Finance and Accounting Interview Tips for Freshers

Feeling nervous about your finance or accounting interview? There is no need to worry! Stepping into the corporate world as a fresher can be exciting yet overwhelming. You don’t have to be worried; here is the good news: you can walk into that interview room with a lot of confidence and leave behind a long-lasting impression with proper preparation. Whether it be technical questions or showing people that you’re analytical, let us help you put your best foot forward. Let’s get interview-ready and much closer to landing your dream finance and accounting job.

Basic Finance and Accounting Concepts

Let’s see some important finance and accounting concepts that a fresh face needs to be aware of while joining this field. These basics are sure to impress your interviewers, not to mention lay down a proper foundation for your career.

 Assets and Liabilities

Assets: Assets are anything of value owned by a company. Assets may be tangible or intangible; tangible assets are cash, inventory, and equipment, while intangible assets are patents, trademarks, and goodwill. Assets fall under two major heads:

• Current Assets: Current assets are assets that can be converted into cash or used up within one year. Examples include cash, accounts receivable, and inventory.

• Non-current Assets (Fixed Assets): These are assets that have a long-term expectation of generating value for over one year. Examples include land, buildings, and machinery.

Liabilities: Liabilities are a company’s obligations. They may be current or non-current. Knowing the two is important:

• Current Liabilities: These are obligations due within one year, such as short-term loans and unpaid bills.

• Non-Current Liabilities These are long-term obligations, such as bonds or mortgages.

Income and Expenses

• Income: Income is also referred to as revenue, which is the money a business earns from its operations. It is one of the key indicators of a firm’s success in generating streams of revenue. Income may be generated from sales, interest, dividends, or royalties.

• Expenses: These consist of the cost incurred to maintain the business. Such expenses might include wages, rent, utilities, materials, etc. The need for maximising profitability necessitates effective cost management.

Profit and Loss

• Profit: Profit is the resultant monetary gain a company makes when its income goes beyond its expenses. It simply is the positive result of its operations and is one of the great indicators of financial health in a company. A company that consistently proves profitable is generally considered sound and successful.
• Loss: A loss occurs when the expenses of a company exceed its income. It simply indicates that the firm is not earning enough income to offset its costs. Losses are not unusual for any business, but they should be controlled and minimised to have long-term sustainability.

Cash Flow

Cash flow is the movement of money in and out of a company. It is part of the financial management of a company because it represents a firm’s liquidity or its ability to pay bills and debts when they fall due.

Budgeting

Budgeting refers to planning and managing a firm’s financial resources. A budget represents a roadmap of financial spending and income expectations in a company.

finance and accounting interview tips,

Financial Statements

Financial statements happen to be the backbone of finance and accounting, through which a company’s basic financial health and performance become evident. They are important tools of decision-making, providing essential information for stakeholders to study profitability, stability, and cash flow. Let’s take up the three major types of financial statements:

   1. Income Statement (Profit and Loss Statement)

• • Purpose: The income statement provides a clear view of a company’s profitability for a specific period, either monthly, quarterly, or yearly. It shows how well a company is at generating revenues and keeping its expenses under control; therefore, it is essential in measuring the efficiency of operations and areas for improvement.

• Key Elements: Revenue, expenses, and net income.

   2. Balance Sheet

• • Purpose: A balance sheet is a statement showing what a company owns (its assets), owes (its liabilities), and what’s left to the owners as residual interest (its equity) at a given time. This statement is a good tool for determining whether or not a company has financial stability and can service both short- and long-term obligations.

• Key components: assets, liabilities, and equity.

   3. Cash Flow Statement

• Purpose: The cash flow statement is a report of cash inflows and outflows from the company during a particular period. It gives an insight into how liquid the company is by showing how well it can generate cash to run its operations, invest in growth, and manage debt. This is important in determining the financial flexibility of a company.

• Key Elements: Operating, investing, and financing activities

Financial Statements Preparation

Preparing financial statements necessitates an in-depth understanding of accounting principles and practices. Among the important things to know when preparing these statements are as follows:

  1. Accrual Accounting vs. Cash Accounting

• Accrual Accounting: Recognises transactions at the point of occurrence and not based on cash flows.

• Cash Accounting: Recognises transactions only at the time that money is received or paid.

   2. Consistency

• One of the fundamental principles guiding the preparation of financial statements is consistency. There must be continuity in the methods and principles used from one period to another in any company. The financial statements produced will be comparable, hence enabling users to evaluate the performance and position of a company from period to period. Changes in methods must be disclosed and explained for the financial statements.

3. Relevance

• In preparing financial statements, relevant information must be incorporated in order to enable the user to make decisions based on such information. Irrelevant or immaterial information clutters financial statements and makes it hard for stakeholders to understand the performance of a company in its financial aspect. Meaningful and important information should therefore be presented.

   4. Comparability

• Comparability is another important concept while presenting financial statements. Financial statements should be prepared in such a way that they can easily be compared with other periods or with the financial statements of other companies. This provides benchmarking and trend analysis. Often, investors and creditors will rely on the ability to compare financial statements to assess a company’s health and growth prospects.

   5. Disclosure

• Financial statements must also include clear and comprehensive disclosures of significant accounting policies and estimates. This information would facilitate the understanding of the process of preparation of the financial statements and the judgements used by management. Major disclosure areas may include revenues recognised, methods of depreciation, and accounting for contingencies or uncertainties.

Accounting Cycle

The accounting cycle refers to a step-by-step process applied by businesses in the recording and preparation of financial statements. There are six stages that include:

   1. Identifying Transactions

• The accounting cycle starts with the identification of the financial transactions. Examples could include sales, purchases, payment receipts, or any form of financial transaction taking place within the company. All of these transactions should then be accounted for in the accounting cycle. This may take place with source documents such as an invoice, a receipt, a purchase order, and a bank statement.

   2. Journalising

• The transaction is recorded in a journal often referred to as the general journal after identification of the transactions. This journal represents a chronological record of all transactions and consists of critical details such as the date of the transaction, accounts affected, a description of the transaction, and the amount involved.

   3. Posting

• After transactions are recorded in the journal, they must be transferred to the general ledger. The general ledger is a comprehensive record of all accounts used by the company. Each account, whether it’s an asset, liability, equity, revenue, or expense, has its dedicated ledger page.

   4. Trial Balance

• The trial balance is prepared once all transactions have been posted to the general ledger. This is an important tool of internal control that would ensure that there is equality of debits and credits in the accounting system. A failure to balance the trial balance means an error has occurred in the accounting records, which has to be corrected before proceeding further.

   5. Adjusting Entries

• The accounting records have to be updated in such a way as to reflect the accrual accounting principle by making adjusting entries. They are essential in showing the occurrence of revenues and expenses earned or incurred, regardless of the fact that cash has not exchanged.

6. Financial Statements

• With the adjusting entries prepared and accounts current, one then prepares the financial statements.

Closing Entries

The accounting cycle would not be complete if closing entries were not done since it resets temporary accounts and prepares them for the next accounting period. Closing entries is the final step in the accounting cycle. They are necessary for resetting the temporary accounts, like revenue and expense accounts, to zero balances. The aim is to prepare these accounts for the next accounting period. These are:

   1. Closing Revenue Accounts

• Purpose: To transfer the sum of the revenue recorded throughout the accounting period into the income summary account. This will leave the revenue accounts empty for use in the next accounting period.
• Procedure: Debit the balance of each of the revenue accounts while crediting that same amount to the income summary account.

   2. Closing Expense Accounts

• Purpose: To transfer all expenses incurred during the period to the income summary account. This will ensure that all expense accounts are reset to zero for the new period.

• Process: Credit the balance of each expense account and debit the equivalent amount to the income summary account.

   3. Transferring to Capital Accounts

• Purpose: Move the net income or the net loss from the income summary account into the capital of the owner in terms of net income profit or overall loss.

• Process: Income summary is debit if a debit balance signifies a loss; else a credit balance is an indication that there is a profit, and the amount shall be credited to the capital account.

Auditing

Auditing refers to the process of evaluating and reviewing a firm’s accounting records to determine accuracy and adherence to established accounting standards. It is commonly conducted by an external auditor. The following are the major considerations of auditing:

   1. Internal vs. External Audits

• Internal Audit: Auditing done within an organisation by its employees.
• External Audit: It is carried out by external, independent auditors.

   2. Auditor Independence

• Auditors should not be biased to ensure the credibility of the audit.

   3. Auditor Reports

• An auditor will issue a report on the findings based on their opinion, which may be either “unqualified,” “qualified,” or “adverse.”

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Conclusion

In the competitive finance and accounting world, success in a job interview sets the stage for a career. We hope this guide has given you valuable insight into key concepts and interview tips to make a lasting impression on your future employers. Remember, preparation and confidence are your keys to success.

FAQs

What’s the difference between assets and liabilities?
Assets represent what a company owns, such as cash or property, while liabilities are the debts or loans it owes.

What’s the purpose of an income statement?
An income statement displays the profit of a company for a specific period by indicating revenues and subtracting expenses to result in net income or loss.

Can you explain the accounting cycle briefly?
The accounting cycle follows a sequence of steps such as journalising, posting, preparing a trial balance, and generating financial statements.

What are adjusting entries, and why are they necessary?
Adjusting entries ensures the correct periodisation of transactions, thus correctly matching revenues with expenses and updating asset and liability accounts.

Why do companies need external audits?
An external audit ensures that the financial statements are accurate, compliant, and transparent. This will also build stakeholders’ trust and fulfil legal requirements.

Partham Barot is an ACCA-certified professional. showcasing his expertise in finance and accountancy. he’s revolutionising education by focusing on practical, real-world skills. Partham’s achievements underscore his commitment to elevating educational standards and empowering the next generation of professionals.