Financial accounting NECO exam past questions and answers

Financial accounting NECO exam past questions and answers

Here they are;

Question: What is the fundamental accounting equation?

A) Assets = Liabilities - Equity

B) Assets = Liabilities + Equity

C) Assets = Liabilities / Equity

D) Assets = Liabilities * Equity

Answer: B) Assets = Liabilities + Equity

Question: What does the term "GAAP" stand for in accounting?

A) Generally Accepted Accounting Principles

B) Generally Acknowledged Accounting Procedures

C) General Accounting and Auditing Practices

D) General Assessment of Accounting Policies

Answer: A) Generally Accepted Accounting Principles

Question: What is the purpose of a balance sheet?

A) To show revenues and expenses

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

C) To detail cash flows during a period

D) To summarize income and expenses over a period

Answer: B) To report the company's financial position at a specific point in time

Question: How is net income calculated?

A) Revenue - Expenses

B) Assets - Liabilities

C) Equity - Liabilities

D) Revenue + Expenses

Answer: A) Revenue - Expenses

Question: What is depreciation in accounting?

A) Increase in the value of an asset

B) Decrease in the value of an asset over time

C) A liability on the balance sheet

D) Money set aside for future expenses

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

Question: What is the purpose of an income statement?

A) To show the company's financial position

B) To report cash flows during a period

C) To summarize income and expenses over a period

D) To detail assets and liabilities

Answer: C) To summarize income and expenses over a period

Question: Which financial statement represents a snapshot of a company's financial condition at a specific moment?

A) Income Statement

B) Cash Flow Statement

C) Balance Sheet

D) Statement of Retained Earnings

Answer: C) Balance Sheet

Question: What is the formula for Return on Investment (ROI)?

A) Net Income / Total Assets

B) Net Income / Average Equity

C) Net Income / Average Total Liabilities

D) Net Income / Total Revenue

Answer: A) Net Income / Total Assets

Question: What is the purpose of the cash flow statement?

A) To show the company's profitability

B) To detail assets and liabilities

C) To summarize changes in cash during a period

D) To report the company's financial position

Answer: C) To summarize changes in cash during a period

Question: What is accrual accounting?

A) Recognizing transactions when cash is received or paid

B) Recognizing transactions when they occur, not when cash changes hands

C) Accounting for only tangible assets

D) Recording transactions after the financial period ends

Answer: B) Recognizing transactions when they occur, not when cash changes hands

Question: How does a company calculate Earnings Per Share (EPS)?

A) Net Income / Total Assets

B) Net Income / Average Equity

C) Net Income / Number of Outstanding Shares

D) Net Income / Total Revenue

Answer: C) Net Income / Number of Outstanding Shares

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

A) To show the company's profitability

B) To summarize changes in cash during a period

C) To report the company's financial position

D) To detail assets and liabilities

Answer: B) To summarize changes in cash during a period

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

A) Decreasing the value of a liability

B) Decreasing the value of an asset over time

C) Increasing the value of an asset

D) Increasing the value of a liability over time

Answer: B) Decreasing the value of an asset over time

Question: How is the debt-to-equity ratio calculated?

A) Total Debt / Total Equity

B) Total Equity / Total Assets

C) Total Debt / Total Assets

D) Total Assets / Total Equity

Answer: A) Total Debt / Total Equity

Question: What is the purpose of the Statement of Retained Earnings?

A) To show the company's profitability

B) To summarize changes in cash during a period

C) To report the company's financial position

D) To explain changes in the retained earnings account

Answer: D) To explain changes in the retained earnings account

Question: How is the Gross Profit Margin calculated?

A) Gross Profit / Net Sales

B) Net Income / Total Revenue

C) Gross Profit / Total Revenue

D) Net Sales / Total Revenue

Answer: C) Gross Profit / Total Revenue

Question: What is the purpose of the trial balance in accounting?

A) To summarize changes in cash during a period

B) To detect errors in the accounting system

C) To report the company's financial position

D) To detail assets and liabilities

Answer: B) To detect errors in the accounting system

Question: What is the difference between accounts payable and accounts receivable?

A) Accounts Payable represents money owed to the company, while Accounts Receivable represents money the company owes to others.

B) Accounts Payable represents money the company owes to others, while Accounts Receivable represents money owed to the company.

C) Both represent money the company owes to others.

D) Both represent money owed to the company.

Answer: B) Accounts Payable represents money the company owes to others, while Accounts Receivable represents money owed to the company.

Question: What is the formula for the Quick Ratio (acid-test ratio)?

A) (Current Assets - Inventory) / Current Liabilities

B) Current Assets / Current Liabilities

C) Current Assets / (Current Liabilities - Inventory)

D) (Current Assets + Inventory) / Current Liabilities

Answer: A) (Current Assets - Inventory) / Current Liabilities

Question: In the context of financial statements, what does the term "bottom line" refer to?

A) Net income

B) Gross profit

C) Operating income

D) Total revenue