Most Asked Accounts Payable Interview Questions

Following is the list of most frequently asked Accounts Payable Interview questions and their best possible answers.

1) What do you understand by Account Payable? Explain it with an example.

Accounts payable or AP is an amount that a company needs to give to vendors for goods and services purchased on credit. It has to be paid off to its creditors or suppliers within a period. Accounts payable is a type of existing liability of a company.

In other words, we can say that accounts payable is due money which the company has to pay to the vendors or suppliers for goods or services received that have not yet been paid for. Accounts Payable is considered as a liability and comes under the head 'current liabilities'. It is a short-term debt payment that needs to be paid to avoid default.

For example, suppose a restaurant orders food and beverage from a company on credit to owe money to the company. These items are part of the inventory and are considered trade payables. On the other hand, the restaurant's obligations to other companies, such as the company cleaning the restaurant's staff uniforms, are considered accounts payable. Generally, both categories fall under the broader accounts payable category, and many companies combine both under the term accounts payable.

2) What is the meaning of TDS? How is it charged?

TDS is an acronym that stands for Tax Deducted at Source. It is charged on the Base Amount. It is a simple tax deduction process. Under this process, if a person (deductor) is liable to make payment to any other person (deductee), will deduct tax at the source and transfer the balance amount to the deductee. The deducted TDS amount will be remitted to the Central Government.

There are mainly two different types of TDS:

• TDS on salaried employees: TDS on salaried employees must be deducted from the salary paid to the employer if it crosses the tax limit. This money has to be paid to the government on or before the due date.
• TDS on contractors and other professionals: In TDS on contractors or other professionals, there is a slab that min tax, surcharge, education cess plus higher education cess. The finance minister regulates it, and they can make changes or keep the same or remove in every year budget. You can deduct the TDS on the bill amount while paying or if an advance is paid.

3) What steps should you take before approving an invoice for payment?

Before approving an invoice for payment, we should take some of the following steps:

• We should validate the statement once for checking any holds.
• If the workflow is implemented, begin approval for the invoice. Once the invoice is approved, you can go for payments.
• We should create accounting after the endorsement of the invoice.

4) What is the difference between debenture holder and preference shareholder?

Following is a list of significant differences between debenture holders and preference shareholders:

5) What do you understand by a Non-PO Invoice?

A Non-PO Invoice is an invoice that does not have a PO (purchase order). This invoice requires approval from the authorized person/persons to process the payment.

6) What are the different processes of accounts payable?

Following are the different processes of accounts payable:

• Purchase requisition
• Purchase order
• Goods receive
• Inspect goods
• Invoice receive and verification
• Release payment
• Make payment
• Reconciliation

7) Which are the main MIS reports of an accounts department? What format is used to prepare the MIS?

MIS is an acronym that stands for Management Information System. MIS helps the organization, especially the managers, organize, evaluate information and data, and provide information in a timely and efficient manner, which later helps management in decision-making. It is mainly used to focus on the accounting and economic aspects, analyzing problems, and providing solutions.

Structure of an MIS report

You can see the following formats that are used to prepare the MIS report. Here you can see the contents sheet-wise. Let's see an example of an MIS report of an organization.

First Sheet: Employee's Details

This sheet contains the details of the employees.

• Code
• Name of employee
• Date of birth
• Designation
• CTC
• Address for communication
• Permanent address
• Contact number
• Blood group
• Maximum qualification
• Extra qualifications
• Total Experience

Second Sheet: The salary structure

Here, you have to write down the complete salary structure and also make a column for the salary after any revision.

Third Sheet: New Joins

In this sheet, you have to write down the name of new joins of that month with detail like CTC, Designation, DOB, Contact no. etc.

Forth Sheet: Resigned employees

This sheet contains employees who have resigned during that month with details such as name, designation, date of joining, date of resignation, last working day, etc.

Fifth sheet: The attrition rate

According to this MIS report, you can find out the attrition report, qualification analysis reports, team management reports, etc.

8) What are the different types of assets?

There are mainly two kinds of assets that are current assets and fixed assets.

9) What do you understand by liabilities?

A liability is something a person or a company obliged from the bank. This is what a company owes, usually a sum of money. Liabilities are settled over time by transferring economic benefits, including money, goods, or services. In other words, we can say that liability is an obligation between one party and another which is not yet completed or paid for.

10) What do you understand by the term Debit Balance? How can we recover it if we won't have any future transactions from the supplier?

The debit balance is an amount of cash the customer must have in the account as security to follow the execution of a purchase order so that the transaction can be settled correctly. To recover the debit balance, we have to raise 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 their side.

To recover the debit balance, we can follow up with the vendor to send us the excess amount or refund back, or we can adjust that extra amount in future invoices submitted by that vendor.

11) How can you define a good supplier?

We can use the following steps to define a good supplier:

• A good supplier should create self-confidence in the client's mind.
• Services that he has promised have to be completed at any cost.
• Services have to be completed according to the requirement of the client.
• He should proceed with another order by completing the three steps.

12) What do you understand by Open Item Management?

Open item management ensures that all items that have not yet been cleared are available in the system. You can archive a document only after when the open items in a document are cleared.

13) What do you understand by wire transfer?

Wire transfer is an electronic payment method used to transfer funds from one bank account to another bank account through SWIFT. It is a type of digital payment where the beneficiary account is added to another account which releases payment that is instantly credited t the beneficiary account.

14) What do you understand by IFA?

The term IFA stands for Institute of Financial Accountants. It is a professional accountancy body that represents and provides certification for financial accountants in the United Kingdom. The IFA is a full member of the International Federation of Accountants. It was founded in 1916 with the motto of making small businesses count.

15) What is STPI? What is the main objective of STPI?

The term STPI stands for Software Technology Parks of India. It is a science and technology organization established in 1991 by the Indian Ministry of Electronics and Information Technology. The main objective of this organization is to encourage, promote and boost the export of software from India. It is also responsible for providing infrastructure, skilling, mentoring, market connect, and supports startups.

16) Why is the knowledge of STPI required in Accounts Payable?

The knowledge of STPI is required in Accounts Payable because some software service providers get exemption from STPI for their software exports. So, in Accounts Payable, we have to define the vendor STPI location-wise. In India, there are different STPI locations. If one vendor supplies services or materials to all or some of the STPI locations, we need to maintain the same vendor STPI wise.

17) What do you understand by Fringe Benefits Tax or FBT?

FBT stands for Fringe Benefits Tax. It is a tax that is applied to provide some benefits to employees from their employer and the cash salary or wages. For example, a novated lease is a benefit outside your salary or wages. So, it is an example of FBT.

FBT was introduced by the Finance Act 2005 with effect from April 1, 2006. It was set at 30 percent of the cost of benefits the company paid. This is an additional tax along with income tax, irrespective of whether or not the company had income-tax liability.

18) What are some examples of fringe benefits?

Companies provide some fringe benefits to all their employees in addition to the compensation or salary paid to them. Some common fringe benefits are telephone reimbursements, employer's contribution to the superannuation fund, some perks such as tuition assistance, health insurance, childcare reimbursements, subsidized cafeteria, free bus service for commute, employee discounts, and employee stock options, etc.

19) What do you understand by a three-way match?

The three-way match is used to avoid paying incorrect payments. It is a process of matching the invoice, comparing the purchase order, and receiving a report to validate the purchase details before making a payment. The primary purpose of the three-way match process is to reduce the risk of fraud and financial loss by preventing the reimbursement of unauthorized purchases.

In the three-way match process, we must follow the steps given below:

• Match the invoice price with the purchase order price.
• Match the quantity billed by the supplier with the ordered quantity.
• Match the quantity received.

20) What is a trade discount? What is its benefit?

A trade discount is a discount or a reduction in price, which a manufacturer or wholesaler gives a retailer/ wholesaler when they buy a product or group of products. In other words, we can say that a trade discount is a certain percentage a manufacturer is willing to cut or reduce its list price for wholesalers or retailers. The manufacturer gives the manufacturer to the retailer based on the volume of goods such as 20% to 40% discount.

The main benefit of trade discounts is attracting more customers and receiving the order in bulk, which ultimately increases the number of sales. Therefore, trade discount usually varies with the quantity of the product purchased.

21) What is the difference between Consignor and Consignee?

Consignor: The consignor is the owner of the goods and is responsible for delivering the goods to the Consignee. For example, goods producers, wholesalers, etc.

Consignee: Consignee is the person who receives the goods, and he possesses the goods and not the owner. For example, suppliers, distributors, etc.

22) What do you understand by an early payment discount?

Early payment discount is a type of discount given to buyers when they pay their bills early. According to the terms and conditions mentioned in the purchase order, the suppliers discount buyers when they make payment before the due date.

For example, if a company ABC sold 1 million rupees worth of goods to XYZ Company and payment terms are 30 days from the invoice date. The ABC Company can give a 5% discount to XYZ Company if they make the payment within one week from the invoice date. It is an example of an early payment discount.