Accounting and Finance

Prepare for your next interview with this comprehensive list of 50 essential questions and answers for junior accountants. This guide is designed for quick preparation, helping you recall core financial accounting concepts. Rather than memorization, a few reads will help you formulate confident and well-structured answers.

This post is the first in a new “Accounting and Finance” series on my blog, created to share practical knowledge and assist professionals like you. I encourage you to leave your feedback and suggestions for future improvements.

Foundational Accounting Principles

1. What are the basic financial statements?
   • Balance Sheet, Income Statement, and Cash Flow Statement—each provides unique insights into a company’s financial health.
2. What is double-entry accounting?
   • Every transaction affects at least two accounts—one debit and one credit—keeping the accounting equation in balance.
3. What is a trial balance?
   • A report that ensures total debits equal total credits, used to detect recording errors before preparing financial statements.
4. What’s the difference between accounts payable and accounts receivable?
   • Accounts Payable: Money owed to suppliers.
   • Accounts Receivable: Money owed to the company by customers.
5. How do you handle accounting errors?
   • Identify the source → Reverse the incorrect entry → Record the correct one → Document and get approval if needed.
6. What is depreciation?
   • The systematic allocation of an asset’s cost over its useful life due to wear and tear or obsolescence.
7. What is working capital?
   • Working Capital = Current Assets – Current Liabilities. It indicates a company’s short-term liquidity and operational efficiency.
8. How do you prioritize tasks during month-end closing?
   • Start with time-sensitive tasks (e.g., accruals, reconciliations), then move to other entries while managing deadlines and accuracy.
9. What’s the difference between cash basis and accrual basis accounting?
   • Accrual basis records revenues and expenses when they’re earned or incurred. Cash basis records transactions only when cash is exchanged.
10. What is the purpose of a general ledger?
    • The general ledger is the complete record of all a company’s financial transactions. It provides a detailed, organized history of all accounts.
11. Describe the accounting cycle.
    • The accounting cycle is a step-by-step process that businesses use to record and process financial transactions, starting with a transaction and ending with financial statements.
12. What is the purpose of closing entries?
    • Closing entries transfer the balances of temporary accounts (revenue, expenses) to retained earnings at the end of a period, resetting them to zero for the next period.
13. What is an accrual? Can you give an example?
    • An accrual is a record of an expense incurred but not yet paid, or revenue earned but not yet received. Example: a company receives a utility bill for services used this month, which it will pay next month.
14. What is a journal entry?
    • A journal entry is the initial record of a business transaction, showing the accounts to be debited and credited.
15. What’s the difference between fixed and variable costs?
    • Fixed costs remain constant regardless of production volume (e.g., rent). Variable costs change in proportion to production volume (e.g., raw materials).

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