Managerial Accounting Interview Questions and Answers
Question - 21 : - Explain personal accounts. List different accounts consisting personal account.
Answer - 21 : -
Personal Accounts are the accounts of persons or organisations with whom the organisation deals in various capacities.
Personal Accounts consist of following types of accounts:
- Accounts of Customers
- Accounts of Suppliers
- Accounts of Bank/Financial Institutions
- Capital Account
Question - 22 : - Explain real accounts. List different accounts consisting real accounts in practical circumstances.?
Answer - 22 : -
Real accounts are the accounts of assets which the company owns and accounts of liabilities which the company owes. Real Account may also consist of some intangible assets.
Real Accounts consist of following types of accounts:
- Building Account
- Furniture Account
- Machinery Account
- Land Account
- Goodwill Account
- Patent Trade Marks Account
Question - 23 : - What are nominal accounts? List accounts consisting the nominal account.
Answer - 23 : -
Nominal Accounts are the accounts of Incomes, Expenses, Losses and Gains.
Nominal Accounts consist of the following types of accounts:
- Insurance Account
- Wages Account
- Interest Paid or Received Account
- Commission Paid or Received Account
- Telephone Expenses Account
- Salary Account
Question - 24 : - What is the principal of double entry system of accounting? What are the advantages of double entry system of accounting?
Answer - 24 : -
The principal of Double Entry system of Accounting is “Every debit has a corresponding credit” hence the total of all debits has to be equal to the total of all credits. In simple words, every business transaction affects two accounts. If one account is debited then the other account will be credited with the similar amount. For example: if the business purchases a machinery worth Rs. 500000, then machinery account gets debited with amount Rs. 500000 as the business is receiving an asset for its operation, on the other side cash account automatically gets credited with the same amount of Rs. 500000 as cash is going out of the business.
Advantages of Double Entry system of Accounting:
- It considers both the aspects of business transaction
- Arithmetic accuracy of the accounting records can be checked and verified by preparing trial balance
- Correct results of the operations can be ascertained by preparing Final Accounts
- Correct valuation of assets and liabilities at any point of time by preparing Balance sheet
Question - 25 : - What Are The Rules Of Double Entry Book Keeping For Various Types Of Accounts?
Answer - 25 : -
Following are the basic rules of double entry book keeping for various types of accounts:
- Personal Account : Debit the Receiver, Credit the Giver
- Real Account : Debit what comes in, Credit what goes out
- Nominal Account : Debit all the Expenses, Credit all the Incomes
Question - 26 : - What is trial balance? What does an accurate trial balance suggest?
Answer - 26 : -
Trial Balance is a summary of all the balances of various ledger accounts and Cash/Book accounts of an organization at any given date. For the preparation of Trial Balance the entire Ledger accounts and Cash book/Bank book are required to be balanced to get the closing balance. Assets and Expenses accounts having debit balance are posted on debit side whereas Income and Liability accounts having credit balance are posted on credit side of the Trial Balance.
An accurate Trial Balance is an evidence that all the transactions are recorded and posted in the General Ledger account as per the accounting principles. It also ensures arithmetical accuracy of the process of ledger posting.
Question - 27 : - What is depreciation? What are the causes of depreciation? Is it a cost? Why?
Answer - 27 : -
Depreciation is a permanent, gradual and continuous reduction in the book value of the fixed asset. Except Land all the fixed assets e.g. Car, Machinery, Furniture etc depreciates in value making the asset useless after the end of a certain period.
Following are the causes of Depreciation:
- Wear and Tear due to regular use of the asset
- Deterioration occurs with the passage of time, whether the asset is in use or not
- Damages done to the assets due to an accident like fire, mishandling etc.
- Depletion of Asset
- Obsolescence i.e. due to new technology in use, new inventions, innovations etc.
Yes, depreciation is a cost. It is a historical cost, which is charged against profits of the organisation reducing the profitability. It is a non-cash cost as it is never paid or incurred in cash.
Question - 28 : - What is the need of depreciation account?
Answer - 28 : -
According to the matching principle of accounting, the costs incurred in the accounting year should be matched with the revenue or income earned during the same accounting year. Thus, it is necessary to spread the cost of fixed asset less scrap or realizable value after the useful life of the fixed asset is over and this process of ascertain the same is called depreciation accounting.
Thus, depreciation account is needed for mainly two purposes:
To ascertain due profits and to represent the value of the fixed asset at its unexpired cost i.e book value of the asset less depreciation.
Answer - 29 : -
Depreciation forms a part of cost which is used for arriving at correct estimation of profits, which then is distributed to the owners of the business in the form of dividend. Addition of depreciation to the cost reduces the amount of distributable profits.
By maintaining a depreciation account a part of the distributable profit is retained in the business as a reserve which is used to purchase new machinery or for other purposes in the future which reduces the profits or dividends received by the owners.
Question - 30 : - List various methods for calculating depreciation.?
Answer - 30 : -
Methods for calculating depreciation are:
- Straight Line Method
- Written Down Value(Reducing Balance)Method
- Production Unit Method
- Production Hour Method
- Joint Factor Rate Method
- Revaluation Method
- Renewal Method