Accounting & Finance including Sales Tax on Services – 80 Marks
Q. Which accounting concept requires that business transactions be recorded separately from the owner’s personal transactions? Answer: Business Entity Concept.
Q. What is the accounting treatment when equipment is purchased for cash? Answer: Increase in Equipment (Asset) and decrease in Cash (Asset).
Q. Which financial statement shows the cash inflows and outflows of a business? Answer: Cash Flow Statement.
Q. What does the term Depreciation represent in accounting? Answer: Systematic allocation of the cost of a tangible asset over its useful life.
Q. Which audit report indicates that financial statements give a true and fair view? Answer: Unqualified Audit Report.
Q. What does Working Capital represent in financial management? Answer: Current Assets minus Current Liabilities.
Q. Which financial ratio measures a company’s ability to pay its immediate liabilities? Answer: Quick Ratio (Acid-Test Ratio).
Q. In auditing, what is meant by Internal Control System? Answer: Procedures and policies designed to safeguard assets and ensure accuracy of records.
Q. What is the purpose of Trial Balance in accounting? Answer: To check the arithmetical accuracy of ledger balances.
Q. What is the meaning of Capital Expenditure? Answer: Expenditure incurred to acquire or improve long-term assets.
Q. Which principle requires accountants to record expenses when they are incurred rather than when they are paid? Answer: Accrual Principle.
Q. What is Cost Accounting primarily used for? Answer: Determining the cost of production and controlling business costs.
Q. What does Dividend represent in corporate finance? Answer: Distribution of profits to shareholders.
Q. What is meant by Materiality in auditing? Answer: The significance of an amount or transaction that could influence decision-making.
Q. Which accounting record summarizes all ledger balances at the end of an accounting period? Answer: Trial Balance.
Q. What is meant by accrual accounting? Answer: Recording revenues and expenses when they occur
Q. Which concept matches expenses with revenues? Answer: Matching Concept
Q. What is the main purpose of trial balance? Answer: To check arithmetical accuracy
Q. Which asset is not depreciated? Answer: Land
Q. What is the formula of Quick Ratio? Answer: (Current Assets – Inventory) / Current Liabilities
Q. Which document authorizes payment? Answer: Invoice
Q. What is meant by contingent liability? Answer: Possible obligation depending on future event
Q. Which account is debited when goods are purchased on credit? Answer: Purchases Account
Q. What is the purpose of bank reconciliation? Answer: To match bank and cash book balances
Q. Which error is corrected by suspense account? Answer: One-sided error
Q. What is meant by provision? Answer: Estimated liability
Q. What is deferred revenue? Answer: Income received in advance
Q. Which method is used for stock valuation? Answer: FIFO
Q. What is meant by cost of goods sold (COGS)? Answer: Cost of goods sold during period
Q. Which account shows owner’s interest? Answer: Capital Account
Q. What is meant by impairment loss? Answer: Reduction in asset value
Q. Which audit opinion is given when statements are true and fair? Answer: Unqualified Opinion
Q. Which sampling method uses random selection? Answer: Random Sampling
Q. What is meant by materiality in auditing? Answer: Significance of misstatement
Q. Which type of error is not disclosed by trial balance? Answer: Error of principle
Q. What is meant by double entry system? Answer: Every transaction has two effects
Q. Which book records credit purchases? Answer: Purchase Book
Q. What is meant by owner’s equity? Answer: Owner’s claim on assets
Q. Which account is credited when cash is received? Answer: Cash Account
Q. What is meant by audit program? Answer: Plan of audit procedures
Q. Which account records depreciation? Answer: Depreciation Account
Q. What is meant by budget? Answer: Financial plan for future
Q. Which budget is prepared first? Answer: Sales Budget
Q. What is meant by standard costing? Answer: Predetermined cost system
Q. What is variance analysis? Answer: Comparison of actual and standard cost
Q. Which cost is relevant for decision making? Answer: Relevant Cost
Q. What is meant by margin of safety? Answer: Excess of sales over break-even
Q. Which financial statement shows profit? Answer: Income Statement
Q. What is meant by dividend? Answer: Profit distributed to shareholders
Q. Which account shows expenses and revenues? Answer: Profit and Loss Account
Q. What is meant by fiscal policy? Answer: Government taxation and spending policy
Q. Which institution controls money supply in Pakistan? Answer: State Bank of Pakistan
Q. What is meant by inflation? Answer: Rise in general price level
Q. Which market deals in long-term securities? Answer: Capital Market
Q. What is meant by debenture? Answer: Long-term debt instrument
Q. Who appoints the Auditor General of Pakistan? Answer: The President
Q. What does GDP stand for? Answer: Gross Domestic Product
Q. In a manufacturing account, what is calculated? Answer: Cost of goods produced
Q. Which of the following is a liability? Answer: Creditors
Q. Which of the following is charged in the Profit and Loss Account? Answer: Office Rent
Q. Where is the headquarters of the ILO? Answer: Geneva
Q. What is ‘Financial Audit’ versus ‘Cost Audit’? Answer: Financial Audit verifies the overall accuracy of financial statements, while Cost Audit verifies the correctness of cost accounts and adherence to the cost accounting plan.
Q. What is ‘Over-capitalization’? Answer: A situation where a company has more capital than it needs for its operations, leading to low earnings per share.
Q. In auditing, what is ‘Detection Risk’? Answer: The risk that the auditor’s procedures will fail to detect a material misstatement that exists in an account balance.
Q. What is ‘Float’ in cash management? Answer: The difference between the balance shown in a company’s checkbook and the balance shown on the bank’s records due to processing delays.
Q. Which authority administers Sales Tax on Services in Punjab? Answer: Punjab Revenue Authority (PRA).
Q. What is the standard sales tax rate on services in Punjab unless otherwise specified? Answer: 16%.
Q. Which schedule of the Act lists services that are exempt from sales tax? Answer: First Schedule.
Q. What is the tax rate on telecommunication services in Punjab? Answer: 19.5%.
Q. Within how many days must an appeal be filed before the Commissioner (Appeals)? Answer: 30 days.
Q. What percentage of tax must be deposited to obtain protection from recovery during appeal? Answer: 10%.
Q. What is the maximum period for which business premises may be sealed by a Commissioner? Answer: One month.
Q. Under the Act, how long must taxpayers maintain their business records? Answer: Six years.
Q. What is meant by Output Tax in sales tax terminology? Answer: Tax charged by a registered person on the services they provide.
Q. Who may issue a warrant to search premises for tax-related records? Answer: A Magistrate or the Commissioner.
Q. Within how many hours must an arrested person be produced before a Magistrate? Answer: Within 24 hours.
Q. What is the maximum period of physical remand allowed during investigation? Answer: 14 days.
Q. What is the penalty for providing false information as a whistleblower? Answer: Rs. 100,000.
Q. What is meant by E-Intermediary under the PRA system? Answer: A person authorized to electronically file returns on behalf of taxpayers.
Q. When is a notice sent electronically considered received? Answer: Within 72 hours of being sent.
Q. A company has opening inventory of Rs. 500,000, purchases of Rs. 1,200,000, closing inventory Rs. 400,000. Calculate cost of goods sold. Answer: Rs. 1,300,000
Q. If gross profit is 25% on sales of Rs. 2,000,000, calculate net sales. Answer: Rs. 2,000,000 (Gross Profit already on Sales)
Q. A service provider collected Rs. 50,000 tax by mistake. How much must be deposited with Government? Answer: Rs. 50,000
Q. Input tax claimed on a business vehicle of Rs. 2,500,000. Allowed? Answer: No, input tax not allowed on vehicles
Q. A registered person paid Rs. 120,000 as tax but filed return 20 days late. Penalty calculation? Answer: Rs. 10,000 + Rs. 200 × 5 = Rs. 11,000
Q. Reverse charge: Imported consultancy service Rs. 500,000. Tax rate 16%. How much tax to deposit? Answer: Rs. 80,000
Q. A company’s accounts show: Accounts Receivable Rs. 400,000, Inventory Rs. 600,000, Current Liabilities Rs. 300,000. Calculate Current Ratio. Answer: (400,000+600,000)/300,000 = 3.33
Q. Taxable service provided Rs. 1,000,000. Output tax 16%. Input tax credit Rs. 150,000. Max adjustment allowed? Answer: 90% of output tax = Rs. 144,000
Q. A business receives e-service from outside Pakistan for Rs. 250,000. When is tax due? Answer: At the time of receipt via reverse charge
Q. A service provider fails to issue 3 tax invoices. Penalty + sealing power? Answer: 1st default Rs. 20,000, 2nd Rs. 50,000, 3rd = premises may be sealed 1 month
Q. A person fails to register and provides services generating Rs. 500,000 tax. Penalty (company)? Answer: Rs. 100,000 or 5% of tax = Rs. 25,000, whichever higher → Rs. 100,000
Q. A company is audited. Short-paid tax Rs. 200,000. Pays during audit but before show-cause notice. Penalty? Answer: 20% of penalty + tax + default surcharge
Q. ADR committee formed within 30 days. Recommendation timeline? Answer: 90 days, final order within 45 days
Q. Tax fraud Rs. 600,000. Default surcharge? Answer: 2% per month = Rs. 12,000 per month
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