Before Interviewing an Accountant, Brush Up on These Key Terms
So, you’re interviewing candidates for accounting positions at your company – but you’re not an accountant yourself. While you’re perfectly at ease assessing soft skills, general knowledge and cultural fit, knowing exactly how to evaluate an accounting professional’s technical strengths takes you a bit outside your comfort zone.
Brushing up on job-specific terminology – including these key terms – will help you meet the challenge of landing top talent in today’s candidate-driven marketplace.
Sarbanes-Oxley: This law holds accountants responsible for the accuracy of a company’s financial information.
GAAP: This is the acronym for Generally Accepted Accounting Principles, an established set of standards for all accounting practices.
Credit: In accounting, this term refers to one half of the double entry system that ensures a balance in one’s records. Certain types of accounts are increased or decreased on the credit side, depending on the transaction.
Debit: This is the other half of the double entry accounting system. As with credits, certain accounts also increase and decrease on the debit side. When all transactions are accounted for, debit and credit totals should be equal on a balance sheet.
Asset: This is anything of value to an organization. Assets include, but are not limited to, cash, equipment, real estate and inventory.
Liability: This is an obligation or debt created from a past business transaction. Liabilities must be tracked until an account is fully settled and closed.
Accounts payable: The most common type of liability, an accounts payable is normally created when a company borrows cash or makes a purchase on credit.
Accounts receivable: This is the opposite of an accounts payable. This type of account usually exists when an organization makes a sale on credit or loans cash.
Equity: This is how accountants view a company’s value. If the value of liabilities exceeds those of assets, then equity is negative. If the opposite is true, equity is positive.
Capital: While this term is commonly used to describe money, a broader definition is the total financial value of a company’s assets.
Balance sheet: This is a statement used to determine a company’s financial health. It is where all assets, liabilities, transactions and equity are assessed. As its name suggests, a balance sheet must have the same numbers on each side: liabilities + owner’s equity = assets.
General ledger: All transactions that occur are ultimately recorded here. A general ledger is used to organize all of a company’s accounting data in one place.
General journal: Although all transactions are recorded on a general ledger, everything is initially recorded in a general journal. A general journal is not used to make official postings; it is just a record of a day’s accounting activities.
Net income: This is the company’s bottom line for an accounting period. It is calculated by subtracting any transaction considered “the cost of doing business” – such as expenses, taxes or asset depreciation – from revenues.
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