (AIS)?

This is a frequently asked accounting interview question thus you should know everything about AIS.

AIS are a computer-based method used for tracking accounting activity and involves – collecting, storing, processing, organizing, and summarizing accounting data and transactions. It also helps in cumulating financial transactions and essential financial reports, which helps stakeholders in decision making. Using AIS for storing and processing financial data helps in the following tasks:

Measure the financial performance

Evaluate the finances of the company and compare it with the previous period to draw a conclusion

Avoid any miss-handling of data

Connects Information Technology with GAAP principles

What do you mean by tangible real accounts and intangible real accounts?

Tangible Real Account – Those assets which can be touched and have a physical existence are defined as tangible real accounts.

Example – Machinery A/c, Vehicle A/c, Building A/c

Journal Entry –

Debit what comes in

Credit what goes out

Intangible real account – Those assets which have some monetary values but can’t be touched are referred to as intangible real accounts.

Example – Goodwill, Patents, Copyrights

Journal Entry –

Debit what comes in

Credit what goes out

How to perform an income statement analysis?

The income statement is the company’s core financial statement highlighting the profits and losses of the company. It involves:

All revenues – expenses (both operating and non-operating activities)

To analyze this statement, financial analysts consider the vertical analysis and horizontal analysis.

Vertical analysis:

It involves comparing the up and down of the income statement to the revenue (in percentage). The key metrics involved are:

Cost of Goods Sold (COGS)

Gross profits

Depreciation

Interest

Earnings before Tax (EBT)

Tax

Net earnings

Horizontal analysis

It involves comparing the year-over-year (Yoyo) change of each line in the income statement. To perform this analysis:

Take the value in Period N and

Divide it by value in Period N-1

Subtract the value by 1 (gives the percent change)

To learn more about how to conduct a financial analysis you can consider taking the following courses:

Financial Analysis Fundamentals by CFI

Valuation and Financial Analysis for Startups Specialization by Courser

What is Section 209(4A) in The Companies Act, 1956?

Section 209(4A) in The Companies Act, 1956 states that:

Every company must preserve the books of accounts, together with the vouchers relevant to any entry in such books of account, in good order, relating to a period of not less than 8 years immediately proceeding the current year.

So of the Current Year Ending is – March 2020 then, the company needs to store the accounts and vouchers for the following years:

March 2019, 2018, 2017… to 2012

Which latest accounting trends you think are prevailing in 2020? [One of the most frequently asked accounting interview questions]

Below are some of the latest accounting trends:

Increased dependency on cloud

Companies are now using cloud computing as a technology for tracking – tracking inventory, sales, and expenses. A report by Accounting Age suggests that 78% of small businesses will rely solely on cloud technology and 67% of accountants say that cloud technology will make their role easier.

Automated Data Entry:

As per the Practice of Now 2020 survey, nearly two-thirds of accountants consider automation of processes, workflows, and payments the biggest challenge that will impact accountancy in the next 12 months. That’s why a lot of companies have started depending upon automation software as they are efficient and reduce the chances of error or loss of entry.

Walk me through the three financial statements.

The balance sheet shows a company’s assets, its liabilities, and shareholders’ equity. The income statement outlines the company’s revenues and expenses. The cash flow statement shows the cash flows from operating, investing, and financing activities.

If I had only one statement and wanted to review the overall health of a company, which statement would I use and why?

Cash is king. The cash flow statement gives a true picture of how much cash the company is generating. That being said, it’s important to note that all three statements truly are required to get a full picture of the health of a company. Learn more about how the three financial statements are linked.

What happens on the income statement if inventory goes up by $10?

Nothing. This is a trick question. The only impact will be on the balance sheet and cash flow statement.

What is working capital?

Working capital is typically defined as current assets less current liabilities. In banking, working capital is normally defined more narrowly as current assets (excluding cash) less current liabilities (excluding interest-bearing debt).

What does having negative working capital mean?

Negative working capital is common in some industries such as grocery retail and the restaurant business. For a grocery store, customers pay upfront, inventory moves relatively quickly but suppliers often give 30 days (or more) credit. This means that the company receives cash from customers before it needs the cash to pay suppliers. Negative working capital is a sign of efficiency in businesses with low inventory and accounts receivable. In other industries, negative working capital may signal a company is facing financial trouble.

If cash collected from customers is not yet recorded as revenue, what happens to it?

It usually goes into “Deferred Revenue” on the balance sheet as a liability if the revenue has not been earned yet.

What’s the difference between deferred revenue and accounts receivable?

Deferred revenue represents cash received from customers for services or goods not yet provided. Accounts receivable represents cash owing from customers for goods/services already provided.

When do you capitalize rather than expense a purchase?

If the purchase will be used in the business for more than one year, it is capitalized and depreciated.

Under what circumstances does goodwill increase?

When a company buys another business for more than the fair value of its tangible and intangible assets, goodwill is created.

How do you record PPE and why is this important?

There are essentially four areas to consider when accounting for PP&E on the balance sheet: initial purchase, depreciation, additions (capital expenditures), and dispositions. In addition to these four, you may also have to consider revaluation. For many businesses, PP&E is the main capital asset that generates revenue, profitability, and cash flow.

How does an inventory write-down affect the three statements?

On the balance sheet, the asset account of inventory is reduced by the amount of the write-down, and so is shareholders’ equity. The income statement is hit with an expense in either COGS or a separate line item for the amount of the write-down, reducing net income. On the cash flow statement, the write-down is added back to CFO as it’s a non-cash expense but must not be double-counted in the changes of non-cash working capital.

What are three examples of common budgeting methods?

Examples of common budgeting methods include zero-based budgeting, incremental budgeting, and value-based budgeting. Learn more about the various types, in CFI’s budgeting and forecasting course.

Please explain the Revenue Recognition and Matching principles

The revenue recognition principle dictates the process and timing by which revenue is recorded and recognized as an item in the financial statements based on certain criteria (e.g., transfer of ownership). The matching principle dictates that the timing of expenses be matched to the period in which they are incurred, as opposed to when they are actually paid.

If you were CFO of our company, what would keep you up at night?

Step back and give a high-level overview of the company’s current financial position, or companies in that industry in general. Highlight something on each of the three statements. Income statement: growth, margins, profitability. Balance sheet: liquidity, capital assets, credit metrics, liquidity ratios. Cash flow statement: short-term and long-term cash flow profile, any need to raise money or return capital to shareholders.

What do you mean by financial accounting?

Financial accounting refers to summarizing and gathering financial data plan to arrange financial reports such as income statement, the balance sheet for the organization’s management lenders, suppliers and other stakeholders.

Define the skills that are needed for an accountant job role?

Skills required to work as an accountant are:

Prepared work style

Excellent at math’s

Ability for technology

Strong analytical skills

Name some accounting software?

Some of the accounting software:

Tally

Free Agent

Fresh Books

Sage 50 cloud

Zoo Books etc.

How many types of business transactions are there in accounting?

There are two types of business transaction:

Revenue

Capital

Define TDS? And where it is shown in the balance sheet?

TDS stands for Tax Deduction at Source. It is introduced to gather text from the company from where the employee profits are generated. It is shown on the assets part, right after the current head asset.

What do you mean by Tally Accounting?

It is the software utilized for accounting in small shops and business for running routine accounting transactions.

Explain Departmental Accounting?

Departmental accounting is a kind of accounting in which a divided account is created for departments. It is managed and shown separately in the balance sheet.

Tell me the abbreviation for the accounting terms credit and debit?

The abbreviation term used for credit and debit are “dry” and “cry”

State the difference between inactive and dormant accounts?

Inactive accounts are the accounts that have been closed and will not be used further, whereas dormant accounts are those that are not efficient today but may be used in the future.

Define working capital?

Working capital is planned as current assets minus current liabilities, which is used in day to day trading.

How do you maintain accounting accuracy?

Maintaining the correctness of an organization’s accounting is a significant activity as it can result in an immense loss. There are different tools and resources which can be used to bound the potential for errors to sneak in and address quickly if any errors do occur.

Differentiate between accounts payable and accounts receivable?

The main difference between accounts payable and receivable are:

Accounts payable: The amount a company owes because it purchased goods or services on credit from a supplier or vendor. Also, accounts payable are liabilities

Accounts Receivable: The amount a company has the right to collect because it sold goods or services on credit to a customer. Also, accounts receivable are assets.

Tell me some common errors in accounting?

The standard errors in accounting are: errors of commission, errors of principle, errors of omission and compensating error.

Why do you think accounting standards are necessary?

Accounting Standards play a significant role in preparing an excellent and precise financial report. It ensures dependability and significance in financial reports.

What are some of the ways to estimate bad debts?

Some of the admired ways of estimating bad debts are ageing analysis, percentage of outstanding accounts and percentage of credit sales.

Define deferred tax asset and how is the value created?

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

What is the equation for the Acid test ratio in accounting?

The equation for the acid test ratio in accounting is:

Acid-test ratio= (Current assets- Inventory)/ Current Liabilities

Name some popular accounting applications?

Some of the popular accounting applications are:

Microsoft accounting professional

Cram Software

Financial Force

Microsoft Dynamics AX

Can you explain the basic accounting equation?

Accounting is all about liabilities, assets and capital. Hence, its equation can be summarized as:

Assets= Liabilities + Owners Equity

Name the different branches of accounting?

The three different branches of accounting are:

Cost Accounting

Financial Accounting

Management Accounting

Define retail Banking?

Retail banking includes a retail client, where particular customers use local branches of better commercial banks.

What do you mean by trade bills?

These are the bills generated against every transaction. It is a part of the documentation process for all kinds of transactions.

Scrap value in accounting? What is the

Scrap value is the remaining value of an asset that any asset holds after its predictable lifetime.

Do you know about the golden rules of accounting?

There are three golden rules in accounting:

Debit what comes in, credit what goes away

Debit the receiver, credit the giver

Debit all expenses and losses, credit all incomes and gains

What are the premises?

Premises refer to fixed assets obtainable on a balance sheet.

So, these are some of the top accounting interview questions & answers for accounting jobs; candidates need to prepare well and get the job in hand easily.

Why accounting standards are mandatory?

Accounting standards are mandatory because:

They play a crucial role in preparing good quality and accurate financial reports.

It ensures reliability and relevance in financial statements.

What is the main difference between accumulated depreciation and depreciation expense?

The difference between accumulated depreciation and depreciation expense is that:

Accumulated depreciation is the total amount of depreciation that has been taken on a company’s assets up to the date of the balance sheet.

Depreciation expense is the amount of depreciation that is reported on the income statement.

How to adjust entries into account?

Entries can be adjusted into account by sorting entries into five categories:

Accrued expenses: Expenses have been incurred, but the vendor’s invoices are not generated or processed yet

Accrued revenues: Revenues have been earned, but the sales invoices are not generated or processed yet.

Deferred revenues: Money was received in advance of having been paid or earned.

Deferred expenses: Money was paid for a future expense.

Depreciation expense: An asset purchased in one period must be allocated to expense in each of the accounting periods of the asset’s useful life.

What are the three factors that can affect your cash flow and business profitability?

The three factors that can affect your cash flow and business profit include:

Cash flows from investing activities: It includes shares, bonds, physical property, machinery, etc.

Cash flows from operating activities: It does not include cash received from other sources like investments.

Cash flow from financing activities: It includes any activities that involve:

Dividend payments that the company made to its shareholders.

Any money that includes stock to the public.

Money borrower going to borrow from the lender.

Wt has the Difference Between an effort Balance and a Balance Sheet?

The balance could also be an inventory of balances from the ledger account while the record could also be a press release of assets and liabilities.

Trial balance contains balances of all personal, real, and nominal accounts, while the record contains balances of only those personal and real accounts which represent assets and liabilities.

It is prepared before the preparation of trading and profit and loss account, while the record is prepared after the preparation of trading and profit and loss account.

This is prepared to ascertain the arithmetical accuracy of posting into ledger while the record is prepared to point the financial position of the business on a selected date.

Debit and credit balances are shown side by side while the record is prepared on a T form basis, the left-hand side showing liabilities while right-hand side representing assets.

Closing stock doesn’t appear within the balance while it’s shown on the assets side of the record.

What do you consider the very best Three Skills Of a superb Accountant? Habitually asked accountant interview questions?

Yes, you’re trying to seek out someone with numerical abilities, but not necessarily a mathematician. You furthermore may have someone with analytical know-how, who can communicate with others. Watch to answers that give a perception about the quality of general business experience, technology expertise, management skills, client assistance introduction, and specific knowledge that can connect on the part.

What’s the Bank Reconciliation Statement? What Are the Steps to organize it?

Bank reconciliation statements could also be a press release prepared at periodical intervals, to point the items which cause disagreement between the balances as per the bank columns of the cash book and therefore the bank passbook on any given date.

Follow the below steps to arrange a bank reconciliation statement:

Take the balance either as per cash book or as per pass book as a start line.

Compare the things appearing within the bank column of the cash book with the item appearing within the bank passbook.

Tick off the things within the passbook with the entries within the cash book. An inventory of unpicked items either in cash book or passbook is going to be found.

Add or deduct items from the balance which has been taken as a start line.

The resultant figure is going to be the balance as shown by the passbook or the other way around.

What are the three main types of accounts?

They are Real, Personal, and nominal but wait. If don’t want to sound artificial and stand out from the gang then confirm you’re explaining your answer in short (one line about each is ideal)

Real – All assets in the company any material or indefinite number as existing records

Personal – Accounts associated with an individual, entity or any legal body, etc. are called personal accounts

Nominal – Any records connected with costs & needs or benefits & profits come into this section.

Why is Depreciation not charged on Land?

Oh! This is a classic and one that fascinates the operations manager more than often. There is no scope for leaving this one out of any list of finance and accounting interview questions. The reason why you’ll never see depreciation being charged ashore is that land has an infinite useful life. Without knowing what percentage of years a hard and fast asset will last depreciation can’t be charged.

The formula to calculate straight-line depreciation is (Cost of Fixed Asset – Scrap Value)/Useful life and you don’t have a variety to fill the denominator here.

What is Amortization?

Amortization is merely finished Intangible assets, unlike depreciation which is for tangible assets. Reduction in value by prorating the value of an intangible over multiple accounting periods is named amortization.

Example – A small-sized technology company Unreal Corp. spends 500,000 on R&D which is expected to sustain for 5 years so it may decide to amortize this & show 1,00,000 each year for 5 years in the financial statements.

If you may wish to deep dive into the topic here is our detailed article on Amortization with an example

How is Closing Property not registered in Trial Balance?

Not all goods purchased in beginning & during the accounting period are sold until the top of that period; this leads to a remainder balance referred to as closing stock.

Closing stock may be a part of purchases & balance already (Trial balance) includes purchases, hence if the closing stock is shown as a separate item it’ll double count and result in an error.

Example: Investing for a while = 60,000, Closing Stock (remainder out of investing) = 10,000, if both of these articles do exist clearly displayed inside balance the result will grow up & claim balance will error out.

The unit too reaches high amongst best investment and accounting interview questions asked in technical rounds by hiring managers.

What are the three main Financial Statements?

This is another quite common question asked in finance and accounting interviews, especially with entry-level roles. Three main financial statements are earnings report, record, and income Statement.

Again, follow the i.e. to add one brief statement to everyone among them, but don’t over-talk it’ll only cause you to susceptible to more questions.

Income Statement – It presents a summarized view of revenue, income, profit, and loss of a specific accounting period.

Balance Sheet – B/S would give them as on time assets, accounts & centre area of a company.

Cash Flow Statement – It shows the movement of money and cash equivalents for a business during an accounting period.

What’s Capital, sort of account & where is it shown within the financial statements?

Also called net worth or owner’s equity, capital is that the money brought in by the owner of the business as an investment to start the operations. Capital may be a Personal Account because it belongs to a private or a firm (owner).

What are Fictitious Assets?

Bind this to your memory fictitious assets are not assets they are fake or deceptive they are expenses & losses which for some reason couldn’t be written off during the accounting period incurred. Both are signed off in many later accounting terms.

What are Contingent Liabilities?

Contingent liabilities are those liabilities that will or might not be incurred by a business counting on the result of a future event. The existence of this type of liability is hooked into the occurrence of a probable event in the future.

Example – Let’s suppose that Apple files a case of a patent violation on Samsung and Samsung not only realizes that it’s going to need to buy violations but also estimates how much in total. In the example, Samsung orders the list expected value into their records of records as a Contingent Contract.

What are Drawings, what sort of account is it & its journal entry?

When a proprietor withdraws cash or goods from its own business for private use it’s termed as drawings. It reduces capital invested and maybe a temporary account which is cleared at the top of every accounting period.

Journal entry for goods withdrawn

Drawing Account Debit

To Cash Account Credit

Journal entry for goods withdrawn

Drawing Account Debit

To Cash Account Credit

What’s a Bank Reconciliation Statement & why is it prepared?

Almost all compilations of finance and accounting interview questions include a minimum of one question on BRS, this subject is deemed important.

Bank Reconciliation Statement or BRS refers to a press release that is formed to reconcile bank balance shown on the statement or passbook with the bank balance shown within the cash book.

Both internal source i.e. the cash book and external source i.e. the bank statement/passbook are reconciled with one another, and then all the mismatches are identified and properly recorded.

Reasons for preparing a BRS

What is Deferred Revenue Expenditure?

Another one of the lists of commonly asked finance and accounting interview questions is Deferred Revenue Expenditure. It is an investment that is interested and acquired as an accounting term, but its benefits are to be derived from the spread of the following accounting periods.

A part of the quantity which is charged to the profit and loss account within the current accounting period is reduced from the entire expenditure and therefore the rest is shown on the balance sheet as an asset.

Example – a little business spends 1, 50,000 on advertising which is unusually large for them. The benefits from it are expected to be derived over 3 years therefore the company decides to divide the expense over 3 yearly payments of 50K. This type of expense is amortized.

Year 1 50,000

Year 2 50,000

Year 3 50,000

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