Interview Questions.

Q1. What Is Sec 72a Of Income Tax Act?

Incentive for amalgamation extended to inns and certain banks - Sec. 72A. The gain of bring forward and set off of collected losses and unabsorbed depreciation would be prolonged within the case of amalgamation of a company proudly owning a hotel with every other enterprise or an amalgamation of a banking company with the State Bank of India or its subsidiary or different specified banks. Two extra conditions for amalgamating a business enterprise will must be fulfilled, viz. That it ought to had been engaged in the enterprise for at least 3 years at some stage in which the collected loss has occurred or the unabsorbed depreciation has collected and it has held constantly as at the date of amalgamation at least 3/4ths of the book price of fixed belongings held through it  years previous to the date of amalgamation.

Q2. What Is The Difference Between Balance Sheet And Profit & Loss Account?

The stability sheet is one of the most important financial statements of a employer. It is suggested to investors as a minimum once in keeping with year. It can also be provided quarterly, semiannually or monthly. The stability sheet provides statistics on what the agency owns (its property), what it owes (its liabilities), and the cost of the enterprise to its stockholders (the shareholders' equity). The call, stability sheet, is derived from the truth that those accounts must continually be in balance. Assets should constantly same the sum of liabilities and shareholders' equity.

A organisation's income declaration/profit and loss account announcement is a document of its income or losses for a given period. It indicates all of the cash a agency earned (sales) and all of the cash a agency spent (fees) for the duration of this era. It additionally bills for the results of some primary accounting concepts including depreciation. The income statement is crucial for investors because it's the basic measuring stick of profitability. A organisation with little or no income has very little cash to bypass on to its buyers inside the shape of dividends. If a organisation continues to file losses for a sustained period, it is able to move bankrupt. In this kind of case, both bond and stock buyers should lose some or all of their funding. On the alternative hand, a enterprise that realizes large earnings could have extra cash to bypass directly to its investors.

Q3. What Are Contingent Liabilities?

These are liabilities, which materialize at the occurring or non-taking place of an occasion.

Contingent liabilities are not actual liabilities and as such do no longer appear inside the legal responsibility aspect of balance sheet. But are disclosed with the aid of manner of a word inside the stability sheet.

Q4. What Is Fundamental Accounting Equation?

Accounting equation is a mathematical expression used to describe the relationship between the belongings, liabilities and proprietor's fairness of the business version. The fundamental accounting equation states that assets same liabilities and owner's fairness, but can be changed via operations applied to each facets of the equation, e.G., assets minus liabilities identical proprietor's equity.

Q5. What Are Marketable Securities?

Marketable securities are cash substitutes. Marketable securities are investments with short-term maturities with little risk because of interest fee fluctuations. Examples of marketable securities consist of Treasury Bills, Negotiable Certificates of Deposit, and Commercial Paper.

Q6. What Is Deferred Revenue Expenditure?

Deferred sales costs constitute sorts of assets whose usefulness do no longer expire within the year of their incidence however generally expires within the near destiny. These styles of expenditures are carried forward and are written off in future accounting intervals.

Sometimes, we make some sales expenditure but it subsequently turns into a capital asset (typically of an intangible nature). Example, if we undertake great upkeep to the prevailing constructing, the deterioration of the premises may be averted. If we rate the complete expenditure at some point of the contemporary, the current yr fees are have an effect on. However, because the benefit of this expenditure is loved over some of years. So, to overcome this handiest a part of the expenditure is charged modern-day year and the stability carried forward and written off regularly for the duration of the destiny durations.

Q7. Discuss The Gaap Measures Used In India?

The financial statements are prepared under the ancient cost conference, according with Indian Generally Accepted Accounting Principles ( GAAP ) comprising of the accounting requirements issued by means of the Institute of Chartered Accountants of India and the provisions of the Companies Act, 1956, as adopted consistently by the enterprise.

All income and expenditure having a fabric bearing on the monetary statements are diagnosed at the accrual basis. The instruction of the financial statements in conformity with GAAP requires, that the management of the organisation ( Management ) make estimates and assumptions, that affect the reported amounts of sales and expenses of the period, pronounced balances of assets and liabilities and disclosures relating to contingent belongings and liabilities as of the date of the monetary statements. Examples of such estimates encompass, expected settlement fees to be incurred to complete software improvement, provision for doubtful debts, future obligations under worker retirement benefit pl and the beneficial lives of fixed belongings. Actual outcomes may want to fluctuate from those estimates.

Q8. What Is Depreciation? List Few Methods Of Providing Depreciation?

It is commonplace information that when an asset is used over a time frame, it looses its price. This loss in cost is known as depreciation. Pickles defines it as "the permanent and continuing diminution within the quality, quantity or price of an asset" Depreciation is the continuous shrinkage of book price of an asset.

Few approach of depreciation are

Straight line Method: An equal amount is written off each 12 months for the duration of the running life of an asset which will lessen the value of the asset to nil or its residual cost on the stop of its beneficial existence.

Reducing Balance Method: A fixed percent of the diminishing price of the asset is written off each year if you want to reduce to its split value at the cease of its life.

Machine hour method: If it's far workable to maintain a record of the actual strolling hours of every system, depreciation may be calculated on the idea of the hours for which the involved machine worked.

Q9. What Is Financial Accounting?

Financial accounting gathers and summarizes monetary statistics to put together monetary reviews together with balance sheet and earnings assertion for the business enterprise's control, buyers, creditors, providers, tax authorities, and different stakeholders.

Q10. What Is The Entry For Deferred Tax Liability According To As22?

Deferred tax belongings and liabilities must be prominent from belongings and liabilities representing cutting-edge tax for the period. Deferred tax assets and liabilities need to be disclosed below a separate heading inside the stability sheet of the organisation, separately from present day assets and cutting-edge liabilities.

The damage-up of deferred tax belongings and deferred tax liabilities into essential components of the respective balances have to be disclosed inside the notes to accounts.

Q11. What Are The Principal Qualitative Characteristics Of Financial Statements?

The precept characteristics of monetary statements are the attributes that make the records furnished within the economic statements useful to the customers. The principle qualitative characteristics are

Understandability: They have to be without difficulty comprehensible to the users. For this motive users are deemed to have reasonable knowledge of enterprise and economic activities.

Relevance: To be useful statistics have to be relevant to the decision-making needs of the users.

Reliability: Information is said to be dependable while it is unfastened from mistakes, bias and can be depended upon through the customers to symbolize faithfully, which it purports to represent.

Comparability: Users should be capable of examine the monetary statements of an enterprise via time to be able to discover traits in its financial position and overall performance.

Q12. What Is The Primary Objective Of Financial Accounting?

The number one goal of the Financial Accounting is to communicate and provide information to the buyers and creditors at the financial sports of the agency with a purpose to help them of their funding decisions.

Q13. Who Governs The Financial Reporting Standard?

Since economic accounting is the technique that provides financial reviews to the majority, professionals inside the accounting, trade and trade, have evolved and formed an accounting standard to be able to function the inspiration of all accounting system and methods completed. Such accounting standard is known as the Generally Accepted Accounting Principles (GAAP).

GAAP represents the rules, strategies, practice and standards accompanied inside the preparation and presentation of the financial statements. Its reason is to make sure consistency and comparison of pronounced financial statistics of enterprise entities, if you want to defend the customers or standard public, on account that they use financial reviews of their financial decisions.

Q14. Difference Between Financial Accounting And Bookkeeping?

Financial accounting isn't the same as bookkeeping. Bookkeeping is a department of financial accounting which pertains to the procedural system of recording and retaining the commercial enterprise tractions. The handiest feature of bookkeeping is to hold the monetary report of the commercial enterprise accurate and entire. On the opposite hand, monetary accounting consists of a broader role compared to bookkeeping. It isn't always merely procedural in nature however additionally conceptual. Financial accounting is also issue with the why, reason or justification of any motion followed. It is responsible no longer most effective inside the entire and correct recording of commercial enterprise tractions but additionally it guarantees that the reported economic announcement abides by using the accounting standards, and all different reporting standards, such as the authorities.

Q15. What Are The Golden Rules Of Accounting?

The golden Rules of Accounting are:

Debits always same Credits

Increases do now not always identical Decreases

Assets - Liabilities = Owner's Equity (The accounting equation).

Q16. What Are The Major Constraints On Relevant And Reliable Financial Statements?

The important constraints on relevant and dependable financial statements are:

Timeliness: If there's undue delay statistics will become inappropriate.

Balance among value and advantage: The blessings derived from facts ought to exceed the value of presenting it.

Balance between the various qualitative traits: In exercise it has become important to attain the perfect stability among the qualitative traits.

True and truthful view presentation: There is not any readability within the term proper and fair view as required via the Companies Act. The conceptual framework does now not discuss this.

Q17. What Is The Difference Between Financial Accounting And Management Accounting?

Financial accounting: has its recognition on the economic statements that are allotted to stockholders, creditors, monetary analysts, and others outside of the business enterprise. Courses in financial accounting cowl the generally universal accounting concepts which need to be accompanied while reporting the outcomes of a enterprise's beyond tractions on its stability sheet, income statement, announcement of coins flows, and declaration of adjustments in stockholders' fairness.

Managerial accounting: has its consciousness on providing information in the organization so that its control can perform the corporation more effectively.  Managerial accounting and fee accounting additionally provide instructions on computing the cost of merchandise at a production organisation. These prices will then be used in the external monetary statements. In addition to fee structures for manufacturers, guides in managerial accounting will encompass subjects along with cost conduct, break-even point, earnings planning, operational budgeting, capital budgeting, relevant costs for decision making, activity based costing, and general costing.

Q18. Tell Me Something About Accounting For Goodwill Finance?

Goodwill is taken into consideration to be one in every of the most important intangible belongings, the cost of which agencies want to mirror correctly in their financial statements. Accounting for this asset, poses many demanding situations for accountants, as it is an unidentifiable intangible asset.

Q19. What Are Financial Statements? Name The Major Financial Statements?

The Financial statements are the reports that result from the system of accounting which permit the interested events to evaluate the profitability and the solvency of the commercial enterprise. The major economic statements are:

Profit and Loss Account

Balance sheet

Cash Flow announcement.

Q20. What Is The Accrual Basis Of Accounting?

Under the accrual foundation of accounting, revenues are mentioned at the earnings declaration while they're earned. (Under the cash foundation of accounting, sales are reported at the profits assertion while the coins is acquired.) Under the accrual foundation of accounting, costs are matched with the associated revenues and/or are stated while the fee takes place, now not while the cash is paid. The end result of accrual accounting is an profits assertion that better measures the profitability of a corporation for the duration of a selected time period.

Q21. What Are Accounting Standards? List Few Advantages?

Accounting Standards are rules and standards of accounting measurement advanced via numerous accounting fashionable placing bodies hooked up in developing and developed international locations.

International Accounting Standard Board (IASB) - International Accounting Standards.

Financial Accounting Standards Board (FASB) US Generally Acceptable Accounting Practices (in particular Statements on Financial Accounting Standards).

In India Institute of Chartered accountants of India Accounting Standards.

The advantages are:

Reduces to an affordable volume eliminates puzzling versions within the accounting treatment.

Lays down disclosure necessities past that required by means of regulation.

To a limited extent allows assessment of economic statements globally.

Q22. What Is The Role Of Financial Accounting In Business?

Every enterprise is required by using law, in which the business is registered and operated, to maintain a record of its commercial enterprise traction and communicate those inside the shape of financial reviews. These reports are commonly known as financial statements.

The customers of these financial statements are what we name stakeholders. These are man or woman, institution of people or enterprise that are at once and indirectly interested in the direction of a commercial enterprise which includes the owner, managers, employees, lenders, the authorities or preferred public.

Financial accounting is the accounting procedure that culminates within the training of monetary reports of a enterprise that is used by stakeholders in forming their monetary selections.

The foremost objective of financial accounting is to provide information concerning the monetary circumstance and performance of a business entity. This records are pronounced and communicated within the form of economic statements.

Additionally, economic accounting suggests the consequences of stewardship of a business management. By searching on the economic reports, users can interpret how properly or terrible the business control has operated and used its sources.

Q23. What Is Meant By The Quality Of Financial Reporting? What Is Conservatism, And How Does It Affect The Quality Of Earnings?

The fine of economic reporting refers to how close the economic statements are to economic truth. The nearer the financial statements are to economic truth, the higher is the excellent of financial reporting. The much less that control makes use of discretionary me to manipulate earnings, the higher the quality of financial reporting. Conservatism me that control should take super care no longer to overstate property and sales and now not to understate liabilities and prices. The greater conservative management is in making accounting judgments, the better will be the quality of financial reporting.

Q24. What Is The Difference Between Accounts Payable And Accrued Expenses Payable?

I might use the liability account Accounts Payable for suppliers' invoices that have been received and have to be paid. As a end result, the stability in Accounts Payable is probably to be a particular amount that is of the same opinion with helping files along with invoices, agreements, and many others.

I might use the liability account Accrued Expenses Payable for the accrual type adjusting entries made at the quit of the accounting length for objects which includes utilities, hobby, wages, and so on. The stability in the Accrued Expenses Payable need to be the overall of the charges that had been incurred as of the date of the stability sheet, however were not entered into the accounts due to the fact an invoice has not been acquired or the payroll for the hourly wages has now not yet been processed, and so forth. The quantities recorded in Accrued Expenses Payable will often be expected amounts supported by way of logical calculations.

Q25. What Is Debenture Redemption Reserve?

The businesses (Amendment) Act 2000 require every employer to create debenture redemption reserve for redemption of debentures out of appropriation of income each 12 months till redemption. This reserve can not be used by the agency besides for the cause of redemption.

Q26. What Do You Understand By Contract Account ?

Account in which posting facts for contracts or settlement items are processed for which the identical series/fee agreements follow. Contract bills are managed on an open object basis within contract money owed receivable/payable.

Q27. Tell Us What You Know About Accounts Receivables And Payables?

Accounts Receivable, usually abbreviated as A/R, is the money this is currently owed to a corporation via its customers. The reason why the customers owe cash is that the product has been brought but has now not been paid for but. Companies mechanically buy goods and services from different companies using credit. Although usually A/R is almost continually became cash within a quick amount of time, there are instances where a agency can be compelled to take a write-off for terrible money owed receivable if it has given credit score to a person who can't or will not pay. This is why you may see something known as allowance for terrible debt in parentheses beside the accounts receivable range.

Accounts Payable is the money that the corporation presently owes to its suppliers, its partners and its employees. Basically, these are the fundamental fees of doing enterprise that a company, for anything reason, has no longer paid off yet. One business enterprise's bills payable is any other enterprise's accounts receivable, that is why each phrases are similarly established. A enterprise has the power to push out a number of its bills payable, which regularly produces a brief-term growth in earnings and contemporary property.

Q28. Define Fifo And Lifo. Explain What Effects That Fifo And Lifo Have On The Balance Sheet During A Period Of Rising Prices And During A Period Of Falling Prices?

FIFO is the stock fee float assumption that treats the primary goods in because the first goods sold. LIFO is the inventory cost float assumption that treats the closing items in because the first items sold. In a duration of rising expenses, FIFO values stock at present day fees. However, LIFO would cost inventory at charges that the organization could have incurred years in the past. The analyst need to take the LIFO fee waft assumption into consideration and don't forget adjusting the stock of a agency using LIFO upward to account for inflation.

Q29. Can You Provide Us A Suitable Definition Of Goodwill?

Goodwill as an intangible asset may be described from  procedures:

Residuum method

Under this approach, goodwill is taken to be the difference among the purchase rate and the honest market price of an obtained companys assets.

Excess income technique

Under this method, the existing price of the projected future extra income over normal income for comparable companies is recorded as goodwill. Due to uncertainty of destiny profits, valuing goodwill the use of this method is hard.