IT Shastra Interview Questions and Answers

Debit represents incoming funds while credit represents outgoing funds.

• Debit is used to record an increase in assets or a decrease in liabilities or equity.

• Credit is used to record a decrease in assets or an increase in liabilities or equity.

• For example, when a company receives cash from a customer, it would debit cash and credit accounts receivable.

• Conversely, when a company pays a supplier, it would credit cash and debit accounts payable.

Net worth is the value of assets minus liabilities of an individual or company.

• Net worth = Assets - Liabilities

• Assets include cash, investments, property, and other valuables

• Liabilities include debts, loans, and other financial obligations

• Net worth is a measure of financial health and stability

• Example: If an individual has $100,000 in assets and $50,000 in liabilities, their net worth is $50,000

Financial statements are reports that show the financial performance of a company over a specific period of time.

• There are three main financial statements: balance sheet, income statement, and cash flow statement.

• The balance sheet shows a company's assets, liabilities, and equity at a specific point in time.

• The income statement shows a company's revenue, expenses, and net income over a specific period of time.

• The cash flow statement shows a company's cash inflows and outflows...read more

A type of obligation that a company or individual owes to another party.

• Liability refers to the legal obligation to pay debts or fulfill other obligations.

• It can be classified as current or long-term, depending on the time frame for repayment.

• Examples include accounts payable, loans, and taxes owed.

• Liabilities are listed on a company's balance sheet and are an important factor in determining financial health.

Golden rules of accounting are basic principles that guide the recording of financial transactions.

• The first golden rule is the rule of debit and credit.

• The second golden rule is the rule of assets and liabilities.

• The third golden rule is the rule of income and expenses.

• These rules ensure accuracy and consistency in financial reporting.

• For example, if a company purchases inventory on credit, the rule of debit and credit dictates that the inventory account is debited and the a...read more

Accounting is the process of recording, summarizing, analyzing, and reporting financial transactions of a business.

• Involves recording financial transactions

• Summarizing financial data into financial statements

• Analyzing financial information to make business decisions

• Reporting financial results to stakeholders

• Ensures compliance with financial regulations and standards