Who Else Wants To Be Successful With 35 Entry-Level Accounting Interview Questions

Written by Sravan

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“Trust yourself. You know more than you think you do.” – Dr. Benjamin Spock

Before attending any job interview, you must trust yourself that you can crack this interview for sure. But, to build such trust, you must have enough confidence to handle the interview. For that, you must possess complete finance knowledge.3

Here, in the article “35 Entry Level Accounting Interview Questions” , we tried to cover some important questions which contain both Entry level accounting questions.

You can consider reading all the questions which would help you to crack the interviews with a lot more confidence.

Let’s begin..!!

1. What is the abbreviation for the accounting terms Debit and Credit?

Debit means an accounting entry that will be passed at the time of recording transactions. Debit either Increases the value of an Asset (or) Decreases the value of Liability / Equity.
Debit in accounting represented by “

Credit means an entry that will be passed when either the value of an asset decreases or the value of liability & equity increases.
Credit in accounting represented by “Cr

2. What do you know about Compound journal entry?

  • A Journal entry that has more than one debit accounts or credit accounts will be called as a “Compounded Journal Entry”.
  • A Compounded Journal entry may contain either 2 Debit accounts or 2 Credit accounts or both.
    The combination will be as follows.
    1. One debit and 2 or more credits (or)
    2. One credit and 2 or more debits (or)
    3. Two or more debits and credits

3. What do you know about the Basic accounting equation?

The accounting equation is the fundamental equation that derives the relationship between the total value of Business Assets with Liabilities & Owner’s Equity. It is based on Double entry system of accounting.

In simple, every journal entry will have a dual effect both on the Debit side and the Credit side of ledger accounts.

The formula for Accounting Equation in broad is as follows.
Assets = Liabilities + Equity

4. What is working capital?

Working capital means Money available with the company to meet its short-term obligations. Working capital indicates the short-term liquidity position of the business for managing its day-to-day operating expenses.

In short, Working capital is the excess of Current assets over Current liabilities.
I.e. Working Capital = Current Assets – Current Liabilities.

5. Tell me what do you know about the 3 financial statements ?

The 3 financial statements are
1. Statement of Profit and Loss – Assess the profit earned or loss occurred for a business enterprise
2. Balance Sheet – To know the financial position of assets, liabilities, and equity at a particular date
3. Cash flow statement – To assess Inflow and outflow of finances.

6. What is the Capitalization of assets and write Journal entries? (Manipal Hospital interview Question – 2017)

When an asset is purchased, the Cost of an asset includes all the costs which are directly related to assets like Purchase price, Installation charges, Transportation charges, Commissioning, Handling charges, Loading & Unloading charges, and all other taxes paid (if any).

Adding all other expenses to the purchase price will be called “Capitalisation”
The Accounting entry for capitalisation is as follows”

Machinery purchased for Rs.53,25,000/- from M/s Corn enterprises incl of Installation charges of Rs.2,50,000/-, Transportation charges of Rs.1,25,000, Commissioning of Rs.75,000, GST Rs.2,50,000/-

The Journal entry for the above transactions is as follows:

DateParticularsL.FDr (Rs.)Cr (Rs.)
Machinery a/c Dr
To Accounts Payable / Bank A/c
(Being Machinery purchased from M/s Corn enterprises)

Read more: Accounting Basics for Students

7. Mention any 3 Accounting Softwares ?

Few top accounting softwares are
1. Tally
Tally is the most commonly used accounting software in India. It is especially for
Small business enterprises due to its easy installation and understanding even for the non-techies.

2. Quick books
Quick books are one of the most widely used accounting software throughout the World.
It is capable of running even complex and multiple accounting processes.
The reporting style of Quickbooks are detailed and Complex.

3. Xero
Xero is another accounting software that works on Cloud-based technology. Xero is a software that allows unlimited users with a clean interface. This software is suitable for Medium & Large firms.

8. What is the major difference between Inactive and Dormant savings bank accounts?

In case you have not done any transactions through your Savings bank account or current account for more than 12 months, then such account will be classified as an “Inactive account”
In case you have not done any transactions for more than 24 months, then such an account will be classified as “Dormant account”

9. What is EBDIT?

EBDIT means “Earnings before Depreciation, Interest and Taxes”. It measures the profitability of the business.

10. What is the difference between Accrued revenue & Accrued expenses?

Revenue that has been earned for providing goods or services but the cash is still recoverable or not received by the seller or service provider.

In other words, the Seller dispatches the goods or the service provider renders the services but the receiver / the buyer will pay/settles the money at a later date. Till the collection is received by the seller, such an amount will be shown on the Balance sheet as a Current asset and in the Income statement will be shown within the revenue line item.

Accrued expenses mean when the services or goods have been received by the receiver or buyer of the goods but the payment for which hasn’t been made.
Eg: outstanding rent, outstanding electricity etc.

11. Cash Collected From the Customer is not Recorded as Revenue what happens to it?

Even though the cash collected for the goods sold or services rendered but the amount is not recorded by the accounts department then

  • The party / Debtors balance still shows the debit balance in the balance sheet
  • And Cash / Bank balance will not be increased.

12. “Proceeds from issue of Equity Shares” is which type of activity in CFS?

Proceeds from the issue of Equity shares will be classified under ”Cash Flow from Financing activity” in the Cash flow statement. As it is an inflow to the business, It will be shown as a positive figure.

13. What is the Journal entry for Credit Sales?

When goods are sold on a credit basis, and the collection of the same is still recoverable then the journal entry in the books of seller is as follows:

DateParticularsL.FDr (Rs.)Cr (Rs.)
Debtors a/c Dr
To Sales A/c
(Being Goods are sold on a Credit basis)

14. What is meant by Tally accounting?

Tally is an accounting software that will be used to record all the accounting transactions and also analyze the data and prepare the financial statements. This system of recording is called Tally accounting.

15. Tell me about any 5 tally shortcuts you use the most?

  1. F4 – To open Contra voucher
  2. F5 – To open Payment voucher
  3. F6 – To open Receipt voucher
  4. F7 – To open Journal voucher
  5. F10 – To view list of all vouchers

16. What is the meaning of a Perpetual or Periodic inventory system?

The perpetual inventory system tracks the position of the inventory balance on a continuous basis. It means whenever the company purchases or sells the goods, the inventory will be updated automatically.

The period inventory system tracks the inventory balance on a periodic basis by making occasional physical counts to ascertain the value of inventory.

17. What is the formula for the Cost of material consumed?

Cost of Material Consumed = Opening Inventory + Purchases + Carriage Inwards – Closing Inventory

18. How many Accounting Standards are published by ICAI?

The Institute of Chartered Accountants of India (ICAI) has implemented 32 accounting standards for Non-Ind AS entities. The list is as follows:

Accounting Standard (AS)

Effective date

AS-1: Disclosure of Accounting Policies


AS-2: Valuation of Inventories (Revised)


AS-3: Cash Flow Statements (Revised)


AS-4: Contingencies and Events Occurring After Balance Sheet Date 


AS-5: Net profit or Loss for the period, Prior Period Items and Changes in Accounting Policies


AS – 6 Depreciation Accounting

Withdrawn by ICAI

AS-7: Construction Contracts (Revised)


AS -8 : Research & Development 

Now included in AS-26

AS-9: Revenue Recognition 


AS-10: Property, Plant and Equipment 


AS-11: The Effects of Changes in Foreign Exchange Rates (Revised)


AS-12: Government Grants 


AS-13: Accounting for Investments


AS-14: Accounting for Amalgamations


AS-15: Employee Benefits


AS-16: Borrowing Costs


AS-17: Segment Reporting


AS-18: Related Party Disclosures


AS-19: Leases


AS-20: Earnings Per Share


AS-21: Consolidated Financial Statements


AS-22: Accounting for Taxes on Income


AS-23: Accounting for Investments in Associates


AS-24: Discontinuing Operations


AS-25: Interim Financial Reporting


AS-26: Intangible Assets


AS-27: Financial Reporting of Interests in Joint Ventures


AS-28: Impairment of Assets


AS-29: Provisions, Contingent Liabilities and Contingent Assets


AS 30: Financial Instruments – Recognition and Measurement;


AS 31: Financial Instruments – Presentation; and


AS 32: Financial Instruments – Disclosures.


Read More: What everyone must know about 40 Basic accounting terminology

19. What do you know about Bank Reconciliation Statement (BRS)?

BRS is a comparison of the Company’s Bank book transactions with the Bank statement. The process of identifying & ascertaining the difference between the two is called a “Bank Reconciliation Statement”

20. What is the formula for the Cost of goods sold?

The cost of goods sold represents the costs involved in making/producing a product that will be sold over a period of time.

The formula for the cost of goods sold is:
COGS = Opening inventory + Purchases – Closing  inventory 

21. What is Net Worth & its formula?

Networth is the Net value of assets an entity owns less the liabilities it owes.
Simply, Networth means the difference between the Assets and liabilities of the business.

Positive Net Worth = Assets are greater than Liabilities
Negative Net Worth = Assets are lesser than Liabilities

Net worth = Total Assets – Total Liabilities. 

22. Mention the EPF applicability for companies?

If an enterprise / an organization of any kind employs 20 or more people, then, it is mandatory for an employer to register under Employee provident fund scheme 1952.

23. Mention the methods by which CFS can be prepared?

Cash flow statements can be prepared using 2 methods:

  1. Direct method
    Under the direct method, actual cash receipts and actual cash payments are presented in the Cash flow statement. The difference between Cash Receipts and Cash Payments is the Net Cash Flow from Operating Activities.
  2. Indirect method
    The indirect method presents the company’s net income before taxes will be considered as a base and adjustment items will be affected for the total net cash.

24. What are the MIS reports?

MIS reports stand for “Management Information Systems”.

These are the reports which are required for management on a periodic basis to analyze the performance of different departments. It may be either Inventory Reports, Sales Reports, Production analysis reports, Budget Reports, Production Reports etc.,

25. Define Retail banking?

Retail banking provides financial services to the general public instead of corporate businesses. It is also known as Personal banking or Consumer banking. It helps individual consumers to make deposits & withdraw their money and to manage their money in an efficient and secure manner.

26. What do you know about NEFT & RTGS?

The word “NEFT” stands for National Electronic Funds Transfer. It is one of the online systems for fund transfers from one bank account to another within India. The NEFT system was launched in November 2005.

The word “RTGS” Stands For ‘Real Time Gross Settlement’. RTGS is a one of funds transfer system where money is transferred from one bank account to another in ‘real-time’, and on a gross basis.

Coming to different banking methods, RTGS is one of the fastest ways to transfer money to any bank within India.
The term ‘Real-time’ means that the initiated payment transaction will be made without having any waiting period and the
transaction will be completed as soon as the processing is done,

The term “Gross settlement” means that the money transfer is completed on a one-to-one basis i.e. transaction to transaction basis (not by the bunch).
The RTGS transactions can be treated as final and irrevocable since the money transfer occurs in the books of the Reserve Bank of India (RBI). 

27. Define Bills receivable? 

Bills receivables are the amount of money expected to be received in the future by the company on goods sold or services rendered on credit. Bills receivable are drawn by the seller and will be shown under the current assets of the company in the Balance sheet.

1. Straight Line Depreciation Method

SLM method of charging depreciation is one of the popular methods of claiming depreciation on assets. Under this method, an equal or uniform amount will be charged till the value of assets gets reduced to zero or till it reaches its salvage value at the end of the estimated useful life of an asset.

Depreciation Formula for the Straight Line Method:
Depreciation Expense = (Cost of an asset – Salvage value) / Useful life 

2. Written-down value 

WDV method of depreciation is another method of charging depreciation. Under this method, a Fixed /constant rate of depreciation applies to assets every year. The amount of depreciation changes every year and is not uniform here. And this process of charging depreciation continues till assets get reduced to the nominal value or Zero.

Written Down Value Method = (Cost of Asset – Salvage Value of the Asset) * Rate of Depreciation in %

28. Mention whether the account “Cash” will be credited or debited when a company pays a bill?

When a company pays bills directly in cash or settled any liability by cash, then, such cash account balance will be reduced. Therefore, Cash account to be credited.

29. What are the activities that are included in the Cash Flow Statement?

The cash flow statement contains 3 types of Cash Flows

  1. Operating cash flows
  2. Investing cash flows
  3. Financing cash flows

30. Where does a cash discount be recorded?

A cash discount is a discount allowed by the seller to get immediate cash receipts. Such cash discount should be debited in the Statement of Profit and Loss.

31. What is the entry for a Trade discount?

“Trade Discount” enables the Retailer to make profits. And one more important thing is that “Trade Discount will not be entered in the books of Accounts”.

There will be NO Entry passed for the Trade Discount in the books of both the Wholesaler and Retailer. The amount of reduction will be done before any type of exchange between the parties. 

Therefore, Trade discount does not form part of books of accounts. 

32. What is the difference between a Term loan and Cash credit?

Term loans are the Long term loans that will be offered for Capital expenditure and Capital expansion purposes. Term loans are issued by banks for a specified amount with specific repayment schedule. 
Eg: Long term assets.

Term loans are payable on EMI / Installment basis along with the accrued interest at a given period of time.

Cash credit or Overdraft will be offered to finance short-term liabilities. I.e. to meet its working capital requirements. In the case of cash credits, only the interest portion will be charged.

33. What is the formula for the Debt-Equity ratio in accounting?

Debt-equity ratio measures the relationship between Long-term debt and Equity

It refers to every company having more equity than debt. Fewer companies will have a debt-to-equity ratio of 1:1. It represents the company’s finances are met equally by debt and equity.

Debt- Equity ratio = Long-term Debt / Shareholder’ funds

34. What is the ideal Current ratio?

The Idle Current ratio is 2:1

Higher Current ratio > Indicates Heavy investment in Current Assets which means Under utilization of resources

Lower Current ratio > Indicates the Company is not in a position to pay off short-term debts.

35. What are the different types of Ratio Analysis?

  1. Liquidity Ratios
  2. Solvency Ratios
  3. Profitability Ratios
  4. Efficiency Ratios
  5. Coverage Ratios

Read more: 3 Golden rules of Accounting

Thanks for reading 🙂

Author is a Qualified CMA with rich industry experience for more than 6 years. He is an All India Ranker (AIR-101) in CMA and also a Semi-Qualified Chartered Accountant having a quite good experience in teaching the subjects of Accounting and Costing to the commerce aspirants.

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