Accountant interview questions and answers

Under the cash basis, income and expenses are recorded only when cash is received or paid. Under the accrual basis, they're recorded when they are earned or incurred, whatever the date of payment. So March's electricity bill paid in April is a March expense under accrual, and an April expense under cash.

Section 128 of the Companies Act, 2013 requires companies to keep their books on the accrual basis and the double entry system. The cash basis is mostly used by very small businesses and some professionals because it's simpler. Accrual gives a truer profit for the period, because it matches income with the expenses that earned it.

They depend on the type of account. For a personal account (a person, firm or bank): debit the receiver, credit the giver. For a real account (assets such as cash, furniture or machinery): debit what comes in, credit what goes out. For a nominal account (expenses, losses, incomes and gains): debit all expenses and losses, credit all incomes and gains.

Example: paying rent of ₹15,000 in cash. Rent is a nominal account and an expense, so debit Rent; cash is real and going out, so credit Cash. Buying furniture on credit from Sharma Furniture: debit Furniture (it comes in), credit Sharma Furniture (the giver). Interviewers often ask you to classify the accounts first, so practise that step.

They are the assumptions behind every set of accounts. Going concern: we assume the business will keep running, so assets are shown at cost less depreciation, not at what they would fetch in a closing-down sale. Consistency: once you choose a method, such as straight-line depreciation, you keep using it so that years can be compared, and you disclose any change. Prudence: recognise expected losses early, but don't record income until it's reasonably certain, as with a provision for doubtful debts. Matching: expenses are recorded in the same period as the income they helped earn. Materiality: small items, like a stapler, can be expensed rather than capitalised.

Give a practical example for each rather than definitions alone.

Ind AS are the Indian Accounting Standards converged with IFRS, notified by the Ministry of Corporate Affairs under the Companies (Indian Accounting Standards) Rules, 2015. They apply to listed companies, unlisted companies above the net-worth thresholds in those rules, and their holding, subsidiary, joint venture and associate companies; other companies follow the older Accounting Standards (AS). For banks and insurers, the regulators decide.

In practice, the big changes are more fair-value measurement of financial instruments, other comprehensive income, Ind AS 115 for revenue from contracts with customers, Ind AS 116 bringing most leases onto the balance sheet as right-of-use assets and lease liabilities, and expected credit loss provisions on receivables under Ind AS 109. Talk about the ones you've actually worked on.

On purchase: Purchases A/c Dr ₹20,000, To Ravi Traders A/c ₹20,000. Purchases is a nominal account, and Ravi Traders, the giver, is credited.

On payment: Ravi Traders A/c Dr ₹20,000, To Bank A/c ₹19,600, To Discount Received A/c ₹400. Ravi Traders is debited with the full amount because the whole liability is settled; the bank pays only ₹19,600, and the ₹400 cash discount is an income. A trade discount, by contrast, is never recorded separately: you book the purchase at the net price. Interviewers often add GST to this: then input CGST and SGST (or IGST) are debited separately at the time of purchase, and Ravi Traders is credited with the invoice total.

A trial balance lists every ledger account's closing balance, debits in one column and credits in the other, to check the arithmetical accuracy of the books. If the totals agree, every entry has been posted with equal debits and credits.

But agreement doesn't prove the books are right. It won't reveal errors of omission (an entry missed completely), errors of commission (the right amount posted to the wrong account of the same type, like Ramesh instead of Rakesh), errors of principle (capital expenditure booked as revenue, such as a new machine debited to Repairs), compensating errors that cancel each other out, and errors in the original entry (a wrong amount entered on both sides). That's why accountants also review ledgers and reconcile balances.

Adjusting entries bring the books onto the accrual basis before the statements are prepared. The common ones: outstanding expenses (Salary A/c Dr, To Salary Payable A/c for March salary paid in April); prepaid expenses (Prepaid Insurance A/c Dr, To Insurance A/c for the part of an annual premium that belongs to next year); accrued income (Interest Receivable A/c Dr, To Interest Income A/c); income received in advance; depreciation; provision for doubtful debts; and closing stock.

In practice I work from a month-end checklist: accruals for bills not yet received, the depreciation run, provisions and inter-company balances, so nothing is missed and every month is comparable. Describe the close you've actually done.

First park the difference in a suspense account so work can continue, then trace it in a fixed order. Recheck the trial balance totals, and that every ledger is included with its balance on the correct side. Halve the difference: a ₹4,500 balance placed on the wrong side creates a ₹9,000 difference, so look for an item of ₹4,500. Check whether an entry of ₹9,000 itself was posted on one side only. And because the difference is divisible by 9, suspect a transposition of digits, such as ₹12,000 posted as ₹21,000.

Then check the totals of the subsidiary books and their postings. In Tally this is rarer, since every voucher balances, so look at opening balances and imported data instead.

The profit and loss statement shows performance over a period: revenue, expenses and the profit or loss for, say, the year ending 31 March. The balance sheet is a snapshot on one date: what the company owns (assets), what it owes (liabilities) and the owners' funds (equity). It always balances, because assets equal liabilities plus equity.

They're connected through equity: the year's profit is added to reserves and surplus on the balance sheet, less any dividends. Depreciation charged in the profit and loss statement also reduces the value of fixed assets on the balance sheet. Companies prepare both in the format given in Schedule III of the Companies Act, 2013.

Profit is calculated on the accrual basis, while cash depends on when money actually comes in and goes out. A company can book large credit sales and show a profit while its customers haven't paid yet; it may also be building stock, repaying loans or buying machinery, none of which reduces profit in full.

The cash flow statement explains the year's change in cash in three parts: operating activities (cash from the core business), investing activities (buying and selling fixed assets and investments) and financing activities (borrowing, repaying loans, issuing shares, paying dividends). It's prepared under Ind AS 7, or AS 3 for other companies. A healthy business generates positive operating cash flow over time; profit without it deserves questions.

Start with profit before tax, then remove non-cash and non-operating items: add back depreciation and amortisation, add back finance costs (usually shown under financing), subtract interest and dividend income (shown under investing), and adjust for any profit or loss on selling assets. That gives operating profit before working capital changes.

Then adjust for working capital: an increase in trade receivables or inventory uses cash, so subtract it; an increase in trade payables or other current liabilities adds cash. Finally, subtract the income tax actually paid. For example, if receivables rose by ₹5 lakh in the year, operating cash flow is ₹5 lakh lower than profit suggests. Always check that the final change in cash agrees with the balance sheet.

The notes explain and break down the numbers: significant accounting policies, details of items such as borrowings, the ageing of trade receivables and payables, fixed assets, related party transactions, contingent liabilities and commitments, and the other disclosures Schedule III and the standards require.

A provision is recognised in the books when there's a present obligation from a past event, an outflow of money is probable, and the amount can be estimated reliably, such as a warranty provision. A contingent liability is only disclosed in the notes: the obligation is possible but not certain, or the outflow isn't probable, or it can't be measured reliably, like a tax demand the company is contesting with a strong case. This comes from Ind AS 37, or AS 29 for other companies.

GST is split according to where the supply takes place. When the supplier's location and the place of supply are in the same state, it's an intra-state supply, and the tax is charged as CGST (for the Centre) and SGST (for the state) in equal halves, or UTGST in a union territory without its own legislature. When they're in different states, and for imports, it's an inter-state supply and IGST is charged, collected by the Centre and shared with the destination state.

Example: a Hyderabad supplier selling to a customer in Telangana charges CGST and SGST; selling to a customer in Bengaluru, it charges IGST. Getting this wrong is costly: tax paid under the wrong head must be paid again under the right one, and the first payment claimed back as a refund.

Input tax credit is the GST paid on purchases used for the business, which can be set off against the GST payable on sales, so tax is paid only on the value added. Under Section 16 of the CGST Act, you can claim it only if you hold a valid tax invoice or debit note, you've received the goods or services, the supplier has reported the invoice so it appears in your GSTR-2B, the supplier has actually paid the tax, and you've filed your own return. You must also pay the supplier within 180 days of the invoice date, or reverse the credit until you do.

Some credit is blocked under Section 17(5), such as food and beverages, club memberships and most passenger cars.

GSTR-1 is the return of outward supplies: invoice-level details of sales, credit notes and debit notes, filed monthly, or quarterly by small taxpayers under the QRMP scheme. It's what feeds your customers' input tax credit. GSTR-3B is the summary return in which you declare the tax on your outward supplies, claim input tax credit and pay the net tax, in cash or from the credit ledger. GSTR-2B isn't filed by you: it's an auto-drafted monthly statement of the input tax credit available from what your suppliers reported.

The annual return is GSTR-9, with the GSTR-9C reconciliation statement for larger taxpayers. Before filing, reconcile GSTR-1 with the sales register and your credit claim with GSTR-2B, because differences lead to notices.

Credit can be claimed only if it appears in GSTR-2B, so reconcile invoice by invoice, matching supplier GSTIN, invoice number and amount. The usual reasons: the supplier hasn't filed GSTR-1 yet, filed it with the wrong GSTIN or invoice number, reported it in a later month, or showed it as a B2C sale. Sometimes the error is ours, such as a wrong entry or a duplicate.

Claim only what appears in GSTR-2B now, keep a list of the rest, and follow up with each supplier to file or amend, with the purchase team holding back payment if needed. Claim each invoice in the month it appears, within the Section 16(4) time limit, and correct our own errors in the books.

E-invoicing means reporting each B2B invoice, export invoice and credit or debit note to the government's Invoice Registration Portal when issuing it. The portal validates it and returns a unique Invoice Reference Number (IRN) and a signed QR code, which must be printed on the invoice; for businesses covered, an invoice without an IRN isn't valid. It applies once a business's aggregate turnover crosses the threshold the government notifies, which has been lowered in stages, so check the current limit.

In practice the accounting software, such as Tally Prime, sends the invoice data and receives the IRN. The details then flow into GSTR-1 automatically, and the e-way bill can be generated from the same data, which reduces mismatches. An IRN can be cancelled only within 24 hours.

The main ones: Contra (F4) for transfers between cash and bank, like depositing cash or withdrawing it; Payment (F5) for money paid out; Receipt (F6) for money received; Journal (F7) for adjustments and non-cash entries such as depreciation; Sales (F8) and Purchase (F9) for invoices. Credit Note and Debit Note are used for sales returns, purchase returns and price corrections; they and other types, such as Memorandum or Stock Journal, are in the voucher type list (F10, Other Vouchers).

A common follow-up is which voucher to use for withdrawing cash from the bank: Contra, since both sides are cash or bank accounts. And a credit purchase of goods goes in a Purchase voucher, not a Journal.

A ledger is an individual account where transactions are posted, such as Rent or ABC Traders. A group is a category of ledgers that decides where they appear in the balance sheet or profit and loss account. Tally comes with 28 predefined groups, 15 primary groups and 13 sub-groups, and you can create your own under them.

Rent goes under Indirect Expenses; a bank term loan under Secured Loans, and an overdraft under Bank OD A/c, both within Loans (Liability); a customer under Sundry Debtors, with bill-wise details on to track each invoice; and output CGST, SGST and IGST under Duties & Taxes, with the type of duty set to GST. A wrong group puts the figure in the wrong place in every report.

Enable GST in the company features (F11) and enter the GSTIN, state and registration type. Set the GST rate and HSN or SAC code on stock items or ledgers, enter each party's GSTIN and state, and create CGST, SGST and IGST ledgers under Duties & Taxes. Tally then calculates the tax on each invoice.

Before filing, open the GSTR-1 and GSTR-3B reports and clear the uncertain transactions, where Tally lists vouchers with a missing HSN, a wrong GSTIN, or a mismatched state or rate. Reconcile purchases with GSTR-2B, which Tally Prime can import, and resolve the mismatches. Then export the return for the portal, or upload it directly if you use connected GST. Finally, compare the totals with the sales and purchase registers.

For receivables, the Outstandings reports: Receivables for all customers, or Ledger Outstandings for one party. With bill-wise details maintained, they show each pending invoice, its due date and how many days it's overdue, and you can view the ageing in periods such as 0-30, 31-60, 61-90 and over 90 days. For today's work, the Day Book lists every voucher entered for the date, so you can check it before closing.

Other reports I check regularly: the Trial Balance, Balance Sheet and Profit & Loss, the cash and bank books, the Stock Summary, and Ratio Analysis for a quick view of working capital. Say that outstanding reports are only as good as the bill-wise entries behind them.

A bank reconciliation statement explains the difference between the bank balance in our cash book and the balance in the bank statement on the same date, and confirms that both are correct. Differences come from timing and from information one side doesn't have yet. Cheques issued but not yet presented for payment, and cheques deposited but not yet cleared, are in our books but not yet in the bank's. Bank charges, interest credited, direct NEFT or UPI receipts from customers, and auto-debits such as loan EMIs are in the bank's records but not yet in ours. And there can be errors on either side.

It's usually done monthly, and more often for busy accounts, so that errors and frauds are found early.

Start from the cash book balance of ₹50,000. Cheques issued but not presented have already reduced our balance but not the bank's, so add ₹8,000. Cheques deposited but not cleared have increased our balance but not the bank's, so subtract ₹5,000. Bank charges have been deducted by the bank but not by us, so subtract ₹200. The bank statement balance is 50,000 + 8,000 − 5,000 − 200 = ₹52,800.

In practice, first record the bank charges in the cash book, giving an adjusted balance of ₹49,800, and then reconcile only the timing items: 49,800 + 8,000 − 5,000 = ₹52,800. Explaining why each item is added or subtracted matters more than the final number.

Import the bank statement into the accounting software, for example Tally Prime's bank reconciliation, and match automatically on amount, date and the UTR or reference number, so only the exceptions need manual work. Ask customers to quote the invoice number in the payment remarks, or use virtual account numbers or payment links that identify who paid.

For credits nobody can identify, don't guess: post them to a suspense or unidentified receipts account, share the list with the sales and collections teams, and clear it as customers confirm. Also review old items: cheques issued but not presented for more than three months are no longer valid, so reverse them and reissue if needed. Finish the reconciliation every month so differences don't pile up.

Keep it to about a minute and link it to accounts work. Present, past, future works well: "I completed my B.Com from [college] with [score], and I'm comfortable with journal entries, GST and Tally Prime. During my [internship or articleship] at [firm], I handled [a task, for example monthly GST returns for ten clients and their bank reconciliations]. I'm now looking for an accountant role where I can handle the full cycle from entries to finalisation, and grow into [a goal, such as finalising accounts independently]."

Mention only the software and returns you've actually worked on; interviewers often follow up on exactly those.

Be honest, because they'll find out anyway, and show how the job and your studies help each other. Explain how you'll manage both, and what the company gains: "I'm preparing for [CA Intermediate] and plan to write in [month]. I study in the mornings and at weekends, and I'd plan my exam leave well in advance, around month-end and filing dates. Working here gives me the practical side of what I'm studying, and I'd like to grow within the finance team after I qualify."

Don't promise that you'll never leave; promise reliability and proper notice. If the role clearly can't allow exam leave, it's better to discuss it now.

Show that you accept deadlines as part of the job, and that you plan to reduce last-minute pressure. Structure: acceptance, how you plan, an example. "Yes, I understand that the days around return due dates and the year-end are busy. I try to keep routine work current, such as entering vouchers daily and reconciling the bank weekly, so the deadline is only about review and filing. During my [internship], we filed returns for [number] clients in the last week of the month; I kept a checklist of each client's status, so nothing was missed."

Interviewers want to hear about planning, not only willingness to stay late.

Pick a real but recoverable mistake, own it, and spend most of the answer on the fix and what you changed. Use STAR: "In my last job I booked a vendor invoice twice, once from the emailed copy and once from the paper bill (situation). In the monthly vendor reconciliation, our balance didn't match the vendor's statement (task). I traced the duplicate, reversed it, and confirmed that the payment hadn't been released twice (action). Since then I check the invoice number against the ledger before booking, and we switched on duplicate-invoice warnings in [software] (result)."

Don't claim you've never made a mistake; every accountant has, and the interviewer wants to hear how you deal with one.

Show that you stay polite but won't compromise the books, and that you look for the proper route. Structure: understand the reason, explain the risk, offer the correct option, escalate if pressed. "I'd first ask why it's needed; often there's a genuine reason, like a vendor's bill that's delayed. I'd explain that backdating or booking without support causes problems in audit and with GST and income tax, and suggest the right way: an accrual entry with a note, or waiting for the vendor's invoice. If I were still asked to do something wrong, I'd politely raise it with [the finance head]."

Interviewers are testing integrity here; a calm, clear answer is better than outrage.