FEDERAL PUBLIC SERVICE COMMISSION Roll Number

COMPETITIVE EXAMINATION-2023
FOR RECRUITMENT TO POSTS IN BS-17
UNDER THE FEDERAL GOVERNMENT
ACCOUNTANCY AND AUDITING, PAPER-I

TIME ALLOWED: THREE HOURS PART-I (MCQS) MAXIMUM MARKS = 20

PART-I(MCQS): MAXIMUM 30 MINUTES PART-II MAXIMUM MARKS = 80
NOTE: (i) Part-II is to be attempted on the separate Answer Book.
(ii) Attempt ONLY FOUR questions from PART-II by selecting TWO questions from EACH SECTION.
ALL questions carry EQUAL marks.
(iii) All the parts (if any) of each Question must be attempted at one place instead of at different places.
(iv) Write Q. No. in the Answer Book in accordance with Q. No. in the Q.Paper.
(v) No Page/Space be left blank between the answers. All the blank pages of Answer Book must be crossed.
(vi) Extra attempt of any question or any part of the question will not be considered.
(vii) Use of Calculator is allowed.

PART – II
SECTION – I
Q. 2. (A) What are the Accounting Principles? Define any four accounting principles shortly. (5)
(B) What are the Accounting Conventions? Define any four accounting conventions shortly. (5)
(C) The below mentioned balances are extracted from the books of Emerging Technologies
Pvt. Ltd. as on 31st August 2022.
Head of Account Amount
Sundry expenses 166,000
Opening Stock 400,000
Premises 3,775,000
Furniture 1,350,000
Machinery 2,600,000
Drawings 250,000
Purchases 6,455,000
Sales 12,262,000
Discount received 47,000
Discount allowed 54,000
Carriage outward 18,000
Returns inward 122,000
Return outwards 28,000
Closing Stock 372,500
Wages and salaries 1,750,000
Cash in hand 940,000
Rent, rates and taxes 137,000
Rent received in advance 53,000
Bills receivables 192,000
Trade creditors 2,076,000
Book debts 3,150,000
Bills payable 130,000
Bank loan 580,000
Capital 6,200,000
Carriage inward 17,000
Required: Prepare a Trial Balance as on that date in a proper format. (10) (20)

Q. 3. Deluxe Software Private Limited closes its books on 31st December every year. You are
provided with the following data:
Shareholders Equity (Rs.’000’)
2021 2020
Opening 700 600
Profit after tax 220 200
920 800
Dividend (100) (100)
Closing 820 700
Other data
Number of Shares (in ‘000s) 60 60

Page 1 of 4
 ACCOUNTANCY AND AUDITING, PAPER-I
Required:
(5)
(a) On the basis of above data, compute the following for the year 2020 and 2021
a. Earnings per share (EPS)
b. Return on closing equity (ROE)
c. Book value per share (BV)
(5)
(b) Compute dividend per share and rate of dividend for the year 2022.
(c) For the year ending 31st December 2022 the management decided to aim for EPS Rs.4.00
(9% higher than for the year 2021) and return on closing equity of 25%. Compute the estimated
book value as at 31st December 2022 assuming that management targets are achieved. Also
compute estimated figures for Profit after Tax, Dividend and Equity. (10) (20)

Q. 4. (A) Post-closing Trial Balance of Premium Fabrics Private Limited for the year ended
December 31, 2021 and 2022 are as follows:
2022 2021
Equities and Liabilities
Issued and paid-up capital 5,000,000 5,000,000
Short-term running finance 3,000,000 800,000
Unappropriate profit 400,000 300,000
Trade Creditors 3,000,000 1,000,000
Accumulated Depreciation:
Plant and Machinery 900,000 600,000
Motor Vehicle 420,000 280,000
12,720,000 7,980,000
Assets
Land and Building 2,500,000 1,500,000
Plant and Machinery 3,000,000 2,500,000
Motor vehicles 620,000 580,000
Stock in Hand 3,600,000 1,100,000
Trade debtors 3,000,000 2,300,000
12,720,000 7,980,000
Additional data:
• During the year 2022, a dividend @ 10% was distributed to the shareholders.
The paid-up value of each share is Rs. 10/-
• A Motor vehicle, having original cost of Rs. 100,000 and depreciated book
value of Rs. 60,000 was sold for Rs. 80,000.
• Gross funds generated from operations during the year was Rs. 1,060,000.
Required: prepare a cash flow statement of Premium Fabrics as per IAS-7 for the year 2022.

(B) Mr. Haider started a business on March 1st 2022 with a capital of Rs. 645,000. His (10)
newly appointed bookkeeper records transaction on simple papers. His cash book page shows
following transactions for the year.
Particulars Amount Particulars Amount
Expenses Paid 27,500 Sales on cash 322,000
Receipts from debtors 241,000 Drawings of Mr. Haider 25,500
Purchase of Motorbike 92,000 Payments to creditors 322,000
Purchases on cash 148,000
On December 31st 2022 value of closing stock is 46,000. The payables and receivables
are Rs.125,000 and Rs. 80,000 respectively. Useful life of motorbike is 8 years and salvage
value will be 32000. Bookkeeper decided to use the straight-line method of depreciation for the
whole useful life of motorbike.
Required: Prepare Trading and Profit and Loss account and Balance Sheet as on 31st (10) (20)
December 2022.
SECTION – II
Q. 5. (A) Eagle Star is a manufacturing company. The Company uses Rowan Premium bonus
scheme for its workers payroll. Workers are also entitled to dearness allowance of Rs. 2,400
per week of 48 hours. Mr. Afzal is one of the workers of that company. His basic wage rate is
1,200 per day of 8 hours. His time sheet for the week is as under:
Job Name Time Allowed Time Taken
Crafting 25 hours 20 hours
Assembling 30 hours 20 hours
Idle time (Waiting) ----- 8 hours
Required: Calculate gross wage of Mr. Afzal for the week. (10)
Page 2 of 4
 ACCOUNTANCY AND AUDITING, PAPER-I
(B) An Automobile factory will use 500,000 tyres for its production in coming year. The
incremental cost of placing an order is Rs. 8,000. The cost of storing a tyre for whole year is
Rs. 2000.Lead time on an order is 5 days and the company wishes to keep reserve supply of
two days usage. Usage per day will be constant in whole work year. Company work year
consists of 250 days.
Required: Calculate Economic Order Quantity and Reorder point.
(10) (20)

Q. 6. (A) A manufacturing company of Lahore submits the following information for the year
ending 31st December 2022:
Particulars Amount Particulars Amount
Sales 4,500,000 Raw Material 1st January 150,000
Purchases 2,020,000 Finished Goods 1st January 700,000
Tools Expenses 45,000 Indirect Labour 50,000
Depreciation of Plant 45,000 Power, Heat & Light 30,000
st
Work in process 1 January 300,000 Finished Goods 31st December 605,000
Purchase Retunes 20,000 Depreciation of machinery 60,000
Fire Insurance 8,000 Raw Material 31st December 290,000
Direct Labour 590,000 Work in Process 31st December 250,000
Misc. Manufacturing Costs 9,000 Indirect Material Consumed 50,000
Selling Expenses 5% of sales Administrative Expenses 2% of sales
Required: Prepare an Income Statement for the year ended 31st December 2022 (10)

(B) Khizra manufacturing corporation has fixed cost for the year ended 31st December 2022
is Rs. 400,000. Variable cost per unit is Rs. 20. Each Unit sells at Rs. 100.

Required:
a) Break Even point (both in units and value) (2)
b) If turnover for the next year is Rs. 800,000, calculate the estimated contribution and
profit, assuming the cost and selling price remain the same (4)
c) A profit target of Rs. 400,000 has been desired for the next year. (4) (10) (20)
Calculate the turnover required to achieve the desired result.

Q. 7. The Balance Sheet of Fazal Din & Co. as on 31st December 2021 was as follows:
BALANCE SHEET
Liabilities & Capital Amount Assets Amount
Current Liabilities Rs. 17,500 Cash Rs. 5,000
Paid-up-Capital Accounts Receivable Rs. 10,000
3,000 ordinary shares of Rs. 10 Materials Rs. 4,000
each Rs. 30,000 Work in Process Rs. 2,000
Retained Earnings Rs. 10,000 Finished Goods Rs. 6,000
Prepaid expenses Rs. 500
Fixed Assets(net) Rs. 30,000
_________ _________
Rs. 57,500 Rs. 57,500

During the year 2022 the retained earnings increase 50% as a result of good business. No
dividend was paid during the year. Balances of Accounts receivables, prepaid expenses, current
liabilities and paid-up capital were the same as 31st December 2022 as they had been on 31st
December 2021, Inventories were reduced as follows:
Material 50%
Work in process 50%
Finished goods 33-1/3%
Fixed Assets were reduced by depreciation of Rs. 4,000 charged 3/4th to factory overhead
and 1/4th to administrative expenses. Sales were made of Rs. 60,000 on account of finished goods
costing Rs. 40,000. Direct labor cost was Rs. 9,000. Factory overhead was applied at the rate of
100% of direct labor cost, leaving Rs. 2,000 under applied which was closed to cost of goods sold
account. Total marketing and administrative expenses amounting to 10% and 15% respectively of
the gross sales.

Required:
(a) An Income statement for 2022, along with the details of Cost of goods manufactured (10)
and sold
(b) A balance Sheet as on 31st December 2022. (10) (20)

Page 3 of 4
ACCOUNTANCY AND AUDITING, PAPER-I

Q. 8. A chemical factory manufactures three kinds of chemicals namely Eucalyptus oil, Hexachlorobenzen
and Toxaphene. In the last week of December 2022, the records were:

Labor No of Rate per hour Hours Worked by

Grade Employees (Rs.) each employee
I 12 40 40
II 36 32 42
III 8 28 40
IV 2 16 44

Output and standard times during the same week were as follows:

Output Standard Minutes

Components
(In Units) for each unit
Eucalyptus oil 888 30
Hexachlorobenzen 1800 54
Toxaphene 960 66

Normal working hours per week are 38. Overtime is paid at the premium of 50 % of the normal hour
rate.

Group Incentive Scheme:

A group incentive scheme is in operation. The time saved is expressed as a percentage of
hours worked and is shared between the group as a proportion of the hours worked by each
grade. The incentive rate is 75% of the normal hour rate.

Required: Prepare the payroll for the last week of December 2022 showing the basic pay, overtime (20)
and incentive amount as separate totals for each grade of labor.
*************

Page 4 of 4
 FEDERAL PUBLIC SERVICE COMMISSION Roll Number
COMPETITIVE EXAMINATION-2023
FOR RECRUITMENT TO POSTS IN BS-17
UNDER THE FEDERAL GOVERNMENT
ACCOUNTANCY & AUDITING, PAPER-II
TIME ALLOWED: THREE HOURS PART-I (MCQS) MAXIMUM MARKS = 20
PART-I(MCQS): MAXIMUM 30 MINUTES PART-II MAXIMUM MARKS = 80
NOTE: (i) Part-II is to be attempted on the separate Answer Book.
(ii) Attempt ONLY FOUR questions from PART-II by selecting at least ONE question from EACH
SECTION. ALL questions carry EQUAL marks.
(iii) All the parts (if any) of each Question must be attempted at one place instead of at different places.
(iv) Write Q. No. in the Answer Book in accordance with Q. No. in the Q.Paper.
(v) No Page/Space be left blank between the answers. All the blank pages of Answer Book must be crossed.
(vi) Extra attempt of any question or any part of the question will not be considered.
(vii) Use of Calculator is allowed.

PART – II
SECTION – I (AUDITING)
Q. 2. Define professional skepticism and explain its key characteristics. Why should auditors (20)
act as though there is always a potential conflict of interest between the auditor and the
management of the enterprise under audit?

Q. 3. What are CAATs? What are some audit procedures that can be performed using CAATs? (20)
What advantages are derived from using CAATs in the financial statement audit?

Q. 4. Define and explain the differences among several kinds of employee frauds that might (20)
occur at an audit client.

SECTION – II (BUSINESS TAXATION)

Q. 5. a. Zia inherited certain assets from his father in the year 20x1. The fair market values of the
assets on the date of inheritance were as follows:
Rs.
25,000 shares of a private limited company 25,00,000
21,000 shares of public listed company 4,62,000
Membership card of Pakistan Stock Exchange 20,000,000
Jewelry 15,00,000

During the tax year 20x5, Zia undertook the following transactions:

1) He gifted some of the assets to his 20-year old son Ishaq. The detail and fair market
values of the assets are as follows: Rs.
-----10,000 shares of a private limited company 2,000,000
-----10,000 shares of a public limited company 1,700,000
----- Membership card of Pakistan Stock Exchange 40,000,000
2) The remaining shares were sold as follows: Rs.
----- shares of a private limited company 3,000,000
----- shares of a public limited company . 1,500,000
Ishaq sold all the assets transferred through gift in the same year. The assets fetched the
following amounts: Rs.
-----10,000 shares of a private limited company 2,500,000
-----10,000 shares of a public limited company 1,500,000
----- Membership card of Pakistan Stock Exchange 55,000,000

Required:
(i) Based upon the above information, compute the taxable income of Zia and Ishaq
for the tax year 20x5 (10)
(ii) Give a brief explanation for the items not included in the taxable income. (10) (20)
Page 1 of 2
ACCOUNTANCY & AUDITING, PAPER-II

Q. 6. Explain the correct tax treatment in each of the following situations: (20)
1. Mr. Hamza made a total contribution of Rs. 150,000 as a donation to the approved
institution mentioned in the 13th schedule. His total income from a business during the tax
year 2023 is Rs. 1,800,000.
2. Nine years ago, Masood inherited a rare sculpture of Buddha which had a fair market
value of Rs. 200,000 on the date of inheritance. In August 2022, the sculpture was sold by
him at Rs. 500,000.
3. In June 2022, Imran entered into an agreement for the sale of the residential plot to
Ibrahim, who paid an advance of Rs. 500,000. According to the agreement, Ibrahim was
required to pay the balance by August 31, 2022. However, instead of paying the balance
amount, he terminated the sale agreement. Imran forfeited the advance of Rs. 500,000 in
accordance with the terms of the agreement.
4. In September 2022, Adnan sold his personal car, Toyota Corolla, to one of his
cousins at the price of Rs. 500,000 whereas the fair market value of the car was Rs.
20,00,000. The car was purchased by him six years ago at of cost of Rs. 10,00,000.
5. Imran was working as a Chief Financial Officer in Dawood Pakistan (Pvt) Limited,
which is a wholly owned subsidiary of Dawood AG, Germany. According to the Company’s
policy, Imran was sent on secondment to Germany on January 1, 2022, for a period of five
years. During this period, half of his salary will be credited to his bank account in Pakistan,
whereas the remaining portion will be received by him in Germany.
6. Maqsood provided consultancy services to a listed company. In consideration for his
services, he received a net amount of Rs. 45,000 after a tax deduction of Rs. 5,000.

SECTION – III (BUSINESS STUDIES AND FINANCE)

Q. 7. Fitch Industries is in the process of choosing the better of two equal-risk, mutually exclusive (20)
capital expenditure projects, M and N. The relevant cash flows for each project are shown in
the following table. The firm’s cost of capital is 9%.

Project M Project N
Initial investment-Cash Outflow -$40,000 -$40,000
Year (t) Cash inflows Cash inflows
1 $14,000 $23,000
2 14,000 12,000
3 14,000 10,000
4 14,000 9,000

i. Calculate each project’s payback period.

ii. Calculate the net present value (NPV) for each project.
iii. Calculate the internal rate of return (IRR) for each project.
iv. Summarize the preferences dictated by each measure you calculated, and
indicate which project you would recommend. Explain why?
Q. 8. How have globalization and information technology created new opportunities for (20)
entrepreneurs? How does an aging population create opportunities for entrepreneurs?
Describe current demographic trends that suggest new goods and services for entrepreneurial
businesses.
**************

Page 2 of 2