Accounting Interview Questions for Investment Banking

Free sample from the Deskcraft question bank

Accounting is the entry ticket: if you can't walk through the three statements, the interview is over early. These are the exact questions the Deskcraft bank drills, from the classic “$10 of depreciation” to deferred taxes.

1. Walk me from revenue to net income.

Model answer

Revenue minus COGS is gross profit; minus operating expenses (SG&A, R&D, D&A) is EBIT/operating income; minus net interest and other non-operating items is pre-tax income; minus taxes is net income. Below that, subtract minority interest and preferred dividends to get net income available to common.

2. Walk me through the major line items of the balance sheet.

Model answer

Assets: current (cash, receivables, inventory, prepaids) and non-current (PP&E, goodwill, intangibles). Liabilities: current (payables, accrued expenses, short-term debt) and non-current (long-term debt, deferred taxes). Equity: common stock and APIC, retained earnings, treasury stock. Assets always equal liabilities plus equity.

3. Walk me through the three financial statements and how they connect.

Model answer

The income statement shows profitability over a period, ending in net income. The cash flow statement starts from net income, adds back non-cash items (D&A, SBC), adjusts for changes in working capital, then shows investing and financing flows to reach the change in cash. The balance sheet is a point-in-time snapshot: net income flows into retained earnings, the ending cash from the CFS becomes cash on the BS, and PP&E links via capex and depreciation. Assets = liabilities + equity must always hold.

4. What are the three financial statements and what does each show?

Model answer

The income statement shows profitability over a period (revenue down to net income). The balance sheet shows financial position at a point in time (assets = liabilities + equity). The cash flow statement shows actual cash movement over a period across operating, investing and financing, reconciling net income to the change in cash. They link: net income flows to the CFS and to retained earnings, and ending cash on the CFS is the cash line on the BS.