“A company buys a machine for €50,000 in cash: what happens in its financial statements?” The question seems simple, and yet many candidates get lost in it, for lack of having practised it out loud. In audit firms, accounting firms and accounting departments, recruiters ask accounting questions to check that the basics are solid and, above all, that the candidate understands how the financial statements fit together. This article covers the three statements, the links between them, the classic questions with suggested answers, journal entries to post and a revision method. It follows the French framework, the plan comptable général (French chart of accounts), with a few IFRS pointers.
Income statement, balance sheet and cash-flow statement
The annual accounts of a French company comprise the balance sheet, the income statement and the notes, according to the rules of the French chart of accounts published by the French accounting standards authority (Autorité des normes comptables). The cash-flow statement is not compulsory for all companies under French GAAP, but it is part of consolidated accounts and features in most interview questions.
The income statement measures performance over a period: income (sales, change in finished goods, grants) minus expenses (purchases, external charges, staff costs, taxes, depreciation, amortisation and provisions, finance costs, corporation tax). It is read by levels: operating profit, financial result, exceptional result, net profit.
The balance sheet is a snapshot at a date: on the assets side, what the company owns or controls (fixed assets, inventory, receivables, cash); on the liabilities side, how it is financed (equity, provisions, borrowings, trade payables and tax liabilities).
The cash-flow statement explains the change in cash between two balance sheets, in three blocks: cash flows from operating activities, from investing activities and from financing activities.
A recruiter does not ask you to recite these definitions, but to know how to use them.
The links between the statements
This is the heart of interview questions. Three links to know perfectly:
- Net profit from the income statement feeds into equity on the balance sheet. A profit increases equity; a dividend distribution reduces it.
- Net profit is the starting point of the cash-flow statement (indirect method): you add back non-cash expenses (depreciation, amortisation and provisions), deduct non-cash income, and adjust for the change in working capital.
- Closing cash in the cash-flow statement matches cash on the balance sheet.
To check that you have mastered these links, the typical question changes one item and asks for the effect on all three statements. The method: start from the income statement, move to the cash-flow statement, finish with the balance sheet, and check that the balance sheet still balances.
Classic questions and answers
“Depreciation on a machine increases by €10,000. What is the effect?” In the income statement, the expense rises by €10,000, so profit before tax falls by the same amount and tax falls in proportion to the applicable rate. In the cash-flow statement, net profit falls, but the depreciation, which involves no cash outflow, is added back; cash increases by the amount of tax saved. On the balance sheet, fixed assets fall by €10,000, cash increases by the tax saving, and equity falls by the lower net profit. The balance sheet still balances.
“What is the difference between an expense and a fixed asset?” An expenditure is capitalised when it relates to an identifiable item, controlled by the company, from which it expects future economic benefits over more than one financial year; it is then depreciated. Otherwise, it is an expense for the year. Borderline cases (development costs, software, major maintenance) are favourite topics for recruiters.
“What is working capital requirement?” It is the financing needed for the operating cycle: inventory and trade receivables minus trade payables and other operating liabilities. An increase in working capital requirement consumes cash, even if the company is profitable.
“Can a profitable company go bankrupt?” Yes, if its cash no longer allows it to pay its debts as they fall due. Rapid growth, customers who pay late or swelling inventory can exhaust the cash of a profitable company.
“What is a provision?” A liability of uncertain timing or amount, recognised when the company has an obligation towards a third party, an outflow of resources is probable and its amount can be reliably estimated. Not to be confused with an impairment, which reduces the value of an asset.
“What is the difference between profit and cash?” Profit follows the accruals principle: a sale is recognised when it is made, even if it has not been collected. Cash follows receipts and payments. The differences come from non-cash income and expenses, working capital and investments.
For an audit position, a frequent question: “Which balance-sheet items do you see as the riskiest?” An expected answer cites areas of estimation (provisions, impairment of inventory and receivables, goodwill), revenue recognition and cut-off, explaining why.
Journal entry cases
Recruiters often ask you to post a few entries, orally or on paper. Here are the classics, with French chart of accounts numbers.
Purchase of goods on credit, €1,200 including VAT at 20% Debit 607 Purchases of goods: €1,000 Debit 44566 Deductible VAT: €200 Credit 401 Suppliers: €1,200
Annual insurance invoice of €12,000 paid on 1 October, year-end 31 December At year-end, nine months relate to the following year: a prepaid expense is recognised. Debit 486 Prepaid expenses: €9,000 Credit 616 Insurance premiums: €9,000
December electricity invoice not received at year-end, estimated at €800 excluding VAT Debit 6061 Non-stockable supplies: €800 Credit 408 Suppliers, invoices not yet received: €800
Depreciation of a €50,000 machine depreciated on a straight-line basis over five years Debit 6811 Depreciation and amortisation charges: €10,000 Credit 2815 Accumulated depreciation of plant and equipment: €10,000
Impairment of a doubtful customer receivable of €6,000 excluding VAT, half of which is considered irrecoverable Debit 416 Doubtful customers: €7,200 Credit 411 Customers: €7,200 (reclassification of the receivable including VAT) Debit 6817 Impairment charges on current assets: €3,000 Credit 491 Impairment of customer accounts: €3,000
Explaining why the entry is posted matters as much as the entry itself: the recruiter is looking for the reasoning (the accruals principle, prudence, matching expenses with income).
How to revise effectively
Go back to the DCG fundamentals. The accounting and advanced accounting exams cover the essentials. A DCG textbook, or your own course notes, is enough for most junior interviews. Our article on presenting the DCG, DSCG and DEC on a CV recalls what recruiters infer from your progress.
Practise out loud. Questions on the three statements are answered orally, always following the same order. Do them with a partner, or record yourself.
Work on real accounts. Take a company’s published accounts, identify the biggest changes, and explain them. This is also the best preparation for the case study in an audit interview.
Adapt to the position. For an accounting firm, add VAT, corporation tax and the tax return package; for a group position, the basics of consolidation, detailed in our article on consolidation accounting on a CV; for an audit firm, assertions and risk areas.
Link to the experience on your CV. Every technical question is an opportunity to cite what you have done: “I posted this type of accrued expense entry on some twenty client files during my work-study placement”. Your CV must therefore contain these elements: the accounting firm staff accountant CV example shows how to describe them. If yours still needs work, the CV editor handles the formatting so that you can focus on this content, in a PDF that screening software reads correctly.
Sources
- Autorité des normes comptables, French chart of accounts, version as at 1 January 2026 🔗.
- Onisep, the DCG accounting and management diploma 🔗.
- IFRS Foundation, IAS 7, Statement of Cash Flows 🔗.
Frequently asked questions
Are accounting questions asked of all candidates?
Almost always in firms and accounting departments, including for internships. Their level adapts to the position: basics for an intern, areas of estimation and consolidation for an experienced profile.
Do you need to know the account numbers of the French chart of accounts?
For a position in an accounting firm, yes, at least the classes and common accounts. In audit, the logic of the entries matters more than the numbers.
Do you need to know IFRS?
For a position in a group or in a large audit network, the main principles are useful. For an accounting firm working with SMEs, the French chart of accounts is enough.
What should you do if you do not know the answer?
Reason out loud from the principles (accruals, prudence, the balance sheet balancing) rather than guessing. Sound reasoning that leads to an incomplete answer is better than a recited answer with no explanation.