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Old Tuesday, July 24, 2007
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Default Accountancy and Auditing Papes 2003

FEDERAL PUBLIC SERVICE COMMISSION
COMPETITIVE EXAMINATION FOR RECRUITMENT TO POSTS
IN BPS – 17 UNDER THE FEDERAL GOVERNMENT, 2003.

ACCOUNTANCY AND AUDITING

PAPER - I

TIME ALLOWED: THREE HOURS MAXIMUM MARKS:100

NOTE: (i) Attempt FIVE questions in all. Including question No. 5 & 6 which are compulsory. Qs 5 carries 40 marks. All other questions carry EQUAL marks i.e. 20 marks each.
(ii) Give workings to solution of questions, wherever relevant.


1. Explain various concepts of Budgeting as practiced globally. State budgeting system being followed in Pakistan. Identify five limitations of the above system and suggest directions of change for improvement,

2. Explain various legal provisions governing principles of accounting and provisions relating to preparation of financial statements relating to banks in Pakistan.

3. Peshawar Manufacturing Company was established in June, 1999 to manufacture a single product using a machine costing Rs. 1,000,000. The machine is expected to last for four years and then have a scrap value of Rs. 130,000. The machine will produce a similar number of goods each year and annual profit before depreciation is expected to be in the region of Rs. 500,000. The Finance Manager has suggested that the machine should be depreciated using either the “Straight – Line Method” or the “Reducing Balance Method”. If the latter method is used, it is estimated that depreciation rate of 40% would be appropriate.

Required:
(1) Calculate annual depreciation charge and net book value of the machine at the end of 2000, 2001 and 2002 using:
(a) Straight – Line Method
(b) Reducing Balance Method

(2) Offer your comments on the use and implication of these two methods for the years 2000 to 2002.

(3) Advise management as to which method should be more appropriate.

4. The Directors of Master Public Limited Company requires Rs. 500 million to invest in a new project. Extracts from the financial statements are as under:

Profit and Loss Account for the year ended December 31:

PARTICULARS ………2001 (MILLION Rs.) …………2002 (MILLION Rs.)
Sales……………………………………….…..6,175………………………….. 6,329
Operating profit…………………………..… 350 ……………………….…… 320
Less: Interest payable……..…………... 30………………………..…….. 30
Net Profit before Income Tax………. 320 ……………….……….…… 290
Net Profit after tax………………………. 128……………………….….... 116
---------------------------------192……………………….…….. 174

Summarized Balance Sheet as at December 31:

PARTICULARS …….…2001 (MILLION Rs.) …………2002 (MILLION Rs.)
Assets:
Fixed assets (Net) ……………….…….901..…………..………………..….1,664
Stocks……………………..………………….447..…………..………………..…….426
Debtors……………………..………....…..308..…………..………….…...….. ..321
Balance at Bank…………………….…..…52..…………..……………….…..……11
TOTAL ..…………..….....……..1,708 ..…………..……...….1,822

Capitals & Liabilities:
Paid up Capital..………….………....….500.…………..……………….….....500
Reserves and surpluses ……….…….525.…………..………………….......649
Loan – 10% debentures …………….300.…………..…………….……......300
Creditors…………..……………….….……205.…………..………………...….... 207
Taxation payable……………………..…128.…………..………………...…....116
Dividends………………………………….....50.…………..……………….….….... 50
TOTAL…………………….…….1,708.…………..…………....1,822

Required: Undertake financial analysis by using pertinent ratios and present your candid view on the performance of the Company.

COMPULSORY QUESTION

5. The following balances were extracted form the ledger of Mr. Irshad as on June 30, 2003.

PARTICULARS ………….………….……….………..Rs.
Property – at cost………….………….………….……….. 90,000
Equipment – at cost………….………….…………………..57,000
Stock………….………….………….………….………….………27,000
Purchase………….………….………….………….……….….259,000
Sales………….………….………….………….……………….. 405,000
Discount allowed………….………….………….……...……..3,370
Provision for depreciation – Property………….…….12,500
Provision for depreciation – Equipment……….…… 32,500
Discount received………….………….………….………..….4,420
Salaries and wages………….………….………….………..52,360
Bad debts………….………….………….………….……….….. 1,720
Loan interest ………………………………….….………..…… 1,560
Carriage outward………….……….……………………….…. 5,310
Other operating expenses………….………….…………. 38,800
Trade debtors………….………….………….…………….…..46,200
Trade creditors………….………….………….………...…. 33,600
Provision for doubtful debts………….………….….…..... 280
Cash in hand………….………….………….…………………..... 151
Bank overdraft………….………….………….……..……... 14,500
Drawings………….………….………….………….………..... 28,630
Loan @ 15%………….………….………….………….…..…. 12,000
Capital July 1, 2002………….………….………….….….. 98,101

The following additional information as at June 30, 2003 is available:

1. Stock at the close of business was valued at Rs. 25,900.

2. Depreciation for the year ended on June 30, 2003 has yet to be provided as follows:

(a) Property: 1% using straight line method
(b) Equipment: 15% using straight line method

3. Salaries and wages are accrued Rs. 1400

4. Other operating expenses include certain expenses prepaid by Rs. 1500. Other expenses include this heading are accrued by Rs. 2000.

5. The provision for doubtful debts is to be adjusted so that it is 0.5% of trade debtors as at June 30, 2003.

6. “Purchases” include goods valued at Rs. 1040 which were withdrawn by Mr. Irshad for his personal use.

Required:
  1. Prepare Trading and Profit and Loss Account for the year ended on June 30, 2003 and Balance Sheet as on the above date.
  2. Present Adjusting and Closing entries.
6. Deliver the correct answer in the answer book.

(1) Acid Test Ratio is calculated as under:
(a) Current Assets/Current Liabilities
(b) Fixed Assets/Current Liabilities
(c) Liquid Assets/Current Liabilities
(d) None of these

(2) Deferred cost is a:
(a) Liability
(b)Asset
(c) None of these

(3) Work Sheet is:
(a) Balance Sheet
(b) Fund Flows Statement
(c) A combination of Profit and Loss Account and Balance Sheet items
(d) None of these

(4) Banks, for the preparation of financial statements, are governed under:
(a) Banking Companies Ordinance, 1962
(b) State Bank of Pakistan Act
(c) None of these

(5) Return on investment is computed:
(a) Investment/Profit x 100
(b) Profit x 100/Investment
(c) None of these
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  #2  
Old Tuesday, July 24, 2007
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FEDERAL PUBLIC SERVICE COMMISSION
COMPETITIVE EXAMINATION FOR RECRUITMENT TO POSTS
IN BPS – 17 UNDER THE FEDERAL GOVERNMENT, 2003.

ACCOUNTANCY AND AUDITING

PAPER - II

TIME ALLOWED: THREE HOURS MAXIMUM MARKS:100

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.

PART – A (COST ACCOUNTING)

1. “Cost Accounting is considered as a tool of management.” Explain various aspects of the above statement and explain dimensions as to how cost accounting can serve as tool of management.

2. The following standards have been established for the operating of the X Company:

Standards:
Materials: Quantity per unit 2½ yards price per yard Rs. 17.
Labour: Time per Unit 3.6 hours. Hourly rate Rs. 18.40
Overhead: Fixed charge Rs. 24,000 per month
Variable rate Rs. 15.00 per unit.
Production for the month 40,000 units
Actual Reports for the month of April
Production 41,200 Units
Material used 10,510 yards at average of Rs. 17.40
Labour 15,276 hours at average of Rs. 18.80
Overhead – variable: Rs. 66,750

Required: Prepare a statement showing actual and standard costs and amounts of variances. Use the two variance method for overhead.

PART – B (AUDITING)

3. Differentiate between “Internal Control” and “Internal Audit”. Suggest ten point Internal Control System for Inventories.

4. Present a lucid analysis for Liabilities of an Auditor. Cite case Law wherever relevant.

PART – C (INCOME TAX)

5. Present salient features of law governing Income from Business under the current income tax of Pakistan.

6. The following information relating to Miss Y is available relating to year ended on 30-6-2003:

PARTICULARS ……..……..……..…..……..Rs.
Salary ……..……..……..……..……..……..….. 240,000
Bonus received……..……..……..……..……..…60,000
Conveyance allowance received ……..…..…7,600
Leave encashment……..……..……..………....80,000
Dividend received……..……..……..……..…...70,000
Income from prize bonds……..……..….....100,000

Required: Compute Taxable Amount for assessment year 2003 – 2004.

PART – D (BUSINES ORGAZIATION AND FINANCE)

7. Currently several Business Combinations are taking place. These are through several methods including Mergers and Acquisitions:

Required:
(a) List steps involved in Business Combinations
(b) Explain five benefits of Business Combinations

8.
Explain the formulas governing the following ratios to be calculated in a large manufacturing Company:

(1) Times Interest (Mark up) earned.
Note: State minimum acceptable standard.

(2) Debt Servicing Ratio

(3) Liquid Ratio
Note: Suggest the minimum acceptable ratio

(4) Debt Equit Ratio
Note: Suggest a fair ratio in a capital intentive company project.


COMPULSORY QUESTION

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

(1) Rent of the premises constitutes variable expenses for cost allocation:
(a) True
(b) False

(2) Sugar used in a sugarcane company is:
(a) Variable cost
(b) Fixed cost
(c) None of these

(3) An auditor is liable under the following circumstances:
(a) Third Party Liabilities
(b) Fraud perpetrated in highly sophisticated circumstances
(c) None of these

(4) Agricultural income is taxable under the Income Tax Laws of Pakistan:
(a) True
(b) False

(5) Principal and markup payment within one year constitutes long term liability for disclosure in the balance sheet of a company.
(a) True
(b) False

(6) Ordinarily one can have the following partners in a partnership in Pakistan under the Partnership Act 1932.
(a) 10
(b) 20
(c) 30
(d) None of these

(7) Working Capital finance can be termed as “Running Finance” in a limited company.
(a) True
(b) False

(8) Income from Capital gains arising out of trading on a stock strange in Pakistan is taxable these days:
(a) True
(b) False

(9) Conversion Cost is calculated as under:
(a) Labour Plus Materials
(b) Labour plus overheads
(c) None of these

(10) Current Ratio can be calculated as under:
(a) Current Liabilities/Current Assets
(b) Current Assets/Current Liabilities
(c) None of these
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sir i think variable cost per unit in Q.2 of paper II is Rs 1.5/unit instead of 15/unit. The question can not be solved with RS 15/unit. It also seem incompatible with actual variable cost per unit which i have calculated as Rs 1.62/unit. Please correct me if i am wrong.
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Quote:
Originally Posted by Last Island View Post
FEDERAL PUBLIC SERVICE COMMISSION
COMPETITIVE EXAMINATION FOR RECRUITMENT TO POSTS
IN BPS – 17 UNDER THE FEDERAL GOVERNMENT, 2003.

ACCOUNTANCY AND AUDITING

PAPER - I

TIME ALLOWED: THREE HOURS MAXIMUM MARKS:100

NOTE: (i) Attempt FIVE questions in all. Including question No. 5 & 6 which are compulsory. Qs 5 carries 40 marks. All other questions carry EQUAL marks i.e. 20 marks each.
(ii) Give workings to solution of questions, wherever relevant.


1. Explain various concepts of Budgeting as practiced globally. State budgeting system being followed in Pakistan. Identify five limitations of the above system and suggest directions of change for improvement,

2. Explain various legal provisions governing principles of accounting and provisions relating to preparation of financial statements relating to banks in Pakistan.

3. Peshawar Manufacturing Company was established in June, 1999 to manufacture a single product using a machine costing Rs. 1,000,000. The machine is expected to last for four years and then have a scrap value of Rs. 130,000. The machine will produce a similar number of goods each year and annual profit before depreciation is expected to be in the region of Rs. 500,000. The Finance Manager has suggested that the machine should be depreciated using either the “Straight – Line Method” or the “Reducing Balance Method”. If the latter method is used, it is estimated that depreciation rate of 40% would be appropriate.

Required:
(1) Calculate annual depreciation charge and net book value of the machine at the end of 2000, 2001 and 2002 using:
(a) Straight – Line Method
(b) Reducing Balance Method

(2) Offer your comments on the use and implication of these two methods for the years 2000 to 2002.

(3) Advise management as to which method should be more appropriate.

4. The Directors of Master Public Limited Company requires Rs. 500 million to invest in a new project. Extracts from the financial statements are as under:

Profit and Loss Account for the year ended December 31:

PARTICULARS ………2001 (MILLION Rs.) …………2002 (MILLION Rs.)
Sales……………………………………….…..6,175………………………….. 6,329
Operating profit…………………………..… 350 ……………………….…… 320
Less: Interest payable……..…………... 30………………………..…….. 30
Net Profit before Income Tax………. 320 ……………….……….…… 290
Net Profit after tax………………………. 128……………………….….... 116
---------------------------------192……………………….…….. 174

Summarized Balance Sheet as at December 31:

PARTICULARS …….…2001 (MILLION Rs.) …………2002 (MILLION Rs.)
Assets:
Fixed assets (Net) ……………….…….901..…………..………………..….1,664
Stocks……………………..………………….447..…………..………………..…….426
Debtors……………………..………....…..308..…………..………….…...….. ..321
Balance at Bank…………………….…..…52..…………..……………….…..……11
TOTAL ..…………..….....……..1,708 ..…………..……...….1,822

Capitals & Liabilities:
Paid up Capital..………….………....….500.…………..……………….….....500
Reserves and surpluses ……….…….525.…………..………………….......649
Loan – 10% debentures …………….300.…………..…………….……......300
Creditors…………..……………….….……205.…………..………………...….... 207
Taxation payable……………………..…128.…………..………………...…....116
Dividends………………………………….....50.…………..……………….….….... 50
TOTAL…………………….…….1,708.…………..…………....1,822

Required: Undertake financial analysis by using pertinent ratios and present your candid view on the performance of the Company.

COMPULSORY QUESTION

5. The following balances were extracted form the ledger of Mr. Irshad as on June 30, 2003.

PARTICULARS ………….………….……….………..Rs.
Property – at cost………….………….………….……….. 90,000
Equipment – at cost………….………….…………………..57,000
Stock………….………….………….………….………….………27,000
Purchase………….………….………….………….……….….259,000
Sales………….………….………….………….……………….. 405,000
Discount allowed………….………….………….……...……..3,370
Provision for depreciation – Property………….…….12,500
Provision for depreciation – Equipment……….…… 32,500
Discount received………….………….………….………..….4,420
Salaries and wages………….………….………….………..52,360
Bad debts………….………….………….………….……….….. 1,720
Loan interest ………………………………….….………..…… 1,560
Carriage outward………….……….……………………….…. 5,310
Other operating expenses………….………….…………. 38,800
Trade debtors………….………….………….…………….…..46,200
Trade creditors………….………….………….………...…. 33,600
Provision for doubtful debts………….………….….…..... 280
Cash in hand………….………….………….…………………..... 151
Bank overdraft………….………….………….……..……... 14,500
Drawings………….………….………….………….………..... 28,630
Loan @ 15%………….………….………….………….…..…. 12,000
Capital July 1, 2002………….………….………….….….. 98,101

The following additional information as at June 30, 2003 is available:

1. Stock at the close of business was valued at Rs. 25,900.

2. Depreciation for the year ended on June 30, 2003 has yet to be provided as follows:

(a) Property: 1% using straight line method
(b) Equipment: 15% using straight line method

3. Salaries and wages are accrued Rs. 1400

4. Other operating expenses include certain expenses prepaid by Rs. 1500. Other expenses include this heading are accrued by Rs. 2000.

5. The provision for doubtful debts is to be adjusted so that it is 0.5% of trade debtors as at June 30, 2003.

6. “Purchases” include goods valued at Rs. 1040 which were withdrawn by Mr. Irshad for his personal use.

Required:
  1. Prepare Trading and Profit and Loss Account for the year ended on June 30, 2003 and Balance Sheet as on the above date.
  2. Present Adjusting and Closing entries.
6. Deliver the correct answer in the answer book.

(1) Acid Test Ratio is calculated as under:
(a) Current Assets/Current Liabilities
(b) Fixed Assets/Current Liabilities
(c) Liquid Assets/Current Liabilities
(d) None of these

(2) Deferred cost is a:
(a) Liability
(b)Asset
(c) None of these

(3) Work Sheet is:
(a) Balance Sheet
(b) Fund Flows Statement
(c) A combination of Profit and Loss Account and Balance Sheet items
(d) None of these

(4) Banks, for the preparation of financial statements, are governed under:
(a) Banking Companies Ordinance, 1962
(b) State Bank of Pakistan Act
(c) None of these

(5) Return on investment is computed:
(a) Investment/Profit x 100
(b) Profit x 100/Investment
(c) None of these
Mcqs answers:
1(c) 2(b)3(c)4(a)5(c)
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Quote:
Originally Posted by Last Island View Post
FEDERAL PUBLIC SERVICE COMMISSION
COMPETITIVE EXAMINATION FOR RECRUITMENT TO POSTS
IN BPS – 17 UNDER THE FEDERAL GOVERNMENT, 2003.

ACCOUNTANCY AND AUDITING

PAPER - II

TIME ALLOWED: THREE HOURS MAXIMUM MARKS:100

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.

PART – A (COST ACCOUNTING)

1. “Cost Accounting is considered as a tool of management.” Explain various aspects of the above statement and explain dimensions as to how cost accounting can serve as tool of management.

2. The following standards have been established for the operating of the X Company:

Standards:
Materials: Quantity per unit 2½ yards price per yard Rs. 17.
Labour: Time per Unit 3.6 hours. Hourly rate Rs. 18.40
Overhead: Fixed charge Rs. 24,000 per month
Variable rate Rs. 15.00 per unit.
Production for the month 40,000 units
Actual Reports for the month of April
Production 41,200 Units
Material used 10,510 yards at average of Rs. 17.40
Labour 15,276 hours at average of Rs. 18.80
Overhead – variable: Rs. 66,750

Required: Prepare a statement showing actual and standard costs and amounts of variances. Use the two variance method for overhead.

PART – B (AUDITING)

3. Differentiate between “Internal Control” and “Internal Audit”. Suggest ten point Internal Control System for Inventories.

4. Present a lucid analysis for Liabilities of an Auditor. Cite case Law wherever relevant.

PART – C (INCOME TAX)

5. Present salient features of law governing Income from Business under the current income tax of Pakistan.

6. The following information relating to Miss Y is available relating to year ended on 30-6-2003:

PARTICULARS ……..……..……..…..……..Rs.
Salary ……..……..……..……..……..……..….. 240,000
Bonus received……..……..……..……..……..…60,000
Conveyance allowance received ……..…..…7,600
Leave encashment……..……..……..………....80,000
Dividend received……..……..……..……..…...70,000
Income from prize bonds……..……..….....100,000

Required: Compute Taxable Amount for assessment year 2003 – 2004.

PART – D (BUSINES ORGAZIATION AND FINANCE)

7. Currently several Business Combinations are taking place. These are through several methods including Mergers and Acquisitions:

Required:
(a) List steps involved in Business Combinations
(b) Explain five benefits of Business Combinations

8.
Explain the formulas governing the following ratios to be calculated in a large manufacturing Company:

(1) Times Interest (Mark up) earned.
Note: State minimum acceptable standard.

(2) Debt Servicing Ratio

(3) Liquid Ratio
Note: Suggest the minimum acceptable ratio

(4) Debt Equit Ratio
Note: Suggest a fair ratio in a capital intentive company project.


COMPULSORY QUESTION

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

(1) Rent of the premises constitutes variable expenses for cost allocation:
(a) True
(b) False

(2) Sugar used in a sugarcane company is:
(a) Variable cost
(b) Fixed cost
(c) None of these

(3) An auditor is liable under the following circumstances:
(a) Third Party Liabilities
(b) Fraud perpetrated in highly sophisticated circumstances
(c) None of these

(4) Agricultural income is taxable under the Income Tax Laws of Pakistan:
(a) True
(b) False

(5) Principal and markup payment within one year constitutes long term liability for disclosure in the balance sheet of a company.
(a) True
(b) False

(6) Ordinarily one can have the following partners in a partnership in Pakistan under the Partnership Act 1932.
(a) 10
(b) 20
(c) 30
(d) None of these

(7) Working Capital finance can be termed as “Running Finance” in a limited company.
(a) True
(b) False

(8) Income from Capital gains arising out of trading on a stock strange in Pakistan is taxable these days:
(a) True
(b) False

(9) Conversion Cost is calculated as under:
(a) Labour Plus Materials
(b) Labour plus overheads
(c) None of these

(10) Current Ratio can be calculated as under:
(a) Current Liabilities/Current Assets
(b) Current Assets/Current Liabilities
(c) None of these
Mcqs answers:1:B(2)A(3)B(4)B(5)B(6)B(7)A(8)A(9)B
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Cureent ratio:C/A-CL
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Quote:
Originally Posted by abidkhan View Post
Mcqs answers:1:B(2)A(3)B(4)B(5)B(6)B(7)A(8)A(9)B
answer of msq no. 2 is none of these. An auditor has the reponsibility to form an opinion on the financial statements rather than validating it. Accordingly, he incurs no liability if he had maintained reasonable diligence
Secondly, current ratio is CA/CL. What you have stated is working capital (CA-CL)
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