10+ Lakhotia Interview Questions and Answers

Golden rules of Accounting, Accrual & Matching Concept.

• Golden rules of accounting include the accounting equation, double-entry accounting, and the concept of debits and credits

• Accrual concept states that revenue and expenses should be recognized when earned or incurred, regardless of when cash is received or paid

• Matching concept states that expenses should be matched with the revenue they helped generate in the same accounting period

• For example, if a company sells goods on c...read more

Inter company transactions are recorded using journal entries.

• Inter company transactions involve two or more entities within the same organization.

• The journal entry for inter company transactions includes a debit and credit entry.

• The debit entry is made in the receiving company's account and the credit entry is made in the giving company's account.

• For example, if Company A sells goods to Company B, the journal entry would be a debit to Company B's account and a credit to Comp...read more

Accounting principles are applied in the preparation of financial statements to ensure accuracy and compliance with regulations.

• The principles of accounting include the matching principle, revenue recognition principle, and the cost principle.

• Financial statements must be prepared in accordance with Generally Accepted Accounting Principles (GAAP).

• The balance sheet, income statement, and cash flow statement are the three main financial statements that must be prepared.

• Examples ...read more

Accounts Receivable is the money owed to a company by its customers while Accounts Payable is the money a company owes to its suppliers.

• Accounts Receivable is an asset account that represents the amount of money owed to a company by its customers for goods or services provided.

• Accounts Payable is a liability account that represents the amount of money a company owes to its suppliers for goods or services received.

• Accounts Receivable and Accounts Payable are both important com...read more

Accrual concept refers to the recognition of revenue and expenses in the financial statements before the actual cash transaction takes place.

• Accrual concept is based on the matching principle, which states that expenses should be recognized in the same period as the revenue they helped generate.

• This means that revenue and expenses are recorded in the financial statements when they are earned or incurred, regardless of when the cash is received or paid.

• For example, if a compan...read more

Bank reconciliation is the process of comparing a company's records with those of the bank to ensure they match.

• Gather bank statements and company records

• Compare deposits, withdrawals, and fees on both sets of records

• Identify and resolve any discrepancies

• Adjust the company's records to match the bank's records

• Prepare a bank reconciliation statement to document the process

• Example: If the company recorded a deposit of $500, but the bank only shows $450, investigate the $50 diff...read more

Accrual and deferral transactions involve recording revenues or expenses before or after they are actually earned or incurred.

• Accrual transactions involve recording revenues or expenses before they are actually earned or incurred

• Deferral transactions involve recording revenues or expenses after they are actually earned or incurred

• Examples of accrual transactions include recognizing revenue for services provided but not yet invoiced

• Examples of deferral transactions include rec...read more

Deferral accounting recognizes revenue or expenses when they are earned or incurred, while accrual accounting recognizes revenue or expenses when they are realized or incurred.

• Deferral accounting involves postponing the recognition of revenue or expenses until a later period.

• Accrual accounting involves recognizing revenue or expenses when they are incurred, regardless of when cash is exchanged.

• Deferral accounting is commonly used for prepaid expenses or unearned revenue.

• Accru...read more

Provisions are liabilities that are certain to occur, while contingencies are potential liabilities that may or may not occur.

• Provisions are recognized when the amount is known with reasonable certainty, while contingencies are disclosed in the financial statements as a footnote.

• Provisions are measured at the best estimate of the amount required to settle the obligation, while contingencies are disclosed if the outcome is uncertain.

• Examples of provisions include warranty obli...read more

Depreciation is the allocation of the cost of tangible assets over their useful life, while amortization is the allocation of the cost of intangible assets over their useful life.

• Depreciation applies to tangible assets like buildings, machinery, and vehicles, while amortization applies to intangible assets like patents, copyrights, and trademarks.

• Depreciation is usually calculated using methods like straight-line, double declining balance, or units of production, while amorti...read more

Accrual concept refers to recognizing revenues and expenses when they are incurred, regardless of when cash is exchanged.

• Accrual concept is a fundamental accounting principle that states that revenues and expenses should be recognized when they are incurred, not when cash is exchanged.

• This concept helps in providing a more accurate representation of a company's financial position and performance.

• For example, if a company provides services in December but receives payment in J...read more

Amortization is the process of spreading out the cost of an intangible asset over its useful life.

• Amortization is commonly used for assets like patents, copyrights, and trademarks.

• It helps match the expense of the asset with the revenue it generates.

• The amortization expense is recorded on the income statement over time.

• It is similar to depreciation for tangible assets like buildings and equipment.

Accrual is the process of recognizing expenses and revenues before they are actually paid or received.

• Accrual accounting matches expenses to the revenue they generate, rather than when the cash is actually exchanged.

• Accruals are necessary to ensure that financial statements accurately reflect the financial position of a company.

• Examples of accruals include accrued interest, accrued salaries, and accrued taxes.

• Accruals are typically recorded at the end of an accounting period ...read more