Are you a person with degree in accounting or a related field? Are you a math or economics graduate then logon to www.wisdomjobs.com. General Accounting is one of the several categories in which accounting is divided. The types of accounting shows the standards associated with the collection the type of activity done and the presentation and documentation of all financial statements. The responsibility requires that transactions are recorded into the Institution Accounting system in accordance with Generally Accepted Accounting Principles. It involves the basic principles, concepts and accounting practice, recording, financial statement preparation. So track yourself as Accountant, Analyst, Accounting Executive, Accounting Assistant, Financial Analyst by looking into General Accounting job interview question and answers given and win the interview.
Question 1. What Are The Various Streams Of Accounting?
Answer :
There are three streams of accounting:
Question 2. Explain Financial Accounting. What Are Its Characteristic Features?
Answer :
Financial Accounting is the process in which business transactions are recorded systematically in the various books of accounts maintained by the organization in order to prepare financial statements. These financial statements are basically of two types: First is Profitability Statement or Profit and Loss Account and second is Balance Sheet.
Following are the characteristics features of Financial Accounting:
Question 3. Explain Cost Accounting. What Are The Objectives Of Doing It?
Answer :
Cost Accounting is the process of classifying and recording of expenditure incurred during the operations of the organization in a systematic way, in order to ascertain the cost of a cost center with the intention to control the cost.
Following are the basic three objectives of Cost Accounting:
Question 4. What Are The Characteristic Features Of Cost Accounting?
Answer :
Following are the characteristic features of Cost Accounting:
Question 5. Define Management Accounting. What Are Its Objectives?
Answer :
Management Accounting is the process of analysis, interpretation and presentation of accounting information collected with the help of financial accounting and cost accounting, in order to assist management in the process of decision making, creation of policy and day to day operation of an organization. Thus, it is clear from the above that the management accounting is based on financial accounting and cost accounting.
Following are the objectives of Management Accounting:
Question 6. What Are The Limitations Of Management Accounting?
Answer :
Limitations of Management Accounting:
Question 7. What Is The Scope Of Management Accounting?
Answer :
Following is the scope of Management Accounting:
Question 8. What Are The Various Techniques Used To Discharge The Function Of Management Accounting?
Answer :
Following are the technique used to discharge the function of management accounting:
Question 9. Compare Financial Accounting And Cost Accounting?
Answer :
Question 10. Compare Financial Accounting And Management Accounting?
Answer :
Question 11. Compare Cost Accounting And Management Accounting?
Answer :
Question 12. What Do You Mean By Accounting Concepts? List Them.
Answer :
Accounting concepts are those basis assumptions upon which basic process of accounting is based.
Following are the basic accounting concepts:
Question 13. Explain Business Entity Concept?
Answer :
Business Entity Concept:
According to this concept, the business has a separate legal identity than the person who owns the business. The accounting process is carried out for the business and not for the person who is carrying out the business. This concept is applicable to both, corporate and non corporate organizations.
Question 14. Explain Dual Aspect Concept?
Answer :
Dual Aspect Concept:
According to this concept, every transaction has two affects. This basic relationship between assets and liabilities which means that the assets are equal to the liabilities remains the same.
Question 15. Explain Going Concern Concept?
Answer :
Going Concern Concept:
According to this concept, the organization is going to be in existence for an indefinite period of time and is not likely to close down the business in the shorter period of time. This affects the valuation of assets and liabilities.
Question 16. Explain Accounting Period Concept?
Answer :
Accounting Period Concept:
According to this concept, the indefinite period of time is divided into shorter time periods, each one being in the form of Accounting period, in order to facilitate the preparation of financial statements on periodical basis. Selection of accounting period depends on characteristics like business organization, statutory requirements etc.
Question 17. Explain Cost Concept?
Answer :
Cost Concept:
According to this concept, an asset is recorded at the cost at which it is acquired instead of taking current market prices of various assets.
Question 18. Explain Money Measurement Concept?
Answer :
Money Measurement Concept:
According to this concept, only those transactions find place in the accounting records, which can be expressed in terms of money. This is the major drawback of financial accounting and financial statements.
Question 19. Explain Matching Concept?
Answer :
Matching Concept:
According to this concept, while calculating the profits during the accounting period in a correct manner, all the expenses and costs incurred during the period, whether paid or not, should be matched with the income generated during the period.
Question 20. Explain Convention Of Conservation?
Answer :
Convention of Conservation:
This accounting convention is generally expressed as to “anticipate all the future losses and expenses, without considering the future incomes and profits unless they are actually realized.” This concept emphasizes that profits should never be overstated or anticipated. This convention generally applies to the valuation of current assets as they are valued at cost or market price whichever is lower.
Question 21. Explain Convention Of Materiality?
Answer :
Convention of Materiality:
This accounting convention proposed that while accounting only those transactions will be considered which have material impact on financial status of the organization and other transactions which have insignificant effect will be ignored.. It gives relative importance to an item or event.
Question 22. Explain Convention Of Consistency?
Answer :
Convention of Consistency:
This accounting convention proposes that the same accounting principles, procedures and policies should be used consistently on a period to period basis for preparing financial statements to facilitate comparison of financial statements on period to period basis. If any changes are made in the accounting procedures or policies, then it should be disclosed explicitly while preparing the financial statements.
Question 23. What Are The Various Systems Of Accounting? Explain Them.
Answer :
There are two systems of Accounting:
Question 24. What Are The Different Types Of Expenditures Considered For The Purpose Of Accounting?
Answer :
For the accounting purpose expenditures are classified in three types:
Capital Expenditure is an amount incurred for acquiring the long term assets such as land, building, equipments which are continually used for the purpose of earning revenue. These are not meant for sale. These costs are recorded in accounts namely Plant, Property, Equipment. Benefits from such expenditure are spread over several accounting years.
E.g. Interest on capital paid, Expenditure on purchase or installation of an asset, brokerage and commission paid.
Revenue Expenditure is the expenditure incurred in one accounting year and the benefits from which is also enjoyed in the same period only. This expenditure does not increase the earning capacity of the business but maintains the existing earning capacity of the business. It included all the expenses which are incurred during day to day running of business. The benefits of this expenditure are for short period and are not forwarded to the next year. This expenditure is on recurring nature.
Eg: Purchase of raw material, selling and distribution expenses, Salaries, wages etc.
Deferred Revenue Expenditure is a revenue expenditure which has been incurred during an accounting year but the benefit of which may be extended to a number of years. And these are charged to profit and loss account.
E.g. Development expenditure, Advertisement etc.
Answer :
Capital Expenditure is an amount incurred for acquiring the long term assets such as land, building, equipments which are continually used for the purpose of earning revenue. These are not meant for sale. These costs are recorded in accounts namely Plant, Property, Equipment. Benefits from such expenditure are spread over several accounting years.
E.g. Interest on capital paid, Expenditure on purchase or installation of an asset, brokerage and commission paid.
No, Capital expenditure should not be considered while calculating profitability as benefits incurred from the capital expenditure are long term benefits and cannot be shown in the same financial years in which they were paid for. They need to be spread over a number of years to show the true position in balance sheet as well as profit and loss account.
Answer :
Revenue Expenditure is the expenditure incurred in one accounting year and the benefits from which is also enjoyed in the same period only. This expenditure does not increase the earning capacity of the business but maintains the existing earning capacity of the business. It included all the expenses which are incurred during day to day running of business. The benefits of this expenditure are for short period and are not forwarded to the next year. This expenditure is on recurring nature.
As the return on revenue expenditure is received in the same period thus the entries relating to the revenue expenditure will affect the profitability statements as all the entries are passed in the same accounting year, the year in which they were incurred.
Answer :
Deferred Revenue Expenditure is revenue expenditure, incurred to receive benefits over a number of years say 3 or 5 years. These expenses are neither incurred to acquire capital assets nor the benefits of such expenditure is received in the same accounting period during which they were paid. Thus they don’t affect profitability statement as they are not transferred to the profitability statement in the period during which they are paid for. They are charged to profit and loss account over a number of years depending upon the benefit accrued.
Question 28. What Is A Balance Sheet? Why Is It Prepared?
Answer :
Balance Sheet is a Statement showing financial position of the business on a particular date. It has two side one source of funds i.e Liabilities, the left side of the balance sheet and application of funds i.e assets, the right side of the balance sheet. It is prepared after preparing trading and profit and loss account and has balances of real and personal accounts grouped and arranged in a proper way as assets and liabilities. It is prepared to know the exact financial position of the business on the last date of the financial year.
Question 29. List The Type Of Items Which Appear Under The Liability Side Of A Balance Sheet?
Answer :
Items which appear under the liability side of Balance Sheet are:
Question 30. What Types Of Items Appear Under The Assets Side?
Answer :
Items which appear under the assets side of Balance Sheet are:
Fixed Assets:
Current Assets:
Question 31. What Are Adjustment Entries? Why Are They Passed?
Answer :
Adjustment entries are the entries which are passed at the end of each accounting period to adjust the nominal and other accounts so that correct net profit or net loss is indicated in profit and loss account and balance sheet may also represent the true and fair view of the financial condition of the business.
It is essential to pass these adjustment entries before preparing final statements. Otherwise in the absence of these entries the profit and loss statement will be misleading and balance sheet will not show the true financial condition of the business.
Question 32. Explain Bank Reconciliation Statement. Why Is It Prepared?
Answer :
Bank Reconciliation Statement is a statement prepared to reconcile the balances of cash book maintained by the concern and pass book maintained by the bank at periodical intervals. At the end of every month entries in the cash book are compared with the entries in the pass book. The causes of differences in balances of both the books are scrutinized and then reconciliation statement is prepared. This statement is prepared for a special purpose and once in a month. It is prepared with a view to indicate items which cause difference between the balances as per the bank columns of the cash book and the bank pass book at a particular date.
Question 33. What Are The Reasons Which Cause Pass Book Of The Bank And Your Bank Book Not Tally?
Answer :
Answer :
While preparing a bank reconciliation statement following important points need to be remembered:
The following items will be subtracted:
Question 35. What Are The Groups Under Which Errors In Accounting Are Placed?
Answer :
Errors in accounting are placed in the following main groups:
Question 36. What Are The Types Of Errors Which Have An Effect On Trial Balance?
Answer :
Following are the types of errors which affect agreement of Trial Balance:
Question 37. What Type Of Errors Do Not Affect The Trial Balance?
Answer :
Following are the types of errors which do not affect the Trial Balance:
Question 38. What Steps Would You Take To Locate The Errors In Case Trial Balance Disagrees?
Answer :
In case Trial Balance disagrees, following steps should be taken to locate the errors:
Question 39. What Is Cost Accountancy? What Are The Objects Of Cost Accountancy?
Answer :
Cost accountancy is the application of costing and cost accounting principles, methods and techniques to the science, art and practice of cost control and the ascertainment of profitability as well as the presentation of information for the purpose of managerial decision making.
Following are the objects of Cost Accountancy:
Question 40. What Is The Difference Between Costing And Cost Accounting?
Answer :
Costing is the process of ascertaining costs whereas cost accounting is the process of recording various costs in a systematic manner, in order to prepare statistical date to ascertain cost.
Question 41. What Is Cost Centre?
Answer :
Cost centre is defined as a location, machine, person, department, division, or any equipment or group of these, in relation to which direct and indirect costs may be ascertained and used for the purpose of cost control. Thus, an organization for the costing purposes is divided in convenient units and one of the convenient units is known as cost centre. Example: collecting, sorting, washing of clothes are the various activities which are separate cost centre in a laundry. The cost centre facilitates this function of cost control. Thus, correct identification of cost centre is a prerequisite for the successful implementation of cost accounting process. This also facilitates the fixation of responsibility in the correct manner.
Question 42. Explain Direct Cost And Indirect Cost?
Answer :
Direct Cost are all the expenses which can be identified with the individual product, service or job cost centre. In the manufacturing process of products, materials are purchased, labors are hired and wages are paid to them. All these take active and direct part in the manufacturing process.
Indirect Cost are all the expenses which cannot be identified with the individual product, service or job cost centre. The totals of indirect costs are termed as overheads. Example: salaries of storekeepers, foremen, work manager’s salary etc.
Question 43. Explain Fixed, Variable And Semi-variable Costs?
Answer :
Fixed Cost is the cost which remains constant or unaffected by variations in the volume of output within a given period of time. Example: Rent or rates, Insurance charges, etc.
Variable Cost is the cost which varies directly in proportion with every increase or decrease in the volume of output with a given a period of time. Example: Wages paid to labours, cost of direct material, consumable stores, etc.
Semi-variable Cost is the cost which is neither fixed nor variable in nature. These remain fixed at certain level of operations while may vary proportionately at other levels of operations. Example: maintenance cost, repairs, power, etc.
Question 44. Explain Controllable And Uncontrollable Costs?
Answer :
Controllable Cost are the costs which can be influenced by the action of a specified member of the undertaking. They are incurred in a particular responsibility centers can be influenced by the action of the executive heading that responsibility centre. For example: Direct labor cost, direct material cost, direct expenses controllable by the shop level management.
Uncontrollable Cost are the costs which cannot be influenced by the action of a specified member of the undertaking. For example: a foreman in charge of a tool room can only control costs pertaining to the same department and the matters which come directly under his control, not the costs apportioned to other department. The expenditure which is controllable by an individual may be uncontrollable by another individual.
Question 45. Explain Normal And Abnormal Costs?
Answer :
Normal Cost are the normal or regular costs which are incurred in the normal conditions during the normal operations of the organization. They are the sum of actual direct materials cost, actual labor cost and other direct expense. Example: repairs, maintenance, salaries paid to employees.
Abnormal Cost are the costs which are unusual or irregular which are not incurred due to abnormal situations of the operations or productions. Example: destruction due to fire, shut down of machinery, lock outs, etc.
Question 46. Explain Opportunity Cost And Differential Cost?
Answer :
Opportunity Cost is the cost incurred by the organization when one alternative is selected over another. For example: A person has Rs. 100000 and he has two options to invest his money, either invests in fixed deposit scheme or buy a land with the money. If he decides to put is money to buy the land then the loss of interest which he could have received on fixed deposit would be an opportunity cost.
Differential Cost is the difference between the costs of two alternatives. It includes both cost increase and cost decrease. It can be either variable or fixed. Example: Cost of first alternative = 10000; Cost of second alternative = 5000; Differential Cost = 10000 – 5000 = 5000.
Question 47. Explain Sunk Cost?
Answer :
Sunk Cost is the sum that has already been incurred and cannot be recovered by any decision made now or in future. This cost is also called stranded cost. Example: A special purpose machine was bought by a company for Rs. 100000. The machine was used to make the product for which it was bought and now it is obsolete and cannot be sold. And it will be unwise to continue using that obsolete product to recover the original cost of the machine. In order words, Rs. 100000 already spent on that machine cannot be recovered in future. Such costs are said to be sunk costs and should be ignored in decision making process.
Question 48. What Things Would You Take Into Consideration While Installing A Costing System?
Answer :
Following things should be taken into consideration while installing a costing system:
Question 49. What Problems You May Face While Installing A Costing System?
Answer :
While installing a Costing System an Organization may face the following problems:
Question 50. What Are The Various Elements Of Costs?
Answer :
There are three elements of cost:
Material Cost: This is the cost of material or the commodity used by the organization for its production purpose. Material is the substance, from which a product is made. Thus, it may be in a raw or a manufactured state. It can be direct or indirect.
Direct Material Cost forms an integral part of the finished product and is identified with the individual cost centre. It is also described as process material, stores material, production material, etc. Example: Raw materials purchased or purchased primary packing material, etc.
Indirect Material Cost is used for ancillary purposes of the business and cannot be conveniently identified with the individual cost centre. Example: Consumable stores, oil and waste, printing and stationery material etc.
Labour Cost: This is the cost, incurred in the form of remuneration paid to the employees or labours of the organisation. The workforce required to convert material into finished product is called labour. It can be direct or indirect.
Direct Labour Cost is the cost incurred on those employees who directly take part in the manufacturing process and easily identified with the individual cost centre.
Indirect Labour Cost is the cost incurred on those employees who do not directly take part in the manufacturing process and cannot identified with the individual cost centre. Example: salary of foreman, salesmen, director’s salary, etc.
Expenses: are the costs of services provided to the organisation. It can be direct or indirect.
Direct Expenses are the expenses which can be directly identified with the individual cost centres. Example: hire charges of machinery, cost of defective work for a particular job or contract etc.
Indirect Expenses are the expenses which cannot be directly identified with the individual cost centres. Example: rent, lighting, telephone expenses, etc.
Question 51. What Are Overheads? How Are They Classified?
Answer :
Overheads are the aggregate of Indirect Material cost, Indirect Labour and Indirect Expenses. Thus, sum of all indirect costs are overheads. They are of three types:
Question 52. Explain Gross Profit?
Answer :
Gross Profit is a company’s revenue minus its cost of goods sold. It is also known as gross margin and gross income. It is calculated by subtracting all costs related to sales i.e. manufacturing expenses, raw materials, labour, selling and advertisement expenses from sales. It is an indication of the managements’ efficiency to use labour and material in the production process.
Gross Profit = Net Sales – Cost of Goods Sold
Question 53. Explain Net Profit?
Answer :
Net Profit/ Operating Profit Net profit, also known as operating profit is actual earnings of the company in a given period of time. It is a measure of the profitability after accounting for all costs. In simple terms, net profit is the money left over after paying all the expenses including taxes and interest. It is the calculated by subtracting total expenses from total revenues. Net income can be either distributed among shareholders of the company or held by the firm as retained earnings for the future purpose .
Net Profit = Gross Profit – Total Operating Expenses – Taxes – Interest.
Question 54. What Are The Steps In Procurement Of Material?
Answer :
Following are the steps in procurement of material:
Purchase Requisition is an indication to the purchase department to purchase certain material required for the production. Following particulars appear in the purchase requisition:
Invoice received from the supplier is compared along with the purchase order, goods received note and inspection note.
Question 55. Why Should Over Stocking Be Avoided?
Answer :
Due to the following consequences over stocking should be avoided:
Question 56. What Can Be The Consequences Of Under Stocking?
Answer :
The following can be the consequences of under stocking:
Question 57. Explain Following Types Of Tenders?
Answer :
Single Tender : When only one source of supply is available then single tender is addressed to the selected supplier.
Limited Tender : This type of tender is addressed to a limited number of suppliers, who are the reliable source of supply.
Open Tender : is open to all the suppliers within the country who can supply the required quantity and quality of materials. Such invitation is made by advertising in newspapers, journals etc.
Global Tender : is open to anybody from any part of the world to supply the required quantity and quality of materials.
Question 58. What Can Be The Discrepancies In Material Receipt?
Answer :
There are two categories of material discrepancies:
First category includes:
These discrepancies are normally caused by the transportation system.
Second category includes:
These discrepancies are caused by the manufacturer.
Question 59. Differentiate Between Bin Card And Stores Ledger?
Answer :
Question 60. What Can Be The Reasons For Bin Card And Stores Ledger Not Getting Reconciled?
Answer :
The following can be the reasons for bin card and stores ledger for not getting reconciled:
Question 61. Explain Valuation Of Receipts?
Answer :
Valuation of receipts is the price billed in the invoices by the supplier. Following points should be kept in mind for this purpose:
Question 62. Explain Valuation Of Issues And Valuation Of Returns?
Answer :
Valuation of issues is a complex process because the material may be issued out of various lots which might have been purchased at various prices. Following methods are used for this purpose:
Valuation of returns indicates the material returned by the production department to stores department. This valuation is done on two basis:
Question 63. Explain Average Price Method?
Answer :
Average Price Method - is the method by which the value of total assets or expenses is assumed to be equal to the average cost of the total assets or expenses. Under this method, it is assumed that the cost of inventory is based on the average cost of the goods available for sale during the period. It is computed by dividing the total cost of goods by the total units which gives a weighted average unit cost for the units of the closing inventory.
Question 64. Explain Weighted Average Method?
Answer :
Weighted Average Method - is the method of calculation in which the weighted average of both the lot sizes as well as the prices of the lot. This method is best for valuing material issues. This method is very useful where the prices and quantities of items vary. Practically, this method is very simple to calculate.
Question 65. What Are The Techniques Of Inventory Control?
Answer :
The techniques of inventory control are:
Question 66. What Is Meant By Spin-off?
Answer :
Spin off is creating new company by selling or distributing the shares of existing company.
Question 67. What Is Difference Between Budget & Budgeting?
Answer :
An estimation of the revenue and expenses over a specified future period of time. A budget can be made for a person, family, group of people, business, government, country, multinational organization or just about anything else that makes and spends money. A budget is a microeconomic concept that shows the tradeoff made when one good is exchanged for another.
Budgeting lies at the foundation of every financial plan. It doesn’t matter if you’re living paycheck to paycheck or earning six-figures a year, you need to know where your money is going if you want to have a handle on your finances. Unlike what you might believe, budgeting isn’t all about restricting what you spend money on and cutting out all the fun in your life. It’s really about understanding how much money you have, where it goes, and then planning how to best allocate those funds. Here’s everything you need to help you create and maintain a budget.
Question 68. What Is The Difference Between Journal Voucher And Contra?
Answer :
journal voucher is the voucher in which all the adjustment related entries and non cash non bank transactions are entered in journal eg-dep, some of them book the bills in journal and while they make a payment they record in payment eg-contractor bill.
contra appears two times in two sides of a account an account will be treated as contra when:
Question 69. What Is Tds And Sale Tax Return?
Answer :
TDS (tax deducted at sources) .The person while making payments of income, covered by the scheme are responsible to deducted TDS and deposit the same in govt treasury with stipulated time . exp-salary, job work, rent, commission etc.
Sale Tax return means annual return against your profit.
Question 70. What Is The Difference Of Fund Flow Statement And Cash Flow Statement?
Answer :
Fund flow deals with transaction within financial year (One year) whereas Cash flow Statement record only cash transaction.
Question 71. What Is Goodwill?
Answer :
Goodwill is an intangible asset of a company which includes company reputation, fame etc., through goodwill company share value may increases.
Question 72. What Is Golden Rules Of Account?
Answer :
personal a/c - debit the receiver, credit the giver.
real a/c - debit what’s comes in, credit what’s goes out.
nominal a/c - debit all expenses & losses, credit all incomes and gains.
Question 73. Definition Of 'generally Accepted Accounting Principles - Gaap'?
Answer :
The common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information.
Question 74. What Is General Accounting Service?
Answer :
General accounting includes bookkeeping methods used for recording of financial transactions of a business or a company. Companies use the double entry book keeping system for recording all financial transactions.
It includes maintaining and keeping a record of various accounting day books including:
A book keeper writes up and maintains various "Daybooks" . He is responsible for making sure that correct transactions are recorded in the correct daybook. A trial balance is finally made with the help of these accounting books and ledgers.
Question 75. What Does A General Accountant Do?
Answer :
As a General Accountant, you will:
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