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Fundamentals of Accounting Interview Questions & Answers - Learning Mode
COOLINTERVIEW.COM COMMON PROFICIENCY TEST (CPT) INTERVIEW QUESTIONS FUNDAMENTALS OF ACCOUNTING INTERVIEW QUESTIONS QUESTIONS & ANSWERS - LEARNING MODE

Fundamentals of Accounting Interview Questions & Answers - Learning Mode

Accounting is the measurement, statement or provision of assurance about financial information primarily used by managers, investors, tax authorities and other decision makers to make resource allocation decisions within companies, organizations, and public agencies. The terms derive from the use of financial accounts. Accounting is a service activity. Its function is to provide quantitative information primarily financial in nature, about economic entities, that is intended to be useful in making economic decisions, and in making reasonable choices among alternative courses of action. Accounting helps a business in having a complete and systematic record of its business transactions, reporting the results of its operation and interpreting such results for the purpose of effective control of future operations or activities.

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Accounting Policies Interview Questions & Answers (10) Learning Mode | Exam Mode

Accounting Standards Interview Questions & Answers (13) Learning Mode | Exam Mode

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Fundamentals of Accounting Interview Questions & Answers - Learning Mode
Try Fundamentals of Accounting Interview Questions & Answers - Exam Mode
Question: Money owed from a outsider is a:
a) Asset
b) Liability
c) Expense
d) Capital


Answer: (a)
Description: When we have to receive something from any other person it becomes an asset for the receiving person. Liability will be one when something is due to be paid to an outsider. Expense is the outflow of economic resources to earn the specified revenue. Capital is the sum provided by the owner for investment purposes in a business. Source: CoolInterview.com
Question: The process of recording financial data along with the preparation of trial balance are covered under:
a) Book Keeping
b) Accounting
c) Classifying
d) Summarising


Answer: (a)
Description: Book- keeping is the recording phase of financial data along with preparation of trial balance. It constitutes a base for accounting. Financial Statements do not form part of this process. Accounting starts where book- keeping ends. Source: CoolInterview.com
Question: What is crosstalk?

Answer: (c) Accrual, Matching and Periodicity
Description: According to accrual concept, expenses should be recorded in the period in which obligation to pay has arisen, not in the period the cash have been paid while income should be recorded in the period in which right to receive has been established. As per matching concept, all expenses matched with the revenue of that period should only be taken into consideration. Periodicity concept fixes up the time- frame for which the performance is to be Source: CoolInterview.com
Question: Which of the following is an event?
a) Sale of goods for Rs. 5,000
b) Closing stock of worth Rs. 4,000
c) Purchase of goods for Rs. 8,000
d) Rent paid Rs. 2,000


Answer: (b)
Description: Sale of goods, purchase of goods and rent paid are all transactions, closing stock left at the end of the year is an event. Source: CoolInterview.com
Question: Business Enterprise is a separate identity apart from its owners under which concept?
(a) Materiality Concept
(b) Accounting Concept
(c) Entity Concept
(d) Ownership Concept


Answer: (c) Entity Concept
Description: Entity concept states that business enterprise is a separate identity apart from its owner. It means that the enterprise is liable to the owner for capital investment made by the owner. Source: CoolInterview.com
Question: Ram starts business with Rs. 90,000 and then buys goods from Shyam on credit for Rs. 23,000. The accounting equation based on Assets= Capital + Liabilities will be:
a) 1,13,000= 90,000+ 23,000
b) 1,13,000= 1,13,000+ 0
c) 90,000= 67,000 + 23,000
d) 67,000= 90,000 - 23,000


Answer: (a)
Description: Accounting Equation as per the dual aspect concept is:
Assets= Capital + Liabilities
When Ram starts business:
A= C + L
Cash= Capital+ Liability
90,000= 90,000+ Nil
When gods are bought on Credit:
A= C+ L
Cash+ Goods= Capital+ Creditors
90,000+ 23,000= 90,000+ 23,000
1,13,000= 90,000+ 23,000 Source: CoolInterview.com
Question: Debtors- Rs. 50,000. A provision for bad debt is created at 5% according to which concept? a) Conservatism b) Matching c) Accrual d) Dual Aspect

Answer: (a) Conservatism
Description: Conservatism states that the incomes shall not be anticipated and all possible losses should be provided for. Bad debt is a possible loss and hence provision shall be made on it as per the concept of conservatism. Source: CoolInterview.com
Question: How do you validate the selection criteria of a report? And how do you display initial values in a selection screen?

Answer: (d) Entity
Description: Entity Concept states that business enterprise is a separate identity apart from its owner. Business transactions are recorded in business books of accounts and owner's transactions in his personal books of accounts.
Hence, proprietor's personal travelling expenses are not to be charged in business accounts due to entity concept. Source: CoolInterview.com
Question: Change in accounting estimate means:
a) Differences arising between certain parameters re-estimated during the current period and actual results achieved during the current period
b) Differences arising between certain parameters estimated earlier and re-estimated during the current period
c) Differences arising between certain parameters estimated earlier and actual results achieved during the current period
d) Both (b) and (c)


Answer: (d)
Description: Estimates have to be made for certain items that have not occurred on the balance sheet date and therefore they cannot be measured using valuation principles. In such a situation a reasonable estimate based on the existing situation and past experience is made. Such estimate are made in connection with the computation of depreciation, amortisation and impairment losses as well as accruals, provisions and employee benefit obligations. The process of estimation involves judgeme Source: CoolInterview.com
Question: What are the commands used for interactive reports?

Answer: (a) Conservatism
Description: Conservatism states that the accountant should not anticipate income and should provide for all possible losses. Discount is a possible expense which shall be provided for according to the concept of conservatism. Source: CoolInterview.com
Question: Rosa pays Rs.1,200 on 1.06.2009 towards yearly subscription (July 01 2009 - June 30 2010). So, what will be the premium paid entry for the financial year 2009-10?
a) Rs. 300 as prepaid
b) Rs. 900 as prepaid
a) Rs. 1200 as prepaid
a) Rs. 1200 as full payment


Answer: (a) Rs. 300 as prepaid
Description: Period for which subscription paid= July 1,09 to 30 June 10 Duration of year = 01.04.09 to 31.03.10.
So subscription for 3 months i.e. (April 2010 to June 2010) is prepaid.
So prepaid premium= 3* 100 p.m.= Rs. 300. Source: CoolInterview.com
Question: Fundamental Accounting Assumptions are:
a) Going Concern, Conservatism, Accrual
b) Going Concern, Matching, Consistency
c) Going Concern, Consistency, Accrual
d) Going Concern, Entity, Periodicity


Answer: (c)
Description: As per accounting Standard-1 (AS-1), the fundamental accounting assumptions are:
-Going Concern -Consistency -Accrual
These are presumed to be followed during preparation of any financial statements and a special disclosure is required if any of them is not followed. Source: CoolInterview.com
Question: The Accounting Convention of Matching means:
a) Profit for the period to be matched with sales revenue
b) Profit for the period to be matched with investment
c) Expenses of one period to be matched against the expenses of another period
d) Expenses of one period to be matched against the revenue of the same period


Answer: (d)
Description: According to Matching Concept, all expenses of one period should be matched with the revenues of that period itself. In the financial statements of the organization if any revenue is recognized then expenses related to earn that revenue should also be recognized. This concept is based on accrual concept as it considers the occurrence of expenses and income and do not concentrate on actual inflow or outflow of cash. This leads to adjustment of certain items like prepaid and ou Source: CoolInterview.com
Question: What is the objective of conservatism?
(a) Anticipate profits but not losses
(b) Anticipate losses but not profits
(c) Anticipate both profits and loses
(d) Anticipate income


Answer: (b) Anticipate losses but not profits
Description: Conservatism states that the accountant should not anticipate income and should provide for all possible losses. Therefore, the main objective of conservatism is to anticipate losses but not profits. Source: CoolInterview.com
Question: There are ___________ generally accepted measurement bases or valuation principles:
a) Two
b) Three
c) Four
d) Five


Answer: (c)
Description: There are four generally accepted measurement basis or valuation principles. There are:
(1) Historical Cost
(2) Current Cost
(3) Realizable Value
(4) Present Cost Source: CoolInterview.com
Question: The Accounting Equation is based on:
a) Going Concern Concept
b) Dual Aspect Concept
c) Money Measurement Concept
d) All of these


Answer: (b)
Description: Accounting Equation is presented as follows: Equities+ Liabilities= Assets
Since, the liability side and asset side of the equation has to tally, hence it is based on dual aspect concept. This concept is the core of double entry book keeping and states that every transaction or event has two aspects, one debit and equal and opposite credit. Source: CoolInterview.com
Question: ABC Ltd. purchased a building by paying Rs. 50,00,000 as on 1st April, 2000. On 1st April, 2007 it found that it would cost Rs. 1,50,00,000 to purchase the similar building. This value of Rs. 1,50,00,000 is known as:
a) Historical Cost
b) Realizable Value
c) Current Cost
d) Present Cost


Answer: (c)
Description: Current cost provides an alternative measurement base. Assets are carried out at the amount of cash or cash equivalent that would have to be paid if the same or an equivalent asset was acquired currently. Therefore the value of Rs. 1,50,00,000 will be designed as current cost as it is required to purchase a similar building currently. In the same way when current cost measurement base is followed, the liabilities are carried at the undiscounted amount of cash or cash equivale Source: CoolInterview.com
Question: An asset was purchased for Rs. 6,60,000. Cash was paid Rs. 1,20,000 and for the balance a bill was drawn for 60 days. What will be the effect on fixed assets? a) Rs. 1,20,000 b) Rs. 5,40,000 c) Rs. 6,60,000 d) Nil

Answer: (c) Rs. 6,60,000
Description: Effect on fixed assets will be that they will increase by Rs. 6,60,000.
Entry:
Assets A/C Dr. 6,60,000
To Cash A/C 1,20,000
To Bills Payable A/C 5,40,000 Source: CoolInterview.com
Question: Outstanding expenses is included in Profit & Loss A/c at the year end according to which concept? a) Matching b) Full disclosure c) Accrual d) Going Concern

Answer: (c) Accrual
Description: Under accrual concept, The effects of transactions and other events are recognized on mercantile basis i.e. when they occur (and not when cash is received or paid) and they are recorded in accounting records and reported in financial statements of the period to which they relate. Source: CoolInterview.com
Question: Which financial statement represents the accounting equation
ASSETS= LIABILITIES+ OWNER'S EQUITY
a) Income Statement
b) Cash Flow Statement
c) Balance Sheet
d) Funds Flow Statement


Answer: (c)
Description: The Accounting Equation:
Assets= Liabilities+ Owner's Equity
This is represented through the position statement i.e. Balance Sheet. Source: CoolInterview.com

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