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FINALTERM EXAMINATION

FALL 2006

MGT401 - FINANCIAL ACCOUNTING II (Session - 1 )

Marks: 60

Time: 120min

StudentID/LoginID: ______________________________

Student Name: ______________________________

Center Name/Code: ______________________________

Exam Date: Monday, February 19, 2007

VIRTUAL UNIVERSITY OF PAKISTAN

Financial Accounting II (MGT401)

FINAL TERM EXAM (1) (Fall 2006)

Total Marks: 60Please read the following instructions carefully before attempting any question: All questions are compulsory.

This exam consists of 15 Multiple Choice Questions (MCQs) of 1 mark each, 5 True/False of 1

mark each, 5 fill in the blanks of 1 mark each, 3 Short questions carry 5 marks each and 2

Descriptive questions carry 10 marks each.

For each Multiple Choice Question, read the options available and select which you consider is the

correct option.

This examination is closed book, closed notes and closed neighbours.

Do not ask question about the contents of this examination from anyone.

You may wish to pace yourself with your own watch, but the Supervisor will be the official

timekeeper of the test.

Failure to comply with the Supervisor’s directions will result in your test being cancelled. Please

comply with supervisor’s directions to avoid any unpleasant event.

For Teacher's use only Question 1 2 3 4 5 6 7 8 9 10 Total

Marks Question 11 12 13 14 15 16 17 18 19 20

Marks Question 21 22 23 24 25 26 27 28 29 30

Marks Question No: 1 ( Marks: 1 ) - Please choose one Issuance of shares at discount is the inverse of: ►

Issuance of Bonus

►

Issuance at Premium

►

Right Shares Issue

►

Further Issue

Question No: 2 ( Marks: 1 ) - Please choose one A private company is not required to issue a _________ as it is prohibited by its articles from inviting general public to subscribe for its shares. ►

Cash flow statement

►

Prospectus

►

Income statement

►

Balance sheet

Question No: 3 ( Marks: 1 ) - Please choose one Risks and rewards associated with the ownership related to: ►

Finance Lease

► Operating Lease

►

Hire Purchase Agreement

►

Installments

Question No: 4 ( Marks: 1 ) - Please choose one Minimum lease payment(MLP) includes from lessor point of view: ►

Total payment

►

Residual value guaranteed by lessee

►

Party related to him or third party

►

All of the given options

Question No: 5 ( Marks: 1 ) - Please choose one In operating lease, rental expenses should be charged to: ►

Balance sheet

►

Profit and loss account

►

Income of lessee

►

None of the given options

Question No: 6 ( Marks: 1 ) - Please choose one Fair presentation means: ► Application of Companies Ordinance, 1984

►

Income Tax Ordinance, 2001

►

IAS with additional disclosure

►


Question No: 7 ( Marks: 1 ) - Please choose one Rendering of services, revenue associated with the transaction can be estimated reliably when, which of the following conditions are satisfied: ►

The amount of revenue cannot be measured reliably

►

It is doubtful that economic benefits associated with the transaction will flow to the entity

►

The stage of completion of the transaction at the balance sheet date can be measured reliably

►

The cost incurred for the transaction and the cost to complete the transaction cannot be measured reliably

Question No: 8 ( Marks: 1 ) - Please choose one Which transaction will cause an increase in capital employed: ►

Receipt of payment from account receivables in cash

►

Increasing the provision for bad debts

►

Receipt of a loan

►

Disposal of a fixed asset for more than its book value

Question No: 9 ( Marks: 1 ) - Please choose one Income statement formats based on classification of: ►

Expenses

►

Incomes

►

Revenues

►


Question No: 10 ( Marks: 1 ) - Please choose one Preliminary expenses are an example of: ►

Revenue expenditure

►

Deferred revenue expenditure

►

Capital expenditure

►


Question No: 11 ( Marks: 1 ) - Please choose one The stock sheet for the previous year was incorrectly undercasted by Rs. 200,000, whether it is: ►

Changes in accounting policy

►

Change in accounting estimate

►

Prior period error

►


Question No: 12 ( Marks: 1 ) - Please choose one An example of cash flows from operating activities is: ►

Cash receipt from sale of goods and rendering of services

►

Cash payment to acquire property plant and equipment

►

Proceed from short term financing

►

Cash payment and receipt from acquisition and disposal other long term assets

Question No: 13 ( Marks: 1 ) - Please choose one Inventories are carried in the books of accounts according to the methods of valuation given in: ►

IAS 28

►

IAS 2

►

IAS 4

►

IAS 29

Question No: 14 ( Marks: 1 ) - Please choose one A public company is required to file a _____________with SECP before allotment of shares. ►

Prospectus

►

Statement in lieu of prospectus

►

Articles of Association

►


Question No: 15 ( Marks: 1 ) - Please choose one According to the International Accounting Standards any decrease in the value of goodwill is made with the help of: ►

Amortization

►

Impairment

►

Depreciation

►


Question No: 16 ( Marks: 1 ) - Please choose one Fractional shares shall not be offered and all fractions less than a share shall be consolidated and disposed of by the company. ►

True

►

False

Question No: 17 ( Marks: 1 ) - Please choose one IAS 20 “Employee Benefits” – specifies calculation, recording and reporting of retirement benefit related costs of the entity. ►

True

►

False

Question No: 18 ( Marks: 1 ) - Please choose one Lease payments are recognized as expense and sublease payments received are recognized as income,

in the books of lessee. ►

True

►

False

Question No: 19 ( Marks: 1 ) - Please choose one Creditors (long and short term) are more interested in profitability rather than an entity’s ability to repay them. ►

True

►

False

Question No: 20 ( Marks: 1 ) - Please choose one An entity shall not present any items of income and expense as extraordinary items, either on the face of the income statement or in the notes. ►

True

►

False

Question No: 21 ( Marks: 1 ) _______________ in the lease is the discount rate that, causes the aggregate present value of minimum lease payments to be equal to the fair value of the leased asset. Question No: 22 ( Marks: 1 ) IAS 1 suggest certain order for the notes to the account, these notes are helpful for users when comparing different _________ of different entities. Question No: 23 ( Marks: 1 ) __________ include expense incurred on administration and management of the business. Question No: 24 ( Marks: 1 ) ___________ is the current estimate of discounted value of future cash flows.

Question No: 25 ( Marks: 1 ) ______________ are those liabilities that depend on happening of an event. Question No: 26 ( Marks: 5 ) Briefly describe major classifications of expenses that are to be presented on the face of balance sheet. Question No: 27 ( Marks: 5 ) An organization with a called up and paid up capital of 200,000 ordinary shares of Rs. 10/- each and also 20,000, 10% Preference shares of Rs. 10/- each. The organization manufactures spare parts. The gross profit was Rs. 600,000. The organization paid the required preferred share dividend and declared @ Rs. 1/- per share. Required: Assuming an income tax rate 20% show the trading results and EPS of the organization. Question No: 28 ( Marks: 5 ) Differentiate between: (2.5+2.5)

1. Wholly Owned and Partially Owned Subsidiaries. 2. Direct and Indirect Subsidiaries

Question No: 29 ( Marks: 10 ) Under what conditions a Company can buy its own shares, what is the mode for such purchase and if the company make default in compliance with this section what are the penalties?(6+4) Question No: 30 ( Marks: 10 ) Briefly explain the following terms: (2.5x4)

a. Inception of lease b. Lease term c. Guaranteed residual value d. Interest rate implicit

o Recognized as asset in the balance sheet Contingent assets are:

Question No. 1 Marks : 01

Total Marks: 50 Total Questions: 26

Failure to comply with the Supervisor's directions will result in your test being cancelled. Please comply with supervisor's directions to avoid any unpleasant event.

Remember not to spend too much time on any one MCQ. Since all MCQ's carry equal marks, it is important to manage your time and responses to test questions effectively.

A clock is given in the exam software. Software will automatically be closed at the end of 150 minutes.

Do not click the "Finish button" while solving your paper. Once you clicked the "Finish" button, you will not be able to access your paper again. Click it at the end of your paper. That means you have submitted your complete paper.

Save your answer before proceeding to the next question.

For each MCQ question, read the choices available and select the choice which you consider is the correct answer, by clicking on the appropriate check box.

You should try to complete MCQ's in 25 - 30 minutes in order to give yourself 120 - 125 minutes for descriptive questions.

Each MCQ and True False carry 2 Marks each and Descriptive Questions carry 5 Marks each.

This exam consists of 10 Multiple Choice Questions (MCQ's), 10 True False and 6 descriptive questions.

All questions are compulsory. INSTRUCTIONS:

Time Allowed: 150 Minutes

Final Term Examination – Spring 2005

MGT401 Financial Accounting II

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Repurchased shares can be reissued by Public Unlisted Companies.


o You have returned goods worth Rs. 150 which the supplier has not yet accounted for

o You have paid the supplier Rs. 150 which he has not yet accounted for

o The supplier has allowed you Rs. 150 cash discount which you had omitted to enter in your ledgers

o The supplier sent an invoice for Rs. 150 which you have not yet received.

A supplier sends you a statement showing a balance outstanding of Rs. 14,350. Your own records show a balance outstanding of Rs. 14,500/-


o d: Both (b) and (c) o c: Physical Assets

a: Investments oo b: Prepaid Expenses

Which assets are specifically excluded from Financial Assets: Question No. 4 Marks : 01

o False o True

According to IAS 2 Inventories are assets that are not held for sale in the ordinary course of business.


o False o True

A reduction of share capital can be effected through an ordinary resolution.


oo None of the given options

Disclosed in the financial statements o Any of the given options depending upon certain condition


o False o True

Accounting policy once selected can never be changed.


o Profit is earned only if the value of an organization's net assets or its operating capability has increased during the accounting period.

o Fixed assets should be properly maintained.

o A business should invest its profits in the purchase of capital assets.

o The capital of a business should be kept intact by not paying out dividends.

The capital maintenance concept implies that:


o None of the given options o Both (a) and (b)

o b: liabilities to pay for goods or services that have been received or supplied and have been invoiced or formally agreed with the supplier

o a: possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity

Contingent liabilities are: Question No. 8 Marks : 01

How is a surplus on revaluation of assets treated?


True oo False

50 oo 58

Stock is valued using FIFO. Opening stock was 10 units at 2 each. Purchases were 30 units at Rs. 3 each, then issues of 12 units were made, followed by issues of 8 units. Closing stock is valued at:

Question No. 1 6 Marks : 01

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


o False o True

According to IAS 38 an intangible asset should be measured initially at cost.


o False o True

The premium collected by a company on issue of shares can be distributed among its existing shareholders only.


o None of the given options.

o All the payments that the lessee can be required to pay to the lessor

o The contingent rent payable by lessee o The lease rentals payable by the lessee to the lessor

Minimum Lease Payments are: Question No. 12 Marks : 01

• Present value • Realizable value • Current cost • Historical cost

Briefly explain the following methods for measurement of elements of financial statement:

True oo False

IAS 23, "Borrowing Cost" requires capitalization of borrowing cost as a benchmark treatment.


o Has been replaced in accounting records by a system of current cost accounting.

o Values all assets at their cost to the business, without any adjustment for depreciation.

o Records only past transactions. o Fails to take account of changing price levels over time.

The historical cost convention: Question No. 20 Marks : 01

oo Both (b) and (c)

c: Charged to share premium account o Both (a) and (b)

o b: Written off as expense o a: Shown as reduction in share capital.

Discount allowed on issue of shares is: Question No. 1 9 Marks : 01

What are the disclosure requirements of the Companies Ordinance 1984 for Contingent Liabilities?


o False o True

Private Limited companies are not required to issue prospectus for issue of shares.


60 oo 70

Explain in light of IAS 7 "Cash Flows" what is meant by Cash Flow from Investing Activities? Give examples.


o False o True

A revaluation loss is charged to profit and loss account in the period in which the revaluation is carried out.


o False o True

While preparing a cash flow principal payment made under a lease finance arrangement is shown under financing activities.


o Excess of expenditure over income o Ability of a business to pay its debts in time o Income generating capability of the business o Excess of income over expenditure

Liquidity is: Question No. 23 Marks : 01

What is the method of recognition in case of exchange of similar assets? Question No. 22 Marks : 05

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1. A private company

i

______________is not required to issue a prospectus as it is prohibited by its article from nviting general public to subscribe for its shares.

Q

uestion No. 4 Marks : 1

3. IAS 16 4. IAS 28

2. IAS 4 1. IAS 2

t

Property, plant and equipment are carried in the books of accounts in accordance with he requirements of :

Q


3. Statutory Meeting 4. None of the given options

2. Extra Ordinary Mee1. General Meeting

ting

_

The issue of the shares at discount must be authorized by resolution passed in ______________of the company and must be sanctioned by the Commission.

Q


Finance cost includes ___________ paid on loan, lease and other costs paid to obtain financial services.

Q


Time Allowed: 150 Minutes Final Term Examination – Spring 2006

MGT401

Q

3. = Weighted average number of ordinary shares / Net profit or loss for the period = Earnings

2. = Net profit or loss for the period x Weighted average number of ordinary shares 1. = Net profit or loss for the period /Weighted average number of ordinary shares

B Q

3. Long term Murabaha 2. Liabilities against asse1. Debentures

E Q

1. True

Cash flow statement is d

Q

3. Rebate 2. Discoun1. Premium

T Q

3. Conventional2. Historical cost 1. Borrowing cost

fu

Interest and other co

Q

3. A listed company

4. A non listed company


sts incurred by an enterprise in connection with the borrowing of nds is known as:

cost 4. Current cost


he amount in excess of the face value of the share is called:

t

4. Interest


ivided into four components: Operating, Financing, Investing, and Leasing Activities.

2. False


xample of Non-Current Liabilities under 4th schedule is:

ts subject to finance lease

4. All of the given options


asic EPS should be calculated by:

4. – Profit attributable to Preference Shareholders /Net profit or loss for the period


2. A public company

Q

1. True

Royalties shall be recogni

Q

Cash payments to Owners i.e. dividend, drawings etc Cash receipt from sale of Property, Plant and Equipme

fl

Question No. 14 Marks : 1 Following are the examples of the cash

a

The aggregate amount or the value

Q

3. Any amount that is guar2. All lease rentals 1. Initial payment o

In Q

3. The Operation of law 2. A Legislation 1. A Contract

Q it

n? Explain s content as per lay down under section 53 of Companies Ordinance 1984.


A legal obligation is an obligation that derives from:

4. All of the given options


lease agreement, minimum lease payments include:

r down payment

anteed to be paid during or at the end of the lease term 4. All of the given options


of the premium on shares shall be transferred to an ccount, called ________________

flows. Write the names of components of cash

ow to which they are directly related:

nt



zed on an accrual basis in accordance with the substance of the relevant agreement.

2. False


What is the importance of Prospectus under section 2 (1) 29 in an organizatio

Recording and disclosure on gains / losses arising from foreign currency transactions is included in IAS 21 titled as ________________________ .


5. Recording of current maturity as on June 30, 2006 4. Payment of first rental installment as on June 30, 2006 3. Payment of security deposit 2. Recording of current maturity at the inception of lease 1. Recording of asset at the inception of lease

Draw the entries for the following:

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.


4. None of the given options 3. A revaluation under IAS 16 Property, Plant and Equipment 2. A change in Accounting Policy 1. No change in Accounting Policy under IAS 8

In case of tangible non-current assets, if a policy of revaluation is adopted for the first time, then this is treated as:


4. None of the given options 3. Fixed assets are installed under finance lease 2. A disposal of fixed assets 1. An addition of fixed assets has been taken place

If the closing balance is lower than the difference of the opening balance and depreciation for the Year, it shows:


Comments the above example in accordance to IAS 37, should there any legislative requirement or provision be recognized or not?

A Furnace has a lining that needs to be replaced every 5 years due to technical reasons. At the balance sheet date, the lining has been in use for 3 years.

Question No. 27 Marks : 1 Differentiate between Profit Oriented and Non-Profit Oriented entities. Question No. 26 Marks : 1

2. False 1. True

The information as to profitability is provided by the balance sheet of the entity. Question No. 25 Marks : 3

4. Asset 3. Liability 2. Deferred Liability 1. Equity

If an entity declares dividends to the holders of equity instruments after the balance sheet date, the entity shall not recognize those dividends as a :


4. Excess of expenditures over income 3. Ability of a business to pay its debts in time 2. Income generating capability of the business 1. Excess of income over expenditures

Liquidity is defined as: Question No. 23 Marks : 1

__________________ is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated cost necessary to make the sale.


2. False 1. True

Right shares are issued when accumulated profit is being capitalized by the issuance of shares.


2. False 1. True

A contractual arrangement whereby, two or more parties undertake, an economic activity which is subject to join control, is called Subsidiary Companies.


Differentiate between Finance Lease and Operating Lease. Question No. 31 Marks :1

4. IAS 32 3. IAS 39 2. IAS 12 1. IAS 17

Lease accounting is regulated by __________which was introduced because of abuses in the use of lease accounting by companies.


4. Both Prepaid Expenses & Physical Assets 3. Physical Assets 2. Prepaid Expenses 1. Investments

Which of the following asset is specifically excluded from Financial Assets: Question No. 29 Marks : 1

Under IAS 33 ______________________is widely used by investors as a measure of a company’s performance.


How many ways are there to reduce the share capital of a company? Write down their names with sections.

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FINALTERM EXAMINATION

FALL 2006


Marks: 60

Time: 120min


Student Name: ______________________________

Center Name/Code: ______________________________

Exam Date: Monday, February 19, 2007

VIRTUAL UNIVERSITY OF PAKISTAN


FINAL TERM EXAM (1) (Fall 2006)

Total Marks: 60Please read the following instructions carefully before attempting any question: All questions are compulsory.

This exam consists of 15 Multiple Choice Questions (MCQs) of 1 mark each, 5 True/False of 1

mark each, 5 fill in the blanks of 1 mark each, 3 Short questions carry 5 marks each and 2

Descriptive questions carry 10 marks each.


correct option.

This examination is closed book, closed notes and closed neighbours.





comply with supervisor’s directions to avoid any unpleasant event.


Marks

Question 11 12 13 14 15 16 17 18 19 20 Marks

Question 21 22 23 24 25 26 27 28 29 30 Marks

Question No: 1 ( Marks: 1 ) - Please choose one Issuance of shares at discount is the inverse of: ►

Issuance of Bonus

►

Issuance at Premium

►

Right Shares Issue

►

Further Issue

Question No: 2 ( Marks: 1 ) - Please choose one A private company is not required to issue a _________ as it is prohibited by its articles from inviting general public to subscribe for its shares. ►

Cash flow statement

►

Prospectus

►

Income statement

►

Balance sheet

Question No: 3 ( Marks: 1 ) - Please choose one Risks and rewards associated with the ownership related to: ►

Finance Lease

►

Operating Lease

►

Hire Purchase Agreement

►

Installments

Question No: 4 ( Marks: 1 ) - Please choose one Minimum lease payment(MLP) includes from lessor point of view: ►

Total payment

►

Residual value guaranteed by lessee

►

Party related to him or third party

►


Question No: 5 ( Marks: 1 ) - Please choose one In operating lease, rental expenses should be charged to: ►

Balance sheet

►

Profit and loss account

►

Income of lessee

►


Question No: 6 ( Marks: 1 ) - Please choose one Fair presentation means: ►

Application of Companies Ordinance, 1984

►

Income Tax Ordinance, 2001

►

IAS with additional disclosure

►


Question No: 7 ( Marks: 1 ) - Please choose one Rendering of services, revenue associated with the transaction can be estimated reliably when, which of the following conditions are satisfied: ►

The amount of revenue cannot be measured reliably

►

It is doubtful that economic benefits associated with the transaction will flow to the entity

►

The stage of completion of the transaction at the balance sheet date can be measured reliably

►

The cost incurred for the transaction and the cost to complete the transaction cannot be measured reliably

Question No: 8 ( Marks: 1 ) - Please choose one Which transaction will cause an increase in capital employed: ►

Receipt of payment from account receivables in cash

►

Increasing the provision for bad debts

►

Receipt of a loan

►

Disposal of a fixed asset for more than its book value

Question No: 9 ( Marks: 1 ) - Please choose one

Income statement formats based on classification of: ►

Expenses

►

Incomes

►

Revenues

►


Question No: 10 ( Marks: 1 ) - Please choose one Preliminary expenses are an example of: ►

Revenue expenditure

►

Deferred revenue expenditure

►

Capital expenditure

►


Question No: 11 ( Marks: 1 ) - Please choose one The stock sheet for the previous year was incorrectly undercasted by Rs. 200,000, whether it is: ►

Changes in accounting policy

►

Change in accounting estimate

►

Prior period error

►


Question No: 12 ( Marks: 1 ) - Please choose one An example of cash flows from operating activities is: ►


►

Cash payment to acquire property plant and equipment

►

Proceed from short term financing

►

Cash payment and receipt from acquisition and disposal other long term assets

Question No: 13 ( Marks: 1 ) - Please choose one Inventories are carried in the books of accounts according to the methods of valuation given in: ►

IAS 28

►

IAS 2

►

IAS 4

►

IAS 29

Question No: 14 ( Marks: 1 ) - Please choose one A public company is required to file a _____________with SECP before allotment of shares. ►

Prospectus

►

Statement in lieu of prospectus

►

Articles of Association

► None of the given options

Question No: 15 ( Marks: 1 ) - Please choose one According to the International Accounting Standards any decrease in the value of goodwill is made with the help of: ►

Amortization

►

Impairment

►

Depreciation

►


Question No: 16 ( Marks: 1 ) - Please choose one Fractional shares shall not be offered and all fractions less than a share shall be consolidated and disposed of by the company. ►

True

►

False

Question No: 17 ( Marks: 1 ) - Please choose one IAS 20 “Employee Benefits” – specifies calculation, recording and reporting of retirement benefit related costs of the entity. ►

True

►

False

Question No: 18 ( Marks: 1 ) - Please choose one Lease payments are recognized as expense and sublease payments received are recognized as income, in the books of lessee. ►

True

►

False

Question No: 19 ( Marks: 1 ) - Please choose one Creditors (long and short term) are more interested in profitability rather than an entity’s ability to repay them. ►

True

►

False

Question No: 20 ( Marks: 1 ) - Please choose one An entity shall not present any items of income and expense as extraordinary items, either on the face of the income statement or in the notes. ►

True

►

False

Question No: 21 ( Marks: 1 ) _______________ in the lease is the discount rate that, causes the aggregate present value of minimum lease payments to be equal to the fair value of the leased asset. Question No: 22 ( Marks: 1 ) IAS 1 suggest certain order for the notes to the account, these notes are helpful for users when comparing different _________ of different entities. Question No: 23 ( Marks: 1 ) __________ include expense incurred on administration and management of the business. Question No: 24 ( Marks: 1 ) ___________ is the current estimate of discounted value of future cash flows. Question No: 25 ( Marks: 1 ) ______________ are those liabilities that depend on happening of an event.

Question No: 26 ( Marks: 5 ) Briefly describe major classifications of expenses that are to be presented on the face of balance sheet. Question No: 27 ( Marks: 5 ) An organization with a called up and paid up capital of 200,000 ordinary shares of Rs. 10/- each and also 20,000, 10% Preference shares of Rs. 10/- each. The organization manufactures spare parts. The gross profit was Rs. 600,000. The organization paid the required preferred share dividend and declared @ Rs. 1/- per share. Required: Assuming an income tax rate 20% show the trading results and EPS of the organization. Question No: 28 ( Marks: 5 ) Differentiate between: (2.5+2.5)

1. Wholly Owned and Partially Owned Subsidiaries. 2. Direct and Indirect Subsidiaries

Question No: 29 ( Marks: 10 ) Under what conditions a Company can buy its own shares, what is the mode for such purchase and if the company make default in compliance with this section what are the penalties?(6+4) Question No: 30 ( Marks: 10 ) Briefly explain the following terms: (2.5x4)

a. Inception of lease b. Lease term c. Guaranteed residual value d. Interest rate implicit

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FALL 2006


Marks: 40

Time: 60min


Student Name: ______________________________

Center Name/Code: ______________________________

Exam Date: Saturday, November 25, 2006

Please read the following instructions carefully before attempting any question: • All questions are compulsory.

• This exam consists of 10 Multiple Choice Questions (MCQs), 5 true false, 5 short

questions and 1 descriptive question.

• Time management is very important. MCQs and fill in the blanks may be solved first

to secure enough time for remaining descriptive question.

• The use of notes, handouts, books or any other helping material is strictly prohibited

in the centre during the exam.

• Please reply the short descriptive question and long descriptive question keeping in

view the marks allocated for each question.

• For each MCQ question, read the choices available and select the choice which you

consider is the correct answer, by clicking on the appropriate check box.

• Save your answer before proceeding to the next question.

• Do not click the “Finish button” while solving your paper. Once you clicked the

“Finish” button, you will not be able to access your paper again. Click it only at the

end after attempting the whole paper, which will be an indication that you have

submitted your complete paper.

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• A clock has been given in the exam software. Software will automatically be closed

after 90 minutes.

• It is your responsibility to manage time and responses to test questions effectively.

• Failure to comply with the supervisor’s directions will result in your test being

cancelled. Please comply with supervisor’s directions to avoid any unpleasant event.


Marks Question 11 12 13 14 15 16 17 18 19 20

Marks Question 21

Marks Question No: 1 ( Marks: 1 ) - Please choose one Which one of the following is the example of non-profit oriented organization: ►

NGO’s

►

Trusts

►

Societies

►


Question No: 2 ( Marks: 1 ) - Please choose one Annual General Meeting (AGM) is required to be held within _________ of incorporation. ►

06 months

►

12 months

► 15 months

►

18 months

Question No: 3 ( Marks: 1 ) - Please choose one The amount by which the carrying amount of an asset exceeds its recoverable amount is called as: ►

Impairment loss

►

Residual value

►

Depreciation

►

Fair value

Question No: 4 ( Marks: 1 ) - Please choose one Which of the following are the examples of development activities? ►

Design, construction and testing of pre-production models

►

Design of tools, jigs moulds dies, involving new technology

►

Design, construction and operation of pilot plant

►


Question No: 5 ( Marks: 1 ) - Please choose one Investments made for long term in associated companies, is recorded using _______method of recognition and shown separately in the balance sheet as long-term assets. ►

Equity

► Cost

►

Both Cost and Equity

►


Question No: 6 ( Marks: 1 ) - Please choose one Costs of purchase of Inventories comprising which of the following: ►

Purchase price

►

Import duties and other taxes

►

Transport less trade discount, rebate and other similar amounts

►


Question No: 7 ( Marks: 1 ) - Please choose one Under Benchmark Treatment IAS-2, does not recommend the following method of stock valuation for incorporating its value in financial statement. ►

FIFO method

►

The weighted average cost method

►

LIFO method

►


Question No: 8 ( Marks: 1 ) - Please choose one A contractual arrangement whereby, two or more parties undertake, an economic activity which is subject to joint control is called ________.

►

Joint Venture

►

Subsidiary Companies

►

Associated Companies

►


Question No: 9 ( Marks: 1 ) - Please choose one An intangible asset with indefinite useful life shall: ►

Be amortized using straight line method

►

Not to be amortized

►

Be amortized using reducing balance method

►

Either be amortized using straight line method OR be amortized using reducing balance method

Question No: 10 ( Marks: 1 ) - Please choose one A complete set of financial statement includes which of the followings: ►

A Balance sheet and Income statement

►

A statement of changes in financial position

►

Notes, other statements and explanatory material

► All of the given options

Question No: 11 ( Marks: 1 ) - Please choose one In the first step of formation of a Company the availability of name is checked from SECP, that is at least two companies with same name can registered. ►

True

►

False

Question No: 12 ( Marks: 1 ) - Please choose one An increase in economic benefits during the accounting period in the form of increase of assets and decrease in liabilities is termed as Expenses. ►

True

►

False

Question No: 13 ( Marks: 1 ) - Please choose one An item of property plant and equipment that qualifies for recognition should be initially measured at its cost. ►

True

►

False

Question No: 14 ( Marks: 1 ) - Please choose one In IAS 23 Qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use. ►

True

►

False

Question No: 15 ( Marks: 1 ) - Please choose one Cash discounts are usually received on bulk purchase and are agreed at the time of negotiation of cost. The cost of inventory is recorded net of these discounts. ►

True

►

False

Question No: 16 ( Marks: 3 )

What is the main objective for the preparation of Financial Statements? Question No: 17 ( Marks: 3 ) Differentiate between Depreciation and Impairment. Question No: 18 ( Marks: 3 ) How many types of relations exist among different companies? Question No: 19 ( Marks: 3 ) Who is responsible for the preparation and maintenance of financial statements of a company? Question No: 20 ( Marks: 3 ) What is the effect of revaluation of asset and how it is adjusted? Question No: 21 ( Marks: 10 ) Explain different types of financial risks that an entity may transfer to another party while undertaking transactions in Financial Instruments?

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Remember not to spend too much time on any one MCQ. Since all MCQ’s carry

equal marks, it is important to manage your time and responses to test questions

effectively.

A clock is given in the exam software. Software will automatically be closed at

the end of 90 minutes.

Do not click the “Finish button” while solving your paper. Once you clicked the

“Finish” button, you will not be able to access your paper again. Click it at the

end of your paper. That means you have submitted your complete paper.

Save your answer before proceeding to the next question.

For each MCQ question, read the choices available and select the choice which

you consider is the correct answer, by clicking on the appropriate check box.

You should try to complete MCQ’s in 10 - 15 minutes in order to give yourself 75

- 80 minutes for descriptive questions.

Each MCQ carries 1 Mark each, each fill in the blank carries 1 mark each, each

short Question carry 3 Marks each and descriptive questions carry 10 marks

each.

This exam consists of 10 Multiple Choice Questions (MCQ’s), 5 fill in the blanks,

5 short questions and 1 descriptive question.

All questions are compulsory.

Time Allowed: 90 Minutes Mid Term Examination – Spring 2006

MGT401 Financial Accounting II

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A contractual arrangement whereby, two or more parties undertake, an economic activity which is subject to joint control is called _________


Public Limited Company Partnership NGO’s / NPO’s Sole proprietorship

There is no concept of capital in: Question No. 3 Marks : 1

• In the process of production for sale. • Held for sale in the ordinary course of business;

IAS 2 ___________are assets: Question No. 2 Marks : 1 Generally there are two types of discounts; __________ and _____________ . Question No. 1 Marks : 1

Failure to comply with the Supervisor’s directions will result in your test being

cancelled. Please comply with supervisor’s directions to avoid any unpleasant

event.

Use of calculator is allowed.

__________ is an asset that necessarily takes a substantial period of time to get ready Question No. 9 Marks : 1

is the net balance of the total assets of the business less third party’s liabilities. _________ Question No. 8 Marks : 1 What is balance sheet? Describe its contents. Question No. 7 Marks : 3

Rs. 70 Rs. 60 Rs. 58 Rs. 50

Closing stock is valued at:

• Then issues of 12 units were made, followed by issues of 8 units. • Purchases were 30 units at Rs. 3 each, and • Opening stock was 10 units at 2 each.

A Company uses FIFO method to evaluate its stock. The information for the stock is as follows:


None of the given options Added in the fixed asset As indirect income in income statement Separately in the balance sheet.

The surplus arising from revaluation of fixed assets of an entity is shown:


9 to 12 months 6 to 9 months 1 to 3 months 3 to 6 months

Statuary Meeting is required to be held within: Question No. 12 Marks : 1

Labour and other costs relating to sales Attributable overheads. Supervisory personnel Costs of personnel directly engaged in providing the service

does not consist of: service providerThe cost of inventories of a Question No. 11 Marks : 1

Profit is earned only if the value of an organization’s net assets or its operating capability has increased during the accounting period.

Fixed assets should be properly maintained. A business should invest its profits in the purchase of capital assets. The capital of a business should be kept intact by not paying out dividends.

The capital maintenance concept implies that: Question No. 10 Marks : 1 for its intended use.

All of the given options. An income statement

A statement of changes in financial position & Notes, other statements and explanatory material.

A balance sheet A complete set of financial statements include: Question No. 19 Marks : 1 How many types of Financial Risk are there in a business? Question No. 18 Marks : 3

5,000 8,000 10,000 16,000

If a Company purchased an Asset for Rs.20, 000. The estimated useful life of asset is ten years. After five years the Book Value of the Asset will be: (using straight line method of depreciation and no residual value)


How many methods are there for Recognition of Investment in Associated Companies? Explain each method in detail.


A semi-fixed asset A fictitious liability An intangible asset A fixed asset

Goodwill is most appropriately classified as: Question No. 15 Marks : 1 Define Authorized Capital. Question No. 14 Marks : 3 Explain Accounting treatment of Capital in Companies.

What do you understand by the term Contingent Liabilities? Question No. 21 Marks : 3

Record every financial transaction individually. Produce a Trial balance. Provide financial information to users of such information. Maintain ledger accounts for every transaction.

The main aim of accounting is to: Question No. 20 Marks : 1

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Largest Online Community of VU Students MIDTERM EXAMINATION

SPRING 2007


Marks: 40

Time: 90min


Student Name: ______________________________

Center Name/Code: ______________________________

Exam Date: Tuesday, May 08, 2007


Midterm Examination (Spring 2007)

TIME ALLOWED: 90 Minutes

TOTAL MARKS : 40

INSTRUCTIONS:

Please read the following instructions carefully before attempting any question:

All questions are compulsory.

This exam consists of 10 Multiple Choice Questions (MCQs) of 1 mark each, 5 True False of 1

mark each, 3 Short questions of 5 marks each and one Descriptive question of 10 marks.


correct one.

This examination is closed book, closed notes and closed neighbors.





comply with supervisor’s directions to avoid any unpleasant event

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Marks Question 11 12 13 14 15 16 17 18 19

Marks Question

Marks Question No: 1 ( Marks: 1 ) - Please choose one In case of a single member company _______ person(s) is (are) required to be nominated to takeover the company in case of a death of the member. ►

One

►

Two

►

Three

►

Four

Question No: 2 ( Marks: 1 ) - Please choose one Company should be termed as a __________ of another company if other company holds more than 50% of its shares or has the power to appoint more than 50% of its directors. ►

Associated

►

Subsidiary

►

Joint Venture

►


Question No: 3 ( Marks: 1 ) - Please choose one Directors or shareholders having ______ voting power can call for Extraordinary General Meetings (EOGM).

►

10%

►

15%

►

20%

►

25%

Question No: 4 ( Marks: 1 ) - Please choose one Quality control during commercial production cost Rs. 10,000/- will be charged to: ►

Research expenses

►

Development cost

►

Profit and Loss account

►


Question No: 5 ( Marks: 1 ) - Please choose one Which one of the following is an example of Conversion Cost? ►

Labour and factory overheads

►

Labour and work in process

►

Work in process and finished goods

►

Factory overhead and work in progress

Question No: 6 ( Marks: 1 ) - Please choose one Which of the followings are among the non-current assets?

►

Tangible and intangible assets

►

Operating assets

►

Financial assets of a along term nature

►


Question No: 7 ( Marks: 1 ) - Please choose one Which one of the following is the concept of the capital maintenance? ►

Financial capital maintenance

►

Physical capital maintenance

►

Both Physical and Financial capital maintenance

►


Question No: 8 ( Marks: 1 ) - Please choose one Movement of capital issued and reserves are presented through which of the following statement? ►

Cash flow statement

►

Statement of changes in equity

►

Income statement

►

Balance sheet

Question No: 9 ( Marks: 1 ) - Please choose one A maximum limit of the amount of the capital that a company can issue is mentioned in the Memorandum of Association and Article of Association of the company is called: ►

Authorized capital

►

Issued capital

►

Subscribed capital

►

Paid up capital

Question No: 10 ( Marks: 1 ) - Please choose one Cost of inventories will consist of which of the following costs? ►

Purchase cost

►

Costs of conversion

►

Installation costs

►


Question No: 11 ( Marks: 1 ) - Please choose one Cash discounts are received on early payment of the outstanding amount. These discounts are conditional and are not reduced from the value of the inventory. ►

True

►

False

Question No: 12 ( Marks: 1 ) - Please choose one

In the rare cases of conflict between an IAS and the Framework, the Framework will prevail. ►

True

►

False

Question No: 13 ( Marks: 1 ) - Please choose one Current assets will also include marketable securities if they are expected to be realized within twelve months of the Balance Sheet date. ►

True

►

False

Question No: 14 ( Marks: 1 ) - Please choose one Significant influence is the ability to participate and to control the financial and management affairs of the enterprise. ►

True

►

False

Question No: 15 ( Marks: 1 ) - Please choose one International Accounting Standards (IAS) are issued by International Accounting Standard Board (IASB). ►

True

►

False

Question No: 16 ( Marks: 5 ) State different objectives of International Accounting Standard (IAS)? Question No: 17 ( Marks: 5 ) Differentiate between legal obligation and constructive obligation. Question No: 18 ( Marks: 5 ) What are the effects of revaluation of asset and how it is adjusted? Question No: 19 ( Marks: 10 )

State the different methods of recognition of Investment in Associate.

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