Job interviews can be tricky. Accountant job interviews are no exception, as they can invoke fear in any candidate due to curveball questions that might be thrown at them. If you are preparing to interview for an accounting role, this article will help you answer 5 common tricky questions that interviewers ask candidates during accountant job interviews.
Being able to answer these questions competently will certainly boost your confidence. It might even help you land the job.
1. What makes net income different from cash flow?
This one comes up in many accountant job interviews.
You will answer this question by letting the interviewer know that when a business operates on a strict cash basis, especially smaller businesses, net income is usually equal to cash flow.
However, if in the case of accrued income and expenses, where accounts receivables and payables need to be accounted for, net income will be different from cash flow. Below are some of the line items that affect the two differently.
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Non-cash items: These include items like depreciation and amortization which will be accounted for on the income statement but do not directly affect cash flow.
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Accrued expenses: These include accounts payable and would usually appear on the income statement but do not affect immediate cash flow.
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Loans: As for loans, they would usually impact cash flow but only the interest payments would be included on the income statement.
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Capital expenditure: These would generally make a dent in the cash flow of the business but aren’t recorded in the income statement.
You can add that one way to make the relationship between income and cash flow clear is to prepare a statement of cash flows. This is because it gives a clear picture of cash flow from operating, investing, and financing activities and how they all reconcile down to net cash at the end of the accounting period.
2. What do you do if Days Sales Outstanding (DSO) is high?
To tackle this question, you can first define what DSO is before explaining how you will deal with a high DSO.
Days Sales Outstanding (DSO) is a metric used to describe how long it typically takes a business to collect payment for a transaction. DSO is frequently calculated monthly, quarterly, or annually. DSO is computed by dividing the accounts receivable in a period (usually a month) by the total credit sales for that period and multiplying the result by the number of days in a period. The number of days it takes to convert sales into cash on average is basically the collection cycle.
The formula for DSO:
DSO = (Accounts receivable balance/credit sales for the period) * No. of days in the period.
An optimal DSO would be about 45. A DSO of 60 or 70 is considered high.
Causes of high DSO include slow payers, bad payment terms, and payment difficulties. These can be addressed by making adjustments to the payment terms, introducing new payment methods, and encouraging early payments.
3. Does a negative working capital spell trouble for a business?
Negative working capital does not always mean a business is in trouble.
Businesses like restaurants and grocery retail stores frequently have negative working capital. This is because their customers generally pay in full upfront, and inventory turns over quite rapidly, but suppliers frequently provide them with credit terms of 30 days or more. In other words, the business gets its money from customers before it's required to pay its suppliers. When a company's inventory and accounts receivable are minimal, negative working capital is an indication of efficiency.
In some other sectors, a company's negative working capital can be a warning that it is having financial difficulties.
4. Given the current state of the three statements at our company, what do you think our CFO should be concerned about?
Naturally, they would have provided you with the statements to be asking this question. Go through them and give a broad summary of the company's present financial situation or the financial situation of businesses in that sector in general.
Tease out a key aspect of each of the three statements. For instance:
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Take growth from the income statement
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Liquidity or credit metrics from the balance sheet
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The cash flow profile (short and long term) from the cash flow statement.
Details like these could help you find out if funding should be sought or if returns can be made to shareholders.
5. What is the current corporate income tax in your country?
This question is designed to know if you stay on top of industry trends. The corporate income tax differs from country to country. It is advisable to have this information and other basic accounting regulations in your country at your fingertips.
Conclusion
While most accountant job interviews will cover more than the above questions, the above 5 are some of the tricky ones that do come up often. Nailing the answers to these questions will boost your confidence and stand you in good stead during the interview.
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