Note: (i) Attempt FOUR questions in all, including Question No. 6 which is COMPULSORY.
(ii) Extra attempt of any question or any part of the attempted question will not be considered
(iii) All question carry EQUAL marks.

1. Explain and illustrate legal provisions governing preparation of banking companies and financial statements in Pakistan.

2. The books of Safeer Manufacturing Co. engaged in assembling refrigerators showing the following information for the ix months ended on December 31, 2005.

Particulars Rs
Material purchased---------------------------------------------- 1,041,250
Stock-July 1, 2005:
Material--------------------------------------------------1, 25,000
Finished goods (50 refrigerators) ---------------------- 20,575
Director Labour -------------------------------------------------- 1,025,000
Factory Overheads-------------------------------------------------- 435,050
Selling expenses ---------------------------------------------------- 214,000
General & Admn. Expenses --------------------------------------- 241,500
Financial Management expenses ------------------------------------- 9,200
Sales (6000 refrigerators) -----------------------------------------3,180,000
Stock – December 31, 2005:
Material ----------------------------------------------------- 75,000
Finished goods (250 refrigerators)
You can calculate the amount of closing stock
Refrigerators at cost
There was no work-in-process at the end of the year.
Required:
(1) An income statement.
(2) Number of Unites manufactures
(3) Unit cost of refrigerators manufactured
(4) Gross Profit and the Net profit per unit sold.


3. The following is the trial balance of Metropolitan Company (Private) Limited as on June 30, 2005:
Particulars Debit Credit
Plant & Machinery ------------------------------------------------ 375,000
Wages ---------------------------------------------------------------- 90,000
Vehicles -------------------------------------------------------------- 71,000
Furniture and Fixtures ---------------------------------------------- 30,000
Carriage inward ------------------------------------------------------- 5,000
Carriage outward--------------------------------------------------- 6,250
Freehold Land ---------------------------------------------------- 75,000
Purchasing expenses --------------------------------------------- 28,750
Insurance ------------------------------------------------------------ 6,250
Rates and taxes --------------------------------------------------- 25,000
Office supplies ----------------------------------------------------- 5,750
Electricity --------------------------------------------------------- 48,500
Salaries ------------------------------------------------------------ 40,000
Opening stock ---------------------------------------------------- 56,750
Purchases -------------------------------------------------------- 325,000
Sales return --------------------------------------------------------- 8,250
Discount -------------------------------------------------------------3,000
Bad debts ----------------------------------------------------------- 4,375
Mark-up & bank charges ----------------------------------------- 5,625
Cash in hand ------------------------------------------------------- 7,125
Short term deposit ----------------------------------------------- 50,000
Repairs & maintenance ----------------------------------------- 14,500
Postage, telegram & telephone ---------------------------------- 5,000
Sundry debtors -------------------------------------------------- 116,100
Capital ----------------------------------------------------------- 500,000
Investment -------------------------------------------------------- 37,500
Sales ------------------------------------------------------------- 795,000
Purchases return --------------------------------------------------10,750
Sundry Creditors -------------------------------------------------61,600
Bank Overdrafts ------------------------------------------------- 29,375
Reserve for doubtful debt ----------------------------------------7,500
Discount & Commission ---------------------------------------- 4,250
Interest received -------------------------------------------------- 3,125
Dividend income ------------------------------------------------- 5,625
1,417,225 1,417,225

The following adjustments are required to be made into the accounts:
(1) Closing stock Rs. 73,000.
(2) Depreciation to be provided at following rates:
(a) Freehold land ------------------------------------- 5%
(b) Vehicles ------------------------------------------ 20%
(c) Other assets ------------------------------------- 10%
(Plant & Machinery and furniture and Fixtures)
(3) Reserve for doubtful debt is required to be kept at 5% of the debtors balance.
(4) Prepaid insurance Rs. 1,500 and rates & taxes – Rs. 375
(5) Outstanding wages Rs. 3,000 and salary Rs. 8, 375
Required:
Prepare trading profit and loss account and balance sheet as at 30-06-2005.

4. Working capital of X Company at December 31-2005 exceeds the working capital at December 31-2004 by Rs. 50,000 as reported blow.
2005 2004
Particulars Rs Rs
Current Assets
Cash, Marketable securities 150,000 250,000
& accounts receivable
Merchandise inventory 450,000 250,000
Total Current Assets 600,000 500,000
Current Liabilities 300,000 250,000
300,000 250,000
Required:
Undertake liquidity analysis with particular reference to:
(1) Current ratio
(2) Quick ratio
(3) Working capital
First calculate the ratios, later compare the same with reference to standard ratios and later present a lucid analysis.

5. Explain various types of depreciation methods relating to:
(a) Fixed assets
(b) Wasting assets
Illustrate your answer properly in respect of how various depreciation methods are used.


COMPULSORY QUESTION

6. Answer all questions in the following format. An overwritten answer can carry no marks. Correct answers and rationale will carry equal grade:

S. No True/False Rationale

(1) There is no difference between Financial Report and Financial statement.
(True/False)
(2) Calculating number of days uncollected of sales is known as Collection Index.
(True/False)
(3) Wages paid for construction of a plant is revenue expenditure. (True/False)
(4) Times interest earned is a great interest for a banker. (True/False)
(5) Budgeted Profits are always high when pessimistic approach for preparing budget is followed. (True/False)
(6) Work Sheet only presents Balance Sheet figures. (True/False)
(7) Trial Balance is prepared from ledger. (True/False)
(8) Banks are governed under the Companies Ordinance, 1984 only for preparation of their financial statements. (True/False)
(9) Suspense Account is a clear account with no question to be asked. (True/False)
(10) Ledgers are prepared from vouches much before transactions are recorded in the Journal. (True/False)