NABTEB Bookkeeping Past Questions And Answers (Objective and Theory)
Section A: Bookkeeping Questions
Question: What is the purpose of a subsidiary ledger in accounting?
A) To record day-to-day transactions
B) To summarize financial statements
C) To provide detailed information for specific accounts
D) To manage employee salaries
Answer: C) To provide detailed information for specific accounts
Question: How does the direct write-off method differ from the allowance method for recognizing bad debts?
A) Direct write-off method estimates bad debts
B) Allowance method matches bad debts to revenue
C) Direct write-off method uses a contra account
D) Allowance method records bad debts when identified as uncollectible
Answer: D) Allowance method records bad debts when identified as uncollectible
Question: What is the purpose of the cash disbursements journal?
A) To record cash received from customers
B) To track cash payments made by the company
C) To calculate net income
D) To manage accounts receivable
Answer: B) To track cash payments made by the company
Question: How does the FIFO (First-In-First-Out) method differ from the LIFO (Last-In-First-Out) method in inventory valuation?
A) FIFO assumes older inventory is sold first
B) LIFO assumes newer inventory is sold first
C) FIFO increases the cost of goods sold
D) LIFO decreases the cost of goods sold
Answer: A) FIFO assumes older inventory is sold first
Question: What is the purpose of the cash receipts journal?
A) To record cash payments to suppliers
B) To track cash received from customers
C) To calculate net income
D) To manage accounts payable
Answer: B) To track cash received from customers
Section B: Theory Questions
Question: Explain the concept of goodwill in accounting and how it is accounted for in financial statements.
Answer: Goodwill represents the intangible value of a business beyond its tangible assets. It is recorded on the balance sheet when a company acquires another, calculated as the purchase price minus the fair value of identifiable net assets.
Question: Define the term “amortization” and discuss its application in accounting.
Answer: Amortization is the systematic allocation of the cost of intangible assets over their useful life. It is similar to depreciation for tangible assets and is crucial for accurately reflecting the value of intangible assets on the balance sheet.
Question: Discuss the impact of a company’s choice between the straight-line method and the declining balance method on the depreciation expense.
Answer: The straight-line method evenly allocates depreciation over an asset’s useful life, resulting in a consistent annual expense. The declining balance method, on the other hand, front-loads depreciation, causing higher expenses in the early years and lower expenses in later years.
Question: Explain the term “contra account” and provide an example.
Answer: A contra account is an account with a balance opposite to that of its related account. An example is “Accumulated Depreciation,” which is a contra account to the “Property, Plant, and Equipment” asset account.
Question: Describe the role of the internal audit in the context of bookkeeping and financial management.
Answer: Internal audit ensures that a company’s financial processes, controls, and bookkeeping practices comply with regulations and internal policies. It helps identify and address potential risks and ensures the accuracy and integrity of financial information.
