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Default MCQ's Accounting & Auditing Paper -I (2013)

Accounting & Auditing Paper -I (2013)

PART-I ((MCQs) (COMPULSORY)

Q.1. (i) Select the best option/answer and fill in the appropriate Circle on the OMR Answer Sheet. (20x1=20)
(ii) Answers given anywhere, other than OMR Answer Sheet, shall not be considered.


1. Double Entry Book Keeping was fathered by:
(a) Luca Paioli
(b) Yoyji Ijiri (c) Micheal Hammer (d) Ishikawa

http://en.wikipedia.org/wiki/Double-entry_bookkeeping_system
It was first codified in the 15th century by the Franciscan friar Luca Pacioli.


2. Accumulated loss of a company is shown in the balance sheet as:
(a) Liability (b) As an asset (c) As foot note to balance sheet (d) None of these

Profit is recognized on Credit side while Losses on Debit side.
http://www.indiastudychannel.com/exp...an-Assets.aspx


3. Under the Companies Ordinance 1984, disclosure of financial information is legally required for listed companies
under:
(a) Schedule 6 (b) Schedule 5 (c) Schedule 4 (d) Schedule 8

http://www.secp.gov.pk/corporatelaws...mp_Ord1984.pdf


4. A company is considered sick under the Companies Ordinance 1984 where current ratio is:
(a) Below 0.5 : 1 (b) Below 3 : 1 (c) Above 2.5 : 1 (d) None of these

Section 295 (d)(iii) CO1984
http://www.secp.gov.pk/corporatelaws...mp_Ord1984.pdf
(iii) current ratio has deteriorated beyond 0.5 :1


5. Banks are required to prepare their financial statements as per following legislation:
(a) Free to prepare with no legislative requirements (b) Under Companies Ordinance 1984
(c) Banking Ordinance 1962 (d) State Bank Laws

http://www.sbp.org.pk/bsd/2001/C36.htm
In terms of Section 34 of the Banking Companies Ordinance, 1962 the banks are required to prepare their annual accounts in the forms set out in the Second Schedule to the said Ordinance.


6. Preparation of financial statement of listed insurance companies in Pakistan is governed by:
(a) Insurance Act 1938 (b) Insurance Ordinance 2000 (c) Companies Act 1913 (d) Companies Ordinance 1984

http://www.pgi.com.pk/pdfs/annual2012_PGI%20annual%202012.pdf
http://www.pgi.com.pk/pdfs/halfyearly2006.pdf

BASIS OF PRESENTATION
The financial statements have been prepared in accordance with the requirements of accounting regulations laid down by the SECP (Insurance Rules, 2002) of the Insurance Ordinance, 2000.
Insurance Ordinance, 2000 (Primarily), CO1984 (secondary).


7. Trading loss occurs when:
(a) Revenues exceed the matching relevant costs. (b) Revenue and matching costs are equal to each other.
(c) When relevant matching cost exceeds revenues (d) None of these

Simple, when cost (e.g. Rs. 100) is greater than Revenue (e.g. Rs. 80), then loss (of Rs. 20) will occur.
Furthermore, See matching concept also.
Generally, while making financial statements only those costs are undertaken which MATCHES to the accounting period in which the Matched Revenue was generated.


8. Accounting requirements governing NGOs are prescribed in:
(a) Partnership Act 1932 (b) Cooperative societies legislation (c) Companies Ordinance 1984 (d) None of these

http://www.asp.org.pk/indepth/csos_covernance_resources/2.pdf
There are between 10 to 18 different laws in Pakistan that may govern an NGO.


THE CO-OPERATIVE SOCIETIES ACT, 1925

71. Rules. (2) (h)
prescribe the accounts and the books to be kept by a society and provide for the audit of such accounts,.......

CO1984 does not apply as per sec 4(i) of CO1984
PA 1932 Sec 4 defines partnership, while NGO's are not businesses for sharing profit/losses.


9. Work sheet is equivalent to:
(a) Balance sheet (b) Income statement (c) Trial Balance (d) None of these

Basically, Work Sheet is the SUM of Balance sheet,Income statement andTrial Balance. BUT nature of worksheet is of Trial Balance.


http://www.wisegeek.com/what-is-a-trial-balance.htm
The trial balance is an accounting listing that shows the beginning and ending balances for all accounts included in the set of books. This worksheet format makes it possible to evaluate whether or not the total debits for the period cited are in balance with the total number of credits generated for the same period. When a true trial balance exists, the total credits and total debits will be equal.


10. Work sheet does include:
(a) Fund flows statement (b) Cash gensation statement (c) Cash flow statement (d) None of these

Work Sheet is the SUM of Balance sheet,Income statement andTrial Balance formats.


11. Deffered tax is shown in the balance sheet as:
(a) Liability (b) Asset (c) An expenditure in income statement (d) None of these

No Doubt, its controversial. ****Deferred**** not "Deffered"

Can be asset or liability.

Para 58 IAS 12
Current and deferred tax shall be recognised as income or an expense and included in profit or loss for the period.....

Whatever the amount of Deferred tax is shown in the balance sheet, it is shown as in the Expenditure section of Income statement under the head Taxation, along with the current tax.


12. The following represent tangible assets and are shown in the balance sheet as:
(a) People (b) Expenses (c) Revenue (d) Goodwill


It should be INtangible.
option a,b,c are irrelevant as they cannot be shown on Balance Sheet.


13. Under the Rule of thumb a good current ratio is:
(a) 6 : 1 (b) 10 : 1 (c) .05 : 1 (d) 2 : 1

http://www.encyclopediaofcredit.com/Working-Capital

Current Ratio: The current ratio gauges how capable a business is in paying current liabilities by using current assets only. Current ratio is also called the working capital ratio. A general rule of thumb for the current ratio is 2 to 1 (or 2:1 or 2/1).


14. Financial analysis is a legislative requirement under:
(a) Companies Ordinance 1984 (b) Partnership Act 1932 (c) Voluntary act (d) None of these

CO84 & PA32 does not contain the word "analysis".
No Voluntary Act exists in Pakistan.

Generally financial statements in Pakistan does not contain any sort of analysis.


15. Pakistan follows the following budgeting system at Federal level:
(a) Zero-Based Budgeting (b) Program Budgeting
(c) Responsibility Budgeting (d) Incremental / decremental budgeting

http://www.grbi.gov.pk/Documents/BudgetaryReform.pdf
pg 31
The recurrent budget estimates are prepared on incremental basis.


16. Preparation of budget by a company is compulsory under:
(a) No Law (b) Several laws (c) Securities & Exchange Ordinance 1969 (d) Companies Ordinance 1984

CO84 & SEO69 does not require any budget preparation.


17. Depreciation must be accounted for:
(a) Revenues (b) Fixed Assets (c) Share Capital (d) None of these

Revenue and Share capital are not tangible items for which depreciation is calculated.


18. Accelerated depreciation is allowed under:
(a) Income Tax Ordinance 2001 (b) Voluntary principals (c) Prudential Regulations (d) None of these

Section [23B. Accelerated depreciation to alternate energy projects.


19. Partnerships are legally required to prepare their financial statements for distribution on wide basis under:
(a) Partnerships Act 1932 (b) Securities & Exchange Rules 2000
(c) Voluntary Act for Compliance (d) None of these

Partnerships are not legally required for FS especially to be distributed on wide basis.

20. A company is considered sick if the market value compared to its par value is:
(a) 1 : 1 (b) 2 : 1 (c) 0.25 : 1 (d) None of these


Section 295 (d)(i) CO1984
http://www.secp.gov.pk/corporatelaws...mp_Ord1984.pdf

the market value of its shares as quoted on the stock exchange or the net worth of its share has fallen by more than seventy-five per cent of its par value
if 75% fall in par then value will remain 25% i.e. 0.25 to 1
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