Financial accounting is the language of business; it forms a basis of communication between a business owner and external parties like shareholders, creditors and potential investors. As you will realize, it is difficult for a business to thrive without basic knowledge on accounting. It is important for potential accounting job seekers and students to equip themselves with basic accounting knowledge. If you are new in accounting and preparing for accounting interview or exam, the following accounting questions will help you practice and build confidence prior to the task ahead.
What is the general financial accounting equation?
Accounting equation also called the balance sheet equation forms the basis of double entry rule. The equation is; Assets= Capital/ Equity + Liabilities. It indicates the relationship between the owners’ equity, capital and assets. The balance sheet gives a detailed representation of the accounting equation by equating assets on one side to owners’ equity and liabilities on the other side.
Explain the principle of double entry rule?
Double entry concept states that for every financial transaction (i.e debit or credit) you must record of an equal value on opposite financial entry. Financial transactions have a different effect on different classes of accounts. However, the double entry principle ensures that there is a balance in the book keeping equation and ensuring balancing of trial balance at the end.
What do you understand by GAAP accounting?
GAAP is an acronym for Generally Accepted Accounting Principles. These GAAP provides regulations which an entity should use in preparation of financial statements and presenting it to the public. GAAP safeguards the interests of financial statement users like potential investors, shareholders, creditors and the government from in accurate financial reports. Application of GAAP is in the United States while International Financial Reporting Standards applies across many countries in the world.
What is accrual basis of accounting?
Accrual basis is a concept that record revenues in the income statement when they occur as opposed to when you receive the cash. This is contrary to the cash basis which records transactions in the income statement when you receive the cash is. Accrual basis provides a better approach to estimate the profitability of a business in a trading period.
State and explain two purposes of a bank reconciliation statement
Bank reconciliation is a statement that correct and match the bank balance between the organization cash book and the actual bank balance in its bank statement. The main reason for difference in bank balance is due to items which may appear in the bank statement but not reflecting in the cash book. Examples are bank charges, dishonored check, direct credits, direct debits and bank charges among other items. Preparation of bank reconciliation is meant to adjust the cash balance to agree with the bank statement balance by reflecting omitted transactions.
What is ratio analysis in financial accounting?
Ratio analysis provides a means of relating different financial variables from a business financial statement. The analysis uses the information obtained to analyze business performance. Ratio analysis is a tool that indicate different performance measurement like profitability, liquidity, solvency and efficiency.
It is important to note that most accounting questions involve summarizing, recording, analyzing, interpreting and explaining financial transactions; most of which are mathematical in nature. We help our clients find answers to different types of accounting questions ranging from simple to more complicated accounting questions. Our expertise possess a deep understanding of accounting concepts and years of experience in accounting questions academic essay writing.