Accounting & Finance including Sales Tax on Services – 80 Marks
Q. What is meant by Financial Leverage in corporate finance? Answer: The use of borrowed funds to increase the potential return on investment.
Q. In auditing, what is Inherent Risk? Answer: The risk that an account balance may contain material misstatements assuming no related internal controls.
Q. What is the Quick Ratio (Acid-Test Ratio) used to measure? Answer: A firm’s ability to meet short-term liabilities without relying on inventory.
Q. What is Window Dressing in financial reporting? Answer: The practice of manipulating financial statements to present a more favorable financial position.
Q. Which accounting standards are generally applied in Pakistan for corporate financial reporting? Answer: IFRS (International Financial Reporting Standards).
Q. What is Deferred Tax Liability? Answer: A tax obligation that arises due to temporary differences between accounting income and taxable income.
Q. What is Mezzanine Financing? Answer: A hybrid form of financing that combines features of debt and equity.
Q. In an audit report, which paragraph states the auditor’s final conclusion? Answer: The Opinion Paragraph.
Q. What is the Break-Even Point (BEP) in cost accounting? Answer: The level of sales at which total revenue equals total costs.
Q. What is Standard Costing used for in management accounting? Answer: Comparing actual costs with predetermined standard costs to analyze variances.
Q. What is Capital Gearing? Answer: The relationship between a company’s long-term debt and its equity capital.
Q. What is meant by Management Audit? Answer: An evaluation of management performance and organizational efficiency.
Q. What does Impairment of an Asset mean? Answer: A permanent reduction in the recoverable value of an asset below its carrying amount.
Q. What is Treasury Stock? Answer: Shares that a company has repurchased from its shareholders.
Q. What is Zero-Based Budgeting (ZBB)? Answer: A budgeting method in which every expense must be justified for each new budget period starting from zero.
Q. Under the Act, who is primarily responsible for paying sales tax on services? Answer: The registered person providing the taxable service.
Q. What is Withholding Sales Tax on services? Answer: A system where the service recipient deducts tax at source and deposits it with PRA.
Q. Which section of the Act deals with Offences and Penalties? Answer: Section 48.
Q. What is meant by E-Audit under the PRA system? Answer: An audit conducted through electronic records and online data submitted by taxpayers.
Q. Can an officer conduct a search of premises without proper authorization? Answer: No, a warrant or authorization from a competent authority is generally required.
Q. What penalty may apply for non-issuance of a tax invoice? Answer: A monetary penalty such as Rs. 5,000 or a percentage of the tax involved.
Q. What does Condonation of Time Limit mean? Answer: The authority’s power to extend deadlines under special circumstances.
Q. What is the composition of the Appellate Tribunal? Answer: Judicial Members and Accountant Members.
Q. What is Search and Seizure in taxation enforcement? Answer: The legal authority to inspect premises and seize records related to tax evasion.
Q. What is meant by Taxable Turnover? Answer: The total value of taxable services provided during a tax period.
Q. What is Rectification of Mistake in tax orders? Answer: Correction of clerical or arithmetical errors in an official order.
Q. Who is a Representative Taxpayer? Answer: A person responsible for paying tax on behalf of another person.
Q. Is Consultancy Service taxable under the Punjab Sales Tax on Services Act? Answer: Yes, it is a taxable service listed in the Second Schedule.
Q. What is an Exempted Service? Answer: A service listed in the First Schedule on which sales tax is not charged.
Q. Besides filing returns, what is the PRA online portal used for? Answer: Checking taxpayer registration status and verifying the Active Taxpayer List.
Q. What type of asset is goodwill? Answer: Intangible Asset
Q. A debit balance in the bank statement usually indicates: Answer: Bank overdraft
Q. Which financial statement shows the financial position at a point in time? Answer: Balance sheet
Q. In accounting cycle, the first phase is: Answer: Identifying economic transactions
Q. Recording financial transactions in day‑to‑day order is done in: Answer: General Journal
Q. If cost of sales is Rs. 60,000 and sales are Rs. 95,000 with operating expenses Rs. 20,000, net profit is: Answer: Rs. 15,000
Q. Sales tax on services in Punjab is charged at: Answer: 16%
Q. Who is liable to pay tax for services provided within Punjab? Answer: Service provider
Q. Who is liable to pay tax for services received from a non-resident? Answer: Service recipient
Q. What does “Reverse Charge” mean in Punjab Sales Tax on Services Act? Answer: Registered recipient pays the tax
Q. Input tax adjustment cannot exceed: Answer: 90% of output tax for the tax period
Q. Payment exceeding Rs. 50,000 must be made through: Answer: Banking channel (cheque, draft, or pay order)
Q. Value of a taxable service includes: Answer: Gross amount including federal/provincial duties (excluding Punjab sales tax)
Q. Short-paid tax refers to: Answer: Paying less than the tax due
Q. If a registered person files a revised return, the time limit is: Answer: 120 days from filing original return
Q. Penalty for failure to issue tax invoice (1st default) is: Answer: Rs. 20,000
Q. Who is considered a “Defaulter” under the Act? Answer: Director, partner, or guarantor failing to pay tax
Q. Retention period for records after July 2022 is: Answer: 6 years
Q. Who has the authority to conduct a special or forensic audit? Answer: Chartered Accountants, Cost & Management Accountants, or forensic experts
Q. Maximum penalty if tax is paid during audit but before show-cause notice? Answer: 20% of penalty plus tax and default surcharge
Q. The standard rate of tax under the Act is: Answer: 16%
Q. What is the formula of Net Sales? Answer: Sales – Sales Returns
Q. Calculate Net Sales if Sales = 120,000 and Returns = 20,000 Answer: 100,000
Q. What is Cost of Goods Sold (COGS)? Answer: Opening Stock + Purchases – Closing Stock
