Accounting Papers of Ibp Part Two

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ACCOUNTING FOR FIANANCIAL SERIVCES

6 Years
Past Papers
From
Summer 2006
To
Winter 2011
Study for JAIbP
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IBP- the knowledge Institute
Accounting for Financial Services Stage-I

Q.1
Please write the alphabate of your choice in the answer column.
i.
ii.
iii.
iv.
v.
vi.
vii.
Making provision for doubtful debts in anticipation of actual bad debts is

on the basis of convention of:
A)
Disclosure
B) Consistency
C)
Conservatism
D) None of the above
Cash book is an example of:
A)
General journal
B) It is not a journal
C)
Special journal
D) None of the above
As far as liquidity is concerned a company having a current ratio of 2.5 is
always better than another company having a current ratio of 2.0
A) Yes
B)
No
C)
Not sure
Which of the following statements is False?
A)
Patent and copyright costs are expensed when incurred.
B)
Software development costs may be capitalized.
C)
Research and development costs are expensed when incurred.
D)
None of the above
During period of rising prices:
A)
LIFO COGS > Weighted Average COGS > FIFO COGS
B)
LIFO COGS < Weighted Average COGS < FIFO COGS
C)
LIFO COGS > Weighted Average COGS < FIFO COGS
All of the following statements are generally true except:
A)
The accounting process only recognizes value changes arising
from actual transactions.
B)
Accrual accounting may allocate transactions and cash flows to
time periods other than those in which the cash flows occur.
C)
Reported income under the accrual concept provides a measure of
current operating performance based solely on actual current
period cash flows.
Which of the following would be classified as long-term debt?
A)
Mortgages, current maturities of long-term debt, bonds.
B)
Mortgages, notes payable in three years, bonds.
C)
viii.
(09)
(Answer)
Bonds, obligations under leases, obligations under running finance.
D)
None of the above
The audit firm while auditing the accounts of Mari Limited found that
owners equity was understated and liabilities were overstated. Which of
the following errors could have caused the error?
A)
Making the adjusting entry for depreciation twice.
B)
Failure to record the earned portion of income received in
advance.
C)
Failure to record the adjusting entry to record revenue which had
been earned but not yet billed to clients.
D)
None of the above
IBP-the knowledge Institute
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ix.
Q.3
A worksheet can not be used for which of the following purposes?

A)
Preparing interim financial statements without actually adjusting
or closing the accounts.
B)
Reducing to a single page the presentation of financial
information within the companys annual report.
C)
Showing accountants and management how proposed adjusting
entries and transactions will affect the financial statements.
D)
None of the above
State True or False in the answer column. Give brief reason for your selection at
the space provided below the question.
(10)
(Answer)
i.
A balance sheet summarizes the financial position of an entity for a

period of time.
ii.
If the debit side of a trading account exceeds its credit side then the
balance is termed as Gross profit.
iii.
For calculating cash from operations, creditors in the beginning are added
to the net profit and creditors at the end are deducted from the net profit.
iv.
A company may use different depreciation methods in its financial

statements and its income tax return.
v.
The banks are required to raise their paid-up capital to Rs.3.b by

December, 31, 2006.
vi.
vii.
viii.
ix.
x.
Q.2
The process of preparation of trial balance always helps in tracing the

errors in accounting records.
The comparison of the results of one accounting period with that in the
past is possible when the convention of consistency is adhered to by the
business.
The principle of consistency means that the company should use the same
method of depreciation for all the fixed assets.
The investing activities in the cash flow statement also include the
amount of cash invested in money market funds during the accounting
period.
Writing-off of loans against the provision for bad loans has no effect on
the income of the banks during the period of write-off.
Computational Questions
i)
Capital at the beginning of the year was Rs.20,000. During the year, owner
withdrew Rs.18,000 for his personal use while the capital at the end of the
year is Rs.31,000. What was his net profit for the year?
(02)
ii)
Ali purchased 8 units of a product on credit at Rs.50 each, less 25% trade
discount and is entitled to a cash discount of 5% if he pays within 14 days of the
invoice date. If he pays within the discount period, how much he will pay? (02)
iii)
A sales manager is entitled to a 5% commission on net income arrived at after

deducting his commission. If the income before payment of commission is
Rs.21,000, what is the amount of net income?
(02)
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iv)
A firm prepares its annual accounts on June 30th. The ledger account shows
insurance A/c (debit) Rs.800 as on July, 2005. On December 31, 2005 the
annual insurance premium of Rs.2,100 became due and was paid. What
amount would be charged for insurance expense as on June 30, 2006?
(02)
v)
The opening balance in the Provision for Doubtful Debts was Rs.705. During
the year, the direct write-offs amounted to Rs.30 and at the year end the
Debtors account showed a balance of Rs.15,000 (after writing-off Rs.30). The
charge to profit and Loss account for bad debt expense for the year including
the direct write-off amounted to Rs.200. Calculate the percentage provision
that had been made for doubtful debts at the year end.
(02)
Use the following data to answer Questions 6 to 9.

1.
Net Sales
Rs.12,000
2.
COGS
Rs 6,500
3.
Increase in inventory
Rs 1,000
4.
Decrease in Accounts Receivable
Rs
250
5.
Increase in Accounts Payable
Rs
500
6.
Cash interest paid
Rs
450
7.
Dividends paid
Rs
250
8.
Cash interest received
Rs
200
9.
Sale of common stock
Rs 2,750
10.
Retirement of long-term debt
Rs 1,250
11.
Purchase of equipment
Rs 1,200
Q.3
vi)
Calculate the firms cash flow from operations.
(02)
vii)
What was the firms cash flow from investing activities?
(02)
viii)
Calculate the firms financing cash flow.
(02)
ix)
If the firm had an opening cash balance of Rs.550, what was its closing cash
balance?
(02)
x)
At January 1, 2005, XYZ had a machinery costing Rs.45,000 which had been
depreciated by Rs.13,500. In the Profit and Loss Account for the year ended
December 31, 2005, depreciation was charged at 25% on the straight line
method instead of 30% on the reducing balance method. Calculate the impact
of this error in calculating the depreciation on the net income for the year. (03)
As of December 31, 2005 following data are available in respect of the loans and
advances and consumer finance portfolios of PLC Bank Ltd.
(15)
Regular (Normal)
Substandard
Doubtful
Loss
Loans & Advances

Rs.5,550 m
250 m
500 m
. 900 m
Consumer Finance
Rs.750 m
50 m
80 m
90 m
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The balance already available in the provisions for doubtful debts against each category is
as given below:
Loans & Advances Consumer Finance
Regular (Normal)
Rs. 7.50 m
Substandard
Rs. 10 m
Rs. 5.00 m
Doubtful
Rs.100 m
Rs. 15.00 m
Loss
Rs.750 m
Rs. 70.00 m
The Consumer Finance (Regular) includes an amount of Rs.250 million which is
unsecured.
Required:
Calculate the amount of provisions for bad debts for the period ended December 31, 2005 in
light of SBPs Prudential Regulations in this respect?
Q.4
From the following information available for the years ended December 31,
2004, prepare the balance sheet and profit and loss account for ABC Bank
Limited in proper format.
(20)
(Rs. In Million)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
Cash and balances with treasury banks

Provision against NPLs and advances
Share capital
Advances
Dividend income
Operating fixed assets
Deferred tax liabilities
Bills payable
Income from dealing in foreign currencies
Deposits and other accounts
Other liabilities
Mark-up / return / Interest earned
Investments
Other income
Reserves
Other provisions / write-offs
Taxation for the year-Current
Mark-up / return / interest expensed
Balances with other banks
Other assets
Borrowings from Financial institutions
Provision for diminution in the value of investments
Taxation for the prior year-Current
Fee, commission and brokerage income
Other charges
Administrative expenses
Surplus on revaluation of assets
Subordinated loans
Taxation for the year-Deferred
Un-appropriated profit
Taxation for the prior year-Deferred
9,854
(185)
1,250
44,466
26
2,140
138
1,117
110
64,857
1,362
2,810
17,751
286
504
(52)
(293)
(1,217)
1,592
1,614
6,362
(1)
(15)
338
(1)
(1,339)
446
950
2
431
5
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Q.5
(25)
Sarfraz & Sons
Balance Sheet Excerpts
Years Ended December 31:
ASSETS
Current Assets
Cash
Marketable Securities
Trade Debtors
Stocks
Prepaid expenses
Total Current Assets
2003
2004
2005
600
1,500
3,000
5,000
500
10,600
800
500
4,000
7,000
600
12,900
500
0
5,000
11,000
700
17,200
0
1,700
1,400
2,000
5,100
1,000
3,300
1,700
2,000
8,000
1,200
6,800
2,200
1,800
12,000
2003
26,000
6,000
7,000
2004
30,000
8,000
10,000
2005
35,000
26,000
9,000
4,000
3,000
500
2,500
1,250
1,250
5,000
5,000
490
4,510
2,310
2,200
6,000
3,000
480
2,520
1,220
1,300
Current Liabilities
Bank Overdraft
Creditors
Accrues Expenses
Current Portion of Long Term Debt
Total Current Liabilities
Profit and Loss Account Excerpts

For the Years Ended December 31:
Sales
Cost of goods sold
Gross Profit
Expenses
Operating Expenses
Operating Income
Financial charges
Income before tax
Income tax
Profit after tax
Required:
a) Calculate the suitable ratios and comment upon the liquidity of the company.
b) Calculate the length of the operating cycle and comment up on the efficiency
of the management in utilizing the assets of the company.
c) As a lender what would be your recommendations?
-.-.-.-.-
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Accounting for Financial Services
Accounting for Financial Services - Stage-I

ISQ Examination (Winter-2006)
Q.1
Please write the alphabate of your choice in the answer column.
(10)
(Answer)
The purpose of adjusting entries is to:

A
Adjust the owners capital account for the revenue, expense, and
withdrawal transactions which occurred during the year.
Apply the realization principle and the matching principle to

transactions affecting two or more accounting periods
Adjust daily balances in assets, liabilities, revenue and expense

accounts for the effects of business transactions
D
E
Prepare revenue and expense accounts for recording the

transactions of the next accounting period
None of the above.
Which of the following statements best describes the nature of depreciation:

A
Allocation of the cost of a fixed asset to the periods in which

services are received from the asset
Regular reduction of asset value to correspond to decline in the

market value as the asset ages
ii.
C
D
E
A process of correlating the carrying value of an asset with its

gradual decline in physical efficiency
Allocation of cost in a manner that will ensure that plant and
equipment items are not carried on the balance sheet at amounts
in excess of net realizable value
None of the above
Which of the following is not the indicator of liquidity position of a bank:
iii.
A
B
C
D
E
Credit Deposit Ratio

Liquid Assets to Liquid Liabilities Ratio
Statutory Liquidity Ratio
Currency notes held
None of the above
Which of the following is not part of TierI capital of the bank:
iv
A
B
C
D
E
Premium on shares
Reserve for bonus
Surplus on revaluation of securities
Discount on issue of shares
None of the above
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A bank will always incur net loss if:
A
B
C
D
E
Cost of funds exceeds its return on earning assets

Operating expenses exceeds gross profits
Other income exceeds other expenses
Capital budget exceeds depreciation
None of the above
Which of the following is not treated as part of the Tier-II capital of the
bank:
vi
A
B
C
D
E
Subordinated debt
Surplus on revaluation of fixed assets
General provisions
Branch Expansion expenses
None of the above
Which of the following would not be classified as current assets of a

manufacturing company:
vii
A
B
C
D
E
Cash in Hand
Inventory
Receivables
Short-term Borrowing
None of the above
Which of the following is not an intangible asset:
viii
Software development cost
B
C
D
E
Goodwill
Pre-payment for purchase of softwares
Website development cost
None of the above
Revaluation gain / loss on Held for Trading securities is taken to:
ix
A
B
C
D
E
Equity
Surplus / Deficit on revaluation of securities
Profit & Loss Account
Balance Sheet
None of the above
The term IFRS refers to:
A
B
Information on Financial Reserves and Securities

Internal Financial Resources System
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C
D
E
Q.2
International Financial Reporting System

International Financial Reporting Standards
None of the above
State True or False in the answer column. Give brief reason for your selection at the space
provided below the question.
(17)
(Answer)
i
Software expenses are depreciated on annual basis and charged to

Profit and Loss Account.
ii
Net book value represents the fair value of an asset net of

accumulated depreciation.
iii
If a capital expenditure is erroneously treated as a revenue

expenditure, this will understate the net income of the current year.
iv
The Accounting principle of Consistency require a company to use

the same rate of depreciation for all of its assets.
Accumulated depreciation represents a fund being accumulated for

the replacement of plant assets.
vi
The Statement of Cash Flows is designed to assist users in assessing

the profitability of a company.
vii
viii
ix
xi
Bank reconciliation means an analysis that explains the difference

between the balance of accounting records and cash book of the
bank.
A Balance Sheet shows the Assets, Liabilities, and Owners Equity of
a business entity, valued in conformity with generally accepted
Accounting principles.
Accountants assume no business will last for ever; therefore, assets
are never valued in a Balance Sheet in excess of their immediate sale
value.
According to the rules of Debit and Credit for Balance Sheet
accounts, decreases in liability and owners equity accounts are
recorded by debits.
According to matching concept, an entity is not only to measure
revenues in a particular accounting period but also has to calculate
expenses which can be assigned in earning such revenues.
xii
The principle of conservatism takes into account all potential profits

but leaves all potential losses.
xiii
The provision for bad debts is debited to sundry debtors account.
xiv
An expenditure incurred on increasing the useful life of a fixed asset

is revenue expenditure.
xv
A major objective of accounting for inventories is the proper

determination of income through the process of matching appropriate
costs against revenues.
xvi
The damaged stock, if its market price is less than its cost price,
should be valued at cost price.
xvii
Sales + closing stock Purchases- Gross Profit = Opening Stock.
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Q.3
Choose one of the two alternatives given below and fill in the blanks in the given
statements:
(10)
As per the going concern concept, the business is viewed as having _____ life, until
and unless it has entered into a state of liquidation. (definite/indefinite).
ii The closing debit balance falls on the__________ side. (debit/credit)
i
iii
Any expenditure incurred in acquiring the right to carry on a business is ________

expenditure. (capital/revenue)
iv
In FIFO method, issues of materials are priced in order of their________.

(issues/purchases)
In periods of rising prices, the profit under LIFO method is indicated at ________
amount. (reduced/increased).
Any gain on the sale of non-current asset should be_______ the net profit for
determining funds from operation. (added to/deducted from)
If the net profit earned during the year is Rs. 50,000 and the amount of debtors in the
vii beginning and at the end of the year is Rs. 10,000 and Rs.20,000 respectively, then the
cash from operations will be equal to Rs.________ . (40,000/60,000)
vi
viii
For calculating cash generated from operations, provision for doubtful debts is
_______ the profit made during the year. (added to/deducted from)
ix
As per the requirements of State Bank of Pakistan, loans classified as loss require a
provision of______ of outstanding balance, net of liquid assets. (100%/ 50%)
If there is decrease in cost of goods sold, it will result in ______ in the gross profit.
(increase/decrease)
Computational Questions:
ABC Ltd. has a total equity of Rs.5,000,000/-. Its sales turnover is 4 times of
equity and the net profit margin on sales is 5 percent. What is the Return
on Equity (ROE). (02)
ii
ABC Ltd. has a credit sales of Rs.2,400,000/- during 2005. The outstanding
receivables as of 1st January and 31st December, 2005 were Rs.375,000/- &
Rs.425,000/- respectively. Calculate the Debtor Turnover Ratio and the
debt collection period. (02)
iii
Q.4
The ratios relating to liquidity position of ABC Ltd. are given below:
2004
2005
2003
- Current Ratio
2.00
2.13
2.28
- Acid Test Ratio
1.20
1.10
0.90
- Debtors Turnover
10.00
8.00
7.00
- Stock Turnover
6.00
5.00
4.00
The Current Ratio is increasing, while the Acid Test Ratio is decreasing.
Explain the contributing factor(s) for this apparently divergent trend. (02)
ABC Ltd. has decided to replace one of its existing staff cars by trade in
with a new car. The old car was purchased for Rs.800,000/- and has been
depreciated by the Straight Line method with the assumption of a 5 years
life and no salvage value. Annual depreciation expense is Rs.160,000/- .
After 4 years of use, the car is traded in with a new model having a list
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iv
price of Rs.1,000,000/-. Automobile dealer grants a trade in allowance of

Rs.240,000/- for the old car; the additional amount to be paid to acquire
the new car is, therefore, Rs.760,000/-.
You are required to calculate the (i) Book value of old car, (ii) Gain or loss
on exchange and (iii) Accumulated depreciation (03)
Based on the data given at Question 3(iv) above, give the general entries to
record the removal of the old car and recording of the new car. (02)
vi
ABC Ltds net profit was Rs.4 million in 2004 and Rs.1.6 million in 2005.
What percentage increase in net profit must ABC Ltd. achieve in 2006 to
offset the decline in profits in 2005 (02)
A and B belonging to the same industry have applied to a bank for a loan of equal
amount to be repaid over two years:-
Q.5
- Current Ratio
- Acid test Ratio
- Debt-equity Ratio
- Number of times interest earned
Company A
Company B
3.2 : 1
1.7 : 1
30 : 70
6
2.0 : 1
1.1 : 1
40 : 60
5
Based on above you are required to answer the following questions:

a) If you could grant a loan to only one company, which would it be and why? (05)
b) If you could grant a loan to both the companies, would you be willing to do so
and why or why not? (05)
Royal Bank Ltd. has received credit applications from two small companies
manufacturing ready-made garments for an unsecured short-term loan of Rs.500,000
each. In order to remain within the limit on aggregate unsecured lending under
Prudential Regulations, the bank can grant loan to only one of these companies. The
relevant information provided by the two companies is given below:
Rs. in Thousands
ABC Ltd.
Q.6
Assets
Cash
Sundry Debtors
Stock
Other Assets
Total Assets
Liabilities & Equity
Current Liabilities
Long-term loans
Share Capital
Retained Earnings
Total Liabilities & Equity
Additional information :
Sales
Rate of Gross profit on sales
XYZ Ltd.
170
274
900
1,344
1,000
2,344
300
424
1,350
2,074
1,020
3,094
500
800
800
244
2,344
640
1,000
1,200
254
3,094
2,400
30%
1,700
40%
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Based on the above information, you as the credit officer of the bank are required to:
(i) Calculate the relevant ratios of both these companies. (10)
(ii) Recommend to the management that which company should be granted the credit
andy
why? (05)
Q.7
Following information is available in respect of Republican Bank Ltd. for the

year ended December 31, 2005:
(Rs. in thousand)
1
2
3
4
5
6
7
8
9
10
11
12
13
Fee, commission and brokerage income

Mark up / return / interest earned
Other Liabilities
income from dealing in foreign currencies
Reserves
Provision against non-performing loans and advances
Taxation for the prior years
Surplus on revaluation of assets
Advances net of provisions
Other income
Bad debts written off directly
14
15
16
17
18
19
20
21
22
23
24
25
Borrowings from financial institutions

Unappropriated profit
Taxation for the year - Deferred
Bills Payable
Share capital
Deferred Tax Assets
Investments net of provisions
Dividend income
Subordinated loans
Mark up / return / interest expensed
Liabilities against assets subject to finance lease
26
Reversal of provision for impairment in the value of

investments
27
28
29
30
31
Deferred tax liabilities

Other charges
Operating Fixed Assets
Lendings to financial institutions
838
2,592
8,780
5,550
2,271
356
5,862
638
(188)
1,218
85,977
207
0
10,562
0
196
1,316
118,795
1,507
0
25,708
51
3,000
4,278
2
36
567
2
3,193
11,767
10,172
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32
33
34
Other Assets
Taxation for the current year
Gain on sale of investments
2,733
829
100
You are required to prepare on the SBP prescribed format:

i)
ii)
Balance Sheet as of 31st December, 2005 (15)

Profit & Loss Account for the year ended 31st December, 2005. (10)
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Accounting for Financial Services - Stage-I

ISQ Examination (Summer-2007)
Q.1
i
ii
iii
iv
v
Q.2
Following are some transactions of a proprietorship firm. Please indicate how increase and decrease
in each transaction will affect the assets and liabilities of the firm. (05)
The proprietor invests Rs 8,000,000 cash in the business.
He purchases land for Rs 3,000,000 and pays in cash.
He purchases a building for Rs 4,500,000 and pays Rs 2,000,000 in cash and the balance Rs 2,500,000
after two months.
Sold a portion of land for Rs 900,000 (at its cost) on credit.
Rs 2,500,000 was paid in full settlement of building cost in cash.
Zeeshan Ltd. is calculating its ratios relating to debt paying ability for the year ending 31st
December 2006. Following is the relevant information: (10)
Income Statement
Sales (60% cash sales)
Cost of goods sold expenses
Interest Expenses
Cash
Accounting Receivable
Inventory
Plant and Equipment
(net of accumulated depreciation)
Accounts Payable
Taxes Payable
i
ii
iii
iv
v
vi
vii
viii
ix
x
Rs
8,000,000
5,600,000
1,500,000
Balance Sheet
1st January 2006 (Rs)
900,000
1,400,000
1,700,000
4,000,000
31st December 2006 (Rs)

1,200,000
2,000,000
2,800,000
4,500,000
2,250,000
1,180,000
2,500,000
1,000,000
Working capital
Current ratio
Acid-test ratio
Difference between current and acid test ratio?
Accounts receivable turnover.
Average collection period for Accounts Receivable.
Reasons for relatively slow collection period in (vi)
Inventory Turnover
Average selling period for inventory.
Should Zeeshan Ltd., be concerned about its average selling period for inventory.
Q.3 The following figures have been taken from the books of Standard Commercial Bank Ltd.
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Q.3
(20)
Authorized capital
2,000,000. ordinary shares of Rs. 100. each
200,000,000
Issued, subscribed and paid-up capital.

2,000,000 ordinary shares of Rs.100. each, Rs. 50. called and paid
100,000,000
Reserve Fund
Acceptances and endorsements on behalf of customers
Bills for collection
Sundry creditors
Unclaimed Dividends
Loans, overdrafts and cash credits
Bills Payable-In Pakistan
Bills, discounted and purchased
Interest and discount
Borrowed from banks
Cash with other banks
Cash with SBP
Cash in hand
Premises (after depreciation upto 31.12.2005)
Dividend for 2005
Profit and Loss (cr) on 1.1.2006
General Expenses (including stationery 1,000,000 and directors
Fees 400,000)
Rent
Salaries (including salary to General Manager 4,800,000 and
Directors Fees 1,000,000).
Interest accrued and paid.
Investments (at cost)
Money at call and short notice
Current Accounts.
Savings Bank Deposit
Fixed Deposit
a
b
c
d
e
70,000,000
40,000,000
28,000,000
6,000,000
6,000,000
1,400,000,000
160,000,000
100,000,000
130,000,000
140,000,000
260,000,000
300,000,000
12,000,000
240,000,000
10,000,000
42,000,000
2,000,000
4,000,000
16,000,000
40,000,000
600,000,000
60,000,000
1,600,000,000
600,000,000
190,000,000
Additional Information:
Assume Investment mentioned above is at below market value.
The prescribed break down of advances may be ignored.
Rebate on bills discounted and purchased for unexpired terms amounted to Rs 1,000,000.
Charge depreciation @5% on premises on original cost (260,000,000)
Provision for doubtful debts amounting to Rs 6,000,000. is to be made. The bank has no business outside
Pakistan.
Required: Profit & Loss Account and Balance Sheet for the year ended 31st December 2006 as near
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to the prescribed SBP format as possible.
Q.4
Q.4 Following is the Statement of cash flows for a company for the year ended 31st December
2006. (15)
Cash flows from operating activities:
Net Income
Annual depreciation
Increase in accounts receivable
Decrease in inventory
Decrease in accounts payable
Increase in faxes payable
Total cash flows from operating
(Rs)
Cash flows from investing activities:

Sale of equipment
Plant and equipment purchase
Total cash flows from investing activities
(Rs)
Cash flows from financing activities:

Payment of note payable
Increase in bonds payable
Payment of dividends
Total cash flows from financing activities
Increase in cash
(Rs)
250,000
140,000
(30,000)
20,000
(100,000)
70,000
350,000
80,000
(170,000)
(30,000)
(140,000)
340,000
(140,000)
60,000
320,000
The company sold equipment costing Rs 140,000 during 2006. The equipment was sold for its net book
value.
Required:
Fill in the amounts in the balance sheet for 2006 by using the information from the statement of cash
flows. Provide computations.
Balance Sheet
31st December 2006 and 2005
2006
Assets:
Cash
Account receivable
Inventory
Plant & equipment (cost)
Less accumulated depreciation
Total Assets
2005
420,000
570,000
720,000
1,710,000
1,100,000
(250,000)
2,560,000
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Capital and liabilities:

Accounts payable
Taxes payable
Total current liabilities
Long-term notes payable
Bonds payable
Share holders Equity:
Paid-up capital
Retained earnings
Total share holders equity
Total liabilities & share holders equity
Q.5
i
ii
iii
iv
v
Q.6
510,000
420,000
930,000
500,000
400,000
300,000
430,000
730,000
2,560,000
Computational Questions: (05)

Calculate a traders drawings from the following information:
Opening capital
200,000
Closing Capital
230,000
Net profit
50,000
A company incurred a loss of Rs.20,000 on trade- in of a machine which was originally purchased at a
cost of Rs.100,000. The machine has been traded-in with a new machine having a list price of
Rs.120,000. Cash payment to vendor amounted to Rs.85,000. Calculate the book value of old machine.
A trader starts a business with Rs. 10,000 cash and a van worth Rs.5,000. At the end of his first year he
has Rs.2,000 in the bank, stock worth Rs.5,000, debtors valued at Rs.2,000 and the van which is now
worth Rs. 4,000. If he has withdrawn Rs.2,000 from the business during the year for his personal use,
what is the amount of profit/loss for the year?
From the following data of ABC Bank calculate the capital adequacy ratio as required by SBP:
Capital held
2,500
Risk-weighted assets (total)
38,500
From the data in 4 above calculate the amount of total capital required and shortfall in capital, if any?
Based on historical data of XYZ Co., it has been observed that the accounts receivables are
recovered 50% in the month of transaction, 30% in the next month, 15% in the 3rd month and 5%
in the 4th month. (15)
Following information is available for the company:
Month of Transaction
Credit Sales in Rs.
April
200,000
May
150,000
June
180,000
July
160,000
August
120,000
September
100,000
October
80,000
November
90,000
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December
60,000
Required: Calculate the month-wise amount expected to be received during July to December.
Q.7
ii
iii
Q.8
a
b
c
d
e
Q.9
PPI Ltd. Acquired a food processing machine for Rs.75,000 on February 15, 2005. Thecompanys
policy is to record full years depreciation if the asset is purchased during the first half of the year.
The machine is estimated to have a residual value of Rs.30,000 at the end of its service life which is
expected to be 6 years. The machines working hours are estimated at 25,000. Its production is
estimated at 40,000 units. During 2005, the machine was operated for 4,200 hours and produced
8,000 units.
Required:
Compute the depreciation charge for 2005 by using: (10)
a)
Straight line method
b)
Service hours method
c)
Productive output method
d)
Sum of the years digits method
e)
Declining balance method, using an annual rate of 35%
Journal-entry to record the depreciation under the straight-line method. (3)
Show presentation on Balance Sheet as at December 31, 2005 based on the straight-line method. (2)
You are provided with the following information at the end of June 30 (05)
Unpaid wages Rs.3000
Unexpired insurance Rs.2000
Unearned income Rs.1000
Interest payable on loan Rs.6000
Interest receivable on investments Rs.4000
Required: Make adjusting entries to incorporate the above information in the accounts.
M has a beginning inventory of Rs.50,000 on January 1. During the month of January, net
purchases amount to Rs.20,000 and net sales total Rs.30,000. Assume that Ms normal gross profit
rate is 40% of net sales. Using these facts, calculate the cost of inventory on January 31: (05)
Q.10 Balance Sheet of AA & Co. showed the following information as at December 31, 2005.
Account Receivables
Allowance for Doubtful Accounts
Following transactions took place during the year ended December 31, 2006.
Credit sales
Cash Sales
Cash collected
Doubtful accounts written off
225,300
6,759
1,245,500
230,600
1,386,200
2,300
Company has a policy of providing for 3% of outstanding Receivables as Allowance for doubtful
accounts.
Required:
(a)
Prepare the following accounts for the year as they would appear in the books of AA & Co.
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(Journal
i)
ii)
(b)
entries are not required) :

Accounts Receivable Account. (02)
Allowance for Doubtful Accounts. (02)
Compute the amount of allowance for doubtful accounts required at the end of the year. (01)
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Accounting for Financial Services Stage-I

Q.1
State TRUE or FALSE in the answer column:
(08)
(Answer)
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Accounting provides useful and reliable information on am

entitys economic activities to interested persons both within
and outside the organization.
Profit seeking organizations generally aim to provide goods
and services in such a manner so as to earn an acceptable rates
of return on owners investment.
External accounting reports need not conform with generally
accepted accounting principles.
Controlling is the process of ensuring that an organizations
plan is successfully implemented.
Accounting reports do not play an important part in the
control process.
Accounting information is an economic commodity.
A debtor is a firm or person to whom payment is to be made
for goods supplied or services rendered.
Every business transaction has two basic concept one involves
receipt of benefit and the other parting of a benefit.
Accounting cycle moves thru the stages of: Analysis,
recording.
Total and control Accounts are not the same.
Common size income statements show income and expenses
as percentage of total assets.
The price-earnings ratio is used to evaluate earning power of a
company.
The dividend yield calculation include the market price per
share.
The return on total assets ratio measures how wisely
management uses debt to acquire assets.
Inventory shortages are less likely when inventory turnovers is
high.
Basic accounting equation is applicable to marketing
concerns.
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Q.2
Please write the alphabet of your choice in the answer column.
(20)
(Answer)
The analysis of financial statements helps identify a

companys strengths and weaknesses. It indicates if a
company:
1
A) is managing its inventory efficiently

B) has sufficient plant assets.
C) is collecting accounts receivable quickly.
D) is achieving all of the above.
E) None of the above
Common size income statements show:
A)
B)
C)
D)
revenue and expenses as standardized Rupee amounts.

assets, liabilities and shareholders equity as negatives.
revenue and expenses as percentage of sales revenue.
assets and liabilities as percentage of shareholders
equity.
Earning per share indicates how:
A) much of a companys net income is paid out as dividend.

B) much of a companys net income can be paid as dividend
and retained for growth.
C) much of a companys net income the preference
shareholders are entitled to.
D) effectively a company uses its assets.
Which of the following is not included, directly or indirectly
in the formula for the price earnings ratio?
A)
current market price per share.
B)
earning per share.
C)
number of ordinary shares outstanding.
D)
dividends per share.
E)
None of the above
The return on assets is a useful ratio for financial analysis.
This ratio includes all but________.
A)
C)
E)
net income.
B)
after tax interest expense. D)
None of the above
average total assets.

preference dividends.
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The return on ordinary shareholders equity is often calculated

by financial analysts. This ratio is designed to show:
10
A) how efficiently management uses companys assets.

B) what is the total return to ordinary share holders.
C) how efficiently the company collects accounts
receivable.
D) what percentage of total share holders equity is paid as
dividend.
A companys average collection period for accounts
receivable is useful when it is:
A) compared to prior years results.
B) compared to competitors results.
C) compared to budgets results.
D) all of the above.
Inventory turnover is a measure of the liquidity of inventories.
Inventory turnover is:
A) cost of goods sold divided by the change in inventory.
B) sales revenue divided by average inventory.
C) cost of goods sold divided by average inventory.
D) sales revenue divided by beginning inventory.
Which of the following is not a cash equivalent:
A) A money market fund.
B) A short-term note receivable.
C) A Govt. Treasury bill.
D) Commercial paper.
A change in balance sheet item other than cash is:
A)
B)
C)
D)
E)
ignored while preparing the statement of cash flows.

considered only as a possible cash outflow.
a potential cash flow.
a change in a liability.
None of the above
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Which of the following statements about cash flow is true?

A)
11
12
13
14
15
16
a cash outflow is indicated when the equipment account

increases.
B) a cash outflow is indicated if the long term debt account
increases.
C) a cash flow is indicated if the long term debt account
decreases
D) a cash outflow is indicated if the equipment decreases.
Which one of the following is not source of cash:
A) decreasing assets other than cash.
B) increasing liabilities.
C) decreasing owners equity.
D) increasing owners equity.
Which one of the following is use of cash:
A) increasing liabilities.
B) decreasing owners equity
C) decreasing assets other than cash.
D) Increasing owners equity. E) None of the above
When a company earns a profit on its operations this usually
generates a:
A) cash inflow
C) no increase or decrease in cash.
D) none of the above
Depreciation expenses is:
B) cash outflow
A) a cash inflow.
B) ignored when preparing statement of cash flows.
C) added to the accumulated depreciation account.
a cash outflow.
Which of the following is least important as a measure of
short-term liquidity?
A)
C)
E)
Quick ratio
B) Current ratio
Debt ratio
D) Cash flow from operating activities
None of the above
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In each of the past five years the net sales of Alpha Ltd have
increased at about half the rate of inflation, but net income has
increased approximately twice the rate of inflation. During
this period the companys total assets, liabilities, and equity
have remained almost unchanged, dividends are
approximately equal to net income. These relationships
suggest (indicate all correct answers):
17
18
19
A) Management is successfully controlling costs and

expenses.
B) The company is selling more goods every year.
C) The annual return on assets has been increasing.
D) Financing activities are likely to result in a net use of
cash.
The following data are available from the annual report of a
company:
Current Assets
Rs. 480,000
Current liabilities
Rs. 300,000
Average total assets
Rs. 2,000,000
Operating income
Rs. 240,000
Average total equity
Rs. 800,000
Net Income
Rs. 80,000
Which of the following statements are corret?
A) The return on equity exceeds the return on assets.
B) The current ratio is .625:1
C) Working capital is Rs. 1,200,000
D) None of the above answer is correct.
Zeeshan Co. Ltds net income was Rs. 400,000 in 2004 and
Rs. 160,000 in 2005. What percentage increase in net income
must the Co. achieve in 2006 to offset the decline in profits in
2005?
A) 60%
B)
150%
C)
D) 67%
E)
None of the above
A sure figure of working capital:
20
A)
C)
E)
Cash Balance
Credit Limit from Bank
None of the above
600%
B) Cash & Bank Balance

D) All the above
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Q.3
Fill in the blanks in the statement given below:
(20)
i.
Account to be debited due to use of permanent assets in known as

_______________________ account.
ii.
The method of recording an equal amount of depreciation every year is known as

__________________________ method.
iii.
When depreciation every year goes on declining and it is charged at a fixed

percentage it is called _______________________ method.
iv.
When bank statement contains credits and the same are not recorded in the Cash
Book, the Bank Statement Balance will be _______________________ than
the balance shown in the cash book.
v.
The closing balance of the Cash Book will be ________________________than

the closing balance shown in the bank statement if it contains bank charges which
have not been recorded in the Cash Book.
vi.
The statement which ties up the balance shown in the Bank Statement and the
Cash Book is known as_________________________.
vii.
Balance sheet can either be made in ____________ form or _____________ form.
viii.
____________________ assets are shown first in the Balance Sheet of a Bank.
ix.
_____________ assets consist of Patents, Copyrights, Trademark, Goodwill etc.
x.
The matching principle governs the ________________ and_________________

of expenditure.
xi.
The matching principle directs to measure the ________________________.
xii.
Some expenses are easy to match against particular________________________.
xiii.
IAS 7 deals with_______________________________________.
xiv.
IAS 11 deals with_____________________________________.
xv.
IAS 14 deals with_____________________________________.
xvi.
IAS 40 deals with_____________________________________.
xvii.
While granting loan by a Bank to a single person the total exposer should not
exceed __________________ percent of the total ________________ of the
Bank. Out of this exposer _______________ percent should be _______________
and __________________ percent should be ___________________.
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xviii. While granting loan by a Bank to a Group the total exposer should not exceed
_________________ percent of the total ___________________ of the Bank.
Out of this exposer ___________________ percent should be ________________
and _____________________ percent should be.
xix.
The total contingent liability of a bank should not exceed____________________

times of the _____________________ of the bank.
xx.
Borrowers exposer in total should not exceed ________________________ times

of ________________________ as disclosed in the latest Balance Sheet.
Q.4
The trial Balance of a Company show the following balances as on 30th June
2007.
(20)
Bank Account
Accounts Receivable
Stores supplies Inventory (opening)
Trade Inventory (opening)
Stores Equipment
Unexpired Insurance
Carriage Inward
Accumulated Depreciation
Miscellaneous Expenses
Accounts Payable
Directors current Account (Dr.)
Paid up capital
Sales
Salaries and wages
Rent and Rates
Advertisement and promotional expenses
Purchases
Rs.
2,030,000
2,156,000
94,000
7,900,000
4,400,000
532,000
266,000
510,000
382,000
1,740,000
3,180,000
10,462,000
34,155,000
3,550,000
2,100,000
458,000
19,819,000
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Additional information:
Trade inventory on 30th June, 2007
6,020,000
th
Stores supplies Inventory on 30 June, 2007
28,000
Expired Insurance.
142,000
Depreciation for the year
400,000
Accrued salaries and wages
34,000
Prepared Rent.
400,000
Accrued Advertisement and promotional expenses
42,000
Required:
An eight column work sheet for the year ended 30th June, 2007 excluding adjusted
trial balance
Q.5
Quetta Coal mining Co. Ltd., purchased mining rights over a piece land having
coal deposits estimated at 10.0 million tons for Rs. 8.0 billion. An additional cost
of Rs.20.0 million was incurred for construction of infrastructure facilities. The
estimated value of land after extraction of deposits was Rs. 10.0 million. 800,000
tons of coal was extracted during the first year. In the second year the company
incurred a further expenditure of Rs. 10.0 million on a new approach road and
extracted 1.6 million tons of coal.
(06)
Required:
Amount of depletion to be charged for the first and second year of operation.
Q.6
Best Audio Ltd sells top of the line Stereo Equipment. A new state of the art
speaker system has been introduced. During the current year the company
purchased nine of these speaker system at the following dates and acquisition
costs:
(04)
Date
October 1
November 17
December 1
Available for sale during the year
Units
purchased
2
3
4
9
Unit Cost
(Rs)
3,000
3,200
3,250
Total Cost
(Rs)
6,000
9,600
13,000
28,600
On November 21 the Co. sold four of these speakers, the other five remained in
inventory at 31st December. The company uses a perpetual inventory system.
Required:
A)
Cost of goods sold
B) Closing inventory using the following methods
C)
Average Cost
D) First in First Out (FIFO)
E)
Last-in first out (LIFO)
showing the number of units and the unit costs of the cost layers comprising the cost of
goods sold and the closing inventory.
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Q.7
The Accountant of Modern Traders has completed the books of accounts and
prepared Trial Balance for the year ended 30th June 2006. It was found that
debits exceeded credits by Rs. 27,880. This amount was credited to a
suspense account, after sometime following errors were detected:
1
2
3
4
5
6
Sales returns book was undercast by Rs. 1,000.

Purchase of some furniture for Rs. 3,000 was passed through
purchase day book.
Rs. 3,750 paid as wages to workers for making show-cases was
charged to wages account.
Purchase of Rs. 6,710 was posted to the debit of creditors account as
Rs. 6,170.
A cheque for Rs. 2,000 received from Saleem was dishonoured and
was passed to the debit of allowances account.
Goods costing Rs. 1,000 had been returned by a customer and were
taken into stock but no entry was made in the books.
A sale of Rs. 2,000 to Imran & co. was credited to their account.
Sale amounting to Rs. 10,000 was passed through purchased day

book. The customers account had however been correctly debited.
Required:
(A)
Journal Entries (without narration) to rectify the errors with reasons.
(B)
suspense Account
Q.8
(08)
(04)
Given below are some of the assets, liabilities items from the SBP prescribed
balance sheet for the banks circulated as per BSD Circular #4 of 2006. You are
required to briefly describe these items.
A)
B)
C)
D)
E)
Lending to financial institution

Subordinated loan
Surplus (deficit) on revaluation of assets
Contingencies & commitments
-.-.-.-.-.-
(02)
(02)
(02)
(02)
(02)
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Q.1
(10)
Q.2
(20)
Q.3
Fill in the blanks in the statement given below:
(05)
Q.4
Put by letter whether each of the actions listed below will immediately
- increase (I),
- decrease (D) or
- have no effect (N) on the ratios shown.
(10)
Current
ratio
1
Company issued ordinary shares for cash
Bought raw materials on account
Received money from accounts receivable
Expiration of prepaid rent
Payment of cash dividend
Purchase of long term investment with cash
Sale of fixed assets for cash with no gain or loss
Stock written off
Refinance on a long term basis currently matured debt
10
Bought fixed asset with a 6 month note
Acidtest
ratio
Debt to
equity
ratio
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Q.5
The followings are the figures of unadjusted Trail Balance at year end. With the
help of additional information prepare 10 columnar worksheet.
(15)
Capital
Machinery
Debtors
Drawings
Purchases
Creditors
Wages
Bank
Stock in Trade
Rent
Sales
Sundry expenses
350,000
122,500
94,500
31,500
332,500
49,000
175,000
52,500
70,000
15,750
507,500
12,250
Additional information
Closing stock
21,000
Accrued Rent
1,750
Prepaid Wages
7,000
Depreciation on Machinery
Q.6
10%
p.a
From the following prepare Perpetual Inventory Records based on Moving

Average.
(05)
Unit
March 1, 2007
Opening Inventory
March 9, 2007
Unit Cost
(Rs)
700
100
Purchase
1,050
110
March 10, 2007
Sale
1,400
March 15, 2007
Purchase
1,400
116
March 18, 2007
Sale
1,050
March 24, 2007
Purchase
350
126
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Q.7
On 01-01-2000 a firm purchases machinery amounting to Rs. 500,000 on 1-072002 it buys additional machine worth Rs. 100,000 and spends Rs. 10,000 on its
erection. The accounts are closed each year on 31st December. The firm charges
annual depreciation @ 10%.
(04)
Required:
Machinery Account for 5 years under
(i)
Straight line Method
Q.8
(ii)
Reducing balance method.
The record of a firm was destroyed by fire in June 2005 and the following data
are available:
(05)
Year 2005
Sales
Purchase
August
434,000
397,000
September
472,550
270,000
October
486,000
330,000
November
495,250
370,000
Opening Stock on 1st August 2005 was Rs. 336,500

Required
Computation of closing stock at the end of each month and gross profit assuming that
sales are made at 15% above cost (calculate up to the nearest rupee)
Q.9
On 1st Jan 2008 Mr. Faisal owed Mr. Akhtar Rs. 44,280. Further transactions
between the two were as under:(04)
i)
ii)
iii)
iv)
Jan. 16, 2008, Mr. Faisal purchased goods from Mr. Akhtar amounting to
Rs.58,160
Feb 20, 2008 Mr. Faisal received cash amounting to Rs. 37,540 from
Mr. Akhtar.
March 18, 2008 Mr. Faisal purchased goods from Mr. Akhtar in the sum
of Rs.40,390.
Mr. Akhtar charged Mark-up @ 6% p.a. on the daily balances to be
charged up to 31-03-2008.
Required:
Compute mark-up payable by Mr. Faisal to Mr. Akhtar
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Q.10 The accountant of International Traders has completed the books of accounts
and prepared Trial Balance for the year ended 30th June 2006. It was found that
debits exceeded credits by Rs. 38,770. This amount was credited to a
suspense account, after sometime following errors were detected:
i)
Sales return book was under cast by Rs. 2,500.
ii)
Purchase of some furniture for Rs.5,000 was passed through purchase day
book.
iii)
Rs.4,930 paid as wages to workers for making show-cases was charged to

wages account.
iv)
Purchase of Rs.7,610 was posted to the debit of creditors account as

Rs.7,160
v)
A cheque for Rs.3,800 received from Saleem was dishonoured and was
passed to the debit of allowances account.
vi)
Goods costing Rs. 1,500 had been returned by a customer and were taken
into stock but no entry was made in the books.
vii)
A sale of Rs. 1,750 to Imran & Co. was credited to their account.
viii)
Sale amounting to Rs. 15,000 was passed through purchased day book.
The customers account had however been correctly debited.
Required:
(a) Journal Entries to rectify the errors with reasons.
(b) Suspense Account
(08)
(04)
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Q.11 These are the real figures of a leading bank of Pakistan for the period ended
December 31, 2007.
(Rupees in thousand)
2007
Income from banking services
15,088,220
Cost of services
(2,200,432)
Value added by banking services
12,887,788
Non-banking income
14,297
Provision against non-performing assets
(2,874,226)
10,027,859
Salaries, allowances and other benefits
3,733,127
37.2%
Income Tax
1,876,918
18.7%
As dividends
2,827,843
28.2%
341,656
3.4%
1,248,315
12.4%
10,027,859
100%
Depreciation / Amortization
Retained in Business
Use your judgment to briefly describe:

1.
Income from banking services
2.
Cost of services
3.
Provision against non performing assets
4.
Distribution to owner and government
5.
Retained in business
-.-.-.-.-.-
(10)
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ACCOUNTING FOR FINANCIAL SERVICES STAGE-I

ISQ EXAMINATION (WINTER) 2008
Q.1
(27)
(Answer)
Accrual accounting techniques are used to:

A)
B)
1
C)
D)
Q.2
assign revenues and expenses to the appropriate

accounting period.
record the anticipated effects of actions that may occur
at a future date.
report the results of actions whose monetary effects are
difficult to estimate.
allocate non-operating revenues and expenses to the
appropriate business unit.
Choose one of the two alternatives given below and fill in the blanks in the
following Statements.
(09)
1)
Q.3
Acceptances, endorsements and other obligations __________ a contra item

(are /are not)
Following transactions were carried out during 2007 by Chaudry Waseem Limited
(CW). Put a letter whether each of the transaction will immediately.
(10)
----
Increase (I),
Decrease (D), or
have no effect (N) on the ratios/figures shown
Fixed
Assets
Turnover
Working
Capital
Current
Ratio
January 1, 2007: CW issues 100,000 shares of

stock at Rs 10 par-value.
January 20, 2007: CW purchases a building for
Rs 50,000 and purchases equipment for
Rs 20,000. It pays half the price in cash and
the other half through a bank loan.
March 1, 2007: CW acquires finished goods
for Rs 200,000. CW pays cash for half of the
merchandise, and the remainder is purchased
on account.
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4
5
March 30, 2007: CW pays Rs 25,000 in

employee salaries.
July 1, 2007: CW decides to rent additional
building space and pays for six months rent, at
Rs 2,000 a month, in advance.
August 22, 2007: CW sells all of the finished
goods for Rs 400,000, of which Rs 200,000 is
on account and the remainder is received in
cash.
October 30, 2007: CW collects Rs 100,000 in
cash from its accounts receivable, and uses this
money to pay down its accounts payable.
November 23, Year1: CW declare dividend @

Rs 2.50 per share, payable on Dec. 30, 2007
December 30, 2007: Depreciation for the year

is Rs 2,000 on the building and Rs 2,400 on
the equipment.
10
December 30, 2007: CW pays Rs 250,000 in

dividends.
Q.4
On 30th June, 2008 the balance on an organisation's cash book was a debit of
Rs 10,420. On the same date the bank statement showed that the organisation was in
credit with a total of Rs 8,380. The following was then discovered:
(A)
Bank charges of Rs 240 were shown on the bank statement but had not been
entered into the cash book.
(b)
The payments side of the cash book had been undercast by Rs 1,000.
(c)
A standing order payment of Rs 700 appeared on the bank statement but had
been omitted from the cash book.
(d)
Cheques drawn by the organisation for Rs 1,200, Rs 600 and Rs 350, had not
yet been presented at the bank by 30th June and there fore did not appear on
the bank statement.
(e)
A cheque receipt from a customer of Rs 2,250 had been paid into the bank
account on 29th June but did not appear on the bank statement until 3rd July.
Required:
Prepare the bank reconciliation statement as at 30th June 2008.
(10)
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Q.5
Following information is made available to you about a Plant purchased by your

company for the factory:
(06)

Purchase price -Estimated useful life -Estimated salvage value at the end of useful life --
Rs 12,000,000
Five years
Rs 2,000,000
Using Straight line depreciation method:

A)
Record depreciation for the third year
B)
Record disposal on cash, if sold for 2,575,000 at the end of useful life.
C)
Record disposal on credit if sold for 2,575,000 at the end of fourth year
Q.6
Following is the Balance sheet of a leading commercial bank as at December 31,

2007
(10)
2007
2006
23,039,577
14,742,711
1,705,445
3,292,041
Lendings to financial institutions
19,050,239
5,777,382
Investments
46,953,241
44,926,652
144,033,634
111,206,774
6,445,111
4,720,662
638,168
680,093
10,161,361
7,227,953
252,026,776
192,574,268
Bills payable
2,278,007
2,448,620
Borrowings
18,410,425
9,693,785
206,031,324
161,410,268
ASSETS
Advances
Deferred tax assets
Other assets
LIABILITIES

Sub-ordinated loans
2,500,000
Other liabilities
5,119,267
4,471,948
234,339,023
178,024,621
17,687,753
14,549,647
Share capital
4,488,642
4,488,642
Reserves
6,133,209
5,693,484
NET ASSETS
REPRESENTED BY
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Unappropriated profit
5,607,796
2,731,979
16,229,647
12,914,105
1,458,106
1,635,542
17,687,753
14,549,647
Surplus on revaluation of assets net of tax
Examine the data and comments upon the operations, growth and asset, liability
management of the bank.
Q.7
(A)
Ace company is calculating its ratios relating to debt paying ability for the
year ended 31st December 2002. Following are the relevant informations:
Net income
Interest Expenses
Income Tax
Income Statement
Rs. 180,000
Rs. 60,000
Rs. 45,000
Balance Sheet
Total shareholders equity

Total liabilities & shareholders
equity
1st January 2002

Rs. 240,000
Rs. 600,000
31st December 2002

Rs. 300,000
Rs. 750,000
The company had 10,000 ordinary shares outstanding for the entire year of 2002.
There were 5,000 preference shares issued on 31.12.2002 for which the company
received Rs. 25,000.
Required :
(i)
Times interest earned ratio
(ii)
Debt to equity ratio
(iii) Book value per share
Q.7
(B)
A company takes an average of 81.11 days to collect an Accounts

receivable. Total sales was Rs. 600,000 of which 70% were cash sales.
Required : Average balance in Accounts Receivable

Q.7
(C)
(02)
(02)
(02)
(02)
A company takes an average of 125 days to sell an item of inventory. The

average balance in inventory is Rs. 146,000.
Required : Calculation of cost of goods sold.
(02)
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Q.7
(D)
Required :
(i)
(ii)
Q.8
Sohail & Co. has a dividend payout ratio of 80% and a dividend yield of
25%. The current market price is Rs 40.
Calculation of dividend per ordinary share

Calculation of earning per share.
(02)
(01)
Mr. Ayaz was unable to pay his creditors and as such was insolvent. The
balances in the books on that date of Mr. Ayaz was as follows:
Estimated to
Realize
1,400,000
550,000
1,080,000
50,000
200,000
860,0000
60,000
Book Values
Plant and Machinery
Furniture and Fixtures
Inventory
Shares of Rs. 10 each fully paid
Life Policy of Mr. Ayaz
Accounts Receivable Good
Accounts Receivable Doubtful
Accounts Receivable Bad
Cash-in-hand
Bank overdraft
Preferential creditors
Trade creditors on open accounts
2,864,000
700,000
1,500,000
200,000
200,000
860,000
120,000
200,000
10,000
10,000
2,540,000
234,000
2,380,000
The bank held security on assurance policy for Rs 600,000 on the owners life surrender
value Rs 200,000. On 1st July, 2005 there was a surplus of assets over liabilities amounting to
Rs 4,800,000 and during the period the owner withdrew Rs 1,400,000 from the business. The
Receiver completed some pending transactions resulting into a profit of Rs 100,000.
Required:
(i)
(ii)
(iii)
Statement of affairs
Computation of Net loss during the period
Deficiency Account.
(06)
(05)
(04)
-.-.-.-.-.-
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Q.1
(18)
Q.2
(35)
Q.3
Following transactions were carried out during 2008 by Chinawala Brothers

(CWB). Put a letter whether each of the transaction will immediately
(10)
Increase (I),
decrease (D), or
have no effect (N) on the ratios/figures shown.
Leverage
Ratio
1. January 1, 2008: CWB issues 150,000 shares of

stock at Rs.10 par-value.
2. January 20, 2008: CWB purchases a building for
Rs.70,000 and purchases equipment for
Rs.35,000. It pays half the price in cash and the
other half through a bank loan.
3. March 1, 2008: CWB acquires finished goods for
Rs.150,000. CWB pays cash for half of the
merchandise, and the remainder is purchased on
account.
4. March 30, 2008: CWB pays Rs.45,000 in
employee salaries.
5. July 1, 2008: CWB decides to rent additional
building space and pays for six months rent, at
Rs.3000 a month, in advance.
6. August 22, 2008: CWB sells all of the finished
goods for Rs.400,000, of which Rs.300,000 is on
account and the remainder is received in cash.
7. October 30, 2008: CWB collects Rs.160,000 in
cash from its accounts receivable, and uses this
money to pay down its accounts payable.
8. November 23, Year1: CWB declares dividend
@Rs.2.50 per share, payable on Dec. 30, 2008.
Return
on Assets
Quick
Ratio
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9. December 30, 2008: Depreciation for the year is

Rs.3000 on the building and Rs.2400 on the
equipment.
10. December 30, 2008: CWB pays Rs.250,000 in
dividends.
Q.4
(A)
A company manufactures tools to customer specifications. Following data

relate to a customers order for March.
(02)
Direct material used.
Rs. 42,000
Direct labour hours worked
500
Direct labour hourly rate
Rs.
Machine hours used
18
300
Applied factory overhead rate per machine hour
Rs.
60
Calculate total manufacturing costs.

(B)
From the informations given below regarding a Department calculate

FIFO Equivalent units of production for the Department.
(02)
Materials
Percent
Units
Completed
Open Inventory
New units started
Closing Inventory
30
350
20
70%
-80%
Conversion
Percent
Units
Completed
30
350
20
90%
-50%
Materials __________________
Conversions ________________
(C)
From the following informations find out cash collections for February.
Rs.
Forecast Sales
December
120,000
January
100,000
February
150,000
March
250,000
April
200,000
May
160,000
of the above forecast sales 80% are credit Sales, collection pattern are as
under: 30% of Accounts in the month of Sale and balance 70% in the
following month.
(02)
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(D)
A company takes an overage of 81.11 days to collect an accounts

receivable. Total sales were Rs 600,000 of which 70% were cash sales.
Calculate the average balance in accounts receivable.
(02)
(E)
Maheen Ltd has a dividend payout ratio of 80% and a dividend yield of
25%. The current market price is Rs 40 calculate:
(02)
(i)
Dividend per common share
(ii)
Earning per share
Assuming that share is of Rs. 10 each.
Q.5
Following is the financial high lights of a Commercial Bank in Pakistan.
(05)
Rupees in million
2006
2005
2004
2003
2002
1,071
809
540
571
658
Net Mark-up income
332
288
283
211
238
Profit after tax
295
272
286
162
157
Paid-up Capital
3,242
2,162
2,162
2,162
2,103
Shareholders Equity (Net)
4,058
2,962
2,735
2,375
2,202
Total Income
Review the above data and offer your comments on each item especially mentioning
percentage increase / decrease.
Q.6
Following are adjusted and un-adjusted Trial Balance of a company as on 30th

(12)
June 2007.
Un-adjusted
Cash
Accounts Receivable
Trading Inventory
Store supplies inventory
Prepaid insurance
Store Equipment
Carriage outward expenses
General Expenses
Proprietors Drawing
Salaries
Rent Expenses
Advertising
Purchases
Entertainment Expenses
Accounts Payable
Dr.
Rs
101,500
107,800
390,000
4,700
19,100
205,000
13,300
19,100
159,000
177,500
80,000
22,900
982,000
1,200
Cr.
Rs
62,000
Adjusted
Dr.
Rs
100,000
107,800
301,000
3,300
12,000
205,000
13,300
19,100
159,000
179,200
80,000
22,900
982,000
1,200
Cr.
Rs
62,000
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Accumulated Depreciation
Proprietors Capital
Sales
Commission Income
Stores Supplies Expenses
Insurance Expenses
Depreciation Expenses
Salaries Payable
18,000
503,100
1,500,000
200,000
1,400
7,100
20,000
1,700
1,500
Cash Short / over (Suspense Account)
Un-earned commission
Profit & loss Account
Total Rs 2,283,100
Required:
i)
ii)
iii)
Q.7
38,000
503,100
1,500,000
160,000
2,283,100
390,000
40,000
301,000
2,605,800
2,605,800
Adjusting Journal entries as on 30.06.2007

Opening journal entries as on 01.07.2007
Reversing journal entries as on 01.07.2007
From the following data prepare perpetual inventory records based on

A)
FIFO and
B)
LIFO Methods
Dates
Dec 20,2008
Dec 22,2008
Dec 24,2008
Dec 26,2008
Dec 28,2008
Dec 30,2008
Particulars
Qty
Unit Price
Opening Inventory
Purchased
Sold
Purchased
Sold
Purchased
2000
4000
5000
5000
4000
6000
100
105
-.-.-.-.-.-
110
115
(10)
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Q.1
State True or False in the answer column.
Q.2
Please write the alphabet of the selected answer in the given space:
Q.3
Choose one of the two alternatives given below and fill in the blank in the
following statements:
Q.4
There was a credit balance of Rs 4,190/- in bank statement of the ABC Company
on 29th February, 2009. On the very date the cash book of the company showed a
debit balance of Rs 5,210/-. On going through the above records, it revealed that:
A)
Payments side of cash book was under cast by Rs 500/-
B)
Under mentioned charges were not entered in the cash book:

(i)
With holding income tax Rs 300/(ii)
Bank charges Rs 100/(iii) Profit Rs 280/-
C)
The payment of Rs 350/- made by the bank in compliance with the

existing instructions of the company has not been entered in the cash book
D)
A cheque amounting to Rs 1,125/- received from a customer paid into the

bank on 27th February, 2009 did not appear in the bank statement till 1st
March, 2009
E)
Cheques drawn by the company for Rs 600/-, Rs/- 300 & Rs 175/- had not
been presented at the bank
Required:
Prepare the Bank Reconciliation Statement as at 29th February 2009.
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Q.5
From the following data prepare:Perpetual Inventory record based on methods

A)
B)
Q.6
LIFO
FIFO
Unit
Unit Cost (Rs)
June 1, 2009 Opening Inventory
2,000.00
30.00
June 9, 2009 Purchase
3,000.00
33.00
June 10, 2009 Sale
4,000.00
4,000.00
June 18, 2009 Sale
3,000.00
1,000.00
34.80
37.80
Asad & Co are reviewing their receivables at the year end, 30th June 2009 which
total Rs 187,930/- before reflecting the following:
A)
B)
C)
Bad debts of Rs 3,710/- are to be written off

Rs 1,200/- has been received in respect of a bad debt which was written
off in the previous year. No. more money is expected to be received from
the customer
The provision for doubtful debts at 1st July 2008 comprised:
Specific provisions
Naveed & Bros
Khalid & Sons
General provision, 2% of debts
not already provided for
Rs 1,714
Rs 1,300
----------Rs 3,014
Rs 2,420
----------Rs 5,434
======
The provision against Naveed & Bros debt is no longer required as their debt is
included in Rs 3,710/- bad debts to be written off in the period
The provision against Khalid & Sons debt is to remain, and provision is required in
respect of the debt of Sohail Nawab which stands at Rs 6,200/The general provision is to remain at 2% of debts not already provided for.
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Required:
A)
open up a receivables Ledger control account and a bad debts expense
account and record the transactions in (A) and (B) above
B)
Calculate the provision for doubtful debts at 30 June 2009
C)
Open up a provision for doubtful debts account and record the

Provision at 30 June 2009
D)
Show how the receivables of Asad & Co would be reported in his

balance sheet at 30 June 2009
Q.7
Journalize following transactions in the books of M/s Amin Brothers

Note : Computations need to be shown clearly
Machinery worth Rs. 1,000,000/- in cash purchased on July 1, 2007
Depreciation is charged on diminishing balance method @ 20% with no salvage
value at the end
On 1st Jan 2008 this machine is exchanged with a new one that has a cash price
of Rs 800,000/-. Old machinery is valued at Rs 750,000/-. Difference is adjusted
through Cash payment.
Q.8
Prepare adjusting entries for the year ended October 31, 2009, based on the
following data:
a) A two-year insurance policy costing Rs 30,000/- was purchased on September
30, 2007.
b) Employee salaries are owed for 3 days of a regular 6-day work week. Weekly
payroll, Rs 18,000/-.
c) The balance in Supplies before adjustment is Rs 9,600/-. A physical count
reveals Rs 2,350/- of supplies on hand on October 31, 2009.
d) Equipment was purchased at the beginning of the year for Rs 320,000/-. The
equipment has a useful life of 4 years and no salvage value. The company
uses Straight line method for recording Depreciation
e) Unearned Service Revenue has a balance of Rs 94,200/- before adjustment.
Records show that Rs 62,725/- of that amount has been earned by October
31, 2009.
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Q.9
Differentiate between:
A)
B)
C)
D)
Generally Accepted Accounting Principles & International Accounting

Standards
Perpetual & Periodical Methods of Store Keeping Records
Bank Drafts & its Pay-order
Bankruptcy & Liquidation
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Q.1
Q.2
Q.3
Strike out one of the two words which is not true from the following statements.
Give reasons for your choice below each statement.
(i)
Purchase of new spare wheel at a cost of Rs. 5000 for an old truck because
the spare wheel was stolen, is Revenue / Capital expenditure.
Reason:-
(ii)
Spent Rs. 30,000 for a PABX telephone exchange of a higher capacity in

replacement of existing one of lower capacity, is Revenue/ Capital
expenditure
Reason:-
(iii)
Construction of new under-ground water tank at a cost of Rs, 100,000

because the water was leaking from the old one, is Revenue/Capital
expenditure
Reason:-
(iv)
Purchase of new pencil cells at a cost of Rs. 100 for wall clocks, is Revenue
/ Capital expenditure
Reason:-
(v)
Reason:-
Purchase of a new Toyota Truck at a cost of Rs. 1,000,000/= in

replacement of old KIA Truck, is Revenue / Capital expenditure

(vi)
Installation charges of Rs. 200,000/= of a newly purchased plant, is

Revenue/ Capital expenditure
Reason:-
(vii)
Consultancy fees paid for a new project estimated to be completed at

Rupees ten million, is Revenue/Capital expenditure
Reason:-
(viii) The re-painting of a car of a new colour at a cost of Rs. 50,000/= after 4
days of its purchase because the colour of the car is not liked by the
management, is Revenue/Capital expenditure
Reason:-
(ix)
Paid Rs. 5000 for painting the company name and product on the new car
purchased at a cost of Rs. 500,000/-, is Revenue / Capital expenditure
Reason:-
(x)
Purchase of a new battery of an office car for Rs. 4000 in replacement of

unserviceable one, is Revenue/ Capital expenditure
Reason:-
Q.4
ABC & Company had the following transactions upto 30th June 2009
(i)
Purchased goods for Rs. 50,000 and availed a cash discount of 5%
(ii)
2% Commission received in Cash on third party deal of Rs. 20,000
(iii)
Paid Rs. 400 as wages to Mr. Waheed
(iv)
Sold goods for Rs. 34,500 to Ahreem & Co
(v)
Sales worth Rs. 4,000 were returned by Shahed Brothers
(vi)
A cheque for Rs. 1000 was received for cash sales from Mr. Jaffer
(vii)
Sold an old asset which was rendered unserviceable for Rs. 15,000
(viii) A cheque for Rs. 10,000 was discounted through bank at 1%

(ix)
Cash payment of Rs. 390 was made to Shamim Brothers for purchase of
office supplies
(x)
A cheque for Rs. 4,000 issued to a creditor was dishonored by bank and
returned by creditor
Required:
Journal Entries to record the above transactions
Q.5
Following is the information about bank transactions in respect of Jamal and

Company.
(i)
(ii)
(iii)
(iv)
On September 30, balance of cash book was Rs. 264,130 and balance as
per bank statement was Rs. 278,278
Cash receipts of Rs. 40,126 on September 30, were not deposited till
October 1
Among the paid cheques returned by the bank was one for Rs. 21,000
drawn by Jamal Brothers, but charged in error to Jamal and Company
The following memoranda accompanied the bank statement
(a)
(b)
(c)
(v)
Debit Memo for service charges for the month of September Rs. 315
Debit memo attached to a cheque of AB Company, marked NSF
for Rs. 6,245
Credit memo for Rs. 60,500 representing the proceeds of non
interest bearing note collected by the bank from Jamal and
Company. The note face value was Rs. 61,000, balance was
deducted by bank as collection charges.
Following cheques were issued, but not presented for payment.

Cheque No 348
Rs 12,600
351
Rs 5,180
356
Rs 3,554
------------Rs 21,334
=======
Required
(a)
(b)
Bank Reconciliation Statement as of September 30

Journal Entries to correct the cash book balance
(07)
(03)

Q.6
Mohammad Naqi & Co entered into a deal with Hanif Enterprizes for the
purchase of their business. Following are the balance sheets of Hanif Enterprizes
and Mohammad Naqi & Co .
Hanif Enterprizes
(Rs)
Assets
Inventories
Notes Receivable
Prepaid Insurance
Plant & Equipment

65,000
37,000
3,600
197,000
302,600
Account Payable
Long-term Loans
Share Capital
Retained Earnings
24500
71000
180000
27100
302,600
Mohammad Naqi & Co

(Rs)
Assets
Inventories
Account Receivable
Unexpired rent
Plant & Equipment
Cash & Bank balance

136,400
26,000
600
151,000
55,000
369,000
Account Payable
Bank Borrowings
Capital
56,600
112,400
200,000
369,000
The basis of purchase is net worth (owners equity) of Hanif Enterprizes plus Rs. 100,000
for good will. A sum of Rs. 300,000 will be borrowed from bank for the purpose of the
purchase.
Required:
(A)
Work out the purchase price including goodwill
(03)
(B)
Revised balance sheet of Mohamamd Naqi & Co after

incorporating the deal
(07)

Q.7
Hamid & Mahmud deal in grocery. Following data is extracted from their
Balance Sheet as on June 30, 2009.
(Rs)
Balance as on June Balance as on June
30, 2009
30, 2008
Interest Payable
17,500
2,000
Unearned Rental Income
30,000
60,000
Unexpired Insurance
18,000
Nil
Income Statement for the year ended June 30, 2009 of Hamid & Mahmud
provides following information relating to above heads of accounts
Interest Expenses
Rental Income
Insurance Expenses
Rs 20,000/Rs 360,000/Rs 14,000/-
Required:
Computation of cash received and paid during the year end June 30, 2009 on
account of
A)
B)
C)
Rental Income
Interest
Insurance
(02)
(02)
(02)

Q.8
Give below the formula for calculating each of the following ratios & briefly
state purpose of the ratio:
(10)
(i)
Current Ratio
(A)
Formula
(B)
(ii)
(iii)
Acid test Ratio

(A)
Formula
(B)
Purpose
Merchandise Inventory Turnover

(A)
Formula
(B)
(iv)
Purpose
Turnover of Accounts Receivable

(A)
Formula
(B)
(v)
Purpose
Purpose
Income to owners equity

(A)
Formula
(B)
Purpose
THE INSTITUTE OF BANKERS PAKISTAN

ACCOUNTING FOR FINANCIAL SERVICES
Q.1
Q.2
Q.3
Choose one of the two alternatives given below and fill in the blank in the
following statements:
Q.4
Following is the trial balance of Shahid & Co as on 30th June, 2010

(Rupees)
Title of Account
Finished goods Inventory --- July 1, 2009
Process Inventory--- July 1, 2009
Materials Inventory---July 1, 2009
Book Debts
Creditors
Buildings
Accumulated depreciation on building
Machinery & Equipment
Accumulated depreciation on machinery
Cash in hand
Bank overdraft
Unexpired Rent
Accrued Expenses
Paid up capital
Retained Earnings
Material Purchased
Sales
Salaries and other benefits
Stores and spare consumed
Electricity & Gas
Rent Expenses
Other Factory Expenses
Administrative Expenses
Selling & Distribution Expenses
Bank Charges
Debit
Credit
458,000
172,000
178,000
226,200
771,000
800,000
80,000
1,700,000
340,000
112,600
471,800
6,000
66,000
800,000
176,400
3,504,000
5,395,000
370,000
40,000
70,000
7,000
222,000
83,000
144,000
7,400
8,100,200
8,100,200
Following adjustments have to be made in the above data:(i)
Closing Inventories on 30th June, 2010 were

a)
Materials
b)
Work in Process
c)
Finished goods
204,000
77,000
512,000
(ii)
Provision for Insurance
16,000
(iii)
Depreciation to be charged on straight line

method at 5% on Building and 10% on Machinery
(iv)
Provision for doubtful debts
5,900
(v)
Sales return to be recorded
77,000
Required:
1) Journal entries to record the adjustment
2) A profit & loss account for the year ended 30th June, 2010
3) A balance sheet as on 30th June, 2010
Q.5
A)
Differentiate among Deferred Costs, Accrual and Prepayments
B)
How would you classify the following transactions?

i)
ii)
iii)
iv)
Q.6
Amount spent on making an advertisement film which will be used

for many years
Portion of Rent paid in advance for one year at the end of the year
Wages for the last month of the accounting year remained unpaid.
Amount for the services rendered not received till the end of the
year.
A company purchased items for inventory during 2009 at continuously higher

costs. Its last two purchases of 2009 were 20 units on December 20 at a cost of
Rs.14 per unit and 30 units on December 30 at a cost of Rs.15 per unit. On
December 28, 2009 the company made its last sale for the year when it sold 10
units. Calculate Cost of Goods Sold based on following methods. Complete
Calculation must be shown:
A)
B)
C)
D)
LIFO periodic
LIFO perpetual
FIFO periodic
FIFO perpetual
-.-.-.-.-.-

ACCOUNTING FOR FINANCIAL SERVICES
Q.1
Q.2
List 04 revenue and expenditure items for financial institutions.
Q.3
List 2 off balance sheet items for financial institutions.
Q.4
The following financial statements are from the 2010 Annual Report of the
Niagara Company:
Income Statement for Year Ended December 31, 2010
US$
Sales
Cost of goods sold
Depreciation expense
Sales and general expense
Interest expense
Income tax expense
Net income
1,000
(650)
(100)
(100)
(50)
(40)
60
Balance Sheets at December 31, 2009 and 2010
2009
2010
US$
US$
ASSETS
Cash
Accounts receivable
Inventory
Current assets
Fixed assets (net)
Total assets
50
500
750
1,300
500
1,800
60
520
770
1,350
550
1,900
100
590
10
700
300
75
615
20
710
350
LIABILITIES AND EQUITY

Notes payable to banks
Accounts payable
Interest payable
Current liabilities
Long-term debt
Page 1 of 4

Deferred income tax
Capital stock
Retained earnings
Total liabilities & equity
Required:
300
400
100
1,800
310
400
130
1,900
Cash Flow statement by using Indirect Method
Q.5
Explain the closing process through expense and revenue summary

account.
Q.6
Identify which general accounting principle best describes each of the following
practices:
Q.7
(a)
Mr. Ali owns both beverages and tourism services. In preparing financial
statements for tourism services, Mr. Ali makes sure that the expense
transactions of beverages are kept separate from tourisms statements.
(b)
In December, 2010, A-Plus Floors received customers order and cash

prepayments to install carpet in a new house that would not be ready for
installation until March, 2011. A-Plus Floors should record the revenue
from the customer order in March 2011, not in December, 2010.
(c)
If Rs 30,000 cash is paid to buy land, the land is reported on the buyers
balance sheet at Rs 30,000.
(d)
A telecommunication company sells talk time through scratch cards. No

revenue is recognized when the scratch card is sold, but it is recognized
when the subscriber makes a call and consumes the talk time.
The following balances are extracted from the books of M/s . Asrar & Bros at
December 31, 210.
Cash
Supplies
Prepaid Insurance
Equipment
Account Payable
Unearned Consulting Revenue
Capital
Withdrawals
Consulting Revenue
Rental Revenue
Rs 3,950
Rs 9,720
Rs 2,400
Rs 26,000
Rs 6,200
Rs 3,000
Rs 30,000
Rs
600
Rs 5,800
Rs
300
The following transactions need to be adjusted as on December 31, 2010.

(a) Remaining unused supplies are Rs 8,670.
(b) Depreciation expense for the period is Rs 375.
(c) Insurance expired during the period Rs 100
Page 2 of 4

(d)
Rs 250 consulting revenue have been earned from the unearned consulting
revenue.
Unpaid salaries Rs 210.
Accrued consulting revenues Rs 1,800.
(e)
(f)
Required:
A)
B)
Q.8
Prepare the adjusted trial balance at December 31, 2010.

Prepare work sheet for the period ended on December 31, 2010.
The following information relates to transactions between a company and its

customers.
Balance as on 1.4.2009 is Rs. 50,000.

Bad debts are 2% and discount to the customers is given @ 1% of the
opening balance of Sundry Debtors.
Returns from the customers are Rs 3,000
Cash received from Debtors is Rs. 2,30,000.
Cash received from Debtors in transit is Rs. 14,000.
Cash Sales are Rs. 5,00,000.
Credit Sales are Rs. 2,50,000.
Required:
Q.9
Calculate the amount of Sundry Debtors as on 31.3.2010.
Table shows the balance sheet and income statement of ABC ltd. As on 31st
December, 2010.
Balance Sheet
Fixed Assets
Current Assets
Investments
Capital
Reserves
Long Term loans
Current Liabilities
Income Statement
100,000
50,000
20,000
Sales
COGS
Operating Expenses
170,000
Depreciation
5,000
Interest
2,000
20,000
80,000
40,000
30,000
170,000
Required:
100,000
20,000
10,000
Tax
Total Expense
10,000
47,000
Profit
53,000
Compute Return on Capital Employed (ROCE).
Q.10 The following information is collected of accounts receivable of M/s Modern

Chemicals Ltd.
Rupees
Accounts Receivable 1-1-2010
750,000
Less Allowance for Bad Debt Account
100,000
Page 3 of 4
Total Rs
Credit Sales for the year 2010
650,000
2,800,000
Other transactions during the year were as under:

Accounts Receivable written off
75,000
Cash collection against credit sales
1,900,000
Account Receivable recovered which were written off previously
25,000
Compute the following:

A) Accounts Receivable outstanding as on 31st December, 2010.
B)
The management estimates that 1.5% of its credit sales will prove to be
uncollectible. Make provision under income statement approach.
C)
Pass journal entry for the amount of provision computed at (B) above
and prepare a T account showing the balance which will appear against
Allowance for Bad Debt Account at the close of the year.
-.-.-.-.-.-
Page 4 of 4

Accounting for Financial Services Stage-II
Section-I
Multiple Choice Questions

Number of Questions: 30
Marks: 45
Allotted Time: 60 minutes
Section-II
Constructed Response Questions
Number of Questions: 08
Marks: 55
Allotted Time: 120 minutes
Page 1 of 6

Q.31 Following data pertains to the Yakjehti Bank. Identify which of the
following transactions shall be classified as Operating, Investing and
Financing activities.
Exhibit: Business Transactions
Sl.
Transactions
Repurchased own outstanding stock
Purchased additional machinery
Fixed capital expenditure
Dividend income received
Dividend paid to stock holders
Net investments in securities, associates and joint venture
Lending to financial institutions
Proceeds from sale of fixed assets
Exchange adjustments
10 Borrowings from financial institutions
Page 2 of 6
Classification

Q.32 The following data pertains to company A:
Acquisition cost of asset
Salvage value
Useful life
Cash flow per year
Accumulated depreciation
Expected output of machine
Rs.60,000
Rs. 5,000
5 years
Rs.10,000
Rs. 6,000
20,000 units
Use the above data to answer the following:

A.
Calculate the first years depreciation expense based on straight

line method (SLM) and double declining method (DDM)?
B.
Compared to reported equity using Double declining method, if the

company A had used straight line method to calculate the
depreciation expense, the equity would have been lower same or
higher in initial years? Justify your answer.
C.
What will be the effects on cash flow statement in each method?

Justify your answer.
Q.33 Return on equity is one of the measures of profitability commonly used

to evaluate the return generated on investors investments. Following
data pertains to Aquarius Manufacturing Co.
Financial Ratios
Operating Margin
Return on Assets (%)
Assets to Equity ratio
Tax burden
Interest burden
Asset turnover
2007
0.12
5.76%
1.2
0.5
0.6
1.6
2008
0.1
5.13%
1.53
0.51
0.61
1.65
A.
Calculate the return on equity for FY2007 and FY2008 using the
above data?
B.
Has the companys Return on Equity (ROE%) changed i.e.

decreased or increased or remained constant in FY 2008
against previous year?
C.
What are the factors that gave rise to that change? Briefly justify
your answer.
Q.34 A)
Describe how trial balance is prepared.

importance.
Q.34 B)
Briefly state Adjusted Trial Balance and its purpose.
Page 3 of 6
Explain its

Q.35 On 1 October 2009 M/s Jami Solutions entered into an agreement to
lease a generator that had an estimated life of 10 years. The lease period
is for four years with annual rentals of Rs. 5,000 payable in advance from
1 October 2009. The generator is expected to have a nil residual value at
the end of its life. It has a fair value of Rs. 50,000 at the inception of the
lease.
A.
Identify the type of lease.
B.
Show journal entries to record lease transaction and related

depreciation expense.
C.
How should the lease be accounted for in the income statement and
Balance Sheet of M/s Jami Solution for the year end on 31 March
2010?
Q.36 With reference to the quality of financial statements, define the following
concepts.
A.
Reliability
B.
Relevance
C.
Prudence
D.
Materiality
E.
Accounting period
Q.37 Osaka manufacturing uses general journal to record its day to day
business transactions. Osaka recently purchased a production plant to
meet the increasing demand of the product. Sequence of the
transactions relating to the plant is given below
A.
On 1 January 2010, purchased a plant for cash Rs. 1,000,000.
B.
On 3 December 2010, recorded depreciation expense using straight

line method with 10 years of useful life and zero salvage value
estimated after ten years.
C.
On 1 January 2011, sold the plant for Rs. 1,000,000 cash.
Question:
Create the general journal entries using the above sequence of

transactions.
Q.38 Suppose you are working as a credit analyst in You Bank. Your manager
has asked you to prepare a comparative analysis of the business
performance of two similar businesses, M/s Yarn Expert and M/s Cotton
Cares to decide further credit line.
The financial accounts of the two firms are as under:
Page 4 of 6
M/sYarn Expert
M/s Cotton Cares
Balance Sheet
Assets
Cash & cash Equivalents
Notes receivable
Inventory
Operating Fixed Assets
Other Assets
Total Assets
4,000
7,000
5,000
18,000
5,000
8,000
13,000
16,000
33,000
6,000
39,000
76,000
4,000
7,000
13,000
11,000
4,000
5,000
8,000
24,000
16,000
23,000
39,000
76,000
Liabilities & Stockholder's Equity

Accounts payable
Notes payable
Bonds payable
Capital
Retained Earnings
Total Liabilities & Stockholder's Equity
Income Statement
Sales
Cost of Goods Sold
Gross Margin
60,000
41,800
18,200
95,000
67,000
28,000
Selling Expense
Interest expenses
Income Tax
Total Operating expenses
9,000
4,000
2,000
1,800
16,800
12,000
6,000
3,600
3,500
25,100
Net Income
1,400
2,900
Operating Expenses
Additional information:
Number of shares of M/s Yarn Experts and M/s Cotton Cares is 1,000 and
3,000 respectively.
Market price of shares of M/s Yarn Experts is Rs. 35 and of M/s Cotton
Cares is Rs. 18
Dividend paid by M/s Yarn Experts is Rs. 6 and by M/s Cotton Cares is
Rs. 5.2
Compute the following:
Page 5 of 6

A.
Prepare an analysis of liquidity, using any 3 of the following ratios

current ratio, quick ratio, Average days sales collected, average
days inventory converted.
B.
Prepare an analysis of profitability using any 4 of the ratios from

gross profit margin, net profit margin, asset turnover, returns on
asset, returns on equity, earning per share.
-.-.-.-.-.-
Page 6 of 6

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ACCOUNTING FOR FIANANCIAL SERIVCES

Study for JAIbP

Accounting for Financial Services Stage-I

Please write the alphabate of your choice in the answer column.

Making provision for doubtful debts in anticipation of actual bad debts is

Bonds, obligations under leases, obligations under running finance.

IBP-the knowledge Institute

A worksheet can not be used for which of the following purposes?

A balance sheet summarizes the financial position of an entity for a

A company may use different depreciation methods in its financial

The banks are required to raise their paid-up capital to Rs.3.b by

The process of preparation of trial balance always helps in tracing the

A sales manager is entitled to a 5% commission on net income arrived at after

Use the following data to answer Questions 6 to 9.

Calculate the firms cash flow from operations.

What was the firms cash flow from investing activities?

Calculate the firms financing cash flow.

Loans & Advances

IBP-the knowledge Institute

Cash and balances with treasury banks

IBP-the knowledge Institute

Total Current Liabilities

Profit and Loss Account Excerpts

IBP-the knowledge Institute

Accounting for Financial Services

Accounting for Financial Services - Stage-I

Please write the alphabate of your choice in the answer column.

The purpose of adjusting entries is to:

Apply the realization principle and the matching principle to

Adjust daily balances in assets, liabilities, revenue and expense

Prepare revenue and expense accounts for recording the

Which of the following statements best describes the nature of depreciation:

Allocation of the cost of a fixed asset to the periods in which

Regular reduction of asset value to correspond to decline in the

A process of correlating the carrying value of an asset with its

Which of the following is not the indicator of liquidity position of a bank:

Credit Deposit Ratio

Which of the following is not part of TierI capital of the bank:

Accounting for Financial Services

A bank will always incur net loss if:

Cost of funds exceeds its return on earning assets

Which of the following would not be classified as current assets of a

Which of the following is not an intangible asset:

Software development cost

Revaluation gain / loss on Held for Trading securities is taken to:

The term IFRS refers to:

Information on Financial Reserves and Securities

Accounting for Financial Services

International Financial Reporting System

Software expenses are depreciated on annual basis and charged to

Net book value represents the fair value of an asset net of

If a capital expenditure is erroneously treated as a revenue

The Accounting principle of Consistency require a company to use

Accumulated depreciation represents a fund being accumulated for

The Statement of Cash Flows is designed to assist users in assessing

Bank reconciliation means an analysis that explains the difference

The principle of conservatism takes into account all potential profits

The provision for bad debts is debited to sundry debtors account.

An expenditure incurred on increasing the useful life of a fixed asset

A major objective of accounting for inventories is the proper

Sales + closing stock Purchases- Gross Profit = Opening Stock.

Accounting for Financial Services

Balance sheet can either be made in form or _ form.

The matching principle governs the and_