Pac Mids With Solution 1,2,3,4,8

The Professionals’ Academy of Commerce
CAF Mid-Term Examination (Autumn-2020)
Introduction to Accounting (CAF-01)

Total Marks: 50 Time Allowed: 120 Minutes
(Note: Reading Time: 10 Minutes, Paper Attempting Time: 90 Minutes & Answer Script
Uploading Time: 20 Minutes)
Question # 1:
Choose the correct answer and write it on your answer scripts: (Marks: 04)
1- Purchase & sale of goods with altering its shape and size is.
a. Trading Business
b. Manufacturing Business
c. Services
d. None of the above
2- Which of the following is not a business transaction?
a. Sales of goods or services
b. Purchase of goods or services
c. Cash withdraw for payment of salaries to employees
d. Owner purchased a car for his personal use, from his own bank account
3- A business is separate from its owner. What is this concept called?
a. Owner-Business entity concept
b. Business concept
c. Business entity concept
d. Capital concept
4- Which of the following business organizations can raise a large amount of capital easily:
a. Sole Proprietor
b. Partnership
c. Company
d. All of the above
Question # 2:
Mr. Awais Farman has started business many years ago. He has strong accounting department
which is headed by Mr. Yawar Khan He has master degree in Commerce. Mr. Yawar Khan is
unaware of accounting treatment of Fixed Assets & Depreciation. He has provided the following
information to Mr. Junaid Zahid who is a Chartered Accountant . The balances as on 1 st January
2019; Rs.
Equipment – At cost 18,900,130

Accumulated Depreciation- Equipment 4,210,600
The following information is relevant to the Equipment;
(i) All Equipments are depreciated using reducing balance method with 4 years of
useful life and 30 % residual value on cost
(ii) Equipment BL-101 was Purchased on 1st May 2019 for Rs.3,000,000. Further,
Installation cost on BL-101 is 15 % on cost that was paid on the date of
acquisition of BL-101.
(iii) Equipment JA-222 which was purchased on 1st July 2017 for Rs.3,100,000 and
was sold on 10th November 2019 for Rs.1,520,000 in cash.
(iv) Full depreciation is charged in the month of purchase and no depreciation is
charged in month of disposal.
Required:
a) Prepare Equipment-At cost and accumulated depreciation account for the year
ended 31st December 2019. (Marks: 12)
b) What are depreciable Assets? (Marks: 04)
Question # 3:
The following information and transaction pertain to the business of IK Traders. It has the following
balances as on 1st January 2019:
Rs.
Trade Debtors ?
Provision for bad 430,000
debts
During the year 2019, the following transactions took place:
Rs.
Sales 19,875,570
sales returns- 80% were credit 850,000
bad debts 280,000
Discount allowed 685,000
collection from credit customers 10,850,430
Further Information:
(i) IK traders follows a policy of making a general provision of 4% against trade debtors.
(ii) Credit sales were 75% of total sales.
(iii) Details of specific provision on 1st January 2019 and recoveries there against during
the year end 31st December 2019 are as follows:
Rs. Rs.
Customers Name Provided Recoveries
Waqas Traders (40% of amount due) 50,000 125,000
Yawar Traders(50% of amount due) 87,500 100,000
Hassam Associates( 56.25% of amount due) 112,500 100,000
Remaining debts of Yawar traders needs to be written off.
(iv) A debtor Osama who had a debit balance of Rs. 526,000 had also supplied goods to
IK traders of Rs. 786,000.
(v) Collection from credit customers includes recovery against debts written off during
the year ended 31 December 2018 amounted to Rs. 305,000.
(vi) Further bad debts to be written off Rs. 450,000.
(vii) Specific provision is also required to be made of the following receivables:
Customer Name Amount Due Provided
Ahmad Associates 75,000 75,000
Hussain Traders 145,000 109,000
Moaeed Traders 96,000 48,000
(viii) As per the historical trend it is expected that full amount shall be recovered, in
normal credit period, from Mr. Waqas who owed Rs. 750,000 as on December 31,
2019.
Required:
Prepare debtors control account, provision for doubtful debt account and bad debts expense
account for the year ended December 31, 2019. (Marks: 18)
Question # 4:
Following are the transactions of Indus Traders a retail outlet for the month of April, 2019.
1/1 Owner invested his personal furniture of Rs. 100,000, Motor Vehicle of Rs. 500,000, cash of
Rs. 200,000
1/1 Business entered into rent agreement with landlord and paid Rs.100,000 as refundable
security deposit of the premises and Rs.10,000/- rent for the month of January. Both
payments are made through cheque.
2/1 Bought Office equipment of Rs. 100,000 by paying Rs. 20,000 in cash and 50,000 by
cheque and balance is payable in two months.
3/1 Bought Furniture of Rs. 80,000 on installments from Sigma furniture by paying Rs. 10,000
in cash and balance is payable in 7 equal installments.
5/1 Bought goods on credit from Pak Enterprises having list price of Rs. 50,000, after bargain
he was able to receive bargain discount of 5% of list price.
6/1 Cash of Rs. 30,000 deposited into the business bank account.
7/1 Owner withdraw cash of Rs. 10,000 from business for personal use.
7/1 Loan of Rs. 200,000 received from Micro Finance Bank in cheque.
8/1 Owner withdraws goods worth Rs 10,000 from business for personal use.
9/1 Received rent Rs 15,000 in cash from tenant by letting out part of the premises.
12/1 Sold goods on credit to Bahria Traders for Rs. 150,000 on 30 days credit and offered him
2% discount if payment is made in 10 days.
17/1 Owner invested further Rs.50,000 into the bank account of the business.
31/1 1st Installment of Rs. 10,000 for furniture bought from Sigma furniture paid by cheque.
31/1 Cash of Rs. 20,000 donated to PM Corona Relief Fund.
31/1 Goods for the value of Rs. 50,000 donated in Corona affectless.
Required:
Prepare journal entries to record the above transactions in general journal and prepare ONLY
cash account in general ledger. (Narration in General journal is not required.) (Marks: 12)
(THE END)
Mid-Term Solution
Introduction to Accounting
ANSWERS (Q1,2,3)
Question – 1:
1. B
2. D
3. C
4. C
Question – 2:
a)
Equipment-Cost
b/f 18,900,130 Disposal 3,100,000 2
bank 3,450,000 2
c/f 19,250,130
Acc. Depreciation
disposal 1,536,176 b/f 4,210,600
dep. 4,329,112
c/f 7,003,540
working 1
4 0.3
RB%= 1− √
1
2
0.2599
working 2 depreciation expense
on b/f
(14,689,530 - 1,996,164) * 0.2599 3,299,006 1.5
on addition
3,450,000*0.2599* 8/12 597,770 1.5
on disposal
1,996,164*0.2599* 10/12 432,336 1.5
4,329,112
working 3 WDV of disposal
3,100,000*[(1-0.2599* 6/12) * (1-

WDV @ start of 2017
0.2599)]
1,996,164 1.5
WDV till date of

1,996,164 - 432,336
disposal
1,563,828
Acc. Dep 1,536,172
b)
a. Are held by an enterprise for use in the production or supply of goods or services for rental to
others or for administrative purposes.
b. Are expected to be used during more than one period and
c. Have limited useful life example, machines and vehicles etc
Question – 3:
Particulars Amount particulars amount marks
b/f (w-3) 5,000,000 sales returns 680,000 1+.5
sales 14,906,670 bad debts 280,000 .5+.5
discount allowed 685,000 .5+.5
bad debts 305,000 cash/bank 10,850,430 .5+.5
bad debts 75,000 0.5
contra/t.p.c 526,000 0.5
bad debts 450,000 0.5
c/f 6,665,240 0.5

20,211,670 20,211,670
Provision for doubtful debts a/c
particulars amount particulars amount

b/f 430,000 0.5
bad debts 78,220
1
c/f 508220
508,220 508,220 0.5
Bad debts expense a/c
Particulars amount particulars amount

debtors 280,000 debtors 305,000 .5+.5
debtors 75,000
0.5
debtors 450,000 SOCI 578,220
provision for doubtful debts 78,220 1+.5
883,220 883,220 0.5
Working-1 calculation of G.P

Rs.
C/F 6,665,240 2
specific provision (w-2.1.a) -416,000
other adjustments -750,000
5,499,240
G.P (5,499,240*.04) 219,970
Working -2 Rs.
G.P 219,970
S.P 288,250 1
T.P 508,220
Working 2.1
customer name amount due provision required
(A) (B) 2
Hassam Associates 100,000 56,250
Ahmad Associates 75,000 75,000
Hussain Traders 145,000 109,000
Moaeed Traders 96,000 48,000
Total 416,000 288,250
Working-3 Opening balance 1
Total debtors = General debtors + specific debtors total debtors = 180,000/.04 + 500,000
balance = 5,000,000
Answer # 4 Journal Entries
Indus Traders Marking

Scheme
Journal
Debit Credit
Date Description
Rs. Rs.
2019
April
1 Furniture 100,000
Motor Vehicle 500,000

1.00
Cash 200,000
Capital 800,000
1 Security Deposit 100,000
Rent 10,000 0.50
Bank 110,000
2 Equipment 100,000
Cash 20,000
0.50
Bank 50,000
Equipment Payable 30,000
3 Furniture 80,000
Cash 10,000 0.50
Sigma Interior Payable 70,000
5 Purchases (500,000 - (500,000 x 5%) 475,000
Pak Enterprises Payable 475,000 0.50
6 Bank 30,000
Cash 30,000 0.50
7 Drawings 10,000
Cash 10,000 0.50
7 Bank 200,000
Bank Loan 200,000 0.50
8 Drawings 10,000
Purchases 10,000 0.50
9 Cash 15,000
Rental Income 15,000 0.25

12 Bahria Traders Receivables 150,000
Sales 150,000 0.50
0.50
17 Bank 50,000
Capital 50,000 0.25
31 Sigma furniture Payable 10,000
Bank 10,000 0.50
31 Donation 20,000
Cash 20,000 0.50
31 Donation 50,000
8.00
Marking
General Ledger Scheme
Cash a/c
Date Description Rs. Date Description Rs.
2019 2019
April April
1 Capital - 2 Equipment - 0.5 mark
9 Rental income - 3 Furniture - for each
6 Bank - correct
7 Drawings - figure.
15 Motor expenses 10,000 Max. upto
31 Donation - 4 marks
31 Balance c/d (10,000)

- -
Introduction to Accounting (CAF-01)

Question # 1:
Choose the correct answer and write it on your answer scripts: (Marks: 08)
1- Purchase & sale of goods with altering its shape and size is.
a. Trading Business
b. Manufacturing Business
c. Services
d. None of the above
2- Which of the following is not a business transaction?
a. Sales of goods or services
b. Purchase of goods or services
c. Cash withdraw for payment of salaries to employees
d. Owner purchased a car for his personal use, from his own bank account
3- A business is separate from its owner. What is this concept called?
a. Owner-Business entity concept
b. Business concept
c. Business entity concept
d. Capital concept
4- Which of the following business organizations can raise a large amount of capital easily:
a. Sole Proprietor
b. Partnership
c. Company
d. All of the above
5- Find out the amount of unpresented cheques from the following information.
Rs.
Balance as per cash book 6,000
Balance as per bank statement 5,500
Uncredited cheques 800
a. Rs. 300 b. Rs. 1,300
c. Rs. 12,300 d. Rs. 10,700

6- Which of the following will be adjusted in adjusted/corrected cash book:
a. Bank forgets to record a transaction.
b. Cheque issued to supplier but he did not deposit the cheque for collection.
Cheque issued in previous period but bank debited business' account in the
c. current period.
d. Cheque received from a customer but dishonored subsequently.
7- Unfavorable balance is:
(i) Debit balance in cashbook
(ii) Credit balance in cashbook
(iii) Debit balance in bank statement
(iv) Credit balance in bank statement
a. (i) and (iii) b. (i) and (iv)
c. (ii) and (iii) d. (iii) only
8- Balance as per cash book is Rs. 25,000 and balance as per bank statement is Rs. 23,500.
Which of the following statement will reconcile the difference in full:
a. Unpresented cheques of Rs. 4,000 and uncredited cheques of Rs. 2,500.
b. Unpresented cheques of Rs. 700 and uncredited cheques of Rs. 800.
c. Unpresented cheques of Rs. 3,000 and uncredited cheques of Rs. 4,500.
d. Bank mistakenly debited with 500 and unpresented cheques of Rs. 1,000.
Question # 2:
a. Differentiate between Limited and Unlimited Liability with reference to different business
organizations. (Marks: 03)
b. List down any four users of financial statements? (Marks: 02)
Question # 3:
The accountant of Online Traders reconciled his cash book with the Bank statement every month.
His bank reconciliation statement for the month of April 2020 was as follows:
Rs.
Balance as per bank statement (Overdraft) (13,500,000)
Less: Un - Presented cheques:
Jimmy Brothers (162,000)
Sohail (330,000)
Usman (78,000)
Adjusted balance as per cash book (Overdraft) (14,070,000)
The following is the extract of the Bank column in the cash book for the month of May,
2020,and a copy of the Bank statement for the same period.
Cashbook (Bank Column)

Date Particulars Rs. Date Particulars Rs.
May-01 Muneer & Sons 12,540,000 May-01 Balance b/d 14,070,000
4 L & T Co. 2,250,000 5 GWK 138,000
5 CMC Computers 10,260,000 8 Haris& Sons 87,000
19 Ali Printers 663,000 16 PK Finance 330,000
23 MMC 1,350,000 23 HB & Co 747,000
29 K & Co 1,197,000 29 Quality Printers 225,000
31 Balance c/d 12,663,000
28,260,000 28,260,000
Bank Statement
Date Particulars Rs.(Debit) Date Particulars Rs. (Credit)
May-01 Balance b/d 13,500,000 May-02 Muneer & Sons 12,540,000
1 Jimmy Brothers 162,000 4 L & T Co 2,250,000
4 Sohail 330,000 5 CMC Computers 10,260,000
5 General Insurance 195,000 22 Ali Printers 636,000
8 GKW 138,000 23 C Ltd. Credit transfer 1,095,000
19 PK Finance 330,000 29 MMC 1,620,000
19 Bank Charges 198,000
29 Bank Commission 135,000
29 Standing Order ABC & Sons 12,540,000
31 Balance c/d 873,000
28,401,000 28,401,000
Required:
a) Adjusted balance as per cash book on May, 31, 2020. (Assume that all figures shown in
the cash book are correct.) (Marks: 06)
b) A bank reconciliation statement as at May 31, 2020 (Marks: 04)
Question # 4:
Star enterprises commenced its business on 1 May 2020. The following information is available for
the first month of operations:
i. Set up the entity with capital in Bank: Rs. 7,000,000.

ii. Bought goods on credit from the following suppliers: Salman Brothers Rs.900,000,
Kamal Enterprises Rs.1,400,000, Rafiq and Sons Rs.700,000. Kamal Enterprises
allowed a 10% trade discount and 5% cash discount on list price if payment is made
within 30 days. All above figures of purchases were net of trade discount.
iii. Sold goods on credit to Salamat & Co. Rs 900,000, Jamal traders Rs. 1,000,000 and
Rahim Store Rs.1,600,000.
iv. Purchased goods of Rs. 200,000 from Mr. Rehan by paying through cheque. Out of
these, goods amounting to Rs. 60,000 were withdrawn by owner.
v. Salamat & Co. directly transferred Rs. 430,000 in business bank account and Jamal
traders returned 50% of goods sold to them.
vi. Goods costing Rs. 200,000 were returned to Kamal Enterprises and remaining amount
was paid through cheque.
vii. Advertising costs of Rs.200,000 were paid in the business bank account of local
newspaper publisher.
viii. Stock in trade as at 31 May 2019 was Rs. 90,000.
Required:
a) Record the above entries in the relevant books of prime entry in a proper format.
(Marks: 10)
b) Prepare trial balance for the month ended 31 May 2020 (Preparation of ledger accounts is
not necessary). (Marks: 05)
Question # 5:
Following are the transactions of Indus Traders a retail outlet for the month of April, 2019.
1/1 Owner invested his personal furniture of Rs. 100,000, Motor Vehicle of Rs. 500,000, cash of
Rs. 200,000
1/1 Business entered into rent agreement with landlord and paid Rs.100,000 as refundable
security deposit of the premises and Rs.10,000/- rent for the month of January. Both
payments are made through cheque.
2/1 Bought Office equipment of Rs. 100,000 by paying Rs. 20,000 in cash and 50,000 by
cheque and balance is payable in two months.

3/1 Bought Furniture of Rs. 80,000 on installments from Sigma furniture by paying Rs. 10,000
in cash and balance is payable in 7 equal installments.
5/1 Bought goods on credit from Pak Enterprises having list price of Rs. 50,000, after bargain
he was able to receive bargain discount of 5% of list price.
6/1 Cash of Rs. 30,000 deposited into the business bank account.
7/1 Owner withdraw cash of Rs. 10,000 from business for personal use.
7/1 Loan of Rs. 200,000 received from Micro Finance Bank in cheque.
8/1 Owner withdraws goods worth Rs 10,000 from business for personal use.
9/1 Received rent Rs 15,000 in cash from tenant by letting out part of the premises.
12/1 Sold goods on credit to Bahria Traders for Rs. 150,000 on 30 days credit and offered him
2% discount if payment is made in 10 days.
17/1 Owner invested further Rs.50,000 into the bank account of the business.
31/1 1st Installment of Rs. 10,000 for furniture bought from Sigma furniture paid by cheque.
31/1 Cash of Rs. 20,000 donated to PM Corona Relief Fund.
31/1 Goods for the value of Rs. 50,000 donated in Corona affectless.
Required:
Prepare journal entries to record the above transactions in general journal and prepare ONLY
cash account in general ledger. (Narration in General journal is not required.) (Marks: 12)
(THE END)
Mid-Term Solution
Introduction to Accounting
ANSWERS (Q1,2,3)
Question – 1:
1. B
2. D
3. C
4. C
5. A
6. D
7. C
8. A
Question – 2 part-a:
Limited Liabilities Unlimited Liabilities

Limited liability means the business Unlimited liability means the business
owners’ liability for debts is restricted to owner is personally responsible for any
the amount they put into the business loss the business makes.
Companies have limited liability Sole Proprietor and partnership has
unlimited liability
A company is liable for its own debts. If a The sole proprietor or partner is(are)
company does not have the money to wholly liable for the debts of the business,
make the payment, the company alone is borrowing money in his/her own name,
liable for the debt. The owners and has to pay the amount back to the
(shareholders) are not personally liable to lenders even if he has to sell his/her own
make the payment. The liability of personal belongings.
shareholders is limited to the amount of
capital they have invested or agreed to
invest in the company.
Question – 2 part-b:
The following are the users of Financial Statements:

(0.5 marks each)
1. Investors
2. Lenders
3. Suppliers
4. Government
5. General public
6. Employees
7. Customers
8. Managers
Question – 3
Online Traders Marking

Scheme
Adjusted Cash Book
Date Description Rs.000 Date Description Rs.000 Dr Side Cr Side
31-May Balance b/d 12,663 Insurance premium 195 0.5 1.0
C Ltd. 1,095 Bank charges 198 0.5 1.0
Bank Commission 135 1.0
Muneer & Sons 12,540 1.0
Balance c/d 690 1.0
13,758 13,758
Sub Total 1.0 5.0
1.0
Answer - 1 (b) 6.0
Bank Reconciliation Statement

0.5
2.0
0.5
Rs.000 0.5
0.5
Balance as per Bank Statement 873
4.0
Less: Un Presented Cheques (87+747+225+78) (1,137)
Add: Un Credited Cheques 1197
Add: Amount wrongly recorded in Bank Statement 27
Less: Amount wrongly recorded in Bank Statement (270)

Adjusted Balance as per Cash Book 690
10.00
Answer: 4
Star ent. books of prime entry Rs. in (000)

Star ent. trial balance
Marks Debit Credit
Marks Purchase day book 0.50 Sales 3,500
Description Rs. (000) 0.50 Sales return 500
0.50 Salman 900 0.50 Receivables (3500-430-500) 2,570
0.50 Kamal ent 1,400 0.50 Drawings 60
0.50 Rafiq and sons 700 0.50 Purchases (3000+200-60) 3,140
0.50 3,000 0.50 Trade payables (3000-200-1200) 1,600
0.50 Purchase return 200
0.50 Capital 7,000
Sales day book 0.50 Advertisement expense 200
Description Rs. (000) 0.50 Bank 5,830
0.50 Salamat 900
0.50 Jamal traders 1,000
0.50 Rahim store 1,600
0.50 3,500
12,300 12,300
Sales return day book
Description Rs. (000) Purchase return day book
0.50 Jamal traders 500 Description Rs. (000)
500 0.50 Kamal Ent. 200
General journal
Rs. in (000)
Description Debit Credit
0.50 Drawings 60
0.50 Purchases 60
0.50 Discount Allowed 20
0.50 Receivables 20
Cash Book (Rs. in '000')
Cash Bank Cash Bank
0.50 Capital 7,000
Purchases 200 0.50
0.50 Salamat 430
Advertisement exp 200 0.50
Payables 1,200 0.50
Balance c/d 5,830 0.50
- 7,430 - 7,430
Answer # 5 Journal Entries
Indus Traders Marking

Scheme
Journal
Debit Credit
Date Description
Rs. Rs.
2019
April
1 Furniture 100,000
Motor Vehicle 500,000

1.00
Cash 200,000
Capital 800,000
1 Security Deposit 100,000
Rent 10,000 0.50
Bank 110,000
2 Equipment 100,000
Cash 20,000
0.50
Bank 50,000
Equipment Payable 30,000
3 Furniture 80,000
Cash 10,000 0.50
Sigma Interior Payable 70,000
5 Purchases (500,000 - (500,000 x 5%) 475,000
Pak Enterprises Payable 475,000 0.50
6 Bank 30,000
Cash 30,000 0.50
7 Drawings 10,000
Cash 10,000 0.50
7 Bank 200,000
Bank Loan 200,000 0.50
8 Drawings 10,000
9 Cash 15,000
Rental Income 15,000 0.25

12 Bahria Traders Receivables 150,000
Sales 150,000 0.50
0.50
17 Bank 50,000
Capital 50,000 0.25
31 Sigma furniture Payable 10,000
Bank 10,000 0.50
31 Donation 20,000
Cash 20,000 0.50
31 Donation 50,000
8.00
Marking
General Ledger Scheme
Cash a/c
Date Description Rs. Date Description Rs.
2019 2019
April April
1 Capital - 2 Equipment - 0.5 mark
9 Rental income - 3 Furniture - for each
6 Bank - correct
7 Drawings - figure.
15 Motor expenses 10,000 Max. upto
31 Donation - 4 marks
31 Balance c/d (10,000)

- -
BMBS (CAF-04)
Question # 1:
For each of the following scenarios, identify which role is being practiced by the manager
according to Henri Mintzberg Model and give justification of your choice.
a) Sales manager of company XYZ is sensing competitive market. He is trying to find

out the different prices of products being offered by other competitors in the market
so that he can recommend a pricing strategy to his top management.
b) Marketing manager in Waleed steel mill is finalizing a deal with a customer. He is trying
hard to close the deal in the best interest of the company.
c) Production manager of Izaz Fibers participates to represent his organization in the
annual conference of APTMA (All Pakistan Textiles Mills Associations).
d) Production manager in company ZRK develops close relationships with his workers.
He constantly guides them, motivates them and helps them in completing their tasks.
e) Mr. Amir is working in a renowned NGO and his job is to build contacts with
different businessmen so that he can encourage them to donate generously for social
cause. (10)
Question # 2:
For each of the following, identify the key activity of value chain that is adding value in overall
firm`s product/services give justification of your choice.
a) PAC has a very strong management and information structure that directly
supports its outstanding academic services.
b) Pepsi has one of the widest networks of distribution that directly helps Pepsi to have a
strong foothold in the market
c) Daewoo Batteries Ltd always source cheaper but quality raw material to keep their
production cost as low as possible.
d) Ali and co. is a firm of accountants who always focus on hiring qualified personnel. They
have a sound training and development department that trains different employees
according to the skill set they need in order to perform their jobs.
e) Bugatti automobiles focus on design and development of their new car models so that
customers can enjoy a premium drive with luxury.
f) KFC has established customer complaint center where customers can easily log their
complaints regarding food quality, staff behavior, overall environment or any other issue
customer faces during their dine in experience. (12)
Question # 3:
Historically the directors of Zed Bank have resisted change, seeking to offer a traditional
approach to its customers. However, recent problems within the banking industry and an
increasingly competitive market have forced the Board to consider a number of important
initiatives, including:
Enhancing its current services to customers by providing them with on•line
internet and telephone banking services; and
Reducing costs by closing many of its rural and smaller branches (outlets).
In an attempt to pacify the employee representatives (the Banking Trade Union) and to reduce
expected protests by the communities affected by branch closure, a senior Bank spokesperson
has announced that the changes will be ‘incremental’ in nature. In particular, she has stressed
that:
the change will be implemented over a lengthy time period
there will be no compulsory redundancies
Banking staff ready to take on new roles and opportunities in the online
operations will be retrained and offered generous relocation expenses.
For customers, the Bank has promised that automatic cash dispensing machines will be
available in all the localities where branches (outlets) close. Customers will also be provided
with the software needed for Internet banking and other assistance necessary to give them
quick and easy access to banking services.
The leader of the Banking Trade Union is ‘appalled’ at the initiatives announced. He has
argued that the so-called ‘incremental’ change is in fact the start of a ‘transformational’
change that will have serious repercussions, not only for the Union's members but also for
many of the Bank's customers.
Required:
Distinguish incremental change from transformational change. Explain why the Bank
spokesperson and the trade union leader disagree over their description of the change. (06)
Question # 4:
a) Edgar Schein explained three levels of culture in an organization i.e., Outer

skin/artifacts, espoused values/inner layer and basic underlying
assumption/paradigm. For each of the following, identify which layer of culture is
being referred to:
i. The owner of Sohail Group has always focused on principles of work ethics in
his organizational tries to reflect these principles through various activities in
the organization.
ii. The goals in XYZ are stated and documented for reference purposes.
iii. Engro corporations have given company maintained cars to their employees.
iv. The corporate color of Bank Alfalah has changed from blue to red, depicting
more energy and vitality in their operations.
v. The mission statement is displayed bold and clear on the main building of Farman
Son`s Ltd. (05)
b) Identify which stage of implementing change given by Gemini consultants, is
presented by following:
i. The stage in which the focus is on finding new products and markets that fit well with
the entity.
ii. The stage in which entity decides that where the resources should be used.
iii. The stage in which the entity give training to their employees.
iv. The stage in which the entity creates a system for measurement of performance.(04)
Question # 5:
Which of the Hoftstede’s dimension best fits in each of the following scenario?
a) Pearson specter a UK company have Tightly-knit framework where people have stronger
bonds to their group and group membership forms a person’s self-identity.
b) Zane limited is an automobile company which is famous for its organizational
culture in which people define themselves as individual and form loose ties with their
groups.
c) Management of MMS limited use pragmatic approach, they encourage thrift and efforts in
modern education as a way to prepare for the future.
d) Uruguay limited has a culture in which employees prefer predictable situation and
have low tolerance for ambiguity.
e) Employees of Arhum limited are good in maintaining relationships, caring for the weak,
and quality of life.
f) Paris limited has a culture in which people value achievement and
competitiveness, as well as acquisition of money and other material objects.
g) Management of Coriell limited focuses on maintaining hierarchical order in which
everybody has a place and which need no further justification.
h) The employees of Zeta limited are more comfortable in performing their work
when they are provided with specific instructions regarding the performance of their
work but their performance deteriorates when they are provided with a principle based
code of conduct. (08)
Question # 6:
ABC Limited has shown poor performance during the preceding five years in spite of
the fact that the company owns substantial physical assets, including modern machinery for
manufacturing of a wide range of products. All the assets of the company are in good
working condition and marketing prospects for the products are also promising.
However, the company’s organizational structure has been designed inappropriately
and therefore has serious shortcomings and weaknesses which create impediments in its
operations and are responsible for the company’s unsatisfactory performance.
Required:
Identify and explain briefly the traits which would be apparent in the working of ABC Limited
because of its inappropriately designed organizational structure. (05)
(The End)
Mid Term Suggested Solution
Ans.1 (2 marks for each point)
1) Monitor: Because he is sensing competitive market. He is trying to find out the different
prices of products being offered by other competitors in the market so that he can
recommend a pricing strategy to his top management.
2) Negotiator: Because he is Committing organizational resources in “real-time” with the

broad information available from their informational roles.
3) Figure head: Because he is performs ceremonial duties. Examples: greeting visiting

dignitaries, attending an employee’s wedding, taking an important customer to lunch.
4) Leader: Because he is responsible for the work of subordinates, motivating and encouraging
employees, exercising formal authority.
5) External liaison: Because he is making contacts outside the vertical chain of command
including peers in other companies or departments, and government and trade organization
representatives.
Ans.2 (2 marks for each point)
1) Corporate infrastructure: This relates to the organization structure and its management
systems, including planning and finance management, quality management and
information systems management.
2) Outbound logistics: These are activities concerned with the storage of finished goods
before sale, and the distribution and delivery of goods (or services) to the customers. For
services, outbound logistics relate to the delivery of a service at the customer’s own
premises.
3) Purchasing: These are activities concerned with buying the resources for the entity –
materials, plant, equipment and other assets. Successful buying often means lower
purchase costs, or achieving a secure source of supply for key materials or components.
4) Human resources management: These are the activities concerned with recruiting,
training, developing and rewarding people in the organization.
5) Technology development: These are activities related to any development in the
technological systems of the entity, such as product design (research and development)
and IT systems.
6) Services: These are all the activities that occur after the point of sale, such as installation,
warranties, repairs and maintenance, and providing training to the employees of
customers
Ans.3
Incremental change means step by step changes over time, in small steps. When incremental
change occurs within an organization, it is possible for the organization to adapt to the change
without having to alter its culture or structures significantly. Employees are able to adapt to
the gradual changes, and are not unsettled by them.
In contrast, transformational change is a sweeping change that has immediate and widespread
effects. The effect of transformational change is usually to alter the structure and culture of the
organization, often with major staff redundancies and the recruitment of new staff with new
skills.
The spokesperson for the bank has argued that the change will be incremental. Since the
change will take place over a long period of time, staff will have time to adapt to the new
structure. There will be no compulsory redundancies and staff will be retrained in new skills.
Although some branches will close others will remain open, and customers will be offered
additional facilities through online banking.
The trade union leader believes that the change will be much more dramatic. He might believe
that many employees will leave the bank because they are unable to adapt to the new service,
or because they are unwilling to relocate from the branches that are closed down. The bank
might push through the branch closure programme more quickly than it has currently
proposed, and staff redundancies could be made compulsory if there are not enough
individuals willing to take voluntary redundancy.
Essentially, the two individuals take differing viewpoints because they are looking at change
differently. The spokesperson for the bank wants to persuade employees to accept the change,
and even welcome it. The trade union representative wants to warn employees about the
potential consequences, and has therefore stressed the risks.
Ans.4
(a) (1 marks for each point)

1) Paradigm/Assumption
2) Espoused values/Inner layer
3) Outer skin/Artifacts
4) Outer skin/Artifacts
5) Inner skin/Espoused values
(b) (1 mark for each point)

1) Revitalize
2) Restructure
3) Renew
4) Reframe
Ans.5 (1 mark for each point)
1) Collectivism
2) Individualism
3) Long-term orientation
4) High uncertainty avoidance
5) Femininity
6) Masculinity
7) High power distance
8) Low-uncertainty avoidance
Ans.6
1. Conflicts and lack of coordination: Lack of clarity of goals and individuals
working at cross-purposes give rise to conflicts and a non-conducive team
environment resulting in poor coordination between the planning and actual
operational levels.
2. Delays and inappropriate decisions: Lack of proper and timely communication
of information to the relevant individuals on account of insufficient delegation of
authorities and inappropriate reporting channels resulting in delays and
inappropriate decisions.
3. Low motivation and morale: Low level of motivation and poor morale amongst
the employees due to lack of clarity of job descriptions and inappropriate or
complex reporting lines.
4. Rising costs: Tall hierarchal structures at management positions and excessive red-
tape at the expense of genuine productive work resulting in high operating costs.
5. Inability to seize business opportunities: Lack of coordination and
communication among the various operating and planning and research
departments resulting in failure to identify and seize new business opportunities as
they emerge from time to time.
6. Inability to adapt to external changes in business environment: Lack of
coordination among the key management and the various departments which
prevents the company from foreseeing the changes in business environment and
utilize its physical assets at optimum levels.
Page 1 of 4

Cost and Management Accounting (CAF-08)
(Note: Reading Time: 10 Minutes, Paper Attempting Time: 90 Minutes & Answer Script Uploading
Time: 20 Minutes)
Question No.01
Adnan Limited (AL) is a retailer and sells product Zafran (Z) at a price of Rs. 3,400 per unit. The product is
purchased from a supplier in Islamabad at a cost of Rs. 2,400 per unit plus transportation charges amounting
to Rs. 6,000 for each delivery.
The records over a 5-year period show that monthly sales ranged between 900 units to 1,200 units, as shown
below:
Units Probability
900 0.30
1000 0.45
1100 0.20
1200 0.05
The following further information is available:

(i) The supplier requires 30 days to fulfil an order.
(ii) The costs of the ordering department are as follows:
 Variable costs - Rs. 3,000 per order
 Fixed costs – Rs. 480,000 per annum
Purchases of Z constitute 5% of the total purchases of AL.
(iii) The holding costs associated with Z are as follows:
 Warehouse rent Rs. 360,000 per annum. 2% of the warehouse space is required to store 1,000
units of Z.
 Cost of Insurance @ 1.0% of the cost of goods stored in the warehouse, per annum.
(iv) AL places its surplus funds in an account which earns interest @ 8% per annum on a daily basis.
Required:
Determine the level of inventory at which it would be most profitable for AL to reorder the product Z.
(10 marks)
Page 2 of 4
Question No.02
Shahbaz Chemicals (SC) produces a chemical that is manufacture in two different processes. Following
information pertains to process B for the month of January 2020;
Liter Rs. in ‘000’

Opening work in process ( 90% to conversion ) 10,000 4,000
Cost for the month:
Received from Process-A 45,000 27,000
Material added in Process-B 25,000 20,000
Conversion Cost incurred in Process-B - 25,000
Finished goods transferred out 70,000 -
Closing work in process ( 60% to conversion ) 8,000
In Process B, material is added at the start of the process and conversion costs are incurred evenly throughout
the process. Process losses are determined on inspection which is carried out on 70% completion of the
process. Process loss is estimated at 5% of the inspected units and is sold for Rs.140 per liter.
SC uses FIFO method for inventory valuation.
Required:
(a) Prepare a statement of equivalent units (4 marks)
(b) Prepare a statement of cost per unit (4 marks)
(c) Prepare a statement of Evaluation (4 marks)
Question No.03
Sigma Garments (SG) is engaged in selling ready-made garments. These garments are processed through three
production departments. SG's production facility also has two service departments. Following information
relates to budgeted production overheads for the year ending December 31, 2019
Rs.
million
Depreciation (building) 40.00
Depreciation (P&M) 18.00
Indirect labor 54.00
Insurance (building) 22.00
Power 96.00
General lighting 14.00
Repairs (P&M) 36.00
Other relevant budgeted information for 2019:

Page 3 of 4
Cutting Stitching Finishing Maintenance Canteen

Direct material [Rs.
million] 94.00 102.00 50.00 - -
Direct labor [Rs. million] [Rs. 800 per
hour] 45.00 32.00 24.00 - -
Indirect labor [Rs. million] 11.00 12.00 13.00 10.00 8.00
Area covered (sq. yards) 1500 1200 800 500 400
Cost of P&M [Rs. million] 240 360 120 - -
KWH consumption 10000 25000 10000 - -
Machine hours 24000 36000 12000 - -
Light points (no.) 20 20 15 5 10
Machine Labor
Basis of OAR - -
Labor hours hours hours
Service departments provide support as follows:

Cutting Stitching Finishing Maintenance Canteen
Maintenance 25% 45% 30% - -
Canteen 30% 30% 35% 5% -
Required:
Calculate OAR for year 2019 for each production department.
(10marks)
Question No.04
The trial balance of the Ettehad Company shows the following balances as on October 01, 2019:
Rs Rs.
Cash 51,600
Accounts receivable 95,480
Allowance for doubtful debt 5,650
Finished goods 157,400
Work in process 170,800
Materials 89,760
Building 240,000
Accumulated depreciation - building 96,000
Equipment 474,480
Accumulated depreciation - equipment 230,420
Accounts payable 108,540
Accrued payroll 13,200
Share capital 160,000
Retained earnings 665,710
Page 4 of 4
1,279,520 1,279,520
During the month of October, following transactions took place:

Rs.
(a) Materials purchased on account 80,000
(b) Direct materials issued 130,000
(c) Total payroll (direct labour) 160,000
(d) Wages paid 150,000
(e) Accounts payable paid 270,000
(f) Depreciation to be provided for October at the rate of 2% per annum on
Building; 10% per annum on equipment ?
(g) Factory overhead applied to production at 60% of direct labour cost ?
(h) Work in process, October 31 150,000
(i) Cost of goods sold 410,000
(j) Sales on account 570,000
Required:
Prepare journal entries for the above transactions. (Marks 10)
Question No.05
The following information relates to week's performance of three employees
A B C
units produced 160.00 276.00 68.00
Hours per unit 0.50 0.25 0.75
Basic hourly rate 80.00 100.00 70.00
Hours worked as direct
worker 48.00 54.00 30.00
Hours worked as indirect
worker - - 12.00
Other information
(i) The normal working hours of week are 42.
(ii) for the first 6 hours overtime is paid @ 50% above normal rate .Any
further overtime is paid @ double the normal rate
Bonus Is paid @ 3/5 of normal rate of time saved
(iii)
Required :
Determine Total wages earned by each employee in week (8 marks)
Page |1

Cost and Management Accounting (CAF-08)
Question No.1 Adnan Limited (AL)
(a) Determining the optimum re-order level:
Reorder level Incremental

stock Stock out Loss of Sales Loss of Carrying Total cost
Probability Costs (Rs.)
(Units) (Units) (Units) (Units) Contribution
(C) E+F
(A) (B) D = (B)x(C) E = (*1000 x D) F= (**216 x A)
900 - 100 0.45 45 45,000 - 45,000
- 200 0.20 40 40,000 - 40,000
- 300 0.05 15 15,000 - 15,000
100,000
1,000 - 100 0.20 20 20,000 - 20,000

- 200 0.05 10 10,000 - 10,000
- - 30,000
1,100 100 100 0.05 5 5,000 21,600 26,600

- 26,600
-
1,200 200 - - - - 43,200 43,200
(Marks 2.5 each ROL working)
*Contribution = Rs. 3,400 – Rs. 2,400 = Rs. 1,000
**CC= 2400*9% = Rs. 216
Conclusion:
Profit would be maximized at re-order level of 1,100 units. Therefore, the company should reorder when
the stock reaches 1100 units.
Page |2
Question No.2 Shahbaz Chemicals (SC)
(a) Statement of Equivalent Units ( Total4 marks)

Equivalent Units Quantity
Schedule
Material Conversion
------------------Liter----------------
Opening WIP (90% to conversion) (M-0.5) (10,000) (9,000) 10,000
Material received from Process-A(M-0.5) 45,000
Material added in Process-B(M-0.5) 25,000
80,000
Transferred to finished goods(M-0.5) 70,000 70,000 70,000
Units started and completed during the month (A) 60,000 61,000
Closing WIP (60% to conversion) (M-1)
4800 8,000
(B) 8,000
Normal Loss at 5% [(80,000-10,000-8,000) x 5%](M-1) 3,100
Abnormal gain (70% to conversion) balancing (C) (1,100) (770) (1,100)
(D) 66,900 65,030 80,000
(b) Statement of Cost Per Unit ( Total4 marks)

Cost Material Conversion Total
-------Rs. in ‘000’------
Opening WIP(M-0.5) - - 4,000
Cost for the month: Department-A(M-1.5) 27,000 27,000
Department-B (M-1) 20,000 25,000 45,000
Normal loss scrap value (3100 x 140) (M-1) (434) - (434)
Net Cost (E) 46,566 25,000 75,566
----------- Rupees ----------

Cost per Unit [F = (E ÷ D)] 696.05 384.44 -
(c) Statement of Evaluation ( Total4 marks)

Cost of finish goods: ------------Rs. in ‘000’-----------
Opening WIP(M-0.5) 4,000
Cost for the month ( A x F) (M-1) 41,763 23,451 65,214
69,214
Cost of Closing Stock (B x F) (M-1.5) 5,568 1,845 7413
Cost of abnormal gain (CxF) (M-1) 766 296 1,062

Question no.3:
Allocation / Apportionment
Items Basis Total Cutting Stitching Finishing Maintenance Canteen Marks
----------------------------- Rs. million ---------------------------
Dep (build.) Area 40.00 13.64 10.91 7.27 4.55 3.64 1
Machine
Dep (P&M) 18.00 6.00 9.00 3.00 - -
hours 1
Indirect labor Given 54.00 11.00 12.00 13.00 10.00 8.00 0.5
Insurance (build.) Area 22.00 7.50 6.00 4.00 2.50 2.00 1
Power KWH 96.00 21.33 53.33 21.33 - - 1
Gen. light Light points 14.00 4.00 4.00 3.00 1.00 2.00 1
Machine
Repairs (P&M) 36.00 12.00 18.00 6.00 - -
hours 1
75.47 113.24 57.61 18.05 15.64
Secondary apportionment:
Canteen 4.69 4.69 5.47 0.78 (15.64) 1
Maintenance 4.71 8.47 5.65 (18.83) - 1
Total OH 84.87 126.41 68.73 - -
Basis 56,250 36,000 30,000 1

Labor hours Machine hours Labor hours
OAR per hour (Rs.) 1,508.75 3,511.27 2,290.90 0.5

Question no.4
a. Material 80,000
0.75
Account payable 80,000
b. WIP 130,000
0.75
Material 130,000
c. WIP 160,000
0.75
Payroll 160,000
d. Accrued Payable 150,000

0.75
Cash 150,000
e. Account Payable 270,000

0.75
Cash 270,000
f. FOH control A/C 4354
Acc. Dep- Building 400 1.5

Acc. Dep- Equipment 3,954
g. WIP 96,000
0.75
FOH control A/C 96,000
h. Finished goods 406,800 0.75

WIP 406,800
i. Cost of Sale 410,000

1
Finish goods 410,000
j. Account receivables 570,000

0.5
Sales 570,000
WIP
Opening balance 170,800 Finish goods 406,800
FOH 96,000
Material 130,000
Labor 160,000
Closing balance 150,000
Question no. 5
A B C
BasicWages
(M-2) 3,360.00 4,200.00 2,940.00
(42x80) (42x100) (42x70)
Overtime
(M-2) 720.00 2,100.00 -
(6x80x1.5) (6x100x1.5)
(6x100x2)
Bonus(w-1) 1,536.00 900.00 882.00

(M-4)
Total
Wages 5,616.00 7,200.00 3,822.00
W-1
A B C
Std time for actual output(actual prod/std prod per hour) 80.00 69.00 51.00
('160/2) ('276/4) ('68/(1.33333))
Actual time for actual output 48.00 54.00 30.00
Time Saved 32.00 15.00 21.00
Hourly rate 80.00 100.00 70.00
Bonus 1,536.00 900.00 882.00

INTRODUCTION TO ECONOMICS AND FINANCE (CAF-02)
Question # 1:
(a) Describe demerit goods and club goods with at least two examples each. (M.04)
(b) Opportunity cost is important for active agents of an economy. Elaborate with examples.
(M.06)
Question # 2:
Demonstrate the production possibility curve on an economy for consumer goods and military
equipment’s. Use appropriate diagram to support your answer. Explain the effect of economic
growth on a country’s production possibility frontier. (M.10)
Question # 3:
(a) Mr. Zain ul Abideen is dealing in room coolers for last few years. Over the years his
accounts book have shown a record growth in its sale. Surprisingly he has experienced a
sharp scaling back in sale this year. On investigation he was found that one of the major
reasons is availability of a new substitute in the market. Zain was selling his product at the
rate Rs. 25000 per unit. In the absence of an alternative, it’s total sale was recorded 2000
units during a course of time. Since it was observed that Zain’s sales gone down in a
result when an alternative is avail with a price cut from Rs. 28000 to Rs. 22000 per unit.
Calculate the cross elasticity of demand and state its degree. (M.08)
(b) State why the income elasticity of demand is negative for inferior goods? (M.02)
Question # 4:
(a) Support price is a system to protect the week agents of an economy from exploitation
especially in agriculture. Explain how minimum price system works in this regards.
Elucidate your thought by means of a suitable diagram. (M.06)
(b) Apart from the price of a product, there are many other factors which affect the
quantum of supply into a market. Explain those factors which responsible for a fall in
supply of product. (No need of diagram) (M.04)
Question # 5:
(a) Differentiate between cardinal and ordinal school of thoughts of utility. (M.02)
(b) In economic theory it is affirmed that the real income of consumers increases as price
of product under consideration falls. Explain that price effect, comes from the income
and substitution effects in this case. (Support your answer with help of diagram). (M.08)
THE END
IEF Mid-Term Suggested Solution By Sir Ijaz Butt
Question # 1:
(a) Describe demerit goods and club goods with at least two examples each? (M.04)
Answer:
Demerit Goods:
A good or service whose consumption is considered unhealthy, degrading, or otherwise socially undesirable due to
the perceived negative effects on the consumers themselves".
Examples, alcoholic beverages, and recreational drugs.
Club Goods:
Are a type of good in economics, sometimes classified as a subtype of public goods that are excludable but non-
rivalrous, at least until reaching a point where congestion occurs. These goods are often provided by a natural
monopoly.
Examples, Cinemas, and Cable Television
(b) Opportunity cost is important for active agents of an economy. Elaborate with examples? (M.06)
Opportunity Cost:
The forgone benefits by using a factor of production in its next best alternative.
The opportunity cost is the cost of losing an opportunity to get next benefit.
The application of the concept of opportunity cost can be observed in all sectors / agents of the of an economy such
as:
i. Consumer: Consumer considers the opportunity forgone while spending his income among various goods to
satisfy his wants.
ii. Government: Government also considers the opportunity cost by using resources to provide various
development and non-development projects to the society.
iii. Firms: The forgone benefit by using a factor of production during a production process is the core aim of a firm
to maximize its profits.
Question # 2:
Demonstrate the production possibility curve on an economy for consumer goods and military equipment’s. Use
appropriate diagram to support your answer. Explain the effect of economic growth on a country’s production
possibility frontier? (M.10)
Answer
Production Possibility Curve:
A production Possibility Frontier/Curve (PPC or PPF) shows different combination of two goods that an economy
can produce when all the resources are fully and efficiently applied.
Assumption of PPF:
PPF (curve) is based on the following assumption:

1. Only two goods ‘X’ (Consumer goods) ‘Y’ (Capital goods) are produced in different proportion in the economy.
2. There is full employment of resources.
3. The supply of factors are fixed. But these can be re-allocated for production of two goods within limits.
4. The production techniques are given and constant.
5. The time period is short
6. The firm has given quantities of an input with which it produces the two goods.
7. It produces more of one good and less of the other.
Diagram and Explanation:
Attainable Consumer Capital We can illustrate this concept by using following diagram:
Combinations Good Good
A 0 15 Diagram:
B 1 14
Cur
C
u
e
v
r
ve
P
o
b
s
s
y
t
i
i
l
i
A
PossibilityCurve
B
CapitalGood
C 2 12
Possi
K1
bility
P
o
d
u
o
n
c
r
t
i
K2 C
duct o
ion d
u
o
n
c
Pro r
t
i
B
D 3 9 .N
.M
E 4 5 C
C1 2Consumed Good
F 5 0
The movement from X point to Y point illustrate a very important aspect of the economic problem, the principle of
opportunity cost. The opportunity cost of any choice is measured in terms of the alternative that have to give up.
Hence the opportunity cost of increasing the production of consumer goods from C1-C2 is the fall in production of
capital goods from K1 to K2. This trend is showing the opportunity cost. In above diagram this point M indicates a
combination of capital goods and consumer goods where all resources are not employed fully. Whereas the point N
is not technically possible in given present resources and technology. Hence the opportunity cost of any decision or
choice can be defined as the next best alternative sacrificed or forgone.
ECONOMIC GROWTH AND SHIFT IN PPF:

Economic growth can be defined as an outward shifting of the economy’s production possibility frontier, or an
increase in its production potential.
When the PPF shifts outwards, we can imply that there has been growth in an economy. Alternatively, when the
PPF shifts inwards it indicates that the economy is shrinking due to a failure in its allocation of resources and
optimal production capability. A shrinking economy could be a result of a decrease in supplies or a deficiency in
technology. An economy can only be producing on the PPF curve in theory; in reality, economies constantly
struggle to reach an optimal production capacity. And because scarcity forces an economy to forgo some choice in
favor of others, the slope of the PPF will always be negative; if production of product A increases then production of
product B will have to decrease accordingly.
TWO MAIN CHARACTERISTICS / PROPERTIES OF PPC / PPF:
Downward Sloping: The reason for being downward sloping in the transformation ofresources from one
commodity to another commodity. The increase in production of one commodity will result in decrease in other
commodity.
Concave to origin: The reason for being concave to origin is because some of the economy’s resources are better
at producing consumer goods and some are better for capital goods. So, due to transferring resources from efficient
use to inefficient use. The opportunity cost increases and PPF becomes concave to origin.
Question # 3:
(a) Mr. Zain ul Abideen is dealing in room coolers for last few years. Over the years his accounts book has
showna record growth in its sale. Surprisingly he has experienced a sharp scaling back in sale this year. On
investigation he was found that one of the major reasons is availability of a new substitute in the market. Zain was
selling his product at the rate Rs. 25000 per unit. In the absence of an alternative, it’s total sale was recorded 2000
units during a course of time. Since it was observed that Zain’s sales gone down in a result when an alternative is
avail with a price cut from Rs. 28000 to Rs. 22000 per unit. Calculate the cross elasticity of demand and state its
degree. (M.08)
Solution:
Price of Q.D (for

substitutes Zain)
28000 2000
22000 X
It is supposed that new demand X=1500 units (students will assume any will to calculate the elasticity)
22000−28000 1500−2000
e.d = ÷
(22000+28000)/2 (1500+2000)/2
e=
(b) State why the income elasticity of demand is negative for inferior goods? (M.02)
Answer:
An inferior good will always have a negative income elasticity of demand, because as income increases,
the demand for the product will decrease, as consumer switch to other alternative.
Question # 4:
(a)Support price is a system to protect the week agents of an economy from exploitation especially in agriculture.
Explain how minimum price system works in this regards. Elucidate your thought by means of a suitable diagram?
(M.06)
 In the above diagram supply shifts outwards from S1 to S2 meaning (with no intervention) the price
will fall to Pe.
 However, because the government guarantees the price at Pmin it buys the surplus stock: Q2 – Q3
 The fact that farmers receive this price, naturally means that the price is stable, thus achieving the
policy goal
Should there be a commodity shortage in a future period, these stock levels could be used to release onto
the market and reduce the upward pressure on price
(b) Apart from the price of a product, there are many other factors which affect the quantum of supply into a
market. Explain those factors which responsible for a fall in supply of product. (No need of diagram) (M.04)
Answer:
Whenever there is a change in conditions other than price it may cause outward and inward shift simultaneously.
The following factors will shift the supply curve:
(i) Change in cost of production.
(ii) Change in the technology or method of production.
(iii) Change in efficiency of factors of production.
(iv) Discoveries and innovations.
(v) Change in indirect taxation.
(vi) Change in price of competitive supply.
(vii) Entry and exist of firms into industry.
Question # 5:
(a)Differentiate between cardinal and ordinal school of thoughts of utility? (M.02)
Answer:
Cardinal Thought of utility:
Cardinal thought of utility means utility can be measured quantitatively (like any other physical commodity) by
assigning a numeric value to it e.g. 10,20.
Ordinal Thought of utility:
Ordinal measurement means utility cannot be measured using numeric value. Consumer can only give
ranking/preference to different commodities on the basis of satisfaction received from each commodity
e.g. 1st,2nd,3rd.
(b)In economic theory it is affirmed that the real income of consumers increases as price of product under
consideration falls. Explain that price effect, comes from the income and substitution effects in this case.
(Support your answer with help of diagram). (M.08)
Price effect:
Price effect is the change in consumer equilibrium (i.e. change in quantity purchased of good) due to change in
price of a good.
Income effect:
Income effect is the change in consumer equilibrium (i.e. change in quantity purchased of good) due to change
in income of the consumer.
Effect of price on quantity demanded can be bifurcated into real income effect and substitution effect i.e.
Price Effect = Income effect (I.E) + Substitution effect (S.E).
Diagram and Explanation:
Here we see the same price movement as before: a fall in the price of Good X.
Keeping utility constant, were we dealing with the new relative prices, then A’ of Good X would be consumed.
The income effect is then brought into place, effectively moving from A’ to B. This causes the quantity of B
consumed to decrease.
Here the substitution and income effects are working in opposite directions; however, the substitution effect
dominates the income effect.
We see that the price of Good X falling still leads to an increase in the quantity consumed nevertheless.
BUSINESS LAW (CAF-03)

MERCANTILE LAW
Question # 1:
Choose the correct option from the given choices in each of the following: (Marks: 08)
i) Which of the following Statement regarding Criminal Law is correct?

a) The object of Criminal Law is compensation.
b) An accused is sentenced on the balance of probabilities
c) A crime is a public wrong
d) Criminal proceedings are usually initiated by an individual
ii) A bill is finally assented when passed by:

a) National Assembly & Senate
b) Senate only
c) Cabinet & President
d) None of the above
iii) Where agreement is enforceable by law at the option of one party and not at the option
of the other,
i. The agreement is said to be void
ii. The agreement is said to be voidable
iii. The agreement is illegal
iv. The agreement is unenforceable
iv) A teaches his parrot to recite an offer to B and sends the parrot to B. When parrot flew
to B and recited the offer to B,
a) This becomes a valid communication of an offer.
b) This does not amount to a valid communication of an offer.
c) The parrot becomes an agent of A to make the offer.
d) The offer does not become valid unless someone takes the parrot to B to recite the
offer.
v) On attaining the age of majority can a minor ratify the agreement made by him when he
was minor?
a) No because agreement with minor is void
b) No because ratification has retrospective effect
c) No because minor is not competent to contract
d) No because minor even in the age of majority has to act through his guardian
vi) Karim borrowed Rs. 500,000 from Bashir in 2002. The debt became time-barred under
the law of limitation. However, Karim met Bashir in 2009 and verbally acknowledged his
liability to the extent of Rs. 300,000. Can Bashir hold Karim liable?
a) Yes, because acknowledgement revives the time-barred debt
b) No, because acknowledgement must be in writing
c) Yes, because it is an exception to the rule that agreement without consideration is
void.
d) None of the above is correct
vii) An agreement made under mistake is void:

a) If it is induced by a party to the agreement as to the substance of the thing, which is
the subject of the agreement.
b) If it is made by both the parties to an agreement, as to matter of fact essential to the
agreement.
c) If it is an opinion of both the parties to an agreement about the value of things which
form the subject-matter of the agreement
d) If it is made about any law in force in Pakistan.
viii) The exception to the rule that agreement in restraint of trade is void is:
a) The agreements made to preserve the goodwill of a business
b) The agreements made to create monopoly in businesses of indigenous things
c) The agreements to control employees in their jobs
d) All of the above
Question # 2:
a) Aslam and Zahid jointly found some goods belonging to another and agreed to divide these
between them, but Zahid who was in possession of these goods, later on refused to do so.
Aslam is intending to file a suit against Zahid for the purpose to obtain his share in the
goods. Can he succeed in it and why? (Marks: 02)
b) State whether the following are contingent contract or otherwise, giving brief reasons.
i. A agrees to pay B Rs. 50,000 if he proves that two straight lines can enclose a space.
ii. A agrees to construct a building for B for Rs. 100,000 on the condition that the payment
will be made on the completion of the building
iii. A agrees to sell his house to B for 100,000 if his father does not return within two years
from the United States of America. (Marks: 03)
c) Ahmad in desperate need of money agreed to sell his car worth Rs.100,000/- to Akram for
just Rs.10,000. But before the car was delivered, Ahmad received another offer of Rs.
70,000/- and he refused to deliver car to Akram on the ground of inadequacy of
consideration. Is Ahmad justified for his action? (Marks: 02)
d) X of Peshawar sends a letter by post to Y of Karachi offering to sell his car for Rs.100,000,
this letter is posted on 1st January and reaches Y on 7th January. Y sends his acceptance
by post on 10th January. But X receives acceptance letter on 15th January. Answer each of
the below questions.
i. When is the communication of acceptance complete as against the acceptor?
ii. If X sends a telegram on 8th January revoking his offer and this telegram reaches Y
before the letter of acceptance is posted. Is revocation of offer valid? (Marks: 04)
e) A, who is trying to sell an unsound horse, forges a veterinary surgeon’s certificate, stating
that the horse is sound and pins it on the stable door. B comes to examine the horse but
the certificate goes unnoticed by him. He buys the horse and finds later on the horse to be
unsound. He wants to avoid the agreement under the plea that he has been defrauded. Will
he succeed? (Marks: 03)
f) X buys from Y a painting which both believe to be the work of an old master and for which X
pays a high price. The painting turns out to be only a modern copy. Discuss the
consequences of this subsequent discovery on the agreement. (Marks: 03)
COMPANY LAW
Question # 3:
Choose the correct option from the given choices in each of the following: (Marks: 05)
i) A company or body corporate which exercises or controls more than one-half of the voting
securities of any other company or controls the composition of the board of such other
company is known as:
a) Subsidiary company
b) Co-operative company
c) Holding company
d) Listed company
ii) A person may make an application in specified form and manner with a specified fee to the
registrar for reservation of any name. If the application is refused by registrar, aggrieved
person may prefer an appeal to the Commission within:
a) 60 days
b) 30 days
c) 15 days
d) 90 days
iii) If a company changes its name, then former name is required to be mentioned along with
the new name for a period of:
a) 90 days from the date of issue of the new certificate of incorporation.
b) 120 days from the date of issue of the new certificate of incorporation.
c) One year from the date of issue of the new certificate of incorporation.
iv) Any member or members of the affected class representing at least 10 percent
shareholding of that class may apply for an order against the resolution varying their rights.
They will apply to:
a) The registrar
b) The commission
c) The board of directors
d) The board of directors
e) The Court
v) A supplement to the prospectus invites the general public for subscription of earlier offered
securities. The supplement to the prospectus contains:
a) New prospectus
b) Self-prospectus
c) Updated disclosures
Question # 4:
a) Organizations working for useful objects of the society often need protection of limited
liability for such work.’ However, there are certain conditions subject to the fulfilment of
which an exemption may be granted to an entity from using the word ‘Limited’ to its name.
Describe those conditions and also specify the authority who may grant such exemption
under the Companies Act, 2017. (Marks: 03)
b) Enlist any five points of Articles of association as per table A. (Marks: 02)
Question # 5:
Sony Limited, holding 56% voting securities of Marvel Limited and 14% voting securities of Disney
Limited, owns and controls 22% voting securities of Warner Limited. Composition of board of
directors of Sony Limited is controlled by Fox Limited. Further Marvel Limited holds 59% and
Disney Limited holds 19% voting securities of Warner Limited.
Identify the relation between companies under provisions of Companies Act 2017. (Marks: 03)
Question # 6:
As per the Securities Act 2015, no person shall make a public offer of securities unless the issuer
has submitted a prospectus for approval of Commission and Commission has approved the same.
State if in each of the below independent scenarios prospectus is required to be filed for approval
along with reasons, according to the requirements of Securities Act 2015:
a) Iron Man Limited is planning to issue shares to its existing members as bonus shares.
(Marks: 01)
b) Strange Limited has allocated shares for issuance to its employees and their family
members. (Marks: 01)
Question # 7:
a) Justice Limited intends to include a statement, in the prospectus, purporting to be made by

Mr. Bruce Wayne, who’s being hired as securities advisor. Give the conditions, under
provisions of Securities Act 2015, to be fulfilled, for including Mr. Bruce’s statement in
prospectus for its publishing, issuance and circulation. (Marks: 02)
b) Andy Limited has filed its Memorandum and Articles of Association with the registrar and
obtained certificate of incorporation of company. It is now intending to obtain certificate of
commencement of business. Give the conditions which Andy Limited needs to comply with
under provisions of Companies Act 2017 to satisfy registrar for the said purpose.
(Marks: 03)
c) Leonard (PVT.)LTD. has published a pamphlet to market their smartphone in the market. It
has mentioned its authorized share capital on the advertisement. Leonard (Pvt.) Ltd.
received a notice from the registrar stating that information regarding authorized share
capital on advertisement is not legally correct. Enlighten the company secretary as to the
requirements in the pamphlet which registrar might have indicated. (Marks: 02)
d) Dare Devil Limited (DDL), a manufacturer of markers, intends to alter the authorized share
capital clause, of its memorandum, allowed by its articles. Under provisions of Companies
Act 2017:
i Give the procedure, DDL has to follow for the said purpose.
ii State the purposes for which a company has to alter the capital clause of its
memorandum. (Marks: 03)
THE END
Solution C.LAW
Q#1 The Securities and Exchange Commission of Pakistan, on such conditions and subject to
such regulations as it thinks fit allow an association which has been formed or is capable of
being formed as a limited liability company to register as a limited company without the
addition of word ‘Limited’ or (Guarantee) Limited etc. to its name, subject to the following:
(i) Such association has been set up for promoting:
• commerce Art science
• Religion Health social welfare
Education Protection of Environment
Research
Sports
• charity any other useful object
(ii) Such association applies or intends to apply its profits, if any, or other income in
promoting its objects, and
(iii) Such association prohibits the payment of any dividend to its members.
Q#2 As per definition of subsidiary company under the provisions of Companies Act 2017:
• Sony Limited is a subsidiary company of Fox Limited as composition of its board of
directors is being controlled by Fox Limited.
• Marvel Limited is a subsidiary company of Sony Limited as Sony Limited holds more than
50% i.e. 56% of its voting securities
• Warner Limited is a subsidiary company of Marvel Limited as Marvel Limited holds more
than 50% i.e. 59% of its voting securities Warner Limited is a subsidiary company of Sony
Limited as Sony Limited holds more than 50% i.e. 57.7% (22% + 33.04% + 2.66%) of its
voting securities, of which:
➢ 22% voting securities are owned directly; and
➢ 33.04% (56% X 59) and 2.66% (14% X 19) voting securities are owned together with
Marvel Limited and Disney Limited respectively.
➢ Further, Marvel Limited is subsidiary of Sony due to more than 50% of its voting
securities which also makes Warner Limited the subsidiary of Sony Limited.
Q#3 Being holding company of Sony Limited, Fox Limited is also the holding company of
Marvel Limited and Warner Limited.
a) As per the Securities Act 2015, prior approval for issuance of prospectus is not necessary
where the securities are shares and are offered as bonus shares to any or all of the members
of the issuer. Hence approval is not required by Iron Man Limited for issuance of shares to its
members as bonus shares.
b) As per the Securities Act 2015, prior approval for issuance of prospectus is not necessary
where the securities are offered by the issuer to its employees or families of such employees.
Henceapproval is not required by Strange Limited for issuance of shares in the given
situation.
Q#4 As per provisions of Securities Act 2015, a prospectus containing a statement purporting
to be made by an expert i.e. Mr. Bruce Wayne or to be based on a statement made by him shall
not be issued, circulated or published unless:
1. The expert has given his written consent to the issue of the prospectus with the statement in
the form and context in which it is included; and
2. There appears in the prospectus a statement that the expert has given and has not withdrawn
his consent.
Q#5 For obtaining the certificate of commencement of business, Andy Limited has to meet
certain requirements, under provisions of Companies Act 2017, which are as follows:
1. The company should have allotted shares against cash for an amount which is at least equal
to the amount of minimum subscription.
2. The directors of the company should have paid, to the company, full amount on each of the
shares taken or contracted to be taken by them and for which they are liable to pay in cash.
3. No money is or may become liable to be repaid to applicants for any shares which have been
offered for public subscription.
4. There should be filed with the registrar a duly verified declaration by the chief executive or
one of the directors and the secretary that the aforesaid conditions have been complied with.
5. In the case of a company which has not issued a prospectus inviting the public to subscribe
for its shares, there has been filed with the registrar a statement in lieu of prospectus.
Q#6 Whenever a company mentions its authorized capital in any advertisement or notice or in
any statement, it shall mention the amount of its subscribed and paid up capital as well in equally
conspicuous letters and in equally prominent position.
Therefore, the company secretary should also have the issued, subscribed and paid up capital
amount published in the pamphlet prominently so that the legal defect can be removed.
Q#7 a) To alter the capital clause of its memorandum, under provisions of Companies act 2017,
Dare Devil Limited Limited is required to:
1. pass a special resolution
2. file the resolution and the related documents i-e altered copy of the memorandum of
association with the registrar within 15 days of passing the resolution, failing which, the
resolution shall not be effective and shall ultimately lapse .
b) A company has to alter the capital clause of its memorandum, under provisions of
Companies Act 2017, so as to:
1. Increase the authorized capital whenever it requires; Cancel that part of its authorized
capital which has not been paid up till the date of cancellation and such cancellation shall
not affect the rights of paid up shareholders;
2. Consolidate the share capital into shares of a larger amount; or
3. Divide and subdivide the share capital into shares of an amount smaller than the one
fixed by the memorandum of association initially.
M.C.Q (1)
(C)
M.C.Q (2)
(B)
M.C.Q(3)
(A)
M.C.Q(4)
(D)
M.C.Q(5)
(C)
Solution M.Law
Midterm (autumn 2020)
1) Choose from the options
i) Which of the following Statement regarding Criminal Law is CORRECT?

a) The object of Criminal Law is compensation.
b) An accused is sentenced on the balance of probabilities
c) A crime is a public wrong
d) Criminal proceedings are usually initiated by an individual
ii) A bill is finally assented when passed by

a) National Assembly & Senate
b) Senate only
c) Cabinet & President
iii) Where agreement is enforceable by law at the option of one party and not at the option of the other.
a) The agreement is said to be void
b) The agreement is said to be voidable
c) The agreement is illegal
d) The agreement is unenforceable
iv) A teaches his parrot to recite an offer to B and sends the parrot to B. When parrot flew to B and recited
the offer to B.
a) This becomes a valid communication of an offer.
b) This does not amount to a valid communication of an offer.
c) The parrot becomes an agent of A to make the offer.
d) The offer does not become valid unless someone takes the parrot to B to recite the offer.
v) On attaining the age of majority can a minor ratify the agreement made by him when he was minor
a) No because agreement with minor is void
b) No because ratification has retrospective effect
c) No because minor is not competent to contract
d) No because minor even in the age of majority has to act through his guardian
vi) Karim borrowed Rs. 500,000 from Bashir in 2002. The debt became time-barred under the law of
limitation. However, Karim met Bashir in 2009 and verbally acknowledged his liability to the extent of
Rs. 300,000. Can Bashir hold Karim liable?
a) Yes, because acknowledgement revives the time-barred debt
b) No, because acknowledgement must be in writing
c) Yes, because it is an exception to the rule that agreement without consideration is void.
vii) An agreement made under mistake is void

a) If it is induced by a party to the agreement as to the substance of the thing, which is the subject of
the agreement.
b) If it is made by both the parties to an agreement, as to matter of fact essential to the agreement.
c) If it is an opinion of both the parties to an agreement about the value of things which form the
subject-matter of the agreement
d) If it is made about any law in force in Pakistan.
viii) The exception to the rule that agreement in restraint of trade is void
a) The agreements made to preserve the goodwill of a business
b) The agreements made to create monopoly in businesses of indigenous things
c) The agreements to control employees after they leave their jobs
d) All of the above
2) Answer the following
i. Finder of the lost goods is subject to the responsibilities of a bailee and is bound to take
reasonable care of the goods until returned to the original owner. Aslam and Zahid were
bound to return the goods and they cannot divide these between them. Thus Aslam cannot
file the suit to obtain his share in the goods.
ii.
a) This is not a contingent contract because it is impossible to prove that two straight lines
can enclose a space and agreement to do impossible act is void.
b) This is not a contingent contract because it is a simple transaction of reciprocal promises
not an agreement based on uncertain event.
c) This is a valid contingent contract based on uncertain future event, i.e. return of father
within two years from USA.
iii. consideration doesn’t need to be adequate; it must have some value.so the contract on
account of consideration amounting to Rs.10000 is valid if Ahmad refused to carry out the
contract, he is liable to pay damages to Akram.
iv.
a. The communication of acceptance is complete as against the acceptor on 15 th January
because the letter of acceptance is received by offeror on 15th January.
b. X’s revocation is valid because X can revoke his offer at any time before the letter of
acceptance is posted by the offeree.
V) B will not succeed because he bought the horse after examination and not on the basis of
the Certificate. B has not therefore been deceived by the Certificate actually and a deceit
which does not deceive is not a fraud.
vi) The contract is absolutely void as there is a mutual mistake of both the parties as to the
substance or quality of the subject-matter going to the very root of the contract. In case of
bilateral mistake of essential fact, the agreement is void-ab- initio. In furtherance of the
consequences thereof the advantage both parties exchanged will be returned.
ThePr
ofessi
onal
s’AcademyofCommer
ce
CAFMi
d-Ter
m Exami
nat
ion(
Aut
umn-
2020)
BUSI
NESSLAW (
CAF-
03)
Tot
alMar
ks:50 Ti
meAl
lowed:120Mi
nut
es
(Not
e:Readi
ngTime:10Mi
nut
es,
PaperAt
tempt
ingTi
me:90Mi
nut
es&AnswerScr
iptUpl
oadi
ng
Time:20Minut
es)
MERCANTI
LELAW
Questi
on#1:
Choosethecor
rectopt
ionf
rom t
hegi
venchoi
cesi
neachoft
hef
oll
owi
ng: (
Mar
ks:05)
1)Whi
chi
nst
rumenti
simmedi
atel
ypay
abl
eondemand?
a)Cheque
b)Pr
omi
ssor
yNot
e
c)Bi
l
lofexchange
d)Al
loft
hese
2)Anagencyr
elat
ionshi
pmaybecreatedretr
ospecti
vel
y.Thi
smayhappenwhenaperson
whodoesnotactual
lyhav
eact
ualauthori
tyasanagentnegot
iat
eswit
hathi
rdpar
ty,
cl
aimi
ngtobeanagentofanamedpr inci
pal.Thi
sis
a) Agencybyexpr
essappoi
ntment
b)Agencybyr
ati
fi
cat
ion
c)Agencybyest
oppel
d)Agencybynecessi
ty
3)Mr.X&Mr.Ygointoashop.Mr.Xsaystotheshopkeeper
,“LetMr
.Yhav
ethegoods.Iwi
l
l
seeyouar
epai
d.”Stat
ethenat
ureofcontr
actbetweenMr.X&Mr .Y.
a)Thecont
ractbet
weent
heMr
.X&Mr
.Yi
sav
oidabl
econt
ract
.
b)Thecont
ractbet
weent
heMr
.X&Mr
.Yi
sabai
l
mentcont
ract
.
c)Thecont
ractbet
weent
heMr
.X&Mr
.Yi
sani
ndemni
tycont
ract
.
d)Thecont
ractbet
weent
heMr
.X&Mr
.Yi
saguar
ant
eecont
ract
4)Amoneybil
lshal
lori
ginat
eint
heNati
onalAssembl
yaf
teri
thasbeenpassedbyt
he
Nat
ional
Assembly,
itshal
lbepr
esent
edtothe
a)Pr
esi
dentofPaki
stan
b)Pr
imeMi
nist
erofPaki
stan
c)Chai
rmanSenat
e
d)Speakeroft
heNat
ional
Assembl
y
5)XYZBankgr antedaloanofRs.10Mi l
li
ont
oABClimi
tedagainstthepl
edgeofshar esofa
l
istedcompany .ABCli
miteddefaul
tedont
her
epaymentoftheloan.Themar ketvalueof
thesharesatthetimeofdefaul
twasRs.9Mil
l
ion.Whati
sther emedyavai
labletoXYZ
Bank?
a)XYZBankcanonl
yfi
l
easui
tfort
her
ecov
eryoft
hedef
aul
tedamount
b)XYZBankcanonl
yfi
l
easui
tfort
her
ecov
eryoft
her
emai
ningamount
c)XYZBankcannotf
il
easui
tfort
her
ecov
eryoft
hedef
aul
tedamount
d)XYZBankcanf
il
easui
tfort
her
ecov
eryoft
hedef
aul
tedandr
emai
ningamount
Quest
ion#2:
a)Hassan,AbubakarandZai nar epartnersinafi

rmi nther at
ioof2:3:5.Zaintransf er
redhis
shareofint
eresttohisbrother,Zahidwiththemut ualconsentofal lthepartners.Zahid
aft
ergetti
ngZain’ssharediscussedwi ththepartnersthattheyshoul dinvestinABCst udio,
anewlyformedst ar
tupwi t
ht hepotentialtogr
ow.Par tnersbeli
ev ethatiti
sbet tertowait
ontheinvest
mentast hefi
rm mi ghtfacecashflowpr oblemsint henearf uture.Zahidis
sti
ll
eagertoinvestinABCst udio.ExplainwhetherZahidcani nvestinABCSt udiowi t
hout
theconsentoftheotherpar t
ners?
(Marks:03)
b)HamzaandNauman, partnersinBroAssociates,decidedtoincludeRaf eyinthepar tner

ship
whohasagoodcr editrati
ngi nthemarket.Farhanont herepresentati
onmadebyHamz a
andNaumant hatRaf eyisapar tnerint
hefirm now,suppl i
edthef i
rm withfurnit
ureand
fi
xtur
esworthRs.100, 000.Thef ir
m defaul
tedandFar hanfi
ledasui tagainstallofthem for
recover
yoftheamount .Rafeyclaimsthatheisnotliabletopayt hemoneysi ncehehadno
i
deaaboutsuchr epresentation.Undertheprovisi
onsoft hePar t
nershipAct1932, comment
whetherRaf
eyisexemptf rom pay i
ngtheamountt oFar han?
(
Mar
ks:04)
c)Mubarikboughtsomegoodsoncr edi
tfrom hisneighborAslam.Beforetheduedat eofthe
payment,Mubarikrecei
vedabearerchequef rom hisfr
iendHiraasabi r
thdaypresent.
Mubariki
ndorsedthechequetoAsl am onaccountofpay mentofthegoodsbought .
Unbeknownsttobot hofthem,Hi
ra’sti
tl
et othechequewasdef ect
ive.Undert
hepr ovi
sions
ofNegoti
ableInstr
ument sAct
,1881,explainwhetherAslam wouldbeabl etorecoverthe
amountofthecheque? (Marks:02)
d)Undert
heprovi
sionsofNegot
iabl
eInst
rument
sAct1881,
cal
cul
atet
hemat
uri
tyoft
he
fol
l
owingi
nstr
ument s
i
. Abi
l
lofex ed31stDecember
changedat ,2018i
smadepay
abl
eatt
womont
hsaf
terdat
e.
i
i. Apr
omi
ssor
ynot ed1stJanuar
edat y,2019i
smadepay
abl
e20day
saf
terdat
e.
i
ii
. Abi
ll
ofexchangedated30August,2018i
smadepayabl
ethr
eemont
hsaf
terdat
e.Assume
t
hedateonwhichtheinst
rumenti
satmaturi
tyi
sSunday
. (
Marks:03)
e)Iti
st hepri
marydut
yoftheparl
i
amenttol
egi
slat
e.Doespar
li
amentl
egisl
atetomaker ules
forcourseout
li
neandexaminat
ionofI
CAPstudent
s?Howiscont
rolexer
cisedundersuch
system? (
Mar ks:04)
f
) ShahAlam pledgedsomeofthegoodsent
rust
edtohim byhi
sfri
endAlam tosel
linDubai
ataprofit
abl
er at
e.Expl
aint
hecondi
ti
onst
hatAzam needstoful
fi
ll
inordertocr
eatea
val
idpledge?
(Marks:04)
COMPANYLAW
Quest
ion#3:
Chooset
hecor
rectopt
ionf
rom t
hegi
venchoi
cesi
neachoft
hef
oll
owi
ng: (
Mar
ks:05)
i
) Acompanyorbodycorporat
ewhichexerci
sesorcont
rol
smorethanone-
hal
fofthevot
ing
secur
it
iesofanyot
hercompanyorcontr
olsthecomposi
ti
onoft
heboardofsuchother
companyisknownas:
a)Subsi
diar
ycompany
b)Co-
oper
ati
vecompany
c)Hol
dingcompany
d)Li
stedcompany
i
i)Aper sonmaymakeanappl i
cati
oni
nspecifi
edform andmannerwi
thaspecif
iedf
eetot
he
regi
strarf
orr
eservat
ionofanyname.I
ftheappli
cati
onisref
usedbyregi
str
ar,
aggr
iev
ed
personmaypreferanappealt
otheCommi ssi
onwithin:
a)60day
s
b)30day
s
c)15day
s
d)90day
s
i
ii
)Ifacompanychangesi
tsname,
thenf
ormernamei
srequi
redt
obement
ionedal
ongwi
th
t
henewnamef oraper
iodof
:
a)90day
sfr
om t
hedat
eofi
ssueoft
henewcer
ti
fi
cat
eofi
ncor
por
ati
on.
b)120day
sfr
om t
hedat
eofi
ssueoft
henewcer
ti
fi
cat
eofi
ncor
por
ati
on.
c)Oney
earf
rom t
hedat
eofi
ssueoft
henewcer
ti
fi
cat
eofi
ncor
por
ati
on.
d)Noneoft
heabov
eiscor
rect
i
v)Anymemberormember soft
heaf
fect
edclassrepr
esent
ingatl
east10per
cent
shar
ehol
dingoft
hatcl
assmayappl
yforanorderagai
nstther
esol
uti
onvar
yingt
hei
rri
ght
s.
Theywi
l
lappl
yto:
a)Ther
egi
str
ar
b)Thecommi
ssi
on
c)Theboar
dofdi
rect
ors
d)Theboar
dofdi
rect
ors
e)TheCour
t
v
)Asuppl ementtotheprospectusinv
itesthegeneralpubl
i
cforsubscr
ipt
ionofear
li
erof
fer
ed
secur
it
ies.Thesuppl
ementt otheprospectuscontai
ns:
a)Newpr
ospect
us
b)Sel
f-
prospect
us
c)Updat
eddi
scl
osur
es
d)Noneoft
heabov
e
Quest
ion#4:
a)Organizati
onswor kingforusefulobject
softhesociet
yof t
enneedprotect
ionofli
mit
ed
l
iabil
i
tyf orsuchwor k.
’Howev er,ther
earecert
aincondit
ionssubj
ecttotheful
fi
lmentof
whichanexempt ionmaybegr antedtoanenti
tyfr
om usingtheword‘Limit
ed’t
oitsname.
Descri
bet hosecondi t
ionsandal sospecif
ytheauthor
it
ywhomaygr antsuchexempti
on
undertheCompani esAct,2017. (Mar
ks:03)
b)Enl
i
stanyf
ivepoi
ntsofAr
ti
clesofassoci
ati
onaspert
abl
eA. (
Mar
ks:02)
Quest
ion#5:
SonyLimit
ed,hol
ding56%v ot
ingsecur
it
iesofMarvel
Limit
edand14%v ot
ingsecuri
ti
esofDi
sney
Li
mi t
ed,ownsandcontrol
s22%v oti
ngsecuri
ti
esofWarnerLimi
ted.Compositi
onofboardof
di
rector
sofSonyLimitedi
scontrol
ledbyFoxLimi
ted.Fur
therMarvelLi
mitedholds59%and
DisneyLi
mitedhol
ds19%v oti
ngsecuri
ti
esofWarnerLimit
ed.
I
dent
if
yther
elat
ionbet
weencompani
esunderpr
ovi
sionsofCompani
esAct2017. (
Mar
ks:03)
Quest
ion#6:
AspertheSecuri
ti
esAct2015, noper sonshall
makeapubl i
coff
erofsecuri
ti
esunlessthei
ssuer
hassubmit
tedapr ospectusforapprovalofCommi ssi
onandCommi ssi
onhasapprovedthesame.
Stat
eifi
neachoft hebelowindependentscenariosprospectusi
srequir
edtobefi
ledforapprov
al
al
ongwithreasons,accordi
ngtot herequir
ementsofSecurit
iesAct2015:
a)I
ronManLi
mit
edi
spl
anni
ngt
oissueshar
est
oit
sexi
sti
ngmember
sasbonusshar
es.
(
Mar
ks:01)
b)St
rangeLi
mit
edhasal
l
ocat
edshar
esf
ori
ssuancet
oit
sempl
oyeesandt
hei
rfami
l
y
members. (Mar
ks:01)
Quest
ion#7:
a)Just
iceLi
mit
edi
ntendst
oincl
udeast
atement
,int
hepr
ospect
us,
pur
por
ti
ngt
obemadeby
Mr .BruceWay ne,who’
sbeinghir
edassecuri
ti
esadv i
sor
.Giv
ethecondit
ions,under
provisionsofSecuri
ti
esAct2015,tobeful
fi
ll
ed,f
orincl
udi
ngMr.Bruce’
sstatementin
prospect usf
oritspubl
ishi
ng,i
ssuanceandci
rcul
ati
on.
(Mar ks:02)
b)AndyLimit
edhasf i
ledi
tsMemor andum andArticl
esofAssociati
onwi t
hther egi
str
arand
obtai
nedcert
if
icat
eofincorporat
ionofcompany .I
tisnowintendingtoobtaincert
if
icat
eof
commencementofbusi ness.Giv
ethecondit
ionswhi chAndyLimitedneedst ocomplywit
h
underpr
ovisi
onsofCompani esAct2017tosatisfyregi
str
arforthesaidpurpose.
(
Mar
ks:03)
c)Leonard(PVT.
)LTD.haspubl ishedapamphl ettomarketthei
rsmartphoneint hemar ket
.It
hasmentioneditsauthori
zedshar ecapitalontheadv er
ti
sement.Leonard(Pvt.)Lt
d.
recei
vedanoticefrom theregist
rarstat
ingt hati
nformati
onregardi
ngauthorizedshar e
capit
alonadvert
isementi snotlegal
lycor r
ect.Enl
ightenthecompanysecretaryastot he
requi
rementsi
nt hepamphl etwhichregistrarmighthaveindi
cated. (Marks:02)
d)DareDevi
lLimit
ed(DDL)
,amanufacturerofmar
ker
s,intendstoalt
ertheaut
hor
izedshare
capi
talcl
ause,
ofit
smemorandum, al
lowedbyit
sart
icles.Underprov
isi
onsofCompanies
Act2017:
i Gi
vetheprocedure,
DDLhastofol
l
owf ort
hesai
dpurpose.
i St
i atethepurposesforwhi
chacompanyhastoal
tert
hecapit
alcl
auseofi
ts
memor
andum. (
Mar
ks:03)
THEEND
Sol
uti
onC.
LAW
Q#1 TheSe curit
iesandExchangeCommi ssionofPakistan,onsuchcondi t
ionsand
subjectt
osuchr egulat
ionsasitt
hinksfitall
owanassoci ati
onwhi chhasbeenf ormed
oriscapabl
eofbeing formedasal imit
edl iabi
l
itycompanyt oregi
sterasalimit
ed
companywithouttheadditi
onofwor d ‘ Limi t
ed’or(Guarantee)Limit
edetc.toit
s
name,subjecttot hefol
lowing:
(
i) Suchassoci
ati
onhasbeensetupf
orpr
omot
ing:
• commer
ce Ar
t sci
ence
• Rel
i
gion Heal
th soci
alwel
far
e
Educat
ion Pr
otect
ionofEnv
ironment
Resear
ch
Spor
ts
• char
it
y anyot
herusef
ulobj
ect
(i
i
) Suchassoci ati
onappl
i
esori
ntendst
oappl
yit
spr
ofi
ts,
ifany
,orot
heri
ncomei
n
promot
ingi
tsobj
ects,and
(
ii
i) Suchassoci
ati
onpr
ohi
bit
sthepay
mentofanydi
vi
dendt
oit
smember
s.
Q#2 Asperdef
ini
ti
onofsubsi
diar
ycompanyundert
hepr
ovi
sionsofCompani
esAct
2017:
 SonyLimi
tedi
sasubsi
diarycompanyofFoxLi
mit
edascomposi
ti
onofi
tsboar
dof
di
rect
orsi
sbei
ngcontr
oll
edbyFoxLimit
ed.
 Mar
velLi
mi t
edisasubsi
diar
ycompanyofSonyLi
mit
edasSonyLi
mit
edhol
dsmor
e
t
han50%i.e.56%ofi
tsvoti
ngsecur
it
ies
 WarnerLi
mitedisasubsidiar
ycompanyofMar velLi
mitedasMarv
elLimit
edholds
morethan50% i .
e.59% ofi tsvoti
ngsecuri
t i
esWar nerLi
mit
edi sasubsidi
ary
companyofSonyLi mit
edasSonyLi mitedholdsmor ethan50%i.
e.57.7%(22%+
33.
04%+2. 66%)ofit
sv ot
ingsecur
it
ies,
ofwhich:
 22%v
oti
ngsecur
it
iesar
eowneddi
rect
ly;
and
 33.
04%(
56%X59)and2.66%( 14%X19)v ot
ingsecur
it
iesar
eownedt
oget
her
wit
hMar
vel
Limi
tedandDi
sneyLimi
tedr
espect
ivel
y.
 Furt
her,Mar
velLi
mitedi
ssubsi
diar
yofSonyduetomor ethan50%ofi
tsvot
ing
securi
ti
eswhi
chalsomakesWarnerLi
mit
edthesubsi
diar
yofSonyLi
mit
ed.
Q#3 Bei
nghol
dingcompanyofSonyLi
mit
ed,FoxLi
mit
edi
sal
sot
hehol
ding
companyofMar
vel
Limi
tedandWar
nerLi
mit
ed.
a)Aspert heSecuri
ti
esAct2015,pri
orapprovalf orissuanceofprospectusisnot
necessarywherethesecur
it
iesar
esharesandar eofferedasbonussharestoanyor
allofthemember soft
heissuer
.Henceapprovalisnotr equi
redbyI
ronManLimited
forissuanceofshar
estoit
smember sasbonusshar es.
b)Aspert heSecuri
tiesAct2015,pri
orapprov
alfori ssuanceofpr ospectusisnot
necessarywher
ethesecuri
ti
esareoffer
edbytheissuertoi t
semployeesorf amili
es
ofsuchempl oy
ees.Henceappr
ovali
snotrequir
edbySt rangeLi
mitedf orissuance
ofsharesint
hegivensi
tuat
ion.
Q#4 Asperpr ovi

sionsofSecuri
ti
esAct2015,apr ospect
uscont
aini
ngast
atement
pur
por
ti
ngtobemadebyanexper ti.
e.Mr.BruceWayneortobebasedonast
atement
madebyhi
m shall
notbeissued,ci
rcul
atedorpubl
i
shedunless:
1.Theexperthasgivenhiswri
tt
enconsentt
ot heissueofthepr
ospect
uswi
tht
he
st
atementinthef
orm andcont
exti
nwhichi
tisincl
uded;
and
2.Thereappear
sintheprospect
usast
atementt
hatt
heexper
thasgi
venandhasnot
wit
hdrawnhisconsent
.
Q#5Forobtai
ningthecer
ti
fi
cat
eofcommencementofbusi
ness,AndyLi
mit
edhast
o
meetcer
tai
nr equi
rement
s,underpr
ovi
sionsofCompani
esAct2017,whichar
eas
fol
l
ows:
1.Thecompanyshoul
dhaveal
lott
edsharesagai
nstcashf
oranamountwhi
chi
sat
l
eastequal
tot
heamountofmini
mum subscr
ipt
ion.
2.Thedir
ectorsofthecompanyshoul
dhav
epaid,t
ot hecompany,f
ullamountoneach
ofthesharestakenorcont
ract
edtobetakenbythem andforwhichtheyarel
iabl
e
topayi
ncash.
3.Nomoneyisormaybecomeli
abletoberepai
dtoappl
i
cant
sforanyshar
eswhi
ch
hav
ebeenoff
eredf
orpubl
i
csubscr
ipt
ion.
4.Thereshoul
dbef il
edwi t
ht heregi
str
aradulyv er
if
ieddecl
arat
ionbythechi
ef
execut
iveoroneoft hedir
ector
sandt hesecr
etar
ythattheafor
esai
dcondi
ti
ons
havebeencompl
iedwi t
h.
5.Inthecaseofacompanywhi chhasnoti
ssuedaprospect
usinv
iti
ngt
hepubli
cto
subscri
befori
tsshar
es,
ther
ehasbeenfil
edwit
htheregi
str
arastat
ementi
nli
euof
prospect
us.
Q#6Wheneveracompanyment i
onsit
saut
hor
izedcapi
tal
inanyadver
ti
sementor
not
iceori
nanyst
atement
,itshal
lmenti
ont
heamountofit
ssubscri
bedandpai
dup
capi
tal
aswel
li
nequal
l
yconspi
cuousl
ett
ersandi
nequal
l
ypr
omi
nentposi
ti
on.
Ther
efore,
thecompanysecr
etar
yshoul
dalsohavet
heissued,
subscri
bedandpaidup
capi
talamountpubl
i
shedint
hepamphletpromi
nent
lysothatt
helegaldef
ectcanbe
removed.
Q#7 a)Toal
tert
hecapi
talcl
auseofi
tsmemorandum,underpr
ovi
sionsofCompani
es
act2017,
Dar
eDevil
Limi
tedLi
mitedi
srequi
redt
o:
1.passaspeci
alr
esol
uti
on
2.f
il
et he resol
uti
on and t he relat
ed documentsi-e al
ter
ed copy of t
he
memorandum ofassociati
onwi t
ht heregi
str
arwit
hin15day sofpassi
ngthe
r
esol
uti
on,fai
li
ngwhich,theresoluti
onshal
lnotbeef
fect
iveandshal
lul
ti
matel
y
l
apse.
b)Acompanyhastoalt
ert
hecapi
tal
clauseofi
tsmemor
andum,
underpr
ovi
sionsof
Compani
esAct2017,soasto:
1.Incr
easet heauthor
izedcapitalwheneveri
trequi
res;Cancelthatpartofi
ts
author
izedcapit
alwhichhasnotbeenpai duptil
lthedateofcancell
ati
onand
suchcancell
ati
onshallnotaf
fectt
heright
sofpai
dupshareholder
s;
2.Consol
i
dat
etheshar
ecapi
tal
int
oshar
esofal
argeramount
;or
3.Div
ideandsubdi
vi
det
hesharecapi t
alintosharesofanamountsmal
l
ert
hant
he
onefi
xedbythememorandum ofassociati
oninit
ial
l
y.
M.
C.Q(
1)
(
C)
M.
C.Q(
2)
(
B)
M.C.
Q(3)
(
A)
M.C.
Q(4)
(
D)
M.
C.Q(
5)
(
C)
Sol
uti
onM.
Law
Mi
dter
m(aut
umn2020)
AnswerNo.2
a)Accordi
ngt oprov
isionsofthePart
nershi
pAct1932,anypersonwit
hwhom apar
tnershar
es
hispr
ofitderi
vedfrom thef
irm,i
sonlyadmit
tedtotheshareofprof
it
sonl
ynoti
nconductof
thefi
rm
I
nthegivenscenar
io,Consentoft
heotherpar
tner
sisir
rel
evant
.Zahi
disnotenti
tl
edto
i
nvesti
nABCSt udi
oorany whereel
sebecausehecannoti
nterf
erei
ntheconductoft
hefi
rm.
Heonlyshar
esprofitoft
hefir
m.
b)Accordi
ngtoprov
isi
onsofthePar
tnershi
pAct1932,whenapersonholdshimsel
foutasa
part
neroral
lowsothert
odoit,
heisthenstoppedf
rom denyi
ngthecharact
erhehas
assumedandupont hef
ait
hofwhichcredi
torsmaybepresumedtohav eact
ed.
Inthegi venscenar
ioFarhansuppl
i
edgoodstoBroAssociat
esont hebasisof
representati
onmadebyHamzaandNauman.I fRafeyknowi
nglypermitt
edhimsel
ftobe
representedasapar t
ner,t
henheisli
abl
etopaytheamountregardlessofhav
ingno
knowl edgeofsuchrepresent
ati
ons
However,
ifhehaddeni
edanysuchrepr
esent
ati
onshol
dinghi
msel
fasapar
tneri
npubl
i
c,
hewouldnotbeli
abl
etopayanyt
hing.
AnswerNo.c
Accordingtoprovisi
onsofNegotiabl
eInstrumentsAct1881,inordert
obeahol deri
ndue
course,theti
tl
eofpr evi
oushol
dermustnotbedef ect
ive.I
fapersonisawareofthe
defecti
vetit
leoftheholderf
rom whom heder i
vedhisownt it
le,
thenhewouldnotbe
consideredasholderinduecourse.Butifapersonhasnoknowl edgeofthedef
ectsint
it
le
ofthepr ev
iousholders,
hewouldber egardedasholderinduecourse.
I
nthegi
venscenari
o,Hi
rahadadefect
ivet
it
lebutAsl
am whil
ereceiv
ingthechequehadno
i
dea aboutthi
s.Hetookt
heinstr
umentingoodfai
thandtherefor
eisenti
tl
edto
r
ecei
vet
heamount
d)
i
)Thebi
llofexchangeisatmaturi
tyont
hir
ddayaf
termat
uri
tyont
het
hir
ddayaf
ter28th
Febr
uar
y, 2018i .e.3rdMar
ch,2018
i
i
)Thepr
omi
ssor
ynot
ewi
l
lbeatmat
uri
tyon24thAugust
,2019
i
i
i)Thebi
l
lofexchangei
satmat
uri
tyon2December
,2018
AnswerNo.e
Indel
egatedlegisl
ati
onpowerisgiventoanexecuti
ve(aminist
erorpubl i
cbodyt omake
subor
dinateordelegatedl
egisl
ati
on)forspeci
fi
edpurposeonly.Forexampl e,
localaut
hor
it
ies
aregi
venstatutorypowerstomakeby e-l
awswhichapplywit
hinaspeci f
iclocali
ty.
Cont
rol
overdel
egat
edl
egi
slat
ioni
sexer
cisedi
nfol
l
owi
ngway
s:
(
i) Parl
i
amentexer
cisescont
rol
overdel
egat
edl
egi
slat
ionbyr
est
ri
cti
ngordef
ini
ng
powert
omaker ules
(
ii
) Rulesmadeunderdel
egat
edpowertomovel
egi
slat
ionmaybechal
l
engedi
nthe
court
sonthegr
oundsofbeingul
tr
avi
res.
AnswerNo.f
I
nt hegivenscenar
io,
Azam isamercanti
l
eagentofShahAlam.Accor
dingtot
he
provi
sionsofContr
actAct,
thepawneeofgoodsfrom amercant
il
eagent,
whohasno
author
ityfr
om thepri
nci
paltopl
edge,get
sagoodt i
tl
etot
hegoodsif:
 Theagentisinpossessi
onoft
hegoodsordocument
soft
it
let
othegoodswi
tht
he
consentoftheowner
 Theagentpl
edgest
hegoodswhi
l
eact
ingi
ntheor
dinar
ycour
seofbusi
nessofa
mercant
il
eagent
 Thepawneeact
singoodf
ait
hand
 Thepawneehasnotatt
het
imeoft
hepl
edge,
not
icet
hatt
heagenthasno
aut
hori
tyt
opledge.
AnswerNo.1
1)A
2)B
3)C
4)A
5)D

Pac Mids With Solution 1,2,3,4,8

Uploaded by

Copyright:

Available Formats

Pac Mids With Solution 1,2,3,4,8

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Pac Mids With Solution 1,2,3,4,8

Uploaded by

Copyright:

Available Formats

The Professionals’ Academy of Commerce

CAF Mid-Term Examination (Autumn-2020)

Introduction to Accounting (CAF-01)

Equipment – At cost 18,900,130

payments are made through cheque.

cheque and balance is payable in two months.

in cash and balance is payable in 7 equal installments.

he was able to receive bargain discount of 5% of list price.

2% discount if payment is made in 10 days.

31/1 Cash of Rs. 20,000 donated to PM Corona Relief Fund.

working 2 depreciation expense

3,100,000*[(1-0.2599* 6/12) * (1-

WDV till date of

Acc. Dep 1,536,172

c/f 6,665,240 0.5

Provision for doubtful debts a/c

particulars amount particulars amount

Bad debts expense a/c

Particulars amount particulars amount

883,220 883,220 0.5

Working-1 calculation of G.P

Working-3 Opening balance 1

Indus Traders Marking

Motor Vehicle 500,000

1 Security Deposit 100,000

Rent 10,000 0.50

Equipment Payable 30,000

Cash 10,000 0.50

Sigma Interior Payable 70,000

5 Purchases (500,000 - (500,000 x 5%) 475,000

Pak Enterprises Payable 475,000 0.50

Cash 30,000 0.50

Cash 10,000 0.50

Bank Loan 200,000 0.50

Purchases 10,000 0.50

Rental Income 15,000 0.25

Sales 150,000 0.50

Capital 50,000 0.25

31 Sigma furniture Payable 10,000

Bank 10,000 0.50

Cash 20,000 0.50

Purchases 50,000 0.50

31 Balance c/d (10,000)

Introduction to Accounting (CAF-01)

Balance as per cash book 6,000

Balance as per bank statement 5,500

Uncredited cheques 800

a. Rs. 300 b. Rs. 1,300

c. Rs. 12,300 d. Rs. 10,700

a. Bank forgets to record a transaction.

d. Cheque received from a customer but dishonored subsequently.

7- Unfavorable balance is:

(i) Debit balance in cashbook

(ii) Credit balance in cashbook

(iii) Debit balance in bank statement

(iv) Credit balance in bank statement

a. (i) and (iii) b. (i) and (iv)

c. (ii) and (iii) d. (iii) only

a. Unpresented cheques of Rs. 4,000 and uncredited cheques of Rs. 2,500.

b. Unpresented cheques of Rs. 700 and uncredited cheques of Rs. 800.

3,100,000[(1-0.2599 6/12) * (1-