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ACCOUNTING &
FINANCE
(5566)
Executive MBA/MPA
ZAHID NAZIR
Roll.No. AB523655
Semester:Autumn 2008
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Question 1
a). State the group of persons having an interest in a
business organization and examine the nature of their
information needed. Differentiate between
recordative, interpretative and auditive functions of
Accounting.
Marks: 10
Marks: 10
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a).
• Managers
• Shareholders
• Creditors
• Employees
• Customers
• Banks
• Financial Investors
• Suppliers
• Labour Union
• Potential Investors
CREDITORS
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EMPLOYEES
GOVERNMENT
MANAGEMENT
Organizations may or may not exist for the sole purpose of profit.
However, information needs of the managers of both kinds of
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CONSUMERS
RECORDATIVE FUCTION
INTERPRETATIVE FUNCTION
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AUDITIVE FUNCTION
b)
The data reports are prepared on a historical basis in the following
manner. First the data is created and collected on the basis of either
historic or predictive method. The professional methods like:
• Manual
• Mechanical
• Electronic
After the historic data is collected, it is recorded in accordance with
generally accepting accounting theory. A large number of
transactions or events have to be entered in the books of original
entry i.e. journal and ledgers in accordance with the classification
scheme already decided upon. Professional methods lead to data
recording which consist of accounting method. After this data is
evaluated by different methods like internal auditing etc. At the end
we get data reporting activity which may be internal or external.
Historic Predictive
Data Reporting
External Internal
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Question 2
a). Examine the role of accounting concepts in the preparation of
financial statements. Do you find any of the accounting
concepts conflicting with each other? Give examples.
Marks: 10
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a).
ACCOUNTING CONCEPTS
Accounting concepts are the ground rules of accounting that are (or
should be) followed in preparation of all accounts and financial
statements.
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8). Entity:
Profit can be realized only after capital of the firm has been
restored to its original level, or is maintained at a
predetermined level.
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12). Matching:
13). Materiality:
16) Objectivity:
17). Realization:
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Question 3
Dr. Fazal Karim, a psychologist, moved from Shikarpur to set up an office
in Islamabad. After one month, the business had the following assets.
Cash in hand Rs. 2,800
Cash at bank Rs. 25,000
Debtors Rs. 12,680
Office Supplies Rs. 8,000
Office Equipment Rs. 70,500.
Marks: 20
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BALANCE SHEET
Debtors 13,850
Office 1,07,100
Equipments
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Question 4
Following is the summarized Profit and Loss account of
Khan Enterprises for five consecutive periods. Complete
the same by supplying the missing information:
1 2 3 4 5
Sales 1000 3000 5000
Cost of Goods 500 800 2500 3000
Sold
Gross Profit 700 1000 1500
Admin Expenses 100 300 400
Selling & 150 200 500 600
Distribution Exp
Operating Profit 200 400 1000
Other Incomes 150 200 500
Net Profit 300 1000
Before Tax
Corporate 200 300
Income Tax
Profit after Tax 150 500 800
Marks: 20
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1 2 3 4 5
Sales 1000 1500 3000 4000 5000
i.e.
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Question 5
a). Equipment costing Rs.76,000 was purchased by Saqib
Corporation, at the beginning of the current year. The
company will depreciate the equipment by the
declining-balance method, but it has not determined
whether the rate will be at 150 percent or 200 percent
of the straight line rate. The estimated useful life of
the equipment is eight years. Prepare a comparison of
the two alternative rates for management for the first
two years Saqib Corporation owns the equipment.
Marks: 10
Marks: 10
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a).
Solution:
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b).
COST ACCOUNTING
• measuring performance
• reducing or managing costs
• determining the fees or prices for goods and services
• deciding to authorize, modify or discontinue a program or
activity
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COST
The amount of expenses (actual / notional) incurred on or
attributable to a given thing is called cost.
ELEMENTS OF COST
The elements of cost are shown in the following figure.
COST
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i) MATERIALS
ii). LABOUR
iii). EXPENSES
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