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IBP JAIBP Stage I study materials
IBP JAIBP Stage I study resources

IBP JAIBP Stage I practice questions

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Question 1Business Communication

In a bank's internal memo, the section that states the purpose of the memo and the action required from the reader is best placed:

  1. In an appendix attached to the memo for reference only
  2. At the end, after the background and supporting data have been presented
  3. Only in the subject line, with no repetition in the body
  4. In the opening paragraph, so the reader knows immediately why the document was sent Correct answer.

Explanation

Banking memos follow the direct approach: the purpose and required action appear up front so a busy reader can act without reading the whole document. Background and supporting figures then follow to justify the request. Burying the purpose at the end delays decision-making and is poor internal communication practice.

Question 2Business Communication

A relationship manager must tell a long-standing corporate client that a requested overdraft facility has been declined. Which opening is most appropriate for the letter?

  1. Thank you for your letter of 3 March regarding banking facilities. Correct answer.
  2. Pursuant to policy circular 14/2023, overdraft facilities are subject to credit assessment.
  3. You will surely understand that the bank cannot approve every request it receives.
  4. We regret to inform you that your request for an overdraft facility has not been approved.

Explanation

In a bad-news letter the standard structure opens with a neutral, courteous buffer that acknowledges the customer's correspondence before the refusal is stated. This preserves goodwill and prepares the reader. Stating the refusal in the very first line, or implying the client should have known better, damages the relationship.

Question 3Business Communication

In business correspondence, the 'you-attitude' means that the writer:

  1. Frames the message in terms of the reader's needs and benefits Correct answer.
  2. Addresses all senior staff formally by their titles
  3. Uses the pronoun 'you' in every sentence of the message
  4. Writes only about the reader and never about the sender's organisation

Explanation

The you-attitude is a perspective, not a word count: the writer translates features into reader benefits and shows understanding of the reader's position. Mechanical repetition of 'you' does not create it. The sender's organisation may still be discussed, provided the focus stays on the reader's interests.

Question 4Business Communication

A credit analyst writes: 'The account was reviewed by the committee and it was decided that the limit would be increased.' The main weakness of this sentence for a business report is that it:

  1. Is too short to convey the required detail
  2. Mixes British and American spelling conventions
  3. Contains a spelling error in a technical term
  4. Uses the passive voice and obscures who decided Correct answer.

Explanation

Two passive constructions ('was reviewed', 'it was decided') leave the decision-maker unnamed and make the sentence wordy. In analytical reports, active voice clarifies accountability, for example 'The committee reviewed the account and increased the limit.' Passive voice is acceptable when the actor is genuinely unknown or unimportant, which is not the case here.

Question 5Business Communication

Which element distinguishes a formal report from a routine internal memo in standard business practice?

  1. A formal report is always shorter than a memo
  2. A formal report never includes recommendations
  3. A formal report is written only by external consultants
  4. A formal report normally includes preliminary parts such as a title page, table of contents and executive summary Correct answer.

Explanation

Formal reports are long, structured documents that typically carry prefatory sections: title page, transmittal, table of contents, and an executive summary for readers who will not read the full text. Memos are short internal messages without such apparatus. Length and authorship vary, so those are not reliable distinguishing features.

Question 6Business Communication

An executive summary of a 40-page credit portfolio review should:

  1. Reproduce the introduction of the report verbatim
  2. Summarise the key findings, conclusions and recommendations so a senior reader can act without reading the full report Correct answer.
  3. List every table and chart included in the report
  4. Present only the methodology used to collect data

Explanation

An executive summary is a self-contained condensation of purpose, key findings, conclusions and recommendations, written for decision-makers. It is not a table of contents nor a methods section. Readers should be able to grasp the substance and the recommended action from the summary alone.

Question 7Business Communication

A bank employee must request three days of casual leave from a line manager. Which channel is most appropriate for this routine internal request?

  1. A registered letter addressed to the branch
  2. A short email or formal leave application through the approved HR system Correct answer.
  3. A notice posted on the staff bulletin board
  4. A press release issued by the corporate affairs department

Explanation

Routine internal requests follow the organisation's normal internal channel, typically an email or the HR leave system, because it is direct, documented and reaches the decision-maker. Public or external channels are disproportionate and breach confidentiality norms. The chosen channel should match the audience and the sensitivity of the message.

Question 8Business Communication

In a business letter, the complimentary close 'Yours faithfully' is conventionally paired with:

  1. A salutation using 'Dear Sir or Madam' where the name is unknown Correct answer.
  2. A subject line instead of a salutation
  3. A salutation using the recipient's name, such as 'Dear Mr Khan'
  4. No salutation at all

Explanation

Traditional British convention pairs the unnamed salutation 'Dear Sir or Madam' with 'Yours faithfully', and a named recipient with 'Yours sincerely'. The pairing signals the degree of acquaintance between writer and reader. Modern practice is more flexible, but examinations and formal bank correspondence still expect the conventional pairing.

Question 9Business Communication

During a meeting, a participant says: 'I think we should revisit the fee structure, but that's just my view.' The phrase 'but that's just my view' functions as:

  1. A directive instructing the group to vote
  2. A paraphrase used to confirm understanding
  3. A summary of the previous speaker's point
  4. A hedge that softens the assertion and invites discussion Correct answer.

Explanation

Hedging language reduces the force of a claim so that it can be offered without appearing to impose on the group. Phrases such as 'I think', 'perhaps' and 'just my view' are typical hedges in workplace discussion. They are not directives, summaries or paraphrases, which perform different communicative functions.

Question 10Business Communication

The most important quality of feedback given to a subordinate after a poorly handled customer complaint is that it should be:

  1. Specific, behavioural and focused on improvement rather than on the person Correct answer.
  2. Delivered publicly so the whole team learns from the mistake
  3. General enough to avoid any discomfort
  4. Written only, with no opportunity for the employee to respond

Explanation

Effective feedback describes observable behaviour and its impact, then agrees on improvement, which makes it actionable and preserves dignity. Public criticism and personal attacks damage trust, while vague comments give nothing to act on. Two-way discussion lets the employee clarify facts and commit to change.

Question 11Business Communication

Which of the following best describes 'noise' in the Shannon-Weaver model of communication as applied in a bank branch?

  1. The manager's written instruction to staff
  2. The receiver's reply to the sender
  3. The formal channel chosen for the message
  4. Any interference that distorts the message between sender and receiver, such as a faulty intercom or jargon Correct answer.

Explanation

In the Shannon-Weaver model, noise is any factor that interferes with the transmission or reception of the message, whether physical (a faulty intercom) or semantic (jargon the receiver does not understand). It is distinct from the message itself, the channel, and the feedback loop. Reducing noise is a central aim of clear business communication.

Question 12Business Communication

A team leader sends a one-line email: 'Please handle the audit query.' The subordinate does not know which audit, which client, or by when. The communication failure is best described as:

  1. Insufficient encoding of the message for the receiver's context Correct answer.
  2. A failure of the feedback channel only
  3. Excessive redundancy in the message
  4. Deliberate withholding of information by the sender

Explanation

The sender encoded the message from their own frame of reference, omitting the details the receiver needs to act: subject, scope and deadline. This is a classic encoding problem caused by failure to analyse the audience. Feedback alone cannot repair a message that lacks essential content.

Question 13Business Communication

In a business presentation, the statement 'Our digital onboarding now takes eleven minutes from application to account activation' is most effective because it:

  1. Avoids any technical terminology
  2. Uses a concrete, quantified benefit that the audience can evaluate Correct answer.
  3. Relies on emotional appeal rather than evidence
  4. Is deliberately vague to protect commercial secrets

Explanation

Concrete figures make claims verifiable and memorable, and they connect the feature to a benefit the audience cares about, such as speed. Vague or purely emotional claims are weaker in a business setting where listeners weigh evidence. Specificity is a core principle of effective presentation language.

Question 14Business Communication

A presenter displays a slide containing eight bullet points of dense text and reads them aloud. The main presentation error is that the slide:

  1. Is not numbered for reference
  2. Contains too few visual elements
  3. Duplicates the spoken word and overloads the audience's reading and listening channels Correct answer.
  4. Lacks the presenter's name

Explanation

When a slide repeats what the speaker says, the audience tries to read and listen simultaneously, and attention splits. Effective slides carry a few keywords or a visual, with detail delivered orally. Numbering or attribution is a minor formatting matter compared with this design flaw.

Question 15Business Communication

Which question type is most likely to produce detailed, unbiased information in a selection interview for a bank officer post?

  1. A hypothetical question about the interviewer's own career
  2. A closed question such as 'Are you honest?'
  3. An open behavioural question such as 'Describe a time you resolved a difficult customer complaint' Correct answer.
  4. A leading question such as 'You enjoy working under pressure, don't you?'

Explanation

Open behavioural questions invite candidates to describe actual past conduct, which gives richer and more reliable evidence than yes/no answers. Leading questions push the candidate toward the desired reply, and closed questions yield minimal information. Behavioural evidence is also harder to rehearse than opinions about oneself.

Question 16Business Communication

In a group discussion, one member repeatedly interrupts others and dominates the floor. From the perspective of group communication, this behaviour chiefly harms:

  1. The group's adherence to the meeting agenda time
  2. The choice of venue for the next meeting
  3. The accuracy of the minutes taken by the secretary
  4. The participation and contribution of other members, reducing the quality of the group's output Correct answer.

Explanation

Dominating the floor suppresses other members' contributions, so the group loses information and diverse perspectives, lowering decision quality. Effective group communication depends on balanced participation. Agenda timing may suffer, but the primary harm is to member participation and output quality.

Question 17Business Communication

The abbreviation 'cc' in an email message field indicates that the recipients:

  1. Receive a blind copy and are hidden from other recipients
  2. Receive a copy for information and are visible to all other recipients Correct answer.
  3. Are automatically excluded from any reply
  4. Are the primary addressees expected to act on the message

Explanation

The 'cc' (carbon copy) field carries the message to people who need to be informed but are not the primary addressees, and their addresses are visible to everyone. Hidden recipients belong in 'bcc'. Primary addressees belong in the 'to' field.

Question 18Business Communication

A clerk must inform 300 account holders of a change in service charges. Which approach best combines efficiency with legal defensibility?

  1. A social media post on the bank's public page
  2. A notice displayed only inside the branch
  3. Individual telephone calls to each customer with no written record
  4. A standardised circular letter or email sent to all affected customers, retaining a record of dispatch Correct answer.

Explanation

A standardised circular reaches a large audience consistently and creates a documented record that the notice was given, which matters for regulatory and contractual obligations. Telephone calls without records and passive notices may fail to reach customers and are hard to evidence. Mass communication must be both efficient and auditable.

Question 19Business Communication

Which sentence avoids a dangling modifier and states the action clearly in a banking context?

  1. Having verified the signature, the officer cleared the cheque. Correct answer.
  2. Verifying the signature, the cheque was cleared.
  3. The cheque, having verified the signature, was cleared.
  4. Having verified the signature, the cheque was cleared by the officer.

Explanation

A participial phrase at the start of a sentence must describe the subject of the main clause. Here the officer performs the verification and clears the cheque, so 'the officer' must be the subject. In the other versions the cheque appears to verify the signature, which is illogical.

Question 20Business Communication

The primary purpose of a transmittal letter accompanying a consultant's report to a bank's risk committee is to:

  1. Identify the report, explain why it is being submitted, and draw attention to key points or required decisions Correct answer.
  2. Provide the consultant's curriculum vitae in full
  3. Present the full findings of the report a second time
  4. Replace the executive summary in the report

Explanation

A transmittal letter is a short covering document that establishes the context of submission: what is enclosed, why, and what the recipient is asked to do. It does not duplicate the report's content or substitute for the executive summary. It is a bridge between sender and recipient, not an analytical section.

Question 21Business Communication

A branch manager wants to persuade staff to adopt a new account-opening procedure. Which message structure is most persuasive for an internal audience already aware of the change?

  1. A long chronological history of previous procedures before any mention of the new one
  2. A direct structure: state the change, give the reasons and benefits, then specify the required actions Correct answer.
  3. An indirect structure that reveals the change only in the final paragraph
  4. A purely emotional appeal with no procedural detail

Explanation

When the audience already knows about the change, the direct structure works best: the change is stated first, followed by reasons and benefits, then concrete actions. Withholding the change until the end frustrates informed readers. Persuasion in internal communication rests on reasons and clear instructions, not emotion alone.

Question 22Business Communication

In business writing, the term 'conciseness' is best achieved by:

  1. Replacing wordy phrases with single words and eliminating unnecessary repetition Correct answer.
  2. Removing every adjective from the document
  3. Using the shortest possible sentences regardless of meaning
  4. Omitting all technical terms

Explanation

Conciseness means conveying the message in the fewest words that preserve meaning, chiefly by cutting wordy phrases ('in view of the fact that' becomes 'because') and needless repetition. It does not require stripping all adjectives, chopping sentences into fragments, or avoiding necessary technical vocabulary.

Question 23Business Communication

A letter from a bank contains the sentence: 'Your request for a replacement card has been processed and the card will be dispatched within five working days.' From the reader's perspective, this sentence is effective because it:

  1. Avoids committing the bank to any deadline
  2. Uses passive voice throughout to avoid responsibility
  3. Gives a clear outcome and a specific timeframe the customer can rely on Correct answer.
  4. Focuses on the bank's internal processing steps

Explanation

Customer correspondence should state the outcome and a concrete timeframe, which reduces uncertainty and follow-up enquiries. Specific commitments also build trust when the bank meets them. Vagueness about deadlines or excessive focus on internal process serves the sender rather than the reader.

Question 24Business Communication

Which of the following is the clearest example of an appropriate subject line for an email to the head of credit risk about a delayed approval?

  1. Approval delay on the Siddiqui Textiles facility – action needed by 12 May Correct answer.
  2. Urgent!!!
  3. Regarding the matter we discussed
  4. Hi

Explanation

An effective subject line identifies the topic, the specific case and any action or deadline, so the recipient can prioritise and later retrieve the message. Vague lines such as 'Hi' or 'Urgent!!!' convey no information and hamper searching. Specificity is the key criterion for professional email subject lines.

Question 25Business Communication

A junior officer disagrees with a decision in a meeting. Which approach best reflects assertive rather than aggressive communication?

  1. Agreeing in the meeting and then ignoring the decision in practice
  2. Stating the disagreement directly, giving the reason, and inviting the chair's response Correct answer.
  3. Attacking the competence of the person who proposed the decision
  4. Remaining silent in the meeting and complaining afterwards to colleagues

Explanation

Assertiveness means expressing one's view clearly and respectfully while remaining open to reply, which protects both the relationship and the quality of the decision. Aggression attacks the person, while passive behaviour such as silence or covert non-compliance leaves the issue unresolved. Assertive communication is a core workplace skill in banking teams.

Question 26Business Communication

A branch manager circulates a written instruction to all tellers about a new cash-handling limit. Which quality of effective business writing is most directly tested by whether every teller can state the exact limit after reading it?

  1. Brevity
  2. Courtesy
  3. Completeness
  4. Clarity Correct answer.

Explanation

Clarity concerns whether the receiver can understand the message exactly as the sender intended, so a limit that tellers can restate precisely shows the writing was clear. Brevity and courtesy matter but do not by themselves guarantee accurate comprehension of a specific figure.

Question 27Business Communication

A customer service officer at a bank receives a complaint that has already been escalated twice. Which opening is most appropriate for the reply letter?

  1. Thank you for writing to us about the disputed debit on your account, and we are sorry for the inconvenience. Correct answer.
  2. We refer to your letter of 3 March regarding the disputed debit on account 4471.
  3. Kindly note that your complaint has been received and is under process as per policy.
  4. It is regretted that the matter could not be resolved earlier despite our best efforts.

Explanation

In a customer complaint reply, the opening should acknowledge the customer's concern and express regret before moving to facts, which builds goodwill and shows the message is receiver-oriented. Acknowledging the issue first also makes the later explanation easier for the customer to accept.

Question 28Business Communication

A bank's internal audit report recommends that loan files be checked weekly instead of monthly. In the report's recommendations section, which phrasing is most effective?

  1. Weekly checking of loan files is an option that could be explored at some stage.
  2. The Loan Department should check loan files weekly, with the first check due on 1 July. Correct answer.
  3. It is suggested that the frequency of loan file checking may possibly be reviewed.
  4. The loan department should consider whether weekly checking might be beneficial.

Explanation

Recommendations are actionable when they name the responsible party, the specific action, and a timeframe. Hedged wording weakens accountability and leaves the reader unsure whether any change is required.

Question 29Business Communication

A credit officer writes to a corporate client: 'Your proposal has been approved subject to the condition that the collateral valuation is completed before disbursement.' Which communication purpose does this sentence primarily serve?

  1. Requesting additional information from the client
  2. Apologising for a delay in processing
  3. Persuading the client to accept a new product
  4. Conveying a decision with a condition attached Correct answer.

Explanation

The sentence states an approval decision and immediately attaches a condition that must be met, which is a decision-with-condition message. It is not a request for information, a sales pitch, or an apology.

Question 30Business Communication

In the communication process, a bank's circular announcing revised profit rates is encoded by the treasury department and decoded by branch staff. Which element does the circular itself represent?

  1. The feedback
  2. The message Correct answer.
  3. The context
  4. The channel

Explanation

The message is the encoded idea or content that the sender transmits, so the circular's content is the message. The channel is the medium carrying it, feedback is the receiver's response, and context is the surrounding situation.

Question 31Business Communication

A relationship manager must tell a long-standing corporate client that a requested overdraft has been declined. Which approach best reflects the indirect (bad-news) message pattern?

  1. Give only the reasons and let the client infer that the request was declined.
  2. State the refusal in the first sentence and end with a warning about future requests.
  3. State the refusal first, then give the reasons, then close with goodwill.
  4. Begin with a buffer, give the reasons, state the refusal, then offer an alternative and close positively. Correct answer.

Explanation

The indirect pattern places a neutral buffer first, then builds the reasons, then states the refusal, and closes with an alternative and goodwill so the client is prepared for the decision. Leading with refusal or ending with a threat damages a valued relationship.

Question 32Business Communication

A bank officer writes: 'The committee approved the new limit and the revised fee. It will take effect on Monday.' In revising this for business communication, which issue should be corrected?

  1. The passive voice should be used in the second sentence.
  2. The two sentences should be joined with a semicolon.
  3. The word 'Monday' should be replaced with a numeric date.
  4. The pronoun 'It' has an unclear antecedent, so the noun should be repeated. Correct answer.

Explanation

The pronoun 'It' could refer to either the new limit or the revised fee, both of which can take effect. Repeating the intended noun identifies which change begins on Monday and removes the ambiguity from the instruction.

Question 33Business Communication

A bank's annual report is being prepared for shareholders. Which tone is most appropriate for the chairman's message within it?

  1. Formal and impersonal, avoiding any reference to people
  2. Highly technical, using specialised jargon throughout
  3. Formal yet readable, using plain words and direct sentences Correct answer.
  4. Conversational and informal, using contractions and slang

Explanation

A chairman's message to shareholders should be formal but readable, using plain words and direct sentences so that non-specialist investors can follow it. Excessive formality, slang, or jargon all reduce accessibility for a mixed audience.

Question 34Business Communication

Which of the following best describes the role of a bank's public relations function during a service outage that has affected thousands of customers?

  1. Selling new products to customers while they wait for service to resume
  2. Preparing the technical root-cause analysis of the outage
  3. Handling internal payroll queries from branch staff
  4. Managing the bank's reputation by providing accurate, timely information to the public and media Correct answer.

Explanation

Public relations is concerned with building and protecting the organisation's reputation through planned, accurate communication with external audiences such as customers and the media. Technical analysis and sales are separate functions.

Question 35Business Communication

A branch holds a meeting to decide which of two queue-management systems to adopt. Which seating arrangement best supports open discussion among the eight participants?

  1. Participants seated in a classroom layout with a lectern at the front
  2. All participants seated in rows facing the branch manager at the front
  3. Participants seated in a single line along one side of the room
  4. Participants seated around a circular or oval table Correct answer.

Explanation

A circular or oval table gives every participant equal visual access and signals that all contributions are welcome, which encourages open discussion. Row, classroom, and single-line layouts concentrate attention on a leader and discourage interaction.

Question 36Business Communication

A candidate for a bank officer position is asked: 'You find a cash difference at the end of the day. What would you do first?' Which competency does this question primarily assess?

  1. Knowledge of the bank's product range
  2. Judgement in handling an operational problem Correct answer.
  3. Willingness to work overtime
  4. Fluency in a second language

Explanation

A situational question about a cash difference probes how the candidate would reason and act in a real operational situation, which is a test of judgement. It does not test product knowledge, language ability, or availability.

Question 37Business Communication

A team is drafting a proposal to introduce an Islamic banking window at a branch. Which structure best supports a persuasive proposal to senior management?

  1. Problem or opportunity, proposed solution, evidence of benefits, cost, and a clear request for approval Correct answer.
  2. Chronological account of how the idea arose, followed by a list of staff involved
  3. A summary of competitors' products, with no recommendation
  4. Detailed technical specifications first, with the business case in an appendix

Explanation

A persuasive proposal moves from the recognised need to the proposed solution, supporting evidence, costs, and a specific request for approval. This order lets decision-makers see the rationale before they judge the numbers.

Question 38Business Communication

In a negotiation with a supplier of ATM maintenance services, a bank's representative says: 'We understand your cost pressures, but we need a response time of four hours for critical faults.' Which negotiation behaviour does this statement illustrate?

  1. Acknowledging the other side's position while asserting a firm requirement Correct answer.
  2. Making a unilateral concession without asking for anything in return
  3. Avoiding the issue to preserve the relationship
  4. Threatening to end the relationship if terms are not accepted

Explanation

The statement recognises the supplier's cost concerns while clearly stating the bank's requirement, which is an integrative, assertive-but-considerate negotiating move. It is neither avoidance, a free concession, nor a threat.

Question 39Business Communication

A bank plans to communicate a major restructuring to employees. Which sequencing of channels best supports both timely reach and the opportunity for questions?

  1. Announce it first in a press release, then let employees learn about it from the media
  2. Hold briefings for senior managers only, leaving branch staff to hear informally
  3. Post a notice on the intranet only, with no follow-up
  4. Send an all-staff email, then hold departmental briefings where managers answer questions Correct answer.

Explanation

Effective internal communication reaches employees directly and quickly, then provides interactive follow-up so concerns can be addressed. Letting staff hear major news from outside or through rumours damages trust.

Question 40Business Communication

A cross-cultural team at a bank includes members from high-context and low-context cultures. Which practice best reduces misunderstanding in their written exchanges?

  1. Using humour and cultural references to build rapport in every email
  2. Relying on implied meaning and shared assumptions to keep messages short
  3. Stating key points explicitly, avoiding idioms, and confirming understanding in writing Correct answer.
  4. Assuming all members interpret deadlines and priorities in the same way

Explanation

In mixed high-context and low-context teams, explicit statements, plain language, and written confirmation reduce the risk that implicit meaning is missed. Idioms and humour often travel poorly across cultures and can create confusion.

Question 41Principles of Accounting

Under the double-entry system, a credit entry in a ledger account represents which of the following?

  1. A decrease in a liability account
  2. An increase in an equity account Correct answer.
  3. An increase in an asset account
  4. A decrease in an income account

Explanation

Credits increase equity, liability and income accounts and decrease asset and expense accounts. The rule follows from the accounting equation, where owners' equity sits on the credit side. A credit to an equity account therefore records an increase in the owner's residual interest.

Question 42Principles of Accounting

A firm pays PKR 60,000 cash for a delivery van. What is the effect on the accounting equation?

  1. Assets increase and equity increases
  2. Assets decrease and equity decreases
  3. Assets increase and liabilities increase
  4. One asset increases while another asset decreases Correct answer.

Explanation

Cash falls by 60,000 and the vehicle rises by 60,000, so total assets are unchanged. Both accounts are assets, and the transaction merely changes their composition. Equity and liabilities are unaffected because no profit, capital or obligation arises.

Question 43Principles of Accounting

Which document is prepared first when a business makes a credit sale to a customer?

  1. A debit note
  2. A sales invoice Correct answer.
  3. A statement of account
  4. A credit note

Explanation

A credit sale is evidenced by a sales invoice, which states the goods, quantity, price and terms. The invoice is the source document for recording the receivable and the sale in the books. Other documents follow later or serve different purposes.

Question 44Principles of Accounting

A trial balance totals agree, yet an error remains in the ledger. Which error would still allow the trial balance to balance?

  1. Entering a purchase in the purchases account twice
  2. Posting a cash payment to the bank column only
  3. Omitting a supplier's invoice from the books entirely
  4. Recording a sale of 5,000 as 500 in both the sales and receivable accounts Correct answer.

Explanation

A compensating error of equal amount on both the debit and credit sides leaves the trial balance in agreement. The same wrong figure is entered in both accounts, so debits still equal credits. Such errors are found by checking source documents, not by the trial balance.

Question 45Principles of Accounting

Which of the following is a real account in the classification of ledger accounts?

  1. Capital account
  2. Bank account Correct answer.
  3. Commission received account
  4. Rent expense account

Explanation

Real accounts relate to assets and properties, including cash at bank, and they are carried forward to the next period. Bank is an asset and therefore a real account. Nominal accounts cover expenses, losses, incomes and gains, while capital is a personal account.

Question 46Principles of Accounting

A business receives PKR 120,000 in advance from a client for work to be done next month. How should this be recorded at receipt?

  1. Debit income and credit bank
  2. Debit an asset and credit capital
  3. Debit bank and credit income
  4. Debit bank and credit a liability Correct answer.

Explanation

Cash received before the service is performed creates an obligation to deliver, so it is recorded as deferred income, a liability. The bank account is debited and the liability credited. Income is recognised only when the work is performed.

Question 47Principles of Accounting

Under the accrual basis of accounting, when is revenue recognised?

  1. When the invoice is printed
  2. When the goods or services are delivered Correct answer.
  3. When the accounting period ends
  4. When cash is received from the customer

Explanation

Accrual accounting recognises revenue when the performance obligation is satisfied, that is, when goods or services are transferred to the customer. Receipt of cash is not the trigger. This matches revenue with the period in which it is earned.

Question 48Principles of Accounting

A machine costing PKR 800,000 has an estimated residual value of PKR 80,000 and a useful life of 8 years. Using the straight-line method, what is the annual depreciation charge?

  1. PKR 110,000
  2. PKR 80,000
  3. PKR 100,000
  4. PKR 90,000 Correct answer.

Explanation

Straight-line depreciation equals cost less residual value, divided by useful life. Here (800,000 - 80,000) / 8 = 90,000 per year. The residual value is excluded because it is expected to remain at the end of the asset's life.

Question 49Principles of Accounting

Which method of inventory valuation is prohibited under IAS 2?

  1. Weighted average cost
  2. First-in, first-out
  3. Specific identification
  4. Last-in, first-out Correct answer.

Explanation

IAS 2 permits FIFO and weighted average cost, and requires specific identification for items that are not ordinarily interchangeable. LIFO is not permitted because it can distort the balance sheet value of inventory. The standard aims to reflect actual cost flows.

Question 50Principles of Accounting

A trader's sales are PKR 500,000, opening inventory is PKR 40,000, purchases are PKR 320,000 and closing inventory is PKR 50,000. What is the gross profit?

  1. PKR 190,000 Correct answer.
  2. PKR 200,000
  3. PKR 180,000
  4. PKR 170,000

Explanation

Cost of goods sold equals opening inventory plus purchases less closing inventory: 40,000 + 320,000 - 50,000 = 310,000. Gross profit is sales less cost of goods sold: 500,000 - 310,000 = 190,000. This measures profit before operating expenses.