CAMATA FINAL EXAM 2026 — 300
REVISION MCQs |questions , answers &
rationales
All 300 questions cover Financial Accounting, Management Accounting, Taxation, Auditing,
Business Law, Finance, and Management — mirroring a typical final professional examination
format.
1. Which accounting concept requires that expenses be matched with the revenues they
help generate?
A. Prudence concept B. Going concern concept C. Matching concept D. Consistency concept
(C) Correct Answer: Matching concept
Rationale: The matching concept (also called the accruals concept) requires that expenses
are recognised in the same period as the revenues they helped generate, ensuring accurate
profit measurement.
2. A company purchases machinery for Ksh 500,000 with a useful life of 10 years and no
residual value. What is the annual depreciation under the straight-line method?
A. Ksh 25,000 B. Ksh 50,000 C. Ksh 100,000 D. Ksh 45,000
(B) Correct Answer: Ksh 50,000
Rationale: Straight-line depreciation = (Cost − Residual Value) / Useful Life = (500,000 − 0)
/ 10 = Ksh 50,000 per year.
3. Which financial statement shows a company's financial position at a specific point in
time?
,A. Income Statement B. Cash Flow Statement C. Statement of Changes in Equity D. Balance
Sheet
(D) Correct Answer: Balance Sheet
Rationale: The Balance Sheet (Statement of Financial Position) shows assets, liabilities, and
equity at a specific date, reflecting the company's financial position at that moment.
4. Under IAS 2, inventories should be valued at:
A. Cost or net realisable value, whichever is higher B. Cost or net realisable value, whichever is
lower C. Market value only D. Historical cost only
(B) Correct Answer: Cost or net realisable value, whichever is lower
Rationale: IAS 2 requires inventories to be measured at the lower of cost and net realisable
value, applying the prudence concept to avoid overstating assets.
5. What does the current ratio measure?
A. Profitability of a business B. Long-term solvency C. Short-term liquidity D. Asset utilisation
efficiency
(C) Correct Answer: Short-term liquidity
Rationale: The current ratio (Current Assets / Current Liabilities) measures the ability of a
business to meet its short-term obligations using its current assets.
6. Which of the following is NOT a characteristic of a partnership?
A. Shared profits and losses B. Unlimited liability for partners C. Separate legal personality D.
Mutual agency
(C) Correct Answer: Separate legal personality
Rationale: Partnerships do not have a separate legal personality — only companies (limited
or public) have this feature. A partnership and its partners are legally the same entity.
,7. The double-entry principle states that:
A. Every transaction has two equal and opposite effects B. Assets must always exceed liabilities
C. Revenue must match expenses D. Cash inflows must equal cash outflows
(A) Correct Answer: Every transaction has two equal and opposite effects
Rationale: The double-entry system requires that for every debit entry there is a
corresponding credit entry of equal value, keeping the accounting equation (Assets =
Liabilities + Equity) in balance.
8. Which of the following taxes is a direct tax in Kenya?
A. Value Added Tax (VAT) B. Excise Duty C. Pay As You Earn (PAYE) D. Customs Duty
(C) Correct Answer: Pay As You Earn (PAYE)
Rationale: PAYE is a direct tax levied directly on an individual's employment income.
VAT, excise duty, and customs duty are indirect taxes collected through transactions.
9. The standard VAT rate in Kenya as administered by KRA is:
A. 10% B. 14% C. 16% D. 20%
(C) Correct Answer: 16%
Rationale: Kenya's standard VAT rate is 16% as provided under the Value Added Tax
Act. This applies to most taxable goods and services supplied in Kenya.
10. Which body is responsible for tax administration in Kenya?
A. Central Bank of Kenya (CBK) B. Kenya Revenue Authority (KRA) C. National Treasury D.
Capital Markets Authority (CMA)
(B) Correct Answer: Kenya Revenue Authority (KRA)
Rationale: KRA is the government agency mandated to collect revenue on behalf of the
Government of Kenya, administering taxes such as income tax, VAT, and customs duty.
, 11. Goodwill is classified as:
A. A current asset B. A tangible fixed asset C. An intangible fixed asset D. A fictitious asset
(C) Correct Answer: An intangible fixed asset
Rationale: Goodwill represents the excess of purchase price over fair value of net assets
acquired and is classified as an intangible non-current asset under IAS 38 and IFRS 3.
12. Which of the following best defines "working capital"?
A. Total assets minus total liabilities B. Current assets minus current liabilities C. Fixed assets
minus long-term liabilities D. Cash and bank balances only
(B) Correct Answer: Current assets minus current liabilities
Rationale: Working capital measures a company's operational liquidity and is calculated as
current assets minus current liabilities. A positive figure indicates the firm can meet short-
term obligations.
13. In management accounting, a cost that remains constant regardless of output level is
called a:
A. Variable cost B. Semi-variable cost C. Fixed cost D. Marginal cost
(C) Correct Answer: Fixed cost
Rationale: Fixed costs do not change with the level of production or sales within a relevant
range. Examples include rent, insurance, and management salaries.
14. The contribution margin is calculated as:
A. Sales revenue minus total costs B. Sales revenue minus variable costs C. Sales revenue minus
fixed costs D. Gross profit minus operating expenses
(B) Correct Answer: Sales revenue minus variable costs
Rationale: Contribution margin = Sales − Variable Costs. It represents the amount
available to cover fixed costs and generate profit, and is central to marginal costing and
CVP analysis.
REVISION MCQs |questions , answers &
rationales
All 300 questions cover Financial Accounting, Management Accounting, Taxation, Auditing,
Business Law, Finance, and Management — mirroring a typical final professional examination
format.
1. Which accounting concept requires that expenses be matched with the revenues they
help generate?
A. Prudence concept B. Going concern concept C. Matching concept D. Consistency concept
(C) Correct Answer: Matching concept
Rationale: The matching concept (also called the accruals concept) requires that expenses
are recognised in the same period as the revenues they helped generate, ensuring accurate
profit measurement.
2. A company purchases machinery for Ksh 500,000 with a useful life of 10 years and no
residual value. What is the annual depreciation under the straight-line method?
A. Ksh 25,000 B. Ksh 50,000 C. Ksh 100,000 D. Ksh 45,000
(B) Correct Answer: Ksh 50,000
Rationale: Straight-line depreciation = (Cost − Residual Value) / Useful Life = (500,000 − 0)
/ 10 = Ksh 50,000 per year.
3. Which financial statement shows a company's financial position at a specific point in
time?
,A. Income Statement B. Cash Flow Statement C. Statement of Changes in Equity D. Balance
Sheet
(D) Correct Answer: Balance Sheet
Rationale: The Balance Sheet (Statement of Financial Position) shows assets, liabilities, and
equity at a specific date, reflecting the company's financial position at that moment.
4. Under IAS 2, inventories should be valued at:
A. Cost or net realisable value, whichever is higher B. Cost or net realisable value, whichever is
lower C. Market value only D. Historical cost only
(B) Correct Answer: Cost or net realisable value, whichever is lower
Rationale: IAS 2 requires inventories to be measured at the lower of cost and net realisable
value, applying the prudence concept to avoid overstating assets.
5. What does the current ratio measure?
A. Profitability of a business B. Long-term solvency C. Short-term liquidity D. Asset utilisation
efficiency
(C) Correct Answer: Short-term liquidity
Rationale: The current ratio (Current Assets / Current Liabilities) measures the ability of a
business to meet its short-term obligations using its current assets.
6. Which of the following is NOT a characteristic of a partnership?
A. Shared profits and losses B. Unlimited liability for partners C. Separate legal personality D.
Mutual agency
(C) Correct Answer: Separate legal personality
Rationale: Partnerships do not have a separate legal personality — only companies (limited
or public) have this feature. A partnership and its partners are legally the same entity.
,7. The double-entry principle states that:
A. Every transaction has two equal and opposite effects B. Assets must always exceed liabilities
C. Revenue must match expenses D. Cash inflows must equal cash outflows
(A) Correct Answer: Every transaction has two equal and opposite effects
Rationale: The double-entry system requires that for every debit entry there is a
corresponding credit entry of equal value, keeping the accounting equation (Assets =
Liabilities + Equity) in balance.
8. Which of the following taxes is a direct tax in Kenya?
A. Value Added Tax (VAT) B. Excise Duty C. Pay As You Earn (PAYE) D. Customs Duty
(C) Correct Answer: Pay As You Earn (PAYE)
Rationale: PAYE is a direct tax levied directly on an individual's employment income.
VAT, excise duty, and customs duty are indirect taxes collected through transactions.
9. The standard VAT rate in Kenya as administered by KRA is:
A. 10% B. 14% C. 16% D. 20%
(C) Correct Answer: 16%
Rationale: Kenya's standard VAT rate is 16% as provided under the Value Added Tax
Act. This applies to most taxable goods and services supplied in Kenya.
10. Which body is responsible for tax administration in Kenya?
A. Central Bank of Kenya (CBK) B. Kenya Revenue Authority (KRA) C. National Treasury D.
Capital Markets Authority (CMA)
(B) Correct Answer: Kenya Revenue Authority (KRA)
Rationale: KRA is the government agency mandated to collect revenue on behalf of the
Government of Kenya, administering taxes such as income tax, VAT, and customs duty.
, 11. Goodwill is classified as:
A. A current asset B. A tangible fixed asset C. An intangible fixed asset D. A fictitious asset
(C) Correct Answer: An intangible fixed asset
Rationale: Goodwill represents the excess of purchase price over fair value of net assets
acquired and is classified as an intangible non-current asset under IAS 38 and IFRS 3.
12. Which of the following best defines "working capital"?
A. Total assets minus total liabilities B. Current assets minus current liabilities C. Fixed assets
minus long-term liabilities D. Cash and bank balances only
(B) Correct Answer: Current assets minus current liabilities
Rationale: Working capital measures a company's operational liquidity and is calculated as
current assets minus current liabilities. A positive figure indicates the firm can meet short-
term obligations.
13. In management accounting, a cost that remains constant regardless of output level is
called a:
A. Variable cost B. Semi-variable cost C. Fixed cost D. Marginal cost
(C) Correct Answer: Fixed cost
Rationale: Fixed costs do not change with the level of production or sales within a relevant
range. Examples include rent, insurance, and management salaries.
14. The contribution margin is calculated as:
A. Sales revenue minus total costs B. Sales revenue minus variable costs C. Sales revenue minus
fixed costs D. Gross profit minus operating expenses
(B) Correct Answer: Sales revenue minus variable costs
Rationale: Contribution margin = Sales − Variable Costs. It represents the amount
available to cover fixed costs and generate profit, and is central to marginal costing and
CVP analysis.
