Small Business Accountants since 1991

Ten Interview Questions to Ask a Bookkeeper

experienced bookkeeperSo you want to employ a bookkeeper. Maybe you’d like a regular part-time employee, or perhaps somebody self-employed to update your books every now and then.

Either way, the esoteric nature of bookkeeping makes it difficult for you to know whether your bookkeeper is doing the job properly. It doesn’t help that here in the UK literally anyone can call themselves a bookkeeper, or set up in business as one, even if they have no qualifications or experience. Chances are you won’t really know how capable your new bookkeeper is until much further down the line, perhaps not until you hand your books to your accountant at your year end. Of course, many small businesses end up having to double-pay for their accountants to sort out bookkeeper errors and straighten out the books.

To avoid that happening to you, here are ten questions for your prospective employee to answer at the interview stage. You’ll perhaps have to be a little more diplomatic if you’re ‘interviewing’ a self-employed bookkeeper; they have legal responsibilities under the Money Laundering Regulations to secretly vet you and your financial affairs, so they shouldn’t mind you checking out their capabilities in return.

Using the ten questions below should help you sort the wheat from the chaff. The correct answer to each question is highlighted in red print, with a few comments added by us – also in red – in case you’d like some background. Separately, at the foot of this page are the full ten questions without answers, for you to copy, paste, and print a hardcopy.

1. A person who owes money to the business is a creditor | debtor | customer | none of these

2. Goods drawn from a business for a sole proprietor’s personal use are called drawings | perks | loans | none of these

3. The amount invested in the business by its sole proprietor is called cash | capital | revenue | none of these

4. When you make a sale to a customer in Scotland, VAT charged to your customer is shown in your books as Input VAT | Output VAT | Standard Rate VAT | Zero Rate VAT

Insight: All very gentle questions about terminology so far. ‘Scotland’ in Q4 is a red herring, and might just as easily say ‘England’.

5. How much is the VAT Fraction?  3/23  |    7/47  |  1/5   |   1/6

Insight: Multiply a gross price by the current VAT fraction to obtain its VAT element eg £120 x 1/6 = £20 VAT.  Incidentally, 3/23 and 7/47 are the old VAT Fractions, used when VAT was 15% and 17.5% respectively.

6. If goods with a list price of £4,500 plus VAT are purchased at 20% trade discount, which is the net figure to be recorded in the purchase daybook? £3,600 | £4,500 | £4,320 | £5,400

7. If goods are sold for £15,500 including VAT, less discount allowed of £600, which amount will be recorded in the cash-book?  £600 | £14,900 | £15,500 | £16,100

Insight: Two Simple arithmetic questions above. Any bookkeeper entering more than £3,600 for Q6 would cost you many hundreds of pounds, as you’d be overpaying your supplier.

8. A director of a limited company is voted an interim dividend of £5,000. Journal entries in the company’s books would be: debit dividends & credit director’s loan account | debit director’s loan account & credit dividends | debit director’s loan account & credit creditors | debit bank & credit director’s loan account

Insight: The penalties for getting the simple journal at Q8 above wrong could be horrendous. At worst the dividend could be declared invalid by HMRC, with costly tax implications for the director.

9. Sales returns are debited | credited | debited and credited | none of these to a customer’s sales ledger account

10. When a supplier’s puchase ledger account isn’t at zero balance, it will always show a debit | credit | either of these | neither of these  balance

Insight: Simple debit and credit questions, above, complete the set. In Q10, there’s usually a credit balance but may instead be a debit balance if for example you’ve overpaid that supplier, or received a credit note for faulty goods returned by you.

How well should your prospective bookkeeper score? Well, these are all very straightforward bookkeeping questions that pretty much anyone who knows the ropes should be able to get right. The answers should be second nature to anyone capable. Allow for the odd slip – put it down to interview nerves if you like. But anyone scoring less than 8 correct answers will at best be inexperienced and at worst incapable.

bookkeeper hanging himselfOne more tip: a good question to ask your interviewee is “if you were writing up the books at the end of a week or a month, in which particular order would you process the entries onto a computerised accounting program (such as Sage or Quickbooks)?” Now there’s no right or wrong answer to that, but the reply will allow you to see how confident and familiar your interviewee is with bookkeeping. Anyone who knows their stuff will reel off their answer without having to think too hard; anyone inexperienced will be forced to think on their feet, and will come over as hesitant and unsure. Probe their answers by asking why – “why in that particular order?” to see whether the justifications are plausible.

For example, when we ourselves at Taxsmiths® carry out bookkeeping duties for our clients we prefer to process sales and purchase invoices first, followed by bank and credit card transactions, and finally cash transactions.  (If we were do it the other way round by entering the bank transactions first, the sales and purchase ledgers would then be devoid of invoices to allocate against those bank transactions).

A final thought: if your prospective bookkeeper is self-employed (or operates through their own company) then they MUST be registered with a Money Laundering Supervisory Body, otherwise they’ll face some rather serious Anti-Money-Laundering criminal charges (the penalty for which is up to two years’ imprisonment). That’s something you should ask up front, and distance yourself from if necessary. For most bookkeepers with a bookkeeping or accountancy qualification, their “Supervisory Body” will be their professional association. Those without qualifications (remember, anyone can call themselves a bookkeeper) are compelled to register with and pay an annual fee to HMRC to act as their Supervisory Body (and, naturally enough, HMRC take their supervisory duties seriously by taking a close interest in your books).

Good Hunting!

© Taxsmiths® 2014

Here are the questions without their answers, for you to copy, paste, and print a hardcopy:

1. A person who owes money to the business is a creditor | debtor | customer | none of these

2. Goods drawn from a business for a sole proprietor’s personal use are called drawings | perks | loans | none of these

3. The amount invested in the business by its sole proprietor is called cash | capital | revenue | none of these

4. When you make a sale to a customer in Scotland, VAT charged to your customer is shown in your books as Input VAT | Output VAT | Standard Rate VAT | Zero Rate VAT

5. How much is the VAT Fraction?  3/23  |    7/47  |   1/5  |   1/6

6. If goods with a list price of £4,500 plus VAT are purchased at 20% trade discount, which is the net figure to be recorded in the purchase daybook? £3,600 | £4,500 | £4,320 | £5,400

7. If goods are sold for £15,500 including VAT, less discount allowed of £600, which amount will be recorded in the cash-book?  £600 | £14,900 | £15,500 | £16,100

8. A director of a limited company is voted an interim dividend of £5,000. Journal entries in the company’s books would be: debit dividends & credit director’s loan account | debit director’s loan account & credit dividends | debit director’s loan account & credit creditors | debit bank & credit director’s loan account

9. Sales returns are debited | credited | debited and credited | none of these to a customer’s sales ledger account

10. When a supplier’s purchase ledger account isn’t at zero balance, it will always show a debit | credit | either of these | neither of these  balance

© Taxsmiths® 2014

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