Accounting Internship Interview Questions

The income statement shows a company's revenue and expenses over a period, like a quarter or a year, and ends with net income. The balance sheet is a snapshot at one moment: what the company owns in assets, what it owes in liabilities, and the owners' equity, and assets always equal liabilities plus equity. The cash flow statement starts with net income, adjusts for non-cash items like depreciation and for changes in working capital, then adds investing and financing activities to show how cash actually changed during the period.

Net income from the income statement is the starting line of the cash flow statement, and it's also added to retained earnings in the equity section of the balance sheet. The cash flow statement then adjusts for non-cash items and changes in balance sheet accounts like receivables and inventory. The net change in cash it calculates, added to the beginning cash balance, gives the ending cash that appears on the balance sheet — which is how the balance sheet stays in balance.

I'll assume a 25 percent tax rate. On the income statement, pre-tax income falls by $10 and taxes fall by $2.50, so net income drops by $7.50. On the cash flow statement, net income is down $7.50 but I add back the $10 of depreciation because it's non-cash, so cash from operations goes up by $2.50. On the balance sheet, cash is up $2.50 and PP&E is down $10, so assets fall by $7.50; on the other side, retained earnings fall by $7.50, so it balances.

Under cash accounting you record revenue when you receive payment and expenses when you pay them. Under accrual accounting, which GAAP requires for most companies, you record revenue when it's earned and expenses when they're incurred, so they match the period they belong to. For example, if a company delivers a service in December but is paid in January, accrual accounting records December revenue and an accounts receivable, while cash accounting would record nothing until January.

Every journal entry has debits equal to credits, which keeps the accounting equation in balance. Debits increase asset and expense accounts and decrease liabilities, equity and revenue; credits do the opposite. For example, if a company buys $500 of supplies on account, it debits supplies, an asset, for $500 and credits accounts payable, a liability, for $500.

Working capital is current assets minus current liabilities, so things like cash, receivables and inventory minus payables and other short-term obligations. It matters because it shows whether a company can pay what's due in the next year. It also affects cash flow: if receivables grow because customers are paying more slowly, that ties up cash even when the income statement looks healthy, which is why the cash flow statement subtracts increases in working capital.

Audit teams test a company's financial statements and controls so they can give an independent opinion that the statements are fairly presented, which investors and lenders rely on. Tax teams prepare returns and help clients plan around tax rules. Advisory, or consulting, helps clients with specific problems such as risk, technology or transactions. I'm applying to audit because I like seeing how a whole business works, and my [auditing course or experience] showed me I enjoy testing whether the numbers hold up.

I chose accounting after my intro class because I liked that there's a right answer you can prove, and that every business depends on it. I'm on track to meet my state's education requirement for the CPA through [150-hour plan, master's program or the experience pathway], and I plan to start the exam [timing]. An internship here would show me which service line I want to build my career in before I commit to it full-time.