Guideline( Study Material )

for Screening / Professional Test for the post

of

Senior Auditor (BPS-16)

Posts Advertised Vide Consolidated Advertisement
No. 06/2014

of Federal Public Public Service

Commission
(Curriculum & Research Wing)
Compiled By:Mr. Asif Altaf ( A.O )
Ex. Faculty Member M.A.T.I.
Karachi.
O/O the C.N.A. Karachi.

Syllabus for Screening / Professional Test for the

post of
Senior Auditor (BPS-16)
Posts Advertised Vide Consolidated Advertisement
No. 06/2014
of Federal Public Public Service Commission
(Curriculum & Research Wing)

FPSC Advertisement No. 06/2014 (Consolidated)

Pakistan Military Accounts Department

y, Grammar Usage,

ng Principles & Procedures,

of Record for Audit Purpose,
ledger & Cash Book,
Budget,
ent & Depreciation,
l Planning & Cost Accounting,
Accounts, Re-appropriation of Accounts and Supplementary Grant,
nt of Audit Objections
ion of Pension Documents.
rocurement Rules, 2004

nistration (Finance/ Accounting)/ Commerce/ Economics/

t qualifications from a University recognized

xperience in the field of Accountancy/Auditing OR

rs Degree from a University recognized by HEC.

perience in the field of Accountancy/Auditing

Part-I

English = 20 marks:Vocabulary, Grammar Usage, { Objective Type Test

(MCQ) }
A).Vocabulary
2

B).Grammar Usage: Correct use of Verb

Change into Passive Voice
Synonyms / Antonyms
Correct use of Parts of Speech
Misc
Suggested reading books:1- Exploring the World of English by:- S Sadat Ali Shah
2- High School English Grammar & Composition
a)-by:-R Martin &
b)-by:-S Chand

English { MCQs }

Synonyms Test
Antonyms Test
Analogies Test
Grammar Test
Word Choice (Vocabulary) Test
Word Choice (Grammar) Test
Summary Completion Test
Reading Comprehension Test

01-Synonyms Test

C.
D.
E.

Synonyms Test for English Learners.

1.

2.

3.

4.

ANOMALY
A.
Normal
B.
Straight
C.
Irregularity
D.
Integrity
E.
None of these
ABSTRUSE
A.
Showy
B.
Evident
C.
To prove something
D.
Skillful
E.
Concealed
VACOUS
A.
Stupid
B.
Truthfulness
C.
Ravenous
D.
Dreamer
E.
Confused
PRAGMATIC
A.
Practical
B.
Magnetic

Liar
Arrogant
Uncertain

5.

PROBITY
A.
Probability
B.
Honesty
C.
Peaceful
D.
Carelessness
E.
Extraordinary

6.

MINATORY
A.
Managing
B.
Moving
C.
Threatening
D.
Cheating
E.
None of these

7.

TOUCHSTONE
A.
Very hard stone
B.
Criteria
C.
Static
D.
Comfortable
E.
Path

8.

ACRIMONIOUS
A.
Bitter
B.
Cheap
C.
Expensive
D.
Momentary
E.
Affection

9.

BROOK
A.
Friend
B.
Tolerate
C.
Enemy
D.
Polish
E.
Fraud

10. SUCCINCT
A.
Concise
B.
Tranquil
C.
Ratify
D.
Slowly
E.
Superficial
E.
5.

EMINENT
A.
Famous
B.
Sad
C.
Imminent
D.
Happy
E.
Unknown

6.

PARTISAN
A.
Neutral
B.
Popular
C.
Biased
D.
Apart
E.
Stubborn

7.

NEPOTISM
A.
Query
B.
Favoritism
C.
Impartial
D.
Neophyte
E.
Nearness

8.

ENIGMA
A.
Mystery
B.
Postmortem
C.
Demise
D.
Understood
E.
Frightened

9.

CAPRICIOUS
A.
Intrinsic
B.
Certain
C.
Rest
D.
Shaky
E.
Copy

02-Antonyms Test
Antonyms Test for English Learners.

1.

2.

3.

4.

FOE
A.
B.
C.
D.
E.

Friend
Enemy
Foul
Fail
Fraud

CONSENSUS
A.
Agreement
B.
Disagreement
C.
Quality
D.
Special case
E.
Bold
FECKLESS
A.
Weak
B.
Careful
C.
Careless
D.
Unlucky
E.
None of these

None of these

10. AFFRONT
A.
Praise
B.
To insult
C.
To face
D.
Confront
E.
To remove

MELANCHOLY
A.
Sorrowful
B.
Happy
C.
Confused
D.
Convicted

5.

CALCULUS : MATHEMATICS
A.
physics : chemistry
B.
mathematics : science
C.
book : pencil
D.
college : university

03-Analogies Test
Analogies Test for English Learners.

1.

ABERRATION : ANOMALY
A.
auspicious : favourable
B.
cacophony : euphony
C.
eclectic : gifted
D.
fallow : badly felt
E.
erudite : stuffed

E.

objective : subjective

2.

DETERIORATE : IMPROVE
A.
feckless : careless
B.
evanescent : exigent
C.
hope : hone
D.
accumulation : narrate
E.
obstinate : tractable

6.

ISLAND : ARCHIPELAGO
A.
classroom : school
B.
student : teacher
C.
brook : building
D.
chary : cautious
E.
transport : transfer

3.

AGGRAVATE : ALLEVIATE
A.
later : precede
B.
urbane : naive
C.
evasive : wordy
D.
feeble : worker
E.
disavow : confront

7.

FOND : DOTING
A.
chide : pillory
B.
doctrine : patient
C.
strut : walk
D.
levy : bevy
E.
time : search

4.

VINDICTIVE : MERCY
A.
transient : fleeting
B.
elated : happy
C.
crestfallen : cognizant
D.
cajole : coax
E.
skeptical : trustfulness

8.

TIGER : CARNIVOROUS
A.
lion : hungry
B.
cow : herbivorous
C.
pen : write
D.
building : impressive
E.
tree : forest

9.

TREPIDATION : FEAR
A.
baleful : tolerate
B.
ameliorate : amenable
C.
join : conjoin
D.
compliant : argumentative
E.
candid : beget

10. STUBBORN : OBSTINATE

A.
mulish : tractable
B.
trepidation : confident
C.
impecunious : penny
D.
gloomy : morose
E.
education : school

4.

If you want to know what a man

is like, take a good look at how he
treats his inferiors, not his equals.
A.
Noun clause
B.
adjective clause
C.
Adverb clause
D.
Noun phrase

5.

Attack is the best

form of defence.
A.
Preposition
B.
Adjective
C.
Conjunction
D.
Verb

6.

An apple a day keeps the

doctor away.
A.
Adverb
B.
Article
C.
Interjection
D.
Preposition

7.

Do not look where you fell, but

where you slipped.
A.
Intransitive verb
B.
Transitive verb
C.
Auxiliary verb
D.
Adjective

8.

Those who do not learn from

history are doomed to repeat it.
A.
Infinitive
B.
Participle
C.
Gerund
D.
Conjunction

9.

Don't look a gift horse in the

mouth.
A.
Assertive sentence
B.
Interrogative sentence
C.
Imperative sentence
D.
Optative sentence

04-Grammar Test
Grammar Test for English Learners.
1.
2.

3.

Don't think there are no

crocodiles because the water is
calm.
A.
Simple Sentence
B.
Compound sentence
C.
Complex sentence
D.
Mixed sentence

10. Oh! Hell hath no fury like a

woman scorned.
A.
Mixed sentence
B.
Exclamatory sentence
C.
Optative sentence
D.
Assertive sentence

If you fear God, you won't fear

humans.
A.
Complement
B.
Indirect object
C.
Direct object
D.
Subject

11. Life is what you make it.

A.
Noun clause
B.
Adjective clause
C.
Adverb clause

D.

Noun phrase

05-Word Choice Test

Word Choice Test for English Learners.

1.

I cannot concentrate, here is too

much __________.
A.
detraction
B.
distraction
C.
people
D.
sound
E.
contraction

2.

It is expected that the assembly

will _________ these treaties.
A.
force
B.
ratify
C.
notify
D.
signify
E.
check

3.

Oil is mostly _________ by trucks

in Pakistan.
A.
transfer
B.
transmit
C.
transport
D.
travel
E.
deliver

4.

Bus _________ are going to

increase.
A.
fees
B.
rates
C.
bills
D.
credits
E.
fares

5.

Pakistani __________ met his

counterpart in London.
A.
console
B.
counsel
C.
councel
D.
consul
E.
council

6.

Children like to watch science

__________ movies.
A.
fiction
B.
faction
C.
fraction
D.
fallacy
E.
friction

7.

This account is exempted from

__________ charges.
A.
tax
B.
bevy
C.
levy
D.
interest
E.
taxation

8.

His believe that he could do this,

is his __________.
A.
allusion
B.
illusion
C.
delusion
D.
depict
E.
addict

9.

You are wearing an army's

uniform, but the __________ is
missing.
A.
epic
B.
epoch
C.
epithet
D.
epicure
E.
epaulet

10. University professors visit the

website www.sheir.org and
___________ the data.
A.
B.
C.
D.
E.

inform
appraise
apprise
amended
commended

06-Word Choice
Grammar Test
Word Choice (Grammar) Test for
English Learners.
1.
2.
3.

I am afraid __________ cats.

A.
to
B.
from
C.
of
D.
with
E.
by

4.

We did not have __________

questions for the lecturer.
A.
none
B.
any
C.
some
D.
no
E.
more

5.

Octopuses have not only large

brains __________ also a welldeveloped nervous system.
A.
but
B.
and
C.
are

D.
E.

and have
or

6.

The manager __________ everyone

go home an hour early on Friday
afternoon.
A.
allowed
B.
let
C.
permitted
D.
got
E.
asked

7.

He came in Karachi __________

August 14, 2010.
A.
in
B.
on
C.
for
D.
from
E.
with

8.

Bilal is not receiving the call. He

is __________ at work.
A.
already
B.
still
C.
yet
D.
looking
E.
no longer

9.

Bilal is getting __________ the car.

A.
out of
B.
out
C.
out from
D.
out through
E.
outside

D.
E.

07-Summary
Completion Test

10. Saad is travelling __________ the

school.
A.
to
B.
towards
C.
off
D.
through
E.
None of these
11. They
A.
B.
C.
D.
E.

total of
some of

Summary Completion Test for English

Learners.
Complete
with

went __________ the rain.

despite
in spite
under
avoiding
and enjoy

the following
correct

passage
option

During the later years of the American

Revolution,
the
Articles
of
Confederation government was formed.
This government (1)__________ severely
from a lack of power. Each state
distrusted (2)__________ and gave little
authority to the central or federal
government.
The
Articles
of

12. I was surprised by the large

__________ people who came.
A.
number of
B.
amount of
C.
sum of

Confederation
(3)__________
a
government which could not raise
money (4)__________ taxes, prevent
Indian raids, or force the British out
(5)__________ the United States.
1.

2.

A.
B.
C.
D.
E.

damaged
suffered
fail
diminished
none of these

A.
B.
C.
D.
E.

other
the other
others
the others
none of these

A.
B.
C.
D.
E.

produced
made
obtained
elected
none of these

A.
B.
C.
D.
E.

with
from
for
to
with the

A.
B.
C.
D.
E.

with
from
for
to
of

3.

4.

5.

08-Reading
Comprehension Test
Reading Comprehension Test for
English Learners.

Read
the
following
passage
carefully and answer the given

10

questions
Unemployment is an important index of
economic slack and lost output, but it is
much more than that. For the
unemployed person, it is often a
damaging affront to human dignity and
sometimes a catastrophic blow to family
life. Nor is this cost distributed in
proportion to ability to bear it. It falls
most heavily on the young, the
semiskilled and unskilled, the black
person,
the
older
worker,
and
underemployed person in a low income
rural area who is denied the option of
securing
more
rewarding
urban
employment.
The
concentrated
incidence of unemployment among
specific groups in the population means
far greater costs to society that can be
measured simply in hours of involuntary
idleness or dollars of income lost. The
extra costs include disruption of the
careers of young people, increased
juvenile delinquency, and perpetuation
of conditions which breed racial
discrimination in employment and
otherwise deny equality of opportunity.
There is another and more subtle cost.
The social and economic strains of
prolonged
underutilization
create
strong pressures for cost-increasing
solutions. On the side of labor,
prolonged high unemployment leads to
share-the-work pressures for shorter
hours,
intensifies
resistance
to
technological
change
and
to
rationalization of work rules. On the
side of business, the weakness of
markets leads to attempts to raise
prices to cover high average overhead
casts and to pressures for protection
against
foreign
and
domestic
competition.
1. According to the passage,
unemployment is an index of
A.
over utilization of capacity
B.
economic slack and lost
output
C.
diminished resources
D.
the employment rate
E.
under capacity

11

2.

While unemployment is
damaging to many, it falls most
heavily upon all except the
A.
black
B.
semiskilled
C.
unskilled
D.
underemployed
E.
white middle class

3.

The cost to society of

unemployment can be measured
by all except
A.
lost incomes
B.
idleness
C.
juvenile delinquency
D.
disruption of careers
E.
the death rate

4.

Serious unemployment leads

labor groups to demand
A.
more jobs by having
everyone work shorter hours
B.
higher wages to those
employed
C.
no fire policies
D.
cost-cutting solutions
E.
higher social security
payments

5.

According to the passage, a

typical business reaction to a
recession is to press for
A.
higher unemployment
insurance
B.
protection against imports
C.
government action
D.
restrictive business
practices
E.
restraint against union
activity

6. A
7. A
8. B
9. C
10. D
04-ANSWERS: GRAMMAR TEST
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

ANSWERS:01-ANSWERS: SYNONYMS TEST

1. C
2. E
3. A
4. A
5. B
6. C
7. B
8. A
9. B
10. A
02-ANSWERS: ANTONYMS TEST
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

A
B
B
B
E
A
C
D
B
A

03-ANSWERS: ANALOGIES TEST

1.
2.
3.
4.
5.

A
E
A
E
B

12

B
C
A
A
A
A
A
C
B
A

05-ANSWERS: WORD CHOICE TEST

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

A
B
B
B
E
A
C
D
B
A

06-ANSWERS: WORD CHOICE

(GRAMMAR) TEST
1. C
2. B
3. A
4. B
5. B
6. B
7. A
8. B
9. A
10. A
07-ANSWERS: SUMMARY
COMPLETION TEST
1.
2.
3.
4.

B
D
A
B

5. E

08-ANSWERS: READING
COMPREHENSION TEST
1.
2.
3.
4.
5.

13

B
E
E
A
B

Part-II
Professional Test=80 Marks
. Accounting Principles & Procedures,
Scrutiny of Record for Audit Purpose,
Journal, ledger & Cash Book,
Annual Budget,
Adjustment & Depreciation,
Financial Planning & Cost Accounting,
Head of Accounts, Re-appropriation of Accounts and
Supplementary Grant,
Settlement of Audit Objections
Preparation of Pension Documents.
Public Procurement Rules, 2004

01-Accounting Principles &

Procedures,
a)-12 Basic Accounting Principles GAAP
Understanding the basic accounting principles that is very important as it
affects the preparation of financial statements. The following accounting
rules and assumptions dictate what, when and how to measure financial
items.
These rules were created by the Financial Accounting Standards Board
(FASB) and are called General Accepted Accounting Principles (GAAP).
GAAP refers to the standard guidelines for financial accounting used in any
given jurisdiction. GAAP includes the standards, conventions, and rules
accountants follow in preparing and reporting financial statements.
The following are 12 basic but important accounting principles:
1.
Accounting Entity is the business unit for which the financial
statements are being prepared. The accounting entity recognizes that there
is a business entity that is separate from its owner(s). In addition, the
economic unit engages in identifiable economic activities and controls
economic resources.
2.
Going Concern Accounts assume that the life of the business entity
is infinitely long and will never dissipate. In some cases, if there is a clear
sign that a business may go bankrupt, the accountant must issue a qualified
opinion stating the potential of a demise.
3.
Measurement Accounting only deals with things that can be
measured, quantifiable. Therefore, aspects that are crucial to profits may
be overlooked such as customer loyalty.

Units of Measure The US Dollar (USD) is the standard value used

in financial statements for companies in the United States. Any foreign
transactions must be translated to USD based on the current exchange rate.
5.
Historical Cost The transactions that results in what a business
owns and owes are recorded at their original cost. This may cause the
companys books to be understated. For example, a company can own a
manufacturing facility that is valued at $25,000,000 but carry it on the
books for their purchase price of $7,000,000.
6.
Materiality The concept of materiality allows you to violate another
accounting principle if the value is so tiny that the financial reports will not
have an impact. Materiality is a judgment call by the accountant.
7.
Estimates and Judgments Often times, it is OK to guess due to the
nature that businesses are complex. It is legal, if the accounting is the best
you can do, the expected error would not affect the financial reports and the
guesses are consistent for each period.
8.
Consistency - Each individual enterprise must choose a single
method of accounting and reporting consistently over time.
9.
Conservatism
Accountants must agree more with an
understatement than an overvaluation. This accounting guideline states
that if doubt exists between two alternatives, the accountant should choose
the result with a lesser asset amount and/or a lesser profit.
10.
Periodicity Is the activity within the scope of an accounting period
that must be recorded within the time period on a financial statement.
Normally the life of a business can be divided into periods of time (month,
quarter or year).
11.
Substance Over Form This is a concept where the entity is
accounting for items according to their substance and economic reality and
not just its form.
12.
Accrual Basis of Presentation In accrual accounting, if a business
transaction makes money in a period then all of its associated costs and
business expenses should also be reported in that particular period. All
businesses with inventory must use the accrual basis. The alternative for
business that dont carry inventory is cash basis accounting in which
transactions are recorded as they are physically received or paid out.
4.

b)-Accounting Procedures:Definition

Similar to accounting method, but applied more to internal controls and

routine issues Like computing amortization, depreciation, and petty
cash expenses.
OR
General Accounting Procedures are tools to assist you in your day to day
tasks. ( e.g: Account & Cash Handling Procedures
Consultants (Engaging & Paying)
Payroll Procedures
Plant & Equipment Procedures
Sponsored Projects & Research Procedures
Tax Related Procedures

Travel & Reimbursement Procedures

Other Accounting Procedures

02-Scrutiny of Record for Audit

Purpose,
The purpose of an audit is to provide an objective independent examination of
the ...inspection; Year-end scrutiny; Re-computation; Tracing in subsequent
period ... financial records and financial statements. The auditor must examine a
variety of records and documents to verify that payroll was correctly reported
for unemployment compensation purposes. Payments for personal services are
made differently, and through different accounts, from employer to employer.
The auditor is required to scrutinize all records that may show payments to
individuals for personal services, and determine if these payments have been
properly classified.

03-Journal, ledger & Cash Book,

a)-

Meaning of Journal The word Journal has been derived from

the French word JOUR means daily records. Journal is a book of original
entry in which transactions are recorded as and when they occur in
chronological order (in order of date) from source documents. Recording in
journal is made showing the accounts to be debited and credited in a
systematic manner. Thus, the journal provides a date-wise record of all the
transactions with details of the accounts and amounts debited and credited
for each transaction with a short explanation, which is known as narration.

Ledger

is a book of account which contains a condensed and

classified record of all transactions of the business posted from the journal.
It is also called the book of final entry. In other words, the book, which
contains accounts, is known as the ledger, also called the Principal Book.
Ledger provides necessary information regarding various accounts.
Personal accounts in ledger show how much money firm owes to the
creditors and the amount it can recover from its debtors. The real accounts
show the value of properties and also the value of stock. Nominal accounts
reflect the sources of income and also the amount spent on various items. In
accounting all transactions are ultimately recorded in the ledger. In this
book, separate accounts are opened for each account head and all
transactions relating to a particular account head will be posted in the
concerned account.
b)-

c)- Cash Book:Journal in

which
all cash
receipts and payments (including bank deposits and
withdrawals)
are
recorded
first,
in
chronological order,
for posting to general
ledger. Cash book is regularly reconciled with the bank statements as an
internal auditing measure. In larger firms, it is commonly divided into
two parts: (1) Cash disbursement journal in which all cash payments (such
as accounts payable, operating expenses, petty cash purchases) are
recorded, and (2) Cash receipts journal in which all cash receipts (such
as accounts receivable, cash sales, sale of assets) are recorded.

04-Annual Budget,
Definition of 'Annual Budget'

Any budget that is prepared for

a 12-month period. An annual budget outlines both the income and
expenditures that are expected to be received and paid over the coming
year. Annual budgets are used by individuals, corporations, governments
and various other types of organizations.

Annual budgets can apply to either a fiscal or calendar year. These budgets
help their creators to plan for the upcoming year and make the necessary
adjustments in cash flow to cover expenses. Annual budgets help both
individuals and organizations to accurately project their future cash flows
and effectively manage their money.

05-Adjustment & Depreciation,

The age replacement policy which minimizes the average expected cost per
unit time over an infinite time span is obtained in the case where the cost
structure
involves
a
term
which
takes
into
account adjustment costs, depreciation costs or interest charges which are
suffered at fixed intervals of time of equal length. The optimal policy is
shown to be nonrandom and sufficient conditions are given for it to be
finite. Stopping rules in the search of this finite solution are also given.

06-Financial
Accounting,

Planning

&

Cost

Financial planning is the task of determining how a business will afford to

achieve its strategic goals and objectives. Usually, a company creates a
Financial Plan immediately after the vision and objectives have been set.
Whereas , Cost accounting is a process of collecting, analyzing,
summarizing and evaluating various alternative courses of action. Its goal is
to advise the management on the most appropriate course of action based
on the cost efficiency and capability. Cost accounting provides the detailed
cost information that management needs to control current operations and
plan for the future.

07-Head of Accounts, Reappropriation of

Accounts and Supplementary
Grant:a)-Head of Accounts:1)- Govt Side { Fed & Prov } 04-Main Head of A/Cs

a-Revenue b-capital c-Debt & d- Remittance

2)-Pvt Side 05-Main Head of A/Cs
a-Assets b- Liabilities c-Capital / O.Equity
d-Revenue & e- Expenses
( * these are also called / termed as basic element of Financial
Statement Order ).
Financial Statement Order:01)- Income Statement & 02)- Balance Sheet
*Income Statement { consist of Revenue & Expenses }
*Balance Sheet { consist of Assets, Liabilities, Capital /
O.Equity }

b)-Re-appropriation of Accounts:Appropriation or re-appropriation

represents the allotment of a

particular sum of money to meet expenditure on a specified job as
enunciated in the Detailed Demands for Grants. It is operative only for the
financial year for which it is made.

c)-Supplementary Grant:-

Supplementary and excess grants

Supplementary and excess grants.-If in respect of any financial year it is
found(a) that the amount authorized to be expended for a particular service for
the current financial year is insufficient, or that a need has arisen for
expenditure upon some new service not included in the Annual Budget
Statement for that year; or
(b) that any money has been spent on any service during a financial year in
excess of the amount granted for that service for that year;
The Federal Government shall have power to authorize expenditure from
the Federal Consolidated Fund, whether the expenditure is charged by the
Constitution upon that Fund or not, and shall cause to be laid before the
National Assembly a Supplementary Budget Statement or, as the case may
be, an Excess Budget Statement, setting out the amount of that
expenditure, and the provisions of Articles 80 to 83 shall apply to those
statements as they apply to the Annual Budget Statement.

08-Settlement of Audit Objections

Settlement of Audit Objections:All

the Audit reports will be first placed before Audit Committee headed
by the Head of Department.

This Audit Committee will take decisions regarding Settlement and the
further Action plan for the Audit Paras observed /Objected.
High Risk Paras, involving Financial Implication and System Failure will
be necessarily placed before Departmental Audit Committee and State
Level Audit Committee,
It is suggested that Director (Audit), should be a member of all the
Audit Committees
The office audited is expected to furnish Para-wise replies to the audit
report through his controlling officer/ Head of the Department where
necessary within 6 weeks from the date of issue of final report. Unusual
delays should be brought to the notice of the senior officials of Audit Cell.
The progress of settlements of objection should be watched through control
register of outstanding audit reports.
First reminder for Para wise replies to IA report should ordinarily be
issued after six weeks from the date of its issue and a second reminder
where necessary may be issued a month later. Subsequent reminders should
be given on official letters at the appropriate levels. Normally a report
should be settled within six weeks from the date of issue.
An Objection book should be maintained in every office for entering
therein objections having monetary value. The progress of recovery or
sanction to the write off the loss should be watched through objection book.
It shall be personal responsibility of the senior official to ensure that no
objection required to be noted in the objection book is omitted and that
prompt and vigorous action is taken to settle finally the outstanding
objection at the appropriate level.
Objections of routine nature relating to initial records i.e. cash book,
stock register, log books and service books etc. where department/office has
accepted the Audits point of view and has intimated that necessary
compliance can be verified at the time of next audit, may be treated as
settled.
Specific objections pointing out overpayments, short and non-realization
of Government dues, irregular payment of grants, non-utilization of costly
stores, equipments and machinery, irregular purchases and other serious
irregularities where the department/office concerned has furnished
satisfactory reply may be treated as settled subject to verification at the
time of next audit.
All such objection should be abstracted by the dealing assistant of the
head office on a separate sheet of paper with the last column Remarks of
Inspecting Officer. This abstract shall be given to the inspecting party
along with the other records at the time of next audit for on the spot
verification. Such objection shall also be treated as settled for the purpose
of control register of outstanding inspection reports / paras and objection
book.

09-Preparation of Pension
Documents.
Every Head of Office shall undertake the work of preparation of
pension papers before or as per prescribed procedure the date on
which a Government servant is due to retire on superannuation, or

on the date on which he proceeds on leave preparatory to

retirement, whichever is earlier.

10-Public Procurement Rules, 2004.

PPRA definition of Contractor as contained in ... PPR 2004 has eliminated all
discretions in procurement process, ... contractor or supplier nor put others at a
disadvantage, and elimination of culture of Gallop/Short Tender etc

Basic Accounting Terms, Acronyms and

Abbreviations Students Should Know:-

No matter what career you are pursuing, you will need to learn
the lingo used in your field or industry. All industries have their own unique
blend of terms, acronyms and abbreviations.
If you want to fully understand the industry and your organization in order
to do your job effectively, its imperative you understand this language from
the start.
"Accounting is the language of business. Knowing the language is critical
for success in any corporate function because the information is
communicated using these terms,. This is especially true for anyone
looking to work in the accounting field.
Because of the strange accounting job titles, different accounting myths and
these industry terms, its not uncommon for people to think working in
accounting is complicated or confusing when really its just got its own
unique language.
As someone new to the accounting industry, you will be introduced to a
variety of new terms. Beware: they may seem intimidating at first. But
familiarizing yourself with these basic accounting terms, acronyms and
abbreviations
early
on
will
help
you better
prepare
for
a
successful accounting career. Knowing how to talk the talk will allow you
to quickly shift your focus in the classroom beyond these terms and toward
learning the accounting techniques you will use in your job.
Read through these basic accounting terms, study them and commit them to
memory. By the time you finish your accounting degree, they will be second
nature to you and you will be on your way to apromising career.

Basic Accounting Terms List

1. Accounts Receivable AR

Definition: The amount of money owed by your customers after goods or services have been
delivered and/or used. See how it works here.

2. Accounting ACCG
Definition: A systematic way of recording and reporting financial transactions.

3. Accounts Payable AP
Definition: The amount of money you owe creditors (suppliers, etc.) in return for good
and/or services they have delivered. See how it works here.

4. Assets (Fixed and Current) FA and CA

Definition: Current assets are those that will be used within one year. Typically this could
be cash, inventory or accounts receivable. Fixed assets (non current) are more long-term
and will likely provide benefits to a company for more than one year, such as a building,
land or machinery.

5. Balance Sheet BS
Definition: A financial report that summarizes a company's assets (what it owns), liabilities
(what it owes) and owners equity at a given time.

6. Capital CAP
Definition: A financial asset and its value, such as cash or goods. Working capital is
calculated by taking your current assets subtracted from current liabilities.

7. Cash Flow CF
Definition: The revenue or expense expected to be generated through business activities
(sales, manufacturing, etc.) over a period of time. Having a positive cash flow is essential in
order for businesses to survive in the long run.

8. Certified Public Accountant CPA

Definition: A designation given to someone who has passed a standardized CPA exam and
met government-mandated work experience and educational requirements to become a
CPA.

9. Cost of Goods Sold COGS

Definition: The direct expense related to producing the goods sold by a company. This may
include the cost of the raw materials (parts) and amount of employee labor used in
production.

10. Credit CR
Definition: An accounting entry that may either decrease assets or increase liabilities and
equity on the company's balance sheet, depending on the transaction. When using

the double-entry accounting method there will be two recorded entries for every
transaction: a credit and a debit.

11. Debit DR
Definition: An accounting entry where there is either an increase in assets or a decrease in
liabilities on a company's balance sheet.

12. Expenses (Fixed, Variable, Accrued, Operation) FE, VE, AE, OE

Definition: The fixed, variable, accrued or day-to-day costs that a business may incur
through its operations. Examples of expenses include payments to banks, suppliers,
employees or equipment.

13. Generally Accepted Accounting Principles GAAP

Definition: A set of rules and guidelines developed by the accounting industry for
companies to follow when reporting financial data. Following these rules is especially
critical for all publicly traded companies.

14. General Ledger GL

Definition: A complete record of the financial transactions over the life of a company.

15. Liabilities (Current and Long-Term) CL and LTL

Definition: A company's debts or financial obligations it incurred during business
operations. Current liabilities are those debts that are payable within a year, such as a debt
to suppliers. Long-term liabilities are typically payable over a period of time greater than
one year. An example of a long-term liability would be a bank loan.

16. Net Income NI

Definition: A company's total earnings, also called net profit or the bottom line. Net
incomeis calculated by subtracting totally expenses from total revenues.

17. Owner's Equity OE

Definition: An owners equity is typically explained in terms of the percentage amount of
stock a person has ownership interest in the company. The owners of the stock are
commonly referred to as the shareholders.

18. Present Value PV

Definition: The value of how much a future sum of money is worth today. Present value
helps us understand how receiving $100 now is worth more than receiving $100 a year
from now. See an example of the time value of money here.

19. Profit and Loss Statement P&L

Definition: A financial statement that is used to summarize a companys performance and

financial position by reviewing revenues, costs and expenses during a specific period of
time; such a quarterly or annually.

20. Return on Investment ROI

Definition: A measure used to evaluate the financial performance relative to the amount of
money that was invested. The ROI is calculated by dividing the net profit by the cost of the
investment. The result is often expressed as a percentage. See an example her

Abbreviations:

GAO: General Accounting Office

SEC: Securities and Exchange Commission
R&D: Research and Development
DFAS: Defense Finance and Accounting Service
CPA: Certified Public Accountant
CFO: Chief Financial Officer
NPV: Net Present Value
NYSE: New York Stock Exchange
FASB: Financial Accounting Standards Board
EPS: Earnings Per Share
CIA: Certified Internal Auditor
AICPA:American Institute of Certified Public Accountants
CAPM: Capital Asset Pricing Model
GAAP: Generally Accepted Accounting Principles
IASC: International Accounting Standards Committee
GL: General Ledger
IFRS: International Financial Reporting Standards
IAS: International Accounting Standards
IAG: International Auditing Guidelines
PMADPakistan Military Accounts Department
MATI Military Accounts Training Institute
CGA Controller General of Accounts
PAD Pakistan Audit Department
AGP Auditor General of Pakistan
FPSC Federal Public Service Commission
AGPR Accountant General of Pakistan Revenue
MAG Military Accountant General

CHAPTER 3
BASIC STRUCTURE OF THE FORM OF ACCOUNTS
20.

Period of Accounts

The annual accounts of the Central, State and Union Territory Governments shall record transactions which take
place during a financial year running from 1st April to 31st March.
NOTE:- The Government accounts of a year may be kept open for a certain period in the following year
for completion of the various accounting processes inter alia in respect of the transactions of March, for
carrying out certain inter-departmental adjustments, and for closing the accounts of several Provident Funds
and Suspense heads. Adjustments may also be made after the close of the year for the rectification of
mispostings and misclassifications coming to notice after the 31st March. An actual cash transaction taking
place after 31st March, should not, however, be treated as pertaining to the previous financial year even
though the accounts for that year may be open for the purposes mentioned above.

21.

Cash basis of Accounts

With the exception of such book adjustments as may be authorised by these rules or by any general or special orders
issued by the Central Government on the advice of the Comptroller and Auditor General of India, the transactions in
Government accounts shall represent the actual cash receipts and disbursements during a financial year as
distinguished from amounts due to or by Government during the same period.

22.

Currency in which Accounts are kept

The accounts of Government shall be maintained in Indian currency i.e. rupees. All transactions of the Central and
State Governments taking place in other countries shall be passed on monthly by the Indian Embassies/Missions to
India and brought to account finally in the Indian books after they have been converted into rupees.

23.

Form of Accounts - Main Divisions of Accounts

Government accounts shall be kept in the following three parts:-

Part I Consolidated Fund

of India (including Union Territory Administration or
of the State or Union Territory Government concerned.
Part II Contingency Fund

Part III Public Account

of India (including Union Territory Administration/Government)

or of the State concerned.

NOTE:- There being no separate Public Account in the case of Union Territory Governments, the
transactions pertaining to this account shall be booked in the Public Account of the Central Government.

In part I, namely Consolidated Fund, of the accounts, there shall be two main divisions, namely:

(i) Revenue Consisting of sections for 'Receipt heads (Revenue Account)' and 'Expenditure heads
(Revenue Account)'.
(ii) Capital, Public Debt, Loans consisting of sections for 'Receipt heads (Capital Account)',
'Expenditure heads (Capital Account)', and 'Public Debt', 'Loans', and 'Advances'.
The first division shall comprise the section Receipt heads (Revenue Account) dealing with the proceeds of taxation
and other receipt classed as revenue, and the Section 'Expenditure heads (Revenue Account)' dealing
with expenditure met therefrom.
The second division shall comprise the following sections:

(a) The Section 'Receipt heads (Capital Account)' which deals with receipts of a Capital nature which
cannot be applied as a set off to Capital Expenditure.
(b) The Section 'Expenditure heads (Capital Account)' which deals with expenditure met usually from
borrowed funds with the object of increasing concrete assets of a material and permanent character. It
also includes receipts of a Capital nature intended to be applied as set off to Capital expenditure.
(c) The Section 'Public Debt' Loans and Advances, which comprise, of loans raised and their
repayments by Government such as, Internal Debt, External Debt of the Central Government, and loans
and Advances made by Governments and their recoveries; transactions relating to 'Appropriation to
Contingency Fund' and 'Inter-State Settlement';
In Part II, namely Contingency Fund, of the accounts shall be recorded the transactions connected with the
Contingency Fund set up by the Government of India or of a State or Union Territory Government under Article 267 of
the Constitution/ Section 48 of the Union Territories Act, 1963.
In Part III, namely Public Account, of the accounts, the transactions relating to Debt (Other than those included in Part
I), 'Deposits', 'Advances', 'Remittances' and 'Suspense' shall be recorded. The transactions under Debt, Deposit and
Advances in this part are such in respect of which Government incurs a liability to repay the moneys received or has
a claim to recover the amounts paid, together with the repayments of the former (Debt and Deposits) and the
recoveries of the latter (Advances). The transactions relating to 'Remittances' and 'Suspense' in this Part shall
embrace all merely adjusting heads under which shall appear such transactions as remittances of cash between
treasuries and currency chests and transfer between different accounting circles. The initial debits or credits to these
heads will be cleared eventually by corresponding receipts or payments either within the same circle of account or in
another account circle.

24.

Sectors and Sub-sectors of Accounts

(a) Within each of the Divisions and sections of the Consolidated Fund referred to in rule 23, the transactions shall
be grouped into Sectors such as, "General Services", "Social Services", "Economic Services", under which specific
functions or services shall be grouped. The Sectors shall be sub-divided into Major Heads of Account, in some cases
the Sectors are, in addition, sub-divided into sub-sectors before their division into Major Heads of Account. Each
Sector in a section shall be distinguished by a letter of the Alphabet.
(b) In Part IIContingency Fund, there shall be a single Major Head and all the transactions met out of the
Contingency Fund shall be recorded under it.
(c) In the case of Part IIIPublic Account, the transactions shall be grouped into sectors and sub-sectors, which
shall be further sub-divided into Major Heads of Account. The Sectors/Sub-Sectors shall be distinguished by letters of
the alphabet.

25.

Allotment of Code to each Major Head and range of Code Numbers

A four digit Code has been allotted to the Major Head, the first digit indicating whether the Major Head is a Receipts
Head or Revenue Expenditure Head, or Capital Expenditure Head or Loans and Advances. Head or it pertains to
Public Account, if the first digit is '0' or '1', the Head of Account will represent Revenue Receipt; '2' or '3' will represent

Revenue Expenditure; '4' or '5' Capital Expenditure; '6' or '7' Loans and Advances Head; (4000 for Capital Receipt)
and '8' will represent Contingency Fund and Public Account(8000 for Contingency Fund).
Adding 2 to the first digit of the Revenue Receipt will give the Code Number allotted to corresponding Revenue
Expenditure Head; adding another 2the Capital Expenditure Head and another 2the Loans and Advances Head
of Accounts; e.g.

0401 represents the Receipt Head for Crop Husbandry

2401 represents the Revenue Expenditure Head for Crop Husbandry
4401 represents the Capital Outlay on Crop Husbandry
6401 represents Loans for Crop Husbandry.
Such a pattern is however, not relevant for those departments which are not operating Capital/Loan Head of accounts
e.g. Department of Supply. In a few cases, however, where receipt/expenditure is not heavy, certain Major Heads
have been combined under and single number, the Major Heads themselves forming sub-major heads under that
number.
The range of code numbers allotted under the scheme of codification is shown below:-

Part I - Consolidated Fund

Major Head Code Nos.

Section I Receipt Heads (Revenue Account)

0020-1999

Expenditure Heads (Revenue Account)

2011-3999

Section II - Receipt Head (Capital Account)

4000

Expenditure Heads (Capital Account)

4046-5999

Section III Public Debt, Loans & Advances

6001-7999

Part II - Contingency Fund

8000

Part III - Public Account

8001-8995

26.

Major, Minor and Detailed Heads

(a) The main unit of classification in accounts shall be the major head which shall be divided into minor heads,
each of which shall have a number of subordinate heads, generally shown as sub-heads. The sub-heads are further
divided into detailed heads. Sometimes major heads may be divided into 'sub-major heads' before their further
division into minor heads.
The Sectors, Major heads, Minor heads, Sub-heads and Detailed heads together constitute a five tier arrangement of
the classification structure of Government Accounts.

(b) Major heads of account falling within the Consolidated Fund shall generally correspond to 'Functions' of
Government, such as different services like "Crop Husbandry", 'Defence' provided by Government, while minor
heads subordinate to them shall identify the 'Programme' undertaken to achieve the objectives of the function
represented by the major head. A programme may consist of a number of schemes or activities and these shall,
generally, correspond to 'sub-heads' below the minor head represented by the programme. In certain cases,
especially in regard to non-developmental expenditure or expenditure of an administrative nature, the sub-heads may
denote the components of a programme, such as 'Organisations' or the different 'Wings of Administration'.
(c) A "detailed head'', is termed as an object classification. On the expenditure side of the accounts particularly in
respect of heads of accounts within the Consolidated Fund, detailed heads are primarily meant for itemised control
over expenditure and indicate the object or nature of expenditure on a scheme or activity or organisation in terms of
inputs such as 'Salaries', 'Office Expenses', 'Grants-in-aid', 'Loans'. 'Investments'.
(d) The detailed classification of account heads in Government Accounts and the order in which the Major and
Minor heads shall appear in all account records shall be such as are prescribed by the Central Government from
time to time on the advice of the Comptroller and Auditor General of India. The 'List of Major and Minor Heads of
Account of Union and States contains the classification prescribed in this regard. The classification prescribed
(including the code No. assigned upto the major heads and minor heads thereunder) should be strictly followed.
NOTE 1:- With effect from 1st January, 1982 and in the case of Jammu and Kashmir, Maharashtra,
Manipur and Sikkim from 15th January, 1982, State Governments have been entrusted with their consent, in
terms of clause (1) of article 258 of the Constitution, the functions of the Central Government under Article
150 of the Constitution in so far as such functions relate to the opening of sub-heads and detailed heads of
accounts under the various Major and Minor heads of Accounts in the State concerned, subject to the
following conditions:
(i)
Orders issued by a State Government for opening subheads and detailed heads are consistent with the
directions issued by the Central Government from time to time.
(ii)
No sums shall be paid by the Central Government to the State Government concerned in respect of
any extra costs of administration incurred by the State in connection with the exercise of the functions so
entrusted.
NOTE 2:- With effect from 1st April, 1982 the President in terms of clause (1) of Article 239 of the
Constitution, has directed the Administrators of the Union Territories of Arunachal Pradesh, Goa, Daman &
Diu, Mizoram and Pondicherry, subject to his control, also to discharge the functions of the Central
Government under Article 150 of the Constitution in so far as such functions relate to the opening of subheads and detailed heads of account under the various Major and Minor heads of account within their
respective territories subject to the following conditions:
(i) the said discharge of functions shall be subject to the forms prescribed by the President under Article
150; and
(ii) No sums shall be paid by the Central Government to the Union Territory concerned in respect of any
extra cost of administration incurred in connection with the said discharge of functions.
NOTE 3:Directions issued by the Ministry of Finance (Department of ExpenditureController General of
Accounts) on the advice of the Comptroller and Auditor General in connection with the exhibition of
expenditure incurred by State/Union Territory Governments against grants-in-aid and loans given to them by
various Ministries/ Departments of the Government of India under Central Plan Schemes and Centrally
sponsored Plan Schemes, are reproduced in Appendix 4.

27.

Classification of expenditure as "Charged" or as "Voted"

Expenditure which under the provisions of the Constitution is subject to the vote of the Legislature shall be shown in
the accounts separately from expenditure which is "Charged" (on the Consolidated Fund of India or of a State or
Union Territory Government. The expression "Charged" or "Voted" shall be appended to the heads concerned to
distinguish the two categories of expenditure.

28.

Classification of transactions in accounts

(1) Under Article 150 of the Constitution, the accounts of the Union and of the States shall be kept in such form as
the President may on the advice of the Comptroller and Auditor General, prescribe. The word "Form" used in Article
150 has a comprehensive meaning so as to include the prescription not only of the broad form in which the accounts
are to be kept but also the basis for selecting appropriate heads under which the transactions are to be classified.
(2) The estimates of receipts and expenditure framed by Government or in any order of Appropriation shall indicate
provisions, ordinarily against heads opened in conformity with these rules. Where there is divergence, the
corresponding receipt or expenditure shall be brought to account under the appropriate major head or minor head or
other unit of classification as determined by the President on the advice of the Comptroller and Auditor General of
India.
"Principles and Rules regulating adjustments between Governments of certain category of charges and receipts,
which have been accepted by all Governments are given in Appendix 5."

29.

Basis of classification

As a general rule, the classification of transactions in Government accounts, shall have closer reference to the
function, programme and activity of the Government and the object of the revenue or expenditure, rather than the
department in which the revenue or expenditure occurs. This principle is, however, subject to such exceptions as may
be authorised specially in any individual case or class of cases e.g. receipts representing 'Interest' are shown under
"0049Interest Receipts" and expenditure on the maintenance and repairs of the non-Residential buildings under the
administrative control of the Public Works Department are shown under the major head "2059Public Works"
irrespective of the functions to which they relate. Important general orders governing classification of pay and
allowances (including travelling allowances) of Government servants, expenditure on civil works, contributions made
by or to Government, refunds of revenue, shall be issued by Government from time to time.

30. Criteria for determining whether expenditure should be classified under heads of Capital
Section or Revenue Section of the Consolidated Fund.
(1) Expenditure of a capital nature to be classified in the Capital Section shall broadly be defined as expenditure
incurred with the object of either increasing concrete assets of a material and permanent character.
NOTE:- Expenditure on a temporary asset or expenditure on Grants-in-aid to local bodies or institutions
(for the purpose of creating assets which will belong to these local bodies or institutions) cannot ordinarily
be classifiable as capital expenditure, and shall not, except in cases specifically authorised by the President
on the advice of Comptroller and Auditor General be debited to a capital head of account.

(2) Expenditure of a Capital nature shall be distinguished from Revenue expenditure both in the Budget Estimates
and in Government Accounts.
NOTE:- Capital expenditure is generally met from receipts of a capital, debt, deposit or banking character
as distinguished from ordinary revenue derived from taxes, duties, fees, fines and similar items of current
income including extra-ordinary receipts. It is open to the Government to meet Capital expenditure from
ordinary revenues provided there are sufficient revenue resources to cover this liability.

(3) Expenditure of a Capital nature as defined above shall not be classed as Capital expenditure in the
Government accounts unless the classification has been expressly authorised by general or special orders of
Government.

31.

Allocation between capital and revenue expenditure on a capital scheme

(1) The allocation between capital and revenue expenditure on a Capital Scheme for which separate capital and
revenue accounts are to be kept shall be determined in accordance with such general or special orders as may be
prescribed by the President on the advice of the Comptroller and Auditor General.
(2) The following are the main principles governing the allocation of expenditure on a Capital Scheme, between
Capital and Revenue accounts:

(a) Capital account should bear all charges for the first construction and equipment of a project as well
as charges for intermediate maintenance of the work while not yet opened for service. It would also bear

charges for such further additions and improvements as may be sanctioned under rules made by
competent authority.
(b) Subject to (c) below, revenue account should bear all subsequent charges for maintenance and all
working expenses. These embrace all expenditure on the working and upkeep of the project and also on
such renewals and replacements and such additions, improvements or extensions as prescribed by
Government.
(c) In the case of works of renewal and replacement which partake both of a capital and revenue
nature, the allocation of expenditure should be regulated by the broad principle that revenue should pay
or provide a fund for the adequate replacement of all wastage or depreciation of property originally
provided out of capital grants and that only the cost of genuine improvements, whether determined by
prescribed rules or formulae or under special orders of Government, should be debited to Capital
account. Where under special orders of Government, a Depreciation or Renewals Reserve Fund is
established for renewing assets of any commercial department or undertaking, the distribution of
expenditure on renewals, and replacements between Capital account and the Fund should be so
regulated as to guard against over-capitalisation on the one hand and excessive withdrawals from the
Fund on the other.
(d) Expenditure on account of reparation of damage caused by extraordinary calamities such as flood,
fire, earthquake, enemy action, should be charged to Capital account or to Revenue account or divided
between them in such a way as may be determined by Government according to the circumstance of
each case.
(e) Capital receipts in so far as they relate to expenditure previously debited to Capital heads, accruing
during the process of construction of a project, should be utilised in reduction of capital expenditure.
Thereafter, their treatment in the accounts will depend on circumstances, but except under a special rule
or order of Government, they should not be credited to the revenue account of the department or
undertaking.
32.

Net Gain or Loss by Exchange in respect of Government transaction in foreign currencies

Net gain or loss by exchange in respect of Government transactions in foreign currencies shall be uniformly adjusted
under the head "0075/2075Miscellaneous General Services Gain/Loss by Exchange".

33. Classification and accounting of transactions pertaining to more than one Major Head of
Account
For the sake of convenience or for other special reasons, receipts on charges pertaining to more than one head of
account may be booked in the first instance under one of the heads concerned, but the portion creditable or debitable
to the other head or heads involved should be transferred from the former head to the latter before the accounts of
the year are closed. A few instances are cited below:-

(1) Where the charges for the supply of water from Irrigation canals are consolidated with the land
revenue demand, the recoveries at the consolidated rates are, in the first instance, credited to the head
"0029Land Revenue" and an approximate amount calculated as the share due to Irrigation is
transferred to the relevant Irrigation Revenue Head.
(2) Charges for collection of Corporation Tax are accounted for under the minor head "Collection
ChargesIncome Tax" below the major head "2020 Collection of Taxes on Income and Expenditure" in
the first instance, the amount debitable to the minor head "Collection chargesCorporation Tax" being
transferred later from the former minor head to the latter.
(3) The Establishment and Tools and Plant charges of Public Works Divisions are, in the first place,
booked under a single Major Head subject to final apportionment among the several major heads
concerned.

34.

Classification and accounting of transactions relating to Scheduled Areas

Receipts and expenditure pertaining to Scheduled Areas in a State vide clause I of Article 244 of the Constitution
shall be accounted for under the same major and minor heads under which corresponding receipts and expenditure
pertaining to other areas of the State are accounted for, but the receipts and expenditure of the former kind may be
shown in the accounts separately from the later if Government so desires.

35.

Classification and accounting of recoveries of overpayments

Recoveries of overpayments whether made in cash or by deduction from payment vouchers shall always be taken as
reduction of expenditure under the appropriate expenditure head concerned irrespective of the year to which such
recoveries relate.

36.

Accounts of Government Commercial Departments or Undertakings

Where any departments or departmental Undertakings of Government function on commercial lines, the essential
formalities of commercial accounts to the extent prescribed by Government should be strictly observed. In such
cases, separate commercial accounts of the departments or Undertakings shall be kept outside the regular
Government accounts. Gross receipts and expenditure of commercial departments or undertakings shall be
accounted for under the appropriate major and minor heads in the same way as ordinary receipts and expenditure of
Government. The heads of accounts should, as far as possible, be common to the Government account, and the
General Ledger maintained at the department or undertaking, and should be selected with due regard to the
principles of governmental and commercial accounting so; that the monthly classified account of income and
expenditure of the department or undertakings may be prepared readily from the General Ledger.

37.

Rectification of Misclassifications

The procedure to be followed in rectifying misclassifications in accounts shall be such as may be prescribed by Govt.

38. Criteria for writes-off of balances from Debt. Deposit, Suspense and Remittances Heads
closed to balance and classification thereof in accounts
Ordinarily, all amounts due to Government which are found to be irrecoverable shall be written-off from the Debt head
of account concerned to an expenditure head as a loss to Government. Similarly, any balance due by Government
remaining unclaimed for such time as may be prescribed by Government shall be credited as revenue of the
Government concerned by debit to the Debt or Deposit head concerned. Amounts outstanding due to book-keeping
errors under heads which close to balance shall be written-off to "8680-Miscellaneous Government Account-Write off
from heads of account closing to balance". With the specific approval of the Comptroller and Auditor General in all
cases where the compilation of account is his responsibility and in cases where the accounts have been
departmentalised or separated from Audit, with the specific approval of the Controller General of Accounts; provided
that the Comptroller and Auditor General and the Controller General of Accounts may delegate the power to
appropriate Accounts authorities to such extent and subject to such conditions as may be decided by them.
Where it is not possible to establish that unreconciled balances/differences under heads of account which close to
balance are either due to book-keeping errors or involve loss/ receipts, the balances/differences may be written-off to
"8680 Miscellaneous Government Account - Writes-off from heads of account closing to balance", with the approval of
the Comptroller and Auditor General of India after obtaining concurrence of the Government concerned in all cases
where the compilation of account is his responsibility and in cases, where the accounts have been departmentalised
or separated from Audit, of the Controller General of Accounts after concurrence of the Chief Accounting Authority
concerned is obtained.
Such unreconciled balances or differences between the ledger balances and those of as per the relevant subsidiary
registers or Broad-sheets, under any detailed/sub-detailed heads of account relating to any Debt, Deposit, Suspense
and Remittance heads in the State Accounts, as per the list of Major & Minor Heads of Account, not exceeding Rs.
1000/- in each case in any financial year, may be written-off by an Accountant General to the head "8680
Miscellaneous Government Account Write-off from heads of account closing to balance" subject to the following
conditions:

(i) The amounts of unreconciled balances or differences are continuing for a period of over five years,
in the year in which it is proposed to be written-off.
(ii) The Accountant General has satisfied himself that a dead end has been reached in resolving the
differences and

(iii)

The concurrence of the State Government has been obtained for the write-off.

FPSC Senior Auditors Test Preparation Basic Accounting Terms and Questions for Test
Definition of accounting: the art of recording, classifying and summarizing in a significant manner and in terms
of money, transactions and events which are, in part at least of a financial character and interpreting the results
there of.
2. Book keeping: It is mainly concerned with recording of financial data relating to the business operations in a
significant and orderly manner.
3. Concepts of accounting:
A. Separate entity concept
B. Going concern concept
C. Money measurement concept
D. Cost concept
E. Dual aspect concept
F. Accounting period concept
G. Periodic matching of costs and revenue concept
H. Realization concept.
4 Conventions of accounting:
A. Conservatism
B. Full disclosure
C. Consistency
D. Materiality
5. Systems of book keeping:
A. single entry system
B. double entry system
6. Systems of accounting:
A. Cash system accounting
B. Mercantile system of accounting.
7. Principles of accounting:
A. Personal a/c: Debit the receiver
Credit the giver
B. Real a/c: Debit what comes in
Credit what goes out
C. Nominal a/c: Debit all expenses and losses
Credit all gains and incomes
8. Meaning of journal: Journal means chronological record of transactions.
9. Meaning of ledger: Ledger is a set of accounts. It contains all accounts of the business enterprise whether real,
nominal, personal.
10. Posting: It means transferring the debit and credit items from the journal to their respective accounts in the
ledger.
11. Trial balance: Trial balance is a statement containing the various ledger balances on a particular date.
12. Credit note: The customer when returns the goods get credit for the value of the goods returned. A credit
note is sent to him intimating that his a/c has been credited with the value of the goods returned.
13. Debit note: When the goods are returned to the supplier, a debit note is sent to him indicating that his a/c
has been debited with the amount mentioned in the debit note.
14. Contra entry: Which accounting entry is recorded on both the debit and credit side of the cashbook is known
as the contra entry.
15. Petty cash book: Petty cash is maintained by business to record petty cash expenses of the business, such as
postage, cartage, stationery, etc.
16. Promissory note: an instrument in writing containing an unconditional undertaking signed by the maker, to
pay certain sum of money only to or to the order of a certain person or to the barer of the instrument.
17. Cheque: A bill of exchange drawn on a specified banker and payable on demand.
18. Stale Cheque: A stale cheque means not valid of cheque that means more than six months the cheque is not
valid.
20. Bank reconciliation statement: It is a statement reconciling the balance as shown by the bank passbook and
the balance as shown by the Cash Book. Obj: to know the difference & pass necessary correcting, adjusting
entries in the books.
21. Matching concept: Matching means requires proper matching of expense with the revenue.
22. Capital income: The term capital income means an income which does not grow out of or pertain to the
running of the business proper.
23. Revenue income: The income, which arises out of and in the course of the regular business transactions of a
concern.
24. Capital expenditure: It means an expenditure which has been incurred for the purpose of obtaining a long
term advantage for the business.
25. Revenue expenditure: An expenditure that incurred in the course of regular business transactions of a
concern.
26. Differed revenue expenditure: An expenditure, which is incurred during an accounting period but is applicable

further periods also. Eg: heavy advertisement.

27. Bad debts: Bad debts denote the amount lost from debtors to whom the goods were sold on credit.
28. Depreciation: Depreciation denotes gradually and permanent decrease in the value of asset due to wear and
tear, technology changes, laps of time and accident.
29. Fictitious assets: These are assets not represented by tangible possession or property. Examples of
preliminary expenses, discount on issue of shares, debit balance in the profit And loss account when shown on
the assets side in the balance sheet.
30. Intangible Assets: Intangible assets mean the assets which is not having the physical appearance. And its
have the real value, it shown on the assets side of the balance sheet.
31. Accrued Income: Accrued income means income which has been earned by the business during the
accounting year but which has not yet been due and, therefore, has not been received.
32. Outstanding Income: Outstanding Income means income which has become due during the accounting year
but which has not so far been received by the firm.
33. Suspense account: The suspense account is an account to which the difference in the trial balance has been
put temporarily.
34. Depletion: It implies removal of an available but not replaceable source, Such as extracting coal from a coal
mine.
35. Amortization: The process of writing of intangible assets is term as amortization.
36. Dilapidation: The term dilapidation to damage done to a building or other property during tenancy.
37. Capital employed: The term capital employed means sum of total long term funds employed in the business.
i.e.
(Share capital+ reserves & surplus +long term loans (non business assets + fictitious assets)
38. Equity shares: Those shares which are not having pref. rights are called equity shares.
39. Pref.shares: Those shares which are carrying the pref.rights are called pref. shares Pref.rights in respect of
fixed dividend. Pref.right to repayment of capital in the event of company winding up.
40. Leverage: It is a force applied at a particular work to get the desired result.
41. Operating leverage: the operating leverage takes place when a changes in revenue greater changes in EBIT.
42. Financial leverage: it is nothing but a process of using debt capital to increase the rate of return on equity
43. Combine leverage: It is used to measure of the total risk of the firm = operating risk + financial risk.
44. Joint venture: A joint venture is an association of two or more the persons who combined for the execution of
a specific transaction and divide the profit or loss their of an agreed ratio.
45. Partnership: Partnership is the relation b/w the persons who have agreed to share the profits of business
carried on by all or any of them acting for all.
46. Factoring: It is an arrangement under which a firm (called borrower) receives advances against its
receivables, from financial institutions (called factor)
47. Capital reserve: The reserve which transferred from the capital gains is called capital reserve.
48. General reserve: the reserve which is transferred from normal profits of the firm is called general reserve
49. Free Cash: The cash not for any specific purpose free from any encumbrance like surplus cash.
50. Minority Interest: Minority interest refers to the equity of the minority shareholders in a subsidiary company.
51. Capital receipts: Capital receipts may be defined as non-recurring receipts from the owner of the business or
lender of the money crating a liability to either of them.
52. Revenue receipts: Revenue receipts may defined as A recurring receipts against sale of goods in the normal
course of business and which generally the result of the trading activities.
53. Meaning of Company: A company is an association of many persons who contribute money or moneys worth
to common stock and employs it for a common purpose. The common stock so contributed is denoted in money
and is the capital of the company.
54. Types of a company:
1. Statutory companies
2. Government company
3. Foreign company
4. Registered companies:
A. Companies limited by shares
B. Companies limited by guarantee
C. Unlimited companies
D. private company
E. public company
55. Private company: A private co. is which by its AOA: Restricts the right of the members to transfer of shares
Limits the no. Of members 50. Prohibits any Invitation to the public to subscribe for its shares or debentures.
56. Public company: A company, the articles of association of which does not contain the requisite restrictions to
make it a private limited company, is called a public company.
57. Characteristics of a company:
> Voluntary association
> Separate legal entity
> Free transfer of shares
> Limited liability
> Common seal
> Perpetual existence.
58. Formation of company:
> Promotion
> Incorporation

> Commencement of business

59. Equity share capital: The total sum of equity shares is called equity share capital.
60. Authorized share capital: It is the maximum amount of the share capital, which a company can raise for the
time being.
61. Issued capital: It is that part of the authorized capital, which has been allotted to the public for subscriptions.
62. Subscribed capital: it is the part of the issued capital, which has been allotted to the public
63. Called up capital: It has been portion of the subscribed capital which has been called up by the company.
64. Paid up capital: It is the portion of the called up capital against which payment has been received.
65. Debentures: Debenture is a certificate issued by a company under its seal acknowledging a debt due by it to
its holder.
66. Cash profit: cash profit is the profit it is occurred from the cash sales.
67. Deemed public Ltd. Company: A private company is a subsidiary company to public company it satisfies the
following terms/conditions Sec 3(1)3:
1. Having minimum share capital 5 lakhs
2. Accepting investments from the public
3. No restriction of the transferable of shares
4. No restriction of no. of members.
5. Accepting deposits from the investors
68. Secret reserves: Secret reserves are reserves the existence of which does not appear on the face of balance
sheet. In such a situation, net assets position of the business is stronger than that disclosed by the balance
sheet.
These reserves are created by:
1. Excessive depot an asset, excessive over-valuation of a liability.
2. Complete elimination of an asset, or under valuation of an asset.
69. Provision: provision usually means any amount written off or retained by way of providing depreciation,
renewals or diminutions in the value of assets or retained by way of providing for any known liability of which the
amount cannot be determined with substantial accuracy.
70. Reserve: The provision in excess of the amount considered necessary for the purpose it was originally made
is also considered as reserve Provision is charge against profits while reserves is an appropriation of profits
Creation of reserve increase proprietors fund while creation of provisions decreases his funds in the business.
71. Reserve fund: The term reserve fund means such reserve against which clearly investment etc.,
72. Undisclosed reserves: Sometimes a reserve is created but its identity is merged with some other a/c or group
of accounts so that the existence of the reserve is not known such reserve is called an undisclosed reserve.
73. Finance management: Financial management deals with procurement of funds and their effective utilization in
business.
74. Objectives of financial management: financial management having two objectives that Is:
1. Profit maximization: The finance manager has to make his decisions in a manner so that the profits of the
concern are maximized.
2. Wealth maximization: Wealth maximization means the objective of a firm should be to maximize its value or
wealth, or value of a firm is represented by the market price of its common stock.
75. Functions of financial manager:
> Investment decision
> Dividend decision
> Finance decision
> Cash management decisions
> Performance evaluation
> Market impact analysis
76. Time value of money: The time value of money means that worth of a rupee received today is different from
the worth of a rupee to be received in future.
77. Capital structure: It refers to the mix of sources from where the long-term funds required in a business may
be raised; in other words, it refers to the proportion of debt, preference capital and equity capital.
78. Optimum capital structure: Capital structure is optimum when the firm has a combination of equity and debt
so that the wealth of the firm is maximum.
79. Wacc: It denotes weighted average cost of capital. It is defined as the overall cost of capital computed by
reference to the proportion of each component of capital as weights.
80. Financial break-even point: It denotes the level at which a firms EBIT is just sufficient to cover interest and
preference dividend.
81. Capital budgeting: Capital budgeting involves the process of decision making with regard to investment in
fixed assets. Or decision making with regard to investment of money in long term projects.
82. Payback period: Payback period represents the time period required for complete recovery of the initial
investment in the project.
83. ARR: Accounting or average rates of return means the average annual yield on the project.
84. NPV: The Net present value of an investment proposal is defined as the sum of the present values of all
future cash inflows less the sum of the present values of all cash out flows associated with the proposal.
85. Profitability index: Where different investment proposal each involving different initial investments and cash
inflows are to be compared.
86. IRR: Internal rate of return is the rate at which the sum total of discounted cash inflows equals the
discounted cash out flow.
87. Treasury management: It means it is defined as the efficient management of liquidity and financial risk in
business.

88. Concentration banking: It means identify locations or places where customers are placed and open a local
bank a/c in each of these locations and open local collection canter.
89. Marketable securities: Surplus cash can be invested in short term instruments in order to earn interest.
90. Ageing schedule: In an ageing schedule the receivables are classified according to their age.
91. Maximum permissible bank finance (MPBF): It is the maximum amount that banks can lend a borrower
towards his working capital requirements.
92. Commercial paper: A cp is a short term promissory note issued by a company, negotiable by endorsement
and delivery, issued at a discount on face value as may be determined by the issuing company.
93. Bridge finance: It refers to the loans taken by the company normally from commercial banks for a short
period pending disbursement of loans sanctioned by the financial institutions.
94. Venture capital: It refers to the financing of high-risk ventures promoted by new qualified entrepreneurs who
require funds to give shape to their ideas.
95. Debt securitization: It is a mode of financing, where in securities are issued on the basis of a package of
assets (called asset pool).
96. Lease financing: Leasing is a contract where one party (owner) purchases assets and permits its views by
another party (lessee) over a specified period
97. Trade Credit: It represents credit granted by suppliers of goods, in the normal course of business.
98. Over draft: Under this facility a fixed limit is granted within which the borrower allowed to overdraw from his
account.
99. Cash credit: It is an arrangement under which a customer is allowed an advance up to certain limit against
credit granted by bank.
100. Clean overdraft: It refers to an advance by way of overdraft facility, but not back by any tangible security.

Business Administration Paper - 2000

(1)
(a)
(b)
(c)
(d)

Public Accountants generally perform these services:

Income tax services, Management Advisory services, and independent
auditing services
Internal auditing, Income tax services and management controlling.
Public accounting, private accounting and budgeting.
None of the above is correct.

(2)
Identify the organization created by Congress to regulate security markets including
flow of information from companies to public:
(a)
(b)
(c)
(d)

TVM
NPV
IRR
SEC

(3)

Select the term that describes a cash distribution to a Corporations Stockholders:

(a)
(b)
(c)
(d)
(e)

Paid out Capital

Cash Management
A dividend
None of these
All of the above are correct

(4)

Frederick Winslow Taylor work/book entitled the principles of Scientific Management

is published, in:

(a)
(b)
(c)

1875
1901
1911

(d)

None of these

(5)

One of the most successful Industrialists and the father of Modern Personnel
Management is:

(a)
(b)
(c)
(d)
(6)
(a)
(b)
(c)
(d)
(e)

(7)
(a)
(b)
(c)
(d)
(e)
(8)
(a)
(b)
(c)
(d)
(e)
(9)

F.W. Taylor
James Watt
C. Babbage
Robert Owen
Who has the major Contributions in the Theory of Bureaucracy:
Henry Gantt
Hanri Fayal
W.D. Scatt
Max Weber
None of these

Which one, of the following MNCs (Multinational Co.) has the higher revenues during
mid. 1990s:
General Motor
IBM
AT &T
General Electric
None of the above
Give the, name of the author who has the major contributions in the field of
marketing:
H. Koontz
W.J. Stanton
P.B. Miller
Gitt Man
All of these
The profit margin is a ratio between the corporations net income and:

(a)
(b)
(c)
(d)
(e)

Total expense
Total assets
Cost
Total revenues
None of the above

(10)

MNCs are responsible for the majority of Foreign Direct Investment (FDIs) and have
a higher revenues than the national income of some of the countries they serve:

(a)
(b)
(c)
(d)

Fully agreed
Not agreed
It is not possible
None of these

(11)

Earned but uncollected revenues, that are recording the adjusted process, recorded
with a credit to the revenues and debit to the expense is called:

(a)
(b)

Adjusted Trail balance

Expenses

(c)
(d)
(12)

Accrued revenues
None of these
Which one of the following is not a part/variable of the marketing Mix (4Ps):

(a)
(b)
(c)
(d)

Product
Price
Place
Person

(e)

None of these

(13)

The major steps in the accounting cycle are the following:

(a)
(b)
(c)
(d)
(e)

The procedure used in worksheet

Begin with Trail Balance
Completed only once in business life
None of the above
All of these

(14)

Which of the following items is not unique to the financial statements of

merchandising Companies?

(a)
(b)
(c)
(d)
(e)
(f)

Cost of good sold

Gross profit
Account receivable
Net sales
All of the above
None

(15)

The repairs made to keep a plant/asset in normal and good operating condition are
called:

(a)
(b)
(c)

Plant Management
Operation Management
Ordinary repairs

(16)

A company that owns more than 50% shares of another company and controls that
corporation is known as:

(a)
(b)
(c)

Subsidizing
Consolidated CO.
None of these

(17)

The process of individual growth in the full utilization of a persons managerial

capabilities is called management development:

(a)
(b)

True
False

(18)

Promotion is not a part of marketing:

(a)
(b)
(c)

Agreed
Not agreed
None of these

(19)

A way of analyzing leadership style where leaders are classified on a grid with TWO
dimensions is called:

(a)
(b)

Managerial grid
Two way theory

(c)

None

(20)

Robert Owen is known as the Father of Modern Personnel Management:

(a)
(b)
(c)

Yes
No
May be Taylor
Business Administration Paper - 2001

(1)
(a)
(b)
(2)
(a)
(b)
(3)
(a)
(b)
(4)
(a)
(b)
(5)
(a)
(b)

Most preferred stock pays a fixed dividend at regular intervals.

True
False
Any increase in an asset item is a source of funds.
True
False
Depreciation is a book-keeping entry that allocates the cost of assets against income
but does not involve any movement of capital.
True
False
The maturity of a security relates to the owners ability to convert it into cash on
short notice:
True
False
The credit period represents the period of time during which a cash discount can be
taken on short notice.
True
False

(6)

Which ratio is computed with the help of the following? Cost of goods sold/Inventory

(a)
(b)
(c)
(d)

Receivable turnover
Times interest earned
Inventory Turnover
None of these

(7)

________ is the right that is delegated to an individual or a department to control

specific processes, practices, policies and other matters relating to activities
undertaken by person in other departments.

(a)
(b)

Line authority
Functional Authority

(c)
(d)

Line and Staff Authority

None of these

(8)

Decentralization is the tendency to disperse decision making in an organized

structure:

(a)
(b)
(9)

True
False
Programmes are plans which are general statements or understandings that guide or
channel thinking in decision making:

(a)
(b)

True
False

(10)

_______ is that part of managing that involves establishing an international s

tructure of roles for people to fill in an organization:

(a)
(b)
(c)
(d)

Leading
Controlling
Planning
None of these (Organizing)

(11)
(a)
(b)
(12)

Henri Fayol applied the principle of Division of Work to all kinds of work,
managerial as well as technical.
True
False
________ spell out specific required actions or non-actions, allowing no discretion:

(a)
(b)
(c)
(d)

Procedures
Budgets
Rules
None of these

(13)

Business buyers are as geographically dispersed as final consumers.

(a)
(b)

True
False

(14)

The distribution between a consumer good and an industrial good is based on the
purpose for which product is purchased:

(a)
(b)
(15)

True
False
Intensive distribution occurs when the product is stocked in as many outlets as
possible.

(a)
(b)

True
False

(16)

Merchant wholesalers are independently owned business that do not own (take title
to) the goods they sell:

(a)
(b)

True
False

(17)

Which of the following elements in a compensation package provides the greatest

amount of incentive for salespersons?

(a)
(b)
(c)
(d)

Salary
Fringe Benefits
Commissions
Use of Company Vehicle

(18)

The process whereby the seller distinguishes between market segments, selects one
or more of these segments, and develops products and marketing-mixes tailored to
each segment is called _______ marketing.

(a)
(b)
(c)
(d)

Mass
Target
Product Variety
Service

(19)

Goods that the consumer, in the process of selection and purchase, characteristically
compares on such bases as suitability, quality, price and style are called _______
goods.

(a)
(b)
(c)
(d)

Shopping
Specialty
Unsought
Convenience

(20)

Product ______ is a period of rapid market acceptance and increasing profits.

(a)
(b)
(c)
(d)

Development
Introduction
Growth
Maturity

Business Administration Paper - 2002

Q1.

Which one of the following statement is correct?

(a)

(d)

Decisions in public organizations emphasize political priorities, while decisions in

business organizations are rational and apolitical.
Public decisions makers, in contracts to their business counter parts are
constrained by administrative procedure that limit managerial authority and
autonomy.
It is hard to get high performance out of government employees because, compared
to their business counterparts they are logy, more security oriented and less
motivated.
None of the above is true.

Q2.

Who has written the famous book Principles of Scientific Management?

(a)
(b)
(c)
(d)
(e)

Eltca Mayo
Henls Fayol
Fredric Taylor
Maw weber
None of These

Q3.

Which one of the following cannot be consider as an important dimension on which

nations culture differ?

(a)

Individualism Vs Collectivism

(b)
(c)

(b)
(c)
(d)

Power Distance
Uncertainty Avoidance
Economic development

Q4.

Market penetration pricing strategy can be pursued in price sensitive market?

(a)
(b)

True
False

Q5.

A Product can have a combination of physical product and service

(a)
(b)

True
False

Q6.

Vertical marketing System is integration of manufacturing and marketing activities

(a)
(b)

True
False

Q7.

Distribution of free product samples is part of publicity

(a)
(b)

True
False

Q8.

Which one of the following is not the part of marketing Mix?

(a)
(b)
(c)
(d)
(e)

Advertising
Personel Selling
Publicity
Sales promotion
None of the above is the part of martikng mix

Q9.

Which one of the following is not the part of product attributes?

(a)
(b)
(c)
(d)
(e)

Quality
Positioning
Brand
Packaging
None of the above

Q10.

Under the monopolistic combination, market consist of few sellers who are highly
sensitive to each others pricing and marketing strategies

(a)
(b)

True
False

Q11:

Which of the following statements is not part of theory 'X'

assumptions?

(a)
(b)
(c)
(d)

Decisions are made in participative manner

Employees inherently dislike work
Employees must be coerced to achieve goals
Employees tend to avoid responsibilities

Q12: Which of the following statement is not true?

(a)
(b)
(c)
(d)

Planning that proves inaccurate is a waste of management time

Planning can eliminate change

Planning reduces flexibility

None of these

Q13: Which of the following sources of power is dependent on authority?

(a)
(b)
(c)
(d)
(e)
Q14:
(a)
(b)

Legitimate power
Coercive power
Expert power
Referent power
None of the above
Deciding whether to record a sale when order for services is received or

when the services are performed is an example of a

Classification issue
Recognition issue

(c)
Valuation issue
(d)
None of these
Q15: Payment for a two year insurance policy (in advance) is debit to
(a) Unexpired insurance
(b) Cash
(c) Insurance expense
(d) Expired insurance
Q16:

Which

of

the

following

is

an

important

reason

for studying

accounting?

(a)
(b)
(c)

(d)

Accounting information is useful in making economic

decisions
Accounting plays an important role in society
The study of accounting can lead to a challenging career

None of the above

Q17: If a company has liability of 19,000 and owner's equity of 57,000 its assets are
(a)
(b)
(c)
(d)

38,000
57,000
76,000
19,000

Q18:

Transactions are initially recorded in the

(a)
(b)

Books of Final Entry

Books of original entry

(c) T accounts
(d)
Accounting equation
Q19: The term Hybrid Security is used for
(a)
(b)

Common Stock
Defferred Stock

(c) Preferred Stock

(d)
None of the above
Business Administration Paper - 2003
(1)

Business risk is influenced by the firms decision to use debt in its financial
structure. TRUE

(2)

The most important function of management is controlling. TRUE

(3)
A short term creditor would consider liquidity ratios to be more important than
efficiency ratios. TRUE

(4)

According to Maslow, when a need is satisfied, it tends to lose its ability to motivate.
TRUE

(5)

The term marketing mix refers to the degree of advertising Vs personal selling used
to market product. FALSE

(6)
The difference between an agent and a merchant wholesaler is that an agent always
takes title but a merchant wholesaler does not. FALSE
(7)
The management of working capital is required because of a lack of short term
synchronization between demand and supply. TRUE
(8)

A manager who believes that people inherently dislike work probably accepts
McGregors Theory X. TRUE

(9)

Inventory carrying costs can be minimized by carrying fewer units in inventory.

TRUE

(10)

A balance sheet is an accounting report used solely for the corporate form of
business. FALSE

(11)

For management, budgeting is perhaps the most powerful_____.

(a)
(b)
(c)
(d)
(12)

Forecasting tool
Control device
Hiring tool
Accounting measure
The income statement is a summary of:

(a)
Revenue and expenses
(b)
Assets, liabilities and capital
(c)
Increases and decreases in capital
(d)
None of these
(13)
One benefit of using ratio analysis when interpreting financial statements is that:
(a)
(b)
(c)
(d)

Ratios facilitate comparisons between different companies.

All ratios have exact standard values with which performance can be compared.
Ratios take into account all the specific factors affecting particular companies and
industries.
None of these

(14)

Planting and policy making are primarily functions of:

(a)
(b)
(c)
(d)

Top management
Middle management
Operating management
None of these

(15)

An informal organization often exists within a business because:

(a)
(b)
(c)
(d)

Not all relationships can be specifically defined.

Small organizations do not necessarily emphasize strict adherence to line authority.
Human behavior naturally crosses established authority lines.
All of these

(16)

In marketing, selling and buying would be called the:

(a)
(b)
(c)
(d)

Primary functions
Exchange functions
Profit functions
Critical functions

(17)

Institutional advertising is:

(a)
(b)
(c)
(d)

Aimed only at people in institutions

Run only by institutions
Designed to promote a type of product rather than a particular brand.
Designed simply to show that the firm is a good place to do business.

(18)

The current ratio of a firm having Rs. 25,000 of current assets, Rs. 30,000 of fixed
assets, Rs. 5000 of current liabilities and Rs. 10,000 of fixed liabilities would be:

(a)
(b)
(c)
(d)

5:1
7:1
10:1
None of these

(19)

The organizational form that replaces individual authority at all levels with group
representation is:

(a)
(b)
(c)
(d)
(20)

Line
Line and staff
Functional
Committee
Working Capital may be expressed as:

(a)
(b)
(c)
(d)

Current assets minus current liabilities

Current and fixed assets minus current and fixed liabilities
Current assets over current liabilities
Current and fixed assets over current and fixed liabilities
Business Administration Paper - 2004

(1)

In a large corporation, the firms owners are usually its top managers. False

(2)

The basic information needed to construct a flow of funds statement is found on the
income statement. True

(3)

The operating break-even point is the point at which operating profits equal revenues
minus operating costs. False

(4)

A sinking fund is a poorly performing mutual fund whose net asset value is declining.
False

(5)

Penetration Pricing is used when a marketer introduces a new product at a relatively

high price. False

(6)

The most common channel for consumer products is manufacturer-retailerconsumer. True

(7)

In the classification of consumer products, convenience products are usually more

expensive than shopping products. False

(8)

During the maturity stage of the PLC, sales increase at faster rate than during any

other stage. False

(9)

A wide span of management results in few organizational levels, and a narrow span
results in many levels. True

(10)

The Line relationship involves making decisions and acting on them.True

(11)

Data is defined as formal system of gathering, integrating, comparing, analyzing,

and dispersing information internal and external to the enterprise in a timely,
effective and efficient manner.False

(12)

A manager who believes that people inherently dislike work probably accepts
McGregors Theory X. True
If a manufacturer gives a 30 percent discount to retailers and a 10 percent discount
to wholesalers, which type of discount is being given?

(13)
(a)
(b)
(c)
(d)

Quantity
Cash
Functional (also called trade discount)
Seasonal

(14)

Publicity differs from advertising in as much as:

(a)
(b)
(c)
(d)

It is directed at large numbers of consumers.

Its message is of a non personal nature.
It is carried by the mass media.
It is a non paid Form of reaching the public.

(15)
(a)
(b)
(c)
(d)
(16)

In which stage of the PLC are promotion expenses per product item usually highest?
Introduction
Growth
Maturity
Decline
Which of the following is not a disadvantage of using a Committee?

(a)
(b)
(c)
(d)

High cost in time and money

Splitting responsibility
Group deliberation and judgment
Compromise decisions

(17)

Identify the Organization established by our Federal government to regulate security

markets:

(a)
(b)
(c)
(d)

SBP
SEC
NAB
NFC

(18)
If the credit terms are 2/10, net 30 and the amount of invoice is Rs. 4000, how
much is the discount if the invoice is paid in 20 days?
(for example, the term 2/10, net 30 allows a customer to deduct 2% of the net
amount owed if the customer pays within 10 days of the invoice date. If a customer does not
pay within the discount period of 10 days, the net purchase amount
(without the discount) is due 30 days after the invoice date.)
(a)
(b)
(c)

Zero
Rs. 30
Rs. 60

(d)
(19)
(a)
(b)
(c)
(d)
(20)
(a)
(b)
(c)
(d)
(e)

Rs. 120
Which of the following is not part of the promotion-mix?
Public relations
Product planning
Personal selling
Advertising
Selling activities include:
Sales presentations
Demonstrations
Handling objections
Closing the sale
None of these
Business Administration Paper - 2005

(1)
(2)

Planning initiates other functions of management. True

Managements make things to happen. False

(3)

The ultimate criterion of control is the extent that activities are complete in ways
that lead to more profits. False

(4)

Computer Technology helps the management but does not replace the management.
True

(5)

Promotional mix is also known as communication mix. True

(6)

Marketing environment is made up of micro-environment and macro-environment.

True

(7)

Promotional mix is the part of marketing mix. False

(8)

Marketing strategy consists of specific strategy for target markets, positioning, the
marketing mix and marketing expenditure levels. True

(9)

A Financial manager has a full control over its firms stock price.False

(10)

Liquidity ratios measure a firms ability to meet short term obligations.True

(11)

The internal rate of return method is the most widely used capital budgeting
techniques. False

(12)
(13)

Stock exchange facilitates investment in real assets by providing secondary market

to the financial securities.False
The organizing function of management includes:

(a)
(b)
(c)
(d)

How tasks to be grouped.

Conflict resolution among sub-ordinates.
Comparison of actual results with a budget.
Definition of organizations goals.

(14)

The key to motivating todays diversified work force lies in:

(a)
(b)

Creativity
Goal setting

(c)
(d)

Support
Flexibility

(15)

Control should be placed:

(a)
(b)
(c)
(d)

Where they are cost-effective

On all activities
Where there are problem areas
On the single most important

(16)

The marketing logic by which the business unit hopes to achieve its marketing
objective is called:

(a)
(b)
(c)
(d)

Business strategy
Marketing strategy
Production & distribution strategy
All of these

(17)

Strategic planning is the process of developing a formal strategy for:

(a)
(b)
(c)
(d)

Identifying clear objectives

Long run survival & growth
Continuity & Consistency
All of these

(18)

Who are the true owners of Corporation?

(a)
(b)
(c)
(d)

Debt holder
Common stock holders
Managers of the firm
Board of directors

(19)

What does an efficient port folio provide?

(a)
(b)
(c)
(d)
(20)

Highest return for a given amount of risk

Least risk for a given level of return
Highest possible return and least amount of risk
Both a and b
The economic order quaintly (EOQ) increases when which of the following increases?

(a)
(b)
(c)
(d)

Sales
Ordering costs
Carrying costs
Both a and b

Business Administration Paper - 2006

1)
The three stages of marketing practices through which a company may pass are
entrepreneurial marketing, formulate marketing and entrepreneurial marketing.
[True]
2)

The continual segmenting or fragmenting of markets impedes the new product

development process.[False]

3)

Reverse-flow channels refer to situations where one channel level acquires a level
back in the channel, such as sears owning its own suppliers [True]

4)

Planning is concerned with defining an organizations goals and objectives and how

to integrate and coordinate activities.

[True]

5)

Leadership and management are two terms for the same process.[False]

6)

Effective control systems monitor everything happening in the organization.[False]

7)

In informal planning, the organizations objectives are rarely verbalized. [True]

8)

The trait approach to leadership has identified a specific set of personality

characteristics that determine leader success.[True]

9)

A brand is an offering from a known source. [True]

10)

The concept of compounding deals with finding the future value of a present
sum.[True]

11)

Short term creditors would be most interested in the firms of leverages

ratios.[False]

12)

Working capital management includes in part the administration of cash, marketable

securities, receivables and inventories. [True]
Which of the following is NOT one of the four specific drivers that underpin the new
economy?

(13)
a.
b.
c.
d.
e.

Industry convergence
Disintermediation and reintermediation
Customer delivered value
Customization and customerization
Digitalization and connectivity

(14)

___ lays out the target markets and viable propositions that organization will offer
based on an analysis of the best market opportunities

a.
b.
c.
d.
e.

the strategic market plan

the portfolio analysis
the human resource plan
the tactical marketing plan
marketing research

15)

the attractiveness of a market offering is based:

a.
b.
c.
d.
e.

on the product, its placement, its price and its promotion

on the match between customer needs and wants and distribution and
pricing of the product
almost entirely on the product being offered
on product features and quality, services mix and quality, and price appropriateness
entirely on the match between perceived product and actually product

16)

high levels of efforts are unlikely to lead to favorable job performance unless:

a.
b.
c.
d.

technology is also considered

quality of the effort is also considered
team work is also considered
management efforts are also considered

17)

In order to bring about effective organizational change, changes in technology need

to be accompanied by making changes in _____:

a.
b.

Strategies
Structure

c.
d.

People
Both (b) and (c)

18)
a.
b.
c.
d.
19)

A capital investment is one that:

has the prospect of short term benefits
has the prospect of long term benefits
Is only undertaken by large corporations with large amounts of capital
applies only to investment is fixed assets
If the general level of interest rates rises, the prices of already issue bonds will:

a.
b.
c.
d.

Rise
Remain unchanged
Fall
Fluctuate

20)

If the EOQ for an item decreases, the average level of inventory will:

a.
b.
c.
d.

Decrease
Increase
Remain the same
There is no relationship between EOQ and inventory levels

Business Administration Paper - 2007

(1)

A decision is a choice made between two or more alternatives.(True)

(2)

Frank Gilbreth is known as father of Scientific Management.(False)

(3)

The responsibility for organizational planning rests with middle level management.
(True)

(4)

The Hawthrone Experiments found that people were more concerned with preserving
the work group than with maximizing their pay. (True)

(5)

Selling concept assumes that heavy selling and promotional efforts are needed to
stimulate more demand for the product. (True)

(6)

Any paid form of non-personal presentation and promotion of ideas, goods or

services by identified sponsor is known as public relation. (False)

(7)

Market Segmentation is concerned with dividing the market demographically and

geographically. (False)

(8)

Joint Venturing is a form of entering foreign markets by joining with foreign

companies to produce or market a product or service. (False)

(9)

Another name of cash flow is accounting profit. (False)

(10)

The Financial Manager has full control over his firms stock price.(False)

(11) Systematic risk can be diversified away by adding more securities to a portfolio.
(False)
(12)
(13)

Discounting is the process of finding present value. (True)

Extreme division of labour leads to result in:

(a)
(b)
(c)
(d)
(e)

Motivation
Boredom
Decreased work skill
Non-specialization
None of these

(14)

Fayol defines 14 principles of management. Which of the following is not one of

those principles?

(a)
(b)
(c)
(d)
(e)
(15)

Scalar chain
Espirit de corps
Centralization
Directedness of command
None of these
An example of pre-control established by management would be:

(a)
(b)
(c)
(d)

Rules
Policies
Budgets
All of these

(16)

Firms credit policy usually includes establishing:

(a)
(b)
(c)
(d)

Credit standards
Credit terms
Collection policy
All of these

(17)

Liquidity ratios are computed by using information from:

(a)
(b)
(c)
(d)

Balance Sheet
Income statement
Cash flow Statement
Both (a) and (b)

(18)

Conservative working capital management strategies involve:

(a)
(b)
(c)
(d)

Low risk, Low return

Low risk, High return
High risk, High return
High risk, Low return

(19)

Product life cycle has the following stages:

(a)
(b)
(c)
(d)
(20)

Introduction and Maturity

Growth and Maturity
Introduction, Maturity and Decline
Introduction, Growth, Maturity and Decline
Which product is most likely to be purchased through routine decision-making?

(a)
(b)
(c)
(d)
(e)

Car
Desk
Soft Drink
Shirt
None of these
Business Administration Paper - 2008

(1)

The last stage of Maslow Need Hierachy is Esteem. (False)

(2)

An effective Manager is one who achieves the goal with the least amount of
resources. (True)

(3)

Audit is a type of controlling system. (True)

(4)

Removal of undesirable elements serves as Negative Reinforcement tool to motivate

the people. (True)

(5)

Marketing of services heavily rely on advertising. (True)

(6)

Advertising is paid, personal communication through media (False)

(7)

Skimming pricing is used when the customers are quality conscious.(True)

(8)

Advertising is usually at the top of Promotion Mix of every product.(True)

(9)

Profit as against Share Price Maximization is always a desirable goal of organization.

(False)

(10)

For a short-term creditor, liquidity ratios are more important than efficiency ratios.
(True)

(11)

Low levels of net working capital decrease risks. (False)

(12)

The present value of an annuity is inversely related to future value of annuity.

(True)

(13)

The three levels of a product are:

(a)
(b)
(c)
(d)

Core, Packaging and Promotion

Actual, Core and Pricing
Augmentation, Core and Actual
None of these

(14)

MBO means:

(a)
(b)
(c)
(d)

Management based on Organization

Management based on Objectives
Management by Objectives
None of these

(15)

The two broad price policies are:

(a)
(b)
(c)
(d)
(16)
(a)
(b)
(c)
(d)

Demand and sales based pricing

Penetration and low pricing
Skimming and Demand based pricing
None of these
Quick Ratio is calculated by dividing:
Current Assets by Current Liabilities
Current Assets by Inventories
Current Liabilities by Current Assets
None of these

(17)

Decreasing inventories is a source of:

(a)
(b)
(c)
(d)

Assets
Funds
Credit
None of these

(18)

Entrepreneur is:

(a)
(b)
(c)
(d)

Manager looking for profit

Manager looking for employees satisfaction
Manager looking for every opportunity
None of these

(19)

The depth of a 'Product Mix' indicates:

(a)
(b)
(c)
(d)
(20)
(a)
(b)
(c)
(d)

All products offered by a company with its versions

All products offered by a company with its brands
All products and service brands
None of these
A person directly involved in operation and accomplishment of main objectives of
the firm is called:
First-Line manager
Line-Manager
Staff-Manager
None of these

Business Administration Paper - 2009

(1)

The key inputs into Discounted Cash Flow analysis are projected future cash flows.
(True)

(2)

Market demand for a product is the total volume that would be sold by a defined
customer group. (False)

(3)

Operational plans apply to the entire organization and establish the organizations
overall goals. (False)

(4)

Preferred stock has a fixed divided paid every period forever so preferred stock is
essentially a perpetuity.(True)

(5)

The cost of debt is the return that the firms debtors demand on new
borrowing.(True)

(6)

With the Internal Rate of Return, we try to find a single rate of return that
summarizes the merits of a project. (True)

(7)

IBM is example of a manufacturer brand. (True)

(8)

Modifying job responsibilities is an example of structural change.(False)

(9)

---------- is a statement reporting the effects of a firms operating, investing and

financing activities on cash flows over an accounting period.

a.

Income statement

b.
c.
d.
e.

Annual report
Cash flow statement
Balance sheet
None of these

(10)

---------- studied five chief executives at work and identified ten managerial roles.

a.
b.
c.
d.
e.

Max weber
Henry fayol
Henry mintzberg
Fredrick taylor
Michael porter

(11)

A product life cycle -----------------.

a.
b.
c.
d.
e.
(12)

Shows how a product sales or profits may rise or fall over its life
Tells you how long a product will sell for and make a profit
Is divided into three stages
Show how profitable a product will
None of these
All of the following are fixed assets except

a.
b.
c.
d.

Building
Stocks
Production plant
Vehicles

(13)

What is the influencing environmental factor when interest rates increase and firms
find it difficult to borrow funds

a.
b.
c.
d.
e.

Political factor
Social factor
Economic factor
Technological factor
Competitive factor

(14)

Which of the following is not a market entry strategy

a.
b.
c.
d.
e.

Licensing
Indirect exporting
Joint venture
International marketing
None of these

(15)

------------ is information about physical working conditions, work schedule and the
organizational and social context of the job.

a.
b.
c.
d.
e.

Job specification
Job context
Work activities
HR policy manual
None of these

(16)

The liquidity of a firm is a measure of ---------------

a.
b.
c.
d.

Its ability to pay bills

Its ability to respond to changes in demand
How flexible it is in its production plannning
How quickly and easily a firm could relocate to another site

e.

None of these

(17)

Market share means ---------------

a.
b.
c.
d.
e.
(18)

How well a firm is doing

How much power a firm has in the market
How many firms are there in the market
How big a market is
None of these
-------------- refers to a management philosophy that requires employers to
continuously set and relentlessly meet ever high quality, cost , delivery and
availability goals.

a.
b.
c.
d.
e.

Performance management
Performance appraisal
Continuous improvement
Management by objective
None of these

(19)

Beta ------------.

a.
b.
c.
d.
e.

Is a measure of firm specific risk

Is a measure of market risk
Is a measure of total risk
All of these
None of these

(20)

What is the price of a stock that is expected to pay a 1.00 divided next year if the
cost of capital is 14% and the growth rate is zero

a.
b.
c.
d.
e.

7.14
6.75
11.9
6.13
None of these

Business Administration Paper - 2010

(1)

You wish to borrow $ 8000 to be repaid in 24 monthly installments at an annual

interest rate of 8%. What is your monthly payment?

a)
b)
c)
d)
e)

$ 262.82
$ 361.82
$ 150.5
$ 325.00
none

(2)

If you invest $ 600 every six months at 8% compounded semi annually, how much
would you accumulate at the end of 10 years?

a)
b)
c)
d)
e)
(3)

$ 15,883.20
$ 16,926.82
$ 17, 866.85
$ 18,233.45
None
A commercial bank will loan you $ 12,250 for three years to buy a car. The loan
must be repaid in 36 equal monthly payments. The annual interest rate on the loan I
s 12% of the unpaid balance. How large are the monthly payments?

a)
b)
c)
d)
e)

$425.00
$350.67
$375.09
$406.88
none

(4)

What is the future value of $500 investment, with a stated rate of 6% compounded
monthly for 7 years.

a)
b)
c)
d)
e)

700
730
760
790
none

(5)

You are considering investing in a preferred stock that has a dividend of $ 3.25 per
share. The market price of this stock is $ 48.625. What is the rate of return you
would expect to make on this perpetuity?

a)
b)
c)
d)
e)

6.68%
6.24%
6.05%
6.28%
none

(6)

What is not a disadvantage of traditional file processing system?

a)
b)
c)
d)
e)

Program-data dependence
Reduce data redundancy
Limited data sharing
Lengthy development time
none

(7)

An enterprise data model is a (n) _______ model.

a)
b)
c)
d)
e)
(8)

numerical
mathematical
narrative
graphical
none
Which is not a component of relational database?

a)
b)
c)
d)
e)

Entity
Table
Attribute
Hierarchy
none

(9)

Data base application can be divided into 5 categories. Which is NOT a database
application category?

a)
b)
c)
d)
e)

Personal
Department
Enterprise
Relational
none

(10)

A data base that supports organization wide operations and decision making is a (n)
________ database.

a)
b)
c)
d)
e)

department
enterprise
work group
extra-net
none

(11)

As small companies begin to achieve success, they tend to adopt some of the tools
used in professionally run marketing commas. This is a sign that the firm is in the
________ stage of marketing practice.

a)
b)
c)
d)
e)

Entrepreneurial marketing
Formulated marketing
Intrepreneurial marketing
Effective marketing
none

(12)

The concept of a _______ is used to describe a cluster of complementary products

that are closely related in the minds of the consumers but are spread across a
diverse set of industries.

a)
b)
c)
d)
e)

Metamarket
Metamediary
Market place
Marketspace
none

(13)

Marketers can increase the value of customers offering by:

a)
b)
c)
d)

raising benefits and reducing cost

raising benefits by more than raising the cost
lowering benefits by less than the reduction in cost
All of the above can increase the customers value

(14)

When a firm sees its competitors as all companies that compete for the same
consumer dollars, they are concerned with the ________ level of competition.

a)
b)
c)
d)
e)

Brand
Industry
Form
Generic
None

(15)

The number of channel levels from raw material to final product which a company
will participate defines the firm's _________ scope.

a)
b)
c)
d)
(16)

Industry
Geographical
Vertical
Competence
Which of the following best describes the organizational members who integrate and
coordinate the work of others?

a)
b)
c)
d)

Managers
Operatives
Subordinates
Customers

(17)

_________ represent the lowest level of management

a)
b)
c)
d)
e)

Team leaders
First line managers
Operatives
Laborers
none

(18)

Which of the following roles is more important for lower-level managers than for
either middle or top-level managers?

a)
b)
c)
d)
e)

Negotiator
Leader
Coordinator
Entrepreneur
none

(19)

Which of the following skills involve working well with other people?

a)
b)
c)
d)
e)
(20)

Technical
Human
Computer
Empirical
none
The phrase most associated with scientific management is ________?

a)
b)
c)
d)
e)

Management Relations
One of the best
Supply and demand
Quality control
none

Business Administration Paper - 2011

(1)

Fredrick Winslow Taylors Principles of Scientific Management suggested the use of

scientific methods to define:

(a)
(b)
(c)
(d)

The easiest way of doing a job

The most complex way of doing a job
The best way of doing a job
None of these

(2)

The quantitative approach using quantitative techniques in Management is called:

(a)
(b)
(c)
(d)

Scientific Method
Operations Research
Quantitative Approach
None of these

(3)

The perspective that Managers are directly responsible for an organizations success
is known as:

(a)
(b)
(c)
(d)
(4)

Omnipotent view of management

Management orientation
Autocratic management
None of these
Effective Management decisions are:

(a)
(b)
(c)
(d)

Emotional
Based on lots of data
Rational
None of these

(5)

Breakeven Analysis is a useful technique for:

(a)
(b)
(c)
(d)
(6)

Reducing operating costs

Maximizing sales
Resource allocation
None of these
Recruitment helps:

(a)
(b)
(c)
(d)

Improve productivity of HR
Reduce number of employees
Improve labour relations
None of these

(7)
(a)
(b)
(c)
(d)

Grapevine is:
An office decoration plant
An information network
An official drink
None of these (Informal Business Communication)

(8)

Most important asset in an organization is:

(a)
(b)
(c)
(d)

Money
Plant and Machinery
Employees
None of these

(9)

Employees resist organizational change because it:

(a)
(b)
(c)
(d)

Reduces their compensation

Creates uncertainty
Puts more work on them
None of these

(10)

Strictly observing Corporate Ethics is:

(a)
(b)
(c)
(d)
(11)
(a)
(b)
(c)
(d)

Not important in commercial organizations

Against the concept of profit maximization
An essential requirement of professional business management
None of these
According to Herzbergs Motivation - Hygiene Theory, employees salary is:
Hygiene Factor
Motivating Factor
Employees Retention Factor
None of these

(12)

Who has the most power in Value Chain?

(a)
(b)
(c)
(d)
(13)

Suppliers
Distributors
Customers
None of these
Marketing is:

(a)
(b)
(c)
(d)

Sales of goods and services

The range of services starting and ending with the customer
Sales planning and promotion
None of these

(14)

Marketing Strategy is:

(a)
(b)
(c)
(d)

Activities focused to defeat competitors

Activities aimed at creating value and profitable relationship with customers
Activities for maximizing sales
None of these

(15)

Cost strategy means charging:

(a)
(b)
(c)
(d)

Highest price for products

Lowest price for products
Varying prices for products
None of these

(16)

Branding is:

(a)
(b)
(c)
(d)

Not possible for services

Not very useful commercially
Useful for building product loyalty
None of these

(17)

Creation of value in a business means:

(a)
(b)
(c)
(d)

Earning maximum profits

Promoting rapid growth in sales
Optimizing shareholders return in a company
None of these

(18)

Price/Earnings Ratio of a company shows relationship between its:

(a)
(b)
(c)
(d)

Net profit and Sales

Gross profit and Net earnings
Market price of its share and Earnings per share
None of these

(19)

Free Cash Flows are:

(a)
(b)
(c)
(d)
(20)
(a)

Net after tax profit

Expected Revenues minus expected costs and capital expenditures
Cash in hand and in bank
None of these
Term interest earned is:
EBIT Interest on debt

(b)
(c)
(d)

Net profit Debt

Sales Interest Payable
None of these

Opportunity cost:
Unlike other types of cost, opportunity cost does not require the payment of cash or its equivalent. It is a potential benefit or income
that is given up as a result of selecting an alternative over another. For example, You have a job in a company that pays you
$25,000 per year. For a better future, you want to get a Masters degree but cannot continue your job while studying. If you decide to
give up your job and return to school to earn a Masters degree, you would not receive $25,000. Your opportunity cost would be
$25,000.
Almost every alternative has an opportunity cost. It is not entered in the accounting records but must be considered while making
decisions.

Sunk cost:
The costs that have already been incurred and cannot be changed by any decision are known as sunk costs. For example, a
company purchased a machine several years ago. Due to change in fashion in several years, the products produced by the
machine cannot be sold to customers. Therefore the machine is now useless or obsolete. The price originally paid to purchase the
machine cannot be recovered by any action and is therefore a sunk cost.
These costs should not be taken into account while making any decision because no action can revers them.
Sunk Costs: These are the costs (in time, money, mental and emotional energy spent, etc.) incurred in the past as a result of a
decision made long ago. It's now impossible to recover these retrospective costs.
Opportunity Costs: These are the immediate costs of not taking the next best alternative or, in economics speak, of not putting a
resource to its best use.

A goal is a broad primary outcome.

A strategy is the approach you take to achieve a goal.

An objective is a measurable step you take to achieve a strategy.

A tactic is a tool you use in pursuing an objective associated with a strategy.

Goals are long term and objectives are usually accomplished in the short or medium
term.
A goal is a broad aim you establish to start the business planning process. For example, growing sales revenue in North America
can be considered a goal. An objective is a specific milestone that you reach on the way to achieving your goal. For example,
expanding your distribution network is an objective used to reach the goal of raising company revenue.

Difference between Selling and Distribution Cost

distributon expense is a part of selling expense. its comes under the heading of selling expense.
selling expense included various other heads like advertisement expense, distribution expense,packing
expense, octroi, sales tax, hidden profit, cost of product etc etc. while distribution expense isthe expense
occured by the producer of the goods in the form of transportation cost barred by him formaking the
goods reach the retailers, wholesellers or directly to the godown or factory outlet
Absorption costing means that all of the manufacturing costs are absorbed by the units produced. In other words, the
cost of a finished unit in inventory will include direct materials, direct labor, and both variable and fixed manufacturing
overhead. As a result, absorption costing is also referred to as full costing or the full absorption method.

Absorption costing is often contrasted with variable costing or direct costing. Under variable or direct costing, the fixed
manufacturing overhead costs are not allocated or assigned to (not absorbed by) the products manufactured. Variable
costing is often useful for management's decision-making. However, absorption costing is required for
external financial reporting and for income tax reporting.

Opportunity cost is the benefits you lose by choosing one alternative over another one. The opportunity
cost of choosing one investment over another one.
There is an opportunity cost over choosing an investment in bonds over an investment in stocks.

Economic Order Quantity (EOQ)

1.

The economic order quantity is the amount of inventory to purchase that balances the cost of placing an
order of inventory with the cost of carrying the inventory. It identifies the inventory order size that will
minimize the cost of ordering and carrying inventory. OR
Economic order quantity (EOQ) is the order quantity that minimizes total inventory holding
costs and ordering costs. It is one of the oldest classical production scheduling models. The framework
used to determine this order quantity is also known as Wilson EOQ Model or Wilson Formula.

2.
3.
4.
5.
6.
7.
8.

EOQ = 2AB/CS whole under root

Where
EOQ = Economic Ordering Quantity
A = Annual consumption or usage of material in units.
B = Buying cost per order.
C = Cost per unit.
S = Storage and carrying cost per annum.
OR
Economic ordering quantity is the reorder quantity, which is the quantity to be
purchased each time an order is placed.

The current ratio is the proportion (or quotient or fraction) of the amount of current assets divided by the amount
of current liabilities.
The quick ratio (or the acid test ratio) is the proportion of 1) only the most liquid current assets to 2) the amount of
current liabilities. In other words, the quick ratio assumes that only the following current assets will turn to cashquickly:
cash, cash equivalents, short-term marketable securities, and accounts receivable. Hence, the quick ratio
does not include inventories, supplies, and prepaid expenses.

ABSORPTION COSTING
Absorption costing is the practice of charging all costs, both fixed and variable
to operations, process or products. In marginal costing, only variable costs are charged
to productions.

activity based costing (ABC)

ABC allocates direct and indirect costs to activities such as processing an order, attending to
a customer complaint, or setting up a machine

What is the difference between the Cash Flow and Funds Flow statements?
The cash flow statement, known formally as the Statement of Cash Flows, reports a
company's change in cash and cash equivalents from one balance sheet date to
another. The cash flow statement classifies the amount of the change according to
operating, investing, and financing activities. The cash flow statement has been

required by the Financial Accounting Standards Board since 1988, when it issued its
Statement No. 95. You can read about the statement of cash flows
at www.FASB.org/st.
Prior to 1988, accountants prepared a funds flow statement. Generally, the funds
flow statement reported on the change in working capital from one balance sheet
date to another.
OR
1.

Concept
Cash flow statement is based on narrow concept of funds, which considers changes in cash. Funds flow
statement is based on the changes in working capital which considers both the changes in cash as well as
other components of current assets and current liabilities.

2. Basis Of Preparation
Cash flow statement is prepared on cash basis. Funds flow statement is prepared on accrual basis.

3. Working capital
Cash flow statement does not require use of changes in working capital because all the changes
inassets and liabilities are summarizes in cash flow statement. Funds flow statement requires to use
of separate statement of changes in net working capital.

4. Link
The preparation of cash flow statement considers only those transactions that are linked with flow of cash.
The preparation of funds flow statement considers those transactions that are linked with flow of funds along
with actual cash.

5. Usefulness
Cash flow statement is more useful in short term analysis and cash planning. Funds flow statement is more
useful in long-term analysis of financial planning. OR

2. The Cash Flow S tatement allows investors to understand how a company's operations are running, where its
money is coming from, and how it is being spent.

Fund Flow Statement is showing the fund for the future activites of the Company.

3.

Ideal Time;;;

4. the time for which workers are paid but the workers do not work. So it is a loss to the
organisation.

5. 1. Normal Idle Time

This is that waste of time which we can not stop because it is normal and producer has to pay
laborers for this idle time. For example :
a) Walking time from one department to other department.
b) Consuming time to start any job in factory.
c) Consuming time for fulfilling personal needs like drinking of water, refreshment and rest.
d) Consuming time to set the machines.

6. 2. Abnormal Idle Time

This is that wastage of time which we can stop by good supervision.
a) waste of time due to inefficiency of engineers.
b) Power failure
c) Delay of supply of material to factory
d) Strike and lockout

What is budgeting?
Budgeting is a process. This means budgeting is a number of activities performed in
order to prepare a budget. Abudget is a quantitative plan used as a tool for deciding
which activities will be chosen for a future time period.
In a business, the budgeting for operations will include the following:

preparing estimates of future sales

preparing estimates of future cash collections and disbursements

preparing estimates of the future day-to-day activities of the organization

summarizing these estimates into an income statement and balance sheet

7. The budgeted income statement and balance sheet are also known as proforma financial statements. Once prepared and approved, the budgeted
income statement and balance sheet are used to control the future activities
of the business.

Nature & Scope of Business Organizations

(This is a very basic topic, do not go in much details)

Meaning of Business Organization

1.
Business organization is composed of two words, business and organization. In order to understand
the nature of business organization, it is necessary that the meaning of these two words is made
clear to the readers.
(1) Business
Business is a human economic activity. It involves continuous and regular production and
distribution of goods and services with a view to earn profit. Money flowing in and earning of profit
through the satisfaction of the customers are the two measuring rods of the success of a business.
(2) Organization
The meaning of the word organization is generally divided into two parts (i) material organization
and (ii) human organization.
(i) Material Organization
The material organization is the determining and providing of necessary raw materials, tools,
capital, personnel etc in an enterprise fonts smooth functioning.
(ii) Human Organization
It is the appointment of qualified staff, dividing the duties and re of the personnel employed. Then
grouping these duties in the form of posts and delegating authority to each post so that work is
carried out as planned.
Business Organization
Thus is a process or an art of establishing effective cooperation between the factors of production
(land, material, capital equipment. personnel) for producing or acquiring wealth with a view to earn
profit in an enterprise. Scope of business organization. Business organization thus is a process or an
art of establishing effective cooperation between the factors of production (land, material, capital
equipment. personnel) for producing or acquiring wealth with a view to earn profit in an enterprise.
Scope of Business Organization

The scope of business organization has considerably expanded after the Industrial Revolution. The
process of production is now quite complicated. An organization is needed to determine what each
person will do and how much authority each will have. The role of business organization in various
forms of business ownership is discussed in brief.
(1) In Sole Proprietorship
Form of business, the organization structure is very simply. The entrepreneur generally introduces
his own capital. He alone is the sole organizer, financier, decision taker, operator, and controller and
above all responsible for air the success and failures of business, there is generally rule sub-division
of main work into small groups.
(2) In a Partnership Form of Business
ownership, each partner provides capital, labour and management according to an agreement the
partners determine among themselves the extent to which each partner shall take part in the
management. The pattern of division of activities, determination of responsibilities. Delegation of
authority etc depends upon the nature and size of business. As the partnership business is generally
run on small scale, the business organization structure is relatively simple, temporary and informal.
(3) In a Company Form of Business
There is a formal pattern of organization. The work of organization begins even before its
incorporation by the promoters. This work of organization continues after incorporation. An
organization chart of responsibilities is prepared. The duties and responsibilities of the personnel
employed are defined, procedures are aid down. Methods are evolved discussed and put before the
personnel in clear terms. The scope of business organization in corporate business is quite wide and
complicated.
Forms of Business Organization
Introduction
Business concerns are established with the objective of making profits. They can be established either by
one person or by a group of persons in the private sector by the government or other public bodies in the
public sector. A business started by only one person is called sole proprietorship. The business started by a
group of persons can be either Partnership or Joint Stock Company or a Co-operative form of organization.
Forms of business organization are legal forms in which a business enterprise may be organized and
operated.
These forms of organization refer to such aspects as ownership, risk bearing, control and distribution of
profit. Any one of the above mentioned forms may be adopted for establishing a business, but usually one
form is more suitable than other for a particular enterprise. The choice will depend on various factors like
the nature of business, the objective, the capital required, the scale of operations, state control, legal
requirements and so on.
Sole Proprietorship
Meaning: A sole proprietorship or one mans business is a form of business organization owned and
managed by a single person. He is entitled to receive all the profits and bears all risk of ownership.
Features:
The important features of sole proprietorship are:

The business is owned and controlled by only one person.

The risk is borne by a single person and hence he derives the total benefit.

The liability of the owner of the business is unlimited. It means that his personal
assets are also liable to be attached for the payment of the liabilities of the business.

The business firm has no separate legal entity apart from that of the proprietor, and
so the business lacks perpetuity.

To set up sole proprietorship, no legal formalities are necessary, but there may be
legal restrictions on the setting up of particular type of business.

The proprietor has complete freedom of action and he himself takes decisions
relating to his firm.

The proprietor may take the help of members of his Family in running the business.

Advantages
Ease of formation: As no legal formalities are required to be observed.
Motivation: As all profits belong to the owner, he will take personal interest in the business.
Freedom of Action: There is none to interfere with his authority. This freedom promotes initiative and selfreliance.
Quick Decision: No need for consultation or discussion with anybody.
Flexibility: Can adapt to changing needs with comparative ease.
Personal Touch: comes into close contact with customers as he himself manages the business. This helps
him to earn goodwill.
Business Secrecy: Maintaining business secrets is very important in todays competitive world.
Social Utility: Encourages independent living and prevents concentration of economic power.

Disadvantages
Limited resources: one mans ability to gather capital will always be limited.
Limited Managerial Ability
Unlimited Liability: Will be discouraged to expand his business even when there are good prospects for
earning more than what he has been doing for fear of losing his personal property.
Lack of Continuity: uncertain future is another handicap of this type of business. If the sole proprietor
dies, his business may come to an end.
No Economies of Large Scale: As the scale of operations are small, the owner cannot secure the economies
and large scale buying and selling. This may raise the cost of production.

Suitability of Sole Proprietorship Form

From the discussion of the advantages and disadvantages of sole proprietorship above, it is clear that this
form of business organization is most suited where:

The amount of capital is small

The nature of business is simple in character requiring quick decisions to be taken

Direct contact with the customer is essential and

The size of demand is not very large.

2.

These types of conditions are satisfied by various types of small business such as retail shops, legal
or medical or accounting profession, tailoring, service like dry cleaning or vehicle repair etc. hence
sole proprietor form of organization is mostly suitable for these lines of businesses. This form of
organization also suits those individuals who have a strong drive for independent thinking and
highly venturous some in their attitude.
3.

Partnership

4.
Introduction:
Generally when a proprietor finds its difficult to handle the problems of expansion, he thinks of
taking a partner. In other words, once a business grows beyond the capacity of a sole proprietorship
and or a Joint Hindu Family, it becomes unarguably necessary to form partnership. It means that
partnership grows out of the limitations of one-man business in terms of limited financial resources,
limited managerial ability and unlimited risk. Partnership represents the second stage in the
evolution of ownership forms.
In simple words, a Partnership is an association of two or more individuals who agree to carry on
business together for the purpose of earning and sharing of profits. However a formal definition is
provided by the Partnership Act of 1932.
Definition
Section 4 of the Partnership Act, 1932 defines Partnership as the relation between persons who
have agreed to share the profits of a business carried on by all or any of them acting for all
Features of Partnership
simple procedure of formation: the formation of partnership does not involve any complicated
legal formalities. By an oral or written agreement, a Partnership can be created. Even the
registration of the agreement is not compulsory.
Capital: The capital of a partnership is contributed by the partners but it is not necessary that all
the partners should contribute equally. Some may become partners without contributing any capital.
This happens when such partners have special skills, abilities or experience. The partnership firm
can also raise additional funds by borrowing from banks and others.
Control: The control is exercised jointly by all the partners. No major decision can be taken without
consent of all the partners. However, in some firms, there may partners known as sleeping or
dormant partners who do not take an active part in the conduct of the business.
Management: Every partner has a right to take part in the management of the firm. But generally,
the partnership Deed may provide that one or more than one partner will look after the
management of the affairs of the firm. Sometimes the deed may provide for the division of
responsibilities among the different partners depending upon their specialization.
Duration of partnership: The duration of the partnership may be fixed or may not be fixed by the
partners. In case duration is fixed, it is called as partnership for a fixed term. When the fixed
period is over, the partnership comes to an end.
Unlimited Liability: The liability of each partner in respect of the firm is unlimited. It is also joint
and several and, therefore any one of the partner can be asked to clear the firms debts in case the
assets of the firm are inadequate for it.
No separate legal entity: The partnership firm has no independent legal existence apart from that
of the persons who constitute it. Partnership is dissolved when any partner dies or retires. Thus it
lacks continuity.
Restriction on transfer of share: A partner cannot transfer his share to an outsider without the
consent of all the other partners.
5.
6.

Advantages

ease of formation: partnership can be easily formed without expense and legal formalities. Even
the registration of the firm is not compulsory.
large resources: when compared to sole-proprietorship, the partnership will have larger resources.
Hence, the scale of operations can be increased if conditions warrant it.
better organization of business; as the talent, experience, managerial ability and power of
judgment of two or more persons are combined in partnership, there is scope for a better
organsation of business.
greater interest in business: as the partners are the owners of the business and as profit from
the business depends on the efficiency with which they manage, they take as much interest as

possible in business.
prompt decisions: as partners meet very often, they take decisions regarding business policies
very promptly. This helps the firm in taking advantage of changing business conditions.
balanced judgement: as partners possesses different types of talent necessary for handling the
problems of the firm, the decisions taken jointly by the partners are likely to be balanced.
flexibility: partnership is free from legal restriction for changing the scope of its business. The line
of business can be changed at any time with the mutual consent of the partners. No legal
formalities are involved in it.
diffusion of risk: the losses of the firm will be shared by all the partners. Hence, the share of loss
in the case of each partner will be less than that sustained in sole proprietorship.
protection to minority interest: important matters like change in the nature of business,
unanimity among partners is necessary hence, the minority interest is protected.
influence of unlimited liability: the principle of unlimited liability helps in two ways. First, the
partners will be careful in their business dealings because of the fear of their personal properties
becoming liable under the principle of unlimited liability. Secondly, it helps the firm in raising loans
for the business as the financers are assured of the realization of loans advanced by them.
7.
8.

Disadvantages.

great risk: as the liability is joint and several, any one of the partners can be made to pay all the
debts of the firm. This affects his share capital in the business and his personal properties.
lack of harmony: some frictions, misunderstanding and lack of harmony among the partners may
arise at any time which may ultimately lead to the dissolution.
limited resources: because of the legal celing on the maximum number of partners, there is limit
to the amount of capital that can be raised.
no legal entity: the partnership has no independent existence apart from that of the persons
constituting it, i.e it is not a legal entity.
instability: the death, retirement or insolvency of a partner leads to the dissolution of the
partnership. Further even any one partner if dissatisfied with the business, can bring about the
dissolution of partnership. Hence partnership lacks continuity
lack of public confidence: no legal regulations are followed at the time of the formation of
partnership and also there is no publicity given to its affairs. Because of these reasons, a
partnership may not enjoy public confidence.
sustainability: the advantages and drawbacks of partnership stated above indicate that the
partnership form tends to be useful for relatively small business, such as retail trade, mercantile
houses of moderate size, professional services or small scale industries and agency business.
But when compared to sole proprietorship partnership is suitable for a business bigger in size and
operations.

Joint Stock Company

In the modern times the business and industry has been developed on a large scale the capital required for
such industry and trade is huge which cannot be accumulated either in a sole proprietorship or a partnership
organization. As a result of this change, a new form of organization has become quite popular in modern
times which are known as Joint Stock Company. It is normally defined as;
An association of many person who contribute money or moneys worth to common stock or employ it in
some trade and business, and who share profit or loss arising from there.
It means the joint stock company is a voluntary association of individual who contribute their money or
profit to a common stock for carrying on a particular business. The money or moneys worth contributed by
the member known as share holders forms the capital of the company. The capital is divided into numbers
of unit called share. Each share carries definite face value and is transferable in the market without any
restriction or formalities.
A company as soon as incorporated takes a legal entity distinct from the share holder who composes it. It is
managed by a group of persons known as directors. Directors are the representatives of share holders.
Formation of Joint Stock Company
All the joint stock companies whether public or private are governed by the companys ordinance 1984 and
must be formed according to the procedures laid down in that act. For the formulation of Joint Stock
Company the following document must be submitted to the registrar, joint stock Company;
1. The list of directors along with their address.

2. the memorandum of association on which at least 7 person, who are promoters should sign in case of
public limited company and two in case of private limited company. In addition of this it is also essential for
the, to purchase the qualification share.
3. Articles of association duly signed as memorandum of association.
4. The consent of all the directors to act as directors.
5. A formal declaration by the secretary that all the formalities are duly completed.
6. A statement of normal capital.
Along with the above documents, registration fees, which varies with the amount of share capital is paid
off to the treasury.
When the registrar of the joint stock companies is satisfied from all the formalities he will enter the name of
the company in the register and will issue a certificate of incorporation. Now the company will have its
separate existence.

Advantages of a Joint Stock Company

1. Huge Amount of Capital
It is in a position to raise large amounts of capital required for big business. The reasons are the limitations
of liability and the ease of transferability of shares. The small value of shares allows a large number of
persons to invest. So, due to limited liability and issuance of shares, large capital may be raised by a Joint
Stock Company.
2. All People can Invest
In a Joint Stock Company, the shares are of different kinds so they are purchased by persons of different
temperaments. The small value of shares allows the poor people also to purchase it. Besides, a company
may also raise finance by the issue of debentures and bonds.
3. Limited Liability of Shareholders
The liability of shareholders is limited. It means that the risk is spread over a large number of shareholders
and the possibility of hardship on a few is reduced. Secondly, if the business is going to be lost, the
shareholders are not liable to loose anything from their private property.
4.Professional management
Management of a company is in the hands of the directors, who are elected democratically by the members
or shareholders. These directors are known as the "Board of Directors". They manage the affairs of the
company and are accountable to all the investors. So, the investors elect capable persons who have sound
financial, legal and business knowledge to the board so that they can manage the company efficiently.
5. Stability of Business
The success of business also depends upon the life of the business. The Joint Stock Company is more suited
in tis respect, for a company is a legal person having a perpetual succession.
6. Large-scale production
Since there is an availability of large financial resources and technical expertise, it is possible for the
companies to have "large-scale" production. This enables the company to produce more efficiently and at a
lower cost.
7.Research and development
Only in joint stock company form of business, it is possible to invest a lot of money on research and
development so that new design, better quality products, etc. Can be achieved.

Disadvantages of a Joint Stock Company

1. Difficult to form:
The formation & registration of joint stock company involves a long and complicated procedure. A number of
legal documents and formalities have to be completed before a company can start business. The process of
formation requires the services of specialists such as chartered accountants, company secretaries, etc.
Because of all this, the cost of formation of a company is very high.
2. Excessive government control:
Joint stock companies are regulated by government through the Companies Act and other economic
legislations. Especially, public limited companies are required to complete various legal formalities as
provided in the Companies Act and other legislations. Non-compliance with these causes a heavy penalty.
This affects the smooth functioning of the companies.
3. Delay in policy decisions:
Generally policy decisions are taken at the Board of Directors meetings of the company. Further, the
company has to fulfill certain procedural formalities. These procedures are time consuming and therefore,
may delay action on the decisions.

Promotion (Memorandum of Association) &

Management (Article of Association)
1.
Memorandum of Association
The first thing in the formation of a Joint Stock Company is the preparation of the Memorandum of
Association. It is a document, which sets out the constitution of the company and as such, is really
the foundation on which the structure of the company rests. That is why this document has often
been called the charter of the company in its relation to the outside world. The document is
prepared by the promoters of the company. The memorandum of Association must contain the
following clauses:
1. Name Clause
In this clause the full name of the company is shown and the last word of the name of the company
must be limited. The company can adopt any name but there are certain restrictions and the words
like ROYAL, IMPERIAL, EMPIRE and ESTATE etc cannot be used without the special permission of the
Government.
2. Object Clause
This clause is quite important and must be very carefully drafted as it determines the activities of
the company. In the object clause each and every detail of activities of the business to be carried
out must be laid down. Once the object clause is completed, it become very difficult to make any
amendment. The value of the shares, the allotment money must be given in detail.
3. Situation Clause
This act provides that the company must have a registered office so that the registrar may be able
to send notice etc. to the Company at the registered office.
4. Liability Clause
A declaration that shares holder's liability is limited.
5. Capital Clause
This clause must contain a statement as to the amount of capital with which the company proposes
to be registered and the division there of into shares at a certain fixed amount.
Articles of Association
This is another important document, which must be prepared and filed with the Registrar of the
companies. The Article of Association contains rules and regulations regarding the internal working

and management of the company. It defines the powers, rights and duties of Directors,
shareholders and the other officers of the company. The purpose of the Article of Association is to
carry out the objects set out in the Memorandum. The Memorandum limits the jurisdiction beyond
which the Article of Association cannot go. The Article of Association states how the general
meetings are to be held, how the voting is to be transferred, and how they are to be forfeited, how
the accounts are to be kept etc. If a company does not prepare its Article of Association, it can
adopt of Table A of Companies Ordinance.
The articles must be properly drafted, serially numbered and printed and then filed with the
Registrar of the Joint Stock Companies. The article must be signed by the subscribers and witnessed
as in the case of Memorandum. It is usual to print the Memorandum and the Article in one booklet,
as the company is required to provide the copies to members on request. The articles can be altered
at any time by special resolution.

Co-operative Societies
Concept

"A co-operative is a user owned and user-controlled business

that distributes benefits on the basis of use
Co-operation is a movement of people. It is essentially an activity of the people for mutual help and
collective progress.
Co-operation is an activity, where groups of people having common interests come together and work for
mutual benefit. The groups can organize themselves to cater to diverse interests, from housing societies, to
industrial production to co-operative credit to massive co-operative banks.
It is fundamental right of a citizen to form an association. At the same time voluntary membership is
essence of Co-operation, Co-operative Society is not for earning profits. Beneficiaries are the members, who
work together and share together.

Thus co-operation is a form of organization wherein persons voluntarily associate together on the basis of
equality for the promotion of their social and economic growth.

1.
Co-operation: Nature and Substance
The word co-operation is quite familiar to a common man. For him co-operation is simple working
together in any sphere of human activity. In this sense, the roots of co-operation can be traced as
far back as the beginning of human civilization. The modern biologist have claimed that cooperation are the group instinct in man which enabled him to live together, work together, and help
one another in times of difficulty, has been biologically one of the most important and vital instincts.
It is true that some experts have highlighted man's progress in terms of aggression. However, we
have also evidence available from the writings of great authorities like Propotkin who have stressed
sociability to be as important a law of nature as mutual struggle. In his Mutual Aid, he asserts that,
the human society has been sustained on the basis of mutual aid. H. G. Wells observed co-operative
action in nature while Nietzsche felt that there was antagonism at the heart of the world. Broadly,
on the basis of nature of things and course of development, one can certainly conclude that despite
competitive struggle for existence among men, co-operation has contributed significantly as a force
in the voluntary development of man.
E. R. Bowell has rightly stated,
"Co-operation is a universal instrument of creation.
Features:
(i) Voluntary association. A co-operative society is a voluntary association of persons and not of
capital. Any persons irrespective of his caste and creed, can join a co-operative society of his free
will and can leave it at any time after giving due notice to the society. While leaving, he can
withdraw his capital from the society. He cannot, however, transfer his share to another person. The
voluntary character of the co-operative association has two major implications: (a) none will be
denied the right and opportunity to become its member, and (b) the co-operative society will not
compel anybody to become a member. Exception will, of course, have to be made in the case of
people whose professional interests differ from those of the society, e.g., a private trader competing
with a consumer co-operative.

(ii)Finance. The capital of a co-operative society is raised from members by way of share capital.
Since co-operatives are organised by relatively weaker sections of society, the share capital is
generally limited. However, it is a part of government policy to assist and encourage co-operatives
and, therefore, a co-operative society can usually augment its resources by loans from the State an
Central co-operative Banks.
(iii) Control and management. Democracy is the key-note of the management of a co-operative
society. Since most of these societies operate on a local scale the meetings of the members are
generally well attended. At these meetings, the members elect the managing committee an lay
down the policy which its must follow to promote their common interest. Each member, whatever be
his stake in the society, has one vote and hence an equal right to participate in the management of
the society. Members cannot vote by proxy. Besides, the organisation a n control of a co-operative
society tend to be perfectly democratic in so far as its bye-laws are approved by the members after
it has been registered. Not merely this, even the day-to-day work of a co-operative society may be
carried on by members working in different capacities, and outsiders may be employed only when
the society grows too large.
(iv) Service motto. A co-operative society is organised primarily with the object of rendering
maximum service to its members in a certain field. It does not aim at profit at the cost of its
members, for its members, for it is formed basically for providing certain essential facilities to
members . This does not mean that a co-operative society will never work for profit. It is quite usual
for societies to earn profits by extending their services to non-members.
(v) Disposal of surplus. It is usual for commercial concerns to distribute profit among the owners
in the ratio of their capital contribution, or in an agreed ratio. A co-operative form of ownership and
organisation, the surplus arising out of a year's working is given to the members not directly as
dividend on shares held by each of them, but in the form of a bonus which need not be
proportionate to there respective capital contributions. The bonus may be paid to the members in
proportion to purchases made during the year in the case of a consumers' co-operative store, or in
proportion to the goods delivered for sale to the society in the case of a producers' co-operative
store. In fact, the profit arising out of a difference between the cost price and market price may not
be distributed among members but may be utilised in extending amenities and facilities to the
members of for undertaking certain social activities for the benefit of the members. It may be noted
that law requires that every co-operative society must transfer at least one-fourth of its profits to a
general reserve. Likewise, it is provided that a portion of the profit, not exceeding 10 percent, may
be utilised for the general welfare of the locality in which the society is functioning.
(vi) Fixed return on capital. One of the basic principles of co-operative organisation, laid down by
the pioneers of the co-operative movement lime Rochdale and Owen, was that a fixed or limited
return of capital subscribed to the society must be paid out of the surplus to the members. Making
the payment fixed interest on paid-up capital definitely a first charge on the trading surplus, gave
those who joined the society a solid for leaving their saving in deposit with it.
(vii) State control and corporate status. Although voluntary in their basic character, the cooperative societies are subject to considerable Stat control and supervision. In India, the cooperative State co-operative societies Act, as the case may be. The co-operatives desiring to be
registered must fulfill the following broad and basic requirements: (i) A co-operative society must
have at least 10 members who have attained majority in age (i.e., are above 18 years of age). (ii)
The members should be bound together by a common bond' e.g., they may belong to the same
village or locality, tribe, or occupation, etc. (iii) The members should present a joint application to
the Registrar of Co-operative Societies furnishing important particulars like membership, share
capital, objects, etc. (iv) A copy of the be-laws and the scheme of organisation should be submitted
to the Registrar. On registration, the co-operative society will attain the corporate status (the status
of a company) and will become entitled to certain privileges. It will also be subject to control and
supervision by the State. In fact the co-operative department and has to furnish returns of
membership and manual report an accounts to the Registrar of co-operatives. In some states like
Madhya Pradesh, the Registrar of Co-operative Societies even approves of appointments in
managerial position an lays down terms of employment.
Advantages:
An advantage of a co-operative business is they are usually more stable, caring and responsible
employers. They can give greater job satisfaction and variety, and encourage a strong work
commitment. They are more responsible to the customer and the community within the business.
1. Any one is allowed to buy shares into the company.
2.Creates a strong working commitment
3.If the company is incorporated then the members in the company are entitled to Limtited Liability!
Disadvantages:

The following are the reasons of failure or defects and disadvantages of cooperative organization.
1.Lack of capital.
(a).Its members are generally related to the poor group of the society and they are not in a position
to invest a large amount.
(b).External financial resources of the society are limited.
(c).It cannot borrow money from non-members.
(d).It cannot issue any kind of debentures.
(e).It share cannot be transferred to nonmembers.
It thus suffers shortage of capital for the operation of business.
2.Limited scale. Due to the various hindrances behind the growth of capital, it is not possible for
the cooperative society to start its business at a large scale; it therefore, keeps its business limited
in the narrow field of cooperation.
3.Inefficient management. Expert and efficient management is important factor for running the
business successfully. But a society cannot afford to hire the services of superior abilities due to its
limited resources. Therefore its business cannot be carried on smoothly.
4.Lack of prompt decision. As all the matters are decided by the management committee and
complied by another authority, it cannot act with promptness, if a chance comes to make a timely
purchase or sale, they have to wait to get others consent.
Relevant laws of Pakistan
Companies remain the most favoured form of business organization in Pakistan especially for medium and
large-scale business enterprises. Legal regime for establishment and regulation of companies in Pakistan is
given in the Companies Ordinance, 1984. Whereas the function of administration of these companies is
vested in the Securities and Exchange Commission of Pakistan and the Registrar of companies appointed by
the Securities and Exchange Commission of Pakistan for a Province of Pakistan where such company is to be
registered.
Under the provisions of the Companies Ordinance, 1984 a company is a body corporate with separate legal
entity and a perpetual succession and a company may be formed by persons associating for any lawful
purpose by subscribing heir names to the memorandum of association and complying with other
requirements for registration of a company under the provisions of the Ordinance.
The Companies Ordinance, 1984 provides three different types of companies:

A company limited by shares

A company limited by guarantee

An unlimited liability company

Further, under the Companies Ordinance, 1984 two types of limited liability companies are provided namely:

A private limited company

A public limited company (which may be listed or unlisted)

Any one or more persons associated for any lawful purpose by subscribing their name(s) to the
Memorandum of Association and complying with other registration specific requirements of the Companies
Ordinance, 1984 may incorporate a private limited company. Provided that where a company has only one
subscriber to the Memorandum of Association then such a company is called a Single Member Company,
however, a Single Member Company remains a private limited company for all intents and purposes of the
Ordinance. Whereas any three or more persons so associated may form a public limited company. A
company limited by shares whether private company or a public company is the most common vehicle for
carrying out a business enterprise in Pakistan.
Registration of a Company and Commencement of Business in Pakistan
The first step toward incorporation of a company in Pakistan is to file an application before the Registrar of
companies for availability of name. If the proposed name of the company is available and it is not in
contravention to the provisions of the Companies Ordinance, 1984 and the Rules formed there under, then
the Registrar shall issue a certificate stating that the proposed name is available to be adopted.

The nest step is to file the Memorandum of Association and Articles of Association, which in effect is the
constitution of any company, with the Registrar of companies in the Province where proposed company is to
be incorporated, along with other necessary forms prescribed under the Companies Ordinance, 1984. When
the company has been registered the Registrar issues a Certificate of Incorporation. Once such a certificate
has been issued by the Registrar a private limited company may commence its business immediately.
Nonetheless, a public limited company cannot commence its business or exercise its borrowing powers yet
unless the Registrar has issued a Certificate for Commencement of Business. The Registrar issues the
Certificate for Commencement of Business only if the following requirements have been fulfilled:
Shares held subject to the payment of the whole amount thereof in cash have been allotted to an amount
not less in the whole than the minimum subscription
Every director of the company has paid to the company the full amount on each of the shares taken or
contracted to be taken by him and for which he is liable to pay in cash
No money is or may become liable to be repaid to applicants for any shares or debentures which have been
offered for public subscription by reason of any failure to apply for or to obtain permission for the shares or
debentures to be dealt in on any stock exchange
There has been filed with the Registrar of Companies a duly verified declaration by the chief executive or
one of the directors and the secretary in the prescribed form that the aforesaid conditions have been
complied with and the Registrar of Companies has issued a Certificate of Commencement of Business
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 of Companies, a statement in lieu of prospectus
A public limited company may either be listed or unlisted. In case of a listed company its shares may be
quoted and dealt with on one of the three stock exchanges of Pakistan viz. Karachi Stock Exchange, Lahore
Stock Exchange and Islamabad Stock Exchange. Whereas the shares of an unlisted public limited company
may not listed on a stock exchange. A public limited company that intends to have its shares listed on a
stock exchange must obtain permission from the relevant stock exchange under the listing regulations of
that stock exchange.

2.