Model Question Paper Solutions
Answers to the full-length model question paper in the appendix. Each answer is written to the marks shown against its question: one sentence for each 1-mark question in Group A, five marks’ worth of points, tables or working in Group B (split as the paper shows, such as 1 + 4), and full working or a complete answer for each 8-mark question in Group C. Where a question offers a choice (OR), both options are answered.
Group ‘A’ — Very Short Answer Questions (11 × 1 = 11 Marks)
1. Name the two office procedures related to decision-making.
The two office procedures related to decision-making are Tippani and Resolution / Prastabana.
2. Which classification of filing requires a separate index card?
Numerical classification requires a separate (alphabetical) index card, because the files carry only numbers.
3. When was Nepal Rastra Bank established?
Nepal Rastra Bank was established on 2013 Baishakh 14 B.S. (1956 April 26 A.D.).
4. What is an indirect tax?
An indirect tax is a tax levied on the production, import, export or sale of goods and services whose burden the producer or seller shifts to the final consumer through the price, such as VAT, customs duty and excise duty.
5. Write the full form of NFRS.
NFRS: Nepal Financial Reporting Standards.
6. Why is a Bank Reconciliation Statement prepared?
A Bank Reconciliation Statement is prepared to find and explain the causes of difference between the bank balance in the Cash Book and the balance in the Pass Book on a given date, so that errors are detected and the Cash Book can be brought up to date.
7. How do you record outstanding salary expenses given in adjustments in the Final Accounts?
Outstanding salary is added to Salary on the Debit side of the Profit & Loss Account and shown as a liability on the Capital & Liabilities side of the Balance Sheet.
8. Give any two examples of government offices that use Central Level Accounting.
(1) The Ministry of Finance and (2) the Ministry of Education, Science and Technology.
9. What is a Revenue Accounting System?
A Revenue Accounting System is the systematic process of collecting the government’s tax and non-tax revenues, issuing receipts, recording them in the prescribed forms, depositing them into the revenue account and reporting them, according to prevailing laws.
10. Write any two points of importance of Store Accounting.
(1) It protects public goods from theft, loss and misuse, and (2) it shows the exact stock of consumable and durable goods at any time.
11. How does using computers in accounting help in cost control?
Computers reduce paperwork and stationery costs, prepare ledgers and reports automatically without extra clerical staff, and block payments that exceed the budget, which keeps costs under control.
Group ‘B’ — Short Answer Questions (8 × 5 = 40 Marks)
12. Define Tippani. Write any four considerations to be followed while drafting a Tippani. [1 + 4 = 5]
Tippani is a written official note started by a lower-level assistant or section officer and sent up through the administrative hierarchy to the authority who can decide, so that a formal decision can be made on a problem or new administrative matter.
Considerations while drafting a Tippani:
- Clear subject heading: The subject is written clearly and briefly at the top, so the deciding officer knows at once what the note is about.
- Left margin: About one-fourth of the sheet is left blank on the left side for the remarks and instructions of higher authorities.
- Facts in order: The note starts with the background or problem, then gives the relevant legal provisions and budget availability, and ends with clear suggestions.
- Supporting documents, language and signature: Relevant letters, bills or quotations are attached and indexed; the language is polite, simple and unbiased; and every official who forwards or decides on the Tippani signs with name, designation and date.
13. Differentiate between Horizontal (Flat) Filing and Vertical (Upright) Filing in five points. [5] OR Explain any five major functions of a Commercial Bank. [5]
First option: Horizontal vs. Vertical Filing
| Basis | Horizontal (Flat) Filing | Vertical (Upright) Filing |
|---|---|---|
| 1. Position of files | Files lie flat, one on top of another, in drawers or shelves; papers are punched and fastened. | Folders stand upright side by side in deep steel cabinet drawers; papers lie loose in folders. |
| 2. Insertion and removal | Slow; upper files or clips must be opened to reach a lower file or a middle paper. | Quick; any folder or sheet can be taken out or put in without disturbing the others. |
| 3. Space and cost | Cheap equipment, but takes more floor space for large volumes. | Costlier cabinets and folders, but holds thousands of papers in a small floor space. |
| 4. Visibility of labels | The spine or cover must be read by pulling the file out. | Tabs on top of the folders show the labels as soon as the drawer is opened. |
| 5. Suitability | Small offices and records that are seldom referred to. | Large offices with many files that are referred to often. |
Second option: Functions of a Commercial Bank
- Accepting deposits: The bank accepts current deposits (no interest, unlimited withdrawals for businesses), saving deposits (moderate interest, limited withdrawals) and fixed deposits (highest interest for a fixed period).
- Granting loans and advances: It lends through overdrafts, cash credit, term loans, home, auto and education loans, and by discounting bills of exchange against collateral.
- Remittance and fund transfer: It transfers money within the country and abroad through bank drafts, SWIFT and remittance networks.
- Opening letters of credit: By opening an LC, the bank guarantees payment to a foreign exporter, which makes international trade safe.
- Agency and utility services: It collects cheques, dividends and pensions for customers, makes utility payments on their behalf, and provides lockers for the safe custody of gold and documents.
14. What is Tax? Differentiate between Direct Tax and Indirect Tax in four points. [1 + 4 = 5]
Tax is a compulsory payment imposed by the government (federal, provincial or local) under law on individuals, businesses, and goods and services, without any direct personal return to the taxpayer.
| Basis | Direct Tax | Indirect Tax |
|---|---|---|
| 1. Levied on | Income, profit or property of a person or institution. | Production, import, export or sale of goods and services. |
| 2. Shifting of burden | Cannot be shifted; the person taxed bears it. | Can be shifted; the seller recovers it from the consumer in the price. |
| 3. Nature | Progressive; the rich pay at higher rates. | Regressive; rich and poor pay the same rate on the same goods. |
| 4. Examples | Income tax, remuneration tax, property tax, vehicle tax. | VAT, customs duty, excise duty. |
15. From the following particulars, prepare a Bank Reconciliation Statement of Koshi Traders as on 30th Chaitra 2082: [5]
Koshi Traders
Bank Reconciliation Statement
As on 30th Chaitra 2082
| S.N. | Particulars | Details (Rs.) | Amount (Rs.) |
|---|---|---|---|
| Balance as per Cash Book (Dr.) | 45,000 | ||
| Add: | 1. Cheques issued but not presented for payment (15,000 - 9,000) | 6,000 | |
| 2. Direct deposit by a customer into the bank | 6,000 | ||
| 3. Interest credited by the bank in the Pass Book only | 800 | 12,800 | |
| Sub-total | 57,800 | ||
| Less: | 1. Cheques deposited but not credited by the bank | 10,000 | |
| 2. Bank service charge debited in the Pass Book only | 300 | (10,300) | |
| Balance as per Pass Book (Cr.) | 47,500 |
Answer: Balance as per Pass Book = Rs. 47,500. Only the unpresented part of the cheques issued is reconciled: 15,000 - 9,000 = 6,000.
16. Rectify the following accounting errors by passing rectifying journal entries: [5]
| S.N. | Particulars | L.F. | Debit (Rs.) | Credit (Rs.) |
|---|---|---|---|---|
| (a) | Salary Account … Dr. To Ram’s Account (Being salary paid wrongly debited to Ram’s personal account, now rectified) | 10,000 | 10,000 | |
| (b) | Hari’s Account … Dr. To Ram’s Account (Being credit sales to Hari wrongly debited to Ram’s account, now rectified) | 7,000 | 7,000 | |
| (c) | Machinery Account … Dr. To Suspense Account (Being purchase of machinery for Rs. 20,000 debited as Rs. 2,000 in Machinery Account, now rectified) | 18,000 | 18,000 | |
| (d) | Suspense Account … Dr. To Sales Account (Being Sales Book undercast by Rs. 5,000, now rectified) | 5,000 | 5,000 | |
| (e) | Repair Account … Dr. To Building Account (Being repair of building wrongly debited to Building Account, now rectified) | 3,500 | 3,500 |
(c) and (d) are one-sided errors, so the Suspense Account takes the other side; (a), (b) and (e) are two-sided errors corrected between the accounts concerned.
17. From the following details of District Police Office, Sindhuli, prepare a Statement of Expenditure (AGF No. 210) for the month of Poush 2082: [5]
Government of Nepal
District Police Office, Sindhuli
Statement of Expenditure (AGF No. 210)
Fiscal Year: 2082/83 | Month: Poush
| Budget Sub-head No. | Budget Head Title | Annual Budget (Rs.) | Expenditure Up to Mangsir (Rs.) | Expenditure of Poush (Rs.) | Total Expenditure Up to Poush (Rs.) | Remaining Budget Balance (Rs.) |
|---|---|---|---|---|---|---|
| 21111 | Employee Remuneration | 36,00,000 | 15,00,000 | 3,00,000 | 18,00,000 | 18,00,000 |
| 22111 | Water and Electricity | 60,000 | 20,000 | 5,000 | 25,000 | 35,000 |
| 22311 | Office Supplies & Stationery | 1,50,000 | 50,000 | 15,000 | 65,000 | 85,000 |
| 22612 | Travel Expenses | 2,00,000 | 60,000 | 30,000 | 90,000 | 1,10,000 |
| 31123 | Furniture and Fixtures | 3,00,000 | 1,00,000 | 40,000 | 1,40,000 | 1,60,000 |
| Total | 43,10,000 | 17,30,000 | 3,90,000 | 21,20,000 | 21,90,000 |
- Total expenditure up to Poush (including advance): Rs. 21,20,000
- Less: uncleared travel advance: (Rs. 10,000)
- Net expenditure excluding uncleared advance: Rs. 21,10,000
Each row uses the chapter’s formulas: total up to this month = up to last month + this month, and remaining budget = annual budget - total up to this month.
18. Define Retention Accounting. Mention any three conditions in which retention deposit should be kept, and list any four forms used in Store Accounting. [1 + 2 + 2 = 5]
Retention Accounting is the accounting of refundable security deposits received by a government office: recording their receipt, their refund when the obligation is fulfilled, and their forfeiture into government revenue when it is not, in the 600-series forms.
Conditions in which retention deposit is kept:
- Bid security: usually 2% to 3% of the estimated cost, kept when contractors or suppliers submit tenders or quotations, so they do not withdraw their bids.
- Performance security: usually 5%, deducted from running bills or deposited at signing, to guarantee that the work is completed on time and to standard.
- Judicial or court deposit: kept by courts and quasi-judicial bodies during legal proceedings or appeals.
Forms used in Store Accounting:
- Store Requisition (Demand) Form, AGF No. 401
- Purchase Order, AGF No. 402
- Store Entry (Dakhila) Report, AGF No. 403
- Consumable Store Ledger, AGF No. 407
19. Write any five functions of the Ministry of Finance, OR explain five differences between Internal Audit and Final Audit. [5]
First option: Functions of the Ministry of Finance
- Annual budget: It prepares the annual estimates of revenue and expenditure, presents the budget on Jestha 15 every year, and monitors its implementation.
- Fiscal and revenue policy: It frames policies on direct and indirect taxes through the Inland Revenue Department and the Department of Customs.
- Foreign aid and public debt: It negotiates grants and loans with bilateral and multilateral partners such as the World Bank, ADB and IMF, and manages internal and external public debt.
- Supervision of FCGO and public enterprises: It oversees the treasury system run by the FCGO, coordinates with Nepal Rastra Bank on monetary policy, and monitors state-owned enterprises.
- Inter-governmental fiscal transfers: It manages fiscal equalization, conditional, complementary and special grants to provincial and local governments, with the National Natural Resources and Fiscal Commission.
Second option: Internal Audit vs. Final Audit
| Basis | Internal Audit | Final (External) Audit |
|---|---|---|
| 1. Auditing authority | DTCO or PTCO, under the FCGO (executive branch). | The constitutional Office of the Auditor General (OAG). |
| 2. Timing | During the fiscal year (monthly or quarterly). | After the fiscal year ends and the annual statements are ready. |
| 3. Main objective | Advisory and corrective: to find errors early so they can be fixed before the final audit. | Evaluative: to verify regularity, economy, efficiency, effectiveness and propriety of public accounts. |
| 4. Report goes to | The head of the office and the superior department. | The President of Nepal, who places it before the Federal Parliament. |
| 5. Independence | Done by an agency within the government, so less independent. | Done by an independent constitutional body free from executive control. |
Group ‘C’ — Long Answer Questions (3 × 8 = 24 Marks)
20. Explain the three branches/methods of Business Accounting (Financial, Cost, and Management Accounting), and describe why Accounting Standards (NAS and NFRS) are necessary in Nepal. [4 + 4 = 8]
Business accounting identifies, records, classifies, summarizes and interprets the monetary transactions of a business to find its profit or loss and show its financial position. Different users need different information, so it has three branches.
Branches of business accounting:
- Financial Accounting: The basic branch. It records past transactions in the Journal, posts them to the Ledger, prepares a Trial Balance and, at the end of the fiscal year, the Income Statement and Balance Sheet. Its users are mainly outsiders (shareholders, banks, creditors and the Inland Revenue Department) as well as the owners.
- Cost Accounting: It records and allocates the cost of materials, labor and overheads to find the total and per-unit cost of a product or service. It helps control waste and unnecessary costs and fix a competitive selling price.
- Management Accounting: It analyzes and interprets data from financial and cost accounting with tools such as ratio analysis, budgeting, break-even analysis and cash-flow forecasting, so that management can plan, control and make policy decisions.
Why Accounting Standards (NAS and NFRS) are necessary in Nepal:
Accounting Standards are authoritative rules on how transactions are recognized, measured, presented and disclosed. In Nepal, Nepal Accounting Standards (NAS) are formulated by the Accounting Standards Board, and Nepal Financial Reporting Standards (NFRS), in full convergence with IFRS, have applied since 2013 A.D. (2070 B.S.) to banks and financial institutions, insurance companies, state-owned enterprises and listed companies. They are necessary because:
- Uniformity and consistency: Every organization prepares its statements on the same basis, year after year.
- Comparability: Users can compare one firm with another, and one year with the next.
- Prevention of manipulation: Common rules reduce window-dressing and accounting fraud.
- Transparency and credibility: Statements become reliable and acceptable to domestic and foreign investors, lenders and regulators.
Conclusion: The three branches serve outsiders, cost control and management decisions respectively, and accounting standards make the resulting statements uniform, comparable and trustworthy.
21. From the following Trial Balance of Himalayan Trading House for the year ended 30th Chaitra 2082, prepare Trading Account, Profit and Loss Account, and Balance Sheet: [2 + 3 + 3 = 8]
Himalayan Trading House
Trading and Profit & Loss Account
For the year ended 30th Chaitra 2082
| Dr. Particulars | Details (Rs.) | Amount (Rs.) | Cr. Particulars | Details (Rs.) | Amount (Rs.) |
|---|---|---|---|---|---|
| To Opening Stock | 35,000 | By Sales | 2,95,000 | ||
| To Purchases | 1,80,000 | By Closing Stock | 50,000 | ||
| Less: Purchase Return | (5,000) | 1,75,000 | |||
| To Wages | 18,000 | ||||
| Add: Outstanding Wages | 2,000 | 20,000 | |||
| To Carriage Inwards | 4,000 | ||||
| To Gross Profit c/d | 1,11,000 | ||||
| Total | 3,45,000 | Total | 3,45,000 | ||
| To Salaries | 33,000 | By Gross Profit b/d | 1,11,000 | ||
| Add: Outstanding Salary | 3,000 | 36,000 | By Commission Received | 8,000 | |
| To Rent | 12,000 | ||||
| To Insurance (expired) | 4,000 | ||||
| To Depreciation on Plant & Machinery (10%) | 10,000 | ||||
| To Depreciation on Furniture (5%) | 2,000 | ||||
| To Net Profit (transferred to Capital) | 55,000 | ||||
| Total | 1,19,000 | Total | 1,19,000 |
Himalayan Trading House
Balance Sheet
As on 30th Chaitra 2082
| Capital and Liabilities | Details (Rs.) | Amount (Rs.) | Assets and Properties | Details (Rs.) | Amount (Rs.) |
|---|---|---|---|---|---|
| Capital | 1,90,000 | Plant & Machinery | 1,00,000 | ||
| Add: Net Profit | 55,000 | 2,45,000 | Less: Depreciation (10%) | (10,000) | 90,000 |
| Creditors | 42,000 | Furniture | 40,000 | ||
| Outstanding Salary | 3,000 | Less: Depreciation (5%) | (2,000) | 38,000 | |
| Outstanding Wages | 2,000 | Debtors | 60,000 | ||
| Closing Stock | 50,000 | ||||
| Prepaid Insurance | 6,000 | ||||
| Less: Expired | (4,000) | 2,000 | |||
| Cash at Bank | 52,000 | ||||
| Total | 2,92,000 | Total | 2,92,000 |
Answer: Gross Profit = Rs. 1,11,000; Net Profit = Rs. 55,000; Balance Sheet Total = Rs. 2,92,000.
Working notes:
- Insurance: The Trial Balance shows Prepaid Insurance of
6,000, an asset. The4,000that expired during the year becomes an expense in the Profit & Loss Account, and only6,000 - 4,000 = 2,000remains as an asset. - Depreciation: Plant & Machinery
10% of 1,00,000 = 10,000; Furniture5% of 40,000 = 2,000. - Gross Profit:
(2,95,000 + 50,000) - (35,000 + 1,75,000 + 20,000 + 4,000) = 3,45,000 - 2,34,000 = 1,11,000. - Net Profit:
(1,11,000 + 8,000) - (36,000 + 12,000 + 4,000 + 10,000 + 2,000) = 1,19,000 - 64,000 = 55,000.
22. Prepare Journal Vouchers (AGF No. 203) from the following transactions of District Administration Office, Kavre for Shrawan 2082: [8]
Government of Nepal
District Administration Office, Kavre
Journal Voucher (AGF No. 203)
| Date | J.V. No. | Particulars | Budget Sub-head No. | Debit (Rs.) | Credit (Rs.) |
|---|---|---|---|---|---|
| 2082/04/05 | 1 | Dr. B.E. Office Supplies & Stationery Cr. TSA (DTCO) / Bank Account (Being payment order issued for purchasing office materials) | 22311 | 30,000 | 30,000 |
| 2082/04/10 | 2 | Dr. B.E. House Rent Cr. TSA (DTCO) / Bank Account (Being house rent paid to Mr. Chitrakar by payment order) | 28142 | 20,000 | 20,000 |
| 2082/04/14 | 3 | Dr. Advance Section Officer Mrs. Rajani Silwal A/C Cr. TSA (DTCO) / Bank Account (Being advance given to Section Officer Mrs. Rajani Silwal for travel expenses) | (22612) | 25,000 | 25,000 |
| 2082/04/24 | 4 | Dr. B.E. Travel Expenses Cr. Advance Section Officer Mrs. Rajani Silwal A/C (Being travel advance of Mrs. Rajani Silwal cleared on submission of bills of Rs. 25,000) | 22612 | 25,000 | 25,000 |
| 2082/04/28 | 5a | Dr. B.E. Employee Remuneration Cr. Employees Provident Fund (EPF) A/C Cr. Income Tax A/C Cr. TSA (DTCO) / Bank Account (Being Shrawan salary distributed after deducting EPF and income tax) | 21111 | 2,20,000 | 40,000 2,000 1,78,000 |
| 2082/04/28 | 5b | Dr. Employees Provident Fund (EPF) A/C Dr. Income Tax A/C Cr. TSA (DTCO) / Bank Account (Being deducted EPF and income tax deposited to the concerned offices) | — | 40,000 2,000 | 42,000 |
Working notes:
- Voucher 4 (Case 3A, bill equal to advance): the bill of
25,000is the budget expenditure and clears the whole advance, so nothing is paid or returned through the bank. - Voucher 5a: net salary =
2,20,000 - 40,000 - 2,000 = 1,78,000. The EPF of40,000is 20% of the basic salary of2,00,000(10% from the employees plus the 10% government contribution included in the Rs. 2,20,000). - Total budget expenditure (B.E.) debited for Shrawan:
30,000 + 20,000 + 25,000 + 2,20,000 = 2,95,000.