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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: 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: 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: 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: 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: The owner of a company included his personal medical expenses in the company's income statement. Indicate the principle that is violated.
a) Cost principle
b) Conservatism
c) Disclosure
d) Entity Concept


Answer: (d)
Description: According to the entity concept the owner should treat his personal expenses separate from those of the business. If this is not followed it means violation of entity concept. This concept states that enterprise is liable to the owner for capital investment made by the owner. 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: 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: In Accounting money is the:
a) Measurement value
b) Scale of Measurement
c) Scale of Social Measurement
d) Store o Value


Answer: (b)
Description: In accounting process money is the scale of measurement, although now- a- days qualitative information is also communicated along with the monetary information. Money as a measurement of scale has no universal denomination. It takes the shape of currency ruling in a country. There is no constant exchange relationship among the different currencies. Source: CoolInterview.com
Question: Ram purchased a car for Rs. 10,000paid Rs. 3,000 as cash and balance amount will be paid in three equal instalments. Due to this:
a) Total assets increase by Rs. 10,000
b) Total liabilities increase by Rs. 3,000
c) Assets will increase by Rs. 7,000 with corresponding increase in liability by RS. 7,000
d) Both (b) and (c)


Answer: (c)
Description: The journal entries for the transactions are as follows:
Car A/C Dr. 10,000
To Cash A/c 7,000
To Vendors A/C 3,000
As a result of above, The Asset side increase by 7,000 with corresponding increase in liabilities. Source: CoolInterview.com
Question: No inference of profit and the provision making policy for all possible losses is due to:
a) Convention of Consistency
b) Convention of Conservatism
c) Convention of Disclosure
d) Convention of Materiality


Answer: (b)
Description: The Concept of Conservatism states that the accountant should not anticipate income and should provide for all possible losses. This clearly shows that no inference of profit should be made and all possible losses should be incorporated. Source: CoolInterview.com
Question: Fixed assets and current assets are categorized as per concept of:
a) Separate entity
b) Going concern
c) Consistency
d) Time period


Answer: (b)
Description: The concept of going concern treats the life of the business as indefinite i.e. the business life will consist of many accounting periods. Those assets benefit of which is received in one accounting year itself are current assets and those whose benefit extends to more than one accounting period are called fixed assets. Existence of more than one accounting period is supported by going concern concept only. Source: CoolInterview.com
Question: Estimated selling price less estimated cost of sales is:
a) Net Realizable Value
b) Cost of purchase
c) Cost of goods sold
d) None


Answer: (a)
Description: Estimated selling price less estimated cost of sales is known as Net Realizable Value. This is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs are unnecessary to make a sale. 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: All of the following are valuation principles except:
a) Historical Cost
b) Present Value
c) Future Value
d) Realizable Value


Answer: (c)
Description: The four valuation principles are:
(1) Historical Cost
(2) Current Cost
(3) Realizable Value
(4) Present Value
Hence, future value is not a valuation principle. Source: CoolInterview.com
Question: The three fundamental accounting assumptions are?

(i) Going Concerns
(ii) Financial Transaction
(iii) Consistency
(iv) Accrual


Answer: (i), (iii) and (iv)
Description: The three fundamental accounting assumptions are Going Concerns, Consistency and Accrual. Source: CoolInterview.com
Question: For every debit there is an equivalent credit" this statement demonstrates: a) Matching Concept b) Cost Concept c) Money Measurement Concept d) Dual Aspect Concept

Answer: (d) Dual Aspect Concept
Description: According to the dual aspect concept, every transaction has two aspects, one debit and the other credit. In other words, every debit has an equal and opposite credit. Accounting equation is also supported by this concept i.e. Assets= Capital + Liabilities. Source: CoolInterview.com
Question: Money is a measurement scale and has a universal denomination:
a) True
b) Partly True
c) False
d) Can't Say


Answer: (c)
Description: Money as a measurement scale has no universal denomination as the exchange rate between the different currencies keeps on fluctuating. Money takes the shape of the currency ruling in the country of measurement. Eg, In India it is Rs., in US it is Dollar($) etc. 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: 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: Which is the accounting concept that requires the practice of crediting closing stock in the trading account? a) Cost b) Realization c) Going Concern d) Matching

Answer: (d) Matching
Description: Matching principle demands than revenue and the expenses incurred to earn the revenue should be properly matched. At the end of the year inventory of the stock is prepared and is valued at cost. The credit to the trading account has the effect of reducing the debit side of trading account to the extent goods remain unsold, they will be sold or used up next year and the cost will therefore, be properly debited to the next year's trading account. It justified the Source: CoolInterview.com

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