Explanation

• The Quick Ratio (Acid-Test Ratio) measures a company's ability to pay its short-term liabilities using its most liquid assets.
• It excludes inventory and prepaid expenses because they cannot be converted into cash quickly.
• A higher quick ratio indicates better short-term financial strength.

Last verified on 21-07-2026

Explanation

• Father of Double-Entry Bookkeeping (Father of Modern Accounting): Luca Pacioli
• Nationality: Italian
• Famous Book Published: Summa de Arithmetica, Geometria, Proportioni et Proportionalità
• Publication Year: 1494
• Accounting Rule: Every transaction has two entries – Debit and Credit

Last verified on 21-07-2026

Explanation

• Customs duties are a form of Indirect Taxation.
• Customs duty is imposed on imported and exported goods, though it mainly applies to imports.
• Collected By: Pakistan Customs
• Administered Under: Federal Board of Revenue (FBR)
• Purpose: Revenue generation and protection of local industries

Last verified on 20-07-2026

Explanation

• The Annual Consolidated Accounts of the Federation are prepared by the Controller General of Accounts (CGA).
• The Controller General of Accounts (CGA) is responsible for preparing and consolidating the accounts of the Federal Government of Pakistan.
• Reporting Period: One Financial Year (1 July – 30 June)
• Constitutional Basis: Article 170 of the Constitution of Pakistan
• Audited By: Auditor General of Pakistan (AGP)

Last verified on 20-07-2026

Explanation

• Single Accounting System doesn't account for Bad Debts and Depreciation.
• Bookkeeping Systems: 2 (Single Entry & Double Entry)
• Single Entry: Incomplete records
• Double Entry: Every transaction has 2 entries (Debit & Credit)
• Bad Debts: Loss due to non-recovery of receivables
• Depreciation: Gradual reduction in the value of fixed assets

Last verified on 20-07-2026

Explanation

• Important tools of internal controls of an Organization are well-defined job descriptions, segregation of duties, and reconciliation of expenses & revenues.
• Job Description: Clearly defines duties and responsibilities.
• Segregation of Duties (SoD): Separates authorization, recording, and custody functions.
• Reconciliation: Compares accounting records with supporting documents to detect errors.
• Objective of Internal Controls: Safeguard assets, ensure accuracy, and prevent fraud.
• Framework: The COSO Internal Control Framework identifies 5 components of effective internal control.

Last verified on 20-07-2026

Explanation

• System-based Accounting provides timeliness of accounts, customized reporting, and accuracy of accounts.
• Timeliness: Faster preparation of financial reports
• Accuracy: Reduces manual calculation errors
• Customized Reporting: Reports can be generated as needed
• Automation: Saves time and improves efficiency
• Real-time Data: Enables quick financial decision-making

Last verified on 20-07-2026

Explanation

• Output-based budgeting involves linking outputs with budget resources.
• It allocates funds based on the expected outputs or services to be delivered.
• This budgeting system focuses on performance, efficiency, and measurable results.
• It helps improve accountability by relating spending to outcomes.

Last verified on 20-07-2026

Explanation

• The audit risk has increased due to the bulk payment made to the vendor in cash.
• Large cash payments carry a higher risk of fraud, misappropriation, and weak audit evidence.
• Auditors treat high-value cash transactions as high-risk and examine them more carefully.
• The risk arises from the mode and amount of payment, not merely from making a large purchase.

Last verified on 20-07-2026

Explanation

• The accounts which cannot be made with the Single Entry System are Profit & Loss Account, Notional Accounts, and Trial Balance.

Additional information:

• Bookkeeping Systems: 2 (Single Entry & Double Entry)
• Single Entry: Incomplete accounting records
• Double Entry: Every transaction has 2 entries (Debit & Credit)
• Trial Balance: Prepared only under the Double Entry System
• Final Accounts: Trading Account, Profit & Loss Account, and Balance Sheet are properly prepared under the Double Entry System

Last verified on 20-07-2026