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As you prepare for a finance or accounting interview, its essential to have an idea of the types of questions you may be asked. While some questions may be easy, others may be quite challenging. This article will provide you with 10 finance and accounting interview questions, ranging from easy to difficult, to help you prepare for your next interview.

1. What Are the 3 Financial Statements, and How Are They Connected?

The financial statements are crucial for understanding a companys financial health. The three primary financial statements are the Profit and Loss (P&L), the Balance Sheet, and the Statement of Cash Flows.

The P&L provides an overview of the companys revenues, costs, and expenses over a particular period. The Balance Sheet shows a snapshot of the companys assets, liabilities, and equity at a particular point in time. The Statement of Cash Flows shows how the companys cash balance changed over a particular period.

The P&L connects to the Balance Sheet via an account called Retained Earnings. And the Cash Flows pulls balances from both the P&L and Balance Sheet.

2. What’s the Difference between Cash vs Accrual Accounting?

Cash accounting means that you classify money in as income and money out as expenses. Accrual accounting means that you classify income only when it’s earned, and expenses only when they are incurred.

Cash accounting is more straightforward and easy to understand, while accrual accounting provides a more accurate picture of a companys financial health.

3. What is Deferred Revenue?

Deferred Revenue represents the amount of goods or services a company owes to its customers. For example, if a customer pays for a subscription to a service upfront for a year, the company would recognize the revenue over the course of the year rather than all at once.

4. How Do Journal Entries Work?

Journal entries help communicate which accounts on your general ledger are increasing or decreasing. They are denoted via Debits and Credits and must always match one another.

5. What’s a Bank Reconciliation, and Why Is It Important?

Bank reconciliations allow you to compare and match the balance in your bank accounts to the amounts reported in your General Ledger. These are crucial because with cash balances, there can be no room for interpretation.

6. What is an Accrued Expense?

An accrued expense is an expense incurred but not yet paid. It can also represent an expense incurred in which a bill has not been received, resulting in an estimate.

7. What Are Workpapers, and How Should You Organize Them?

Workpapers showcase the supporting calculations for entries recorded in your general ledger, often prepared in Excel. It’s important for these to not only be accurate but also easy for someone else to read and understand.

8. What Are the Chart of Accounts, and How Should They Look?

Your chart of accounts represents the line items that show up on your P&L and Balance Sheet. Its important to design these accounts in a manner in which readers can understand what’s happening easily.

9. What’s a Contra Account, and How Does It Work?

A contra account is an account in a section that behaves in the opposite manner of the accounts in that section. An example can be a discount (contra revenue) and accumulated depreciation (contra asset).

10. How Do You Build a Statement of Cash Flows?

You can easily build a statement of cash flows via the indirect method by taking the net change in your balance sheet, as well as your net income. It is most commonly presented via your Cash from Operating Activities, Cash from Investing Activities, and Cash from Financing activities.

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