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Question No: 43 ( Marks: 3 )

For what purpose Prospectus is issued by the Companies?

Question No: 44 ( Marks: 3 )


Paid up capital on 1st January, 2007 was 124,000 shares of Rs. 10 each

Fresh issue of share capital on 31st March, 2007 was 24,000 shares of Rs. 10 each

Profit before tax 330,000

Tax rate 40%.p.a

Then, calculate Earning per share for 2008.

Question No: 45 ( Marks: 3 )


ABC Limited exchanged Oil with XYZ Limited,

Particulars Rs.

Cost of Oil given up by ABC Limited 10,000

Cost of Oil received by ABC Limited 10,000


Pass Journal Entries in the books of both parties.

Question No: 46 ( Marks: 5 )

Classify the followings as Operating, Investing or Financing activities:

Sr.#.                             Entries                                                                        Classification

0                      Change in Accounts receivable and Inventory          Operating activity

1       Change in Property, Buildings and Equipment                                 investing activity

2     Change in Accumulated depreciation & amortization             operating activity

3     Change in Accounts payable, Accrued wages & Salaries payable   operating activity

4      Change in Note payable                                                                  operating activity

5          Net income                                                                                 operating activity


Question No: 47 ( Marks: 5 )

What are the different ways of defining Contingent Liabilities with respect to IAS-37?

Question No: 48 ( Marks: 10 )

For the year ended 31st December 2007, ABC Company reported a Net Income of Rs.

84,000. The opening and closing balances of Current assets and Current liabilities were

as follows:

Current Assets:          2007                                       2006

Rs. Rs.

Cash                             60,000                                       80,000

Accounts receivable      250,000                                    190,000

Inventory                      437,000                                     360,000

Prepaid expenses          12,000                          14,000

Current liabilities:

Accounts payable          420,000                                     390,000

Accrued liabilities          8,000                                        12,000

Company s Income Statement for the most recent year was as follows:

ABC Company

Income Statement

For the year ended 31st December, 2007


Sales                                        1,000,000

Less: Cost of goods sold            580,000

Gross margin                             420,000

Less Operating expenses           300,000

Income before taxes                  120,000

Less income taxes (30%)           36,000

Net Income                               84,000


Using the direct method, convert the company s Income Statement to a cash basis if the

depreciation charges were Rs. 50,000 and the Deferred Income Taxes on the balance

sheet increased by Rs. 60,000 during the year.

An asset has been leased on July 01, 2005 at a cost of Rs. 871,000. The security deposit Rs. 300,000 and lease rentals include 4 annual installments of Rs. 200,000 each, starting from June 30, 2006. The implicit rate of return (IRR) is 15% p.a. Depreciation is to be charged at 20% on written down method and Residual value is Rs. 200,000.

Draw the entries for the following:

1. Recording of asset at the inception of lease

2. Recording of current maturity at the inception of lease

3. Payment of security deposit

4. Payment of first rental installment as on June 30, 2006

5. Recording of current maturity as on June 30, 2006

Question No: 49 ( Marks: 10 )

Briefly describe the disclosure requirements of Operating Lease with respect to standard.


Q. 29: (Marks 3)


  • Cost of investment                                         Rs. 17,401,095
  • Company’s share in loss of subsidiary                     Rs.   3,129,441



             How would you disclose this matter in notes to the accounts for the year 2008?




We will disclose this matter in notes to the accounts for the year 2008 as follows:


Investment in Subsidiary:


Cost of Investment                                                        Rs. 17,401,095

Company’s share in loss of subsidiary               Rs.   3,129,441

Net Investment                                                          Rs.  14,271654


Q. 30: (marks 3)

What items are included in Notes to the accounts of Stock In Trade?




The following items may be included in Notes to the Accounts of Stock in Trade:


  • The Accounting Policy adopted
  • Method of Stock Valuation
  • Net Realizable Value Concept method
  • Cost Method

Q. 31: (Marks 5)

What do you know about the Bad Debts and Doubtful debts? What factors determine the debts are bad?




Doubtful Debts:


Such debts which have been doubted that those debts are not recoverable are recorded in the head of Doubtful Debts.


Bad Debts:


Such debts which are not receivables conformingly are recorded as Bad debts and are written off in the current period as an expense.


Factors that determine bad debts are:


  • The debtor has been shifted to foreign forever
  • The debtor has been bankrupted
  • The debtor has been escaped without any intimation


Q. 32: (Marks 5)

Define Current Liabilities. What heads should be included in Current Liabilities?




Current Liabilities:


The current liabilities are all of such liabilities which are expected to be paid within on accounting or period or within 12 months period.


Heads of Current Liabilities:


Mainly the current liabilities are classified into following categories:

  • Trade Payables
  • Interest Payables
  • Accrued Expenses
  • Short term Borrowings
  • Current portion of long term liabilities
  • Others (to be specified)

Explain in light of IAS 7 "Cash Flows" what is meant by Cash Flow from

Investing Activities? Give examples.


What is the method of recognition in case of exchange of similar assets?

What are the disclosure requirements of the Companies Ordinance 1984 for

Contingent Liabilities?


What conditions are to be satisfied for recognition of revenue from sale of



Briefly explain the following methods for measurement of elements of

financial statement:

Historical cost

Current cost

Realizable value

Present value


How is a surplus on revaluation of assets treated?


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