NOTE: (i) Attempt FIVE questions in all. Including question No. 9 which is compulsory.
(II) Select at least ONE QUESTION from each of the PART A,B,C and D. All questions carry equal marks.



1. Distinguish between:
(a) Cost accounting and financial accounting
(b) Job order costing and process costing
(c) Joint product cost and by-product cost
(d) Standard cost and budget

2. Rahmat Manufacturing Company uses process costing. The cost incurred in department No. 2 during the month of January were:

Direct Material Cost … Rs. 1,98,000
Direct Labour Cost … Rs, 1,18,000
Factory Overheads Rs. 79,200
The quantity schedule shows that 50,000 units were received from department 1 at a unit cost of Rs. 9. During the month 30,000 units were completed and transferred to next department. 5000 units were competed but in hand. 5000 units were lost during processing. The remaining units were in process at the end of the month. The degree of completion of the in process units was as follows:
40% of the units were 50% complete
20% of the units were 60% complete
20% of the units were 40% complete
Balance of the units were 30% complete

Required: Cost of production report for department No. 2 for the month of Januray.


3. What is internal control? Explain principles of Internal control. Also differentiate between Internal check, Internal audit and Internal control.

4. Define continuous audit. Discuss advantages and disadvantages of continuous audit. Suggest the steps that can be taken to reduce the drawbacks of continuous audit.


5. Explain the tem “Income from Business” under section 18. What are various incomes of a person that shall be chargeable under the head? “Income from Business” under section 18 of income tax ordinance 2001?

6. Compute the taxable income of Mr. Waqar who during the tax year ended June 30, 2004 derived income from the following sources:

1. Salary … 1.00,000
2. Loss from speculation on shares… 4,000
3. Annual leave fare assistance… 10,000
4. Interest free loan received from employer … 90,000
5. Overtime payment received … 10,000
6. Rent ceiling paid by the employer … 1,50,000
7. Zakat paid… 2,000
8. Tax deducted at source … 1,000
9. Conveyance allowances (conveyance provided by employer partly for personal and partly for official purpose, expenditure Rs. 12,000) … 4,7000
10. Share from AOP… 8,000
11. Gratuity received from the employer (Approved by CBR) … 10,000

Amount claimed for Rebate
(a) Shares of listed companies purchased … 13,658
(b) Personal legal expenditure … 5,000
(c) Life insurance premium paid by employee … 10,000


7. Define “Joint Stock Company”. Identify and explain the main points of difference between Joint Stock Company and other forms of business organization.

8. What is Business Finance? Discuss in detail various financial source available to a new venture.

9. Write only the correct answer in the Answer Book. Do not reproduce the questions.

(1) State which of the following are characteristics of job costing:
(i) Homogeneous products
(ii) Customer driven production
(iii) Complete production possible within a single accounting period

(a) (i) only
(b) (i) and (ii) only
(c) (ii) and (iii) only
(d) (i) and (iii) only
(e) None of these.

(2) State which of the following are characteristics of contract costing:
(i) Homogeneous products
(ii) Customer driven production
(iii) Complete production possible within a single account period.

(a) (i) and (ii) only
(b) (i) and (iii) only
(c) (ii) and (iii) only
(d) (ii) only
(e) None of these.

(3) The following extract is taken from the production cost budget of S. Ltd;
Production (Units) 2,000 …… 3,000
Production Cost (Rs.) 11,100 …… 12,900
The budget cost allowance for an activity level of 4,000 units is:

(a) 7,200
(b) 14,700
(c) 17,200
(d) 22,200
(e) None of these.

(4) Direct costs are:
(a) Costs which can be identified with a cost center but not identified to a single cost unit
(b) Costs which can be indentified with a single cost unit
(c) Costs incurred as a direct result of a particular decision
(d) Costs incurred which can be attributed to a particular accounting period
(e) None of these.

(5) A master budget comprises
(a) The budgeted profit and loss account
(b) The budgeted cash flow, budgeted profit and loss account and budgeted balance sheet
(c) The budgeted cash flow
(d) The entire set of budget prepared
(e) None of these.

(6) The best description of a by-product is a joint product which:
(a) Has no economics value
(b) Accounts for a relatively small proportion of the total value of the production process.
(c) Accounts for a relatively small proportion of the total value of the production process.
(d) Will need to be disposed off a cost
(e) None of these.

(7) What type of budget is designed to take into account forecast changes in cost, prices, etc.
(a) Rolling budget
(b) Functional budget
(c) Flexible budget
(d) Master budget
(e) None of these.

(8) Working capital is the:
(a) Effective capital of the company when the business is in full swing
(b) Capital borrowed from the bank
(c) Difference between the current assets and current liabilities
(d) None of them.

(9) The most acceptable method of measuring income is:
(a) To match the costs with revenue
(b) To find out this difference in net worth as on two dates
(c) To apply normal life of return on capital invested.
(d) None of these.

(10) Up to what level Agriculture income is exempt from tax?
(a) Rs. 80,000
(b) Rs. 100,000
(c) Totally exempt
(d) Totally taxable
(e) None of these.

(11) Average relief is available on the following except:
(a) Donation for charitable purpose
(b) Investment in shares
(c) Retirement Annuity scheme
(d) Mark up on Housing Finance Scheme
(e) Donations on Baitul-Mal Fund
(f) None of these.

(12) Special tax relief is granted to a senior citizen if his age is:
(a) 50 years or above
(b) 60 years or above
(c) 65 years or above
(d) None of these.

(13) When preparing balance sheet of a company, Goodwill, Patents, Trade Mark and Designs come under the head of:
(a) Fixed Assets
(b) Fictitious Assets
(c) Current Assets
(d) Miscellaneous Expenditure
(e) None of these.

(14) When debentures are issued at par and are redeemable at premium, credit given to premium on redemption of debentures account is in the nature of a:
(a) Personal Account
(b) Real Account
(c) Nominal Account
(d) None of these.

(15) In comparison to the external auditor, an internal auditor is more likely to be concerned with:
(a) Internal Administrative Control
(b) Cost Accounting Procedures
(c) Operational Auditing
(d) Internal Accounting Control
(e) None of these.

(16) An auditor’s unqualified short form report:
(a) Implies only, that items disclosed in the financial statements and foot notes are properly presented and takes no position on the adequacy of disclosure.
(b) Implies that disclosure is adequate in the financial statements and foot notes.
(c) Explicitly states that disclosure is adequate in the financial statements and foot notes.
(d) Explicitly states that all material items have been disclosed in conformity with generally accepted accounting principles.
(e) None of these.

(17) The role of finance function in the future will be:
(a) Tactical
(b) Professional advisor
(c) Stewards
(d) Specialist team member
(e) None of these.

(18) In principle current assets are financed from:
(a) Retained earning
(b) Long term debts
(c) Issue of fresh Capital
(d) Current liabilities
(e) None of these.

(19) A non-banking asset is:
(a) Item of office equipment
(b) Bank premise
(c) Secured property acquired form defaulting borrower
(d) All of the above
(e) None of these

(20) When preparing a production budget, the quantity to be produced equals:
(a) Sales quantity + Opening stock + Closing stock
(b) Sales quantity – Opening stock + Closing stock
(c) Sales quantity – Opening stock - Closing stock
(d) Sales quantity
(e) None of these

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