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Q.1 What is your experience with GAAP?
This is a very open-ended question and for questions like these one has to think fast about what you plan to put in the plate. You should probably structure your answer around how you used GAAP to report various transactions on various aspects of the accounting cycle. Sample Answer - I have reported general transactions using ABC accounting software with emphasis to follow GAAP revenue recognition principles. Also at month end or closing, I was responsible to prepare trial balances and check the overall system for discrepancies and prepared adjusting entries at relevant intervals. I had assisted the CPA in preparation of the financial statements, closing accounts and post-closing trial balance to prepare the books for the next cycle. You must also discuss about the transaction you were doubtful about and how you would research the proper GAAP rules by referencing the codification and discussing it with your supervisor . In case you do not have any accounting experience then you must talk about the GAAP rules used how you learned to solve problems or about and also how you did some financial statement project where you had to use GAAP rules.
Q.2 What is the importance of documentation when it comes to accounting?
The accounting team of any organization has the responsibility of presenting a fair picture to the shareholders and the management of the company. The Accounting Team works as a watchdog of the organization and that is why documentation becomes very important in accounting. For this appropriate documentation needs to be checked and maintained so that a proper audit trail is maintained and justified as and when required.
Q.3 What is GAAP?
GAAP is abbreviated as generally accepted accounting principles which indicates the basic accounting principles and guidelines such as the cost principle, matching principle, full disclosure, the detailed standards and other rules issued by the Financial Accounting Standards Board (FASB) and its predecessor the Accounting Principles Board, and generally accepted industry practices. GAAP must be adhered to when a company distributes its financial statements outside of the company.
Q.4 On which assumption are financial statements prepared under Indian GAAP?
Wit reference to Indian GAAP, all the financial statements are prepared in accordance with the principle of conservatism which interprets that we must 'Anticipate no profits and provide for all possible losses'.
Q.5 What is the criteria for including cash flow statement under Indian GAAP?
As per the Indian GAAP (AS 3) , the inclusion of Cash Flow statement in financial statements is mandatory only for companies whose share are listed on recognized stock exchanges and Certain enterprises such that whose turnover for the accounting period exceeds Rs. 50 crore. On the other hand all the unlisted companies escape the burden of providing cash flow statements as part of their financial statements.
Q.6 Can you name the various techniques used to discharge the function of management accounting?
Yes there are many techniques used to discharge the function of management accounting like the:
Marginal Costing
Budgetary Control
Standard Costing
Uniform Costing.
Q.7 What do you know about the accounting concepts? list them.
These are those basis assumptions upon which basic process of accounting is based.
Following are the basic accounting concepts:
Business Entity Concept Dual Aspect Concept

Going Concern Concept
Accounting Period
Concept Cost Concept
Money Measurement Concept
Matching Concept.
Q.8 What is a dual aspect concept?
According to this concept, every transaction has two affects. While, this basic relationship between assets and liabilities which means that the assets are equal to the liabilities remains the same.
Q.9 Explain the going concern concept?
If we talk of this concept, the organization is going to be in existence for an undetermined period of time and is unlikely to close down the business in the just a short period of time. Thus, the valuation of assets and liabilities is affected by this.
Q.10 Please share your knowledge regarding the business entity concept?
This Concept states that the business owns a separate legal identity than the person who owns the business. Also, the accounting process is carried out for the business only and not for the person who is carrying out the business. While, this concept is applicable non-corporate organizations to corporate organizations both.
Q.11 Explain accounting period concept?
This concept says that the indefinite period of time is divided into shorter time periods, each one moulded in the form of Accounting period, in order to facilitate the preparation of financial statements on periodical basis. Characteristics like business organization, statutory requirements etc, are the base for the selection of accounting period.
Q.12 Explain the cost concept?
As per this concept, instead of taking current market prices of various assets an asset is recorded at the cost at which it is acquired.
Q.13 What is a money measurement concept?
According to this concept, only those transactions find place in the accounting records, which can directly be expressed in the terms of money. So, this is the major drawback of financial accounting and financial statements.
Q.14 Explain matching concept?
In this concept while calculating the profits in a correct manner during the accounting period, all the expenses and costs incurred during the period, paid or unpaid should be matched with the income generated during that period.
Q.15 Can you explain the convention of conservation?
This accounting convention is predominantly expressed as to “without considering the future incomes and profits unless they are actually realized, anticipate all the future losses and expenses.” This concept's main emphasize is that profits should never be overstated or anticipated. This convention generally applies to the valuation of current assets as they are valued at cost or market price whichever is lower.
Q.16 What is convention of materiality?
This is an accounting convention which proposes that while accounting only those transactions will be considered which have material impact on financial status of the organization and other transactions which have insignificant effect will be ignored thus, in it gives relative importance to an item or event.
Q.17 How many counts of elements of cost are taken under cost in AS-1 of GAAP?
There are three elements of cost under cost in AS-1 of GAAP.
Q.18 Please share your knowledge on convention of consistency?
This accounting convention proposes that for preparing financial statements to facilitate comparison of financial statements on period to period basis the same accounting principles, procedures and policies should be used consistently on a period to period basis. While, if there will be any changes in the accounting procedures or policies, then it should be disclosed explicitly while preparing the financial statements.
Q.19 Describe prime cost under GAAP.
A prime cost under GAAP refers to the sum of all direct costs for production and includes cost of raw materials and labor. Indirect costs are not included as per GAAP.
Q.20 What are the types of errors having an effect on trial balance?
Following are the types of errors by which affect agreement of Trial Balance is affected:
Wrong totaling of subsidiary books
Posting on the wrong side of the account
Posting of the wrong amount
Omission of posting an amount in the ledger
Error of balancing.
Q.21 Explain the principle of continuity under GAAP.
The principle of continuity under GAAP is focused on asset valuation and mandates that while valuations of the asset of the company are done it is assumed the company’s operations is operational.
Q.22 List the errors that do not affect the trial balance?
Following are the types of errors which don't affect the Trial Balance:
Compensating Error
Errors of Principle
Errors of Omission
Errors of Commission
Wrong amount recorded in the subsidiary books
Q.23 Describe the principle of periodicity under GAAP.
The principle of periodicity under GAAP mandates that each and every entry should be distributed across the suitable time period like, revenue is distributed by its relevant period.
Q.24 Give the difference between costing and cost accounting?
Costing a process of ascertaining costs whereas cost accounting is the process of recording various costs in a systematic manner, in accordance to prepare statistical date to ascertain cost.
Q.25 List any cash flows from operating activities under GAAP.
The cash flows from operating activities under GAAP includes: cash received or paid to/from customers, the payment of wages and salaries to employees, the payment of rent, royalties received and the payment of insurance premiums.
Q.26 What are opportunity cost and differential cost?
When one alternative is selected over another the opportunity Cost is the cost incurred by the organization.
For Instance: A person has Rs. 100000 and he has two options to invest his money, buy a land with the money or either invests in fixed deposit scheme. If s/he decides to put his money to buy the land then the loss of interest which s/he could have received on fixed deposit would be an opportunity cost.
The difference between the costs of two alternatives is known to be as the Differential costs. Both cost increase and cost decrease are included in this. It can be either variable or fixed.
For instance: Cost of first alternative = 10000; Cost of second alternative = 5000; Differential Cost = 10000 – 5000 = 5000.
Q.27 How should inventories be valued at, as per AS-2 under GAAP?
Inventories as per AS-2 under GAAP, should be valued at the lower of cost
Q.28 What is meant by spin-off?
Creating new company by selling or distributing the shares of existing company is known as Spin-off.
Q.29 What value does inventories should be valued at, as per AS-2 under GAAP?
Inventories as per AS-2 under GAAP should have value of net realisable value.
Q.30 Definition of 'generally accepted accounting principles - gaap'?
The common set of procedures, accounting principles, and standards that companies use to compile their financial statements. GAAP are a combination of authoritative standards i.e. set by policy boards and simply the commonly accepted ways of recording and reporting accounting information.
Q.31 What are characteristic of depreciable assets as per GAAP?
Depreciable assets as per GAAP have many characteristics and which includes: They are expected to be used during more than one accounting period, have a limited useful life and are held by the company for use.
Q.32 Please list the type of items appear under the assets side?
Items which appear under the assets side of Balance Sheet are:
Fixed Assets:

Current Assets:
Cash Balance,
Sundry Debtors,
Bank Balance,
Prepaid Expenses.
Q.33 Does depreciation is charged on assets purchased for the purpose of resale under GAAP?
No, depreciation is not charged on assets purchased for the purpose of resale under GAAP.
Q.34 Can you name the groups under which errors in accounting are placed?
Errors in accounting are placed in these groups:
Error of Omission
Error of Commission
Error of Principle
Q.35 How is depreciable amount calculated as per GAAP?
Depreciable amount of a depreciable asset is calculated by reducing the residual value from its historical cost.
Q.36 Which factor should be considered under GAAP for assessment of depreciation and the amount to be charged in an accounting period?
The assessment of depreciation and the amount of the depreciable asset are influenced by: historical cost, expected useful life and estimated residual value of the depreciable asset.
Q.37 Describe useful life of a asset as defined under GAAP.
Useful life of an asset under GAAP can be: the period over which a depreciable asset is expected to be used or the number of production expected to be obtained by using the asset.
Q.38 What is included in royalties under GAAP and how it is recognized?
Royalties under GAAP refers to the expenses for using know-how, patents, trademarks and
Q.39 copyrights. Revenue from royalties is recognized on an accrual basis as per the terms of the relevant agreement.
Q.40 In GAAP, does the cost of a self-constructed asset differ from that for an acquired asset?
No, same principles for cost determination are applicable for an acquired or self-constructed asset under GAAP.
Q.41 What is gross book value of a fixed asset under GAAP?
Gross book value of a fixed asset under GAAP refers to its historical cost and may also include any costs substituted for historical cost in financial statements.
Q.42 What is net book value of a fixed asset under GAAP?
The net book value of a fixed asset under GAAP refers to gross book value of that fixed asset but shown as net of accumulated depreciation.
Q.43 What is included in employee benefits under GAAP?
Employee benefits under GAAP includes: Short-term employee benefits paid before year end (wages, salaries, paid leaves and profit sharing bonuses), post-employment benefits (gratuity, pension, provident fund), long-term employee benefits beyond year end (long-term benefits, bonuses) and termination benefits (VRS payments).
Q.44 What does borrowing costs includes under GAAP?
Borrowing costs under GAAP includes: interest and commitment charges, amortisation of any discounts, finance charges for assets acquired under finance leases and exchange differences due to foreign currency borrowings.
Q.45 What is Amortisation? (AS-26)
Amortisation refers to the systematic allocation of the depreciable amount of an intangible asset over its useful life.
Q.46 When does the recognition of revenue is postponed? (AS-9)
Consideration receivable is not determinable within reasonable limits.
Q.47 What does the cost of goods comprises of as per AS-2?
As per AS-2, the cost of goods comprises cost of purchase, cost of conversion and other cost necessary to bring the inventory in present location.
Q.48 Define contingent asset (AS-29)
Contingent asset is a possible asset that arises from past events the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the enterprise.
Q.49 What information as a minimum, should an enterprise include in the notes to its interim financial statements, if material and if not disclosed elsewhere in the interim financial report? (AS-25)
1. explanatory comments about the seasonality of interim operations 2. nature and amount of items affecting assets, liabilities, equity, net income, or cash flows 3. dividends, aggregate or per share (in absolute or percentage terms), separately for equity shares and other shares.
Q.50 When does AS-22 is mandatory in nature for?
AS-22 is mandatory in nature for: 1. Enterprises whose equity or debt securities are listed on a recognised stock exchange in India. 2. Enterprises that are in the process of issuing equity or debt securities. 3. Enterprises of a group, if the parent presents consolidated financial statements.
Q.51 When does consolidated financial statement will not be prepared by the parent company for all the companies that are controlled by the parent company either directly or indirectly, situated in India or abroad? (AS-21)
1. When the control is intended to be temporary because the subsidiary is acquired and held exclusively with a view to its subsequent disposal in the near future. 2. When the parent company has some restrictions on bringing the resources of the subsidiary company to its main resources
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