Bookkeeping NECO Past Questions And Answers (Objective and Theory)

Here they are;

Question: What is the purpose of the general journal in bookkeeping?

a) Summarize financial statements

b) Record transactions in chronological order

c) Calculate depreciation

d) Manage cash flow

Answer: b) Record transactions in chronological order

Question: If a company receives a loan, how would this transaction be recorded in the accounting equation?

a) Increase in assets and liabilities

b) Increase in assets and equity

c) Increase in liabilities and expenses

d) Decrease in assets and equity

Answer: a) Increase in assets and liabilities

Question: Which financial statement reflects the financial position of a company at a specific point in time?

a) Income Statement

b) Cash Flow Statement

c) Balance Sheet

d) Statement of Retained Earnings

Answer: c) Balance Sheet

Question: What is the purpose of the “Accumulated Depreciation” account?

a) Record depreciation expenses

b) Track current assets

c) Calculate net profit

d) Manage accounts payable

Answer: a) Record depreciation expenses

Question: In double-entry bookkeeping, what happens when a revenue account is credited?

a) Revenue increases

b) Revenue decreases

c) Expenses increase

d) Liabilities decrease

Answer: b) Revenue decreases

Theory Section (Continued):

Question: Define the term “Fiscal Year” and explain its significance in financial reporting.

Answer: A fiscal year is a 12-month accounting period used by a company for financial reporting. It is essential as it allows businesses to align their financial activities with annual cycles, making budgeting, reporting, and tax calculations more manageable.

Question: Discuss the role of the “Income Statement” in providing insights into a company’s profitability.

Answer: The Income Statement summarizes a company’s revenues and expenses over a specific period, revealing its net profit or loss. It is crucial for stakeholders to assess the company’s profitability, performance, and potential growth.

Question: Explain the concept of “Double-Entry Bookkeeping” and its advantages in maintaining accurate financial records.

Answer: Double-entry bookkeeping requires every transaction to have equal and opposite effects on at least two accounts. This method enhances accuracy by ensuring that debits equal credits, providing a systematic and reliable way to record financial transactions.

Question: Describe the significance of “Bank Reconciliation” in the bookkeeping process and the steps involved in reconciling bank statements.

Answer: Bank reconciliation ensures that a company’s records match the bank’s records. Steps involve comparing the bank statement with the company’s records, adjusting for any discrepancies, and identifying outstanding transactions to reconcile the two sets of records.

Question: Elaborate on the term “Working Capital” and its importance in assessing a company’s short-term financial health.

Answer: Working capital represents a company’s current assets minus its current liabilities. It is vital for assessing short-term financial health, indicating the company’s ability to cover its short-term obligations and operate efficiently.