TABLE OF CONTENTS
- Accounting Journal Entry—an Understanding
- Elements of a Journal Entry
- Journal Entry Questions and Answers to Ace Your Interview
- Conclusion
- FAQs
Accounting Journal Entry—an Understanding
Usually, the first point of recording a business transaction is an accounting journal. Typically, the journal consists of information on expenses, sales, cash flow, inventory, and debt information. Often, the journal indicates the transaction date, amounts involved, and accounts affected. Accounting professionals use a journal to reconcile future accounts. Furthermore, every transaction in the journal is called a journal entry.
For those who wish to enter the accounting field, thorough knowledge and understanding of a journal entry is paramount. Therefore, an aspirant accountant should have full knowledge of basic general entries, and should be able to answer journal entries questions.
Elements of a Journal Entry
Journal entries follow the accounting field of a double-entry rule, meaning that at least two accounts will be affected by every transaction, such as increased or decreased through a debit or a credit entry. Moreover, the debits and credits total should always equal each other, which ensures that the journal entry is in balance.
The Elements include:
- Date – the transaction date that helps keep financial activities in order
- Reference Number – A unique number for every transaction, which helps identify and retrieve the entry
- Credit and Debit Amounts – The amounts debited from one account and credited to the other
- Description – A brief description of the transaction, which helps audit and detect errors
- Account Names – Names of the accounts involved in the transaction
- Debit and Credit
Debit records increase in assets and expenses, and decrease in equity and liabilities.
Credit records increase in equity and liabilities, and decrease in expenses and assets.
- Double-Entry Principle – For each transaction, debits should equal credits to maintain the account balance.
Debit and Credit 101
A debit or DR is an entry on the left side of an account. A credit or CR is an entry on the right side of the account. When recording transactions, you use different accounts depending on the transaction type. The main accounting accounts include:
- Assets – physical or non-physical types of property that add business value, such as equipment, cash, and land.
- Expenses – costs that occur during business operations, including wages and supplies.
- Liabilities – Amounts that you owe, which include accounts payable.
- Equity – Assets minus liabilities.
- Income/Revenue – Money that your business earns.
Three Main Types of Accounts in Accounting
Personal Accounts
- Record transactions for individuals, firms, and companies.
- Include customers, corporations, creditors, institutions, and outstanding incomes and expenses.
Real Accounts
- Record the property and liabilities of a business.
- It includes cash and bank accounts, as well as investment and property accounts.
Nominal Accounts
- Record income, gains, expenses, and losses.
- The nominal account rule states that all expenses and losses should be debited, and all gains and incomes should be credited.
Other Account Types
- Equity – represents a company’s ownership interest.
- Accounts payable – shows the money owed to vendors, suppliers, and other third parties.
- Accounts receivable – keep tabs of outstanding balances and ensure timely collection of payments owed by customers.
- Representative personal accounts – represent the accounts of natural or artificial persons.
A Journal Entry is Paramount in Any Business
In today’s fast-paced business landscape, maintaining accurate journal entries helps businesses keep track of their financial health and adhere to regulatory requirements. Understanding the function of these entries within the broader accounting scope can provide valuable insights into the operations and financial stability of the company’s operations.
Journal Entry Questions and Answers to Ace Your Interview
The main purpose of accounting interview questions is to evaluate the proficiency of a candidate in financial principles as well as their ability to apply their technical skills in the real-world landscape. Interviewers ask these questions to ensure that the candidate can handle the responsibilities and contribute to the financial health of an organization.
To ace your interview, it’s important to master basic journal entries questions.
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What is the Accounting Equation?
Interviewers ask about this to assess your fundamental understanding of the principles of accounting since it is the cornerstone of double-entry bookkeeping and necessary for roles such as accountant or financial analyst.
Example Answer:
The equation goes like this: Assets = Liabilities + Equity. This is the fundamental principle that ensures a balanced financial statement, reflecting the company’s true financial position.
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Can you name the three main financial statements?
Interviewers will ask you this to gauge your foundational knowledge, as these documents are vital in analyzing the financial health of the company and to make informed decisions.
Example Answer:
Balance sheet, income statement, and cash flow statement are the three main financial statements. The balance sheet is a snapshot of the financial position of the business, the income statement shows profitability over a period, and the cash flow details cash in and out.
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What is the difference between accounts payable and receivable?
You might be asked this to assess your understanding of the necessary accounting processes as well as your ability to effectively manage the company’s cash flow.
Example Answer:
Accounts payable refer to money that the business owes to suppliers, while accounts receivable is money owed by customers to the business. Effective management of both is paramount to maintain a healthy cash flow and to ensure financial stability.
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How will you manage tight deadlines?
Interviewers may ask this to evaluate your time management skills and your ability to work under pressure, which are important in fast-paced scenarios, like project management or accounting.
Example Answer:
I manage tight deadlines by prioritizing tasks according to importance and urgency, as well as using project management tools to stay organized. For instance, I successfully managed several deadlines during the last quarter-end close by breaking down tasks into manageable steps and with close collaboration with the team.
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Can you explain what a general ledger is?
Interviewers may ask this to assess your understanding of a fundamental accounting tool that records all financial transactions. The tool is essential to maintain accurate financial records and prepare financial statements.
Example Answer:
A general ledger is a complete and thorough record of all financial transactions within the business, which serves as the foundation for the financial statement preparation. Moreover, it ensures transparency and accuracy by summarizing all financial data.
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How do you ensure work accuracy?
Interviewers ask about this to evaluate your attention to detail as well as commitment in maintaining high standards, which are crucial in accounting or data analysis.
Example Answer:
I ensure work accuracy by reviewing all financial data meticulously using advanced accounting software to cross-verify entries. In a recent audit, my attention to detail helped identify a discrepancy that saved the business from a possible financial misstatement.
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Have you any experience with accounting software?
You will be asked about accounting software to determine your technical ability and proficiency to adapt to the tools commonly used in the field, which is important for the role of an accountant or financial analyst.
Example Answer:
I have extensive knowledge and experience in different accounting software, such as Oracle, QuickBooks, and SAP. Previously, I simplified the financial reporting process by integrating all these tools, which resulted in a 20 percent efficiency boost.
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What is a Balance Sheet?
Interviewers will ask this to assess your understanding of the fundamental financial statement, which provides a snapshot of the financial status of a business.
Example Answer:
A balance sheet is a financial statement that provides a snapshot of the financial position of the company at a specific time. Moreover, it includes assets, liabilities, and equity, offering a transparent picture of the company’s financial health.
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Can you explain what depreciation is, and how it’s calculated?
Interviewers ask about this to assess your understanding of values and assets allocation over time, which is vital for accurate tax calculations and financial reporting.
Example Answer:
Depreciation is the allocation of the cost of an asset over its useful life, which reflects its wear and tear or even obsolescence. Common methods of depreciation calculation include straight-line and declining balance, which help in reporting the asset value accurately.
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What’s the difference between cash basis and accrual basis accounting?
This is asked to assess your understanding of the fundamental accounting methods, as well as their impact on financial reporting.
Example Answer:
Cash basis accounting recognizes revenue and expenses only when there is cash exchanged. Accrual basis accounting recognizes them when they’re incurred or earned, regardless of cash flow. This distinction is important for accurate financial reporting and decision-making.
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How do you handle confidential information?
Interviewers ask about this to evaluate your ability to maintain security and privacy, which is crucial in roles that involve sensitive data.
Example Answer:
I handle confidential information through a strict adherence to company policies and using secure systems to protect sensitive data. For instance, I have experienced implementing encryption protocols that ensure the security of client financial records, accessed only by authorized personnel.
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What is a Trial balance?
You will be asked about the trial balance for them to assess your ability to ensure that all financial transactions are recorded and balanced accurately, which is vital to maintain accurate financial records and prepare financial statements.
Example Answer:
A trial balance is a statement listing all ledger accounts and their balances at a certain point in time. Moreover, it ensures that debits equal credits, verifying the accuracy of financial records before making the financial statement.
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What is a deferred tax asset or liability?
Interviewers ask about this to assess your understanding of how temporary differences between accounting and tax treatments affect the financial statement.
Example Answer:
A deferred tax asset arises when a business has paid taxes in advance or overpaid taxes. A deferred tax liability happens when taxes are accumulated but not yet paid. The differences are due to temporary discrepancies between taxable income and accounting income.
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Can you explain what working capital is?
This question serves to assess your understanding of the short-term financial health and operational efficiency of the company.
Example Answer:
Working capital is the difference between the current assets and liabilities, which indicates its short-term financial health. It’s crucial to ensure that the business meets its operational requirements and effectively manage its daily expenses.
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What’s the purpose of a bank reconciliation?
This question helps to assess your ability to ensure the accuracy of financial records by comparing internal records with bank statements.
Example Answer:
A bank reconciliation’s purpose is to compare internal financial records with bank statements to ensure accuracy and determine if there are discrepancies. This helps prevent errors and detect fraud in financial reporting, maintaining the financial data’s integrity.
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What’s the difference between a profit and loss statement and balance sheet?
Interviewers ask this to evaluate your understanding of key financial statements and their distinct roles in assessing the financial position and performance of a company.
Example Answer:
A profit and loss statement showcases the expenses and revenues over a certain period, highlighting its profitability. A balance sheet on the other hand provides a snapshot of the financial position of the company at a specific time, which includes assets, liabilities, and equity.
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How do you stay updated with accounting regulations and laws?
Interviewers ask about this to evaluate your commitment to continuous learning and to ensure compliance.
Example Answer:
I stay updated by reading industry publications and updates from regulatory bodies regularly. Moreover, I also join professional workshops and webinars to ensure I am always informed of the latest changes.
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What’s the difference between a journal and a ledger?
Interviewers assess your understanding of fundamental accounting processes. Furthermore, they also ask this to determine how transactions are organized and recorded.
Example Answer:
A journal is a detailed chronological order of all financial transactions. A ledger is a summary of these transactions by account, providing a clear view of financial activity. The journal is deemed the entry point while the ledger organizes financial statement data.
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What is the purpose of an audit?
Interviewers will ask about this to assess your understanding of its roles in ensuring integrity and accuracy of financial statements.
Example Answer:
The purpose of the audit is to provide an independent financial statements examination to ensure accuracy and compliance with accounting standards. This process helps create trust with stakeholders through verifying a company’s financial integrity.
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How do you manage numerous tasks and priorities?
Interviewers ask about this to determine your organizational skills and ability to efficiently handle workload, which is necessary in fast-paced environments, like accounting or project management.
Example Answer:
I manage various priorities and tasks using a combination of project management tools and time management techniques. I have successfully balanced financial reporting, audits, and team coordination by setting clear deadlines and priorities.
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In accounting, what is the purpose of budgeting?
This helps assess your understanding of resource allocation and financial planning, which is vital in maintaining efficiency.
Example Answer:
Budgeting in accounting is to allocate resources efficiently to achieve organizational goals as well as monitor performance. Also, it provides a framework for controlling expenses and making informed decisions.
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What is a fixed asset?
This question is asked to assess your understanding of long-term tangible assets that are crucial for financial planning and company operations.
Example Answer:
A fixed asset is a long-term tangible asset used in the operations of a business, which includes machinery, buildings, and equipment. These are not to be converted to cash within a year and are vital for long-term financial planning.
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Can you explain what a contingent liability is?
Interviewers ask about this to assess understanding of possible financial obligations that could impact the company’s financial statements.
Example Answer:
A contingent liability is a possible financial obligation that is dependent on the outcome of a future event. For instance, if a company is facing a lawsuit, the liability will be recorded only if it’s probably that it will lose the case and the amount could be estimated reasonably.
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What’s the difference between a capital lease and operating lease?
This helps assess your understanding of lease accounting and how it impacts financial statements.
Example Answer:
A capital lease is a long-term lease that transfers the rights of ownership to the lessee. An operating lease is a short-term lease wherein the lessor retains ownership. A capital lease is recorded as an asset and liability on the balance sheet, while an operating lease is treated as a rental expense.
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How do you handle financial record discrepancies?
This helps evaluate your skills in problem-solving and attention to detail, which are important in maintaining accurate financial data.
Example Answer:
When handling discrepancies, I first do a complete review to determine the source of the problem. Then, I will use a reconciliation software to cross-check data and ensure accuracy.
Conclusion
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FAQs
1. How to pass the journal entry interview?
You can pass the interview by thoroughly understanding the fundamental accounting principles, the debit-credit rules, and identifying accounts affected by a transaction accurately.
2. How to prepare a journal entry?
Write a journal entry by debiting your account from which the money would be deducted and crediting the account where money would be transferred.
3. How can I pass an accounting interview?
You should be able to discuss your technical skills, such as preparing cash flow and financial statements, using software, and monitoring financial activities.
4. How do I ace the entry-level accounting interview?
You can ace your interview by knowing the company and job description inside out, brushing up on the basics, highlighting your education and skills, and the reason you want to become an accountant.
5. How do I introduce myself in the interview?
First, provide a basic introduction of yourself, then bring in your experience, as well as your years of experience, and your primary focus areas in accounting.
