Common ATSWA Exam Questions and Answers
Below are 10 common ATSWA exam-style questions with answers and explanations. These
questions cover a range of topics such as financial accounting, management accounting,
taxation, and auditing.
1. Basic Financial Accounting
Question:
What is the primary purpose of preparing the Statement of Financial Position (Balance Sheet)?
Answer:
The Statement of Financial Position provides a snapshot of an organization's financial position
at a specific point in time, showing the assets, liabilities, and equity.
It helps to evaluate the company's solvency, liquidity, and overall financial stability.
The equation is: Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \
text{Equity}
Final Answer: The primary purpose is to show the financial position by listing the assets,
liabilities, and equity.
2. Accounting for Depreciation
Question:
A company purchased equipment for N500,000. The equipment has a useful life of 5 years and a
residual value of N50,000. What is the annual depreciation using the straight-line method?
Answer:
Straight-line depreciation is calculated as:
Depreciation=Cost−Residual ValueUseful Life\text{Depreciation} = \frac{\text{Cost} - \
text{Residual Value}}{\text{Useful Life}}
Substitute the values:
, Depreciation=500,000−50,0005=450,0005=90,000\text{Depreciation} = \frac{500,000 -
50,000}{5} = \frac{450,000}{5} = 90,000
Final Answer: The annual depreciation is N90,000.
3. Taxation - Income Tax Computation
Question:
A company has a net profit of N2,000,000 for the year. The company is subject to a corporate tax
rate of 30%. What is the company's tax liability?
Answer:
The tax liability is calculated by applying the tax rate to the net profit:
Tax Liability=Net Profit×Tax Rate\text{Tax Liability} = \text{Net Profit} \times \text{Tax
Rate} Tax Liability=2,000,000×30%=600,000\text{Tax Liability} = 2,000,000 \times 30\% =
600,000
Final Answer: The company's tax liability is N600,000.
4. Cash Flow Statement
Question:
Which of the following activities is classified as financing activity in the cash flow statement?
A) Purchase of property, plant, and equipment
B) Issuance of share capital
C) Payments to suppliers
D) Interest received
Answer:
Financing activities refer to transactions that change the equity or borrowings of a
business.
The issuance of share capital is a financing activity.
Final Answer: B) Issuance of share capital.
Below are 10 common ATSWA exam-style questions with answers and explanations. These
questions cover a range of topics such as financial accounting, management accounting,
taxation, and auditing.
1. Basic Financial Accounting
Question:
What is the primary purpose of preparing the Statement of Financial Position (Balance Sheet)?
Answer:
The Statement of Financial Position provides a snapshot of an organization's financial position
at a specific point in time, showing the assets, liabilities, and equity.
It helps to evaluate the company's solvency, liquidity, and overall financial stability.
The equation is: Assets=Liabilities+Equity\text{Assets} = \text{Liabilities} + \
text{Equity}
Final Answer: The primary purpose is to show the financial position by listing the assets,
liabilities, and equity.
2. Accounting for Depreciation
Question:
A company purchased equipment for N500,000. The equipment has a useful life of 5 years and a
residual value of N50,000. What is the annual depreciation using the straight-line method?
Answer:
Straight-line depreciation is calculated as:
Depreciation=Cost−Residual ValueUseful Life\text{Depreciation} = \frac{\text{Cost} - \
text{Residual Value}}{\text{Useful Life}}
Substitute the values:
, Depreciation=500,000−50,0005=450,0005=90,000\text{Depreciation} = \frac{500,000 -
50,000}{5} = \frac{450,000}{5} = 90,000
Final Answer: The annual depreciation is N90,000.
3. Taxation - Income Tax Computation
Question:
A company has a net profit of N2,000,000 for the year. The company is subject to a corporate tax
rate of 30%. What is the company's tax liability?
Answer:
The tax liability is calculated by applying the tax rate to the net profit:
Tax Liability=Net Profit×Tax Rate\text{Tax Liability} = \text{Net Profit} \times \text{Tax
Rate} Tax Liability=2,000,000×30%=600,000\text{Tax Liability} = 2,000,000 \times 30\% =
600,000
Final Answer: The company's tax liability is N600,000.
4. Cash Flow Statement
Question:
Which of the following activities is classified as financing activity in the cash flow statement?
A) Purchase of property, plant, and equipment
B) Issuance of share capital
C) Payments to suppliers
D) Interest received
Answer:
Financing activities refer to transactions that change the equity or borrowings of a
business.
The issuance of share capital is a financing activity.
Final Answer: B) Issuance of share capital.
