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Question 1. Define Accounting?
Answer :
According to American Institute of Certified Public Accountants (AICPA), “Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money transactions and events which are, in part at least, of a financial character and interpreting the results there of.”
American Accounting Association (AAA) has defined accounting as “the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by users of the information.”
Question 2. What Are Its Objectives?
Answer :
To record the business transactions in a systematic manner.
To determine the gross profit and net profit earned by a firm during a specific period.
To know the financial position of a firm at the close of the financial year by way of preparing the balance sheet.
To facilitate management control.
To assess the taxable income and the sales tax liability.
To provide requisite information to different parties, i.e., owners, creditors, employees, management, Government, investors, financial institutions, banks etc.
Financial Accounting Interview Questions
Question 3. What Are Its Characteristics?
Answer :
Accounting is the art of recording and classifying different business transactions.
The business transactions may be completely or partially of financial nature.
Generally the business transactions are described in monetary terms.
In accounting process, the business transactions are summarized and analyzed so as to arrive at a meaningful interpretation.
The analysis and interpretations thus obtained are communicated to those who are responsible to take certain decisions to determine the future course of business.
Question 4. What Are Its Limitations?
Answer :
Accounting information is expressed in terms of money. Non monetary events or transactions, however important, are completely omitted.
Fixed assets are recorded in the accounting records at the original cost, that is, the actual amount spent on them plus all incidental charges. In this way the effect of inflation (or deflation) is not taken into consideration.
Accounting information is sometimes based on estimates; estimates are often inaccurate.
Accounting information cannot be used as the only test of managerial performance on the basis of more profits.
Accounting information is not neutral or unbiased. Accountants calculate income as excess of revenues over expenses. But they consider only selected revenues and expenses.
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Question 5. What Are The Various Functions Of Accounting?
Answer :
Recording: Accounting records business transactions in terms of money. It is essentially concerned with ensuring that all business transactions of financial nature are properly recorded.
Classifying: Accounting also facilitates classification of all business transactions recorded in journal. Items of similar nature are classified under appropriate heads.
Summarizing: Accounting summarizes the classified information. It is done in a manner, which is useful to the internal and external users. Internal users interested in these information’s are the persons who manage the business.
Interpreting: It implies analyzing and interpreting the financial data embodied in final accounts. Interpretation of the data helps the management, outsiders and shareholders in decision making.
Accounts Interview Questions
Question 6. Explain The Different Systems Of Accounting?
Answer :
Cash Basis Accounting: According to this system, only actual cash receipts and payments are recorded in the books. The credit transactions are not recorded at all, till actual cash is received or paid.
Mercantile or Accrual System: According to this system, all the business transactions pertaining to the specific period, whether of cash or credit nature, are recorded in the books. This system of accounting is based on accrual concept, which states that revenue is recognized when it is earned and expense is recognized when obligation of payment arises.
Mixed System: Mixed system is modified form of pure-cash-basis accounting. Because of the fact that pure cash basis would result in balance sheet and income statement with limited use, it necessitates the need of mixed accounting in which some items (especially sales and period costs are treated on cash basis and some items (especially product costs and long-lived assets) are treated on accrual basis.
Question 7. What Is Financial Accounting ?
Answer :
Financial or traditional accounting consists of the classification, recording, and analysis of the transactions of a business in a subjective manner according to the nature of expenditure so as to enable the presentation at periodic intervals, of statements of profit or loss of the business and, on a specified date, of its financial state of affairs.
Tally Interview Questions
Question 8. What Is Management Accounting ?
Answer :
Management accounting includes all those accounting services by means of which assistance is rendered to the management at all levels, in formulation of policy, fixation of plans, control of their execution, and measurement of performance. Management accounting is primarily concerned with the supply of information which is useful to the management in decision making for the efficient running of the business and thus, in maximizing profit.
Question 9. What Is Social Responsibility Accounting ?
Answer :
Social responsibility accounting is a new phase in the development of accounting and owes its birth to increasing social awareness, which has been particularly noticeable over the last two decades or so. Social responsibility accounting widens the scope of accounting by considering the social effects of business decisions, in addition to the economic effects. The role of business in society is increasingly coming under greater scrutiny.
Taxation Interview Questions
Question 10. What Is Human Resource Accounting ?
Answer :
It is another new field of accounting which seeks to report and emphasize the importance of human resources in a company’s earnings. It is based on the fact that the only real long lasting asset which an organization possesses is the quality of the people working in it. This system of accounting is concerned with ” the process of identifying and measuring data about human resources and communicating this information to interested parties.”
Question 11. How Does Management Accounting Differs From Financial Accounting?
Answer :
Financial or traditional accounting consists of the classification, recording, and analysis of the transactions of a business in a subjective manner according to the nature of expenditure so as to enable the presentation at periodic intervals, of statements of profit or loss of the business and, on a specified date, of its financial state of affairs. The day-to-day transactions journalized or recorded in subsidiary books are posted in the various ledgers and at the end of the accounting period, a Profit and Loss Account and a Balance Sheet are prepared.
VAT Interview Questions
Question 12. What Is The Difference Between Expenses And Expenditure?
Answer :
Expense is the outflow from a profit oriented organization while expenditure is the outflow from non-profit organization.
Financial Accounting Interview Questions
Question 13. What Are Differences Between Financial Accounting And Management Accounting?
Answer :
Financial Accounting: Financial accounting depicts the past position of the concern, while management accounting stresses at future. Financial accounting is mandatory for all joint stock companies and business organizations but this is not the case with management accounting.
Management Accounting: Management accounting provides data to managers to help them in making decisions about the future. To the contrary, financial accounting aims at meeting the requirements of outside parties who have financial stake in the business.
Question 14. Discuss The Role Of Accountants In Modern Business Organization?
Answer :
Role of Accountants in Modern Business Organization:
Writing up Accounts for Preparing Financial Statements
Audit of Accounts
Role as Management Accountant
Help to government, Revenue Department and Tax Payer
Role as Cost Accountant
Role in Merger, Liquidation
Question 15. Write A Short Note On Finance Officer?
Answer :
Finance is the life blood of business. Procuring financial resources and their judicious utilization are the two important activities of financial management which is a specialized function. The finance manager has to strike a balance between the current needs of the enterprise for cash and the needs of the shareholders for adequate return. Often finance manager and controller are inter-changeable terms and only one of these two positions may be found in a company.
Account executive Interview Questions
Question 16. What Do You Mean By Basic Accounting Concepts?
Answer :
Accounting has come to present status after a period of several hundred years. During this period certain accounting assumptions, concepts and conventions have emerged. Accountants universally in the recording, classification, summarization and reporting of the transactions follow these. Accounting assumptions, concepts and conventions are called Generally Accepted Accounting Principles (GAAP) since they have been commonly accepted by professional accounting world as general guidelines for preparing financial statements and reports.
Question 17. List The Basic Accounting Concepts?
Answer :
The Institute of Chartered Accountants of India in its Accounting Standard-I (AS-I) has stated that going concern, accrual and consistency are fundamental accounting assumptions. For the sake of convenience all accounting concepts are discussed under two headings:
Basic accounting concepts.
Accounting concepts related to income measurement.
Accounting Reports Interview Questions
Question 18. What Are Basic Accounting Concepts?
Answer :
Basic Accounting Concepts are:
Entity Concept.
Money Measurement Concept.
Going Concern Concept.
Cost Concept.
Dual Aspect Concept.
Full Disclosure Concept.
Objectivity Concept.
Accrual Concept.
Accounts Interview Questions
Question 19. What Are Accounting Concepts Related To Income Measurement?
Answer :
Accounting concepts related to income measurement are:
The Time Period Concept (Periodicity Concept).
The Revenue Recognition (Realization) Concept.
The Matching Concept.
The Materiality Concept.
The Consistency Concept.
The Conservatism (Prudence) Concept.
Question 20. Discuss The Importance Of Setting Accounting Standards?
Answer :
Following is the importance of accounting standards:
Standards reduce or eliminate all together confusing variations in the accounting treatment used to prepare financial statements.
With different companies following same standards, comparison of their financial policies and financial results becomes easier.
Accounting standards take care of valuing inventories, contingencies, construction contracts, fixed costs, etc. They cover all aspects of financial activities of company.
The standards help the investors for taking decision on investment.
Setting standards is useful to both the company & and the investor.
Question 21. What Are The Purposes Of Accounting Information?
Answer :
Score Keeping:
The score-keeping function is one the primary purposes of accounting information. It basically deals with the financial health of the enterprise.
Attention Directing :
Attention directing is nothing but the process of giving a signal to the user of accounting information about the need to take a decision. As such the accounting information supplied the user’s attention to take decision.
Problem Solving:
The problem solving function of accounting information involves provisions of such information, which enables the manager to find solutions to the problems.
Question 22. What Are The Uses Of Earnings Information?
Answer :
Accomplishments.
Appropriation Decision.
Problem Identification Using Earning Data.
Determining the Market Value of a Firm.
Question 23. What Is A Balance Sheet?
Answer :
After ascertaining the profit or loss of the business, the businessman wants to know the financial position of his business. For this purpose he prepares a statement of Assets and Liabilities, which is called Balance Sheet.
Question 24. What Are The Objectives Of Preparing Balance Sheet?
Answer :
Principal Objective:
The main purpose of preparing balance sheet is to know the financial position of the business at a particular date.
Subsidiary Objectives:
Though the main aim is to know the exact financial position of the firm at a particular date, yet it serves other purpose as well.
It gives information about the actual and real owner’s equity. Though the capital of the owner indicates owner’s equity, yet some other liabilities are to be accounted for against it also.
It helps the firm to make provisions against possible future losses. A provision is made in the form of the Reserves.
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Question 25. Explain Its Characteristics Of Balance Sheet?
Answer :
The Balance Sheet as distinct from other financial statements has the following characteristics:
It is a statement and not an account. Although balance sheet is a part of the final accounts and prepared with the help of accounts, yet it is not an account but a statement.
It is always prepared on a particular date, and thus shows the position at that date and not for a period.
It has no debit side and credit side. Nor the words ‘To’ and ‘By’ are used before the names of the accounts shown therein. The headings are Liabilities and Assets.
It shows the financial position of the business concern.
It shows what the firm owes to others and also what others owe to the firm.
The totals of Liabilities and Assets always are equal.
Question 26. Write A Short Note On Uses Of Balance Sheet?
Answer :
It shows the financial position of the business concern.
It shows what the firm owes to others and also what others owe to the firm.
It shows the nature and value of the assets.
It also reflects the liquidity of a firm.
Question 27. What Is A Balance Sheet And What Information Does It Convey To An Outsider?
Answer :
The balance sheet is a statement, which shows the financial position of a business on a particular date. It is a statement of balances of all the accounts real and personal, debit balances of all such accounts represent assets and credit balances represent the liabilities.
1. Principal Objective:
The main purpose of preparing balance sheet is to know the financial position of the business at a particular date.
2. Subsidiary Objectives:
Though the main aim is to know the exact financial position of the firm at a particular date, yet it serves other purpose as well.
It gives information about the actual and real owner’s equity. Though the capital of the owner indicates owner’s equity, yet some other liabilities are to be accounted for against it also.
It helps the firm to make provisions against possible future losses. A provision is made in the form of the Reserves.
Taxation Interview Questions
Question 28. What Information Does It Convey To An Outsider?
Answer :
Balance sheet is prepared with a view to measure the true financial position of a business concern at a particular point in time. It shows the financial position of a business in a systematic form. It is a screenshot of the financial position of the business. At one glance, the position of the business, at a particular point of time, can be understood. The various groups interested in the company can draw useful inferences from an analysis of the information contained in the balance sheet.
Question 29. Explain The Meaning Of Owner’s Equity?
Answer :
Owner’s Equity is the residual interest in the assets of the enterprise. Therefore the owner’s equity section of the balance sheet shows the amount the owner have invested in the entity. However, the terminology ‘owner’s equity’ varies with different forms of organization depending upon whether the enterprise is a joint stock company or sole proprietorship/partnership concern.
Question 30. Explain The Meaning Of Assets?
Answer :
“The entire property of all kinds possessed by or owing to a person or organization is called assets. Assets are valuable resources owned by a business and acquired at a measurable money cost”.
Question 31. Explain The Meaning Of Fixed Assets?
Answer :
These are those assets, which are acquired for relatively long periods for carrying on the business of the enterprise. Such assets are not meant for resale. For example, Land and Building, Plant and Machinery etc.
Question 32. Explain The Meaning Of Accrued Liabilities?
Answer :
Accrued liabilities represents expenses or obligations incurred in the previous accounting period but the payment for the same will be made in the next period. In many cases where payments are made periodically, such as wages, rent and similar items, the last month’s payment many appear as accrued liabilities (especially if the practice is to pay the same on the first working day of a month). This obligation shown on the balance sheet indicates that the firm owed the said amount on the balance sheet date.
Question 33. Explain The Meaning Of Contingent Liability?
Answer :
These are liabilities which will exist or not, will depend on any future incident. For the sake of shareholders, it is shown in the footnote in the Balance Sheet. The items, which may come under this sub-heading, are:
Claims against company, which are still not accepted by the company.
Liability for amount uncalled on partly paid shares.
Arrears of fixed cumulative dividends.
Estimated amount of incomplete contracts (capital expenditures), arrangement of which is not made.
VAT Interview Questions
Question 34. What Do You Mean By Capital Expenditure And Revenue Expenditure?
Answer :
Capital Expenditure:
All expenditure incurred in acquiring fixed assets, or improving the existing ones by increasing its efficiency (e.g. by providing substitution, alteration or renovation), or effecting economy in operation of existing assets (e.g. by attaching power motor to hand driven machine) are called capital expenditure.
Revenue Expenditure:
They are all such expenses, which are incurred on the organization and for running the business. The benefits of such expenses are limited to the accounting period only. They are incurred to maintain the earning capacity of the business, whereas capital expenditure are incurred to improving the earning capacity of the business.
Question 35. Explain Deferred Revenue Expenditure?
Answer :
Sometimes some expenditure is incurred which by nature is revenue expenditure, but its benefits are likely to be derived over a number of years. If revenue expenditure is incurred during the current year but paid as advance for the coming year(s), such expenditure is called ‘Deferred Revenue Expenditure’.
Question 36. Explain Capital Receipts And Revenue Receipts?
Answer :
Capital receipts, like capital expenditures do not affect profit, and are either shown as a liability or more often as a reduction from the assets. Any excess realization over the book value of an asset may, however, be treated as a revenue receipt and accounted for as such. It is, therefore, essential to know the distinction.
Examples of Capital Receipts:
Capital invested by the owners of the business.
Amount received from sales of fixed assets or investments.
Conversion into Cash of any Asset except stock.
Loans received.
Account executive Interview Questions
Question 37. What Is Capital Loss And Revenue Loss?
Answer :
Capital loss is that loss which occurs due to sale of some fixed asset. For examples, loss due to issue of shares or debentures at a discount, loss due to misappropriation of Cash from the office or forfeiture of security deposited for getting an agency.
Revenue losses are those losses, which occur due to sale and purchase of goods. For example, Bad Debts, loss due to fall in the price of goods etc.
Question 38. Explain The Importance Of Preparing Trading Account?
Answer :
It provides information about gross profit. The current figure can be compared with earlier ones and reasons found for variations. Accordingly plan can be launched for future growth of the firm.
Ratio of gross profit to sales can help the trader to improve his business administration.
Ratio of direct expenses to sales will help the trader to control and rationalize the expenses.
Comparison of ‘stock in hand’ of the current year with those of the previous years. Reasons for variation can be found out and steps can be taken to adjust things more profitably.
Ratio of cost of goods sold to total sale proceeds can help the trader in fixing the prices of his products.
Precautionary measures can be taken to avoid possible losses by analyzing the items of direct expenses.
Question 39. What Is A Profit & Loss Account?
Answer :
“A Profit and Loss account is an account into which all gains and losses are collected in order to ascertain the excess of gains over the losses or vice versa”.
Question 40. Differences Between Management Accounting And Financial Accounting?
Answer :
The differences between management accounting and financial accounting include:
Management accounting provides information to people within an organization while financial accounting is mainly for those outside it, such as shareholders.
Financial accounting is required by law while management accounting is not. Specific standards and formats may be required for statutory accounts such as International Financial Reporting Standards.
Financial accounting covers the entire organization while management accounting may be concerned with particular products or cost centres.
Accounting Reports Interview Questions
Question 41. What Is Demat Account? What Is The Use Of It?
Answer :
Demat means Dematerialisation of share, in simple it is an account with which a person can trade in security market without which a person cannot buy or sell any share in security market.
Question 42. What Are The Basic Requirements Of Preparing Profit & Loss Account?
Answer :
Materiality.
Prior-period items.
Extra-ordinary items.
Change in accounting policies.
Accrual basis of accounting.
Question 43. Distinguish Between Straight Line And Written Down Method Of Providing Depreciation?
Answer :
Difference between Straight Line Method and Written Down Value Method:
Amount of Depreciation: The amount of depreciation remains the same all the years under straight-line method, while it goes on decreasing every year under the written down value method.
Computation of Depreciation: Under straight line method of depreciation, depreciation is charged on the original cost of the asset, while it is charged on the reducing balance every year under written down value method.
Value of Asset: Under the straight line method the value of the asset become nil at the end of its working life but it never becomes nil under the written down value method.
Rate of Depreciation: Normally, the rate of depreciation is lower under straight-line method whereas it is higher under the diminishing balance method.
Recognition: The straight line method of depreciation is not recognized by the income tax authorities while the later method is well recognized by them.
Question 44. Explain The Following Gross Profit?
Answer :
Gross Profit is obtained by subtracting the cost of goods sold from Net sales.
Gross Profit = Net Sales – Cost of Goods Sold.
Cost of Goods Sold = Opening Stock + Net Purchases + Direct Expenses – Closing Stock.
And Net Sales = Total Sales – Sales Return.
Question 45. Explain The Following Operating Profit?
Answer :
Operating Profit means profit earned by the concern from its business operation and not from the other sources. While calculating the net profit of the concern all incomes either they are not part of the business operation like Rent from tenants, Interest on Investment etc. are added and all non-operating expenses are deducted.
Question 46. Define The Terms ‘fund’ And ‘flow’ In The Context Of The Funds Flow Statement. How Is A Funds Flow Statement Prepared?
Answer :
Meaning of the term ‘Fund’: –
The term ‘Fund’ has been assigned different meanings by different people. In narrow sense ‘Funds’ means cash and Bank balance. To many people funds is nothing but having the net effect of various business events on the basis of cash. This explains the trend towards the preparation and presentation of “Cash Flow Statement” in published report of accounts.
Funds = Current Assets – Current Liabilities = Working Capital
Meaning of the term ‘Flow’: –
The term ‘Flow’ means change. Therefore flow of funds means change in working capital. The change in funds may be either positive or negative. It may be inflow of funds or outflow of funds.
Question 47. Write A Short Note On Cost Accounting?
Answer :
Cost accounting is concerned with the application of costing principles, methods and techniques for ascertaining the costs with a view to controlling them and assessing the profitability and efficiency of the enterprise. In the initial stages cost accounting was merely considered to be a technique for ascertainment of costs of products or services on the basis of historical data. In course of time it was realized, due to competitive nature of the market, that ascertaining of cost was not so important as controlling costs was.
The objectives of cost accounting are:
Ascertaining the costs.
Controlling the costs.
Reducing the costs.
Question 48. Explain The Meaning Of Fixed Cost?
Answer :
These are the costs which remain constants irrespective of the quantum of output within and up to the capacity that has been built up. Examples of such costs are: rent, insurance charges, management salary etc.
Fixed Cost is divided into :
(i) committed fixed costs and
(ii) discretionary fixed costs.
Committed Fixed Costs: This consists largely of those fixed costs that arise from the possession of plant, equipment and a basic organizational structure. For example, once a building is constructed and plant is installed noting much can be done to reduce the costs such as depreciation, property taxes, insurance and salaries of the key personnel etc.
Discretionary Fixed Costs: These are those costs, which are set at fixed amount for specific time periods by the management in the budgeting process. These costs directly reflect top management policies and have no particular relationship with volume of output. These costs can therefore be reduced or eliminated entirely, if the circumstances so require.
Question 49. Explain The Meaning Of Shut Down Costs?
Answer :
Those costs which continue to be incurred even when a plant is temporarily shut-down, e.g. rent, rates, depreciation, etc. these costs cannot be eliminated with the closure of the plant. In other words, all fixed costs, which cannot be avoided during the temporary closure of a plant, will be known as shut down costs.
Question 50. Explain The Meaning Of Sunk Costs?
Answer :
Historical costs incurred in the past are known as sunk costs. They play no role in decision making in the current period. For example, in the case of a decision relating to the replacement of a machine the written down value of the existing machine is a sunk cost .
Question 51. Explain The Meaning Of Opportunity Cost?
Answer :
This cost refers to the value of sacrifice made or benefit of opportunity foregone in accepting an alternative course of action. For example, a firm financing its expansion plans by withdrawing money from its bank deposits. In such a case the lots of interest on the bank deposit is the opportunity cost for carrying out the expansion plant.
Question 52. Explain The Meaning Of Controllable Costs?
Answer :
These are costs, which can be influenced by the action of a specified member of an organization. For example, the foreman of a production department can control the utilization of power or raw material in his department. These are, therefore, controllable costs as far as he is concerned.
Question 53. Explain The Meaning Of Uncontrollable Costs?
Answer :
These are costs that cannot be influenced by the action of a specified member of an undertaking. For example, the foreman of a production department can control the wastage of power in his department, but he cannot control the power, which is being wasted in the powerhouse itself resulting in higher cost per unit of power to him.
Question 54. Explain The Meaning Of Variable Costs?
Answer :
Variable costs tend to vary with the volume of output. Any increase in the volume of production result in an increase in the variable cost and vice-versa. For example, cost of material; cost of labor, etc.
Question 55. Explain The Meaning Of Imputed Or Hypothetical Costs?
Answer :
These types of costs are not recorded in the books of accounts. These costs are not actually incurred but are considered while making a decision. For example, in accounting, interest and rent are recognized only as expenditure when they are actually paid. But in costing they are charged on a notional basis while ascertaining the cost of a product.
Question 56. What Is A Cost Sheet?
Answer :
A Cost Statement or Cost Sheet is “a document which provides for the assembly of the detailed Cost of a Cost Center or Cost Unit”.It is a detailed statement depicting the subdivision of cost arranged in a logical order under different heads.
Question 57. Explain The Meaning Of Absorption Costing?
Answer :
Absorption costing technique is also termed as Traditional or Full Cost Method. According to this method, the cost of a product is determined after considering both fixed and variable costs. The variable costs, such as those of direct materials, direct labor, etc. are directly charged to the products, while the fixed costs are apportioned on a suitable basis over different product manufactured during a period.
Question 58. Explain The Meaning Of Marginal Costing?
Answer :
Marginal costing is a special technique used for managerial decision making. The technique of marginal costing is used to provide a basis for the interpretation of cost data to measure the profitability of different products, processes and cost centers in the course of decision making.
Question 59. Explain The Meaning Of Break Even Point?
Answer :
The break-even point is the point or state of a business at which there is neither a profit nor a loss. In other words, it is at this point where the contribution is equal to fixed expenses.
Question 60. Explain The Meaning Of Marginal Cost?
Answer :
The technique of marginal costing is concerned with marginal cost. The Institute of Cost and Management Accountants, London, has defined Marginal Cost as “the amount at any given volume of output by which aggregate costs are changed if the volume of output is increased or decreased by one unit”. Therefore, Marginal Cost refers to increase or decrease in the amount of cost on account of increase or decrease of production by a single unit. Marginal Cost ordinarily is equal to the increase in total variable cost because within the existing production capacity an increase of one unit in production will cause an increase in variable cost only.
Question 61. Examine The Relevance Of Marginal Costing In The Present Say Context Of Global Business Environment, With Suitable Illustrations, Comparing It With Other Techniques?
Answer :
Marginal costing is a special technique used for managerial decision making. The technique of marginal costing is used to provide a basis for the interpretation of cost data to measure the profitability of different products, processes and cost centers in the course of decision making. It can, therefore, be used in conjunction with the different methods of costing such as job costing, process costing etc., or even with other techniques such as standard costing or budgetary control.
Question 62. What Are The Advantages Of Marginal Costing ?
Answer :
The marginal cost remains constant per unit of output whereas the fixed cost remains constant in total. Since marginal cost per unit is constant from period to period within a short span of time, firm decisions on pricing policy can be taken.
Overheads are recovered in marginal costing on the basis of pre-determined rates. If fixed overheads are included on the basis of pre-determined rates, there will be under-recovery of overheads if production is less or if overheads are more.
Advocates of marginal costing argue that under the marginal costing technique, the stock of finished goods and work in progress are carried on marginal cost basis and the fixed expenses are written off to profit and loss account as period costs.
Marginal costing helps in carrying out break-even analysis, which shows the effect of increasing or decreasing production activity on the profitability of the company.
Marginal costing helps the management in taking a number of business decisions like make or buy, discontinuance of a particular product, replacement of machines, etc.
Question 63. What Are Limitations Of Marginal Costing?
Answer :
It is difficult to classify costs exactly into fixed and variable. Most of the expenses are neither totally variable nor wholly fixed.
Contribution itself is not a guide unless it is linked with the key factor
Sales staff may mistake marginal cost for total cost and sell at a price, which will result in loss or low profits. Hence, sales staff should be cautioned while giving marginal cost.
Overheads of fixed nature cannot altogether be excluded particularly in large contracts while valuing the work-in-progress. In order to show the correct position fixed over heads should be included in work-in-progress.
Some of the assumptions regarding the behavior of various costs etc., are not necessarily true in a realistic situation. For example, the assumption that fixed cost will remain static throughout is not correct.
Question 64. What Is Cvp Analysis?
Answer :
Profit is the most important measure of the firm’s performance. In the free-market economy, profit is a guide for allocating resources efficiently. An analysis of the effects of various factors on profits is an essential step in the financial planning and decision-making. The analytical technique used to study the behavior of profit in response to the changes in volume, costs and prices is called the cost-volume-profit (CVP) analysis.
Question 65. Explain Briefly The Meaning Of Margin Of Safety?
Answer :
The margin of safety represents the difference between the sales at break-even point and the total sales. It can be expressed as a percentage as well as in value. The size of the margin of safety shows the strength of the business. If the margin of safety is small, it may indicate that the firm has large fixed expenses and is more vulnerable to changes in sales. In other words, if the margin of safety is large a slight fall in sales may not affect the business very much but if it small even a slight fall in sales may adversely affect the business.
Question 66. What Is Variance In The Context Of Financial Management?
Answer :
A Variance is the difference between the actual cost and standard cost. If the effect of the variance is to increase the profit, the variance is said to be favorable. In the reverse case, it is adverse or unfavorable.
Question 67. Distinguish Between Direct Material Price Variance And Direct Material Usage Variance?
Answer :
Direct Material Price Variance:
It is that portion of the direct material cost variance which is due to the difference between the standard price specified and the actual price paid.
Mathematically:
DMPV = Actual Quantity x (Standard price- Actual price)
If the actual price is more than the standard price, the variance would be adverse and vice versa.
Direct Material Usage or Quantity Variance:
It is caused due to the difference between the standard quantity specified (for the output achieved) and the actual quantity used.
Mathematically:
DMUV = Standard rate x (Standard quantity for actual output – Actual quantity).
Question 68. What Do You Mean By Ratio Analysis?
Answer :
Ratio analysis is one of the techniques of financial analysis to evaluate the financial condition and performance of a business concern. Simply, ratio means the comparison of one figure to other relevant figure or figures.
Question 69. What Is Meant By Accounting Ratios?
Answer :
A relationship between various accounting figures, which are connected with each other, expressed in mathematical terms, is called accounting ratios.
Question 70. Classify The Various Turnover/activity/performance Ratios. Also Explain The Meaning, Method Of Calculation And Objective Of These Ratios?
Answer :
Classification of Turnover/Activity/Performance Ratios:
Capital Turnover Ratio
Fixed Assets Turnover Ratio
Working Capital Turnover Ratio
Stock Turnover Ratio
Debtors Turnover Ratio
Debt Collection Period
Question 71. What Do You Understand By Capital Structure?
Answer :
Capital structure decisions aims at determining the types of funds a company should seek to finance its investment opportunity and the preparation in which these funds should be raised.
Question 72. What Is The Relationship Between Financial And Operating Leverage?
Answer :
Relationship between financial and operating leverage: In business terminology, leverage is used in two senses: Financial leverage & Operating Leverage.
Question 73. What Do You Understand By “budgeting”?
Answer :
A budget is a plan expressed in quantitative, usually monetary term, covering a specific period of time, usually one year.
Question 74. What Do You Understand By Zero-based Budgeting?
Answer :
The technique of zero base budgeting provides a solution for overcoming the limitations of traditional budgeting by enabling top management to focus on priorities, key areas and alternatives of action throughout the organization.
Question 75. What Do You Understand By Cash Flow Statement?
Answer :
A Cash Flow Statement is similar to the Funds Flow Statement, but while preparing funds flow statement all the current assets and current liabilities are taken into consideration.
Question 76. What Is Business Process Execution Language (bpel)?
Answer :
Business Process Execution Language is a language that is executable for interaction specification along with Web services. The processes of BPCL will export and import information by utilizing exclusively web service interfaces.
Question 77. Explain Bpel And Workflow Foundation?
Answer :
BPEL is process-centric, where as workflow foundation is human centric. BPEL web services based language for business process behavior which can be used for composite web services, where as workflow foundation is a programming model for quickly building workflow enabled applications which are user interface-centric.
Question 78. What Is Role Of Bpel?
Answer :
BPEL is a language for relatively simple description of how web services are composed into business processes. BPEL is the first of its kind.
Allows abstract and executable processes.
Gained support by Majority of companies.
Allows software to exist and similar processes can be executed and developed.
Question 79. Explain About Bpel Orchestration And Choreography?
Answer :
Orchestration:
The control over the web services that are involved and coordinating the execution of different operations on the web services invoked in the operation is taken by the central process in orchestration as per the requirements. The involved web services are unaware of this process. With operations that are explicitly defined and the order of invocation of the web services, the orchestration is centralized.
Choreography:
Choreography does not rely on a central coordinator. The web services involved in the choreography is aware exactly the execution of its operations and whom to interact with. Choreography is a collaborative effort. It focuses on messages exchange. The awareness of business process, operations to execute, messages to exchange, and the time of message exchange are needed for all participants of choreography.
Question 80. Explain About Bpel Executable And Abstract Processes?
Answer :
The exact details of business processes can be specified by executable processes. These can be executed by orchestration engine. An executable process is used in most cases of BPEL. The public message exchange among parties is only allowed by abstract business process. The internal details of process flows do not include and are not executable.
Question 81. What Is Oracle Bpel Process Manager?
Answer :
Oracle BPEL Process Manager is a BPEL engine. It is a member of Oracle Fusion middleware family of products. Orchestration disparate applications and web services are enabled enterprises by Oracle BPEL Process Manager. Quick building and deploying this processing ability in a standards-based manner delivers critical functionality for developing SOA.
Question 82. What Is Bpmn Standard For Business Process Modeling And Analysis?
Answer :
The BPMN specifies a graphical notation for expressing business processes in a Business Process Diagram. Both technical users and business users are supported for business processes using BPMN. BPMN provides a standardized, simple means of process information communication to other business users, customers, suppliers and process implementers.
Question 83. What Is Gaap?
Answer :
Generally Accepted Accounting Principles.
Question 84. What Is The Classification Of Allowance For Uncollectible Accounts?
Answer :
Contra-Asset to Accounts Receivable.
Question 85. What Is The Classification Of Prepaid Rent And Prepaid Insurance?
Answer :
Asset.
Question 86. What Is The Classification Of Accumulated Depreciation?
Answer :
Contra-Asset.
Question 87. What Is The Classification Of Unearned Revenue?
Answer :
Liability.
Question 88. What Is The Purpose Of The Closing Entries?
Answer :
To transfer the temporary account balances to the Owner’s Capital account.
Question 89. What Is The Purpose Of Adjusting Entries?
Answer :
To ensure account balances properly reflect results of business operation.
Question 90. What Is The Purpose Of The Statement Of Owner’s Equity?
Answer :
To update the Owner’s Capital account (Retained Earnings).
Question 91. What Accounts Are Listed On The Income Statement?
Answer :
Revenues, Expenses.
Question 92. What Accounts Are Listed On The Balance Sheet?
Answer :
Assets.
Liabilities.
Owner’s Equity/Retained Earnings/Contributed Capital.
Question 93. Tell Me How Can We Use E4x In Mozilla And Mozilla Based Browers?
Answer :
To make use E4X with Mozilla and Mozilla based browsers (like: Netscape) we used Spidermonkey JavaScript engine. It has been extended to implement E4X but presently we can only use it in nightly trunk builds. The present releases Mozilla 1.7 suite, Firefox 1.0, Netscape 7.2 does not supported E4X.
Question 94. What Accounts Increase With A Credit?
Answer :
Liabilities.
Capital/Retained Earnings/Contributed Capital.
Revenues.
Question 95. What Accounts Increase With A Debit?
Answer :
Assets.
Expenses.
Withdrawals/Drawings/Dividends.
Question 96. What Does Accrual Accounting Mean?
Answer :
Record revenues when earned and expenses when incurred regardless of cash flow .
Question 97. What Are The Four Financial Statements?
Answer :
Income statement.
Statement of Owner’s Equity/Retained Earnings.
Balance Sheet.
Statement of Cash Flows.
Question 98. Explain The Accounts Payable Cycle.
Answer :
Demonstrate your knowledge of this cycle – the length of time it takes the company to pay its accounts payable – and what the implications of the length of this cycle are for the company, for example cash flow.
Question 99. What Is The Distinction Between Cost Accounting And Management Accounting?
Answer :
Cost accounting is concerned with cost accumulation for inventory valuation to meet the requirements of external reporting and internal profit measurement. Management accounting relates to the provision of appropriate information for decision-making, planning, control and performance evaluation.
Question 100. What Is An Ea In Accounting?
Answer :
EA stands for Enrolled Agent. It is a certification by the Internal Revenue Service given to those qualified to practice before them. To become an EA, one must pass a test given by the IRS, the purpose of which is to try to ensure that only qualified people practice before the IRS. You may not be a Power of Attorney for the IRS unless you are an EA or some other certified individual such as a CPA or an attorney.
Question 101. What Are The Different Branches Of Accounting?
Answer :
Following are different branches of accounting:
Cost Accounting.
Financial Accounting.
Management Accounting.
Question 102. Is Financial Accounting Necessary?
Answer :
Yes, the accounting calculates the cost of capital to the business. It compares the current, expected, and historic rates of return. Suppose a company is making 12% returns but borrowing money by using the owner’s credit card at 22% be good to know that.
Question 103. What Is Accounting Normalization?
Answer :
It is removing items from the income statement or balance sheet that do not normally occur during the course of business to better estimate the value of a company.
Question 104. What Are The 4 Phases Accounting?
Answer :
Recording.
Classifying.
Summarizing.
Interpreting.
Question 105. What Are The Functions Of Accounting?
Answer :
Accounting involves the creation of financial records of business transactions, flow of finance, the process of creating wealth in an organization, and summarizing the financial position of a business at a given moment in time.
