Accounting & Finance Interview Questions and Answers

I build the forecast from drivers, not from a flat growth assumption.

First I establish the opening cash balance, then project inflows and outflows month by month for the next twelve months on a rolling basis. For collections I use actual invoice terms and customer payment behaviour, so a sale in March on sixty day terms lands in May. I separate committed revenue from pipeline and weight the pipeline by probability.

Outflows include payroll, rent, supplier payments, tax, loan repayments and capital expenditure. I add known one offs such as quarterly VAT or annual insurance.

Then I produce three scenarios, base, downside and upside, and identify the minimum cash balance and the month it occurs. That tells us whether we need a credit facility or can invest. I refresh it monthly by replacing forecasts with actuals and extending the horizon, and I review variances to improve my assumptions.

Deferred revenue is money a customer has paid before the company has earned it. It sits on the balance sheet as a liability because the company still owes the customer a product or service.

Under accrual accounting and standards such as IFRS 15 and ASC 606, revenue is recognised when the performance obligation is satisfied, not when cash is received. If a customer pays 12,000 for an annual subscription in January, the company records 12,000 of cash and a 12,000 liability. Each month it recognises 1,000 of revenue and reduces the liability by the same amount.

It is a liability because failing to deliver would require a refund or a substitute. Deferred revenue is also a useful signal: growing deferred revenue often indicates a healthy subscription business, which is why analysts watch billings alongside recognised revenue.