Accounting and Finance Interview Study Material
This study material summarizes key accounting and finance concepts to help you prepare confidently for
interviews. Each section is structured to provide clarity on definitions, rules, examples, and real-world
applications.
I. Core Accounting Concepts
A. Definition and Importance
Accounting is the process of recording, summarizing, and analyzing financial transactions. It is the
foundation of financial reporting and essential for informed decision-making.
B. Types of Accounting
1. Financial Accounting – For external reporting.
2. Cost Accounting – Tracks manufacturing costs.
3. Management Accounting – Internal reports for decision-making.
4. Tax Accounting – Focus on tax compliance.
5. Forensic Accounting – Used in legal investigations and fraud analysis.
C. Fundamental Accounting Assumptions & Concepts
• Going Concern – Business will continue operations.
• Consistency – Same accounting methods used consistently.
• Accrual – Record revenues/expenses when incurred, not when cash is exchanged.
• Business Entity – Business is separate from the owner.
• Money Measurement – Only monetary items are recorded.
• Matching – Expenses match related revenues.
• Cost Concept – Record assets at purchase cost.
• Dual Aspect – Every transaction has two sides.
• Accounting Period – Time-based financial reporting.
• Materiality – Record only significant items.
• Conservatism – Record potential losses, not hypothetical gains.
• Revenue Recognition – Revenue is recorded when earned.
D. Accounting Policies
Principles and methods used to prepare financial statements. Must be consistent and disclosed. Changes
allowed for compliance or better representation.
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II. Types of Accounts & Golden Rules
A. Account Types
1. Personal Account – Individuals/firms. Rule: Debit the receiver, Credit the giver.
2. Real Account – Assets. Rule: Debit what comes in, Credit what goes out.
3. Nominal Account – Expenses, incomes. Rule: Debit expenses/losses, Credit income/gains.
III. Double-Entry System & Journal Entries
A. Double-Entry System
Each transaction has dual effects ensuring the equation: Assets = Liabilities + Equity
B. Journal Entries
Basic format: - Dr. (Debited Account) - Cr. (Credited Account)
Types of Entries: - Simple Entry - Compound Entry - Adjusting Entry (AJE)
C. Journals
• General Journal – Miscellaneous entries
• Sales/Purchase Journals – Credit sales/purchases
• Cash Journals – Cash received/paid
• Payroll Journal
• Fixed Asset & Inventory Journals
IV. Financial Statements
A. Main Financial Reports
1. Income Statement – Revenue, COGS, Gross Profit, Operating Profit, Net Profit
2. Balance Sheet – Assets, Liabilities, Equity
3. Cash Flow Statement – Operating, Investing, Financing activities
4. Retained Earnings Statement – Changes in retained profits
5. Notes to Financial Statements – Disclosures and explanations
B. Financial Ratios
• Liquidity: Working Capital, Current Ratio, Quick Ratio
• Profitability: ROI, ROA, ROE, EPS, Profit Margin
• Leverage: Debt-Equity Ratio, Operating & Financial Leverage
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V. Depreciation, Amortization & Impairment
A. Depreciation
Tangible asset wear and tear. - Methods: Straight Line, WDV, Units of Production, etc. - Entry: Dr.
Depreciation Expense, Cr. Accumulated Depreciation
B. Amortization
Applies to intangible assets like patents, goodwill. - Entry: Dr. Amortization Expense, Cr. Accumulated
Amortization
C. Impairment
Occurs when an asset’s recoverable amount is less than its carrying value due to damage, obsolescence, or
changes in market conditions. - Entry: Dr. Impairment Loss, Cr. Asset/Provision for Impairment
D. Disposal of Fixed Assets
When an asset is sold or discarded: - Entry (on sale): Dr. Bank/Cash, Dr. Accumulated Depreciation, Cr.
Asset, Cr./Dr. Gain/Loss on Sale of Asset
E. Reclassification of Assets
Changing the classification (e.g., from current to non-current): - Done based on the nature or purpose of
asset use. - Entry: Dr. New Asset Category, Cr. Old Asset Category
F. Transfer of Fixed Assets
Moving fixed assets between departments or branches: - No effect on the company’s total asset value. -
Entry (if tracked): Dr. Receiving Department A/c, Cr. Transferring Department A/c
VI. Accounting Process
A. Cycle Steps
1. Identify
2. Voucher
3. Journal
4. Ledger
5. Trial Balance
6. Adjustments
7. Financial Statements
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B. Ledger & Posting
Ledger contains classified transactions. Posting transfers journal to ledger.
C. Trial Balance
List of account balances used to detect errors.
D. Accruals & Deferrals
• Accrued Revenue: Earned but not received
• Accrued Expenses: Incurred but not paid
• Prepaid Expenses: Paid in advance
• Unearned Revenue: Received but not earned
E. Reconciliations
• Bank Reconciliation
• Intercompany Reconciliation
• Balance Sheet Reconciliation
F. Month-End Close
Steps to finalize monthly records – includes all above activities.
G. Accounting Standards
• GAAP – U.S. standards
• IFRS – Global framework
• SOX – U.S. corporate financial reporting law
VII. Important Finance Terms
• Audit – External check of records
• Internal Control – Ensures accuracy
• Budgeting/Forecasting – Financial planning tools
• Break-even Point – No-profit/no-loss level
• Fixed/Variable Costs – Do or don’t change with output
• Contribution Margin – Sales – Variable Costs
• Dividend – Shareholder profit distribution
• Inventory Turnover – Stock movement frequency
• Goodwill – Premium paid in acquisition
• Book/Market Value – Asset’s recorded or actual worth
• Operating Cycle – Buy → Sell → Cash
• Capital Employed – Total capital used in operations
• Window Dressing – Misleading financials
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• Sunk Cost – Non-recoverable past expenses
• ABC (Activity-Based Costing) – Cost allocation by activity
Use this guide to revise, memorize journal rules, understand key ratios, and be interview-ready with
conceptual clarity and practical examples.
