5 Trick Questions Frequently Asked in Accounting Job Interviews!

these are five trick questions that are asked during accounting job interviews these are very mean nasty questions that I've heard other people use during accounting interviews I've heard from hiring managers and I've heard from people who are looking for jobs that they heard these questions before so I wanted to go through these questions and answer them and in detail so that if you encounter any of them during job interview you can answer them welcome to another video guys my name is Bill Hannah and in this channel we discuss tips and tricks that will help guide you in your accounting career if your interviewing will give you tips on how to perform well in these interviews and if you already have a job we'll provide you here with the knowledge that will help you earn more money as you've heard before the more you know the more you earn in your job so tune in to this channel and if this is the first time here please hit the subscribe button and the notification bill so that you don't miss out on any of the videos that I put out weekly and today we're discussing five trick questions that are asked or an accounting job interviews and the reason why I'm qualified to look about it is because I'm a controller right now and I set at both sides of the table both as the hiring manager and on the other end of the table as the job seeker so what we'll do is we'll go through the five questions and their answers by going through the least tricky question first and then we'll work our way through the most tricky question towards the end of the video I'll save that for last and as well as I'll provide you with some tips on if you're encountering any of these questions during a job interview how should you behave how should you react to hearing this kind of questions and so without further ado let's jump right in you get the job let's celebrate after okay haha and if I don't get the job are we still going to smoke that pot probably yes so it's starting from question number five which is the least tricky the question goes why is net income different from cash flow and so the interviewer is asking you why when you look at the income statement net income doesn't equal cash flow whether it's inflow if you're making income like net income or net loss cash outflow what's the difference between the two and the answer is two that is that obviously there are certain items that are non-cash basis that go into the business and that's what makes net income different from cash flow now the only way for your net income and your cash flow to be equal is if you're running your accounting on cash basis there are two ways to run the accounting for a business if you're a very small business you're most likely using cash accounting if you're a bigger business you're most likely following US GAAP and you're running your business on accrual so there is cash accounting and accrual accounting in cash accounting net income will always equal your the cash flow so that you're recording the transactions only when the cash occurs so like if cash comes in for revenue that's when you record revenue and when cash goes out that's when you record the expense and so in that case cash flow will always equal your net income however for businesses as they get bigger and immature they follow you as GAAP usually the threshold is five billion dollars in revenue once you go beyond that you most likely want to follow you ask AB which is a true accounting and in that case net income is different from cash flow and the reason why that is is because number one for your sales when you look at the income statement the top line is going to be sales in revenue that's gonna be most likely credit sales so you're selling your product or service for on credit and you are issuing an invoice and receiving the cash in the future and so your revenue is not gonna equal cash because the cash comes in in the future now the second item here is that accrued expenses is an item that you account for when you're running accrual accounting and you want to account for expenses even though the cash has not been spent and so accrued expenses are recording is recording the expense in the period which the transaction or the service has been rendered even though you haven't received an invoice or spent the cash but you still record accrued expenses so these show up in the income statement and effect net income but there's no cash flow impacts from them and the third item is non-cash items that are recorded on the income statement such as depreciation and amortization and we all know that depreciation and amortization have no cash impact and so depreciation is just to record the cost of a fixed asset over the life so if you buy a machinery or equipment it will have a useful life of like five years as an example and your amortized or depreciate the cost over five years there's no cash impact from it it's only affecting net income but not cash and then you have activities such as loans obviously if you're receiving a loan that's cash that's coming in that's gonna be cash flow but it's not gonna show up in the net income it may show up in a small way as an interest in the net income or the income statement however the bulk of it which is the loan itself is gonna be much bigger and that's gonna be cash flow and the item the fifth item here is capex capex is obviously capital expenditure and that's the company investing in the future and buying fixed assets machinery and equipment and these are things that are gonna show up and cash flow but are not gonna be part of net income and that's gonna be also contributing to the difference between net income and cash flow now if you want to get all fancy you might mention to the hiring manager that the way to tie net income and cash flow together is a statement of cash flow so if you look at a savings cash flow it begins by net income and it reconciles that all the way down to cash so it begins with net income and then it factors and non-cash items such as depreciation and amortization and then operating our cash from operating activity that will take into effect accounts receivable accounts payable and then it will take into effect the cash received from financing activities such as loans or interest and then it will go through the cash from cash flow from investing activities such as capital expenditure capex and then it will take we reconcile all that down to cash and so that's how you give them even a better answer so the answer to the question is showing the difference between net income and cash flow is by mentioning these factors that contribute to the differences which is credit sales accrued expenses non-cash items loans capex and then if you want to get all fancy you might mention the cash flow statement that ties the two together and that's the answer to question number five in our list and we'll go now to question number four okay so the next question on our list goes like this if DSO is high how do you fix it and DSO stands for days sales outstanding and if you don't know days sales outstanding is the measure of the number of days it takes to convert sales into cash and so this is basically the collection cycle this is how long it takes from the moment you issue an invoice on average to the point you get the cash in the bank and so the question is if your DSO is high how do you fix it and the first thing you know you need to think about when you hear this question is to think about the actual equation for the associate DSO is accounts receivable balance divided by credit sales obviously we say credit sales here because we're not concerned with cash sales right cash sales are received on a spot with only consumer credit sales times the number of days in the period that so we were measuring for months you take they are balanced on month end divided by credit sales for the same month time the number of days in a month you know whether it's 31 days or 30 days or whatever the case is and if the the number is too high usually an ideal collection cycle is about 45 days so if in this case this number is high and it's 60 or 70 days here are the things that are contributing and are making this number too high and also how you fix it so the first factor is slow payers and this means that you probably have some customers that are slow payers right and these are probably contributing to this number of days that it takes to collect the cash B is bad payment terms and this means that in the contracts that you are drafting with your customers or on your invoice the payment terms are not good so maybe you should make them 30 days if they are today 45 or 60 days so you should consider make the making them shorter and the third item here is that it's hard to pay meaning you're making it hard for the customer to pay you should make it super easy and super intuitive for the customer to pay you by listing all the payment methods on the invoice making sure that your banking information are listed on there if you accept credit card making simple there to have a link or a instructions on how to pay by credit card so the easier you make it for them to pay you the lower the number of di Sole get and this is the fourth question over list now the third question in our list is what is the current corporate income tax rate and maybe you're not necessarily interviewing for a tax position but still the question is relevant for any accounting position because the hiring manager wants to gauge your general knowledge or ability to to know what's going on and just a few whether you're aware of what's happening around you and the corporate income tax rate is something that every accountant should know and in the US the rate is 21% and so you should read up on the country you're in or the reason you're in what is the exact corporate income tax rate anticipate that question and so you can be ready for it and on to the next question now the second question on our list goes like this if working capital is negative is it a sign of trouble and now let's refresh our memory on what working capital is so working capital equals current assets minus current liabilities and so working capital represents the amount of liquid assets that the company has it can be converted to cash rather quickly - its current liabilities and so what goes into current assets will be things such as cash accounts receivable and other liquid investments what goes into current liabilities there will be things like accounts payable and accrued expenses and so the difference between the two represents the amount of liquid assets that the company has which is current assets minus current liabilities and so the question whether working capital is negative whether that's a sign of trouble or not you got to look at the specific circumstances so the answer should be it depends if we look at a business that is a cash business such as a restaurant you'll find that they collect all of their sales on the front so that's like cash sales and they try to delay the payments to the suppliers on the ap side and so that accounts payable is growing while there are accounts receivable is non-existent and so you'll find that their current assets gets bigger than current liabilities and leads to a negative working capital and so it depends on the situation the right answer here should be it depends a negative working capital isn't necessarily always gonna leave mean bad or sign of trouble you have to look at the actual circumstance examine what goes into current assets and current liabilities and make a judgment based on that all right guys we're down to a final question here and this is the most tricky question and I'll tell you why it is a trickiest question in my opinion and the question goes how do you record profit on a sale of a TV if the sale price is $1,000 and the cost is 800 now in reality this question is very straightforward right you're only silligan TV for $1,000 that's your revenue and you are the cost to you is 800 and this should be very straightforward and I'll show you how you book that transaction but the reason why this is tricky is because the hiring manager is stressing on the word profit and so he's trying to see how you record profit and the reason why this tricky is because you're not necessarily recording profit profit is not a GL or journal entry that you book profit I'll show your profit is actually a line item on the income statement and so basically the answer should be hey the recording for this or journal entries for this will go something like this and you know for sales you have a thousand dollars that you're booking so sales have a credit nature and so that'll be a thousand dollars on the credit side and cash your debiting cash for a thousand dollars just your first journal entry and debit to cash credit to sales and the second entry you're making is credit to inventory to reduce it by 800 and debit to cost of goods for 800 to record the cards on this now the way that profit gets populated in the income statement is that revenue from here is $1,000 and cogs is 800 and so profit is $200 what the interviewer is trying to do here is trying to see if you will make a mistake and say you know debit 200 to profit or using profit as a journal entry or anything like that that will be a sign of trouble for him so basically this is a very simple question that the interviewer is trying to frame to you in a in a more tricky light so they will trick you but this is very easy and as long as you record the journal entries and show the effect of the income statement you'll be doing the right thing here now as I mentioned at the beginning of the video I mentioned that I will tell you how you should behave or react when you feel like the question you're being asked is a trick question so the first thing you should be doing is that you should be asking the hiring manager to repeat so don't be afraid to ask him to repeat the question again if anything you will show that as a sign of you being insightful you want to make sure you understand the question before you go ahead and answer it so don't be afraid to ask him to repeat the question second thing is as for a pen and paper for me personally whenever I'm answering this any kind of question like that I need to visualize it so if I have a pen and paper I can write it down and I can look at it and that will give me a level of understanding much better than I then if I try to answer it based on just here in the question visual is always better then the third thing is to slow down there is no pressure this is not a race here like this is there is no pressure for you to try to do this fast you not be in time to answer this question so take your time this will also show a sign of maturity a sign up that you take your time and you want to provide the right answer so my advice here is that you slow down and so this was a guy's these are the five trickiest questions that I've seen being asked in the accounting interviews and the answers to them as well as my advice on what to do when you encounter these questions if you like the contents in this video please give a thumbs up and if you haven't already please subscribe to that channel and if you know someone who's going to a job interview or preparing for an accounting job interview share this video with them this will help them and thank you for watching guys I'll see video [Music]

Channel: The Financial Controller

Views: 117,233

Keywords: career tips, accounting interview, accounting, Interview questions

Id: w4rzo-XZEec

Length: 15min 39sec (939 seconds)

Published: Sat May 23 2020