CANDIDATE DETAILS. Access Number Roll Number For Official Use Only Serial Number

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1 Subjective Booklet Winter 2017 CANDIDATE DETAILS Access Number Roll Number For Official Use Only Serial Number Subject ACCOUNTING FOR FINANCIAL SERVICES Candidate s Name Father s Name CNIC Number Cell Number I verify that my particulars given above are correct and I declare that I have read the INSTRUCTIONS printed in the examination booklet, and/or given in the ISQ Examination Guidelines, violation of which would mean cancellation of my paper and debarment from appearing in future examinations. Candidate s Signature Invigilator s Signature Winter-2017 C-11 Page 1 of 20

2 THIS PAGE IS INTENTIONALLY LEFT BLANK Winter C-11 Page 2 of 20

3 The Institute of Bankers Pakistan ISQ Examination Winter Stage - II Accounting for Financial Services SEAL BOOK HERE Section 2 Constructed and Extended Response Questions Number of Questions: 6 Marks: 55 Allotted time : 120 minutes Winter-2017 C-11 Page 3 of 20

4 INSTRUCTIONS FOR THE CANDIDATES 1. The candidate must abide by the ISQ Examination Guidelines sent along with the admit card. 2. The candidate must sign the booklet after verifying the particulars and should NOT write his/her name or roll number on any other page of the examination booklet. 3. The candidate is advised NOT to approach the invigilators for seeking any explanation related to the questions in the examination paper. 4. Laptops, mobile phones or any other gadgets are NOT permitted in the examination hall. ONLY simple calculators are allowed except where indicated in the ISQ Examination Guidelines. If any candidate is found in possession of any restricted gadgets or items, his/her examination paper will be cancelled immediately. 5. The candidate must ensure that the examination booklet has all the pages duly numbered. If any page is missing, damaged or not numbered, then return the booklet to the superintendent / invigilator and obtain another booklet. 6. Write your answer ONLY in the given space for each question. Anything written outside the given space will not be considered for marking. 7. ONLY blue or black ball points are to be used. 8. The candidate must attempt ALL questions in the paper. For Official Use Only Marks Obtained Q.1 Q.2 Q.3 Q.4 Q.5 Q.6 Total Marks Total in words Marker - I Q.C Scrutiny Re-Scrutiny Marker II Signatures: 1. Marker - I 2. QC 3. Scrutinizer 4. Re-Scrutinizer 5. Marker - II Winter-2017 C-11 Page 4 of 20

5 Q1. A. Explain the following accounting concepts. (5 Marks) i) Going Concern ii) Accounting period iii) Matching iv) Business Entity v) Materiality Winter-2017 C-11 Page 5 of 20

6 B. What is Double Entry Principle/System in Accounting? What are its advantages? (3 Marks) C. Explain the difference between Expense and Expenditure. (2 Marks) Winter-2017 C-11 Page 6 of 20

7 Q2. ABC Agricultural Bank has to post the following transactions in its General Journal and Ledger during the month of December Date 1 st Dec Equipment purchased in cash for new branches worth Rs. 2 million. 4 th Dec Old Equipment sold for Rs. 40,000 at neither profit nor loss. 10 th Dec New Equipment bought on credit from XYZ Co. worth Rs. 90, th Dec Some supplies worth Rs. 150,000 for the new equipment expensed out. 20 th Dec Rent paid for the month of December 2016 and January 2017; Rs. 300,000 for each month. 27 th Dec Salaries paid for the month of December to 1000 employees amounting to Rs. 5 million. A. Post the transactions into the Equipment Account. The opening balance for Equipment account as at 1 st Dec 2016 was Rs. 12 million. (3 marks) Winter-2017 C-11 Page 7 of 20

8 B. Prepare the Journal Entries for the transactions on 20 th December (3 marks) C. Compare and contrast various differences between Journal and Ledger. (4 marks) Winter-2017 C-11 Page 8 of 20

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10 Q3. F&K Cosmetics, a firm which manufactures organic cosmetic products desires financing from your bank. The Income Statement of the firm for the previous two years is provided below: F&K Cosmetics Income Statement Rs. ('000) Rs. ('000) Sales N/A 12,500 Cost of Goods Sold 5,000 5,000 Salaries 2,100 2,300 Advertising Expense Rent 900 1,100 Other Admin Expenses Operating Income 2,100 2,600 Other Income 2,000 N/A PBIT 4,100 4,000 Interest Expense PBT 3,600 3,500 Tax Expense (20%) N/A 700 Net Profit N/A 2,800 A. Calculate: (5 marks) i) Other Income as a percentage of the Net Profit for the year 2016 ii) Sales for the year 2015 iii) Gross Profit for the year 2016 iv) Net Profit for the year 2015 v) Percentage increase/decrease in profit after interest and before tax Winter-2017 C-11 Page 10 of 20

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12 Your Bank s Credit Committee has set the following minimum criteria, each of which must be met for a loan to be extended to a firm. Gross Profit Margin 15.0% Net profit Margin 20.0% Interest Coverage 9 times B. Calculate the above mentioned ratios for the year 2016 and decide whether the loan can be extended to F&K Cosmetics? (5 marks) Winter-2017 C-11 Page 12 of 20

13 Q4. Reproduce the following statements by correcting the underlined text. (5 marks) 1. The Income Statement shows the financial position of a company as at a period end. 2. Accrual concept states that revenue is recorded at the time it is paid. 3. Trading Securities are investments in debt or equity that the management plans to buy and hold for profit in long term. 4. Inventory Turnover is calculated as the ratio of Credit Sales for the year to Average Receivables for the year. 5. The difference of current assets and current liabilities is called the Cost of Goods Sold and their ratio is called the Quick Ratio. Winter-2017 C-11 Page 13 of 20

14 Q5. A. Using the following information, calculate the ending balance in Retained Earnings: i. Beginning Retained Earnings: Rs. 10,000 ii. Net Income: Rs. 5,000 iii. Dividends Paid: Rs. 4,000 (4 Marks) Winter-2017 C-11 Page 14 of 20

15 B. Calculate Net Income based the following data: (4 Marks) Consulting Revenue: Rs. 50,000 Rent Expense: Rs. 5,000 Software Licensing Fees: Rs. 3,000 Dividends Paid: Rs. 6,000 Advertising Expense: Rs. 20,000 Winter-2017 C-11 Page 15 of 20

16 C. Using the following data, calculate how much was paid out in dividends during the year: Beginning Retained Earnings: Rs. 40,000 Net Income: Rs. 15,000 Ending Retained Earnings: Rs. 30,000 (2 Marks) Q6. Explain: (10 Marks) A. Depletion B. Amortization C. Depreciation D. Accrual E. Revaluation Winter-2017 C-11 Page 16 of 20

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FINANCIAL RATIOS 2 Page 1 of 5. The following is information concerning ABC Company and XYZ Company.

FINANCIAL RATIOS 2 Page 1 of 5 The following is information concerning ABC Company and XYZ Company. ABC Company XYZ Company CURRENT ASSETS: Cash 22,600 42,800 Accounts and Notes Receivable 92,500 101,100