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Old Thursday, October 11, 2007
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NOTE: (i) Attempt FIVE questions in all including question No. 8 which is compulsory. All questions carry EQUAL marks.
(ii) Extra attempt of any question or any part of the attempted question will not be considered
(iii) Candidate must draw two straight lines (==================) at the end to separate each question attempted in Answer Books.

PART – A (Cost Accounting)

Q.1. Explain Classifications of Cost under the following headings:
(i) Direct and Indirect costs
(ii) Fixed and variable costs
(iii) Product cost and period costs
(iv) Controllable and Non controllable costs

Q.2. Hamza Manufacturing Company collects its cost data by the job order cost accumulation procedure. For job No 0010, for customer Hunzala Ltd; the following data is available:

Direct Material Cost -------------- Direct Labour Cost
Jan 06 Issued Rs.2,000 ----------- 11 Jan, 150 hours @ 12 per hour
Jan 10 Issued Rs.1,500 ----------- 20 Jan, 200 hours @ 11 per hour
Jan 18 Issued Rs.1,000

Factory overhead is applied @ 5 per direct labour hour. Hunzala Ltd. placed the order for 1,000 units on Jan 05, 2007.
The Hamza Manufacturing Company started the work on job No 0010 on Jan 06, 2007 and job was completed on Jan 20, 2007 (one day before the date wanted by the customer). The sale price of the job was contracted with a mark up of 20% of cost.

Required: Prepare a Job Order Cost Sheet assuming that Selling and Administrative Expenses are 15% on Sales.

PART – B (Auditing)

Q.3. What is an “Audit Program?” What are the contents of “Audit Program?” Discuss its advantages, disadvantages and how its disadvantages be curtailed?

Q.4. Discuss in detail the rights and duties of an auditor of a Public Ltd. Company with reference to Companies Ordinance 1984.

PART – C (Income Tax)

Q.5. What do you mean by the term “Rent Chargeable to Tax?” What are allowable deductions for determining taxable income from Property under Income Tax Ordinance 2001?

Q.6. Ms Maryam is an accountant in Meridian Hotel. Her pay scale is Rs.4000-250-9000.
The other particulars of her income for the tax year ending June 30, 2006 are detailed below:
(1) Basic Salary Rs.8,000 per month.
(2) Bonus Rs.4,000.
(3) Rent free unfurnished accommodation provided by the employer. The annual rental value of the accommodation of Rs.24,000.
(4) Salary of the watchman Rs.600 per month born by employer.
(5) Conveyance allowance Rs.10,200. Conveyance is owned and maintained by the employee.
(6) Interest free loan obtained from employer Rs.80,000.
(7) Medical allowance Rs.12,600.
(8) Income from non professional writings Rs.4,200.
(9) Bonus shares received from Public Ltd. Co. Rs.8,000.
(10) Subsidized lunch facility Rs.10,000.
(11) Motor Vehicle tax paid Rs.500.

Required: Calculate the tax liability of Ms Maryam.

PART – D (Business Organization & Finance)

Q.7. What is Cooperative society? How does it differ from Joint Stock Company? Explain in detail.

Q.8. There is an imperative importance of Finance in the growth and development of a business. Discuss.


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

(1) If annual requirement is 50,000 units, cost per unit Rs.15, ordering cost Rs.20 per order and holding cost 10% of the purchase price then what is economic order quantity?
(a) 577
(b) 1816
(c) 1866
(d) 1155

(2) Average, minimum and maximum daily usage is 400, 180 and 520 units Respectively. Lead time 10 to 15 days and reorder quantity 8000 units. What is reorder level:
(a) 5000
(b) 6000
(c) 7800
(d) 8000

(3) The amount of overtime premium contained in direct wages would normally be classified as:
(a) Part of prime cost
(b) Factory overhead
(c) Direct labour cost
(d) Administrative overhead

(4) Cost of Goods sold Rs.14,000. Purchases Rs.14,000 Carriage Inward Rs.1,000, carriage outward Rs.1,500 and closing inventory Rs.13,000. What is the opening inventory?
(a) Rs.10,500
(b) Rs.11,500
(c) Rs.12,000
(d) Rs.13,000

(5) Which one of the following statements is incorrect with respect to external auditors:
(a) External auditors are independent of organization
(b) The responsibility of external auditor is fixed by statue
(c) External auditors report to the members
(d) External auditors work may range over many areas of activities as determined by the management

(6) The first auditor of a Public Limited Company is appointed by the directors with in:
(a) 30 days of incorporation
(b) 60 days of incorporation
(c) 90 days of incorporation
(d) 120 days of incorporation

(7) Audit working papers are the property of:
(a) Client
(b) Accountant
(c) Auditor
(d) Registrar of Companies

(8) Which of the following would be least likely to be considered an objective of a system of internal control:
(a) Checking the accuracy and reliability of accounting data
(b) Detecting management fraud
(c) Encouraging adherence to managerial policies
(d) Safeguarding assets

(9) Benchmark rate of interest for the tax year 2006 was:
(a) 5%
(b) 6%
(c) 7%
(d) 8%

(10) Dividend income is subject to tax at source at:
(a) 0%
(b) 5%
(c) 10%
(d) 15%

(11) If cost of goods sold Rs.450,000, Opening stock Rs.125,000 and Closing stock Rs.175,000 then inventory turnover ratio is:
(a) 2 times
(b) 3 times
(c) 4 times
(d) 5 times

(12) If cost of good sold Rs.600,000, Operating expenses 40,000, sales Rs.820,000, Sale return Rs.20,000 then operating ratio is:
(a) 50%
(b) 80%
(c) 90%
(d) 100%

(13) Tax deducted at source will be treated as:
(a) Taxable
(b) Exempt
(c) Deductible from net tax
(d) Deductible from total income

(14) If rent received is Rs.1000 per month, token money forfeited Rs.500, insurance premium paid Rs.100, water charges Rs.100, the net property income will be:
(a) Rs.12,000
(b) Rs.12,300
(c) Rs.12,400
(d) Rs.12,500

(15) One of the basic purposes of business combination is:
(a) To provide better services to the community
(b) To sell the goods at competitive prices
(c) To reap profit by eliminating competition
(d) To increase sales

(16) A cooperative society is registered under cooperative society act of:
(a) 1925
(b) 1930
(c) 1984
(d) 1948

(17) Which one of the following is not considered a legal document of Joint Stock Company:
(a) Memorandum of association
(b) Articles of association
(c) Prospectus
(d) Shares

(18) Which one of the following is to be repaid in the last in case of liquidation of company:
(a) Equity capital
(b) Preference Capital
(c) Debentures
(d) Preferential Creditors

(19) Average relief is allowed on the following expenditures except:
(a) Donation for charitable purpose
(b) Investment in shares
(c) Mark-up on housing finance
(d) Contribution to employees children education fund

(20) The most important reason for having an annual audit is to:
(a) Provide assurance to investors & others stake holders that financial statements are dependable.
(b) Enable Directors to avoid personal responsibility for any deficiency in the financial statement.
(c) Meet the requirement of government agency.
(d) Provide assurance that fraud, if any exists, will be brought to light.
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