This content provides a comprehensive overview of the Record-to-Report (R2R) process through a mock interview format, covering its fundamental concepts, key subprocesses, common journal entries, and essential accounting principles like accrual accounting.
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Today we are covering most important 21
record to report interview questions and
answers. We are covering them in a mock
interview format so you get the flavor
of actual interview. So let's not waste
any more time and get started with it.
Thank you for coming in today. I'm
excited to discuss your experience with
recordto-report processes. Let's start
with the basics. What is recordto-report
process in simple words?
>> Thank you for having me. So record to
report or R2R as we commonly call it is
essentially the entire accounting cycle
that starts from recording business
transactions and ends with generating
financial reports. Think of it as the
journey of financial data from the
moment a transaction happens like a sale
or purchase all the way to when it
appears in our financial statements that
management and stakeholders use to make
decisions. It's basically how we
capture, process and report all the
financial activities of a company.
>> That's a good overview. Now, what are
the main subprocesses under R2R?
>> Right. So, R2R has several key
subprocesses. The main ones include
first we have data collection and
journal entry posting. Then there's
account reconciliations which is huge in
R2R. We also have the period end closing
activities, financial reporting
preparation and compliance reporting and
intercompany eliminations. If you're
dealing with multiple entities, each of
these has its own set of activities. For
example, in my previous role, account
reconciliations alone would take us
about 3 to 4 days every month because we
had to reconcile bank accounts, fixed
assets, payables, receivables, pretty
much every balance sheet account.
>> What are the types of journal entries
you have passed in your experience?
>> I've worked with quite a variety
actually. The most common ones are
standard journal entries for regular
business transactions. Then there are
adjusting entries. These are really
important at month end for things like
acured expenses, prepaid adjustments or
depreciation. I have also posted
correcting entries when we found errors
in previous postings. Reversal entries
are another type I use frequently
especially for acrals that need to be
reversed in the following period. And
then there are reclassification entries
to move amounts between accounts when
something was posted to the wrong
account initially. In my last company, I
remember posting a lot of intercomp
entries to eliminate transactions
between our subsidiaries.
>> Let's talk about acrual accounting. What
is acrual accounting and why is it
important in R2R? Acural accounting is
the method where we record transactions
when they occur, not when cash changes
hands. So if we provide a service in
December but get paid in January, we
still record the revenue in December.
This is really important in R2R because
it gives us a more accurate picture of
the company's financial performance for
a specific period. Without acrals, our
financial statements would be well
pretty misleading. Like imagine if we
only recorded revenue when we received
cash. Our December numbers might look
terrible even if we had a great month in
terms of actual business activity. In
R2R we rely heavily on acrals to ensure
our reports reflect the true economic
reality of the business.
>> Good explanation. Now what's the
difference between acral and provision?
That's a good question and honestly
people sometimes use these terms
interchangeably but there is a
difference and acral is typically for
expenses or revenues that we know have
occurred and we can measure pretty
accurately like acured salaries we know
exactly how much we owe employees for
work done. A provision on the other hand
is more for uncertain amounts or timing.
Like we might create a provision for
potential legal costs if we're involved
in a lawsuit, but we're not sure exactly
how much it will cost or when. So
provisions involve more estimation and
uncertainty compared to acrals. Both
appear on the balance sheet as
liabilities, but provisions usually
require more judgment in determining the amount.
amount.
>> That makes sense. Can you explain the
month- end closing process in R2R?
>> Sure. Monthend closing is always
intense. It typically starts a few days
before month end with us preparing cutff
procedures to ensure transactions are
recorded in the right period. Then once
the month ends, we post all our acral
entries things like acred expenses,
prepaid adjustments, depreciation. After
that comes the reconciliation phase
which is probably the most time
consuming part. We reconcile all major
accounts, bank accounts, fixed assets,
payables, receivables. Any differences
need to be investigated and resolved.
Then we prepare trial balance, review it
for any unusual balances and make
correcting entries if needed. Finally,
we generate the financial statements and
supporting schedules. In my experience,
a typical month in close takes about 5
to seven working days, though we have
been trying to shorten it.
>> How do you ensure accuracy while passing
journal entries?
>> That's crucial in R2. I have a few
practices I always follow. First, I make
sure I understand the business
transaction before posting anything. I
review all supporting documentation,
invoices, contracts, approvals. I also
use a standard format for journal entry
descriptions so they are clear and
consistent. Before posting, I always
check that my debits equal credits.
Sounds basic, but you'd be surprised how
often people miss this. I also review
the account codes to make sure I'm
posting to the right accounts. And
whenever possible, I have someone else
review my entries, especially for
significant amounts. We also maintain a
journal entry log to track all postings
which helps with audit trails. In my
last role, we had a policy that any
entry over $10,000 needed supervisor
approval before posting.
>> What are intercomp transactions and how
are they handled in R2R?
>> Intercomp transactions are transactions
between different entities within the
same corporate group. For example, if
company A sells goods to company B and
both are subsidiaries of the same parent
company in our twoar these need special
handling because when we prepare
consolidated financial statements we
need to eliminate these transactions to
avoid double counting. So we track all
intercomp transactions separately
usually using specific account codes.
During consolidation, we create
elimination entries to remove both the
intercomp revenue and the corresponding
intercomp expense. The tricky part is
ensuring both entities record their side
of the transaction consistently. I
remember in my previous role, we had
monthly intercomp reconciliations to
make sure both sides matched before we
could proceed with elimination entries.
>> Let's discuss fixed assets. What are
fixed assets and how are they accounted
for in R2R?
>> Fixed assets are long-term tangible
assets that a company uses in its
operations to generate revenue. Things
like buildings, machinery, computers,
vehicles. In R2R, we account for them at
their cost when acquired and then we
depreciate them over their useful life.
So every month we post depreciation
entries to reduce the asset value and
recognize the expense. We maintain
detailed fixed asset registers that
track each asset's cost, accumulated
depreciation, and netbook value. We also
handle additions, disposals, and
impairments. For example, if we buy a
new computer for $2,000 with a 4year
useful life, we depreciate $500 per year
or about $42 per month. During month
end, posting depreciation entries is
always part of our closing checklist. We
also perform periodic physical
verification to ensure our records match
what's actually there.
>> What's the difference between balance
sheet and P and L account?
>> The balance sheet shows the company's
financial position at a specific point
in time like a snapshot. It has assets,
liabilities, and equity. And it always
balances because assets equals
liabilities plus equity. The PNL or
income statement shows the company's
performance over a period of time like a
movie. It shows revenues, expenses, and
the resulting profit or loss. In R2R,
we're constantly working with both. For
instance, when we record a sale, it
increases revenue on the P and L and
increases accounts receivable on the
balance sheet. The key difference is
timing. Balance sheet is as of a date. P
and L is for a period and at year end
the P and L gets reset to zero but
balance sheet accounts carry forward to
the next year.
>> What are adjusting entries and why are
they needed?
>> Adjusting entries are journal entries we
make at the end of an accounting period
to ensure our financial statements are
accurate under acral accounting. They
needed because not all transactions are
recorded during the period or some need
to be allocated across periods. The main
types are acred expenses like utilities
we've used but haven't been build for
yet. Acured revenues for services we've
provided but haven't invoiced. Prepaid
adjustments like insurance we paid for
but covers future periods and
depreciation expenses. Without these
adjusting entries, our financial
statements would be incomplete or
incorrect. For example, if we don't
acrue December's electricity bill, our
December expenses would be understated
and our liabilities would be understated too.
too.
>> How do you perform GL to subleddger reconciliation?
reconciliation?
>> GL to subleddger reconciliation is
basically making sure the detailed
records in our subleddgers match the
summary amounts in our general ledger.
For example, our accounts receivable
subleddger shows individual customer
balances and this total should match our
AR control account in the GL. I start by
extracting the subleddger detail and the
GL balance as of the same date. Then I
compare the totals. If they don't match,
I investigate the differences. Common
reasons include timing differences.
Maybe a transaction was posted to the GL
but not yet updated in the subleddger or
vice versa. Sometimes there are posting
errors or reclassifications that weren't
properly reflected. I document all
differences and their explanations. We
typically do this monthly for major
accounts like AR, AP and inventory. It's
time consuming but essential for
ensuring data integrity.
>> What are some common errors in R2R and
how do you avoid them?
>> Oh, there are quite a few common ones
I've seen. Posting to wrong accounts is
probably the most frequent like posting
an expense to an asset account or vice
versa. Cut off errors are also common
where transactions get recorded in the
wrong period. Mathematical errors in
calculations especially for complex
acrals and duplicate entries. Sometimes
people post the same transaction twice
by mistake. To avoid this, I always
double check account codes before
posting. Use standardized journal entry
templates when possible and maintain
proper documentation. We also have
review procedures where someone else
looks at significant entries for cutoff.
We have specific procedures around month
end to ensure transactions are recorded
in the right period and we run regular
reports to identify unusual balances or duplicates.
duplicates.
>> Have you worked with any ERP systems
like SAP, Oracle or Blackline in R2R?
Yes, I worked primarily with SAP in my
last two roles. It's quite comprehensive
for R2R processes. We used it for
journal entry posting, account
reconciliations, and generating
financial reports. I'm familiar with
transaction codes like FB50 for journal
entries and FS tenant for GL account
balances. I've also worked with
Blackline for account reconciliations.
It's really helpful for standardizing
the reconciliation process and
maintaining supporting documentation. I
found Blackline particularly useful
because it automates a lot of the
matching process and provides good audit
trails. Oracle I have limited exposure
to but I've heard it's similar in
functionality. Each system has its
learning curve, but once you understand
the R2R process, adapting to different
systems becomes easier because the
underlying concepts remain the same.
>> What is trial balance and how do you
check if it's correct?
>> Trial balance is a list of all general
ledger accounts with the debit and
credit balances at a specific point in
time. It's called a trial balance
because we're testing whether our books
are in balance. Total debits should
equal total credits. To check if it's
correct, first I verify that it actually
balances mathematically. Then I review
each account balance to see if it makes
sense. For instance, cash should
normally have a debit balance and
accounts payable should have a credit
balance. If I see unusual balances like
a credit balance in an expense account,
I investigate further. I also compare
current balances to prior periods to
identify any significant unusual
fluctuations. Sometimes I run age trial
balances to see if there are old items
that need attention. The trial balance
is really the foundation for our
financial statements. So any errors here
will flow through to our reports.
>> What are reclassification entries? When
and why are they used?
>> Reclassification entries are journal
entries used to move amounts from one
account to another without affecting the
total assets, liabilities or equity. We
use them when transactions were posted
to incorrect accounts but the total
amount is right. For example, if someone
posted office supplies expense to office
equipment by mistake, we'd create a
reclassification entry to move it to the
correct account. We also use them for
presentation purposes like reclassifying
long-term debt to current portion when
it's due within a year. I've used them
frequently during month end when we
discover mclassifications during a
review process. Another common situation
is reclassifying between different
expense categories for better financial
statement presentation. The key thing is
that reclassification entries don't
change the overall financial position
just how it's categorized or presented.
>> What are recurring journal entries? Give
some examples.
>> Recurring journal entries are entries
that we post regularly usually monthly
for the same amounts and same accounts.
These are really helpful for
standardizing routine postings and
reducing errors. Common examples include
monthly depreciation entries. The amount
stay the same each month for most
assets, rent expense is another one if
you have a fixed monthly rent, insurance
amortization for prepaid policies, loan
interest if you have fixed rate loans,
and amortization of intangible assets.
In SAP, we could set these up as
recurring entry templates, which saved a
lot of time during month end. Instead of
creating the same journal entry from
scratch each month, we just had to run
the recurring entry program. It also
reduces the chance of errors. Since the
account codes and amounts are
predefined, we typically review these
quarterly to make sure the amounts are
still accurate.
>> What is the purpose of performing
balance sheet account reconciliations?
Balance sheet reconciliations are
crucial for ensuring the accuracy and
completeness of our financial records.
The main purpose is to verify that our
recorded balances actually represent
real assets, liabilities or equity. For
example, when we reconcile our bank
account, we're making sure our cash
balance is accurate and that all
transactions are properly recorded. For
accounts receivable, we're confirming
that the amounts we show as receivable
are actually collectible. These
reconciliations help us identify errors,
missing transactions or items that need
followup. They also provide supporting
documentation for auditors. In my
experience, unreconciled items often
lead to bigger problems later. So, it's
better to address them promptly. We
typically reconcile major balance sheet
accounts monthly and the reconciliations
need to be reviewed and approved by
supervisors to ensure quality.
>> How do you handle suspense accounts or
open items?
>> Suspense accounts and open items require
careful attention because they can
indicate underlying issues. For suspense
accounts, these are temporary holding
accounts where we post transactions when
we are not sure of the correct account
initially. The key is to clear this
regularly. We shouldn't let items sit in
suspense for too long. I make it a
priority to investigate and resolve
suspense items during each month. And
for open items like unmatched invoices
or unresolved differences in
reconciliations, I maintain detailed
registers to track them. Each item needs
to be researched. Sometimes it's just a
timing difference. Other times it might
be an error that needs correction. I
communicate with relevant departments to
get clarification on unclear items. The
goal is to minimize these over time by
improving our processes. In my last
role, we had a policy that any suspense
item over 30 days old needed management
approval to remain open.
>> What's the difference between standard
journal entry and reversal entry?
>> A standard journal entry is a regular
entry we post to record business
transactions. It stays in the books
permanently unless specifically
corrected. A reversal entry on the other
hand is specifically designed to reverse
a previous entry usually in the
following period. The most common use
for reversal entries is with acral
entries. For example, if I post an
acrruel for utilities expense in
December, I'd set it up as a reversing
entry. So it automatically reverses in
January when the actual bill comes in.
This prevents double counting the
expense. The reversal entry has the
exact opposite debits and credits as the
original entry. In SEAP, we could flag
entries for automatic reversal, which
was really convenient. Standard entries
require manual intervention to reverse
them if needed. While reversal entries
are designed with that specific purpose
from the beginning,
>> what steps do you follow during the year
and closing process? Year end closing is
definitely the most intensive period in
R2R. It starts with all the regular
monthend procedures but with much more
scrutiny. First we ensure all
transactions for the year are properly
recorded and cutoff procedures are
strictly followed. Then comes the
extensive reconciliation process. Every
single balance sheet account needs to be
reconciled and any differences resolved.
We also perform detailed analytical
reviews comparing current year to prior
year for unusual fluctuations. Year-end
adjusting entries are more comprehensive
things like inventory adjustments, bad
debt provisions, bonus acrals. We also
handle depreciation calculations for any
midyear additions, tax provisions and
related acrals are prepared. Then
there's the audit preparation,
organizing all supporting documentation,
preparing schedules and responding to
auditor requests. We also start thinking
about disclosures for annual reports.
The whole process typically takes 3 to
four weeks in my experience with lots of
coordination between different teams.
It's exhausting but also satisfying when
everything ties out perfectly.
>> Excellent. Your experience and
understanding of R2R concepts is quite
comprehensive. Do you have any questions
for us about the role?
>> Thank you. Yes, I'd love to know more
about your current month and closing
timeline and whether you're looking to
implement any process improvements or
new systems. Also, what's the team
structure like for R2R functions here?
>> Great questions. We'll be happy to
discuss those details in our next
conversation. Thank you again for your
time today. Thank you so much for the
opportunity. I look forward to hearing
from you soon.
>> So that's the wrap. Hope you got some
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