Q. What is the main objective of a compliance audit?
Answer: To ensure that an organization follows laws, regulations, and internal policies.
Q. Which method is used to value closing inventory under IFRS?
Answer: Lower of Cost or Net Realizable Value.
Q. What does working capital represent?
Answer: Current Assets minus Current Liabilities.
Q. In auditing, what is the purpose of a test of controls?
Answer: To assess the effectiveness of internal controls.
Q. What is the formula for debt-to-equity ratio?
Answer: Total Debt ÷ Shareholders’ Equity.
Q. Accrued expenses are recorded in the accounts when:
Answer: The expense is incurred but not yet paid.
Q. What is double entry accounting principle?
Answer: Every transaction affects at least two accounts, maintaining the accounting equation.
Q. Which financial ratio measures profitability relative to sales?
Answer: Net Profit Margin Ratio.
Q. In cost accounting, what is a variable cost?
Answer: A cost that changes with the level of production.
Q. Internal audit primarily focuses on:
Answer: Risk management, internal controls, and operational efficiency.
Q. Which document summarizes all cash inflows and outflows for a period?
Answer: Cash Flow Statement.
Q. What is the main purpose of a trial balance?
Answer: To ensure that total debits equal total credits.
Q. Operating profit is calculated as:
Answer: Gross Profit minus Operating Expenses.
Q. Which type of financial statement combines the parent and subsidiaries?
Answer: Consolidated Financial Statement.
Q. What is the difference between capital expenditure and revenue expenditure?
Answer: Capital expenditure creates future benefits; revenue expenditure is consumed in the current period.
Q. In auditing, what is meant by substantive procedures?
Answer: Audit tests to detect material misstatements in financial statements.
Q. Liquidity ratios assess a company’s:
Answer: Ability to meet short-term obligations.
Q. What is a fixed asset turnover ratio used for?
Answer: To measure how efficiently fixed assets generate revenue.
Q. Contingent liability arises when:
Answer: A possible obligation depends on a future event.
Q. Which is considered a non-current asset?
Answer: Land, Building, and Machinery.
Q. What is the main purpose of management accounting?
Answer: To assist management in planning, controlling, and decision-making.
Q. What is meant by amortization?
Answer: The gradual writing off of an intangible asset over its useful life.
Q. What is the difference between gross profit and net profit?
Answer: Gross profit excludes operating expenses; net profit includes them.
Q. Which accounting standard deals with revenue recognition?
Answer: IFRS 15.
Q. What is a deferred tax asset?
Answer: Taxes recoverable in the future due to deductible temporary differences.
Q. Which is a primary function of financial management?
Answer: Maximizing shareholder wealth.
Q. What is the purpose of a bank reconciliation statement?
Answer: To reconcile differences between bank and book balances.
Q. In auditing, what is inherent risk?
Answer: The susceptibility of an account balance to a material misstatement assuming no controls.
Q. What is working capital turnover ratio?
Answer: Net Sales ÷ Average Working Capital.
Q. What is a journal entry?
Answer: A record of financial transactions in chronological order.
Q. What is the purpose of cost-volume-profit analysis?
Answer: To analyze how changes in cost and volume affect profit.
Q. What is an operating cycle?
Answer: Inventory period plus accounts receivable period.
Q. What is a zero-coupon bond?
Answer: A bond issued at a discount that pays no interest.
Q. What is goodwill in accounting?
Answer: The excess of purchase price over the fair value of net assets acquired.
Q. Which is an example of a current liability?
Answer: Accounts Payable.
Q. What is the role of an external auditor?
Answer: To provide an independent opinion on financial statements.
Q. What is a petty cash fund used for?
Answer: To handle small day-to-day expenses.
Q. What is the main objective of cost accounting?
Answer: To control costs and assist in decision-making.
Q. Which financial statement shows the company’s financial position at a point in time?
Answer: Balance Sheet.
Q. What is a bank guarantee?
Answer: A promise by a bank to pay a third party if the client defaults.
Q. What is the main objective of internal control?
Answer: To safeguard assets and ensure accurate reporting.
Q. What is the difference between financial accounting and management accounting?
Answer: Financial accounting is for external reporting; management accounting is for internal decision-making.
Q. What is a liquidity ratio example?
Answer: Current ratio.
Q. What is capital gearing ratio?
Answer: Long-term debt ÷ Shareholders’ Equity.
Q. What is a lease in accounting?
Answer: A contractual agreement to use an asset in exchange for payments.
Q. What is the purpose of a stock ledger?
Answer: To record and monitor inventory movements.
Q. What is operating leverage used for?
Answer: To measure the impact of fixed costs on profits.
Q. What is a capital reserve used for?
Answer: To record profits from capital transactions not available for dividends.
Q. In auditing, what is negative confirmation?
Answer: Requesting a third party to respond only if they disagree with the stated balance.
Q. What is meant by the Consistency Principle in accounting?
Answer: The same accounting methods should be used from period to period to ensure comparability.
Q. Which ratio measures the proportion of a company’s debt relative to its equity?
Answer: Debt-to-Equity Ratio.
Q. What is the purpose of Adjusting Entries in accounting?
Answer: To ensure revenues and expenses are recorded in the correct accounting period.
Q. In auditing, what is a Qualified Audit Opinion?
Answer: An opinion issued when financial statements are fairly presented except for certain specific issues.
Q. What does the term Liquidity Ratio measure?
Answer: A company’s ability to meet short-term financial obligations.
Q. Which depreciation method spreads equal depreciation expense over the useful life of an asset?
Answer: Straight Line Method.
Q. What is meant by Accrued Expense?
Answer: An expense incurred but not yet paid or recorded.
Q. In auditing, what is meant by Audit Trail?
Answer: A chronological record that allows transactions to be traced from source documents to financial statements.
Q. What is the purpose of a Subsidiary Ledger?
Answer: To provide detailed information supporting a general ledger account.
Q. What does Return on Investment (ROI) measure?
Answer: Profitability relative to the investment made.
Q. What is Amortization in accounting?
Answer: The gradual write-off of the cost of an intangible asset over its useful life.
Q. In auditing, what is meant by Compliance Audit?
Answer: An audit conducted to determine whether an organization follows applicable laws and regulations.
Q. What does Net Profit Margin indicate?
Answer: The percentage of profit generated from total revenue.
Q. What is meant by Contingent Liability?
Answer: A potential liability that depends on the outcome of a future event.
Q. Which financial statement shows the retained earnings of a company?
Answer: Statement of Retained Earnings.
Q. The effect of writing off bad debts is on which accounts?
Answer: Profit & Loss Account and Debtors Account
Q. If a company uses the FIFO method, what does it affect?
Answer: Cost of Goods Sold and Inventory Valuation
Q. The acid-test ratio excludes which of the following?
Answer: Inventory
Q. Accrued revenue appears in which financial statement?
Answer: Balance Sheet as Current Asset
Q. Contingent liabilities are recorded where?
Answer: Notes to Accounts
Q. Operating cycle formula:
Answer: Inventory period + Accounts Receivable period
Q. Letter of Credit is used for:
Answer: Bank guarantee to foreign bank for imports
Q. Who can conduct a joint audit with FBR?
Answer: Punjab Revenue Authority
Q. Deposit of admitted amount is required during:
Answer: Appeal filing
Q. Prepaid expenses are:
Answer: Expenses paid but not yet incurred
Q. Outstanding expenses are:
Answer: Expenses incurred but not yet paid
Q. Acid-test ratio excludes:
Answer: Inventory
Q. Depreciation is charged to:
Answer: Profit & Loss Account
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