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    Interview Question of Accounting

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    Sahana G
    This document provides an overview of key accounting concepts and terms. It defines accounting as recording, classifying, and summarizing financial transactions. It discusses accounts payable, accounts receivable, debtors, creditors, and the golden rules of accounting for personal, real, and nominal accounts. It also defines important accounting terms like capital expenditure, revenue expenditure, deferred expenditure, invoices, purchase returns, sales returns, and profit and loss accounts. Finally, it briefly describes balance sheets, rectification of errors, tangible and intangible assets, prepaid expenses, income received in advance, bad debts, depreciation, contingent liabilities, and the difference between gross profit and net profit.

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    Interview Question of Accounting

    Uploaded by

    Sahana G
    40 views6 pages
    This document provides an overview of key accounting concepts and terms. It defines accounting as recording, classifying, and summarizing financial transactions. It discusses accounts payable, accounts receivable, debtors, creditors, and the golden rules of accounting for personal, real, and nominal accounts. It also defines important accounting terms like capital expenditure, revenue expenditure, deferred expenditure, invoices, purchase returns, sales returns, and profit and loss accounts. Finally, it briefly describes balance sheets, rectification of errors, tangible and intangible assets, prepaid expenses, income received in advance, bad debts, depreciation, contingent liabilities, and the difference between gross profit and net profit.

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    This document provides an overview of key accounting concepts and terms. It defines accounting as recording, classifying, and summarizing financial transactions. It discusses accounts payable, accounts receivable, debtors, creditors, and the golden rules of accounting for personal, real, and nominal accounts. It also defines important accounting terms like capital expenditure, revenue expenditure, deferred expenditure, invoices, purchase returns, sales returns, and profit and loss accounts. Finally, it briefly describes balance sheets, rectification of errors, tangible and intangible assets, prepaid expenses, income received in advance, bad debts, depreciation, contingent liabilities, and the difference between gross profit and net profit.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    40 views6 pages

    Interview Question of Accounting

    Uploaded by

    Sahana G
    This document provides an overview of key accounting concepts and terms. It defines accounting as recording, classifying, and summarizing financial transactions. It discusses accounts payable, accounts receivable, debtors, creditors, and the golden rules of accounting for personal, real, and nominal accounts. It also defines important accounting terms like capital expenditure, revenue expenditure, deferred expenditure, invoices, purchase returns, sales returns, and profit and loss accounts. Finally, it briefly describes balance sheets, rectification of errors, tangible and intangible assets, prepaid expenses, income received in advance, bad debts, depreciation, contingent liabilities, and the difference between gross profit and net profit.

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    © All Rights Reserved
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    of 6

    Interview Question of Accounting

    Accounting: - It is Art of Recording Classifying, Summarizing in a


    significant manner in term of money transaction.

    Accounts Payable:- The Amount owned by a business to creditor such as


    supplier e.g.(Raw Material) Accounts payable are classed as current
    liabilities on the Balance Sheet.

    Accounts Receivable:- The Amount owing to a business from customer for


    invoiced Amount. Accounts receivable as Current Assets on the Balance
    Sheet.

    Debtor:- A Person who receives money or money’s worth by giving a


    promise to pay the same in future is known as Debtors. In other words
    Debtors is a person who owes money to the business.

    Creditor:- Creditor is a person to whom the business owes money.

    Golden Rules of Accounting

    1. Personal Account: Debit the receiver


    Credit the giver.

    2. Real Account: Debit what comes in


    Credit what goes out

    3. Nominal Account: Debit all expenses and losses


    Credit all incomes and profit.

    4. Personal Account:- Debtors & Creditors


    Records transactions with Persons, Drawings, Banks a/c, Capital a/c of
    properties.

    Real Accounts:- Property(Land & Building, Plant & Machinery,


    Investments, Stock, Cash, Furniture, Good Will).

    Nominal Accounts:- Can’t See (Light, Heat, Bad debts,


    Investment,Rent,Salaries).
    General Reserve or Provision:- Usually the businessman don’t with draw the
    entire profit form the business but retain a part of it in the business to meet
    unforeseen future. An Amount set aside out of profit in the account of an
    organization for a known liability ( even though the specific amount might
    not be known) or for the diminution in value of an Asset.

    Capital Expenditure:- If an Amount is spent in purchase of an Asset. E.g.


    Furniture, Machinery etc. It is called Capital Expenditure. The Asset is
    retained permanently in the business to earn an income for the business.

    Revenue Expenditure:- If an Amount is spent in maintaining an Asset in a


    workable order e.g. Repair to plant, repair to building.

    Deferred Expenditure:- They are expenses which are of Revenue Nature,


    but the debiting of the same is postponed over a period of time.
    Advertising expenditure, Sale Promotion Expenditure even though spent
    in one year the benefit will last for 2 or 3 years.

    Invoice:- It is bill sent by a seller of goods to the buyer stating details of


    the quantity, quality, price, date.

    Purchase Return:- The company return goods to our suppliers or creditors


    due to poor quality, packing etc. Return of goods is known Purchase
    Return.

    Sales Return:- When Customers Return goods to company known as Sales


    Return.

    Revenue: Revenue or income refers to the earnings of the business. It


    includes the sale proceeds of goods, receipts for services rendered and
    earnings form interest, dividend, rent, commission, discount, etc.

    Bank Reconciliation statement: It is the statement where in the causes


    responsible of the difference between the cashbook balance and the passbook
    balance are established and suitable adjustments are made to remove them
    i.e., the causes responsible for the disagreement. So that the two balance can
    reconcile or agree with each other.
    Who prepares the BRS? The BRS statement is prepared by the customer, and
    not by the banker. It can be prepared only by the customer, because it is only
    the customer who has the knowledge of his bank transactions and the bank
    balance as per the cash book and the bank balance as per the pass book which
    are required for the preparation of the bank reconciliation statement.

    When is the BRS prepared? The bank reconciliation statement is prepares as


    on a particular day. It is prepared periodically, usually, at the end of every
    month.

    Where is the BRS prepared? The reconciliation statement be neither a part of


    the journal or subsidiary book nor a part of the ledger, so it can be prepared
    in any of the books of account (i.e., either in the journal or subsidiary book or
    in the ledger) or even on a separate sheet of paper. But, usually, for the sake
    of convenience, it is prepared in the cash book itself on the last page of every
    month.

    Profit and Loss a/c: The Profit and Loss a/c is a account which shows which
    shows the net profit or net loss (i.e., the ultimate profit or loss) of a business
    of a particular trading period. The net profit or net loss is the profit earned of
    loss suffered after charging all business expenses (including depreciation and
    provisions). It is the final profit or loss of a business.

    Balance Sheet: The trading and profit and loss a/c shows only the net profit
    or net loss of a business for a certain trading period. But a trader likes to
    know not only the net profit or net loss of his business for a certain trading
    period, but also the financial position of his business at the end of the trading
    period. For this purpose, he prepares a statement of his assets and liabilities
    (including the capital) as on the closing date of the trading period. The.
    Statement of assets and liabilities prepared on the last date of the trading
    period is known as the “Balance Sheet”. In short, as balance sheet is sheet
    containing the balance of real and personal accounts (i.e., balance of assets
    and liabilities) of a business.

    Rectification of errors: Errors in the books of accounts should not be rectified


    by erasing (i.e., removing) or striking off (i.e., canceling) the wrong entries
    and writing the correct entries, because such a procedure is possible only if
    the errors are detected immediately. Further, such a procedure reduces the
    reliability of the entries in the books and makes the books untidy. So errors
    have to be rectified either by means of necessary adjustments in the concerned
    accounts or by means of journal entries.

    Purchase Book:
    Goods purchased by a business are called purchase. The purchases of goods
    may be cash purchase or credit purchase. The purchase goods are recorded in
    purchase book.

    Purchase Return’s Books: For recording only return of goods bought on


    credit and allowances claimed in connection with goods brought on credit.
    Return of goods brought for cash should not be recorded in purchased
    returns books. Generally, cash received for such returns, and so, such returns
    should be recorded in the cash book.

    Sales Book:
    Goods sold by a business are called sales. The sales of goods may be cash
    sales or credit sales. The sales of goods are recorded in sales book.

    Sales Returns Book: Return of goods sold for cash allowances granted in
    connection with goods sold for cash should not be recorded in sales returns
    book. Generally, cash is paid for such returns, and so, such returns should be
    recorded in the cash book.

    What are tangible assets


    They are the assets or things, which can be seen and felt, may be movable or
    immovable. For ex: furniture, buildings etc.

    Examples of intangible assets.


    Which cannot be seen are called intangible asset
    E.g. Patents and copy rights, goodwill etc

    Pre-paid expenses or expenses paid in advance.


    Some time, it is found that a portion of certain expenses like insurance
    premium, rent, etc. paid during the current period relates to the next period. So
    much of the expenses paid during the current period, but relate to the next
    period are known as “prepaid expenses” or expenses paid in advance

    Income received in advance.


    Sometimes income may be received in full in advance before the actual service
    is rendered. Then such income should not be considered as income of the
    accounting year, such income belongs to next year. Therefore it becomes a
    liability.

    What are bad debts


    It is the common experience of every trader that some of the debtors may not
    pay the debts in full to one or the other, such debts which are not recoverable
    are called bad debts and will have to be written off.

    What is depreciation?
    Assets owned by trader like furniture, plant and machinery, provision etc will
    have certain life of utility to the business and they decrease in the value year
    after year due to wear and tear on account of use in the business. Such decrease
    in value is called depreciation.

    What is contingent liability?


    It is a liability arising from the past events the existence of which will be
    confirmed only by the occurrences or non-occurrence of one or more uncertain
    future events not wholly with in the control of the enterprise. Ex; forward
    exchange contracts.( which may or may not occur)

    What is the difference b/w gross profit and net profit?


    Gross profit is the profit after deduction of direct expenses and before indirect
    expenses/operating expenses. Net profit is the profit after deduction of all
    expenses
    (Direct and indirect expenses etc.)

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