Guide #15Finance, Accounting & Banking 25 min read Updated: September 2026

Accounting Interview Questions: Complete Guide from Basics to Advanced Concepts

An exhaustive accounting masterclass for commerce graduates, accountants, and auditors: Double-entry bookkeeping, adjusting journal entries, 3-statement reconciliation, and GAAP/Ind AS standards.

Accounting interviews evaluate fundamental command over the golden rules of double-entry bookkeeping, adjusting accruals, depreciation schedules, revenue recognition standards, and balance sheet reconciliation. This guide equips candidates with clear principles, worked journal entries, and step-by-step accounting scenarios.

Target Audience: Commerce students, B.Com/M.Com graduates, CA/CPA aspirants, entry-level staff accountants, and audit/tax professionals.

Pillar: Consulting, Finance & Strategy Pillar →

What You'll Learn in This Masterclass

The 3 Golden Rules of Accounting: Real, Personal, and Nominal accounts with debit/credit mechanics.

The Complete Accounting Cycle: Source documents -> Journal entries -> General Ledger -> Trial Balance -> Financial Statements.

Accrual vs Cash Basis: Adjusting entries for accrued revenue, unearned revenue, prepaid expenses, and accrued expenses.

Depreciation & Amortization: Straight-Line Method (SLM) vs Written Down Value (WDV) and tax implications.

Inventory Valuation: First-In-First-Out (FIFO) vs Weighted Average Cost vs LIFO under rising and falling price regimes.

Bank Reconciliation Statement (BRS): Timing differences, unpresented cheques, direct debits, and dishonored instruments.

The Golden Rules of Accounting & Account Classifications

Account Type	Nature / Items Included	Golden Rule of Debit & Credit	Real-World Example Entry
Real Accounts	Tangible & intangible assets (Cash, Machinery, Building, Patents)	Debit what comes in, Credit what goes out	Purchase machinery for cash: Debit Machinery A/c, Credit Cash A/c
Personal Accounts	Individuals, companies, creditors, debtors, bank	Debit the receiver, Credit the giver	Paid cash to vendor ABC Ltd: Debit ABC Ltd A/c, Credit Cash A/c
Nominal Accounts	Expenses, losses, incomes, and gains (Rent, Salary, Interest)	Debit all expenses and losses, Credit all incomes and gains	Paid office rent: Debit Rent Expense A/c, Credit Cash/Bank A/c
Valuation Accounts	Contra accounts that offset assets (Accumulated Depreciation)	Credits increase the contra balance, Debits decrease it	Record annual depreciation: Debit Depreciation Expense, Credit Accumulated Depreciation

Visual Architecture & Process Diagrams

The End-to-End Accounting Cycle FlowchartArchitecture Blueprint

The chronological stages of corporate accounting from business transaction recording to final balance sheet closing.

1. Accrual Accounting vs Cash Accounting & The Matching Principle

Under the Matching Principle (Accrual Basis), revenues must be recognized in the period they are earned, and associated expenses must be recognized in the same period in which they helped generate that revenue, regardless of when cash changes hands.

4 Essential Adjusting Entries at Month-End:

1
Accrued Revenue: Services delivered but unbilled -> Debit Accounts Receivable / Accrued Revenue, Credit Service Revenue.
2
Unearned / Deferred Revenue: Cash received before service delivery -> Debit Cash, Credit Deferred Revenue (Liability). When service is performed: Debit Deferred Revenue, Credit Revenue.
3
Prepaid Expenses: Cash paid in advance for future benefits (e.g. insurance) -> Debit Prepaid Insurance (Asset), Credit Cash. When consumed: Debit Insurance Expense, Credit Prepaid Insurance.
4
Accrued Expenses: Incurred costs not yet invoiced or paid -> Debit Salaries Expense, Credit Salaries Payable (Liability).

2. Depreciation Mechanics: Straight-Line (SLM) vs Written Down Value (WDV)

Depreciation is the systematic allocation of the cost of a tangible fixed asset over its estimated useful economic life.

Straight-Line Method (SLM): Fixed equal depreciation charge each year: Depreciation = (Cost - Salvage Value) / Useful Life. Used widely for financial reporting under US GAAP.
Written Down Value (WDV / Diminishing Balance): Applies a fixed percentage rate to the declining net book value of the asset each year. Depreciation charges are heavy in early years and decline over time. Preferred for tax calculations under Indian Income Tax Act because it matches maintenance cost curves.

High-Frequency Interview Questions & Frameworks

What is a Deferred Tax Asset (DTA) and Deferred Tax Liability (DTL)? Give a real-world example of how each is created.

What the Interviewer is Testing:Tax accounting principles, temporary vs permanent timing differences between accounting books (P&L) and tax returns.

Strategic Approach:1. Define the origin: Temporary timing differences between book income and taxable income. 2. Define DTL: Book income > Taxable income in current year (paying less tax now, will pay more tax later). 3. Define DTA: Taxable income > Book income in current year (paying more tax now, will pay less tax in the future).

Answer Framework:Origin of Temporary Differences -> DTL Mechanics with Example (Accelerated Depreciation) -> DTA Mechanics with Example (Provisions / Bad Debts).

Sample Model Answer:

Deferred taxes arise due to temporary timing differences between accounting profit (calculated under financial standards like GAAP/Ind AS) and taxable profit (calculated under statutory tax laws). A Deferred Tax Liability (DTL) is created when accounting income is greater than taxable income in the current period, meaning the company owes more tax in future years. A classic example is when tax laws allow accelerated tax depreciation while financial statements use straight-line depreciation: taxable income is lower today (lower cash taxes paid now), creating a DTL on the balance sheet. Conversely, a Deferred Tax Asset (DTA) is created when taxable income is greater than accounting income in the current period, resulting in prepayment of tax that will reduce future tax liability. A common example is when a company books a provision for doubtful debts or warranties in its P&L (reducing accounting profit), but tax authorities do not allow the deduction until the debt is actually written off, creating a DTA.

Common Mistake: Confusing temporary timing differences with permanent differences (like non-deductible fines or penalties, which do not create DTAs or DTLs).

How to Personalize: Mention reconciling statutory tax rates to effective tax rates in corporate tax audit engagements.

Explain the purpose of a Bank Reconciliation Statement (BRS). What are the common causes of discrepancy between a company cash book and a bank statement?

What the Interviewer is Testing:Internal controls, cash ledger management, timing differences, and auditing procedures.

Strategic Approach:Define BRS as a control schedule reconciling the bank balance in the company’s internal cash book with the external bank statement balance. Categorize discrepancies into Timing Differences and Errors/Direct Transactions.

Answer Framework:Definition & Purpose -> Timing Differences -> Direct Transactions by Bank -> Errors & Remediation.

Sample Model Answer:

A Bank Reconciliation Statement (BRS) is an essential internal control schedule prepared periodically to explain and reconcile the differences between the cash book balance (bank column) maintained by the company and the balance reported on the bank statement. Common causes of discrepancies include: 1. Cheques issued by the company but not yet presented to the bank for payment (Cash book balance is lower than bank statement). 2. Cheques deposited into the bank but not yet cleared/collected (Cash book balance is higher than bank statement). 3. Direct charges debited by the bank (bank fees, interest charges, overdraft interest) not yet recorded in the company’s cash book. 4. Direct deposits by customers or automated standing orders credited by the bank. 5. Dishonored cheques and clerical recording errors by either the company accountant or the bank.

Common Mistake: Assuming a discrepancy automatically indicates fraud, without first checking unpresented cheques and uncleared deposits.

How to Personalize: Share your experience running automated or manual monthly bank reconciliations in ERP systems like SAP, Tally, or NetSuite.

Costly Mistakes to Avoid

✕
Debiting when an account should be credited, especially confusing expenses with liabilities.
✕
Treating deferred revenue as an income statement line item instead of a balance sheet liability.
✕
Failing to record accrued expenses at month-end closing, overstating net profit.
✕
Ignoring the salvage value when calculating straight-line depreciation.
✕
Confusing LIFO and FIFO inventory impact during periods of inflation (FIFO yields higher reported net income under inflation).

Key Takeaways

•Every financial transaction has equal and opposite debit and credit entries; the trial balance must balance.
•Accrual accounting reflects economic reality by matching expenses to the revenues they help generate.
•Depreciation is a non-cash allocation of asset cost that creates a real cash savings via interest and tax shields.
•Bank reconciliation is the first line of defense against cash leakage and clerical accounting errors.

Final Interview Checklist

Memorize the 3 Golden Rules of Accounting and be able to journalize complex transactions instantly.
Understand the difference between revenue expenditures and capital expenditures.
Explain how FIFO, LIFO, and Weighted Average inventory methods impact Gross Profit during inflation.
Know the 4 month-end adjusting journal entry templates (Accrued Revenue, Unearned Revenue, Prepaid Expense, Accrued Expense).
Understand how provisions (e.g. Provision for Doubtful Debts) affect P&L and Balance Sheet.
Prepare to explain bank reconciliation adjustments clearly on paper.

Frequently Asked Questions (FAQs)

What is the difference between accounts payable and accounts receivable?

Accounts Receivable (AR) is a Current Asset representing money owed to the company by customers for goods or services delivered on credit. Accounts Payable (AP) is a Current Liability representing money the company owes to vendors and suppliers for goods or services purchased on credit.

What is the difference between capital expenditure (Capex) and revenue expenditure (Opex)?

Capex provides economic benefits extending beyond the current accounting year (purchasing buildings, machinery, patents), is capitalized on the Balance Sheet as a fixed asset, and depreciated over time. Opex reflects day-to-day operational costs consumed within the current period (rent, electricity, salaries) and is expensed immediately on the Income Statement.

What is a contra account?

A contra account is an account on the balance sheet that offsets the balance of a related primary asset or liability account, carrying a normal balance opposite to its paired account. Examples include Accumulated Depreciation (contra-asset offsetting PP&E) and Allowance for Doubtful Accounts (contra-asset offsetting Accounts Receivable).

Why does a trial balance agree even when errors exist?

A trial balance only verifies that total debits equal total credits. It will still balance despite: 1. Errors of Omission (transaction completely omitted). 2. Errors of Commission (correct amount posted to wrong account of same type). 3. Errors of Principle (capital expense recorded as revenue expense). 4. Compensating Errors (two independent errors accidentally cancelling each other).

What is the difference between FIFO and LIFO inventory methods under inflation?

Under rising prices (inflation): FIFO (First-In, First-Out) assumes oldest, cheaper inventory is sold first, resulting in lower COGS, higher reported net income, and higher ending inventory on the balance sheet. LIFO (Last-In, First-Out) assumes newest, costlier inventory is sold first, resulting in higher COGS, lower reported net income, and lower taxes.

What is the difference between bad debts and provision for doubtful debts?

Bad debts represent customer receivables confirmed to be permanently uncollectible and written off immediately as an actual loss (Debit Bad Debts Expense, Credit Accounts Receivable). Provision for doubtful debts is an estimated allowance set aside based on historical non-payment probabilities for debts that might default in the future.

What is the substance over form principle in accounting?

The substance over form principle states that transactions and financial events must be accounted for and presented in accordance with their economic reality and commercial substance, rather than merely their legal form (e.g., financial leases where the lessee records the asset on its balance sheet despite not having legal title).

What is the difference between Indian GAAP, Ind AS, and IFRS?

Indian GAAP consists of traditional Indian Accounting Standards based on historical cost accounting. Ind AS (Indian Accounting Standards) are converged with International Financial Reporting Standards (IFRS), incorporating fair-value accounting, comprehensive disclosure norms, and uniform principles for international comparability.

Authoritative References & Standards

Institute of Chartered Accountants of India (ICAI) - Accounting Standards

The official statutory regulatory authority governing accounting principles and auditing standards in India.

IFRS Foundation - International Financial Reporting Standards

Global accounting standards for transparency, accountability, and financial statement integrity.

All journal entries, account classifications, and reconciliation methods conform strictly to standard double-entry bookkeeping and Ind AS/IFRS guidelines. Read our complete Disclaimer Policy.