PIPFA Foundation Level Examination (Pakistan)

Which of the following describes the accounting equation?

• AAssets = Liabilities + Owner's Equity
• BAssets = Liabilities - Owner's Equity
• CAssets + Liabilities = Owner's Equity
• DAssets + Owner's Equity = Liabilities

Under the double-entry system of bookkeeping, which of the following is correct regarding an increase in an asset account?

• AIt is recorded as a credit entry
• BIt is recorded as a debit entry
• CIt has no effect on debits or credits
• DIt must always be accompanied by an increase in a liability

Which book of prime entry is used to record small, everyday cash expenditures such as office stationery or postage?

• ACash Book
• BSales Day Book
• CPetty Cash Book
• DGeneral Journal

What is the primary purpose of preparing a Trial Balance?

• ATo calculate the net profit or loss of the business
• BTo verify the valuation of fixed assets
• CTo determine the cash balance available in bank accounts
• DTo check the mathematical accuracy of the double-entry ledger postings

Which of the following is classified as capital expenditure?

• APurchase of a delivery van for business operations
• BAnnual motor vehicle insurance for a delivery van
• CCost of fuel consumed by a delivery van
• DCost of routine engine servicing for a delivery van

If a business sells goods on credit to customer X, which ledger accounts are affected in the double-entry system?

• ADebit Sales Account; Credit Customer X's Account
• BDebit Customer X's Account; Credit Sales Account
• CDebit Cash Account; Credit Sales Account
• DDebit Sales Account; Credit Cash Account

A business purchased machine for Rs. 500,000 on January 1, 2024. It is depreciated using the reducing balance method at 20% per annum. What is the book value of the machine on December 31, 2025?

• ARs. 400,000
• BRs. 300,000
• CRs. 320,000
• DRs. 380,000

On December 31, 2025, a business has rent expense paid of Rs. 120,000, which includes a prepayment of Rs. 15,000. What amount should be charged to the Statement of Profit or Loss for rent for the year ended December 31, 2025?

• ARs. 135,000
• BRs. 120,000
• CRs. 15,000
• DRs. 105,000

During a bank reconciliation process, it is found that a bank charge of Rs. 1,200 has not been recorded in the Cash Book. What is the correct initial adjustment?

• ACredit Rs. 1,200 in the Cash Book
• BDebit Rs. 1,200 in the Cash Book
• CDeduct Rs. 1,200 from the bank statement balance
• DAdd Rs. 1,200 to the bank statement balance

An invoice of Rs. 8,500 for telephone expenses was recorded in the purchase day book and ledger accounts as Rs. 5,800. Which type of error has occurred?

• AError of Principle
• BError of Commission (or transposition error)
• CError of Omission
• DCompensating Error

Under the accrual basis of accounting, when should revenue be recognized?

• AWhen cash is received from the customer
• BWhen the order is placed by the customer
• CWhen the goods are delivered or services are performed
• DWhen the invoice is printed at the end of the month

Which of the following errors will cause the Trial Balance totals to disagree?

• AA credit sale of Rs. 4,000 completely omitted from the books
• BPurchase of office equipment debited to Repairs Account
• CA cash receipt of Rs. 1,000 from customer Y debited to customer Z's account
• DA debit entry of Rs. 5,000 entered in the purchases ledger without any corresponding cred…

How should a provision for doubtful debts be treated in the Statement of Financial Position?

• AIt is deducted from Trade Receivables
• BIt is added to Trade Receivables
• CIt is presented as a Current Liability
• DIt is presented as a Non-Current Liability

Which of the following is correct regarding a debit balance brought forward in a customer's ledger account?

• AIt indicates the business owes money to the customer
• BIt indicates the customer owes money to the business
• CIt represents an expense for the current period
• DIt represents revenue for the current period

Which of the following is a book of prime entry, not a ledger account?

• ASales Account
• BReceivables Control Account
• CPurchases Day Book
• DCapital Account

If closing inventory is valued at cost price of Rs. 45,000 and net realizable value (NRV) of Rs. 40,000, what value should be reported in the financial statements?

• ARs. 45,000
• BRs. 85,000
• CRs. 42,500
• DRs. 40,000

A business bank statement shows a credit balance of Rs. 80,000. Unpresented checks total Rs. 15,000, and uncredited deposits total Rs. 22,000. What is the adjusted Cash Book balance?

• ARs. 87,000
• BRs. 73,000
• CRs. 83,000
• DRs. 117,000

A sole trader has opening capital of Rs. 150,000. During the year, the owner made drawings of Rs. 40,000, introduced Rs. 25,000 new capital, and the closing capital was Rs. 185,000. What was the net profit for the year?

• ARs. 10,000
• BRs. 50,000
• CRs. 20,000
• DRs. 90,000

To correct an error where a sales invoice of Rs. 6,000 was debited to the sales account and credited to customer receivables, what journal entry must be made?

• ADebit Sales Rs. 6,000; Credit Receivables Rs. 6,000
• BDebit Receivables Rs. 6,000; Credit Sales Rs. 6,000
• CDebit Receivables Rs. 12,000; Credit Sales Rs. 12,000
• DDebit Sales Rs. 12,000; Credit Receivables Rs. 12,000

In the context of preparing financial statements, which of the following is correct regarding a debit balance in the Suspense Account?

• AIt is classified as an expense in the Statement of Profit or Loss
• BIt is classified as revenue in the Statement of Profit or Loss
• CIt is presented as a liability in the Statement of Financial Position
• DIt is presented as an asset in the Statement of Financial Position

A machine was purchased for Rs. 200,000 on 1 January 2025. It has an estimated useful life of 5 years and a residual value of Rs. 20,000. Using the straight-line method, what is the annual depreciation charge?

• ARs. 36,000
• BRs. 40,000
• CRs. 44,000
• DRs. 38,000

A business previously wrote off a Rs. 5,000 debt from Customer A as irrecoverable. The customer later paid the full amount. What journal entry records this recovery in the books of the business?

• ADebit Cash/Bank Rs. 5,000; Credit Bad Debts Recovered Rs. 5,000
• BDebit Customer A Account Rs. 5,000; Credit Cash/Bank Rs. 5,000
• CDebit Bad Debts Expense Rs. 5,000; Credit Customer A Account Rs. 5,000
• DDebit Cash/Bank Rs. 5,000; Credit Sales Rs. 5,000

Which of the following items is recorded in the Receivables (Sales Ledger) Control Account?

• ACredit sales, cash receipts from customers, discounts allowed, and irrecoverable debts
• BCash purchases, payments to suppliers, and discounts received
• CPurchase returns, carriage inwards, and trade discounts
• DOwner's drawings, wages paid, and rent expense

In the Statement of Profit or Loss, 'carriage outwards' (delivery expenses on goods sold to customers) is classified as:

• ACost of sales
• BSelling and distribution expense
• CAdministrative expense
• DFinance cost

A business paid salaries of Rs. 240,000 during the year ended 31 December 2025. At the year-end, salaries accrued (owed but not yet paid) amounted to Rs. 30,000. What is the salary expense reported in the Statement of Profit or Loss for the year?

• ARs. 270,000
• BRs. 240,000
• CRs. 210,000
• DRs. 30,000

Under the FIFO (First-In, First-Out) inventory valuation method, during a period of rising prices, which of the following is correct?

• ACost of goods sold reflects older (lower) prices, and closing inventory reflects newer (h…
• BCost of goods sold reflects newer (higher) prices, and closing inventory reflects older (…
• CBoth cost of goods sold and closing inventory are valued at the same weighted-average pri…
• DClosing inventory is always valued at the lower of cost and net realizable value

A three-column cash book has which three money columns on each side (debit and credit)?

• ADiscount, Cash, and Bank
• BCash, Bank, and Petty Cash
• CDiscount Allowed, Discount Received, and Bank
• DCash, Receivables, and Payables

A proprietor deposits Rs. 15,000 from the office cash till into the business bank account. What entry is made in the cash book?

• ADebit Bank column Rs. 15,000; Credit Cash column Rs. 15,000 (contra entry marked 'C')
• BDebit Cash column Rs. 15,000; Credit Bank column Rs. 15,000
• CDebit Bank Rs. 15,000; Credit Sales Rs. 15,000
• DDebit Capital Rs. 15,000; Credit Cash column Rs. 15,000

When the owner takes goods costing Rs. 8,000 from the business inventory for personal use, what is the correct double-entry?

• ADebit Drawings Rs. 8,000; Credit Purchases Rs. 8,000
• BDebit Drawings Rs. 8,000; Credit Sales Rs. 8,000
• CDebit Purchases Rs. 8,000; Credit Drawings Rs. 8,000
• DDebit Salary Expense Rs. 8,000; Credit Purchases Rs. 8,000

Wages paid to factory workers directly involved in the production of goods should be classified as:

• ADirect labor cost, forming part of prime cost
• BAdministrative expense in the Statement of Profit or Loss
• CSelling and distribution expense
• DFinance cost

In the books of a seller, 'discount allowed' to customers for early payment is treated as:

• AAn expense in the Statement of Profit or Loss
• BA deduction from sales revenue (contra-revenue)
• CA current liability in the Statement of Financial Position
• DA reduction in the cost of goods sold

Which accounting concept assumes that a business will continue to operate in the foreseeable future and has no intention or need to liquidate or significantly curtail its operations?

• AGoing Concern concept
• BAccruals concept
• CPrudence concept
• DConsistency concept

Which of the following is the slope-intercept form of a straight line equation?

• Ay = mx + c
• By - y1 = m(x - x1)
• Cax + by = c
• Dx/a + y/b = 1

A company invests Rs. 100,000 at a simple interest rate of 8% per annum. What is the total interest earned after 5 years?

• ARs. 8,000
• BRs. 40,000
• CRs. 140,000
• DRs. 46,933

What is the derivative of the constant function f(x) = 50?

• A50
• B50x
• C1
• D0

Which of the following describes the objective function in a linear programming problem?

• AThe function that is to be maximized or minimized
• BThe set of inequalities that restrict variables
• CThe coordinates of the corner points of the feasible region
• DThe restriction that variables must be non-negative

Solve the following simultaneous linear equations for x and y: 2x + 3y = 12 3x - y = 7

• Ax = 2, y = 3
• Bx = 1, y = 4
• Cx = 3, y = 2
• Dx = 4, y = 1

What is the future value of a Rs. 50,000 investment compounded annually at 10% per annum for 3 years?

• ARs. 65,000
• BRs. 60,500
• CRs. 66,000
• DRs. 66,550

An annuity pays Rs. 10,000 at the end of each year for 3 years. If the discount rate is 10% per annum, what is the present value of this annuity?

• ARs. 24,868
• BRs. 30,000
• CRs. 27,273
• DRs. 33,100

Find the determinant of the 2x2 matrix A = [[4, 2], [3, 5]].

• A26
• B14
• C22
• D10

The cost function of producing x units is C(x) = 2x^2 + 50x + 300. What is the marginal cost (MC) function?

• A2x + 50
• B4x + 300
• C4x + 50
• Dx^2 + 50x

A linear programming problem has constraints: x + y <= 6, x >= 0, y >= 0. Which of the following is NOT a corner point of the feasible region?

• A(0, 0)
• B(6, 0)
• C(0, 6)
• D(6, 6)