ACCOUNTS AND FINANCE FOR MANAGERS INTERVIEW QUESTIONS


Most Important Frequently Asked Accounts And Finance For Managers Interview Questions



    1. Question 1. Define Accounting?

      Answer :

      According to American Institute of Certified Public Accountants (AICPA), "Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money transactions and events which are, in part at least, of a financial character and interpreting the results there of."

      American Accounting Association (AAA) has defined accounting as "the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information."

    2. Question 2. What Are Its Objectives?

      Answer :

      • To record the business transactions in a systematic manner.
      • To determine the gross profit and net profit earned by a firm during a specific period.
      • To know the financial position of a firm at the close of the financial year by way of preparing the balance sheet.
      • To facilitate management control.
      • To assess the taxable income and the sales tax liability.
      • To provide requisite information to different parties, i.e., owners, creditors, employees, management, Government, investors, financial institutions, banks etc.

    3. Question 3. What Are Its Characteristics?

      Answer :

      • Accounting is the art of recording and classifying different business transactions.
      • The business transactions may be completely or partially of financial nature.
      • Generally the business transactions are described in monetary terms.
      • In accounting process, the business transactions are summarized and analyzed so as to arrive at a meaningful interpretation.
      • The analysis and interpretations thus obtained are communicated to those who are responsible to take certain decisions to determine the future course of business.

    4. Question 4. What Are Its Limitations?

      Answer :

      • Accounting information is expressed in terms of money. Non monetary events or transactions, however important, are completely omitted.
      • Fixed assets are recorded in the accounting records at the original cost, that is, the actual amount spent on them plus all incidental charges. In this way the effect of inflation (or deflation) is not taken into consideration.
      • Accounting information is sometimes based on estimates; estimates are often inaccurate.
      • Accounting information cannot be used as the only test of managerial performance on the basis of more profits.
      • Accounting information is not neutral or unbiased. Accountants calculate income as excess of revenues over expenses. But they consider only selected revenues and expenses.

    5. Question 5. What Are The Various Functions Of Accounting?

      Answer :

      • Recording: Accounting records business transactions in terms of money. It is essentially concerned with ensuring that all business transactions of financial nature are properly recorded.
      • Classifying: Accounting also facilitates classification of all business transactions recorded in journal. Items of similar nature are classified under appropriate heads.
      • Summarizing: Accounting summarizes the classified information. It is done in a manner, which is useful to the internal and external users. Internal users interested in these information’s are the persons who manage the business.
      • Interpreting: It implies analyzing and interpreting the financial data embodied in final accounts. Interpretation of the data helps the management, outsiders and shareholders in decision making.

    6. Question 6. Explain The Different Systems Of Accounting?

      Answer :

      • Cash Basis Accounting: According to this system, only actual cash receipts and payments are recorded in the books. The credit transactions are not recorded at all, till actual cash is received or paid.
      • Mercantile or Accrual System: According to this system, all the business transactions pertaining to the specific period, whether of cash or credit nature, are recorded in the books. This system of accounting is based on accrual concept, which states that revenue is recognized when it is earned and expense is recognized when obligation of payment arises.
      • Mixed System: Mixed system is modified form of pure-cash-basis accounting. Because of the fact that pure cash basis would result in balance sheet and income statement with limited use, it necessitates the need of mixed accounting in which some items (especially sales and period costs are treated on cash basis and some items (especially product costs and long-lived assets) are treated on accrual basis.

    7. Question 7. What Is Financial Accounting ?

      Answer :

      Financial or traditional accounting consists of the classification, recording, and analysis of the transactions of a business in a subjective manner according to the nature of expenditure so as to enable the presentation at periodic intervals, of statements of profit or loss of the business and, on a specified date, of its financial state of affairs.

    8. Question 8. What Is Management Accounting ?

      Answer :

      Management accounting includes all those accounting services by means of which assistance is rendered to the management at all levels, in formulation of policy, fixation of plans, control of their execution, and measurement of performance. Management accounting is primarily concerned with the supply of information which is useful to the management in decision making for the efficient running of the business and thus, in maximizing profit.

    9. Question 9. What Is Social Responsibility Accounting ?

      Answer :

      Social responsibility accounting is a new phase in the development of accounting and owes its birth to increasing social awareness, which has been particularly noticeable over the last two decades or so. Social responsibility accounting widens the scope of accounting by considering the social effects of business decisions, in addition to the economic effects. The role of business in society is increasingly coming under greater scrutiny.

    10. Question 10. What Is Human Resource Accounting ?

      Answer :

      It is another new field of accounting which seeks to report and emphasize the importance of human resources in a company's earnings. It is based on the fact that the only real long lasting asset which an organization possesses is the quality of the people working in it. This system of accounting is concerned with " the process of identifying and measuring data about human resources and communicating this information to interested parties."

    11. Question 11. How Does Management Accounting Differs From Financial Accounting?

      Answer :

      Financial or traditional accounting consists of the classification, recording, and analysis of the transactions of a business in a subjective manner according to the nature of expenditure so as to enable the presentation at periodic intervals, of statements of profit or loss of the business and, on a specified date, of its financial state of affairs. The day-to-day transactions journalized or recorded in subsidiary books are posted in the various ledgers and at the end of the accounting period, a Profit and Loss Account and a Balance Sheet are prepared.

    12. Question 12. What Is The Difference Between Expenses And Expenditure?

      Answer :

      Expense is the outflow from a profit oriented organization while expenditure is the outflow from non-profit organization.

    13. Question 13. What Are Differences Between Financial Accounting And Management Accounting?

      Answer :

      Financial Accounting: Financial accounting depicts the past position of the concern, while management accounting stresses at future. Financial accounting is mandatory for all joint stock companies and business organizations but this is not the case with management accounting.

      Management Accounting: Management accounting provides data to managers to help them in making decisions about the future. To the contrary, financial accounting aims at meeting the requirements of outside parties who have financial stake in the business.

    14. Question 14. Discuss The Role Of Accountants In Modern Business Organization?

      Answer :

      Role of Accountants in Modern Business Organization:

      • Writing up Accounts for Preparing Financial Statements
      • Audit of Accounts
      • Role as Management Accountant
      • Help to government, Revenue Department and Tax Payer
      • Role as Cost Accountant
      • Role in Merger, Liquidation

    15. Question 15. Write A Short Note On Finance Officer?

      Answer :

      Finance is the life blood of business. Procuring financial resources and their judicious utilization are the two important activities of financial management which is a specialized function. The finance manager has to strike a balance between the current needs of the enterprise for cash and the needs of the shareholders for adequate return. Often finance manager and controller are inter-changeable terms and only one of these two positions may be found in a company.

    16. Question 16. What Do You Mean By Basic Accounting Concepts?

      Answer :

      Accounting has come to present status after a period of several hundred years. During this period certain accounting assumptions, concepts and conventions have emerged. Accountants universally in the recording, classification, summarization and reporting of the transactions follow these. Accounting assumptions, concepts and conventions are called Generally Accepted Accounting Principles (GAAP) since they have been commonly accepted by professional accounting world as general guidelines for preparing financial statements and reports.

    17. Question 17. List The Basic Accounting Concepts?

      Answer :

      The Institute of Chartered Accountants of India in its Accounting Standard-I (AS-I) has stated that going concern, accrual and consistency are fundamental accounting assumptions. For the sake of convenience all accounting concepts are discussed under two headings:

      • Basic accounting concepts.
      • Accounting concepts related to income measurement.

    18. Question 18. What Are Basic Accounting Concepts?

      Answer :

      Basic Accounting Concepts are:

      • Entity Concept.
      • Money Measurement Concept.
      • Going Concern Concept.
      • Cost Concept.
      • Dual Aspect Concept.
      • Full Disclosure Concept.
      • Objectivity Concept.
      • Accrual Concept.

    19. Question 19. What Are Accounting Concepts Related To Income Measurement?

      Answer :

      Accounting concepts related to income measurement are:

      • The Time Period Concept (Periodicity Concept).
      • The Revenue Recognition (Realization) Concept.
      • The Matching Concept.
      • The Materiality Concept.
      • The Consistency Concept.
      • The Conservatism (Prudence) Concept.

    20. Question 20. Discuss The Importance Of Setting Accounting Standards?

      Answer :

      Following is the importance of accounting standards:

      • Standards reduce or eliminate all together confusing variations in the accounting treatment used to prepare financial statements.
      • With different companies following same standards, comparison of their financial policies and financial results becomes easier.
      • Accounting standards take care of valuing inventories, contingencies, construction contracts, fixed costs, etc. They cover all aspects of financial activities of company.
      • The standards help the investors for taking decision on investment.
      • Setting standards is useful to both the company & and the investor.

    21. Question 21. What Are The Purposes Of Accounting Information?

      Answer :

      Score Keeping:
      The score-keeping function is one the primary purposes of accounting information. It basically deals with the financial health of the enterprise.

      Attention Directing :
      Attention directing is nothing but the process of giving a signal to the user of accounting information about the need to take a decision. As such the accounting information supplied  the user’s attention to take decision.

      Problem Solving:
      The problem solving function of accounting information involves provisions of such information, which enables the manager to find solutions to the problems.

    22. Question 22. What Are The Uses Of Earnings Information?

      Answer :

      • Accomplishments.
      • Appropriation Decision.
      • Problem Identification Using Earning Data.
      • Determining the Market Value of a Firm.

    23. Question 23. What Is A Balance Sheet?

      Answer :

      After ascertaining the profit or loss of the business, the businessman wants to know the financial position of his business. For this purpose he prepares a statement of Assets and Liabilities, which is called Balance Sheet. 

    24. Question 24. What Are The Objectives Of Preparing Balance Sheet?

      Answer :

      Principal Objective:
      The main purpose of preparing balance sheet is to know the financial position of the business at a particular date.
       Subsidiary Objectives:
      Though the main aim is to know the exact financial position of the firm at a particular date, yet it serves other purpose as well.

      • It gives information about the actual and real owner’s equity. Though the capital of the owner indicates owner’s equity, yet some other liabilities are to be accounted for against it also.
      • It helps the firm to make provisions against possible future losses. A provision is made in the form of the Reserves.

    25. Question 25. Explain Its Characteristics Of Balance Sheet?

      Answer :

      The Balance Sheet as distinct from other financial statements has the following characteristics:

      • It is a statement and not an account. Although balance sheet is a part of the final accounts and prepared with the help of accounts, yet it is not an account but a statement.
      • It is always prepared on a particular date, and thus shows the position at that date and not for a period.
      • It has no debit side and credit side. Nor the words ‘To’ and ‘By’ are used before the names of the accounts shown therein. The headings are Liabilities and Assets.
      • It shows the financial position of the business concern.
      • It shows what the firm owes to others and also what others owe to the firm.
      • The totals of Liabilities and Assets always are equal.

    26. Question 26. Write A Short Note On Uses Of Balance Sheet?

      Answer :

      • It shows the financial position of the business concern.
      • It shows what the firm owes to others and also what others owe to the firm.
      • It shows the nature and value of the assets.
      • It also reflects the liquidity of a firm.



Topic: Accounts And Finance For Managers Interview Questions
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