Accounting Technical - GS Interview
Prepping for my SA and came across this question asked at GS: "How are the 3 statements impacted for a service you delivered (worth $100) but for which the supplier paid half credit half cash?"
My answer: Revenue / Op. Income is up $100 since you delivered it and, assuming a 25% tax rate, Net Income is up 75. On the CFS, Cash is up initially by 75 but you deduct 50 in Accounts Receivable and you end up with a net of +25 at the end of the CFS. The Assets side of the BS has cash up by 25 but AR is also up by 50, so Assets are up by 75. The L&E side is also up by 75 since NI flows into CSE. Everything then balances out.
Is this correct?
Looks generally correct as long as you caveat assumes no marginal COGS or SG&A impact and it’s 100% flow through to bottom line. Unless I missed something
Yes, although the wording about the supplier paying seems off. Typically the business is paying a supplier for some sort of inventory but if the supplier is the customer in this case then yes
Do people find this shit interesting?
When you said NI flows into CSE, you mean flowing into retained earnings right?
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