ACCOUNTING & FINANCE INTERVIEW QUESTIONS ( 271 - 280)

271 Contingent Asset : An asset the existence ownership or value of which may be known or determined only on the occurrence or non occurrence of one more uncertain future events.

272  Contingent liability : An obligation to an existing condition or situation which may arise in future depending on the occurrence of one or more uncertain future events.

273  Deficiency : the excess of liabilities over assets of an enterprise at a given date is called deficiency.

274 Deficit : The debit balance in the profit and loss a/c is called deficit.

275 Surplus : Credit balance in the profit & loss statement after providing for proposed appropriation & dividend , reserves.

276 Appropriation Assets : An account sometimes included as a separate section of the profit and loss statement showing application of profits towards dividends, reserves.

277 Capital Redemption Reserve : A reserve created on redemption of the average cost:- the cost of an item at a point of time as determined by applying an average of the cost of all items of the same nature over a period. When weights are also applied in the computation it is termed as weight average cost.

278 Floating Change : Assume change on some or all assets of an enterprise which are not attached to specific assets and are given as security against debt.

279        Difference between Funds flow and Cash flow statement :

Ø A Cash flow statement is concerned only with the change in cash position while a funds flow analysis is concerned with change in working capital position between two balance sheet dates.

Ø A cash flow statement is merely a record of cash receipts and disbursements. While studying the short-term solvency of a business one is interested not only in cash balance but also in the assets which are easily convertible into cash.

280 Difference Between the Funds flow and Income statement :

Ø A funds flow statement deals with the financial resource required for running the business activities. It explains how were the funds obtained and how were they used,

                            Whereas an income statement discloses the results of the business activities,   i.e., how much has been earned and how it has been spent.

Ø A funds flow statement matches the “funds raised” and “funds applied” during a particular period. The source and application of funds may be of capital as well as of revenue nature.

                                             An income statement matches the incomes of a period with the expenditure of that period, which are both of a revenue nature.

ACCOUNTING & FINANCE INTERVIEW QUESTIONS ( 261 - 270)

261  Convertible Debenture : A debenture which gives the holder a right to conversion wholly or partly in shares in accordance with term of issues.

262 Redeemable Preference Share : The preference share that is repayable either after a fixed (or) determinable period (or) at any time dividend by the management.

 

263 Cumulative preference shares : A class of preference shares entitled to payment of cumulates dividends. Preference shares are always deemed to be cumulative unless they are expressly made non-cumulative preference shares.

264 Debenture redemption reserve : A reserve created for the redemption of debentures at a future date.

265 Cumulative dividend : A dividend payable as cumulative preference shares which it unpaid cumulates as a claim against the earnings of a corporate before any distribution is made to the other shareholders.

266  Dividend Equalization reserve : A reserve created to maintain the rate of dividend in future  years.

267 Opening Stock : The term ‘opening stock’ means goods lying unsold with the businessman in the beginning of the accounting year. This is shown on the debit side of the trading account.

268 Closing Stock : The term ‘Closing Stock’ includes goods lying unsold with the businessman at the end of the accounting year. The amount of closing stock is shown on the credit side of the trading account and as an asset in the balance sheet.

269 Valuation of closing stock : The closing stock is valued on the basis of “Cost or Market price whichever is less” principle.

270 Contingency : A condition (or) situation the ultimate out come of which gain or loss will be known as determined only as the occurrence or non occurrence of one or more uncertain future events.

ACCOUNTING & FINANCE INTERVIEW QUESTIONS ( 251 - 260)

251 Meaning of Charge : charge means it is a obligation to secure an indebt ness. It may be fixed charge and floating charge.

252 Appropriation : It is application of profit towards Reserves and Dividends.

253 Absorption costing : A method where by the cost is determine so as to include the appropriate share of both variable and fixed costs.

254 Marginal Cost : Marginal cost is the additional cost to produce an additional unit of a product. It is also called variable cost.

255  What are the ex-ordinary items in the P&L a/c : The transaction which are not related to the business is termed as ex-ordinary transactions or ex-ordinary items. Egg:- profit or losses on the sale of fixed assets, interest received from other company investments, profit or loss on foreign exchange, unexpected dividend received.

256 . Share premium : The excess of issue of price of shares over their face value. It will be  showed with the allotment entry in the journal, it will be adjusted in the balance sheet on the liabilities side under the head of “reserves & surplus”.

257 Accumulated Depreciation : The total to date of the periodic depreciation charges on depreciable assets.

258 Investment : Expenditure on assets held to earn interest, income, profit or other benefits.

259 Capital : Generally refers to the amount invested in an enterprise by its owner. Ex; paid up share capital in corporate enterprise.

260 Capital Work In Progress : Expenditure on capital assets which are in the process of construction as completion.

ACCOUNTING & FINANCE INTERVIEW QUESTIONS ( 241 - 250)

241 Under capitalization : When a business is able to earn fair rate or over rate on it is outstanding securities.

242 Capital gearing : The term capital gearing refers to the relationship between equity and long term debt.

243 Cost of capital : It means the minimum rate of return expected by its investment.

244 Cash dividend : The payment of dividend in cash

245 Define the term accrual : Recognition of revenues and costs as they are earned or incurred . it includes recognition of transaction relating to assets and liabilities as they occur irrespective of the actual receipts or payments.

245 accrued expenses : An expense which has been incurred in an accounting period but for which no enforceable claim has become due in what period against the enterprises.

246 Accrued revenue : Revenue which has been earned is an earned is an accounting period but in respect of which no enforceable claim has become due to in that period by the enterprise.

247 Accrued liability : A developing but not yet enforceable claim by an another person which accumulates with the passage of time or the receipt of service or otherwise. it may rise from the purchase of services which at the date of accounting have been only partly performed and are not yet billable.

248 Convention of Full disclosure : According to this convention, all accounting statements should be honestly prepared and to that end full disclosure of all significant information will be made.

249 Convention of consistency : According to this convention it is essential that accounting practices and methods remain unchanged from one year to another.

250 Define the term preliminary expenses : Expenditure relating to the formation of an enterprise. There include legal accounting and share issue expenses incurred for formation of the enterprise.

ACCOUNTING & FINANCE INTERVIEW QUESTIONS ( 231 - 240)

231 Financial analysis :The process of interpreting the past, present, and future financial condition of a company.

232  Income statement : An accounting statement which shows the level of revenues, expenses and profit occurring for a given accounting period.

233 Annual report : The report issued annually by a company, to its share holders. it containing financial statement like, trading and profit & lose account and balance sheet.

234  Bankrupt  : A statement in which a firm is unable to meets its obligations and hence, it is assets are surrendered to court for administration

235  Lease : Lease is a contract between to parties under the contract, the owner of the asset gives the right to use the asset to the user over an agreed period of the time for a consideration

236 Opportunity cost : The cost associated with not doing something.

237  Budgeting : The term budgeting is used for preparing budgets and other producer for planning,co-ordination,and control of business enterprise

.

238 Capital : The term capital refers to the total investment of company in money, tangible and intangible assets. It is the total wealth of a company.

239 Capitalization : It is the sum of the par value of stocks and bonds out standings.

240 Over capitalization : When a business is unable to earn fair rate on its outstanding securities

BASIC ACCOUNTING & FINANCE INTERVIEW SHORT QUESTIONS (161-170)

161. Hedging: hedging means minimize the risk.

162. Capital market: capital market is the market it deals with the long term investment funds. It consists of two markets 1.primary market 2.secondary market.

163. Primary market: those companies which are issuing new shares in this market. It is also called new issue market.

164. Secondary market: secondary market is the market where shares buying and selling. In India secondary market is called stock exchange.

165. Arbitrage: it means purchase and sale of securities in different markets in order to profit from price discrepancies. In other words arbitrage is a way of reducing risk of loss caused by price fluctuations of securities held in a portfolio.

166. Meaning of ratio: Ratios are relationships expressed in mathematical terms between figures which are connected with each other in same manner.

167. Activity ratio: it is a measure of the level of activity attained over a period.

168. Mutual fund : a mutual fund is a pool of money, collected from investors, and is invested according to certain investment objectives.

169. Characteristics   of  Mutual Fund :

·        Ownership of the MF is in the hands of the of the investors

·        MF managed by investment professionals

·        The value of portfolio is updated every day

170.advantage of MF to investors :

·        Portfolio diversification

·        Professional management

·        Reduction in risk

·        Reduction of transaction casts

·        Liquidity

·        Convenience and flexibility

ACCOUNTING & FINANCE INTERVIEW QUESTIONS ( 221 - 230)

221.Fixed Assets Turnover Ratio : This ratio indicates the extent to which the investments in fixed assets contributes towards sales.

          Formula :             Net Sales           

                                        Fixed Assets

222 Pay-out Ratio : This ratio indicates what proportion of earning per share has been used for paying dividend.

         Formula :   Dividend per Equity Share     X 100

                                  Earning per Equity share                  

223 Overall Profitability Ratio : It is also called as “ Return on Investment” (ROI) or Return on Capital Employed  (ROCE) . It indicates the percentage of return on the total capital employed in the business.

               Formula :       Operating profit       X 100

                                         Capital employed

      The term capital employed has been given different meanings

a.     sum total of all assets whether fixed or current

b.     sum total of fixed assets,

c.      sum total of long-term funds employed in the business, i.e.,

share capital +reserves &surplus +long term loans –(non business assets + fictitious assets).

Operating profit means ‘profit before interest and tax’

224   Fixed Interest Cover Ratio : the ratio is very important from the lender’s point of view.  It  indicates whether the business would earn sufficient profits to pay periodically the interest charges.

                     Formula :    Income before interest and Tax 

                                                      Interest Charges

225 . Fixed Dividend Cover Ratio :  This ratio is important for preference shareholders entitled to get dividend at a fixed rate in priority to other shareholders.

                    Formula :     Net Profit after Interest and Tax 

                                                   Preference Dividend

226. Debt Service Coverage Ratio : This ratio is explained ability of a company to make payment of principal amounts also on time.

                 Formula :     Net profit before interest and tax

                                        Interest + Principal payment installment  

1-    Tax rate

227 Proprietary Ratio : It is a variant of debt-equity ratio . It establishes relationship between the proprietor’s funds and the total tangible assets.

                  Formula :     Shareholders funds

                                          Total tangible assets

228 Difference Between Joint Venture and Partner Ship :

Ø In joint venture the business is carried on without using a firm name,

In the partnership, the business  is carried on under a firm name.

Ø In the joint venture, the business transactions are recorded under cash system

      In the partnership, the business transactions are recorded under mercantile    system.

Ø In the joint venture, profit and loss is ascertained on completion of the venture

       In the partner ship , profit and loss is ascertained at the end of each year.

Ø In the joint venture, it is confined to a particular operation and it is temporary.

      In the partnership, it is confined to a particular operation and it is permanent

.

229 Meaning of Working capital

:

        The funds available for conducting day to day operations of an enterprise. Also    represented by the excess of current assets over current liabilities .

230 Concepts of Accounting :

1.     Business entity concepts :- According to this concept, the business is treated as a separate entity distinct from its owners and others.

2.     Going concern concept :- According to this concept, it is assumed that a business has a reasonable expectation of continuing business at a profit for an indefinite period of time.

3.     Money measurement concept :- This concept says that the accounting records only those transactions which can be expressed in terms of money only.

4.     Cost concept :-According to this concept, an asset is recorded in the books at the price paid to acquire it and that this cost is the basis for all subsequent accounting for the asset.

5.     Dual aspect concept :- In every transaction, there will be two aspects – the receiving aspect and the giving aspect; both are recorded by debiting one accounts and crediting another account. This is called double entry.

6.     Accounting period concept :- It means the final accounts must be prepared on a periodic basis. Normally accounting period adopted is one year, more than this period reduces the utility of accounting data.

7.     Realization concept :- According to this concepts, revenue is considered as being earned on the data which it is realized, i.e., the date when the property in goods passes the buyer and he become  legally liable to pay.

8.     Materiality concepts :- It is a one of the accounting principle, as per only important information will be taken, and un important information will be ignored in the preparation of the financial statement.

9.     Matching concepts :- The cost or expenses of a business of a particular period are compared with the revenue of the period in order to ascertain the net profit and loss.

10.                        Accrual concept :- The profit arises only when there is an increase in owners capital, which is a result of excess of revenue over expenses and loss.