Financial Process Associate Interview Questions and Answers

Bad debts received are written off as an expense in the income statement.

• Bad debts are uncollectible debts that are written off as an expense in the income statement.

• The amount of bad debts is subtracted from the accounts receivable balance.

• The entry to write off bad debts is a debit to bad debt expense and a credit to accounts receivable.

• The write-off of bad debts reduces the company's net income and assets.

• Example: If a company has $10,000 in accounts receivable and $500 in...read more

A potential liability that may or may not occur depending on the outcome of a future event.

• Contingent liabilities are recorded in financial statements as a footnote.

• Examples include pending lawsuits, warranties, and guarantees.

• They are not recorded as an actual liability until the event occurs.

• Contingent liabilities can have a significant impact on a company's financial health.

• Disclosure of contingent liabilities is important for investors to make informed decisions.

Accruals are expenses or revenues that have been recognized but not yet paid or received.

• Accruals are a way of accounting for expenses or revenues that have been incurred but not yet paid or received.

• They are recorded as a liability or an asset on the balance sheet.

• Examples of accruals include salaries owed to employees, interest on loans, and revenue earned but not yet billed.

• Accruals are important for accurate financial reporting and forecasting.

Working capital is the difference between current assets and current liabilities.

• Working capital = Current assets - Current liabilities

• Current assets include cash, inventory, accounts receivable, etc.

• Current liabilities include accounts payable, short-term loans, etc.

• Positive working capital indicates the company has enough funds to meet its short-term obligations.

• Negative working capital indicates the company may have difficulty meeting its short-term obligations.