Accounting:
What do you mean by break even analysis?
In business, it's when your profit matches the amount of money spent, thus bringing one
to the point where he or she starts making money.
What are fixed costs, variable costs?
Fixed cost which remains fixed despite increase in production up to a given level like
rent, insurance etc.
Variable cost which varies with production like raw material, direct labour etc.More the
production more the variable cost.
Ask for the account types: E.g.: 6XXXX - Liability, 9- fund balance, 8-revenue, 3-
payroll expenses etc..
-What are individuals or org that we owe amounts to a business known as?
Ans: Debtor
-Vans bought on credit from Mr.X. What is debited?
Ans: Vans a/c. Vans are debited because they are an asset. You are not buying it for
resale so it cannot be written as purchases.
-Usually, what asset account in a company's ledger is the most liquid?
Ans: Cash. An account increases in liquidity the easier it is to turn into cash.
What is Earning per share? How is calculated?
Earnings per share (EPS) are the earnings returned on the initial investment amount.
EPS (Basic Formula) = Profit / Weighted Average Common Shares
How is closing stock calculated?
The formula is opening Stock + Purchases - Sales = Closing stock
Closing stock is an asset. It has to appear in the P & L a/c as well as in the B/s as an asset.
How is net profit calculated?
Sales
Less- Cost of Goods sold
Selling and administrative expenses
Depreciation
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Earnings before Interest and taxes(EBIT)
Less- Interest
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Earnings after Interest
less- Taxes
----------------
Net Income.
What is the difference between gross profit & net profit?
Gross profit-EBIT, net profit-EAIT
Do all assets have to be depreciated?
Depreciation is a permanent fall in value of assets, caused by wear and tear (usage) and
Passage of time (ageing). Buildings, machines, furniture etc. depreciate because of the
reasons mentioned above. But land will not lose its value by usage or ageing. Therefore,
land does not at all depreciate.
The proper sequence for the accounting cycle is?
Analyze, journalize, post, adjust, prepare statements, close. First the info is analysed,
then it is journalized in the general journal. Next, the journal entries are posted to the
corresponding accounts. Then, any adjustments for the period are made before the
financial statements are prepared. The last step is to close all the temporary account
at/after the end of the period.
If a mistake is made in a journal entry, two correcting entries are required to fix it? True
or false
Ans: False, You can use two entries to fix it, but two are not required. The entry can
usually be fixed with one entry, or a compound entry.
To debit an account means to add to it? True or false?
Ans: False, Only if the normal balance of an account is debit. If the normal balance of an
account is credit, you deduct.
The owner of a business adds more money into the business. What is credited?
Ans: Capital a/c. Capital is an initial investment in a business. It can be in the form of
money, machinery or other equipment.
Golden accounting rules
Examples of journal entries
a. credit transaction - purchase / sale / discounts
b. provision for bad debts
c. goods lost by fire
Difference between P&l & balance sheet
Trial balance & p&l entries
Different methods of depreciation-straight line method, reducing balance, annuity
Difference between provision, reserve & accruals
Diff between shares & debentures
BRS- bank reconciliation statement
Diff methods of inventory valuation-FIFO, LIFO, weighted avg method
Accounting principles & concepts- matching concept, conservatism
Examples of accounting entries:
Purchase & Sale of goods
Dr. Purchase A/c
Cr. Cash A/c (cash purchase)
Cr. Sundry Creditors (credit purchase)
Cr. Discount received (in case of discount)
Dr. Cash A/c (cash sales)
Dr. Sundry Debtors (credit sales)
Dr. Discount paid (in case of discount)
Cr. Sale A/c
Bank reconciliation entries
Payment made:
Dr. Sundry Creditors
Cr. Bank A/c
Payment received
Dr. Bank A/c
Cr. Sundry Debtors
Interest received
Dr. Bank A/c
Cr. Interest received
Interest Paid
Dr. Interest Paid
Cr. Bank A/c
Bookings that form part of BRS
In Bank not in GL
Interest recd/paid in bank statement
Bank Charges in bank statement
Money received but not accounted in books
In GL but not in Bank
Chq deposited but not cleared
Chq issued but not deposited
Bad debts entries
Dr. Bad debts A/c
Cr. Sundry Debtors A/c
Reserve for Bad debts
Dr. Reserve for Bad debts A/c
Cr. Sundry Debtors A/c
Goods loss in Fire (with/without insurance)
Dr. Goods loss in fire A/c
Dr. Insurance A/c (if there is an insurance claim made/approved)
Cr. Stock/Goods A/c
What are Cash Book and Pass Book?
Answer: Cash book is the book contains of all records of cash trancation whereas the
pass book is a book contains all our transaction with bank
What is meant by Deferred Revenue Expenditure?
Answer: Deferred revenue expenditure is that where the benefit the expenditure can be
had for more than ONE accounting period and less than FIVE accounting periods. There
are no hard and fast rules that the period is linted to 1 - 5. It is just an assumption.
What is reconciliation?
Latest Answer: Reconciliation statement is a statement where we reconcile the statement
with pass book and cash book. In other words its the detection of an errors but not
rectification of errors.
What are the three golden rules of accounts?
Nominal, personal, real
Answer: Personal accounts --> Debit the benefit receiver, credit the benefit giver Real
accounts --> Debit what comes in, credit what goes out Nominal Accounts --> Debit all
expenses and losses, credit all incomes and gains
What is an accrual?
A provision of costs.
What is the Difference between Single Entry system & Double entry system?
Answer: Single Entry is an incomplete record of book keeping Whereas Double Entry is
a complete record of book keeping.
What is the difference between nominal, real and personal accounts?
Answer: Nominal a/c is related with expense/losses & income/gain where real a/c is
with asset (cash, building, goodwill etc)/accounts of properties/ possessions of the
businessman. And personal a/c's are account of individuals, firms, ltd companies, local
authorities,
What is a Suspense Account?
Which is used to temporarily set the accounts having doubtful receipts and
disbursements. Its an account in general ledger in which amounts are temporarily
recorded for pending discrepancies
What are bills receivable?
Answer: BIILS RECEIVABLE IS AN CURRENT ASSET TO THE BUSINESS, WHEN
V SELL TO ANY CUSTOMER IF HE CANT PAY THE AMT V GIVE HIM A
DOCUMENT ASKING HIM TO PAYING WITHIN A SPECIIFIED TIME.EXAMPLE
: MR.X SOLD GOODS TO MR.Y FOR RS.10000/- AND MR.Y IS NOT IN A
POSITION
What is deferred account?
Answer: Deferred Account is something that is not realized in a business. Like in
Installment sales unrealized g.p consist of profit that is on overall installments while
realized is on installment collected. Hence after installments are collected than the
remaining
What is debit and credit from the banks point of view?
Credit what comes in
Debit what goes out
What steps would you take before approving an invoice for payment?
Before making payment
the following steps should be taken
1. Invoice amt, date, qty, quy,
2. Invoice duplication or not
3. Rectification of any Errors in invoice
What is account payable? How we pass the entries in account payable and related
the entire question based on account payable?
Account payable is the outstanding balance that we must pay to the third party or
suppliers. It's a process by which a company buys goods and services on credit and
is billed in the form of an invoice.
