Pakistan Institute of

Public Finance Accountants

Examiners’
Comments
Summer Exam-2015
 Financial
Accounting
 Examiner’s Comments
Summer Exam - 2015
Financial Accounting

General Comments on Examinees Performance

 The overall performances of the examinees were very poor.

 Their write up depicts their non-seriousness with their studies.
 Concepts are not clear.
 Selected study of the topic is another major reason of failure which must be avoided by
the examinees.
 In adequate practice.
 Poor reading habits.
 Poor presentation, lacking clarity.

Question Wise Comments

Q. No. Comments
FINANCIAL RATIOS
1 In this part of the question, examinees were provided with the extract of
Comparative Income Statement and Financial Statement and they were required to
comment and calculate Financial Ratios for (i). Current Ratio (ii). Quick Ratio (iii).
Interest Cover Ratio (iv). Dividend Cover Ratio (v). Price Earning (PE) Ratio. Overall
performance of the examinees was very poor in response to this question and those
who attempted correctly, were unable to comment. Following short comings were
noticed:

 They did not apply the correct formula.

 Some candidates applied the correct formula but could not write the answer
correctly i.e., the answer for Current, Quick, Interest Cover and Dividend Cover
correctly as they expressed their answers in % terms.

 More importantly, majority of examinees were lacking in explaining the financial

ratios with logical arguments.
ACCOUNTING OF INCOMPLETE RECORDS
2 In this part of the question, the examinees were required to Compute (a). Trading
Results (b). Financial Positions with necessary notes. Majority of the examinees not
attempted the question. Some examinees even avoided attempting this question
and those who attempted showed lack of knowledge about the topic. Even they
were not able to prepare Cash and Bank Accounts from given data. Some examinees
posted data to wrong side of these accounts. Following common lapses were
observed.
  Most of the examinees could not calculate the correct figure of Sales. As they
have failed to taken into account the opening balance of Trade Debtors Rs.
1,050,000.

 Collection of Rs. 12,470,000 from Debtors had to be calculated from Cash

Account as balancing figure. This collection was to be posted to debtors
account to ascertain sale as balancing figure.

 Accounts Payable Account was made incorrectly, which was used to calculate
figure for purchases i.e. Rs.12,050,000.

 Some examinees balanced debtors account without taking into account

opening balance and cash collection from debtors.

 Majority of the examinees not calculated the correct figure of Opening Stock
due to poor reading habits as they completely ignore the instructions that
Stock have increased by Rs. 100,000 during the year i.e. Rs. 1,100,000 –
100,000 = Rs. 1,000,000.
FINANICAL STATEMENTS
3 In this question, examinees were required to prepare:-
 Statement of Profit or Loss for the period.
 Statement of Financial Position
 Statement of Changes in Equity

Majority of the examinees attempted this question but the overall performance in
this question was not satisfactory. Following mistakes were observed.
I). STATEMENT OF PROFIT OR LOSS
A good number of examinees could not calculate the correct figure of Cost of Sales
due to the following reasons:-
 Depreciation on Machinery not charged to Cost of Sales as clearly mention in
the notes.
 Treated Capital Work in Progress as part of Cost of Sales.
 A good number of examinees could not calculate the correct figure of
“Administrative Expenses” as they fail to proportionate the Insurance, Rent,
Electric and Salaries Expenses.
 A good number of examinees could not calculate the correct figure of
“Selling Expenses” as they wrongly classified the Transportation Cost as
Selling Expenses instead of treating as Purchase Cost and part of Cost of
Sales.
 A good number of examinees could not calculate the correct figure of
“Finance Cost” Rs. 400,000. Due to poor reading habits and lack of practice
they have taken into account the Finance Cost for the year instead of cost for
the six months as the facility was availed on January 01, 2014
II). STATEMENT OF FINANCIAL POSTION
Almost, all of the examinees attempted this question but the overall performance in
this question was not satisfactory. The following mistakes were observed:

A good number of examinees did not present the assets and liabilities i.e.,
examinees should have given heading for non-current assets first followed by
current assets. Similarly under equity and liabilities category, examinees should have
 given heading in the sequence of equity, non-current liabilities and current
liabilities. That shows inadequate practice.

ASSETS
 The good number of examinees could not calculate the correct amount of
Non-Current Assets as they failed to taken into the amount of Capital Work
completed during the period and transferred to building account.

EQUITY AND LIABILITIES

 The good number of examinees failed to differentiate between the
Authorized Capital and Paid-up Capital.

III). STATEMENT OF CHANGES IN EQUITY

In this part of the question examinees did not perform well. Some common mistakes
noted were:-

 Due to wrong calculation of Profit, examinees could not prepare statement

properly.

 Most of the examinees even did not incorporate the amount of Dividend
paid and declared at the year end.
CASH FLOW STATEMENT
4 In this part of the question, examinees were requiring to prepare Cash Flow
Statement using Indirect Method as per IAS 7. Majority of the examinees attempted
this question but overall performance was not satisfactory. Following are the
common mistakes as given under each statement were noted.

Some of the examinees attempted the question without separating the activities
into operating, investing and financing activities, which was the essence of the
question.

A). CASH FLOWS FROM OPERATING ACTIVITIES

 While calculating cash flows from operating activities a majority of
examinees not calculated Net Profit for the year as they did not take into
account the amount of Dividend declared and paid during the year
amounting to Rs. 300,000.

B). CASH FLOWS FROM INVESTING ACTIVITIES

 While calculating cash flows from investing activities a majority of examinees
were not able to calculate the amount of Cash Outflow for Purchase of Fixed
Assets mainly due to wrong adjustment for the disposal amounts.

C). CASH FLOWS FROM FINANCING ACTIVITIES

 A majority of the examinees ignored the amount of Share Capital increased
during the period while calculating the Cash Flows from Financing Activities.
 COST OF INVENTORY REPORTED AT YEAR END
5 In this part of the question, the examinees were required to calculate the cost of
inventory to be reported at year end. This question appeared difficult and quite
challenging as examinees were required to perform backward calculation for
computing closing value of inventory. Majority of the students failed to handle the
following points:

 Sales of Goods amounted to Rs. 250,000.

 SBH normally sells goods at a mark-up of 25% at cost.

 20% of the sales were made at a discount of 8% of the normal selling price.
DEFINITIONS AS PER IAS
6 In this part of the question, examinees were required to define with reference to
International Accounting Standards (IAS 1):

A) Disclosure requirement regarding Change of Financial Year for presentation of

Financial Statements

 Majority of the examinees failed to provide complete answer. As they

tried to explain self invented answers rather those from the IAS. The
answer left a lot to be desired and exposed the examinees’ lack of
interest towards their studies and it also seems that examinees did not
study the IAS and IFRS and that’s why they producing wrong replies to
the question.

B) According to IAS 1 Circumstances which allows an enterprise to continue to

classify its Long Term Interest Bearing Liabilities as Non-Current Liabilities even
they are to be settled within Twelve Months of the Balance Sheet Date

 Majority of the examinees not attempted this part of the question and
those who attempted showed lack of knowledge and resorted to
irrelevant answers. The answer left a lot to be desired and exposed the
examinees’ lack of interest towards their studies and it also seems that
examinees did not study the IAS and IFRS and that’s why they produced
wrong replies to the question.
Question # 07
7 ACCOUNTING FOR NON CURRENT ASSETS
In this part of the question, the examinees were required to:

A) Factors to be considered while Estimating the Useful Life of Depreciable Assets

as per IAS 16.

 Majority of examinees provided incomplete answers or tried to explain the

concept with their self-invented definitions rather than those from the said
IAS. The answer left a lot to be desired and exposed the examinees’ lack of
interest towards relevant IAS.
B) To Calculate the Cost of New Asset along with Journal Entry to Record the Cost
of New Asset and Gain / Loss arising from the said Transaction.
  Majority of examinees failed to differentiate between Book Value,
Negotiated Value and Fair Value.

 Majority of examinees failed to calculate the Cash Amount to be paid for

exchange of assets i.e. Cost of New Asset = Rs. 320,000 Less Trade in Value of
Assets = Rs. 180,000 = Balance Cash Amount Rs. 140,000 as they considered
fair value of the assets for calculating of Balance Cash Amount.

 Majority of the examinees while calculating the Exchange Gain considered

Fair Value of the Assets instead of Trade in Allowance.

Majority of the examinees were lacking clarity of presentation while preparing the
workings to support their answers.
Performance
Measurement
 Examiner’s Comments
Summer Exam - 2015
PERFORMANCE MEASUREMENT

General Comments on Examinees Performance

Overall a good conceptual and balanced paper to examine. The basic performance
measurement knowledge of examinees. Almost all the examinees tried their best to attempt
the paper completely. But most of them failed to understand the Q.No: 4 and Q.No: 7. All of
other question are attempted by the examinees and almost attempted correctly. Basic
knowledge / concepts of examinees are tested by short form questions.
Nearly all the topics were touched. The student having full grip on the topic can obtain 100%
marks.
Overall performance of examinees was good.

Question Wise Comments

Q. No. Comments
1 Question was related to Absorption / Marginal costing. Student attempted few steps
correctly. The question was simple one which should have been attempted well by
the examinees. Theoretical portion regarding Marginal costing was attempted
correctly by most of the student.
Amount of Fixed cost was calculated by very few students.
2 The question was related to :-
 Expected cost.
 Target cost.
 Cost gap.
The question was simple one. The student who have proper knowledge obtained full
marks. However, the concept of majority was not clear.
3 The question was related to maximization of profit in scarce resources. Majority of
the student attempted the question. The question was simple one.
4 The question was related to break even. Majority of the student attempted but the
answer was wrong. Student failed to calculate:
 Selling price to book shop i.e. 15x80% = 12
 Variable Royalty cost i.e. 12x15% = 1.80
Variable cost per copy of Rs. 3.20/- was given.
5 The question related to calculation of :-
 Activity based recovery rates
 Total unit cost and selling price.
Majority of the student attempted & calculated only Activity-based recovery rates.
The total unit cost and selling price of product was not calculated or calculated
wrongly.
6 The question was related to ratio analysis. Six ratio’s were to be calculated. only 3
ratios:-
 Gross profit percentage
 Current ratio
 Debtors days
Were correctly calculated.
7 The question was related to calculation of residual income before & after additional
investment. Majority calculated the residual income before additional investment
correctly but after additional investment. The residual income was wrongly
calculated.
8 Question was related to material variances. Majority calculated the variances
wrongly. Only two or three variances were calculated correctly.
 Business
Communication
& Beh. Studies
 Examiner’s Comments
Summer Exam – 2015
Bus. Communication & Beh. Studies

Question Wise Comments

Q. No. Comments
Students generally scored average marks in this question. ‘you’ attitude does not
1
mean use of “you only”.

Students did not score good marks. Because they missed the term “Running
2
Finance” and did not provide details necessary for a refusal letter.

3 Most of the answers were not as per requirement of paraphrasing.

4 An average attempt by students resulting in average score.

5 Very few replies were correct. Clearly showed that the students do not study book.

6 Students generally scored good marks in this question.

7 A poorly attempted question. Students only knew of Maslow.

8 A poorly attempted question. It clearly showed lack of study.

Surprisingly very few students followed the proper format of a formal report.
9
Majority of answers did not contain substance.

10 Those who had studied scored very good marks in this question.
Business
Laws
 Examiner’s Comments
Summer Exam - 2015
Business Law

Question Wise Comments

Q. No. Comments
1 This question was attempted well and a large number of students could score
almost full marks however few students either defined various kinds of Precedents
or explained legal system in Pakistan which was totally irrelevant.

2 a) Students in almost all cases did not explain the term “Misrepresentation” in legal
sense and defined in layman language. They also gave examples which were
mostly relevant to “Mistake” or “Fraud”.
b) The part (b) was also not attempted properly.
c) In part (i) large number of students analyzed the situation properly and got
marks but part (ii) was not properly tackled and students did not conclude that
agent should not deal for his own benefit while working for agency business.

3 This question was also not properly attempted. This was about fixation of price by a
third party in case of sale but student took it as agreement to sale and answered on
the basis of a wrong assumption.

4 a) Not attempted properly by a large number of students. This basically required

legal provision whereby directors can fix the number of elected directors 35 days
in advance of election and also as to how the number once fixed can be altered
but students mentioned the procedure for election of directors and lost full
marks.
b) Performance remained average. To declare an election invalid, shareholders with
voting powers of at least 20% may apply to the court within 30 days. The
students were aware of few points in this regard and could score 1-2 marks.

5 This was attempted well by a large number of students.

6 a) Part (a) was attempted better where students could score 3-4 marks and in few
cases full marks.
b) However performance in part (b) was very poor and only 2-3 students could
score 1-2 marks.

7 The performance remained very good and a large number of students could score
full marks.

8 The question basically related to performance of contract whereby one of the party
dies after entering in to contract. The one situation was for the delivery of the goods
and other was for painting a picture which involved personal skill and the answer
should have been different in both such situations whereas large number of
students either suggested that legal heirs/partners should perform both the
contracts or suggested that there is no obligation. Very few students could explain
the differences in both the situations whereby different answers were required.
9 Very poorly attempted. Hardly 5% of the students attempted the question correctly
and about 50% of the students did not attempt the question. Those who attempted
did not explain the term draft but either explained negotiable instrument or bill of
exchange/cheques/promissory notes etc.

10 a) This was a theoretical question and the performance remained average.

Students did not clearly mention the correct period for servicing of various
notices.
b) The performance remained average and about 50% of the students could score
2-3 marks.
Taxation
 Examiner’s Comments
Summer Exam – 2015
Taxation

General Comments on Examinees Performance

 Overall performance was satisfactory.

 Candidates need to understand well the requirement of questions.

Question Wise Comments

Q. No. Comments
1 Majority of the candidates were not aware of the terminologies introduced in 2014,
Income Tax Ordinance-2001.
 Resident Company – Not attempted well.
 Filers, non filers.
 Head of income under Income Tax Ord. 2001 – Almost all the candidates
answer correctly.
 Types of Expenses not allowed – Not attempted well.

2 Tax credit
Very disappointing performance. The candidates were not clear about the concept
and computation of the credit.

3 Sales Tax liability

Almost all the candidates attempted this question and in majority of the cases their
performance was average and candidates in above average & Excellent categories
earned 5 to 8 marks. And 8 marks were the maximum allocated to Question No: 3.

4 Rules relating to return or cancellation of supply on increase in value of supply and

Sale Tax.
Candidates seemed to have been confused or not confident in most of the cases.
They described normal business goods / services, purchase and sales without giving
attention to or ignored the requirement of Sales Tax return and the impact of input
and output of tax required under Sales-Tax 1980. Very few students attempted this
question correctly.

Any other Comments/Suggestion:

Candidates should know their weakness in the subject they study and present the related
concepts well and improve the presentation.
Financial
Reporting
 Examiner’s Comments
Summer Exam - 2015
Financial Reporting

General Comments on Examinees Performance

 The question number was not properly marked in the answer sheets. Students started
numbering in the sequence of their attempt of questions.
 The students did not start the next question on the new page.
 The presentation skills were poor i.e. currency sign and proper headings were not
marked / provided.
 The overall performance of the students was good in Question Number 2, 3, 4 and 6
and most of the students secured good marks. However, Question Number 1, 5 and 7
proved very difficult for them and hardly few students responded well in these
questions.

Question Wise Comments

Q. No. Comments
1 This question was based on IAS 17 (Lease) containing two parts one on operating
lease and the other on finance lease. Most of the students treated both parts as
finance lease. Those who attempted part one as an operating lease failed to
recognize the expense on straight line basis and recognize the expense on cash
payment basis.
The second part of the question was on finance lease and requiring calculation of
rental and then first year extract to financial statements. Most of the students were
not able to calculate the rental.
2 This question was based on IAS 8 (Accounting Policy, change in accounting estimate
and error). Most of the students were able to differentiate between change in
accounting estimate and change in accounting policy and provided relevant answers.
However, few students provided irrelevant answers by mixing change in accounting
estimate and change in accounting policy by giving retrospective treatment for
change in accounting estimate and prospective treatment for change in accounting
policy.
3 The overall performance in this question was good and most of the students scored
well in this question. This question was based on IAS 38 (Intangible Assets) involving
three parts. The answer to second part of the question was not provided correctly
and wrongly treated the cost of license as intangible asset and hardware cost as
tangible asset instead to treating both the costs as tangible asset.
4 This question was based on IAS 37, IAS 10 and IAS 24. The overall response to this
question was good. The common mistakes made were as follows: -
 The students failed to identify the difference between adjusting and non
adjusting events.
 The students treated Mr. Jamil as related party although it is clearly mentioned
in IAS 24 that suppliers are not related parties.
 In part c) of the question students failed to identify the difference between
provision and contingent liability and wrongly created provision against a
contingent liability.
 5 This question was based on consolidated financial statements requiring calculation
of goodwill, Non controlling Interest (NCI) and consolidated retained earnings. The
common mistakes made are as under:
 The students failed to calculate the purchase consideration properly most of
the students did not include deferred consideration at present value.
 The fair value of NCI was not properly computed, however, it was just
multiplication of number of share held by NCI with its fair value of Rs. 17
(250x17=4,250).
 Fair value adjustments of assets and liabilities were not properly
incorporated.
6 This question was based on IAS 37 (Provisions, contingent liability and contingent
asset). The overall response to this question was good and most of the students got
full marks.
This question was based on IAS 23 (Borrowing costs). The overall response to this
7
question was poor, being last question many of the students did not attempt this
question. Most of the students mixed the borrowing cost of specific loans in the
calculation of weighted average borrowing rate.

Any other Comments/Suggestion:

The poor response to the paper shows that the students are not equipped with proper
understanding of the subject.
Management
Accounting
 Examiner’s Comments
Summer Exam-2015
Management Accounting

General Comments on Examinees Performance

The overall performance of the candidates was average. It was commonly noted that
adequate attention was not given towards reading and understanding the questions, which
was required. It has been observed that the student performed straightforward question
well. On the other hand, they were failed to portray good performance in analytical and
subjective questions. One of the main reasons for the deficiencies is the lack of practice and
too much reliance on memorizing the formulas and very little effort in understanding the
concepts involved and specially the basic mathematical functions. Further, students have
shown below average performance in theoretical section of the paper.

Question Wise Comments

Q. No. Comments
1 This question was simple and required the candidates to calculate Break even sales
in units and in revenue figure.
Except few candidates all candidates who attempted the question scored passing
marks.

2 It was good question on preparing lowest cost estimate on relevant cost basis and
was well attempted by majority of candidates. However, some of them made below
mentioned errors resulting in loss of easy marks.
 While estimating cost of fabric many candidates did not use Rate of Rs. 17.50.
 Others applied Rs. 8.5 for 50 m instead of 20 m at Rs. 8.2 and 30 m at Rs. 8.5
while estimating cost of wood.
 In calculation of skilled labor cost candidates incorporated the cost @ Rs. 18
instead of Rs. 24.
 Some of students have lost valuable marks due to consideration of Factory cost
of Rs. 750 along with Supervision cost.
 The general overheads are not incremental, therefore not required to be
included in cost but many students considered as general overheads.
 Question was required to briefly explain the reasons for including or excluding
each of the costs in the estimate. Some students ignored the subject
instruction.

3 The subject question was easy and had four parts.

Although Part (a) was required to calculate each of the six possible profit outcomes
and part (b) required to calculate the expected value of profit for each of the two
price option with recommendation.
Majority of the students mixed the working of above two options. Further because
of shortcut workings, they were unable to calculate the required six possible profit
outcomes. The students are advised to understand that the only way to be able to
solve such question is to understand the concept involved and exact requirement of
 question. Some other students were unable to calculate cost for selling price of
Rs. 35.
Furthermore, Part (c) of the question exposed conceptual weaknesses of the
candidates. The performance was quite unsatisfactory as most of students have
wrongly explained the maximum decision rule.
However, in Part (d), the candidates were required to list down the factors which
may give rise to uncertainty when setting budgets. The performance in this part was
quite average as few candidates could mention required points.

4 This was an easy question requiring workings on data pertaining to material.

5 This question required calculation of Payback Period and Return on Capital

Employed on average. Majority of candidates ignored the depreciation while
calculating the Cash flows. Further some of the students incorporated depreciation
while calculating average profit hence lost valuable marks.

6 It was an easy question on NPV and IRR and well attempted by majority of the
candidates. Some of the common mistakes noted in some scripts are described
below.
 The survey cost was sunk cost but incorporated in calculation of NPV.
 Some candidates made mistake in calculating fixed overheads
 Many students considered machine cost at Rs. 80,000/= instead of 70,000/=
 Some candidates made errors in applying IRR formula.
 Majority of students shown poor performance in Part (c) of the question.

7 It was a good question, required to mention different methods to hedge Interest

Rate Risk.
About 95% students could not attempt the question.

8 This was another question in which students have shown very poor performance
and only 4% (Approx.) were able to score the passing marks in this question.
Auditing
 Examiner’s Comments
Summer Exam – 2015
Auditing

General Comments on Examinees Performance

Overall performance of the candidates was satisfactory. Candidates should read the
question very carefully keeping in mind marks allocated. Some candidates could not attempt
all question because they wrote irrelevant material in attempted questions. Many students
could not understand Question No. 02 & Question No. 07 and lost marks by giving irrelevant
answers.

Question Wise Comments

Q. No. Comments
1 a) This part was well attempted by most of students.
b) In this part students didn’t perform well

2 a) Most of the students could not understand the question.

b) Students wrote overall Audit plan instead of substantive procedures.
3 a) This part was well attempted by most of students.
b) Performance was not upto mark in this part.
4 In this question performance was average.
5 a) This part was well attempted by most of the student.
b) This part was worst attempted by most of the students.
6 This question was high scoring and most of students attempted well and gained high
marks.
7 Part (a) & (b) both were worst attempted by most of the students and this showed
the students could not understand the question that’s why could not apply
knowledge correctly.