Book keeping NABTEB exam questions and answers

Book keeping NABTEB exam questions and answers

Here they are;

Question: What is the purpose of double-entry bookkeeping?

a) To record only expenses

b) To maintain a record of financial transactions with a dual effect

c) To track only revenue

d) To simplify financial reporting

Answer: b) To maintain a record of financial transactions with a dual effect

Question: Which financial statement summarizes a company's revenues and expenses over a specific period?

a) Balance Sheet

b) Income Statement

c) Cash Flow Statement

d) Statement of Retained Earnings

Answer: b) Income Statement

Question: In the accounting equation (Assets = Liabilities + Equity), what does Equity represent?

a) Money owed to creditors

b) Owner's claim on assets

c) Total company expenses

d) Cash on hand

Answer: b) Owner's claim on assets

Question: What is the purpose of the trial balance?

a) To ensure all transactions are recorded accurately

b) To calculate the company's profit

c) To list all company assets

d) To determine cash flow

Answer: a) To ensure all transactions are recorded accurately

Question: What type of account is "Accounts Payable"?

a) Asset

b) Liability

c) Revenue

d) Expense

Answer: b) Liability

Question: Which accounting principle states that expenses should be recorded in the same period as the related revenues?

a) Matching Principle

b) Revenue Recognition Principle

c) Expense Recognition Principle

d) Conservatism Principle

Answer: a) Matching Principle

Question: When recording a sale on credit, which accounts are typically affected?

a) Accounts Receivable and Revenue

b) Cash and Expense

c) Liabilities and Assets

d) Equity and Liabilities

Answer: a) Accounts Receivable and Revenue

Question: What does the term "depreciation" refer to in accounting?

a) Increase in the value of an asset

b) Decrease in the value of an asset over time

c) Total revenue earned by a company

d) Cash paid to shareholders

Answer: b) Decrease in the value of an asset over time

Question: How is the Gross Profit calculated?

a) Revenue minus Expenses

b) Revenue minus Cost of Goods Sold (COGS)

c) Total Expenses minus Net Income

d) Net Income divided by Revenue

Answer: b) Revenue minus Cost of Goods Sold (COGS)

Question: What is the purpose of the Cash Flow Statement?

a) To show the company's financial position at a specific point in time

b) To detail the sources and uses of cash over a period

c) To summarize assets, liabilities, and equity

d) To calculate the company's net income

Answer: b) To detail the sources and uses of cash over a period

Question: Which financial statement provides a snapshot of a company's financial position at a specific point in time?

a) Income Statement

b) Balance Sheet

c) Statement of Cash Flows

d) Statement of Retained Earnings

Answer: b) Balance Sheet

Question: What is the purpose of adjusting entries in the accounting cycle?

a) To correct errors in the financial statements

b) To record transactions in the general ledger

c) To close temporary accounts

d) To calculate total revenue

Answer: a) To correct errors in the financial statements

Question: Which of the following is considered a long-term liability?

a) Accounts Payable

b) Salaries Payable

c) Mortgage Payable

d) Utilities Expense

Answer: c) Mortgage Payable

Question: What is the formula for calculating Net Income?

a) Revenue minus Expenses

b) Assets minus Liabilities

c) Cash plus Accounts Receivable

d) Equity divided by Revenue

Answer: a) Revenue minus Expenses

Question: In which section of the Cash Flow Statement would the purchase of equipment be categorized?

a) Operating Activities

b) Investing Activities

c) Financing Activities

d) Assets Section

Answer: b) Investing Activities

Question: What is the purpose of the general ledger?

a) To record daily transactions in chronological order

b) To provide a summary of all accounts and their balances

c) To list all company assets

d) To calculate total revenue

Answer: b) To provide a summary of all accounts and their balances

Question: How does a credit entry affect an asset account?

a) Increases the asset

b) Decreases the asset

c) No effect on the asset

d) Converts the asset into a liability

Answer: b) Decreases the asset

Question: What is the purpose of the post-closing trial balance?

a) To ensure all transactions are recorded accurately

b) To calculate the company's profit

c) To verify that debits equal credits after closing entries

d) To determine cash flow

Answer: c) To verify that debits equal credits after closing entries

Question: How does a company calculate its Return on Equity (ROE)?

a) Net Income divided by Total Assets

b) Total Revenue divided by Net Income

c) Net Income divided by Average Shareholders' Equity

d) Total Equity divided by Net Income

Answer: c) Net Income divided by Average Shareholders' Equity

Question: Which accounting principle states that assets should be recorded at their original cost?

a) Revenue Recognition Principle

b) Historical Cost Principle

c) Matching Principle

d) Conservatism Principle

Answer: b) Historical Cost Principle