42 accounts payable interview questions and answers

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42 Vital Accounts Payable Interview

Questions with Answers

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42 Accounts Payable Interview Questions and Answers

1. What do you mean by price variation in Purchase Invoice?

The price variation is defined by variance in Invoice unit price and Purchase Order unit. However Invoice can be

posted by users in case the variance is kept within threshold of 5 or 50 USD or lower price.

2. How to account freight cost, handling charges, purchase tax at the time of raising a Purchase

Order?

For instance:

Item to be procured = A

Quantity to be procured = 10

Unit Rate = 100

Interior freight cost for 10 quantity (at the same time of raising Purchase Order) = £1000

Handling charges = £500

Input Tax = @ 10% (on base price)

In details, firstly you create a new name tax, for example create the name Freight Charges Handling Charges Tax

Rates while Purchase Order is being created. It means the Purchase Order will generate Basic + Tax + Freight +

Insurance.

3. What is a Non-PO Invoice?

A non-PO invoice means it does not have Purchase Order. But any invoice is required to have approval of

authorized person in order to come to payment.

4. What is a tolerance limit with respect to invoice processing?

Limit up to which small differences in an invoice are accepted by the invoice recipient without any further

verification being necessary.

5. What is debit and credit from the banks point of view?

Debit means an accounting entry which results in either an increase in assets or a decrease in liabilities on a

company’s balance sheet or in your bank account. If debit bank balances show in bank statement, this means it is

unfavourable condition for the company and credit balance brings favourable condition for the company.

Debit what comes in”

“Credit what goes out”

And this is the golden rule

banks have confused the heck out of people by referring to payments into your bank account as credits and

payments from it as debits, so we tend to think that credits are + and debits are minus



http://interviewquestionsandanswers.biz/what-do-you-mean-by-price-variation-in-purchase-invoice/

http://interviewquestionsandanswers.biz/how-to-account-freight-cost-handling-charges-purchase-tax-at-the-time-of-raising-a-purchase-order/

http://interviewquestionsandanswers.biz/how-to-account-freight-cost-handling-charges-purchase-tax-at-the-time-of-raising-a-purchase-order/

http://interviewquestionsandanswers.biz/what-is-a-non-po-invoice/

http://interviewquestionsandanswers.biz/what-is-a-tolerance-limit-with-respect-to-invoice-processing/

http://interviewquestionsandanswers.biz/what-is-debit-and-credit-from-the-banks-point-of-view/









However they are talking from the banks point of view. So you pay money into the bank it is now "owed" by the

bank to you, therefore it is actually on the minus side of the banks’ balance sheet.

6. Please explain end to end process of accounts payable?

End to end of accounts payable includes the various stages involved in making the payment of an invoice received

from a vendor. The AP activities starts with the receipt of the invoice from the vendor and ends when it gets paid

.The various stages in an AP process are listed below -

(a) Receipt of invoice

(b) Scanning the invoice and uploading it in workflow

(c) Processing the invoice in the system (ERP)

(d) The posting going through QC - quality check.

(e) Resolving a parked invoice.

(f) Payment proposal - report of invoices falling due on the correct date.

(g) Payment run - here the invoice ultimately gets paid.

7. What is a Work flow? And take Retail shop as example and explain the Work flow of the Retail

shop?

A workflow consists of a sequence of connected steps where each step follows without delay or gap and ends just

before the subsequent step may begin. It is a depiction of a sequence of operations, declared as work of a person

or group, [1] an organization of staff, or one or more simple or complex mechanisms. Workflow may be seen as

any abstraction of real work. For control purposes, workflow may be a view of real work in a chosen aspect, [2]

thus serving as a virtual representation of actual work. The flow being described may refer to a document or

product that is being transferred from one step to another.

8. What is the difference between Payments-Liquidation (Disbursements) & Dividend Warrants

Liquidation?

Payments: The partial or complete discharge of an obligation by its settlement in the form of transfer of funds.

Liquidation: The winding up of a business or a firm by its members or its creditors.

The warrants provided that (i) if Distributing paid a dividend or distribution on its stock in cash or property,

Distributing would pay the warrant holders as if their respective warrant was exercised immediately prior to the

record date of such dividend declaration (the dividend right); (ii) and if Distributing made a liquidating distribution

to its shareholders, the warrant holders would receive property as if they had exercised their warrants before the

date of such liquidating distribution (the liquidation right).

In addition to the dividend right and the liquidation right, the warrants provided that the number of Distributing

shares for which each warrant may be exchanged would be adjusted for various events including

(i) a stock split,

(ii) a stock dividend,

(iii) a combination of shares,

(iv) an issuance of additional Distributing stock at a price below their fair market value or

(v) an issuance of additional Distributing convertible securities, warrants, options or similar rights to

subscribe to Distributing stock at a price below fair market value.

9. What are the steps involved in finalization?

Finalization means making way to prepare TB & Balance Sheet. Check the balances of GL and Sub ledgers and

pass the rectification entries where it is to be required. Trial balance should be tally with all GL & Sub ledgers

balances. At the same time we have to do all the inter branch or interoffice reconciliations.











10. What is the Debit Balance recovery? How we can recover if we won’t have any future

transactions from supplier?

The Debit balance recovery is usually made by raising a credit memo for the regular vendors. However if there are

no future transactions from the supplier, we ask the vendor to send the check / make an EFT for the amount due

from him.

When payment is made to the wrong vendor or payment made in excess, in that case overpayment has gone to

the vendor, so for us it is vendor debit balance.

For debit balance recovery, we can either follow-up with the vendor to send us the excess amount / refund back,

or we can adjust that extra amount in future invoices submitted by that vendor.

In case no future transactions, we have to follow-up with the vendor, failing which we have to write off this

amount.

11. What is the meaning of TDS? How it is charged?

Tax Deducted at Source (TDS). And it’s charged on the Base price. Different for Salaried Income. And rest Income

Tax department has chart to charge the TDS in different kind of Income.

12. What is interest on Capital?

Capital is the fund owner starts with the Business. It is done by calculating the true profit owner charge Interest

on the Capital which he/she started with the Business. Int. on Capital is the charge usually used in Pvt Ltd

Company.

13. What is another name for a real account in accounting? Is it a permanent account or a

temporary account?

Real account represents assets. It is a permanent account.

Nominal account represents expenses/income/losses/gains. It is a temporary account.

14. What is consolidation?

Consolidation is the process by which the accounting data for two or more companies is combined to create one

set of financial reports (see reference 1). Many corporations have diversified into multiple business lines, with each

business line as a separate company. While managers, owners and investors could take the financial statements

for every branch of business and add them together, that process might yield mistakes. It is far better to have an

accounting system in place that can generate consolidated financial statements for two or more divisions.

15. What is different between automatic Payments Batches and automatic payments?

Automatic payments batch means auto payment is done on the bases of the batch, which u created for the

payment of particular pay group etc.

Automatic payments means auto payments is done on the bases of single transaction u selected base for the

payments.

16. What are steps to define supplier?

Five C's can define the supplier

1. Capacity of Supplier

2. Capital of Supplier

3. Credibility of Supplier

4. Coordination

5. Commitment











17. What steps would you take before making a payment?

Steps to be taken before making a payment:

1. Whom the payment is made to?? Supplier/employees/govt. etc.--establish the party to the payment.

2. Purpose of the payment, payment against a bill or not, if against a bill, authentication & substantiation of the

invoice/bill, approval, in other words goods receipt, services rendered, salary payable ( adjustment of advances

etc.), due dates for taxes. If the payment is on account check for the approval and the type of payment. Is the

payment against future service?

3. Priority of the payment. Whether the payment is due or overdue. Check the payment maturity status.

4. Charges & deductions against the bill. If the payment is made to any person/organisation? Applicable taxes &

charges are deducted or not?

5. Check the fund status before making a payment, as the negotiability of the cheque or availability of funds in the

bank, if the payment is thru bank.

6. Is payment is on completion of service satisfactory completion proof??

18. What is debit and credit from the customer point of view?

From the customer point of view, DEBIT is the expenditure which he/she incurs (purchase of a car, car account).

CREDIT is the payment, cash or bank account (if payment paid thru cheque)

In case of Cash transaction you paid an amount of £1000/- to customer.

In your books entry is Customer A/C Debit 1000

Cash A/C Credit 1000

In customer books entry is (reverse) Cash A/C Debit 1000

Vendor A/C Credit 1000

Non-Cash items if you have given goods on Credit worth of £1000/- to customer.

Customer A/C Debit 1000

Sales A/C Credit 1000

In Customer books entry is (reverse) Purchase A/C Debit 1000

Vendor A/C Credit 1000

19. What is debit and credit from the banks point of view?

1. If I take money of my bank account. I debited my account?

2. If bank added money to my checking account. They credited my account?

3. If I bought something on my credit card. The store debited my account?

4. If the store gave me refund on my credit card. The store credited my account?

Your confusion is understandable for someone who is not an accountant. Those terms 'Debit' and 'Credit' are

relative to the BANK'S POINT OF VIEW not yours. The bank has a Balance Sheets with Assets on the left and

Liabilities (things that it owes) on the right. Assets must always equal Liabilities + Owner Equity.

On the Asset side, when a bank gains an Asset, it receives a Credit and when it loses an Asset it receives a Debit.

The reverse is true for Liabilities. When a bank gains a Liability, it receives a Debit, but it is Credited when loses a

Liability. When you take money out of your bank account, the bank loses Assets and therefore records a DEBIT

(remember, a loss of Assets is a 'Debit' on the Asset side). When you add money to your bank account, the bank

gains Assets, which is a CREDIT on the Asset side.

When you use a credit card, the store DEBITS your account because you have gained a Liability, a promise to pay

(remember, a Liability goes UP when it is Debited). When you get a refund, your account is CREDITED because

you have lost a Liability (you are no longer obligated to pay that Debt). Remember, a CREDIT on the Liability side

means that Liabilities go DOWN! So 'Debit' and 'Credit' don't mean 'down and up', it just refers to what action(s) is

being taken and on what side of the Balance Sheet the action is taking place.

20. What do you understand by Intercompany Settlement?

A company may have various company codes across the different locations, there will be exchange of goods and

services between these company codes. These goods and services which are shared or exchanged between these

company codes are reconciled during the month end process. The exchange difference has to be settled by a

company code in the way of money transfer this process is known as intercompany settlement.











21. What is the difference between EFT & Wire?

Electronic funds transfer (EFT) is the electronic exchange, transfer of money from one account to another, either

within a single financial institution or across multiple institutions, through computer-based systems. Wire transfer

is a type of EFT.

EFT or electronic funds transfer are commonly used ways to transfer money from and to accounts. Due to

industrialization and globalization, the need to send money to other cities and oversees grew. The need was

further reinforced due to large influxes of immigration. People moving to different cities and to different countries

needed a way to send money back to their families. To counter this need the electronic funds transfer was

developed.

Wire transfer is a method of electronic funds transfer from one person to another that can be made from one bank

account to another bank account or through a transfer of cash at a cash office, such as Western Union. Wire

transfer is also known as credit transfer or bank wire.

22. What do you mean by Mischarge Correction?

An expense which is charged to a wrong account is known as Mischarge and correcting this mischarge is known as

mischarge correction. A rectification entry needs to be passed to correct the mischarge.

23. What items would you verify when processing an expense report / invoice for payment?

Employee Travel and Expense Report (ETER) / Direct Pay / Unencumbered Goods and Services

• The ETER is examined for compliance with Travel policy by the accounting clerk prior to submission to Accounts

Payable.

• Accounts Payable enters ETER information into Banner as a Direct Pay, generates a Banner invoice number, and

records invoice information

• Reimbursement checks for ETERs will be processed within five business days after a completed and correct ETER

is received by Accounts Payable and scheduled for payment in the payment cycle following.

• ETERs should be submitted within 60 calendar days of incurring the expenses. TEARs submitted for expenses

older than two months will not be processed nor reimbursed.

24. What items of information do you need before you can approve an invoice for payment?

Before make payment to the invoice, the following items should be taken into consideration:

Whether the goods received are as mentioned as in the purchase order

Verify the invoice with purchase order

Whether cash discount lost deducted or/ not (if any)

Whether any advance payment is there or/not

Whether any damage is there for goods and any loss of weight to the goods

Take authorised signature on the invoice by the authorised person

25. Tell us about an invoice discrepancy that you discovered and how you resolved the

discrepancy?

Obtain the original order that was placed

Check the order to ensure that there has been a discrepancy

Identify the discrepancy - are there too many items or not enough?

Check the work area to ensure the delivery has not been moved to a different location

Ask a work colleague to check that you have correctly identified the discrepancy

26. Why does a company/business require an Accounts payables process?

Accounts payable process is required in a company because this will help and guide the accountant to manage

their payables with in the normal course of the business.

This includes verifying and checking the invoice details including the credit terms, due date, mode of payment,

payee and the items received. Only the items received will be paid. In case there’s a discrepancy against the

actual receipts, a credit note will be raised by the supplier against the short-shipped invoice.











At the end of the month, AP reconciliation is required confirming both parties balances thru the statement of

accounts (SOA). This you can identify which invoices or payment hasn’t been booked yet by both parties and you

will end up with the same balances, (equal balance from your company and with their company).

27. Which are the main MIS Reports of an accounts department & what the format of preparing the

MIS?

MIS or Management Information System is a computer based system used by most organizations worldwide for

transforming data into useful information for better decision making. It helps management make better plans and

carefully organize business operations.

Management information system is used for generating reports including inventory status reports, financial

statements, performance reports etc. These reports are essential for analysing different aspects of business. These

reports also help to answer 'what-if' questions like what would be the effect on cash flows of a company if the

credit term is changed for its customers etc.

MIS reports also support decision making and it helps to integrate the decision maker and the quantitative model

being used. These automated systems allow managers to make decisions for smooth & successful operation of

businesses. The systems includes computer resources, people, and procedures used in the modern business

enterprise.

MIS is monthly, Quarterly, Six monthly and yearly statements and records to Management of Company to make

them aware of Financial and Non-Financial Information.

M- Management - Senior-Middle-Bottom level management

I- Information - Financial - Nonfinancial

S- System - Method of Communication and Network of Info

System can be automated or manual and Statement Includes for e.g.

Market Analyses

Profit and Loss account

Balance sheet

Cash Flow

Fund Flow

Budgeting - Periodic & Product wise

Standard costing - Marginal costing data.

Trial Balance.

Day to day current asset and current liability.

MIS is important to Management as they are not day to day involved in management and this information is Basic

Raw material to Make Strategic decisions.

28. What documents are required before verifying invoice? What is the process if the supplier

passes an invoice for more amount?

The traditional three way match would apply here. This means the accounts payable processor should compare the

purchase order with the receiving document and the invoice. If all three match, the invoice can be paid - although

many organizations still insist that the invoice be approved. This approval is in addition to the matching process. If

the invoice is for a larger amount, it is considered discrepant and the discrepancy must be resolved - the sooner

the better.

29. What is difference between account payable and bills payable?

Accounts payable: A debtor's accounts of money he owes; normally arise from the purchase of products or

services.

Bills payable: Bill means (An itemized statement of money owed for goods shipped or services rendered). The

outstanding bills (like for instance utility bills etc.) yet to be paid.











What I feel is that the nature of both the accounts in terms of their treatment would be the same; as; both are

Current liabilities yet to paid, think about "payable" & "paid" feel the difference.

30. What is Reconciliation Statement?

A reconciliation statement is a document that begins with a company's own record of an account balance, adds

and subtracts reconciling items in a set of additional columns, and then uses these adjustments to arrive at the

record of the same account held by a third party. The intent of the reconciliation statement is to provide an

independent verification of the veracity of the balance in the company account, as well as to clarify the differences

between the two versions of the account.

Bank accounts: The bank reconciliation compares the balances between a company's version of its cash balance

and the bank's version, typically with many reconciling items for such items as deposits in transit and uncashed

checks.

Debt accounts: The debt reconciliation compares the debt amounts outstanding according to the company and

its lender. There can be differences requiring reconciliation when the company pays the lender, and the lender has

not yet recorded the payment in its books.

Accounts receivable: The receivables reconciliation is usually constructed on an informal basis for individual

customers, and compares their version of outstanding receivable balances to the company's version.

Accounts payable: The payables reconciliation is also usually constructed on an informal basis by individual

supplier, and compares their version of outstanding payable balances to the company's version.

31. How does the payment mechanism work?

As you receive an invoice in the mail, date stamp it with the date received. You can pay an invoice when and if

you have a matching PO, and receiving ticket which has been signed by the employee receiving the item or

witnessing the completion of the service. Once you are sure all three supporting papers match, you then enter the

invoice in the program for payment utilizing the correct accounting line to ensure the correct account is being

charged. It would be entered as a Purchase Order, if one has been set up. If not, you can pay as a direct invoice

(DI). Once entered, a journal voucher will arrive, probably the next day. You would attach the supporting papers

to the journal voucher and send them to the head office, keeping a copy for your files. You need to keep track of

the amount of money available before and after the payment has been made. Also, it is important to ensure the

entire order has been received. If not, a partial payment may be necessary or you can request a credit.

32. What is the difference between Consigner and Consignee?

Consigner is the person who is the owner of the goods and who deliver the goods to the consignee.

Consignee is the person who receives the goods and he just possesses the goods and not the owner.

33. What steps would you take before approving an invoice for payment?

The following are the important steps one should take before approving the payment:

1. Refer the Purchase Order issued.

2. Refer the Goods Received Note (GRN) for having received goods / service as mentioned in the P.O

3. Refer the terms and conditions for making the payment (any credit period)

4. Check the bank balance before approve the invoice for payment.

34. How to pass a JV when we receive bill including service tax? How to close this a/c?

First of all, there are two situations involved in this single question.

1. When you account for those service taxes and

2. When you don't account for those service taxes

Case 1: Suppose you are buying raw material and you must show government how much service taxes you have

paid for procuring the raw material then you will open separate account for service taxes paid and account for that

part of the entry in to that account











Case 2: You simply procure raw material irrespective of the service taxes paid on procuring the same, then you

will pass simple entry - Raw Material A/C DR. to Bank A/C

Entries to post is

Expense A/C DR.

Tax A/C DR.

Vendor A/C CR.

Upon end of each month we will file return with Govt. entry would appear like this.

Tax Payable A/C DR.

Tax A/C CR.

Tax A/C DR.

To Vendor A/C (Govt.) CR.

35. What is 3 Way Matching?

In accounting, the three-way match refers to a procedure used when processing an invoice received from a vendor

or supplier. The purpose of the three-way match is to avoid paying incorrect and perhaps fraudulent invoices.

Three-way refers to the three documents involved:

1. Vendor's invoice which was received and will become part of an organization's accounts payable if approved.

2. Purchase order that was prepared by the organization.

3. Receiving report that was prepared by the organization.

Match refers to the comparison of the quantities, price per unit, terms, etc. appearing on the vendor's invoice to

the information on the purchase order and to the quantities actually received.

After the vendor's invoice has been validated by the three-way match, it can be further processed for payment.

The three-way match is an important step in safeguarding an organization's assets.

36. What is Q-point?

When debit and credit is same at a time.

37. What is the difference between billable and non-billable expenses?

Billable expenses are the expenses incurred by you on behalf of your customer in performing duties / service and

supply. This expenses are recoverable from your customer by way of billing.

Non-billable expenses are the expenses incurred by you for carry out your own business / duties and

responsibilities.

Billable expense would be in example billing your airfare to go to a company convention to your employer for

reimbursement. Non-billable expenses would be the pay-per-view movies you charged in your hotel room while

you were on that stay. You accumulated those expenses on your own account, and was not necessary to your job.

38. Tell us about an invoice discrepancy that you discovered and how you resolved the

discrepancy?

Example Answer: While working in my x organization I found so many discrepancies in invoices mostly vary with

Quantity, Rate, payment terms or sending the different goods and so on. If I found discrepancies, I report to the

higher authorities and call the vendor immediately about the discrepancies to rectify it. If necessary I send a debit

note/memo to vendor or ask him to send credit note/memo for the discrepancies caused.

39. What is the difference between debenture and preference share?

Differences between preference shares and debentures:

- Preference Shareholders are effectively owners while, Debenture-holders are creditors.

- Preference Shareholders may vote at AGMs and be elected as directors, Debenture-holders may not vote at

AGMs or be elected as directors.

- Preference Shareholders receive profit in the form of dividends, Debenture-holders receive a fixed rate of

interest.











- If there is no profit, the shareholder does not receive a dividend, interest is paid to debenture-holders regardless

of whether or not a profit has been made.

- In case of dissolution of firms debenture holders are paid first as compared to shareholder.

The word ‘Debenture’ is derived from the Latin term “debere” which means “to borrow”. Share capital is the main

source of finance of a joint stock company. Such capital is raised by issuing shares. Those who hold the shares of

the company are called the shareholders and are owners of the company. Company may need additional amount

of money for a long period. It cannot issue shares every time. It can raise loan from the public. The amount of

loan can be divided into units of small denominations and the company can sell them to the public. Each unit is

called a ‘debenture’ and holder of such units is called Debenture holder. The amount so raised is loan for the

company. A Debenture is a unit of loan amount. When a company intends to raise the loan amount from the public

it issues debentures. A debenture is a document issued under the seal of the company. It is an acknowledgment of

the loan received by the company equal to the nominal value of the debenture. It bears the date of redemption

and rate and mode of payment of interest.

40. What is the full form of the term WIRE in wire payment? Explain the process for making and

receiving the payment through WIRE?

A wire transfer is an electronic transfer of money. In the case of a bank-to-bank transfer, no actual cash is

exchanged, but electronic balances in the respective accounts are adjusted accordingly. This is a very secure way

to transfer funds, as positive identification of both account holders is required, and there is no chance of a charge

back, unlike with a personal check.

Companies such as Western Union offer an alternate, anonymous method of wire transfer. Therefore, you can

walk into a Western Union in Arizona, for example, and send 100 US dollars (USD) to the Western Union in the

Bahamas simply by paying the Arizona office the cash plus any fees. Your friend in the Bahamas can go to the

Western Union to receive the 100 USD in cash within minutes. The money is transferred electronically.

A cash wire transfer is handy when someone does not have access to a bank account, but it also has drawbacks. If

this type of transfer is used to purchase something from a private party, the seller can provide false information to

the sender. Cash can be collected at the receiving end under the false ID, and the party can disappear without

ever providing the promised goods. Law enforcement is also concerned about subversive organizations using such

transfers to fund illegal activities.

A bank-to-bank wire transfer has the advantage of being much more secure and desirable than other forms of

payment. These transfers even save paper by reducing the need for checks and deposit slips, making them more

environmentally friendly than standard forms of banking.

41. What entry is recorded when $75.00 worth of supplies are purchased on account?

Purchase A/C DR. $75.00

To - Supplier A/C $75.00

Purchasing good two kinds of entry

Either Cash or Credit

If Cash

Purchase A/C------DR xx

To Cash A/C

(Being good purchase on cash)

If Credit

Purchase A/C----DR

To Supplier A/C

(Being goods purchase on Credit)











42. What type of account appear on a post-closing trial balance?

The Trial Balance is made up of 2 parts, the Balance Sheet accounts and the Income Statement (aka Profit and

Loss) accounts. The P&L show Income (Revenues) and Expenses (both Cost of Goods and General). These are the

day-to-day accounts which are closed into the Balance Sheet (Assets, Liabilities & Equity) at the end of the period.

This is usually yearly, but big corporations may close the accounts on a monthly basis.










42 accounts payable interview questions and answers

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