Accounting Interview Questions and Answers
Ques 16. Explain the concept of double-entry accounting.
Double-entry accounting means that every transaction has equal and opposite effects, with debits and credits always balancing.
Example:
If a company borrows $10,000 from a bank, it records a debit to cash (increasing assets) and a credit to liabilities (increasing debt).
Ques 17. What is the purpose of a bank reconciliation statement?
A bank reconciliation statement is prepared to ensure that the company's records match the bank's records, identifying any discrepancies that need to be resolved.
Example:
If a check issued by the company is not yet cleared by the bank, it will result in a reconciling item.
Ques 18. Define the term 'amortization' in accounting.
Amortization is the process of allocating the cost of intangible assets over their useful life, similar to depreciation for tangible assets.
Example:
If a company acquires a patent for $50,000 with a useful life of 10 years, the annual amortization expense is $5,000.
Ques 19. What is the significance of the debt-to-equity ratio?
The debt-to-equity ratio measures the proportion of a company's debt to its equity, indicating the level of financial leverage and risk.
Example:
A debt-to-equity ratio of 0.5 means that the company has $0.50 in debt for every $1 in equity.
Ques 20. Explain the concept of 'materiality' in accounting.
Materiality refers to the significance or importance of financial information, guiding accountants in determining what information to disclose or omit.
Example:
A small accounting error may be considered immaterial, while a large error impacting financial statements is material.
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