Hughes & Hughes Chem Limited Interview Questions and Answers

Journal entry for fixed asset sold with adjustment of gain or loss on sale

• Debit the accumulated depreciation account to remove the asset's accumulated depreciation

• Debit the cash or accounts receivable account for the amount received from the sale

• Credit the fixed asset account for the original cost of the asset

• Credit the gain or loss on sale of fixed asset account for the difference between the sale price and the book value of the asset

Golden principles of accounting refer to the basic rules and guidelines that govern the field of accounting.

• The principle of consistency: Accounting methods and procedures should be consistent from one period to another.

• The principle of materiality: Only significant information that would influence the decision-making of users should be included in financial statements.

• The principle of conservatism: When in doubt, accountants should choose the option that is least likely to o...read more

Journal entry for accrual basis of transaction

• Accrual basis recognizes revenues and expenses when they are earned or incurred, regardless of when cash is exchanged

• To record an expense on accrual basis, debit the expense account and credit the accounts payable or accrued expenses account

• To record revenue on accrual basis, debit accounts receivable and credit the revenue account

• Accrual basis ensures that financial statements reflect the true financial position of a company

• Accru...read more

Depreciation is charged to allocate the cost of an asset over its useful life, matching expenses with revenues.

• Depreciation reflects the wear and tear on assets over time

• It helps in spreading the cost of an asset over its useful life

• Allows for matching expenses with revenues generated by the asset

• Helps in determining the true profitability of a business

• Required by accounting standards to accurately reflect the value of assets on the balance sheet

Conservatism is a political and social philosophy that prioritizes tradition, stability, and gradual change over radical reform.

• Conservatism emphasizes the importance of preserving established institutions and values.

• It is skeptical of rapid societal change and advocates for incremental adjustments.

• Conservatives often prioritize individual responsibility, limited government intervention, and traditional family structures.

• Examples include Edmund Burke's defense of gradual refo...read more

Accrual basis of accounting recognizes revenue when earned and expenses when incurred, regardless of when cash is exchanged.

• Revenue is recorded when it is earned, not necessarily when cash is received

• Expenses are recorded when they are incurred, not necessarily when they are paid

• Matches revenues with expenses in the period they occur, providing a more accurate financial picture

• Required by GAAP for most businesses