Accounting Interview Questions for Finance
Accounting is the foundation of every finance interview. Whether you're targeting IB, PE, or equity research, the first technical questions always test 3-statement mastery. Here are the questions that appear most frequently.
The Pattern Behind Every Accounting Question
Every accounting interview question tests the same core skill: can you trace a transaction through all three statements?
Master this framework and you can handle any accounting question they throw at you, even ones you've never seen before. Interviewers can always tell who understands the logic vs. who memorized answers.
Accounting Questions by Frequency
Walk me through the 3 financial statements.
Income statement: revenue → expenses → net income over a period. Balance sheet: assets = liabilities + equity at a point in time. Cash flow statement: starts with NI, adjusts for non-cash items and working capital, then investing and financing activities.
How are the 3 statements linked?
Net income flows to both the cash flow statement (top) and retained earnings on the balance sheet. The CFS adjusts for non-cash items and working capital, producing net change in cash—which updates the balance sheet.
D&A increases by $10. Walk through the impact.
IS: Pre-tax income ↓$10, taxes ↓$4 (at 40%), NI ↓$6. CFS: NI ↓$6 but D&A add-back ↑$10, net cash ↑$4. BS: Cash ↑$4, PP&E ↓$10, assets ↓$6, RE ↓$6. Balances.
What is working capital?
Current assets - current liabilities. Represents the short-term liquidity needed to run the business. Increases in NWC are a use of cash; decreases are a source of cash.
Cash vs. accrual accounting?
Cash: records when cash moves. Accrual: records when earned/incurred regardless of cash timing. All public companies use accrual. This is why profitable companies can run out of cash.
Walk me through a $100 inventory write-down.
IS: COGS ↑$100, NI ↓$60 (40% tax). CFS: NI ↓$60 + $100 non-cash add-back = cash ↑$40. BS: Inventory ↓$100, cash ↑$40, assets ↓$60, RE ↓$60. Balances.
What is goodwill?
Premium paid above FMV of net identifiable assets in an acquisition. Not amortized under GAAP—tested for impairment annually. Impairment = non-cash charge on the IS.
Capitalizing vs. expensing?
Expensing: full cost hits IS immediately. Capitalizing: cost goes on BS as asset, depreciated/amortized over time. Capitalizing spreads the income statement impact, boosting current earnings at the expense of future earnings.
Accounting Is Just the Foundation
Chapter 1 covers accounting in depth. But interviews don't stop there—you'll need DCF, comps, M&A, and LBO mastery too. The full guide covers all 6 topics in 88 pages.