The Top 20 Accounting and Finance Interview Questions You Need to Know
Interviewing for an accounting or finance role can be daunting. You need to demonstrate both your technical skills and your soft skills to show hiring managers you have what it takes to succeed in the role. That’s why it’s so important to prepare and practice responding to common accounting and finance interview questions.
In this comprehensive guide, I’ll cover the top 20 accounting and finance interview questions employers frequently ask, along with example answers to help you craft your own winning responses. From assessing your technical knowledge to evaluating your communication abilities, these questions aim to provide interviewers with a complete picture of what you can bring to the table.
Let’s dive in!
Technical Questions
The following technical questions aim to assess your core accounting and finance skills and knowledge:
- Walk me through the three main financial statements.
The three core financial statements are the income statement, balance sheet, and cash flow statement. The income statement shows a company’s revenues, expenses, and net income over a period of time. The balance sheet provides a snapshot of a company’s assets, liabilities, and shareholders’ equity at a specific point in time. Finally, the cash flow statement details the company’s cash inflows and outflows from operating, investing, and financing activities. Understanding how these three statements are interconnected is crucial for accurate financial analysis and reporting.
- What are the elements of the accounting equation?
The fundamental accounting equation is Assets = Liabilities + Equity. This shows that a company’s assets must equal the claims against those assets from liabilities and equity. Assets represent resources owned by the company, while liabilities represent its debts and obligations. Equity represents residual claim funds belonging to shareholders. This equation underpins the balance sheet and is a core concept in accounting.
- How does inventory accounting work?
There are two main methods of inventory accounting – FIFO (first-in, first-out) and LIFO (last-in first-out). FIFO assumes the oldest inventory items are sold first while LIFO assumes newest inventory is sold first. Under FIFO, lower costs from older inventory hits the income statement first, resulting in higher net income. Under LIFO, higher costs from newer inventory are expensed first, resulting in lower net income. Companies must choose a method and apply it consistently. Inventory accounting impacts cost of goods sold and the valuation of ending inventory on the balance sheet.
- What are the differences between book and tax depreciation?
Book depreciation is used for financial reporting while tax depreciation is used for income tax purposes. Book depreciation aims to allocate asset costs over useful life while tax depreciation aims to incentivize capital investments by allowing larger depreciation deductions early on. This creates timing differences between book and taxable income. Methods like straight line and double declining balance are used for book, while MACRS is predominant for tax in the U.S.
- Walk me through the closing process in accounting.
The closing process involves making adjusting journal entries to update financial statement accounts at the end of an accounting period. First, revenue and expense accounts are updated through adjustments. Next, permanent balance sheet accounts like assets, liabilities, and equity are updated. Finally, temporary balance sheet accounts like inventory are adjusted along with income statement accounts. An adjusted trial balance is prepared to ensure debits equal credits. Financial statements can then be prepared and the books are closed.
Soft Skills Questions
These behavioral interview questions aim to evaluate your soft skills and cultural fit:
- Tell me about a time you made a mistake in your accounting work. What was the error, and how did you handle it?
This question assesses your accountability, integrity, and problem-solving skills. Be honest about the mistake, taking ownership and outlining what you specifically learned. Emphasize how you took a proactive approach to correcting the error and putting processes in place to prevent it from happening again. This demonstrates maturity, responsibility, and adaptability.
- Describe a situation where you had to explain a complex accounting concept to a colleague or client unfamiliar with accounting principles.
This question evaluates your communication skills. Provide a specific example of breaking down a complex idea in accounting or finance in a way your audience could understand. Emphasize listening to their needs first, using relatable analogies and examples, and checking for understanding. This shows your ability to make technical concepts accessible to non-technical audiences.
- Tell me about a time you faced a challenging deadline in accounting or finance. How did you approach it?
This assesses your time management, organization, and composure under pressure. Describe the challenging situation and how you responded – whether gathering requirements early, creating project plans, or working overtime. Emphasize remaining focused, managing stress, and collaborating with colleagues. Show that even in high-pressure situations, you can prioritize effectively and deliver quality work on time.
- Describe a situation where you had to work collaboratively as part of an accounting/finance team. What was your role, and how did you ensure the team was successful?
This evaluates your teamwork, leadership, and project management abilities. Discuss a specific example that highlights your collaborative approach, whether participating in brainstorming, delegating tasks, encouraging teammates, or integrating different perspectives. Emphasize listening, influencing without authority, and promoting synergies to drive team success. This shows you can work effectively across an organization.
- Why are you interested in this accounting/finance position, and how do you envision contributing to our company’s success?
This assesses your motivation, values, and vision. Show that you’ve researched the company and role responsibilities, tying your interests and strengths to the position. Highlight your applicable skills, knowledge, and experience. Discuss opportunities to have an impact through your functional contributions as well as cultural fit. This demonstrates your enthusiasm and thoughtfulness about how you can positively impact the company.
Technical Questions (continued)
Let’s continue reviewing essential accounting and finance interview questions:
- How does the closing process impact the three main financial statements?
The closing process directly impacts the three main statements. Adjustments made to temporary accounts like inventory and revenues/expenses flow through to the income statement. Permanent account adjustments impact assets, liabilities, and equity on the balance sheet. And adjusting entries can affect the cash flow statement depending on if they are cash or non-cash transactions. The closing process ensures that all financial statements are updated and accurately reflect the company’s position at period end.
- What are the differences between IFRS and GAAP accounting standards?
While there are many detailed differences, some major ones are: IFRS has less guidance and principles versus GAAP’s rules-based standards; IFRS prohibits LIFO inventory method while GAAP allows it; IFRS has different treatment for development costs and extraordinary items; IFRS focuses more on fair value versus GAAP’s historical cost; and IFRS has different criteria for revenue recognition and depreciation calculations. There are ongoing convergence efforts, but many differences remain between the two standards.
- How would you test for and detect fraud in financial reporting?
Look for anomalies in account balances or patterns in transactions. Analyze relationships between accounts that should correlate. Review large, unusual period-end journal entries. Perform surprise inventory counts. Follow up on whistleblower tips. Conduct interviews to understand processes. Implement mandatory vacations and rotate duties. The controls around cash disbursements and revenue recognition often reveal fraud in financial reporting.
- What are the pros and cons of equity financing versus debt financing for a company?
Equity financing means selling shares of stock to investors – this raises cash without requiring repayment, but dilutes ownership. Debt financing means taking on loans and issuing bonds – this provides cash flow without diluting ownership, but requires repaying interest and principal. Equity allows more flexibility with cash, while debt incurs less risk for investors. When choosing financing methods, companies weigh factors like cash needs, growth stage, and credit capacity.
- How would you explain the concept of EBITDA to a non-finance colleague or client?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It reflects a company’s operating profitability before non-cash expenses like depreciation are deducted and before incorporating financing costs like interest. EBITDA focuses on the core drivers of profitability, so it is often used for performance measurement and valuation. It’s like net income with non-operating and non-cash factors stripped out so it purely represents profit from business operations.
Soft Skills Questions (continued)
Here are some additional common behavioral interview questions for accounting and finance roles:
- Tell me about a time you received critical feedback from a supervisor or colleague. How did you respond?
This assesses your approachability, humility, and dedication to self-improvement. Describe the situation objectively, without placing blame. Emphasize listening intently, being open-minded rather than defensive, and appreciating their perspective. Then explain how you developed an action plan and followed through to improve the area discussed. This shows maturity, resilience, and commitment to growth.
- Describe a situation where you had to interact with a difficult colleague or client. What tactics did you use to maintain a positive relationship?
This evaluates your diplomacy, composure, and conflict resolution skills. Share a specific example that illustrates your professionalism in the face of challenges. Discuss listening
List of commonly asked accounting interview questions:
At any given time, the balance sheet shows what an organization owns (its assets), what it owes (its liabilities), and what it has left over (its shareholders’ equity). The income statement illustrates the company’s revenues and expenses over a period, usually a quarter or year. The cash flow statement shows the cash flows generated or used in operating, investing and financing activities.
“Cash is king” is a common true saying in the finance and accounting world. Therefore, the cash flow statement would be the best answer. It gives a true picture of how much cash a company is generating. Also, it’s important to remember that you need all three statements to get a full picture of how healthy a company is. Learn more about how the three financial statements are linked.
Nothing. This is a trick question. The only immediate impact will be on the balance sheet and cash flow statement.
Working capital is typically defined as current assets less current liabilities. When it comes to banks, working capital is usually narrower defined as current assets (not cash) minus current liabilities (not interest-bearing debt).
Negative working capital is common in some industries, such as grocery retail and the restaurant business. Customers pay for groceries in advance, and the stock moves pretty quickly. However, suppliers often give 30 days or more of credit. This means that the company receives cash from customers before it needs the cash to pay suppliers. Negative working capital is a sign of efficiency in businesses with low inventory and accounts receivable. In other industries, negative working capital may signal a company is facing financial trouble. In this case, negative working capital implies a company may be unable to meet its near-term obligations.
A liability that shows up on the balance sheet as “Deferred Revenue” if the money hasn’t been earned yet.
Deferred revenue represents cash received from customers for services or goods not yet provided. Accounts receivable represents cash due from customers for goods/services already provided.
Capitalizing means that the purchase will be used in the ongoing operations of the business for more than one year. If not, it is depreciated or amortized. However, there are some exceptions: land is not depreciated and goodwill is not usually amortized.
Goodwill is made when a company buys another business for more than its net assets (equity) are worth. Therefore, if goodwill increased, it’s because the company acquired another company. Since goodwill is not usually amortized, it must be tested for impairment. If goodwill is impaired it must be written down. Please keep in mind, though, that IFRS lets goodwill that has been below par be revalued higher; US GAAP does not.
When accounting for PP, there are four main things to keep in mind. In addition to these four, you may also have to consider revaluation (IFRS only, not US GAAP). For many industries, PP&E is the main capital asset that generates revenue, profitability and cash flow.
When you write down inventory, it shows up as less valuable on your balance sheet. The same is true for shareholders’ equity. The amount of the write-down is shown as an expense on the income statement, either in cost of goods sold (COGS) or as a separate line item. This lowers net income. You should add the write-down to operating cash flows on the cash flow statement since it’s a non-cash expense. However, you shouldn’t count it twice when you figure out the changes in non-cash working capital.
Examples of common budgeting methods include zero-based budgeting, incremental budgeting, and value-based budgeting. Learn more about the various types in CFI’s budgeting and forecasting course.
According to certain rules, the revenue recognition principle tells us how and when to record and include revenue as an item in the financial statements. g. , transfer of ownership). According to the matching principle, the timing of expenses should match the timing of the revenue they generate, not the timing of when they are paid.
Take a step back and give a broad picture of the business’s current financial state or the financial state of businesses in that industry in general. Highlight something on each of the three statements. Income statement: growth, margins, profitability. Balance sheet: liquidity, capital assets, credit metrics, liquidity ratios. Your cash flow statement shows your short- and long-term cash flow, as well as any money you need to raise or give back to shareholders.
Thank you for reading CFI’s guide to accounting interview questions. If you want to land the accounting job of your dreams then interview prep is key. That’s why we’ve designed special guides to help you prepare with practice questions and answers.
More interview guides you will find helpful include:
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Accounting Interview Questions Guide
We’ve compiled the most frequently asked accounting interview questions along with what we believe are the best answers. Practice is the best way to do well in an interview, so check out our interview guides for finance, FP, and other jobs.
3 most frequently asked accounting interview questions
What are Finance and accounting interview questions?
Another very frequently discussed topic in the list of finance and accounting interview questions is accruals. They are expenses and revenues that have been incurred or earned but have not been recorded in the books of accounts. Adjustment entries are incorporated in the financial statements to report these at the end of an accounting period.
What should a financial accountant do in an interview?
Financial accountants must have a strong understanding of accounting protocols and be able to identify when mistakes have been made. This question shows that the interviewer is looking for someone who will take action if they notice a problem and ensure that the company follows the correct procedures.
What questions should you ask in an accounting interview?
Here are the top three questions to ask in the next interview: What do you do to ensure accounting accuracy? This question assesses the candidate’s methods for maintaining precision in accounting. Sample answer: “To ensure accounting accuracy, I perform regular reconciliations, cross-check data entries, and maintain organized financial records.
How do I prepare for an accounting job interview?
If you’re interviewing for an accounting role, you can prepare for it by reviewing common interview questions. A hiring manager may ask questions about your familiarity with software or your ability to perform certain aspects of an accounting role.
