Top 30 Accounting Interview Questions for Financial Analysts at Deloitte

1. What is the basic accounting equation?

The basic accounting equation is:

Assets = Liabilities + Equity

It represents the foundation of double-entry accounting. A company's assets are financed either through liabilities, such as debt and payables, or through equity provided by owners and retained earnings.

A strong interview answer should also explain that every accounting transaction must preserve this balance.

2. What is the difference between cash accounting and accrual accounting?

Cash accounting recognizes transactions when cash is received or paid.

Accrual accounting recognizes revenue when it is earned and expenses when they are incurred, regardless of when cash changes hands.

For a Financial Analyst, understanding this difference is important because financial statements often contain timing differences between reported earnings and actual cash flows.

3. What is the matching principle?

The matching principle requires expenses to be recognized in the same reporting period as the revenue they helped generate.

For example, if a company makes a sale in December but expects some customers to become uncollectible, the related bad debt expense should be recognized appropriately in relation to that sale rather than being deferred arbitrarily to a later period.

The research specifically highlights bad-debt accounting as an example of testing this principle.

4. What is the difference between revenue and cash received?

Revenue represents income recognized when the applicable revenue-recognition requirements are satisfied. Cash received represents the actual movement of money.

The two can occur at different times. For example, a company may receive cash from a customer before providing a service. In that situation, the initial receipt does not necessarily mean the company can immediately recognize the entire amount as revenue.

This distinction becomes particularly important under subscription and SaaS arrangements.

5. What is a journal entry for a bad debt expense?

Under the allowance approach described in the research, a simplified entry is:

The purpose is to recognize the expected credit loss in the appropriate period while maintaining a separate allowance against receivables.

The research identifies bad-debt treatment and related journal entries as examples of fundamental accounting questions.

6. What is the difference between current ratio and quick ratio?

The Current Ratio is:

Current Assets ÷ Current Liabilities

The Quick Ratio excludes less-liquid current assets and, in the research's formulation, is:

(Cash + Equivalents + Marketable Securities + Accounts Receivable) ÷ Current Liabilities

The quick ratio therefore provides a more stringent view of short-term liquidity because it excludes inventory and prepaid expenses.

7. Why can a high current ratio be misleading?

A high current ratio does not automatically mean that a company has strong immediate liquidity.

If a large portion of current assets consists of inventory that cannot be quickly converted into cash, the company's actual short-term liquidity may be weaker than the current ratio suggests.

This is why the research emphasizes looking beyond the formula and interpreting the composition of current assets.

8. What is the asset turnover ratio?

The Asset Turnover Ratio measures how efficiently a company uses its assets to generate sales.

Asset Turnover = Net Sales ÷ Average Total Assets

A higher ratio generally indicates that the company is generating more sales relative to its asset base, while a lower ratio can indicate less efficient asset utilization.

9. What is EPS, and why is it important?

Earnings Per Share (EPS) measures earnings attributable to each share.

It is important because it standardizes profitability on a per-share basis and is used in valuation measures such as the Price-to-Earnings (P/E) ratio.

The research emphasizes that interviewers may look beyond the calculation and ask what EPS tells an analyst about profitability and valuation.

10. What are the three primary financial statements?

The three primary financial statements are:

• Income Statement — reports revenue, expenses and profit over a period.
• Balance Sheet — reports assets, liabilities and equity at a point in time.
• Cash Flow Statement — explains changes in cash through operating, investing and financing activities.

A Financial Analyst should understand how a transaction can flow through all three statements rather than treating them as independent reports.

11. How does the Cash Flow Statement connect to Net Income?

Under the indirect method, the Cash Flow Statement begins with Net Income and adjusts it for non-cash items and changes in operating assets and liabilities to arrive at cash flow from operating activities.

For example, depreciation reduces Net Income but does not represent a current-period cash payment, so it is added back when calculating operating cash flow.

The research identifies this linkage as an important part of Financial Analyst preparation.

12. Where do dividends appear in the Cash Flow Statement?

Under US GAAP, dividends paid are classified as financing activities because they represent a return of capital to equity investors.

The research also notes that dividends received are classified as operating activities under US GAAP.

This is an example of the regulatory detail that can distinguish a basic accounting answer from a more technically developed one.

13. Walk me through the impact of a $10 increase in depreciation on the three financial statements.

Assume a 20% tax rate.

Income Statement

Depreciation increases by $10, reducing pre-tax income by $10. The resulting tax benefit is $2, so Net Income decreases by $8.

Cash Flow Statement

Net Income falls by $8, but the $10 depreciation expense is added back because it is non-cash.
Therefore, cash flow increases by $2 because of the tax shield.

Balance Sheet

PP&E decreases by $10 through accumulated depreciation, while cash increases by $2. Total assets therefore decline by $8.
Retained earnings also decline by $8 because Net Income has declined by $8.

The Balance Sheet remains balanced.

14. What is EBITDA?

EBITDA stands for:

Earnings Before Interest, Taxes, Depreciation and Amortization.

It is commonly used as a measure of operating profitability before the effects of financing, taxes and depreciation/amortization.

The research highlights EBITDA's importance in valuation and M&A analysis, including the use of EV/EBITDA multiples.

15. Why is EBITDA used in valuation?

EBITDA can help analysts compare operating performance across businesses with different financing structures, tax environments and depreciation policies.

It is also commonly used as the denominator in an Enterprise Value / EBITDA multiple.

However, EBITDA should not be treated as the same thing as cash flow. A strong candidate should understand what EBITDA excludes and why additional analysis is required.

The research specifically connects EBITDA with corporate valuation and adjusted earnings analysis.

16. What is working capital?

Working capital is commonly expressed as:

Working Capital = Current Assets − Current Liabilities

It provides an indication of the resources available to support short-term operating requirements.

For a Financial Analyst, the important part is not simply knowing the formula but understanding how receivables, inventory and payables affect liquidity and cash generation.

17. How can a company improve its working capital?

The research identifies three major areas:

• Accounts receivable: accelerate collections and reduce Days Sales Outstanding.
• Accounts payable: manage payment timing while maintaining supplier relationships and avoiding penalties.
• Inventory: improve inventory turnover and reduce capital tied up in obsolete or excess inventory.

A strong answer should recognize that optimizing working capital involves balancing liquidity with operational requirements rather than simply maximizing or minimizing one account.

18. What is the Cash Conversion Cycle?

The Cash Conversion Cycle measures how long a company takes to convert cash invested in operations back into cash collected from customers.

It is closely connected to:

• Receivables collection
• Inventory management
• Payables management

The research specifically links working-capital questions with the cash conversion cycle and Days Sales Outstanding.

19. What is NPV?

Net Present Value (NPV) measures the present value of future cash inflows and outflows associated with an investment.

A positive NPV indicates that, under the assumptions used in the analysis, the project's discounted value exceeds its initial and other relevant cash outflows.

The research identifies NPV as one of the core capital-budgeting concepts candidates should understand.

20. What is IRR?

Internal Rate of Return (IRR) is the discount rate at which the NPV of a project equals zero.

It expresses the project's return as a percentage rather than as an absolute dollar value.

Interviewers may ask candidates to compare IRR and NPV and explain why the two measures can sometimes produce different conclusions.

21. Which is more useful for mutually exclusive projects: NPV or IRR?

The research highlights the scale problem in capital budgeting.

For mutually exclusive projects, NPV is theoretically preferable because it measures the absolute amount of value created, whereas IRR measures a percentage return.

A project can therefore have a higher IRR but create less absolute value than another project with a larger investment and higher NPV.

22. What is WACC?

Weighted Average Cost of Capital (WACC) represents a company's blended cost of financing from debt and equity.

The research specifically emphasizes that the tax shield applies to the cost of debt because interest expense can provide a tax benefit, while dividends do not receive the same treatment.

Candidates should understand both the formula and the economic reasoning behind it.

23. What is ASC 606?

ASC 606 is the US GAAP revenue-recognition framework based on the transfer of control to the customer.

The research identifies a five-step framework:

• Identify the contract.
• Identify performance obligations.
• Determine the transaction price.
• Allocate the transaction price.
• Recognize revenue when or as performance obligations are satisfied.

24. How is revenue recognized for a SaaS subscription?

For a subscription arrangement where cash is received before the service is provided, the initial entry described in the research is:

Deferred revenue is a contract liability.

As the company satisfies its performance obligation over the subscription period, it recognizes revenue:

This question tests whether a candidate understands the difference between receiving cash and earning revenue.

25. What is the difference between ASC 606, IFRS 15 and Ind AS 115?

The research groups ASC 606, IFRS 15 and Ind AS 115 as revenue-recognition frameworks built around the principle of recognizing revenue based on the transfer of control.

For Deloitte USI-related roles, the ability to connect Indian accounting knowledge with international frameworks can be particularly relevant, depending on the position and engagement.

26. What is ASC 842, and how does lease accounting affect the Balance Sheet?

ASC 842 governs lease accounting under US GAAP.

The research explains that lessees recognize a Right-of-Use (ROU) asset and a corresponding lease liability for leases within its scope.

The lease liability is based on the present value of future lease payments, using the applicable discount rate. The ROU asset incorporates the lease liability along with relevant adjustments such as initial direct costs, prepaid lease payments and lease incentives.

27. What is the difference between a finance lease and an operating lease?

This question tests whether the candidate understands lease classification and its accounting consequences.

Under the research framework, candidates should be prepared to discuss the criteria used to distinguish finance and operating leases and how the classification affects the accounting treatment.

For technical accounting roles, it is also useful to understand the measurement of the lease liability and ROU asset.

28. What is Quality of Earnings in Financial Due Diligence?

Quality of Earnings (QoE) analysis evaluates whether reported earnings reflect the sustainable, normalized earning power of a business.

The research highlights adjustments such as:

• Removing non-recurring litigation settlements
• Normalizing owner compensation
• Adjusting related-party transactions
• Removing one-time gains
• Addressing aggressive revenue-recognition practices

The objective is to understand sustainable earnings rather than simply accepting reported EBITDA at face value.

29. What are debt-like items in Financial Due Diligence?

Debt-like items are obligations that may not appear as traditional interest-bearing debt but can represent future cash outflows that a buyer may inherit.

Examples identified in the research include:

• Unpaid statutory taxes
• Deferred rent accruals
• Unfunded pension liabilities
• Change-of-control bonuses
• Certain warranty provisions

Understanding these items is important in transaction analysis because they can affect the value ultimately attributable to equity holders.

30. How would you explain a financial adjustment to a non-finance stakeholder?

A strong answer should focus on clarity, relevance and business impact, rather than accounting terminology alone.

For example, instead of simply saying:

"The adjustment increases the expense recognition because of an accrual."

You could explain:

"We need to recognize this cost in the current period because the underlying service has already been received. This reduces reported profit for the period, even though the cash payment may happen later."

The research specifically highlights the ability to explain complex financial concepts to non-finance stakeholders as an important communication competency.