NCEA Level 1 Accounting Practice Exam

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• What is the accounting equation?
• Which accounting method recognizes revenues and expenses based on actual cash transactions?
• How is 'net income' defined in accounting?
• For which aspect do the 'Notes to the Financial Statements' NOT provide assistance?
• Which of the following expense categories typically relates to local government services?
• What might a high current ratio indicate?
• Which of the following is least likely to be included in the 'Notes to the Financial Statements'?
• What does a 'general ledger' contain?
• What is the primary role of a bookkeeper?
• What does the term 'net profit' refer to?
• How do the 'Notes to the Financial Statements' enhance transparency in financial reporting?
• Which term describes the process of systematically reducing the cost of assets over their useful life?
• What classification does 'Hire Purchase' fall under?
• What is typically considered a Non-Current Liability?
• Which of the following items would likely require disclosure in the 'Notes to the Financial Statements'?
• What type of cost is 'Freight Out' considered?
• Which of the following is classified as an Intangible Asset (IA)?
• What is double-entry bookkeeping?
• 'Sales' are categorized as which type of account?
• What does 'cash flow' refer to?
• Which of the following is generally categorized as an administrative expense in accounting?
• How is gross profit defined?
• Which of the following best describes 'liabilities' in accounting?
• What type of account is classified as "Bank"?
• How is a 'Gain on sale' classified in accounting terms?
• Goodwill is classified as which type of asset?
• What is the classification of 'Capital' in accounting?
• How are 'assets' defined in accounting?
• Which of the following accounts is most likely to represent a future financial benefit?
• What are 'non-current assets'?
• What type of account is 'Mortgage' considered in accounting?
• What characterizes a 'fiscal year' in accounting?
• What information might 'Notes to the Financial Statements' include regarding related party transactions?
• What are 'adjusting entries'?
• 'Drawings' represent distributions to which accounting category?
• Which of the following are the three main financial statements?
• What category does PPE fall under when referring to shop fittings?
• Which expense represents money lost due to uncollectible accounts?
• What does a 'trial balance' help to verify in accounting?
• When are 'adjusting entries' typically made?
• What type of income is 'Gain on Sale'?
• Which category measures the anticipated loss from receivables that may be uncollectible?
• Which of the following is NOT classified as a Direct Cost?
• What are financial ratios?
• What are variable costs?
• What do purchase returns represent in accounting?
• Which account reflects a claim against another entity?
• What financial metric indicates a company's profitability from operations?
• What is Return on Equity (ROE)?
• What would interest on a loan be classified as in accounting?
• How is 'depreciation' defined?
• Which of the following is not categorized as a current asset?
• What is the break-even point?
• What classification is the "Inventory" account?
• What does 'equity' represent in financial statements?
• Which of the following is classified as a Current Liability (CL)?
• What type of income does 'Rent/Interest received' represent?
• What type of income is classified as 'Commission received'?
• What is typically charged by banks for maintaining an account?
• What does 'owner's equity' represent in accounting?
• Which of the following is classified as a Direct Cost?
• What type of expense involves contributions made to charitable organizations?
• How is 'revenue' defined in accounting?
• What is recognized when performing the analysis of financial statements regarding potential losses?
• In financial reporting, what is the role of external auditors?
• Accumulated depreciation on all assets is classified as what type of account?
• What type of expense is registered when a business acknowledges it may not collect a certain receivable?
• What is a 'ledger'?
• What type of liabilities might be discussed in the 'Notes to the Financial Statements'?
• What is 'retained earnings'?
• The 'Notes to the Financial Statements' assist in understanding which aspect of financial statements?
• How is 'Delivery Expense' classified?
• Which account type does "Accrued Income" primarily represent?
• What is the term for shipping costs that increase the total cost of inventory?
• Which of the following best describes 'fixed costs'?
• What does 'accounts receivable' represent?
• Which of these is an example of Direct Cost related to sales?
• Why are 'internal controls' important?
• In accounting, what does the term 'liability' represent?
• Which of the following accounts is NOT a Current Liability?
• Which of the following best describes 'semi-variable costs'?
• What information does an income statement provide?
• What role do the 'Notes to the Financial Statements' play regarding accounting policies?
• Which account is an example of Equity?
• What does 'budgeting' mean in an accounting context?
• What does 'inventory' refer to?
• What is the primary function of 'accounting principles'?
• What is the accounting term used for salaries paid to employees?
• What type of account is "Term deposit"?
• Which of the following items is NOT considered PPE?
• Identify a 'current asset'.
• What is the primary purpose of the 'Notes to the Financial Statements'?
• Which term is used to define costs related specifically to the maintenance of a physical office space?
• Which piece of information is typically clarified in the 'Notes to the Financial Statements'?
• Which component is crucial for understanding cash flow in a business?
• What is the primary use of a cash flow statement?
• What kind of expense is typically incurred for employee health benefits?
• What is the significance of 'depreciation' in accounting?
• What do you call the total costs incurred to acquire goods for resale?
• Which classification does "Accrued Income" belong to?
• What is the primary purpose of a budget?
• What does 'accrual basis accounting' mean?
• What type of asset is furniture considered?
• Why are the 'Notes to the Financial Statements' essential for compliance?
• What is a common misconception about the 'Notes to the Financial Statements'?
• What type of expense is related to the usage of a retail location over a specific period?
• Ending inventory is subtracted from which total in the calculation of COGS?
• What does the concept of 'materiality' in accounting refer to?
• Which expense is incurred when a company offers a reduction in prices for prompt payment?
• Which of the following is an expense related to business communication devices?
• Explain 'common stock'.
• What are 'post-closing entries' used for in accounting?
• Define 'contribution margin'.
• What is the classification of 'Petrol' expense in accounting?
• What is the main purpose of a 'bank reconciliation'?
• What type of asset is typically represented by accumulated depreciation?
• What is a 'chart of accounts'?
• How is 'GST Payable' categorized in accounting?
• What does 'financial disclosures' provide?
• Customs duty is typically classified under which category?
• Which group is primarily interested in the details provided by the 'Notes to the Financial Statements'?
• What type of expenses are associated with the upkeep and enhancement of buildings?
• What is the typical classification for shop fittings in accounting?
• What is the classification of 'Accounts Payable'?
• Which of the following represents an expense related to staff compensation?
• What is the term used to describe the reduction in value of office equipment over time?
• 'Fees Received' are classified as which type of account?
• How is operating profit calculated?
• What is the primary classification for trademarks in accounting?
• What is the primary purpose of postage expenses in a business?
• What is involved in 'financial reporting'?
• Which term is used to describe the cost of goods sold in relation to inventory?
• What is meant by 'accounts payable'?
• Which expense is recognized for reducing the value of a delivery vehicle over time?
• Patents are classified under which accounting category?
• What does solvency refer to?
• What reflects the ongoing cost of maintaining a commercial property?
• What is the purpose of a cash flow statement?
• 'Drawings' are categorized as which type of account?
• What financial term describes returns of goods previously purchased by a company?
• What does GAAP stand for?
• What distinguishes the accrual basis of accounting from cash basis accounting?
• What does the current ratio measure?
• What financial document would typically show accounts receivable?
• What is 'cash basis accounting'?
• Which term refers to costs incurred by a business that are not directly linked to production?
• Which of the following would be categorized as 'Dividends received'?
• Which expense category includes obligations to government for employee earnings?
• Describe 'accounts summarization'.
• 'Accrued Expenses' represent liabilities for expenses:
• What type of account is classified as "Accounts receivable"?
• What is a common use of financial ratios?
• Define 'debit' in accounting.
• What is considered an 'expense' in accounting?
• What is an 'account' in accounting terms?
• Which type of cost would freight in typically be categorized as?
• Which financial statement provides details about a company's revenues and expenses?
• Delivery vans are considered what type of asset?
• Which expense is write-off related to non-payment by customers?
• Which expense is a common charge incurred for professional financial services?
• What does "Petty Cash" refer to in accounting?
• How is a 'Loan' typically classified?
• Which of the following is true about fixed costs?
• What does 'impairment' mean in accounting?
• In accounting, "Shares" are classified under which category?
• What type of expenses include wages and salaries paid to employees?
• What does "PPE" stand for in accounting terms?
• What type of account is "Computer" classified as?
• Which of the following best describes 'debit'?
• What type of account are 'Accrued Expenses' classified as?
• Which classification fits the account "Trucks"?
• Interest accrued on a mortgage is classified as what type of account?
• What category does 'Sales Salaries' fall under?
• Describe what a 'journal' is in accounting.
• What term describes the ongoing costs that a company incurs to operate?
• Shop wages would be classified as what type of expense?
• What category would insurance costs fall under in a business setting?
• Which of the following represents a non-current asset?
• What does beginning inventory refer to?
• What is the profit margin used to indicate?
• What is a 'trial closing' in accounting?
• What category does "Prepayments" fall under?
• What is a trial balance?
• What type of account is "Supplies on hand"?
• What does ending inventory represent in a financial statement?
• In accounting, interest on a bank overdraft is considered which type of expense?
• What does 'cost of goods sold (COGS)' refer to?
• Which of the following is NOT a section of a cash flow statement?
• The 'Notes to the Financial Statements' can help investors and stakeholders understand what?
• Which of the following is typically a fixed cost for a business?
• What expense category includes costs associated with maintaining vehicles used for business?
• What does a 'credit' do in accounting?
• What type of expense includes all materials necessary for daily office activities?
• What do the 'Notes to the Financial Statements' enhance for users?
• What does liquidity refer to in accounting?
• Which type of expense would be classified as an allowance given for early payment?
• Which of the following expenses are not typically classified as operating expenses?
• Purchases refer to which component in the cost of goods sold (COGS) calculation?