NECO Bookkeeping Past Questions And Answers (Objective and Theory)
Section A: Bookkeeping Questions
Question: What is the purpose of the chart of accounts in bookkeeping?
A) To list employee salaries
B) To track daily transactions
C) To organize and classify accounts
D) To calculate depreciation
Answer: C) To organize and classify accounts
Question: How does a debit entry affect the accounts?
A) Increases
B) Decreases
C) Stays the same
D) Reverses the transaction
Answer: A) Increases
Question: What is the contra account associated with the Accounts Receivable category?
A) Accumulated Depreciation
B) Allowance for Doubtful Accounts
C) Prepaid Expenses
D) Retained Earnings
Answer: B) Allowance for Doubtful Accounts
Question: What is the purpose of the cash basis of accounting?
A) To recognize revenues and expenses when incurred
B) To match expenses with revenues
C) To record transactions when cash is received or paid
D) To create accurate financial statements
Answer: C) To record transactions when cash is received or paid
Question: How does a credit memo impact the accounts?
A) Increases assets
B) Decreases liabilities
C) Increases expenses
D) Decreases revenues
Answer: B) Decreases liabilities
Section B: Theory Questions
Question: Elaborate on the importance of the accounting equation in maintaining financial balance.
Answer: The accounting equation (Assets = Liabilities + Equity) ensures that a company’s resources are accurately represented. Any transaction must maintain this balance, providing a foundation for reliable financial reporting.
Question: Define the term “book value” in the context of asset valuation.
Answer: Book value is the value of an asset as recorded on the balance sheet, calculated by subtracting accumulated depreciation from its original cost. It represents the asset’s net worth.
Question: Explain the concept of the matching principle and its impact on financial statements.
Answer: The matching principle dictates that expenses should be matched with the revenues they generate. This ensures accurate representation of a company’s profitability in a specific accounting period.
Question: Discuss the difference between a current asset and a fixed asset.
Answer: Current assets are short-term assets expected to be converted into cash within a year, while fixed assets are long-term assets with a useful life beyond a year, such as buildings or machinery.
Question: Describe the purpose of the post-closing trial balance in the accounting cycle.
Answer: The post-closing trial balance verifies that the temporary accounts are closed and only permanent accounts remain open. It ensures accuracy before starting a new accounting period.
