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KASNEB ATD practice questions

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Question 1ATD Level I

A business has total assets of Ksh 500,000 and total liabilities of Ksh 180,000. What is the amount of the owner's capital?

  1. Ksh 680,000
  2. Ksh 180,000
  3. Ksh 320,000 Correct answer.
  4. Ksh 500,000

Explanation

The accounting equation states that assets equal capital plus liabilities, so capital is derived by subtracting liabilities from assets. Ksh 500,000 minus Ksh 180,000 gives Ksh 320,000.

Question 2ATD Level I

A petty cashier operates an imprest of Ksh 12,000. At the end of the month, paid vouchers total Ksh 8,600. How much cash is required to restore the imprest?

  1. Ksh 12,000
  2. Ksh 8,600 Correct answer.
  3. Ksh 3,400
  4. Ksh 20,600

Explanation

Under the imprest system the float is restored to its original amount by reimbursing exactly the value of vouchers spent during the period. The amount spent, Ksh 8,600, is therefore the amount required.

Question 3ATD Level I

Ksh 60,000 is invested at 10% per annum simple interest for two years. What is the total interest earned?

  1. Ksh 6,000
  2. Ksh 12,600
  3. Ksh 72,000
  4. Ksh 12,000 Correct answer.

Explanation

Simple interest is computed as principal multiplied by rate multiplied by time. Ksh 60,000 × 10% × 2 years gives Ksh 12,000.

Question 4ATD Level I

The weekly sales (in thousands of shillings) of a kiosk were 6, 9, 10, 15 and 20. What is the mean weekly sale?

  1. 11
  2. 10
  3. 13
  4. 12 Correct answer.

Explanation

The arithmetic mean is the sum of all the observations divided by the number of observations. The sum is 60 and there are five observations, so the mean is 12.

Question 5ATD Level I

What is the main purpose of preparing a trial balance?

  1. Determine the profit for the period
  2. Record transactions in the order they occur
  3. Show the financial position of the business
  4. Verify arithmetical accuracy of the ledger Correct answer.

Explanation

A trial balance lists ledger balances and confirms that total debits equal total credits, which is a check on the arithmetical accuracy of the double entry. It is not itself a statement of profit or of financial position.

Question 6ATD Level I

A set of instructions that directs a computer to perform a given task is referred to as:

  1. Hardware
  2. Software Correct answer.
  3. Humanware
  4. Data

Explanation

Software consists of the programs and instructions that tell the computer hardware what to do. Hardware refers to the physical components, while humanware refers to the people who operate the system.

Question 7ATD Level I

In the communication process, the receiver's response to a sender's message is called:

  1. Feedback Correct answer.
  2. Encoding
  3. Noise
  4. Medium

Explanation

Feedback is the reaction or reply that the receiver sends back to the sender, and it confirms whether the message was understood. Encoding is the conversion of an idea into a message and the medium is the channel used to carry it.

Question 8ATD Level I

An entrepreneur is best described as a person who:

  1. Works for an employer on a monthly salary
  2. Lends money to firms and earns interest
  3. Inspects the accounts of companies for tax
  4. Bears risk while pursuing an opportunity Correct answer.

Explanation

An entrepreneur identifies a business opportunity, mobilises the required resources and bears the risk of the venture in the expectation of profit. A salaried worker, a lender and a tax inspector do not bear entrepreneurial risk.

Question 9ATD Level I

A machine costing Ksh 900,000 has an estimated residual value of Ksh 100,000 and a useful life of five years. Using the straight-line method, what is the annual depreciation charge?

  1. Ksh 200,000
  2. Ksh 180,000
  3. Ksh 160,000 Correct answer.
  4. Ksh 100,000

Explanation

Under the straight-line method the depreciable amount, being cost less residual value, is spread evenly over the useful life. (Ksh 900,000 − Ksh 100,000) ÷ 5 years gives Ksh 160,000 per year.

Question 10ATD Level I

The cash book of a trader shows a debit balance of Ksh 45,000. Bank charges of Ksh 1,200 have not yet been recorded in the cash book, and a cheque of Ksh 8,000 deposited has not yet been credited by the bank. What is the balance on the bank statement?

  1. Ksh 35,800 Correct answer.
  2. Ksh 54,200
  3. Ksh 51,800
  4. Ksh 43,800

Explanation

The unrecorded bank charges reduce the true cash book balance to Ksh 43,800. Since the deposit has not yet been credited, the bank statement balance is lower by Ksh 8,000, giving Ksh 35,800.

Question 11ATD Level I

Trade receivables are Ksh 800,000 and a provision for doubtful debts of 5% is required. The existing provision is Ksh 30,000. What is the increase in the provision to be charged to the profit and loss account?

  1. Ksh 10,000 Correct answer.
  2. Ksh 40,000
  3. Ksh 50,000
  4. Ksh 30,000

Explanation

The required provision is 5% of Ksh 800,000, which is Ksh 40,000. Since Ksh 30,000 already exists, only the increase of Ksh 10,000 is charged to the profit and loss account.

Question 12ATD Level I

Ksh 20,000 is deposited in an account that earns 10% per annum compound interest for two years. What is the total amount in the account at the end of the period?

  1. Ksh 24,000
  2. Ksh 20,400
  3. Ksh 24,200 Correct answer.
  4. Ksh 22,000

Explanation

Compound interest applies the rate to the accumulated balance each year, so the amount is Ksh 20,000 × 1.10 × 1.10. This gives Ksh 24,200.

Question 13ATD Level I

The purchase of a delivery van by a business is classified as:

  1. Deferred revenue expenditure
  2. Revenue expenditure
  3. Capital expenditure Correct answer.
  4. An operating expense

Explanation

Capital expenditure is incurred in acquiring or improving a non-current asset that will be used in the business for more than one accounting period. A delivery van is such an asset, so its purchase is capital expenditure.

Question 14ATD Level I

What is the median of the following figures: 12, 7, 15, 9, 20 and 11?

  1. 11.5 Correct answer.
  2. 12
  3. 11
  4. 12.5

Explanation

The figures are first arranged in order: 7, 9, 11, 12, 15, 20. With an even number of items the median is the average of the two middle values, (11 + 12) ÷ 2, which equals 11.5.

Question 15ATD Level I

Three partners share profits in the ratio 2:3:5. If the total profit for the year is Ksh 400,000, how much does the third partner receive?

  1. Ksh 200,000 Correct answer.
  2. Ksh 120,000
  3. Ksh 240,000
  4. Ksh 80,000

Explanation

The ratio has a total of 10 parts, so each part is worth Ksh 400,000 ÷ 10 = Ksh 40,000. The third partner takes five parts, that is Ksh 200,000.

Question 16ATD Level I

A speaker uses highly technical jargon when addressing a group of villagers. The communication problem created is best described as:

  1. A physical barrier
  2. A psychological barrier
  3. A semantic barrier Correct answer.
  4. An organisational barrier

Explanation

Semantic barriers arise from the meaning of words and symbols, including the use of jargon that the audience does not understand. Physical barriers relate to distance or noise, and psychological barriers relate to attitudes and emotions.

Question 17ATD Level I

In a spreadsheet, the cell reference $B$4 is an example of:

  1. A relative cell reference
  2. An absolute cell reference Correct answer.
  3. A circular reference
  4. A mixed cell reference

Explanation

An absolute reference fixes both the column and the row by placing a dollar sign before each, so it does not change when copied. A mixed reference fixes only the column or only the row.

Question 18ATD Level I

The exclusive legal right granted to an inventor to make and sell an invention for a limited period is known as a:

  1. Trade secret
  2. Patent Correct answer.
  3. Copyright
  4. Trade mark

Explanation

A patent protects a new invention and gives the inventor exclusive rights over its use and commercial exploitation for a set period. Copyright protects original literary and artistic works rather than inventions.

Question 19ATD Level I

Which of the following is an example of system software?

  1. A word processor
  2. An operating system Correct answer.
  3. A web browser
  4. A spreadsheet program

Explanation

System software manages the hardware and provides a platform on which other programs run; the operating system is the main example. Word processors, spreadsheets and browsers are application software written for specific user tasks.

Question 20ATD Level I

A firm has fixed costs of Ksh 150,000, a selling price of Ksh 50 per unit and a variable cost of Ksh 30 per unit. What is the break-even quantity?

  1. 2,500 units
  2. 3,000 units
  3. 5,000 units
  4. 7,500 units Correct answer.

Explanation

Break-even quantity equals fixed costs divided by the contribution per unit. Contribution is Ksh 50 − Ksh 30 = Ksh 20, so Ksh 150,000 ÷ Ksh 20 gives 7,500 units.

Question 21ATD Level I

Goods worth Ksh 5,000 were entered in the purchases account as Ksh 500. Which journal entry corrects this error?

  1. Dr Purchases Ksh 4,500; Cr Suspense Ksh 4,500 Correct answer.
  2. Dr Suspense Ksh 500; Cr Purchases Ksh 500
  3. Dr Purchases Ksh 5,000; Cr Suspense Ksh 5,000
  4. Dr Suspense Ksh 4,500; Cr Purchases Ksh 4,500

Explanation

Purchases were understated by Ksh 4,500, so the purchases account needs an additional debit of Ksh 4,500. Because the debit side of the trial balance was short by that amount, the suspense account carries a credit balance that must now be cleared.

Question 22ATD Level I

A data set has a mean of 50 and a standard deviation of 10. What is its coefficient of variation?

  1. 10%
  2. 5%
  3. 20% Correct answer.
  4. 500%

Explanation

The coefficient of variation expresses the standard deviation as a percentage of the mean, that is (standard deviation ÷ mean) × 100. Here (10 ÷ 50) × 100 gives 20%.

Question 23ATD Level I

Goods costing Ksh 20,000 are sold at a mark-up of 25% on cost. What is the gross profit on the sale?

  1. Ksh 5,000 Correct answer.
  2. Ksh 25,000
  3. Ksh 6,250
  4. Ksh 4,000

Explanation

A mark-up is calculated on cost, so gross profit is 25% of Ksh 20,000, which is Ksh 5,000. The selling price would then be Ksh 25,000.

Question 24ATD Level I

What amount must be invested today at 10% per annum compound interest to accumulate to Ksh 26,620 after three years?

  1. Ksh 20,000 Correct answer.
  2. Ksh 22,000
  3. Ksh 18,000
  4. Ksh 24,000

Explanation

The present value is found by discounting the future amount using the compound factor for three years at 10%, which is 1.331. Ksh 26,620 ÷ 1.331 gives Ksh 20,000.

Question 25ATD Level I

The mean of ten numbers is 20. If one of the numbers, which is 30, is removed, what is the mean of the remaining nine numbers?

  1. 18.89 Correct answer.
  2. 18.00
  3. 19.00
  4. 20.00

Explanation

The total of the ten numbers is 10 × 20 = 200. Removing 30 leaves a total of 170 shared among nine numbers, giving a new mean of 170 ÷ 9, which is approximately 18.89.

Question 26ATD Level I

A business has total assets of Ksh 450,000 and liabilities of Ksh 170,000. What is the amount of the owner's capital?

  1. Ksh 170,000
  2. Ksh 280,000 Correct answer.
  3. Ksh 620,000
  4. Ksh 450,000

Explanation

The accounting equation states that assets equal capital plus liabilities, so capital is found by deducting liabilities from assets. Ksh 450,000 less Ksh 170,000 gives capital of Ksh 280,000.

Question 27ATD Level I

A seller has overcharged a customer on an invoice. Which document is sent to the customer to reduce the amount payable?

  1. Statement of account
  2. Debit note
  3. Credit note Correct answer.
  4. Quotation

Explanation

A credit note is issued by a seller to reduce the amount owed by a customer when goods are returned or when an invoice has been overstated. It records the reduction in the customer's account and in the seller's books.

Question 28ATD Level I

The number of vehicles passing a check point each hour was recorded as 12, 15, 12, 18, 12 and 9. What is the mode of the distribution?

  1. 9
  2. 12 Correct answer.
  3. 15
  4. 13

Explanation

The mode is the observation that occurs most frequently in a data set. The value 12 appears three times, which is more often than any other figure in the list.

Question 29ATD Level I

Which of the following is an input device?

  1. Monitor
  2. Speaker
  3. Scanner Correct answer.
  4. Plotter

Explanation

An input device feeds data into the computer for processing, and a scanner converts printed documents into digital form. Plotters, speakers and monitors all present processed results to the user.

Question 30ATD Level I

A trader invests Ksh 60,000 at 8% per annum simple interest for three years. What is the total interest earned?

  1. Ksh 4,800
  2. Ksh 19,200
  3. Ksh 15,552
  4. Ksh 14,400 Correct answer.

Explanation

Simple interest is calculated as principal multiplied by rate multiplied by time, that is Ksh 60,000 × 0.08 × 3. The interest therefore amounts to Ksh 14,400, and interest is not added to the principal each year.

Question 31ATD Level I

Information that spreads through informal channels within an organisation is best described as:

  1. Horizontal communication
  2. Grapevine Correct answer.
  3. Downward communication
  4. Feedback

Explanation

The grapevine is the informal network through which messages travel by word of mouth outside the official lines of command. It is fast and can carry rumours, which is why managers should monitor it.

Question 32ATD Level I

Which of the following is a feature of a sole proprietorship?

  1. It must have at least two owners
  2. It is a separate legal entity from its owner
  3. The owner has unlimited liability for the debts of the business Correct answer.
  4. Profits are shared among shareholders

Explanation

A sole proprietorship is not a separate legal person, so the owner is personally liable for all business debts without limit. Profits belong entirely to the single owner, who also bears the losses.

Question 33ATD Level I

Sales for a period are Ksh 500,000 and the cost of sales is Ksh 320,000. What is the gross profit?

  1. Ksh 820,000
  2. Ksh 180,000 Correct answer.
  3. Ksh 500,000
  4. Ksh 320,000

Explanation

Gross profit is net sales revenue less the cost of the goods sold, before deducting operating expenses. Ksh 500,000 less Ksh 320,000 gives a gross profit of Ksh 180,000.

Question 34ATD Level I

Where there is no written partnership agreement, profits and losses of a partnership are shared:

  1. Equally among the partners Correct answer.
  2. In proportion to drawings made
  3. In the ratio of capital contributed
  4. In the ratio of time devoted to the business

Explanation

In the absence of an agreement, the law presumes that partners share profits and losses equally, regardless of the capital each has contributed. A different sharing arrangement only applies where the partners have expressly agreed to it.

Question 35ATD Level I

A petty cashier operates a fixed imprest of Ksh 10,000. At the end of the month, paid vouchers total Ksh 7,300 and cash in hand is Ksh 2,700. How much is reimbursed to restore the imprest?

  1. Ksh 7,300 Correct answer.
  2. Ksh 17,300
  3. Ksh 10,000
  4. Ksh 2,700

Explanation

The imprest system restores the float to its original level by reimbursing exactly the amount spent, which is the total of the paid vouchers. Reimbursing Ksh 7,300 brings the cash back to Ksh 10,000.

Question 36ATD Level I

A cheque of Ksh 15,000 issued to a supplier has not yet been presented at the bank. When reconciling from the cash book balance, this cheque is:

  1. Deducted from the cash book balance
  2. Added to the bank statement balance
  3. Added to the cash book balance Correct answer.
  4. Deducted from the bank statement balance

Explanation

The payment is already recorded in the cash book, but the bank has not yet reduced its records, so the bank statement balance is higher than the cash book balance. The unpresented cheque is therefore added back to the cash book balance to arrive at the bank statement balance.

Question 37ATD Level I

A machine costing Ksh 500,000 is depreciated at 20% per annum on the reducing balance basis. What is the depreciation charge for the second year?

  1. Ksh 64,000
  2. Ksh 90,000
  3. Ksh 80,000 Correct answer.
  4. Ksh 100,000

Explanation

Under the reducing balance method the rate is applied to the net book value, so the first year's charge is Ksh 100,000, leaving Ksh 400,000. Twenty per cent of Ksh 400,000 gives a second year charge of Ksh 80,000.

Question 38ATD Level I

Goods with a list price of Ksh 40,000 are sold subject to a trade discount of 10% and a cash discount of 5% for payment within ten days. What amount is recorded in the sales account?

  1. Ksh 36,000 Correct answer.
  2. Ksh 34,200
  3. Ksh 40,000
  4. Ksh 38,000

Explanation

Trade discount is deducted before the transaction is recorded, while cash discount is only recognised when the customer actually pays early. The invoice and sales account therefore show Ksh 40,000 less 10%, that is Ksh 36,000.

Question 39ATD Level I

Goods costing Ksh 25,000 are sold at a margin of 20% on the selling price. What is the selling price?

  1. Ksh 30,000
  2. Ksh 31,250 Correct answer.
  3. Ksh 45,000
  4. Ksh 20,000

Explanation

A margin of 20% on selling price means cost represents 80% of the selling price. Dividing Ksh 25,000 by 0.80 gives a selling price of Ksh 31,250.

Question 40ATD Level I

A business has current assets of Ksh 240,000 and current liabilities of Ksh 160,000. What is its current ratio?

  1. 0.67:1
  2. 2.4:1
  3. 1.6:1
  4. 1.5:1 Correct answer.

Explanation

The current ratio is current assets divided by current liabilities, expressed as a proportion to one. Ksh 240,000 divided by Ksh 160,000 gives 1.5:1, showing that short-term assets cover short-term obligations one and a half times.

Question 41ATD Level I

A manager's telephone message is distorted and partly inaudible because of a faulty line. This communication problem is best classified as:

  1. Physical barrier Correct answer.
  2. Semantic barrier
  3. Organisational barrier
  4. Psychological barrier

Explanation

Physical barriers arise from the environment and the medium used, such as poor equipment, noise or distance. A faulty line interferes with the transmission of the message itself, not with the meaning of the words.

Question 42ATD Level I

The main purpose of preparing a business plan for a potential lender is to:

  1. Record the daily transactions of the business
  2. Demonstrate the viability of the venture and its financing needs Correct answer.
  3. Replace the need for a market survey
  4. Serve as the audited financial statements of the business

Explanation

A business plan sets out the market, operations, management and financial projections so that a lender can judge whether the venture will generate enough cash to repay. It also shows exactly how much finance is required and how it will be used.

Question 43ATD Level I

Cell C3 of a spreadsheet contains the formula =A1+B2. If this formula is copied to cell D4, it becomes:

  1. =A1+B2
  2. =A2+C3
  3. =B3+C4
  4. =B2+C3 Correct answer.

Explanation

By default a cell reference is relative, so it shifts by the same number of rows and columns as the formula itself moves. Copying one column right and one row down changes A1 to B2 and B2 to C3.

Question 44ATD Level I

Rent paid during the year was Ksh 180,000. Rent prepaid at the start of the year was Ksh 15,000 and rent owing at the end of the year was Ksh 25,000. What is the rent expense for the year?

  1. Ksh 190,000 Correct answer.
  2. Ksh 220,000
  3. Ksh 170,000
  4. Ksh 180,000

Explanation

The expense for the year is the amount paid, less any amount prepaid at the beginning that relates to the current year, plus any amount still owing at the end. Ksh 180,000 − Ksh 15,000 + Ksh 25,000 gives Ksh 190,000 under the accrual basis.

Question 45ATD Level I

A network that connects computers located within a single office building is known as a:

  1. Virtual private network
  2. Metropolitan area network
  3. Local area network Correct answer.
  4. Wide area network

Explanation

A local area network covers a limited geographical area such as one building or campus and is usually owned and managed by a single organisation. Wider coverage belongs to metropolitan and wide area networks.

Question 46ATD Level I

Prime cost is made up of:

  1. Direct materials and factory overheads only
  2. Direct labour and production overheads
  3. Direct materials, direct labour and factory overheads
  4. Direct materials, direct labour and direct expenses Correct answer.

Explanation

Prime cost is the total of all direct costs of production, namely direct materials, direct labour and any direct expenses such as hire of special equipment. Factory overheads are indirect costs and are added to prime cost to obtain production cost.

Question 47ATD Level I

A purchase of a motor vehicle was debited to the motor expenses account. This error is best described as:

  1. Error of commission
  2. Error of original entry
  3. Compensating error
  4. Error of principle Correct answer.

Explanation

An error of principle occurs when a transaction is entered in a completely wrong class of account, here a capital item treated as revenue expenditure. The double entry still balances, so the trial balance will not reveal it.

Question 48ATD Level I

A firm has fixed costs of Ksh 240,000, a contribution of Ksh 40 per unit and actual sales of 8,000 units. What is the margin of safety in units?

  1. 5,000 units
  2. 6,000 units
  3. 2,000 units Correct answer.
  4. 8,000 units

Explanation

Break-even units equal fixed costs divided by contribution per unit, giving 6,000 units. The margin of safety is actual sales less break-even sales, so 8,000 less 6,000 gives 2,000 units.

Question 49ATD Level I

Ksh 50,000 is deposited at the end of each year for three years in an account earning 10% per annum compound interest. What is the total amount at the end of the three years?

  1. Ksh 165,500 Correct answer.
  2. Ksh 160,000
  3. Ksh 181,500
  4. Ksh 150,000

Explanation

The deposits form an ordinary annuity, and the future value is the annual deposit multiplied by the annuity factor for three years at 10%, which is 3.31. Ksh 50,000 × 3.31 gives Ksh 165,500.

Question 50ATD Level I

A credit sale of Ksh 9,000 was correctly entered in the sales account but posted as Ksh 900 in the customer's account. Which entry corrects this error?

  1. Debit the sales account with Ksh 8,100
  2. Debit the customer's account with Ksh 8,100 Correct answer.
  3. Debit the suspense account with Ksh 8,100
  4. Credit the customer's account with Ksh 8,100

Explanation

The customer's account has been under-debited by Ksh 8,100, so it must be debited with that amount to restore the correct balance. The opposite entry goes to the suspense account, since only one side of the original posting was wrong.