Suggested Answer CAP I 2009

The Institute of Chartered Accountants of Nepal
Suggested Answers of Accounting
CAP I Examination – June 2009
Attempt all questions. Working notes should form part of the answer.
Question No. 1
From are the following balances extracted from the books of Mr. B. Birat, prepare
Trading and Profit & Loss Account for the year ended Ashadh 31, 2065 and the Balance
Sheet as on that date: 20
NRs. NRs.
Purchases 4,000,000 Land 1,000,000
Sales 4,300,000 Motor Car 200,000
Sundry Debtors 225,000 Return Outwards 12,500
Building 100,000 Return Inwards 22,000
Furniture 50,000 Cash in Hand 8,000
Sundry Creditors 180,000 Cash at Bank 9,800
Wages 46,000 Bank Loans 450,000
Salaries 56,000 Bills Payable 18,000
Insurance 18,000 Opening Stock 228,000
Rent 40,500 Freight Inwards 8,000
Investment 100,000 Freight Outwards 7,000
Postage & Telegram 1,800 Office Electricity 8,000
Traveling & Conveyance 2,400 Office Expenses 15,000
Interest on Bank Loans 25,000 Sundry Income 10,000
Adjustments required:
a) Stock as on Ashadh 31, 2065 was valued at NRs. 450,000.
b) The market value of investment as on 31.03.2065 amounted to NRs. 120,000.
c) Interest accrued on investment amounted to NRs. 5,000.
d) Charge depreciation on Building @ 5%, Furniture @ 25% and Vehicle @ 20%.
e) Outstanding Salaries amounts to NRs. 5,500; whereas, Prepaid Rent amounts to NRs.
7,500.
f) Of the Sundry Debtors, NRs. 2000 is bad and should be written off.
Answer
Mr. B. Birat
Trading and Profit & Loss Account
For the Year Ended Ashadh 31, 2065
Debit Credit
Particulars NRs. NRs. Particulars NRs. NRs.
To Opening Stock 228,000 By Sales 4,300,000
To Purchases 4,000,000 Less: Return Inwards 22,000 4,278,000
Less: Return Outwards 12,500 3,987,500 By Closing Stock 450,000
Debit Credit
Particulars NRs. NRs. Particulars NRs. NRs.
To Wages 46,000
To Freight Inwards 8,000
To Gross Profit C/F 458,500
Total 4,728,000 Total 4,728,000
To Salaries 56,000 By Gross Profit B/F 458,500
Add: Outstanding 5,500 61,500 By Sundry Income 10,000
To Insurance 18,000 By Int on Investment 5,000
To Rent 40,500
Less: Prepaid 7,500 33,000
To Freight Outwards 7,000
To Postage & Telegram 1,800
To Travelling & Convey 2,400
To Office Electricity 8,000
To Office Expenses 15,000
To Int on Bank Loans 25,000
To Depreciation:
Building 5,000
Furniture 12,500
Motor Car 40,000 57,500
To Bad Debts 2,000
To Net Profit C/F 242,300
Total 473,500 Total 473,500
Balance Sheet of Mr. B. Birat

As on Ashadh 31, 2065
Equity & Liabilities NRs. NRs. Assets NRs. NRs.
Capital 1,200,000 Fixed Assets:
Add: Net Profit of the Year 242,300 1,442,300 Land 1,000,000
Bank Loans 450,000 Building 100,000
Bills Payable 18,000 Less: Depreciation 5,000 95,000
Sundry Creditors 180,000 Furniture 50,000
Outstanding Salaries 5,500 Less: Depreciation 12,500 37,500
Motor Car 200,000
Less: Depreciation 40,000 160,000
Sundry Debtors 225,000
Less: Bad Debts 2,000 223,000
Investment 100,000
Closing Stock 450,000

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Prepaid Rent 7,500

Accrued Interest 5,000
Cash in Hand 8,000
Cash at Bank 9,800
Total 2,095,800 Total 2,095,800
Working Notes:
Since there is no Trial Balance given, it is advisable to prepare Trial Balance.
Alternatively, difference may be calculated and be shown as Capital:
Trial Balance as on Ashadh 31, 2065
Debit Credit
Account NRs. Account NRs.
Purchases 4,000,000 Sales 4,300,000
Land 1,000,000 Return Outwards 12,500
Building 100,000 Bank Loans 450,000
Furniture 50,000 Bills Payable 18,000
Motor Car 200,000 Sundry Creditors 180,000
Return Inwards 22,000 Sundry Income 10,000
Cash in Hand 8,000 Balancing Figure (Capital) 1,200,000
Cash at Bank 9,800 Note: Balancing figure may
be calculated in different
Sundry Debtors 225,000 manner also.
Wages 46,000
Salaries 56,000
Insurance 18,000
Rent 40,500
Opening Stock 228,000
Freight Inwards 8,000
Freight Outwards 7,000
Postage & Telegram 1,800
Travelling & Conveyance 2,400
Office Electricity 8,000
Office Expenses 15,000
Investment 100,000
Interest on Bank Loans 25,000
Total 6,170,500 Total 6,170,500

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Question No. 2 ‘a’

On Shrawan 1, 2062 PQR took a mining lease from GVK on a term that royalty was
payable @ NRs. 20 per ton of output with a minimum rent of NRs. 1,000,000 per annum.
Short working, if any, of any year, was recoupable during the subsequent year only.
The lease, however, stipulated that if in any year the normal rent was not attained due to
strike, the minimum rent was to be regarded as having been reduced proportionately
having regard to the length of stoppage. The output was as follows:
Financial Year Output Remarks
2062-63 40,000 Tonnes -
2063-64 54,000 Tonnes -
2064-65 52,000 Tonnes Stoppage due to Strike for 3 Months
Pass journal entries in the books of the landlord GVK for all the three years. 7
Answer In the Books of GVK

Journal Entries
Debit Credit
S. No. Date Particulars NRs. NRs.
1 31/03/2063 PQR A/c Dr. 1,000,000
To Royalties Receivable A/c 800,000
To Royalties Suspense A/c 200,000
(Being rent receivable from PQR; Royalty
receivable being 800,000; Excess NRs. 200,00
credited to Royalties Suspense A/C)
2 31/03/2063 Bank A/c Dr. 1,000,000
To PQR A/c 1,000,000
(Being due amount received from PQR)
3 31/03/2063 Royalties Receivable A/c Dr. 800,000
To Profit & Loss A/c 800,000
(Being Royalties Receivable transferred to
Profit & Loss A/c)
4 31/03/2064 PQR A/c Dr. 1,000,000
Royalties Suspense A/c Dr. 80,000
To Royalties Receivable A/c 1,080,000
(Being Minimum Rent receivable from PQR
after adjusting NRs. 80,000 allowable against
NRs. 1,080,000)
5 31/03/2064 Bank A/c Dr. 1,000,000
To PQR A/c 1,000,000
6 31/03/2064 Royalties Receivable A/c Dr. 1,080,000
To Profit & Loss A/c 1,080,000

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Profit & Loss A/c)
7 31/03/2064 Royalties Suspense A/c Dr. 120,000
To Profit & Loss A/c 120,000
(Being Balance of Royalties Suspense, being
irrecoverable, transferred to PL A/c)
8 31/03/2065 PQR A/c Dr. 1,040,000
To Royalties Receivable A/c 1,040,000
(Being rent receivable from PQR; Royalty
receivable being 1,040,000)
9 31/03/2065 Bank A/c Dr. 1,040,000
To PQR A/c 1,040,000
10 31/03/2065 Royalties Receivable A/c Dr. 1,040,000
To Profit & Loss A/c 1,040,000
Profit & Loss A/c)
Working Notes:
i)
Date Output Royalty Minimum Short working Amount
in @ NRs. Rent Allowable Recouped Irrecoverable Receivable
Tonnes 20 from
Lessee
31/03/2063 40,000 800,000 1,000,000 200,000 - 1,000,000
31/03/2064 54,000 1,080,000 1,000,000 - 80,000 120,000 1,000,000
31/03/2065 52,000 1,040,000 1,000,000 - - - 1,040,000
ii) Strike for 3 months has no impact on Royalty as it is more than Minimum Rent.
Question No. 2 ‘b’

Ram and Hari enter a joint venture to prepare a film for the government. The Government
agrees to pay NRs. 200,000. Ram contributes NRs. 20,000 and Hari contributes NRs.
30,000. These amounts are paid into a Joint Bank Account. Payments made out of the
joint account were:
Purchase of equipment NRs. 12,000

Hire of equipment NRs. 10,000
Wages NRs. 90,000
Materials NRs. 20,000
Office expenses NRs. 10,000

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Ram paid NRs. 4,000 as licensing fees. On completion, the film was found defective and
the Government made a deduction of NRs. 20,000. The equipment was taken over by
Hari at a valuation of Rs.4,000.
Separate books were maintained for the joint venture whose profits were divided in the
ratio of Ram 2/5 and Hari 3/5.
Prepare Joint Bank Account, Joint Venture Account and Co-venturer Accounts. 8
Answer
Joint Bank Account
Debit Credit
Particulars NRs. Particulars NRs.
To Ram 20,000 By Joint Venture A/c- Equipment 12,000
To Hari 30,000 Hire of equipment 10,000
To Joint Venture A/c 180,000 Wages 90,000
Materials 20,000
Office expenses 10,000
By Ram 39,200
By Hari 48,800
Total 230,000 Total 230,000
Debit Joint Venture Account Credit

To Joint Bank A/c-Equipment By Joint Bank A/c-
Hire of equipment 12,000 (NRs. 200,000-20,000) 180,000
Wages 10,000 By Hari 4,000
Materials 90,000
Office expenses 20,000
To Ram (licensing fee) 10,000
Profit transfer. to 4,000
Ram 2/5 15,200
Hari 3/5 22,800
Total 184,000 Total 184,000
Debit Ram A/c Credit

To Joint Bank A/c- Repayment 39,200 By Joint Bank A/c 20,000
By Joint Venture A/c 4,000
(licensing fee)
By J V A/c ( profit) 15,200
Total 39,200 Total 39,200
Debit Hari A/c Credit


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To Joint Venture A/c 4,000 By Joint Bank A/c 30,000

(equipment taken over) By Joint Venture A/c 22,800
To Joint Bank A/c- Repayment 48,800 ( profit)
Question No. 2 ‘c’

Minimax Ltd. purchased a machine for NRs. 400,000 on 01-04-2064. Depreciation was
to be charged at 15% per annum on Straight Line Method.
On 01-01-2065, following expenses were incurred:
NRs. 100,000 for a modification to improve its production capacity
NRs. 20,000 for replacement of a damaged part.
Prepare Machinery Account for the year ending 31-03-2065. 5
Answer
Minimax Ltd.
Debit Machinery Account for the year ending 31-03-2065 Credit
Date Particulars Amount Date Particulars Amount
1/4/2064 To Bank A/c 400,000 31/3/2065 By Depreciation 63,750
(Purchase) [(400,000X15%)+
(100,000X15%X3/12)]
1/1/2065 To Bank A/c 100,000 31/3/2065 By Balance C/F 436,250
(Modification)
Total 500,000 Total 500,000
Notes: NRs. 20,000 incurred for replacement of a damaged part is Revenue Expenditure.

A, B and C commenced business on 1.4.2007 with the capital of NRs. 50,000, 40,000 and
30,000. Profit and losses are shared in the ratio of 4:3:3. Capital carried interest @10%
p.a. During 2007-08 and 2008-09 they made profits of NRs. 35,000 and 45,000 before
allowing interest on capital. Each partner withdrew NRs. 12,000 per year for the personal
use.
On 31st March 2009, the firm was dissolved. Creditors on that date were Rs.19,000. The
assets realized NRs. 130,000 net. Please prepare necessary ledger accounts to affect the
dissolution of firm assuming cut off date is March-end. 10
Answer
Ledger Accounts to affect the dissolution of firm are as per below:
Debit A's Capital Account Credit

Date Particulars NRs. Date Particulars NRs.
31/3/2008 To Drawing 12,000 1/4/2007 By Bank 50,000
By Interest on capital
To Balance C/d 52,200 31/3/2008 (50,000*10%) 5,000
31/3/2008 By PL A/c (WN 1) 9,200

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31/3/2009 To Drawing 12,000 1/4/2008 By balance b/d 52,200
To Realization a/c By Interest on capital
31/3/2009 (Loss) 6,800 31/3/2009 (52,200*10%) 5,220
31/3/2009 To Bank 51,860 31/3/2009 By PL A/c (W N 2) 13,240
Debit B‟s Capital Account Credit

BY interest on capital
To Balance C/d 38,900 31/3/2008 (40,000*10%) 4,000
31/3/2008 By PL A/c(W N 1) 6,900
To Realization a/c BY Interest on capital
31/3/2009 (Loss) 5,100 31/3/2009 (38,900*10%) 3,890
31/3/2009 To Bank 35,620 31/3/2009 By PL A/c (W N 2) 9,930
Dr C's Capital Account Cr.

BY interest on capital
To Balance C/d 27,900 31/3/2008 (30,000*10%) 3,000
31/3/2008 By PL A/c(W N 1 ) 6,900
To Realization a/c BY interest on capital
31/3/2009 (Loss) 5,100 31/3/2009 (27,900*10%) 2,790
31/3/2009 To Bank 23,520 31/3/2009 By PL A/c (W N 2) 9,930
Debit Realization Account Credit

Date Particulars NRs. Date Particulars NRs. NRs.
To Sundry Assets 31/3/2009
31/3/2009 (WN 3) 147,000 By sundry creditors 19,000
31/3/2009 To bank (Payment 31/3/2009
to creditors) 19,000 By Bank (Assets sold) 130,000
31/3/2009 By Realization Loss
31/3/2009 A (4) 6,800
B (3) 5,100
C (3) 5,100 17,000
Total 166,000 Total 166,000

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Debit Bank Account Debit Credit

31/3/2009 To Realization A/c By Realization Ac
130,000 31/3/2009 (Payment to Creditors ) 19,000
31/3/2009 A's capital 51,860
B's capital 35,620
C's Capital 23,520
Total 130,000 Total 130,000
Working Note
WN 1: Distribution of profit
Particulars NRs.
Profit for the year 2007/08 35,000
Less: Total Interest on Capital
(120,000*10%) 12,000
Profit available to partners (4:3:3 Ratio) 23,000
A 9,200
B 6,900
C 6,900
WN 2: Distribution of profit
Particulars NRs.
Profit for the year 2008/09 45,000
Less: Total Interest on Capital
(119,000*10%) 11,900
Profit available to partners (4:3:3 Ratio) 33,100
A 13,240
B 9,930
C 9,930
WN 3: Calculation of Total Assets as on 31/3/2009

Particulars NRs.
Original Capital 120,000
Profit:
year 2007/08 35,000
year 2008/09 45,000
Creditors 19,000
Total Equity & Liabilities 219,000
Less: Drawing
(3X2X12000) 72,000
Total Assets 147,000

PAD Concern issued a cheque of NRs. 2,500 to make payment to its suppliers on 5th
January 2009. But the cheque was dishonoured from the bank and the cheque was

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referred to the drawer. The concern had not prepared bank reconciliation statement since
last week, so that it could not guess the exact amount of balance in its bank account. You
are required to find why the cheque dishonoured?
Amount NRs.
Balance as per cash book 3,250
Wrong credit given by the bank 150
st nd
Cheque sent for deposit on 31 December 2008 was cleared only on 2
January 2009 3,000
Cheque received from customers dishonored by bank but
not recorded in the cash book 1,500
Dividend directly deposited in the bank account 2,500
Annual fee charged by the bank but omitted to be recorded in the cash
book. 200
Telephone bill directly paid by the bank as per the standing Instruction 750
A cheque amounting to NRs. 4,250 was issued which was recorded as NRs. 2,450 in the
cash book. 10
Answer
Statement of Bank Reconciliation Statement
As on 5th January 2009
Particulars NRs. NRs.
Balance As per Cash Book 3,250
Add:
Wrong credit given by the bank 150
Dividend directly deposited into the bank 2,500 2,650
Less:
Annual fee charged by the bank 200
Customers cheque dishonored by bank 1,500
Cheque issued wrongly ( 4250-2450) 1,800
Telephone bill paid by the bank as per the standing instruction 750 4,250
Balance as per Bank Pass Book 1,650
Since the actual balance with bank on 5th January 2009 was NRs. 1,650 only, it was
therefore the bank dishonored the cheque of NRs. 2,500.
Mr. X reports the following accounts on his income statement:
Sales NRs 69,000

Advertisement expenses NRs 3,500
Salaries expenses NRs 39,000
Rent expenses NRs 10,000
These accounts represent two years of revenue and expenses. Mr X provides the
following additional data:
i) Sales in the 2nd year are double those of the 1st year

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ii) Advertising expenses of Rs 500 is for opening promotion and balance for weekly
advertisement in the newspaper.
iii) Salaries represent one employee for the first nine month and then two employees for
the remainder of the time .Each is paid the same salary. No raises have been granted.
iv) Rent has not changed during the period.
Prepare Income statements for Year 1st and Year 2nd. 8
Answer Income Statements

Particulars Year 1(In Rs.) Year 2(In Rs.)
Sales 23,000 46,000
Less: Advertisement expenses (2,000) (1,500)
Less: Salaries expenses (15,000) (24,000)
Less: Rent expenses (5,000) (5,000)
--------------------------------------
Surplus/(deficit) 1,000 15,500
=======================
Working Notes:
Calculation of Sales for Year 1 and Year 2
Let sales in 1st year is X.
X + 2X = 69,000
Or, 3X = 69,000
X = 23,000
Year 1 sales = NRs. 23,000
Year 2 sales = NRs.46,000
Calculation of Advertisement Expenses for Year 1 and Year 2

Two years weekly advertisement expenses= Total Exps – Opening Promotional Exps
= NRs. 3,500-500
= NRs. 3,000
Year 1 advertisement expenses = 500+ 3,000/2 = NRs. 2,000

Year 2 advertisement expenses = 3,000/2 = NRs. 1,500
Calculation of Salaries Expenses for Year 1 and Year 2

Total months = 24
Let each person gets „X‟ amount of monthly salary; then:
24*X*1 + (24-9)* X * 1 = NRs. 39,000
Or, 39X = 39,000
X = 1,000
Salaries expenses for Year 1 = 12 * 1,000 + 3 * 1,000 = NRs.15,000

Salaries expenses for Year 2 = 12 *1,000 * 2 = NRs. 24,000
Calculation of Rent Expenses for Year 1 and Year 2

Rent expense for Year1 = NRs. 10,000/2= NRs. 5,000

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Rent expense for Year2 = NRs. 10,000/2= NRs. 5,000

From the following bills due on different dates, calculate the date on which a single
payment of total amount can be made. 7
Dated NRs.
7th April due 17th May for 6,000
14th May due 22nd July for 12,000
5th June due 2nd August for 10,000
15th June due 30th August for 14,000
Answer
Calculation of Single Payment date of Bill of Exchange
No of days to 17th
Due date Amount May Product (amount * days)
17-May 6,000 - -
22-Jul 12,000 66 792,000
2-Aug 10,000 77 770,000
30-Aug 14,000 105 1,470,000
Total 42,000 3,032,000
Average days = Product / Amount

= 42,000 / 3,032,000
= 72.19 = 72 days (Approx)
Therefore, 72 days from 17th May is the single payment date i.e. 28th July
Question No. 4 ‘c’

Briefly explain qualitative characteristics of financial statements. 5
Answer
The four principle qualitative characteristics of financial statements are:
i. Understandability
As far as practicable, the information provided in the financial statements has to be
simple and readily understandable by the users. But this does not mean that complex
requirements set by the laws of the land should be avoided.
ii. Relevance
The relevance of information depends upon its nature and materiality .Information
becomes material if its omission or misstatement could influence the economic decisions
of the users taken on the basis of financial statement.
iii. Reliability
Even if information is relevant it may not be reliable due to inclusion of fraud and
misrepresentation in the financial statements regarding facts and figures.

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iv. Comparability
The financial data of one business firm should be comparable with that of others in the
same industry. The uniform accounting policies adopted by the particular industry and
accounting standards help comparability.
Question No. 5
Comment with reasons whether the following statements are true or false: 10
a) Valuation of assets of a business is dependent on going concern basis.

Answer
True: Valuation of assets of a business is dependent upon the going concern basis. All the
assumptions for valuation purpose is done expecting the firm to operate continuously.
b) “All the expenses matched with the revenue of that period should only be taken into
consideration” is the accrual concept.
Answer
False: All the expenses matched with the revenue of that period should only be taken into
consideration” is the matching concept.
c) Inventories are valued using LIFO method as per Accounting Standard.

Answer
False: Inventories are valued using weighted average or FIFO method as per Accounting
Standard.
d) Ledger book is popularly known as subsidiary book of accounts.

Answer
False: It is a principle book of accounts.
e) Crossed cheque is not a negotiable instrument.

Answer
True: Cheque is not a negotiable instrument.
f) Patent right is in the nature of Personal Account.

Answer
False: Patent right is in the nature of real Account.
g) The total of the sales is posted to credit of the purchase book.

Answer
False: The total of the sales is posted to credit of the sales book. Only the purchases are
debited / credited to purchase books.
h) The total of sales book was not posted to the ledger is error of commission.
Answer
False: The total of sales book was not posted to the ledger is error of omission.

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i) Quick assets are also known as liquid assets.

Answer
True: Quick assets are also known as liquid assets. These are readily converted into cash.
j) Heavy advertising to introduce a new product is capital expenditure.
Answer
False: Heavy advertising to introduce a new product is not a capital expenditure because
it does not create any asset. It is rather the deferred revenue expenditure as its benefits
pertain to number of future years.
Question No. 6
Write short notes on the followings (ANY FOUR). (4×2.5=10)
a) Users of financial statements
Answer
Financial statements are used by various users for the purpose of making informed
judgment. Broadly, they are classified as external and internal users. Management is
internal user .They use financial statement for making appropriate decisions like
proposing expansion or closing down scale of operations . External users include
creditors, bankers, government etc.
b) Accounting Equation
Answer
The following equation is known as an accounting equation
Assets =Liabilities + Owners‟ Equity
The left side of the accounting equations refers to the valuable economic resources
controlled by an entity. The right side claims that some of those assets are provided by
creditors and others are provided by the owners of the business. In short accounting
equation shows the resources(assets)and claims to these resources (liabilities and owners
equity)
c) Prudence
Answer
Under this concept provision is made for all known liabilities and losses even though the
amount cannot be determined with certainty and represents only a best estimate in the
light of available information . And also profits are not anticipated in view of uncertainty
attached to future events but recognized only when realized.
d) Mortgage
Answer
A transfer of interest in specified immovable property for the purpose of securing a loan
advanced or to be advanced, an existing or future debt or the performance of an
engagement which may give rise to a pecuniary liability . The security is redeemed when
the loan is repaid or the debt discharged or the obligation performed.

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e) Going Concern
Answer
An enterprise is viewed as continuing in operation for the foreseeable future .It is
assumed that the enterprise has neither the intention nor the necessity of liquidation or of
curtailing materially the scale of its operations.
f) Straight line method

Answer
It is a method under which the periodic charge for depreciation is computed by dividing
the depreciable amount of depreciable asset by the estimated number of years of its useful
life.

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Suggested Answers of Business Communication
Attempt all the questions
Question No. 1
What is the importance of communication in business? Discuss the main forms of
communication. (5+10=15)
Answer
Communication is the life-blood of any organization. It is an indispensable part of
organizational business. No business can be possible without communication. And it is
the people- the organizational people, who give life to communication. As such,
organizational effectiveness depends, among other things, upon effectiveness of
communication.
Man is born with an instinct to communicate, though non-humans -domestic and wild
animals and birds and insects -bees and ants also have communication. Bees go in search
of flowers to collect for the collection of honey; in their humming language they
communicate about where flowers are available. But, we as humans do not understand
how they communicate in humming language, we do not take into account the language
of the non-human creatures. .
Human beings communicate everywhere from dawn to dusk. The type of communication
that occurs at home differs from what we communicate and how we communicate in
business organizations, which are a separate entity in the world of communication.
Communication that takes place in a business organization is business targeted. As such,
we are concerned with various types and directions of business related communication.
The meaning of the term business-related is not limited to trade and industry and export-
import business only. Here, the scope of the communication is so broad that it refers to all
types of organizational operations. Business involves deals, the deals that we do in order
get the things done. And it is possible only when we have effective communication. A
poor communication in business results in failure to create goodwill and good impression
among the customers and other business personnel. As a result, our business collapses.
To understand the importance of communication in business, it necessary to note how
much communication business requires. Take, for example, a pharmaceutical
manufacturer keeps himself busy communicating with his employees, who also keep
themselves busy sending and receiving information. They process information with
computers, write messages, fill out forms, give and receive orders, seek advice from the
seniors, and talk to people over the telephone. More specifically, salespeople receive
instructions and information from the home office and send back orders and regular
reports of their activities. Executives use written and oral messages to initiate business
with customers and other companies and respond to incoming messages. Likewise,
production supervisors, research specialists, and others carry out similar kind of tasks.
Everywhere workers receive and send information as they conduct their work. This
typical model of communication in a company highlights the importance of

communication in business.
The nature, volume, types and directions of communication shall be as per nature of the
organization. In short, organizational communication depends upon communication
effectiveness. The importance of communication in business becomes even more
apparent when we consider the communication activities of an organization from an
overall point of view. These activities fall into three broad categories: internal
operational, external operational and personal.
Internal operational communication: All the communication that occurs in conducting
work within a business is classified as internal operational communication. This is the
communication among the business workers that is done to implement the business
operating plans. By operating plan, we mean the procedure that the business has
developed to do whatever it was formed to do, for example, to manufacture products,
provide goods and services, or sell goods. It is operated in various forms such as giving
orders, assembling reports, and writing email. Internal operational communication takes
place with the boundary of the organization. People involved in it include are staff
members- seniors and juniors. The subject- matter of communication consists of
organizational policy matter and the implementation of its planned program.
External operational Communication. The work-related communicating that a business
does with people/ group outside the business is external-operational communication. This
is the communication with its publics- suppliers, service companies, customers,
producers, and the public at large.
External-operational communication includes all the business‟s efforts at direct-selling,
telephoning, advertising, and writing messages. One of the vital aspects of
communication, good business etiquette is viewed as an indispensable part of business
messages since it contributes greatly to a company‟s good image. External operational
communication, in short, refers to all sorts of organizational efforts and activities directed
towards promoting organizational relations and sharing mutually beneficial knowledge,
ideas, information. and experiences. with other organizations. .
Personal Communication. Apart from the above types of communication there a third
one known as Personal communication. Compared the above two, it is least predominant.
It originates from human urge to communicate compressed personal feelings that
includes social, financial and other problems. With the opportunity to release such
personal problems, employees feel more taken care of and get motivated to perform
better. Not all the communication that occurs in business is operational. In fact, much of
it is without purpose as far as the operating plan of the business is concerned. People
communicate with others even when they have no reason to communicate. Sometimes,
seniors are seen talking to their juniors with keen interests on personal, social and
financial problems of individual staff members. Such communicating activities fall into
personal communication.
Personal communication is the exchange of information and feelings in which we human
beings engage ourselves in non-operational communicating activities whenever we come
together. We are social animals. We have a need to communicate and we will
communicate even when we have little or nothing to say.

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Despite its importance in organizational operation, too much of personal communication

is harmful because giving undue advantages to juniors and see them indulged in non-
operational communication for cheap popularity might create problems of organizational
indiscipline. So personal communication must be regulated and controlled as necessary.
Question No. 2
Write a newspaper article, in about 300 words, on the potential and challenges in the
fiscal reforms in the present context of Nepal. Also suggest some effective measures to
avoid the challenges and to meet the goals of successful fiscal reforms in Nepal. 15
Answer
Fiscal reforms
 Improvement in the status of national economy
 Improvement in the systems of taxes and other national incomes
Potential:
 peace process
 political stability
 industrial revolution
 employment schemes, etc.
Challenges
 war and misunderstanding among political parties, inability
 to work collectively with a political consensus
 geographical condition of Nepal
 economic condition of Nepal, etc.
Solution
 new schemes of reform
 commitment from political leaders and citizens
 improvement in the country‟s service system. Base the
 democratic system on the principles of rule of law
Reciprocity
The manner of interaction between two parties or contribution from both sides.
Question No. 3 ‘a
As a Managing Director of a business organization, draft a memorandum informing all
the staff that the Christmas party to be organized on behalf of the management authorities
has been postponed and will be held after the busy business season. 7
Answer
………………. Pvt. Ltd
From : Managing Director

To : All Staff

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Subject : Chirstmas Party

Date -
: …………… 2009
Party Details:
 Date : 27 October 2009
 Food : Nepali as well as continentals
 Special events : Lok Dohari and Dance
 Venue : Soaltee Crown Plaza, New Baneshwor
We apologize that we are postponing the Christmas party our office has planned to
celebrate on 24 December for some unforeseen reasons. We will have to wait until after
Dashain, but we can get you assured that we will celebrate it amidst great enthusiasm and
great rejoicing. Anyone interested in volunteering to help out with the event is
encouraged to call Prem Lama, our events coordinator. His cell phone number is
98510………. Please contact Prem outside of business hours regarding this matter.
Thank you.
Managing Director

Assuming that you are the Personnel Manager of Sipradi Trading Ltd., write a letter of
recommendation for an employee who served the Sales Department of the organization
for a couple of years. 8
Answer
Sipradi Trading Ltd.
Thapathali, Kathmandu
Tel: 01- 4234567, Fax: 01- 42278543
Date: 5 May 6, 2009
To Whom It May Concern

Reference for Mr. Arun Shakya
This is to inform the concerned that Mr. Arun Shakya joined Sipradi Trading Ltd. in
August 2006. Since then he has proved to be a most reliable and effective member of the
Sales Department.
Mr. Shakya is professional and efficient in his approach to work and he is very well-liked
by his colleagues and executive clients. He is well-presented and able to work both
independently and as part of a team.
His contributions to all areas of the company actively in which he has been involved
deserve much appreciation.
I believe that Mr. Shakya will prove to be a valuable asset to any organization that he
may join. We deeply regret his decision to move on and I recommend him, without
hesitation, for any highly responsible job.
I would gladly answer any request for further information.
Prahlad Singh Rana
Personnel Manager
E-mail: mail2prahlad@gmail. Com.

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Question No. 4
Being on the ground on the essay "Mass Media and the Society" written by Gerald Barry
Etal, present your views on „Making the role of mass media constructive in bringing not
social, political and economic revolution in Nepal. 10
Answer
In the dark olden days when the term “media” was not coined, nor was it thought of,
communication was not used in the way we do in the present age of mass
communication. But as the instinct to communicate is inherent in all living creatures,
people carved their inner and deeper feelings – of joys and sorrows, anger and peace, and
love and hatred on the stone tables of their caves. As human beings and the things all
around them changed with the passage of time, communication showed its existence as
the life-blood of personal, social, community and organizational life. Apart from its
dominant role in human life, organizational life without communication is not possible at
all. With the advancement of science and technology, and the development of audio-
visual aids- radio, film and television the information and entertainment system of today
has set up itself as a means of mass communication, to which the bulk of the global
population has an access to. In ensuring people‟s rights to communication, these
instruments and many other types of audio-visual gadgets have been brought to the
service of mankind. They have now been an integral part of human life.
Various forms of mass media, such as radio, theater, cinema and television showed up
between the changing ages and people‟s taste and interest. Each of these forms occupied
a prominent place in the heart of human beings. Theater was once a very popular form of
communication, when people had no option for other sources of information and
entertainment. The role and impact of radio remained unchanged as a cheap and easily
accessible means of mass communication. Later, motion pictures dwarfed the image of
theaters. Invention of television is one of the most significant means of mass
communication. With people‟ access and affordability to television, people now live in an
age of global communication. Invention of cable television based on glass fiber television
and its advantages over the conventional over-the- air television and the hundreds of
channels in service, the present-day world people are now exposed to an age of wonders
of mass communication. With many options of mass communication, the people‟s
unlimited aspirations and changes in their attitude and behavior have been reflected in the
use of popular means of mass communication.
The impact of science and technology on the press cannot be overemphasized. The
attributes of press media as a means of mass communication in reflecting news and views
to the people remains unchallenged.
Though decades witnessed a slight decline in the number of library-goers, the importance
of a library as a repository of knowledge and information remains unquestioned. It gives
what other means of mass communication cannot.
Apart from its encroachment over other forms of mass communication, television is the
most effective means of mass propaganda. It plays a multi-faceted role in educating the

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mass, in enshrining their beliefs on what they see. To the marginalized mass of people, it
showers ways and means of attaining goals of economic development.
However, the inexplicable services mass media can render depend upon knowledge and
wisdom of human beings. Mass media cannot function judiciously under the sway of
unfair journalism. It is apparent that various means of mass media are being used for
fulfilling corrupt and vested interest of politicians at the cost of lives of the common
people.
To conclude, it is indispensable for the media people and the politicians to be wise to
make the best use of mass communication for the welfare of the people at large.
Question No. 5
Answer any THREE of the following questions (3x5= 15)
a) As the head of the Sales Department of a multinational company, write a welcome
email message to a subordinate who has been transferred to your branch office
Answer
To” Kabita Chhetri” mail 2kabir @ yahoo. Com.
cc- All staff
From Mohan Shrestha mohanshrfestha@gmail.com
Subject: Welcome to our team
Dear Kabita
Welcome to our team!!
It is a great pleasure to welcome you to the staff of the Mitsubishi Company. We are
excited to have you join our team, and we hope that you will enjoy working out team.
On the first Monday of each month we hold a special staff lunch to welcome any new
employees. Please be sure to join us next week to meet all of our senior staff and any
other new staff members who have joined us this month. Nikita Luitel will e-mail you
with further details.
If you have any questions during our training period, please do not hesitate to contact me.
You can reach me at email address or any office line at 01- 5432567
With regards,
Mohan Shrestha
Mitsubishi Company
Country Office, Nepal
Tel: 5432567
b) Briefly discuss the component of a business letter
The major components of a business letter as follows:

Heading:

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The heading contains the writer‟s address and the date of the letter. The writer‟s name is
not included and only a date is needed in the heading on the letter head.
Inside address:
The inside address shows the name and address of the recipient of the letter. This
information helps to prevent confusion. At the same time, if the recipient has moved, the
insides address helps to determine what to do with the letter. The inside address includes
the appropriate title of respect of the recipient and the name of the company. When we do
have names of individuals, we have to address them in an appropriate way: Mrs, Mr, Ms,
Dr. and so on. If we are not sure what is correct for an individual, we have to try to find
out how that individual signs letters or consult the forms-of address section a dictionary.
Salutation
The salutation directly addresses the recipient of the letter and is followed by a colon, but
an informal tone is intended, a comma is used. If we not know whether the recipient is a
man or whom, the traditional practice has been to write “Dear Sir” or, “Dear Sirs”, but
this considered to be sexist language. The appropriate way is to say “Dear Sir or Madam”
Subject or reference line:
The subject line clearly states the main purpose of the business letter.
Body of the letter:
The actual message of course is contained in the body of the letter. It is the most
important part of the letter and lies between the salutation and the complimentary close.
The language here should be tactful and formal. Redundancy should be taken care of.
Complimentary close:
At the bottom of the letter, we write “Sincerely yours” or “Faithfully yours” and this part
of the business letter is called the complimentary close. The other common ones are
“Cordially”, “Respectfully” or “Respectfully yours” We can design our own, but we have
to be careful not to make it wordy. Only the first letter is capitalized, and it is always
followed by a comma.
Signature:
Usually, we type our name four lines below the complementary close, and sign our name in
between. In case of a woman, if she wants to make her marital status clear, the expressions like
Miss, Ms. or Mrs. are used in parentheses before the typed version of the first name. The title or
the name of the position we hold had better be included just below or name.

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c) What is a press release? Enlist and briefly explain the basics of press release
Answer
A press release is an announcement, which an office or a company sends to a local or
national press and other media such as radio or TV to publicize. A press release is not an
advertisement but it can result in useful publicity for the company issuing the release.
The announcement can be supplied to the news desks either by a personal contact or by
organizing a press conference where news reporters are invited.
Basics of a press release:
 Give a press release a heading
 Add sub- headings, if necessary
 Use third person pronouns
 Give the essence of the matter in the opening paragraph
 Tell the main story in few paragraphs
 Make the central paragraph short and information self-contained so that an editor can
cut it short, if necessary.
 Provide background information with interesting details
 Repeat the main message in the concluding paragraph.
 Design a heading and sub-heading in such a way that it can catch reader‟s eyes.
d) What is a meeting? Discuss any five techniques of conducting a meeting.

Answer
A meeting is formal or informal gathering of people of an organization in order to discuss
the agenda. A meeting is a meeting of minds. Examples of a formal meeting are
conferences, seminars, etc and the informal meetings even clued discuss among
colleagues and workers. There are many techniques to conduct good meeting and five of
them are as follows:
i) Plan the meeting:
A very important idea to conduct a successful meeting is to plan it thoroughly. We have
to develop the agenda in order to achieve the goals of the meeting. The items in the
agenda should be put the order of their importance an in formal meeting. The agenda
should be previously distributed to the participants.
ii) Move the discussion along:
As a leader, it is your role to control the agendas. When one is finished, you should pick
up the next item. Sometimes, the discussion may deviate from the main subject-matter; in
that case you have to bring the discussion back to the right track.
iii) Control those who talk too much:
In the meeting, few people try to dominate the discussion. Your role is to control them
but as long as their talks are contributing to the goals of the meeting, you can let them go
on. At the same time our job also includes encouraging those people who do not speak at
all.
i. Control time:

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In advance, you need to determine how much time will be needed to cover the items
of the agenda. You should attempt to manage time effectively.
ii. Summarize at appropriate places:
After an item has been discussed, you have to sum it up. You should formally
initiate a new item and end it in the same formal way of giving a summary.
Question No. 6
Explain the use of non-verbal cues in effective oral communication 10
Answer:
In oral communication, besides the words we speak what our audience sees in us is part
of the message and it can have a very real effect on the success of our speech. What our
audience sees, of course, is we – the presenter. They also see what surrounds us. Thus, in
our efforts to improve the effects of our oral presentations, we should thoroughly
understand the communication effects of what our listeners see.
The communication environment: The physical appearance, like the stage, lighting,
background, etc. surrounds us. When we speak, they play significant role in transmitting
the message from speaker to listener. Besides, the outside notice also has the related
influence. For the best communication result, the factors in our communication
environment should contribute to our message.
Personal appearance: The presenter‟s physical appearance is part of the message the
audience receives. Though our personal physical traits are the part of what we are, the
conscious and appropriate use of them can make our presentation effective. Specifically,
we should dress in a manner appropriate for the audience and the occasion. We should be
clean and well groomed and use the facial expressions and physical movement to our
advantage.
Posture: Posture can be used to determine a participant‟s degree of attention or
involvement, the difference in status between communicators, and the level o obvious
thing that our audience sees in us, it is important to maintain god posture while making
presentation. Our body weight must be distributed in a way consistent with the
impression we want to make. We should keep our body erect without appearing staff and
comfortable without appearing limp. We should maintain poise, alert communicative
bearing. And we should do all this naturally.
Body of the letter:
The actual message of course contained in the body of the letter. It is the most important
part of the letter and lies between the salutation and the complimentary close. The
language here should be tactful and formal. Redundancy should be taken care of.
Question No. 7
Answer these questions: (5+5=10)
a) Change the following remarks into more polite forms of English
i) Please send the the cheque within the required date.
ii) Would you pass me that newspaper, please?
iii) Can you write it for me?
iv.)Will you send us your proposal?

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v) I request you to withdraw you claim

b)Combine the following sentences by suing a relative clause:
i) Jack was shot at the end. They had given all responsibilities to Jack
ii) He joined the army. His father is also in the army.
iii) It was the book. I had been searching for the book for long.
iv) He burnt the shelf. He took all the books form the shelf.
v) The garden was really beautiful. She used to spend most of the time in the garden
Answers
a)
i) Please send me the cheque within the required date.
Would please send onus the cheque within the required date/
ii)Would you pass that newspaper, please?
I wonder if you pass on me the newspaper.
iii) Can you write it for me?
Would you mind wring it for me?
iv) Will you send us our proposal?
I don‟t suppose you could send us your proposal, could you?
v) I request you to withdraw your claim
Will it be alright if you kindly withdraw your claim?
b)
i) Jack was shot at the end. They had given all responsibilities to Jack.
Jack to whom they had given all responsibilities was shot at the end.
ii. He joined the army. His father is also in the army.
He, whose father was in the army, joined it.
iii It was the book. I had been searching for the book for long.
It was the book which I had been searching for long.
iv. He burnt the shelf. He had taken the entire book out of the shelf.
He burnt the shelf from which had had taken all the books out.
v. The garden was really beautiful. She used to spend most of the time in the garden.
The garden where (in which) she used to sped most of the time was really beautiful.
Question No. 8
Write short note on any TWO of the following: (2x5+ 10)
a) Resume
b) Press Release
c) Upward and downward communication
Answers:
a) Resume- a document which involves one‟s personal details, education, qualifications,
skills, experiences, etc. required for a job advertised in the paper. In other words, a
resume is the personally developed details of an individual consisting of overall
information related to a candidate‟s educational qualifications, academic achievements,
job experiences, professional expertise and skills and son on. All the information should
be logically organized under different headings and in different columns and points. The

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following constitute different parts of a resume: 1. Resume Head. 2. Objectives/smart

statements, 3. Academic History. 4. Areas of Specicialization.
A resume is written on a separate page after the job application letter. A resume is
preceded by a cover letter which is a step to job security.
Types of Resume:
A resume is of the following types:
a. Functional Resume (focusing on the special educational qualifications, skills,
experiences, etc.)
b. Chronological Resume: Focuses on the recent job history of the candidate.
c. Combined Resume: This includes distinguishing qualities of both types of resume.
b) Press release: It is an announcement which an office/ organization/ company/ sends to

the press and other media for publication about anything which it considers to be news
worth. A press release is not an advertisement but it can result in useful publicity for the
company. It is the means of many on any topic of public interest. New schemes or
policies, relevant decisions and the matters of public interest are made public through
press release.
c) Upward and downward communication:

Upward – Communication directed upwards in terms of rank, e.g. from clerks to the
managers, managers to the managing director, etc. The means of communication can be
reports, memos, etc.
Downward- High levels communicate with staff below them. The means can be memos,
notices] letters, notes, manuals, office order, etc.

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Suggested Answers of Economics
Marks
Attempt all questions.
Part - 'A'
Question No. 1
Answer the following questions (ANY TWO):
a) Define price elasticity of demand. How is it measured with the help of total outlay
method? (3+7=10)
Answer
Price elasticity of demand is the percentage change in quantity demanded in response to
percentage change in price. The price elasticity shows a what rate the demand changes with
change in price.
proportionate change in quantity demanded

Ep = proportinate change in price
q
q q p q p
= =  = 
p q p p q
p
Where,
Δq = Change in quantity demanded
Δp = Change in price
p = Initial price
q = Initial quantity demanded
Measurement of price elasticity with Total outlay Method or Total Expenditure Method
In total outlay method, we see the change in expenditure as a result of change in price.
Then on the basis of change in expenditure, we say whether the elasticity is greater than
unity, or equal to unity or less than unity.
i) The more elastic demand or elasticity is greater than unity (ep>1)
When price elasticity demand is greater than unity, the total expenditure will increase with
the fall in price & will decrease with the rise in price.
ii) Unitary elastic demand or elasticity of demand equal to unity (ep=1):

When the price elasticity of demand is equal to unity, the total expenditure remains the
same with the fall or rise in price.
iii) Inelastic demand or elasticity is less than unity (ep<1):

When the price elasticity of demand is less than unity, the total expenditure will increase
with the rise in price & decrease with the fall in price.
For Example:
Price in NRs. Demands in Units Total Outlay in NRs.
7 200 1400(No.1)
4 300 1200(No.2)
3 400 1200(No.3)
2 800 1600(No.4)
In the schedule the total expenditure increase with the fall in price or decrease with the rise
in price, the elasticity is said to be greater than unity (e.g. between the two prices No.
3&4.)
When the total expenditure remains the same with the change in price (e.g. between No.
2&3), the elasticity is said to be unity.
When the total expenditure decreases with the fall in price or increase with rise in price,
the elasticity is said to be less than unity (e.g. between the two price 1& 2)
This can be explained with the help of diagram:

Y
R
P e >1
N K
e =1
M T
e <1
O X
Total Expenditure
In the diagram, we get a backward bending curve i.e. OTKR curve. The position OT
represents less than unity elasticity because an increase or decrease in price increase or
decrease total expenditure. The position TK represents unity elasticity because a change in
price has no effect on total expenditure. The position KR represents more than unity
elasticity because an increase in price decreases the total expenditure & decrease in price
increases the total expenditure.

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b) What is monopolistic competition? How are the price and the output determined under
it in long run? (2+8=10)
Answer
Monopolistic competition is that form of market in which there are many sellers of a
particular product, but each seller sells somewhat differentiated product. This implication
of fairly large number of firms is that each of the firm produces a small share of the market.
Product differentiation is the key element in monopolistic competition. The products
produced by different forms are similar but not identical.
There are no restriction on the entry of new firms which is known as freedom of entry in
the sense that, new firms are free to produce the close substitutes. Firms under
monopolistic competition has to compete with each other not merely by price cutting, but
also on the basis of non-price competition, i.e. producing differentiated products, incurring
advisement expenditure etc.
Long-run is a period in which market supply cannot be adjusted according t change in
market demand. It is due to lack of sufficient time to vary units of all input.
In the long-run the monopolist firm can earn only super-normal profit but in monopolistic
competition, the firm can earn only normal profit. That means in the monopolistic
competition, no firm would make any profit or loss in the long-run. Because of free entry,
profit will attract new firms. Then the new firms enter into the group (industry), the supply
of the product increases and price decreases due to the increasing competition for factors of
production. After that cost increase and decrease in price and profit will decline. If there are
losses the loss bearing firms leave the group (industry) & the supply decreases & price
increases. The average cost decrease due to the decline in competition for the factors of
production. So the firm need not incur loss and all the firms earn normal profit in the long -
run.
The long run equilibrium under monopolistic competition indicates one important fact that
the firm will not produce optimum output. There will always be excess capacity. The firms
are not in a position to operate their plants to maximum capacity. The difference between
the optimum output and the equilibrium output is called as 'excess capacity' and a excess
capacity is a main characteristic of monopolistic competition. So under monopolistic
competition in the long-run, equilibrium output is less than the optimum output. It can be
explained with the help of diagram.

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P I
O X
In the diagram, the equilibrium point is E, where MR is equal to MC.The equilibrium price is
OP and equilibrium output is OM. At this situation AC is equal to AR and the firm gets only
normal profit. But in this situation AC is not at the lowest point. In this figure, MM1 is the excess
capacity or MM1 is unused capacity. If the output is OM1, AC declines but the reduction in the
price will be higher than reduction in cost. That means cost (RM1) is higher than the price (SM1).
So the firm will not produce the optimum output.
c) Explain the law of variable proportions. Does it apply only in agriculture? (7+3=10)
Answer
The law of variable proportions is associated with the short run production function. This
law shows the effect on the output with the variation in factor proportions. In other words,
it examines the production function with one variable input, keeping other factors constant.
When the quantities of a variable factor- labour- are applied to given quantity of a fixed
factor, the proportions between the two factors (fixed and variable) also changed.
Therefore, this law is called the law of variable proportions.
According to Benham, " As the proportion of one factor in combination of factor is
increased, after a certain point, first the marginal product and then the average product of
that factor will diminish."
Table:
Units of factor Output (in units) Stage of Production
(N) TP AP MP
1 10 10 10
2 30 15 20 1st stage
3 60 20 30
4 80 20 20
5 90 18 10
6 90 15 0 2nd stage
7 80 11.4 -10 3rd stage

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Y
H
F II
I Stage III
Stage Stage TP
K
AP
X
O N M
Y' MP
Unit of Variable Factor
This law is explained in three stages: stage I, stage II and stage III.
Stage I: Stage of Increasing Returns
According to the schedule and diagram, in the stage I, the total product (TP curve)
increases at an increasing rate initially and increases at a decreasing rate later. In this stage
marginal product (MP curve) goes on increasing and reaches to the maximum then starts
falling, but it remains positive. MP is highest at vertically downward to the point F. The
point F, where the total product changes its slope, is called point of inflexion. During this
stage average product (AP curve) is rising throughout its length and reaches to the highest
at point K at the end of the stage I. This stage is known as stage of increasing returns
because the average product of the variable factor increases throughout this stage.
Causes of Operation:
i) Indivisibility of fixed inputs
ii) Specialization of labour through division of labour
Stage II: Stage of Diminishing Returns

In this stage the total product (TP curve) goes on increasing at a decreasing rate and
reaches to the highest point, H, at the end of this stage. In this stage both marginal and
overage product of the variable factor (i.e. MP and AP curve) are declining but positive.
Vertically downward to the point H, the MP is zero at the point M, which is the end of the
stage II. This stage is called the stage of diminishing.

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i) Utilization of fixed inputs at full capacity
ii) Imperfect substitution of variable inputs to fixed inputs.
Stage III: Stage of Negative Returns

In this stage the total product (TP curve) is declining. The marginal product (MP curve) of
the variable factor is negative and the MP curve goes below the x- axis. This stage is
called the stage of negative returns because the marginal product of a variable factor is
negative.
i. Inefficient utilization of variable input
Basically, the law is applicable in agriculture sector due to following reasons:

i) Agricultural production is largely influenced by climate, rainfall and weather
conditions.
ii) Modern tools and techniques can't be applied in agricultural production.
iii) The soil quality may not remain constant to increase in output.
iv) All types of land are not equally fertile. Therefore marginal product of labour falls to
the inferior land.
Question No. 2
Answer the following questions (ANY THREE): (3×5=15)
a) Explain the shape of revenue curves under perfect competition.
Answer
Perfect competition is that situation where there are large numbers of buyers and sellers
and they can not influence the market price of commodity. Under perfect competition, the
firm must take price at which they are to sell as fixed. The demand for the production for
an individual firm is perfectly elastic. The AR or the price remains constant. If diff0erent
units are sold at same price, MR equals price. So the price or AR does not change when
more units are sold, then MR will be equal to price or AR. Under perfect competition, the
commodities produce by all firms is homogenous so that the consumers have no motive for
preferring the product of one firm to another. If a firm rises its price, its sale would fall to
zero. Hence under perfect competition, there will be only one price in the market. This can
be explained with the help of the schedule and diagram.
No. of Price or AR(in TR in MR in

Units Sold NRs.) NRs. NRs.
1. 16 16 16
2. 16 32 16
3. 16 48 16
4. 16 64 16
5. 16 80 16
In this example, the firm has accepted the price of NRs. 16 per dot pen determine by the
industry. In the above table, price remains constant when more units are sold.

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TR goes on increasing as more and more units are sold but rate of increase in TR is
constant. When AR remains constant and MP is equal to AR which can be shown in
figure.
Y Y
Price/AR & MR
Total Revenue
TR
AR/MR
P
O Quantity X O Quantity X
Fig. A
Fig. B
In the Fig. A, TR rises upward that means TR increases when the quantity sold increases.
In the Fig. B, AR & MR curves are horizontal straight line. Horizontal straight line
indicates price or AR remains the same at OP level. When quantity sold in increased &
demand is perfectly elastic, MR curve coincides with AR curve since MR is equal to AR.
b) What are the uses of microeconomics? Explain any four.
Answer
Microeconomics examines how resources are allocated among various individual firm &
industries, how the prices of various product these who cooperate in the production of the
output. Microeconomics is very useful in decision making which are as follows:
Microeconomics examines how resources are allocated among various individual firm &
industries, how the prices of various product these who cooperate in the production of the
output. Microeconomics is very useful in decision making which are as follows:
i) To understand the functioning of free economy: Microeconomics deals with the how an
individual maximizes his satisfaction subject to his budget constraint & how a rational
producer tries to maximize his output at the given cost. There is maximum role of
government in free economy. Micro economics helps to understand optimum allocation of
resources.
ii) Price determination: Microeconomics is also called the price theory as it explains the
product price determination & factor price determination. Micro economics is useful to
understand the price determination in different market structure. Similarly, it is helpful
to determine price of factor inputs such as wage, rent, interest & profit in perfect &
imperfect markets.
iii) Useful in business decision-making: It helps business executive in the attainment of

maximum production by the given amount of resources. With the help of
microeconomics business firms can make decisions in demand analysis, cost analysis
and methods of calculation prices. And prediction of economic events or variables.
iv) To provide tools for economic policies: Microeconomics helps in the formulation of
economic policies for the promotion of mass welfare. It is on the tenets of

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microeconomics that we ascertain the effect of government policies on the allocation of

resources and pricing of certain public utilities like postal service, railways, water,
supply, electricity, etc. Microeconomic theories may also be applied to examine the
implications and effectiveness of the policies adopted by the government.
v) Efficient employment of resources: The price theory deals with decisions and their
consequences on economy and efficiency. In this sense, microeconomics is used by the
government for the efficient use of scarce resources and for achieving sustained
economic growth.
c) Explain the principle of diminishing marginal rate of substitution.
Answer
Marginal rate of substitution is the rate at which one commodity is substituted to another. It is the
rate of substitute, which the consumer prepares for one extra unit of another commodity.
Mathematically, it can be expressed as the ratio of change in Y to change in X.
MRS = ΔY/Δ X, where Δ means change.
It can be explained by the help of the following table.
Combination X–Goods Y–Goods MRS
A 1 50 –
B 2 30 20
C 3 20 10
D 4 12 8
E 5 8 4
Initially, a consumer gives up 20 units of Y for one unit gain in X so MRS in 20. Similarly
while moving from B to C & then from C to D & then from D to E, the MRS of X for 10,
8 & 4 respectively.
The following factors are responsible for diminishing MRS.
i) The want for a particular good is satiable so that as the consumer has more & more of a
good the intensity of his want for that goods goes on declining. So, as the stock of good
X increases, the intensity of desire for it falls. On the other hand, as the stock of good Y
decreases, the intensity of desire for it increases.
ii) Two goods are not perfect substitute if they were the perfect substitutes there would be
constant rate of substation.
A
Y1
Labour
X1 B
Y2 X2
C
IC
O Capital

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Y1
In figure, the rate of substitution while moving from A to B is , & the rate of
X 1
Y2 Y1 Y2
substitution while moving from B to C is & > .
X 2 X 1 X 2
Graphically, slope of indifference curve is known as marginal rate of substitution.
d) What are the sources of supply of loanable funds?
Answer
According to this theory, rate of interest is determined by the demand for and supply of
loanable funds. It is also termed as loanable funds theory of interest.
The supply of loanable funds comes from the following sources.
 Savings by the households and firms: Saving is the part of income which is not sp[ent
on consumption. Saving depends upon two factors: a) size of income and, b) rate of
interest. At constant level of income, saving varies positively with interest.
 Bank credit: It is another source of the supply of loanable funds. Banks advance loans
by creating credit. It is also interest elastic. Banks tend to lend more funds at a higher
rate of interest and less at a lower rate of interest.
 Disinvestment: Disinvestment means allowing the existing machinery to wear out
without and being replaced, i.e; not providing the sufficient funds for depreciation. It
also varies positively with rate of interest.
 Dishording: Dishording means bringing out hoarded money and making it available
for lonable funds. At a higher rate of interest people are induced to dishord money and
increases the loanable funds.
Question No. 3
Answer the following:
a) Justify the following statements with appropriate reasons (ANY THREE): (3×2=6)
i) Macroeconomics is also called income and employment theory.
ii) The VMPL curve slopes downwards to the right.
iii) The short run AC curve is U-shaped.
iv) Monopoly firm is a price maker.
Answer
i) It explains the process of income and employment determination. Hence, it is called
income and employment theory.
ii) Due to the operation of law of diminishing marginal returns in the productivity of
labour, VMPL curve slopes downwards to the right.
iii) Due to the operation of law of variable proportion in shortrun, AC is U-shaped.
iv) Being a sole seller, monopolist has full control over its supply. Hence, he can influence
on price of his product.
b) Write short notes on (ANY THREE): (3×3=9)

i) Accounting cost and Economic cost

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ii) Economic rent and Contract rent

iii) Linear and Non-linear supply functions
iv) Production possibility curve
Answer
i. During the evaluation of financial position of any firm or entity, only monetary
expenses incurred on factor services provided by outsiders are taken into
consideration. Such expenses are called explicit costs. For example all kinds of
expenses like salary, carriage, production costs are explicitly paid to the outsiders
except to the owner himself. These costs are entered in the books of accounts by the
accountants. Therefore, the explicit costs are also called accounting costs. On the other
hand, economic costs are the aggregate of both explicit costs and implicit costs. That
means economic costs include the accounting costs plus implicit costs like the rent,
salary of the entrepreneur and normal profit earned by him.
Economic Cost = Accounting Cost or Explicit Cost + (Implicit Cost + Normal Profit)
ii. Generally, rent means the payment made by tenants to landlords for the use of a
building or a farm. But in economics, rent means only those payments which are made
to the landlord for the use of his land. Rent which is paid to the landlord is usually
gross rent. It includes rent not only for the use of land but also for the use of the
factors like building, land, electricity etc. Thus the total payment made by the tenants
is called gross rent or contract rent. The payment is is the result of an agreement or
contract. It includes the pure rent, cost of land maintenance, reward for risks, reward
for management etc.
According to Ricardo, economic rent is the differential surplus of productivity of intra-
marginal land and productivity of marginal land.
According to Mrs. John Robinson, economic rent is the surplus of actual earnings over
transfer earnings.
iii. If the slope of supply curve remains constant throughtout its length, it is said to be
linear supply function.
If the slope of supply curve changes all along with its length, it is said to be non-linear
supply function.
Mathematically,
Linear supply function: Qx = a + bPx
Non-linear supply function: Qx=aPxb
Where,
Qx=supply of x good, Px=price of x good
A=autonomous supply, b=slope of supply curve

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Figure
PX
PX D1
D1
Non-linear
Linear Demand Demand
Curve D Curve
D
o X o QX
iv. It is the graphic representation of alternative production possibilities in an economy. It

shows various production possibilities that can be produced with given resources and
technology. In short, it depicts the society's menu of choice.
Figure
A
A1
Y Good
X
0 X Good B B1

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Based on given figure, AB is the production possibility curve sloping as concave

downwards. It is due to the operation of law of increasing marginal rate of technical
substitution. It tells us that we can produce more of anyone commodity by giving up some
of the other. Hence, it is called transformation curve. If the productive capacity of the
economy increases, PPCshifts rightwards from AB to A1B1.
Part - 'B'
Question No. 4
Answer the following questions (ANY TWO):
a) Define GDP at market price. How is it computed by product method? (2+8)
Answer
GDPMP refers to the total market value of all final good & services produced within the
country over a period of one year.
When all good & services produces in a country over a period of one year are expressed in
terms of monetary value, the GDP will be obtained. It reveals the aggregate economic
performance of the national economy as a whole.
According to fisher, "The national dividend or income consists solely of services as

received by ultimate consumers, whether from their material of from their human
environment." National income represents as a receipt total, on expenditure total and the
total value of productions. Mathematically, national income is written as N1 = (Y1 + Y2 +
.............. Yn), where Y indicates income.
This method consists in finding out the market value of all final goods & services produced
in a country during one year. This method is also called inventory method or commodity
service method. This method helps to find out the origin of national income from different
sectors of the country.
In this method, first we estimate the gross value of domestic product in a various sectors of
production (economy) such as agriculture, mining, manufacturing, transport,
communication, trade & social services etc. The total of these would give us gross
domestic product (GDP) & we add the net income from abroad, we get gross national
product (GNP). Then we deduct the depreciation cost from GNP, we get the national
product (NNP).
In this method, generally two methods are used to avoid double or multiple counting in the
calculation of national income. They are:
i. Final Product Method
ii. Value Added Method

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i. Final product Method: In this method, we count only final goods & services leaving out
all intermediate goods. It should be remembered that final goods & services are those
which are finally consumed by the consumers. Intermediate goods & services are those
good & services, which do enter in the production of other goods & services. So the
intermediate products are to be excluded from the GNP. For example, bread is a final
goods but flour is an intermediate goods.
ii. Value Added Method: In this method, we do not take into account the value of final
goods & services produced in a country. We go on adding value created at each stage in
the manufacture of a commodity. This method can be illustrated by means of simple
example.
Stages of production Sales value of Increases in value in NRs.

commodity in NRs.
1. Cotton growing farmer 300 200
2. Cloth manufacturing factory 900 600
3. Readymade garment firm 1500 600
4. Retailer 1800 300
Total 4500 1700
Let us suppose that a readymade cotton shirt passes through four stages of production. In
the first stage, the farmer produces cotton by using seed of NRs 100 & sells at price NRs
300, which producing the cotton, the amount of NRs 100 which has been included in the
previous year's national income. Hence NRs 200 (300–100) is the second stage, the raw
cotton is converted into cotton in a factory & its sales value is NRs 900, but actually cost
is NRs 600. In this stage the cotton cloth is converted into cotton shirt by the readymade
garment firm & actual cost is NRs 600, but sales value is NRs 1500. In the fourth stage,
the readymade cotton shirt is sold to a retailer from whom the consumer finally purchases
it. So in this stage the cotton shirt reaches to the consumer, the total value added will be
obtained.
Here, total value added is NRs 1700. Therefore we should add NRs 1700 to the national
income of the country because this repreqents the value of the final production of the
cotton shirt. If we add NRs 4500, it will give us a wrong picture of the national income of
the country. When computing national product by value added method, there would not
the problem of double counting. This gives the correct data. For example, if the national
income is measured on the basis of selling price, then it will be many times more than the
correct date. The main reason for this is the double counting. This double counting occurs
for not deducting the cost of intermediate goods, which should have been deducted in
every stage of production.
b) Define poverty. What are the causes of poverty in Nepal? (4+6)
Answer

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In general poverty means inability to attain a minimal standard of living. The World Bank
has defined poverty as „a state of economic, social and psychological deprivation
occurring among people or countries lacking sufficient ownership, control or access to
resource to maintain minimum standard of living”. National Planning Commission has
defined a poor as „individual with income/consumption levels below the psychologically
required level. Also it has been defined as inability to attain the basic needs of a human
being.
Nepal is considered to be one of the poorest countries in the world. Poverty in Nepal is
largely the result of widespread underemployment in the agricultural sectors. Around 38
percent of Nepalese people are estimated to be living below poverty line or are absolutely
poor.
Causes:
High rate of population growth: The high growth rate of population accompanied by the
low growth rate of economy cuts down the per capita income and the per capita
consumption expenditure and thus increases poverty.
Low Industrial Development: The pace of industrial development is very slow for lack of
the development of infrastructure appropriate industrial policy. This increasing
unemployment results in the increase of poverty.
Social Factors: In Nepal, people are poor also owing to the prevalent socio-cultural
institutions. In order to fulfill social obligations, observe religious ceremonies and perform
rites people spend extravagantly. With low income levels, they either dissave or borrow.
Since savings are negligible, the chances of borrowing are much greater. The high level
indebtedness is both the cause and the effect of poverty. Besides, illiteracy, ignorance,
conservatism born out of sectarian and religious ideas, casterism and joint family system
prevent people from adopting modern ideas and techniques whereby they could increase
their incomes and keep the wolf of poverty of their doors.
Unemployment: Due to high rate of unemployment, people are also compelled to face the
problem of poverty.
Besides these, poverty is also caused by inequality, underdevelopment, low productivity,

corrupted government mechanism.
c) Define expansionary and contractionary monetary policy. Which policy would you
suggest to control economic recession? Give reasons. (5+5)
Answer
According to Shapiro, "Monetary policy is the exercise of the central Bank's control over
the money supply as an instrument for achieving the objectives of economic policy." In
other words, it refers to the policy measures undertaken by the central bank to influence
the availability, cost and use of money and credit with the help of monetary measures to
achieve national economic goals. It is of two types:
Expansionary monetary policy

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A monetary policy designed to expand aggregate demand is called expansionary monetary

policy. The main instruments of this policy are:
i. Decrease bank rate
ii. Decrease cash reserve ratio
iii. Purchasing securities in open market
iv. Adoption of appropriate selective measures.
Contractionary monetary policy

A monetary policy designed to curtail aggregate demand is called contractionary monetary
policy. The main instruments of this policy are:
i. Increase bank rate
ii. Increase cash reserve ratio
iii. Selling securities in open market
iv. Adoption of appropriate selective measures
Recession
It refers to a upper turning stage of economic activities. In this situation, all macro-
economic variables are decreasing continuously at a low rate. I would suggest
expansionary monetary policy to control economic recession.
Cause
To control economic recession, flow of money in circulation should be increased in order
to raise aggregate demand. Thus, central bank follows expansionary monetary measures.
By such measures, there is decrease in cost and availability of credit in the money market
and improves the economy. In other words, due to the effectiveness of such policy, flow
of currency in circulation will decrease by which AD and price level will also decrease. As
a result, there will be improvement in the economy.
Question No. 5
Answer the following questions (ANY THREE):
a) What are the functions of financial intermediaries? 5

Answer
Financial Intermediaries are those institutions that intermediate between ultimate lenders
and borrowers, Money passes through these intermediaries from lenders to borrowers.
Examples of Financial Intermediaries are commercial banks, cooperatives, insurance
companies, etc.
Functions:
 They mobilize the savings of households by giving opportunities of investment
 They help to business, trade and industries sector by providing short terms and long
term loans
 They help the government by purchasing bonds.
 They reduce the risks in investment by portfolio management.
 They provide liquidity in the market by discounting bill, bonds etc.
 They also promote saving and investment habits among the ordinary people.

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 They possess greater resources than individuals to bear and spread risks mong
different borrowers.
b) Explain the psychological law of consumption function. 5

Answer
Psychological law of consumption: Consumption function refers to the general income
consumption relationship. It shows total consumption and total income. It shows the
nature of the functional relationship between consumption and income. According to this
law, people have a tendency to spend more on consumption when their income increases,
but not to the same extent as the increase in income, because a part of income in saved.
This psychological law of consumption contains the following three interrelated
propositions:
i. When aggregate income increases aggregate consumption also increases, but by a some
what smaller amount.
ii. The increase is income will be divided in some ratio between saving and consumption.
iii. Both saving and consumption will increase as a result of the increase in income.
iv. Keynes psychological law of consumption is based on the following assumptions:
v. It assumes constant psychological and institutional complex
vi. It assumes the existence of normal circumstances
vii. It assumes the existence of a laissez-fair capitalist economy.
This law can be explained with help of the diagram.

Y
B
E
A
45°
X
O Y Income
In the figure, the 45°(Y=C) line indicates that all the point on this line whole income is
consumed and nothing is saved. The AEB line represents consumption function. It is

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drawn according to the Psychological law of consumption. It indicates that as income

increases, but not as fast as income. AEB line starts from point A and not from origin o.
This is because of the fact that when income falls to zero, consumption does not fall to
zero. At OY level of income, consumption becomes equal to income and neither dissaving
or saving. After this, as income increases, consumption also increases, but increase in
consumption is less than the increase in income, apart of the increase in income is saved.
c) Define fiscal policy. How does it help to achieve full employment and economic
growth? (1+4=5)
Answer
The objective of fiscal policy may differ from country to country according to the level of
development. Similarly, its objectives may differ from time to time in the same country
according to the level of development and national objectives. Generally, main objective
of fiscal policy in developed countries is to achieve the higher economic growth whereas
in developed countries is to maintain the existing growth rate. The main significance of
fiscal policy in order to achieve economic growth and full employment are explained
below:
i. Economic growth: The achieve the high and sustainable economic growth is one of the
major objectives of fiscal policy. Given the manpower, technology and the natural
resources, the growth rate of a country depends on the rate of savings and investment. The
role of the fiscal policy in the regard is to create conditions for increase in private savings
and investment and to enhance investment in public sector. In order to promote savings,
the rate of income tax is reduced and tax incentives are provided for savings and corporate
sector is provided with a number of incentives and concessions include tax holidays, high
depreciation allowances, investment subsidies, exemption of import duties on capital
imports and so on.
ii. Higher level of employment or full employment: Maintaining full employment in the
developed countries and creation of employment opportunities for millions of unemployed
person in the less developed countries has been one of the objectives of fiscal policy.
According to Keynesian theory of employment, all fiscal measures that accelerate the pace
of economic growth promote employment also. In order to increase the employment level
in a country, government can increase spending on goods and service, provides transfers
to the low income groups and can reduce tax rates. All of these three efforts would lead to
an increase in AD so that employment may increase.
d) What are the characteristics of Nepalese agriculture? Explain any four. (1+4=5)
Answer
The Characteristics of Nepalese Agriculture are:
i. Subsistence agriculture: Nepalese farmers perform agricultural activities for subsistence.
Commercial, collective and cooperative farming is very limited. The principal aim of the
Nepalese farmers is to get the means of subsistence i.e. food from agriculture. There are
small numbers of farmers who have a very low saving potentiallity. What they produce is
barely enough for them. They hardly can meet their basic needs. Commercial farming is
done in a very limited area and on a very modest scale.

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ii. Agriculture depends on monsoon: Nepalese agriculture depends largely on the monsoon
rains. It is said that rains in Nepal are inadequate, uncertain and irregular. Irrigation
facilities as available only to 64 percent of the total irrigable land. So the Nepalese farmers
always look up to the skies for rains. They exchange their dream of good harvest with
monsoon.
iii. Small size of land holdings: Land holdings of the farmers in Nepal are very, small, and
have mostly been fragmented over the years. From such an 'uneconomic' land holding
level increase in agricultural productivity cannot be expected. In the absence of alternative
occupations, sub-divisions of inherent properties of farmers having been taking place. This
is one of the reasons for the smallness of land holdings. The possibility of mechanization
and modernization of agriculture is almost a dream. As a result, the agricultural
productivity of agriculture has not increased.
iv. Low productivity: Nepalese agriculture is characterized by low productivity. In respect

of output per hectare of land, agricultural productivity in Nepal is far below the level of
agricultural productivity in developed countries. The food grain production per hectare
was 1.85mt (according NSCA) because of the use of primitive technology. Low per capita
income and smallness of land holdings are responsible for the low productivity of
Nepalese agriculture.
v. Predominance of food crops: Major food crops such as paddy, wheat, maize and millet
are predominant in Nepalese agriculture. According to Economic Survey 2006/07, it is
estimated that about 76% total crop area produce food crops and in the remaining 20% of
land, produce cash crops like tobacco, cotton, tea, jute, sugarcane vegetable and fruits. The
chief crop of Nepal is paddy, which alone forms 36% of crops.
Question No. 6
Answer the followings:
a) Justify the following statements with appropriate reasons (ANY THREE): (3×2=6)
i) Induced investment varies positively with the level of income.
ii) Nepalese economy is dualistic in nature.
iii) Economic development is wider term than economic growth.
iv) Capital gains are excluded from GDP at factor cost.
Answer
i. Induced investment is the investment made by general people out of their savings. When
general investors find the expenditures less than their income they get induced to use the
saved money as investment. This means higher the income higher the investment and
vice-versa. Therefore, in order to increase this type of investment, productive environment
must be created.
ii. Because of co-existence of market economy and subsistence(or barter) economy in

various parts of the country, Nepalese economy is dualistic in nature.

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iii. Economic growth refers to increase in real national output over a period whereas
economic development refers to increase in real national output with structural changes in
a society. Hence economic development is wider term than economic growth.
iv. Capital gains are excluded from GDP at factor cost because they donot add productive
capacity of the economy.
b) Write short notes on (ANY THREE): (3×3=9)

i) Principles of WTO
Answer
WTO is an international multilateral organization which facilitates in regulating global
trading system. It has set up many agreements regarding trade, intellectual property, e-
business and it acts as the authority to resolve trade disputes It can penalize its
members if found to disobey its rules and regulation during trading.. Its principles are
as follows:
 To create a discrimination-free trading environment among all members around the
globe. No person or the country can be discriminated in any way
 To encourage members to remove trade barriers in the name of customs or other
charges and allow free and competitive trade among members.
 Removal or rules and regulates that disallows foreign (non-domestic) companies to
enter into domestic market and trade freely.
 Transparency should be maintained in every activities of trade.
 Providing more privileges to the less developed countries and give them
opportunity to adjust and compete.
ii) Economic liberalization

Answer
Economic liberalization means the process of shifting the economy from government
control to market economy. The process of liberalization includes the program, such as
removing government control from domestic as well as foreign trade and privatization
of public enterprises, etc.
Nepal ahs adopted the policy economic liberalization after the restoration of
democracy in the country in 1990.
The main significance of economic liberalization are listed below:
 Reduce budget deficit
 Increase in competition
 Efficient use and allocation of resources
 Increase in production
iii) Mixed economy

Answer
The term mixed economy implies an economy in which both the sectors, i.e. the private
and public sector exist simultaneously, the public sector enjoying a definite role. Neap
has adopted mixed economy
The main characteristics of mixed economy are:

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 There is coexistence of private and public sectors in the operation of economic

activities.
 Public sector plays special role in the economy because it regulates and supervises
working of a whole economic system.
 Under this economic system, all types of economic activities are guided and
controlled by economic planning.
 It includes only positive aspects of capitalism and socialism and avoids evils of
these system.
iv) Cyclical and disguised un employment

Answer
Cyclical unemployment is caused by deficiency in aggregate demand. It is associated
with simultaneous unemployment of all the resources, lobour and capital during
economic recession. Since, cyclical unemployment arises due to deficiency of AD, it
can be eliminated by raising AD sufficiently so as to lift output which can be produced
with full utilization of labour.
Disguised unemployment refers to a situation when a person is apparently employed,
but in fact is unemployed. This type of unemployment prevails mostly in rural areas. It
can be eliminated by modernization of agriculture and creation of alternative
employment opportunities in these areas.

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Suggested Answers of Math and Statistics
SECTION – 'A'
A man retires at the age of 60 years and gets a pension of Rs. 1200 a year payable in half
yearly installments for the rest of his life. Taking his expectation of life to be 13 years
further, that the interest is at 4% p.a. payable half yearly, what single sum is equivalent to
this pension? 5
Answer
Here,
Pension (P) = Rs. 1,200 p.a. = Rs 600 per half year
Life (n) = 13 Years = 13×2 = 26 half yearly installments
Interest (r) = 4% per annum = 2% half yearly
r
 Discounting Factor (i) =  0.02
100
p 1 
Now present value of an annuity = 1 
i  (1  i)n 
600 1
= [1  ]
0.02 (1.02) 26
= Rs. 12,075

Convert the following hexadecimal number into binary number system 5
(15 A2 B)16  (.........) 2
Answer
Here,
1  0001
5  0101
A  10  1010
2  0010
B  11  1011
(15 A2B)16  (00010101101000101011)2

What is combination? How does it differ from permutation? Out of ten packets of instant
noodles, three packets have a coupon of special prize inside, but it is not known which
have prize. In how many ways three packets can be selected? How many of these
selections will include at least one prize? 5
Answer
The different groups (or selections) that can be formed out of a given set of objects by
taking some or all of them at a time ( without any consideration to their arrangements) are
called combinations.
In permutation, the order of that selection is also counted, but in combination, order is not
counted.
Three packets can be selected out of ten packets in 10C 3  120 ways.
One prized packet can be selected in 7 C2 3 C1  63ways
Two prized packet can be selected in 7 C1 3 C2  21ways
Three prized packet can be selected in 3C 3  3way s
Total number of selections including at least one prized packet = 63+21+1=85.

Every year, a person buys saving certificates issued by Nepal Rastra Bank. His purchases
in each succeeding year increases by Rs.100. After 10 years, he finds that the total value
of the certificate held by him (excluding interest) is Rs.5000. Find the value of the
certificate purchased by him:
i) in first year and
ii) in the 8th year. 5
Answer
The sequence of the values of the saving certificate purchased forms A.P.
(i) Let ‘a’ be the value of certificate in first year.
d = 100, n=10, sn = 5000
We know that
n
sn   2a  (n  1)d 
2
10
5000 =  2a  (10  1) 100
2
a  50
 The value of saving certificate in first year =Rs.50
(ii) a  50, d  100, n  8, tn  t8  ?

tn  a  (n  1)d
t8  50  (8  1) 100  50  7 100  750
 The value of saving certificate in 8th year = Rs. 750.

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A manufacturer of a certain brand of watch finds that the production cost to each watch is
Rs 200 and the fixed cost is Rs 100,000. If each watch can be sold for Rs 300, determine: (1+1+1+2=5)
i) the cost function
ii) the revenue function
iii) the demand function
iv) the break even point
Answer
Let X be the number of watches produced and sold.
i) the total cost function C(X) = F(X) + V(X), where
Fixed cost F(X) = Rs 100,000
Total variable cost V(X) = Rs 200X
C(X) = Rs (100,000+200X)
ii) Revenue function R(X) = market price * quantity sold = 300 X
R( X ) 300 X
iii) Demand function is p =   Rs 300
X X
iv) The break even point is obtained by solving R(X) = C(X)
or 300X = 100000 + 200X
or 100X = 100000
X = 1000
Hence, 1000 units is the break even point.

For the following matrices K, V and W where,
R1 R2 R3 R4 R1 R2 R3 R4
S1  6 8 3 4
 5 7 4 5  ;V =
R1
 20 
18
S1  2 2 1 3 
S  1 3 1 2
R
R3  24  ; W = 2 
2
K = S2   
R4  35 
S3  8 3 5 1 S 3  3 1 2 0 
Matrix K shows the stock of four types of record players R1, R2, R3 and R4 in three shops
S1, S2 and S3. Matrix V shows the values of the record players in ('00) rupees. Matrix W
gives the week's sales. Find:
i) the stock at the end of the week. 2

ii) the order matrix to bring the stock of each of the cheaper pair of players to 8 and the
dearer pair to 5. 3
Answer
R1 R2 R3 R4
S1  4 6 2 1
i)Stock at the end of the week = K-W= S 2 4 4 3 3
S 3 5 2 3 1
R1 R2 R3 R4 R1 R2 R3 R4 R1 R2 R3 R4

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S1 8 8 5 5 S1 8 8 5 5 4 6 2 1
 
ii) Order matrix = S 2 8 8 5 5 - (K-W) = S 2 8 8 5 5 - 4 4 3 3
     
S 3 8 8 5 5 S3 8 8 5 5 5 2 3 1
R1 R2 R3 R4
S 1  4 2 3 4
= S 2 4 4 2 2
S 3 3 6 2 4

One kind of cake requires 150gm flour and 50gm fat and another kind requires 75gm
flour 75gm fat. We want to make as many cakes as possible when 1500gm flour and
600gm fat are available. Formulate the problem and shade the feasible area. (2+3=5)
Answer
Let number of first type cake =x
And number of second type cake =y
Maximize Z = 5x+3y
Subject to 2 x  y  20
2 x  3 y  24
x  0, y  0
The corresponding equations are

2 x  y  20 2 x  3 y  24
When x = 0, y = 20 when x=0, y = 8
When y = 0 , x=10 when y =0, x=12
Graph:
(0,20)
B(9,2)
C(0, 8)
(12, 0)
O(0,0)
A(10,0)

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The graph of the solution set is shown in the figure. The vertices of the feasible region
OABC are O(0,0), A(10,0),B(9,2) and C(0,8).
Vertices X Y Z=5x+3y
O(0,0) 0 0 Z=0+0=0
A(10,0) 10 0 Z=5×10+3×0=50
B(9,2) 9 2 Z=5×9+3×2 = 51
C(0,8) 0 8 Z=5×0+3×8 = 24
Thus maximum profit Z = Rs.51, when

Number of first kind of cake =9
Number of second kind of cake = 2

1 –cosB
If tan A = sinB , prove that B = 2A. Use this result to prove that:
o
tan (7½) = 6 – 3 + 2 – 2 (2+3=5)
Answer
We know,
1  CosB
tan A  ------------------------ ( i )
SinB
2Sin 2 B / 2 SinB / 2
or tan A    tan B / 2
2SinB / 2  CosB / 2 CosB / 2
or A = B/2 B = 2A Proved
 1
Further to prove tan  7   6  3  2  2
 2
0
 1
Let  7   A , then 2A = B B = 15 0
 2
1  CosB
Again from equation ( i ) tan A 
SinB
 1  1  Cos15 1  Cos(45  30) 1  Cos45  Cos30  Sin 45  Sin30
or tan  7   = =
 2 Sin15 Sin (45  30) Sin 45  Cos30  Cos45  Sin30
 1 3 1 1
1      
= 
2 2 2
 

2  2 2  3 1 2 2  3 1 3 1  
1

3

1 1

3 1 3 1 3 1
=
  
2 2 2 2
2 6 2 32 2 4
 6  3  2  2 Proved
2

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A firm has a demand function p = 108-5Q and the cost function C= -12Q+Q2, where p is
the price per unit, Q is the quantity produced and C is the total cost. Find the price at
which the profit is maximum. Find the maximum profit. 5
Answer
Here
Cost function C = -12Q+Q2
and demand function P = 108-5Q
 Revenue function R = P.Q
= 108Q-5Q2
 Profit function  = R-C
= -6Q2+120Q
For maximizing profit,
d
 12Q  120
dQ
d 2
 12  0( Maximum)
dQ 2
d
Taking 0
dQ
-12Q+120 = 0
Q = 10
Hence profit is maximum when Q = 10
 Maximum profit = -6×102+120×10 = 600
Also price for maximum profit = 108-5×10 = 58
Question 5 ‘b’
The marginal revenue function is given by:
MR = 3-2x-x2, x being the output. Find the total revenue and the demand function.
5
Answer
Here
MR = 3-2x-x2
 Total revenue = M.R. dx
= (3-2x-x2)dx
x 2 x3
= 3x-2.   c
2 3
When x= 0, R = 0
 0 = 0+c
c=0
 Revenue function is
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x3
R = 3x-x2-
3
And, demand function
R 1
p =  3  x  x2
X 3
Section: B
Question No. 6
A sample of 10 observations gave the arithmetic mean of 13 and a variance of 4. Later it
was found that one observation '12' included in the sample should have been '21'. (7+3=10)
a) Find the correct mean and variance.

b) What will be the mean and variance when wrong value is omitted?
Answer
Given, n= 10, X =13, σ2=4
Incorrect value =12
Correct value = 21
Here,

X =
n
 ∑X = n X =10×13=130
 Corrected X = 130-12+21 = 139
Corrected X 139
Corrected X =   13.9
n 10
1
Also, σ 2  Σx 2  (X) 2
n
2
or, Σx 2  n[ 2  (X) ]  10[4  132 ]  10(4  169)  1730
Corrected Σx 2  1730 - (12) 2  (21) 2  2027
Corrected X 2 2
Corrected 2 =  Corrected (X)
n
1
=  2027  (13.9) 2
4
= 202.7-193.21
 Corrected  = 9.49
2
Next, When incorrect value is omitted,

new Σx  130 - 12  118
118 118
and new mean =   13.11
n  1 10  1
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Also, new Σx 2  1730 - (12) 2  1730  144  1586

__
2 = _1_ new ∑ x 2 - ( new x )2
n-1
1
=  1586  (13.11) 2
10  1
= 4.34

From the information given below, find: (2.5+2.5=5)
i) Which factory pays larger amount as daily wage?
ii) What is the average daily wage for the workers of two factories?
Factory-A Factory-B
No. of wage earners: 250 200
Average daily wage: Rs.12 Rs.13.8
Answer
(i) For factory A: n1  250 x1  Rs.12 ∑x1 =?
x 1  n1 x1  250 12  3000
 Amount paid as daily wage in factory A = Rs.3000.
For factory B: n2  200, x 2  Rs.13.8, x 2 ?
x 2  n2 x2  200 13.8  2760

 Amount paid as daily wage in factory B = Rs. 2760
 Factory A pays larger amount as daily wage.
(ii) x12  average daily wage for the workers of two factories
n1 x1  n2 x2 250  12  200  13.8
   12.8
n1  n2 250  200
 The combined daily wage = Rs.12.80

Goals scored by two teams A and B in a football season were as follows:
Number of goals Number of matches
scored in a match
Team - A Team – B

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0 27 17
1 9 9
2 8 6
3 5 5
4 4 3
By calculating the coefficient of variation in each case, find which team may be considered more
consistent. 5
Answer
Computations For C.V. For Team „A‟

No of goals scored No. of matches(f) fx fx2
in a match(X)
0 27 0 0
1 9 9 9
2 8 16 32
3 5 15 45
4 4 16 64
Totals ∑f =53 ∑fx=56 ∑fx2=150
xA 
 fx  56  1.06
 f 53
 A2 
 fx  ( x )  150  (1.06)
2
2 2
 1.7064
f
A
53
 A  1.7064  1.3063
100   A 100 1.3063
 C.V. for team A    123.24
xA 1.06
Computations For C.V. For Team „B‟

No of goals scored No. of matches(f) fx fx2
in a match(X)
0 17 0 0
1 9 9 9
2 6 12 24
3 5 15 45
4 3 12 48
Totals ∑f =40 ∑fx=48 ∑fx2=126

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xB 
 fx  48  1.2
 f 40
B 2

 fx 2
 ( xB ) 2 
126
 (1.2) 2  1.71
f 40
 B  1.71  1.308
100   B 100 1.308
 C.V. for team B    109.0
xB 1.2
Since the C.V. for team B is less than the C.V. for team A, So that team B may be considered to
be more consistent.

The probability that a boy will get a scholarship is 0.75 and that a girl will get is 0.72.
What is the probability that at least one of them will get the scholarship? 5
Answer
P (A) = Probability that a boy gets a scholarship = 0.75
P (B) = " " a girl " " = 0.72
P (AB) = " " both get scholarship = P (A) ×P (B) =0.75×0.72
P (A or B) = At least one of them will get scholarship = P (A) +P (B) - P (AB)
= 0.75+0.72-0.75×0.72
= 0.93

Define measure of central tendency and what are they? (3+2=5)
Answer
The value which locates the central part of the data is known as central tendency or
measure of location. The measure of average is calculated by combining the values from
the set in a specific way and computing a single number as the average of the set.
The following are the five measures of central tendency:
 Mean
(a) Arithmetic mean
(b) Weighted mean
 Median
 Mode
 Geometric mean
 Harmonic mean

A company manufactures different types of electrical appliances. It has been using radio
for advertising its product. The following table shows amounts of radio time (X is
minutes) and the number of electrical appliances sold (Y) over the last six days:
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X : 25 18 32 21 35 29
Y : 16 11 20 15 26 28
Calculate Karl Pearson‟s correlation coefficient between two series and
interpret the result. 5
Answer
X Y X2 Y2 XY
25 16 625 256 400
18 11 324 121 198
32 20 1024 400 640
21 15 441 225 315
35 26 1225 676 910
29 28 941 784 812
160 116 4480 2462 3275
Here,
 X  160 ,  Y  116,  X  4480,  Y 2  2462, and  XY  3275
2
n XY  ( X )( Y )
Correlation coefficient, r 
n X 2    X  n Y 2    Y 
2 2
6  3275  160 116

=
6  4480  25600 6  2462 13456
1090
=
1297.88
= 0.839
It is highly +ve correlated between them.

What are the mathematical models of time series? Explain briefly. 5
Answer
There are basically two Mathematical models followed in the time series:
 Additive model
 Multiplicative model.
Additive model for time series:

The additive model assumes that all the four components of the time series are
independent to each other so that none of these components has any effect on the
remaining three. According to this model it is expressed as the sum of four components
of time series i.e.
Y=T+S+C+R
Multiplicative model for time series:

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It assumes that all the four components of the time series are due to different cause but
they are not necessary independent and they can affect each other. It is expressed as the
product of four components, i.e.
Y= T × S × C × R
Where,
Y = Total time series value for the given time
T= Trend value
S= Seasonal variation
C= Cyclic variation
R= Random or Irregular Variation

Pearson‟s measure of skewness of a distribution is 0.5. Its median and mode are
respectively 42 and 36. Find the coefficient of variation. 5
Answer
a) We are given:
Median = 42, Mode = 36…………………………………….(1)
And Pearson‟s Coefficient of skewness = 0.5
Mean  Mode
Sk   0.5 ………………………………………………(2)

To find s.d.(  ), we first find the value of mean, by using the empirical
relationship between mean, median and mode for a moderately
asymmetrical distribution viz.,
Mode =3median-2mean
3 median-Mode
mean =
2
3  42-36
Mean =  45
2
mean  mod e 45  36
(s.d .)     18
0.5 0.5
Coefficient of Variation (C.V.) is given by:
100   100 18
C.V .    40
mean 45
Hence C.V. is 40

Calculate the Cost of Living Index from the following data: 5
Items Price Weights

Base year Current year
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Food 30 47 4
Fuel 8 12 1
Clothing 14 18 3
House rent 22 15 2
Miscellaneous 25 30 1
Answer
Calculations For Cost Of Living Index Number
Items Weights(W) Prices Price WP
p1
Relatives p   100
Base year(p0) Current year(p1) p0
Food 4 30 47 156.67 626.67

Fuel 1 8 12 150.00 150.00
Clothing 3 14 18 128.57 385.71
House Rent 2 22 15 68.18 136.36
Miscellaneous 1 25 30 120.00 120.00
∑W=11 ∑WP=1418.74
 WP 1418.74
  128.98
Cost of Living Index Number =  W 11

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Suggested Answers of Management & Organizational Relations
Marks
Attempt all Questions.
Question No. 1
Read the following and answer the questions accordingly: (5+5+5=15)
Bibek Dhungel had been General Manager of Suhana Products Limited for five years.
Suhana Products had two major divisions: consumer appliances and industrial supplies.
The company had diversified its activities by acquiring business rather than expanding
from within. The result was rather dissimilar set of products and markets that was hard to
define clearly. Managing in such a complex environment is a real challenge. Bibek
decided to form a group of planning specialists with responsibility of providing the
information the company need to do the right things at the right time.
a) Why have the problems occurred at Suhana Products Limited?
b) What do you think of Bibek‟s management style?
c) What role should Bibek play as general manager?
Answer
a) Suhana Products Limited is a business organization. Any organization is goal
oriented and its goal is profit making for survival. Organisation should be able to handle
its problems related to product and market. People associated with it must have
knowledge of its input material, process mechanism, output marketing and support
systems. But different types of product need different types of dealing. Basically the
products might be for ultimate consumer or industrial users. Depending upon the types of
consumer and nature of products, plans and decisions should be managed.
Problems occurred at Suhana Products Limited as it diversified its activities by acquiring
other business. It has dissimilar set of products which are very difficult to manage with
one line of perception and plan. It also emerged the problem of market clarification.
Suhana Products Limited has no separate organization structure with separate manager
for specific activity. One person might not have sufficient time and knowledge to deal
with all the problems. Delay in taking decision and slow in making information spoils
whole thing in management. Problems of this organization are unsuitable plan and lack of
information for making right decision at right time. Human processes are being replaced
by equipment and selling is being replaced by marketing in present days. So the problems
are more likely to be concerned with forward planning and lack of planning specialists.
b) Sharp changes are taking place in the life of the company and there is a felt need
for speeding up the decision making process in right way and formulate suitable plan. In
such situation all decisions cannot be made at top by Bibek himself. Here a group
decision making is being modified in the light of increasing size and complexity of
organization. Participation in plan setting is being downgraded. This participative style of
management that Bibek followed will bring effectiveness to the organization. Increasing
the effectiveness of organization by changing the style of management can be achieved
and exactly the same Bibek followed.
Suggested Answers of Management and Organizational Relations
c) Bibek as general manager cleared difficulties out of path with help of subordinate
group. Management style refers to the manner in which individual managers behave as
managers that how they look at and react to events, situations and problems and how they
shape their diverse functions, relationships and roles. Bibek looked at the situation of
company‟s diversified activities and reacted at event of acquiring business. He found the
dissimilar set of product and market as a sensitive problem. He adopted quasi-
professional style and injected modern management concepts. He seems to be at once
cautious and courageous and flexible. His management style of making timely sound
decisions, forming planning teams to develop appropriate plans, information and control
systems to keep in touch with events is very appreciable. Professional managers reject
intuition and are aware of the several constraints on their functioning. He designed the
needs in an integrated manner and strived to increase the capability of the company to
cope with complex external environment. Bibek‟s participative management style is the
outcome of management knowledge and education and professionalism.
Bibek as a general manager of the company, should identify, develop and direct the
implementation of business strategy depending on the situation. It is the manager‟s
responsibility to make the environment conducive to work. He should include the sense
of collection even in group of planning specialists to create the output of efficiency.
Bibek is responsible for the efforts of his subordinates. Managerial job has responsibility
of performing the functions of planning, organizing, directing and controlling. The
functions of management make clear what managers do, whereas management roles
indicate how they do it. A role is defined as the expected behavior for a certain position.
Henry Mintzberg a well known management theorist described ten different roles of
manager and these ten roles are grouped into three broad categories like interpersonal,
informational and decisional. As a general manager, Bibek should play the role of
interpersonal in order to coordinate and interact with organizational members. Through
this role, managers provide direction and supervision to employees. Figurehead role,
leader role and liaison role are interpersonal role. General Manager performs
informational role in ways of monitor role, disseminator role and spokesperson role for
collection, processing and dissemination of information. Decision making is the vital
function of general manager and it conceived as entrepreneurship role, disturbance
handler role, resource allocator role and negotiator role. Bibek, working as a general
manager, should perform all these roles consistently for effective team work.

What is planning? Discuss the steps involved in the planning process. 10
Answer
Planning means defining goals, identifying activities, allocating resources to yield
defined targets in a time bound manner ad choosing means to attain defined goals.
Steps in Planning
 Establish goals
 Identify premises
 Identify alternatives
 Testing the practicability of alternatives
Selecting and announcing the final plan
(Note: The above answer is a hint only. Students are suggested to use the given hint to
develop an answer of a full version)

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Explain the functions of leadership. 5
Answer
Leadership lead the group and influence the behaviour of others. Leaders of the
organization attain the organizational goals through their influence. Leadership has to
build an organizational climate that is conducive to better performance. Leadership
functions include directing, supervising, motivating, communicating, maintaining and
mediating.
1) Directing: Directing function includes sharing organizational mission and goals,
defining and setting performance standards, explaining plans and decisions, developing
and training members, organizing group activities and exploiting the full potential of
group members.
2) Supervising: Supervision is concerned with the training coaching and
development of the group members. It includes the checkups required to assure the
prompt and proper execution of orders. Coaching relates to helping employees improve
their performance to reach their potential.
3) Motivating: Leadership function creates a motivational climate in workplaces.
Most people respond to a challenging job. They take pride in their accomplishment. Real
motivation depends upon the pride in one's job, in the organization's product or service,
and upon a personal sense of belonging to the team.
4) Communicating: Communication occurs not only through established channels
for communicating up and down the chain of command but also through the informal
channels. Group functioning is affected if there is poor communication. Providing
information and facilitating communication help to reduce conflicts originating from
differences of opinion among group members.
5) Maintaining: The maintenance function is related to retaining the members of the
group. This is a challenging function of leader which is concerned with providing safe
working conditions and good work environment in the work place. If the leadership
provides these healthy work conditions, group members will be committed to contribute
to group or organizational goals.
6) Mediating: Conflicts are inevitable in groups and organizations. Some
disagreements occur among people, which lead to problems of conflict. If not handled
properly these conflicts could prove to be very harmful to group's performance.
Therefore, the crucial function of leadership is to mediate between the conflicting
members and groups, and solve the problem.

Explain the role of creativity and information in decision making. 10
Answer
Creativity is generating new, novel, improved ideas, insights, approaches to make
decisions. Its role in decision making is:
 Unprogrammed unique situations require creative solutions.
 Problems of growth, new product development, cost reduction, motivation change
management, conflict management require creative solutions.
 Creativity questions customary ways of doing things.
 Creativity improves quality of outcomes.
Role of information in decision making

Information is made to:

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 Recognize and understand the decision problem.

 Develop alternative courses of actions.
 Select the best alternative.
 Follow up implementation of decisions.

Discuss the importance of communication in management. How can communication be
improved? Explain briefly. 10
Answer
Communication is important for:
 For information sharing
 Promoting closeness among peers/hierarchies
 Readies for action/emergencies.
 Helps understand destination.
 Promotes organizational unity.
 Enables to grasp opportunities.
 Enables to face challenges.
 Promotes commitment and involvement.
Methods of improving communication
 Improving communication processes
 Reducing physical barriers
 Simplifying the language
 Promoting interpersonal relationship
 Adjusting with communication technology

Discuss the purpose of organizational control and suggest the characteristics of effective
control system. 10
Answer
Control is a function of management that compares achieved results with planned goals.
The control function is the process of ordering, evaluating, and providing feedback to the
management system of an organization. Control is the regulation of organizational
activities so that same targeted elements of performance remains within acceptable limits.
Without this regulation or organizational control, organizations have no indication of how
well they perform in relation to their goals. At any point in time, it compares where the
organization is in terms of performance to where it is supposed to be. Organizational
control provides a mechanism for adjusting its course if performance falls outside of
acceptable boundaries.
Organizational control has four basic purposes.
1) Adapting to environmental change: In today's complex and turbulent business
environment, all organizations must contend with change. Between the times a goal is
established and the time it is reached, many things can happen in the organization and

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its environment to disrupt movement toward the goal. A properly designed control
system can help managers anticipate, monitor and respond to changing circumstances.
2) Limiting the accumulation of error: Over time, however small errors may accumulate
and eventually become very serious. If the organization properly and adequately
control the quality and rectify the errors, the problems would never reach at point of
damage.
3) Coping with organizational complexity: A business that produces many products
from variety of raw materials and has a large market area, a complicated organization
design and many competitors needs a sophisticated system to maintain adequate
control. So one of the purposes of control is to cope with in situation of complexity.
4) Minimizing costs: When practiced effectively, control can also help reduce costs and
boost output. Another purpose of effective control is to eliminate waste, lower labour
cost and improve output per unit of input.
Some of the features of an effective control system have been suggested below.
1) Timely: To maintain work standards, the control measures should be taken at the right
times, depending on their purposes at any particular time.
2) Simple: Control measures must be simple. If they are not simple, they will take too
long to apply and to give the information needed.
3) Minimal: Control should be minimum as far as possible. Just enough as needed to see
that work done and standard maintained is good control system.
4) Flexible: Too rigid controls may be self defeating. Staff will try to evade them.
5) Accurate: The information provided by the control system must be reliable and
accurate.
6) Focused: The control system should focus on points at which deviations from
standards are most likely to occur or would do the greatest damage.
7) Realistic: The control system must be realistic. Imposing unrealistically high
standards would force employees to distort information on performance.
8) Acceptable: To be effective, the control system must have the general acceptance of
the employees. Imposed control methods can not be successful.
9) Comprehensive: The control system must be clearly understood by employees
working under it.
The purpose of the control system is to establish and maintain order in the management
system. Pre-control, concurrent control and post control are three types of control system
relevant to organizational management. Pre-control help management to avoid mistakes,
concurrent control enables them to catch mistakes as they are being made and post
control keeps them far from repeating past mistakes. Effective control systems alert
managers when something is going wrong.

What is Management Science Approach to management? 10
Answer
Management science approach is a management approach that emphasizes the use of the
scientific method and quantitative techniques to increase organizational success. It
suggests that managers can best improve their organizations by using the scientific
methods and mathematical techniques to solve operational problems.
The management science is also called operational research. It can be traced to world war
II in which leading scientists were asked to help solve complex operational problems in
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the military. The scientists were organized into teams that eventually known as operation
research groups. The operations research groups proved very successful at using the
scientific methods to solve the military's operational problems. They systematically
observe the system whose behavior must be explained and use these specific observations
to construct a generalized framework. Then use the framework to deduce how the system
will behave under conditions that have not been observed.
The success of the operation research group in the military had been so obvious that
managers were eager to try management science techniques in an industrial environment.
After all; managers also had to deal with complicated operational problems. By 1955, the
management science approach to solving industrial problems had proved very effective.
By 1965, the management science approach was being used in many companies and
being applied to many diverse management problems, such as production scheduling,
plant location, and product packaging.
In 1980, surveys indicated that management science techniques are used extensively in
very large complex organizations. Finding ways to apply management science techniques
to smaller organizations is undoubtedly a worthwhile challenge for managers in 1990 and
beyond.
Four primary characteristics are usually present in situations in which management

science techniques are applied. First, the management problems studied are so
complicated that managers need help in analyzing a large number of variables.
Management science techniques increase the effectiveness of the manager's decision
making in such a situation. Second, a management science application generally used
economic implications as guidelines for making a particular decision. Perhaps this is
because management science techniques are best suited for analyzing quantifiable factors
such as sales, expenses and units of production. Third, the use of mathematical models to
investigate the decision situation is typical in management science applications. Models
constructed to represent reality are used to determine how the real world situation might
be improved. The fourth characteristic of a management science application is the use of
computers. The great complexity of managerial problems and the sophisticated
mathematical analysis of problem-related information required are two factors that make
computers very valuable to management science analyst.
Today managers use such management science tools as inventory control models,
network models and probability models to aid them in the decision making process. Since
management science thought is still evolving, more and more sophisticated analytical
techniques can be expected in the future.
Question No. 5
Briefly explain ANY FIVE of the following: (5×3=15)
a) SWOT analysis
Answer
It analyses organization‟s strengths, weakness, opportunities and threats to identify
strategic advantage. It is the foundation of strategy formulation.
b) Hierarchy of needs theory

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Answer
Hierarchy of needs theory states that needs motivate people. However, satisfied needs do
not motivate. Needs are arranged in the following hierarchy
 Self Actualisation
 Self Esteem
 Social
 Safety
 Physiological
c) Time management
Answer
 Defining available time
 Prioritizing activities
 Allocating tasks
 Adhering to the plan/routine
 Reviewing and correcting
d) Virtual concept of organizing

Answer
Virtual concept involves temporary network of companies. They come together to exploit
opportunities. Its key features are:
 Technology : Based on computers and internet links.
 Opportunities : It is exploited.
 Flexibility : It is boundless.
 Trust : Partners trust each other.
 Excellence : Partners pull their core competencies.
e) Globalization
Answer
Globalization has been defined as a process by which an activity or undertaking becomes
worldwide in scope. Globalization is a free movement of goods, services, people, capital
and information across national boundaries. The three important perspectives of
globalization are as follows:
 To a business executive, globalization refers to a strategy of crossing national
boundaries through globalized production and marketing networks.
 To an economist, globalization refers to an economic interdependence between
countries covering increased trade, technology, labour and capital flows.
 To a political scientist, globalization refers to an integration of a global community in
terms of ideas, norms and values.
Globalization is a multi-dimensional process and four important dimensions are

economic, cultural, political and environmental. Economic globalization is contributed by
liberalization, privatization and declining costs of transport and communication. The
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formation of the World Trade Organization (WTO) has given impetus to the process of
interlinkages of the markets in goods, services, capital, trade and finance. The expanding
process of globalization has brought cultural diversities of different countries together to
form a global culture. Advances in communications, television networks, transportation
technology have been reducing the barriers of distance and culture. Nations today are
more interdependent. There are exchanges of views and experiences between nations
regarding the establishment of good governance system, human rights, free media, legal
system and so on. The world community is trying to encourage countries to understand
global environmental issues and adopt measures to protect the environment.
Globalization promotes international business. The international business is composed of
world trade portfolio investment, direct investment and multinational enterprises.
f) Management ethics
Answer
Managerial ethics are the standards of behavior that guide individual managers in their
work. Although ethics can affect managerial work in any number of ways, three areas of
special concern for mangers are the relationship of the firm to the employees, the
employees to the firm and the firm to other economic agents. How an organization treats
its employees in respect of hiring and firing, wages and working conditions and privacy
is an important domain of managerial ethics. Numerous ethical issues also relate to how
employees treat the organization, especially in regard to conflicts of interest, secrecy and
honesty. The behavior of managers toward customers, competitors, stockholders,
suppliers, dealers and unions are also dictated by ethical standards.
Managerial ethics determines management employee relationship in an organization. The
starting point in understanding the ethical context of management is the individual's own
ethical standards. Besides individual ethics, professional ethics like standards that govern
how members make decision and societal ethics that govern how members of society deal
with each other in issues of fairness, justice and rights of individual are principal sources
of organization's code of ethics.
Codes of ethics are formal standards and rules, based on beliefs about right or wrong that
managers can use to help themselves make appropriate decisions. Codes of ethics must be
carefully written and matched with the organization's philosophies. The management of
an organization should monitor, control and evaluate the implementation of ethical codes.
Question No. 6
Distinguish between ANY FIVE of the following: (5×3=15)
a) Managerial roles and managerial skills
Answer
All managers must play certain roles and exhibit certain skills if they are to be successful.
Managers do certain things in order to meet certain needs in the organization. They do
these things as per their managerial responsibilities and we call it the managerial role. In
addition to fulfilling numerous roles of mangers, they need a number of specific skills
which can be termed as managerial skills.
Henry Mintzberg closely observed the day to-day activities of a group of managers by
literally following them around and taking notes on what they did. From the observation
Mitzberg made a conclusion that managers play ten different roles and these managerial
roles fall into three basic categories. Interpersonal role, informational roles and decisional
roles are three basic categories of managerial roles.
There are three interpersonal roles inherent in the manager's job. These are figurehead,
leader and liaison which involve dealing with other people. Then the three informational
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roles identified as monitor, disseminator and spokesperson. Informational role of

manager involve the processing of information. The information acquired by the mangers
as a result of performing the informational role has a major bearing an important
decisions that they make. Four decisional roles are entrepreneur, disturbance handler,
resources allocator and negotiator.
For purpose of playing those managerial role in a successful manner, managers must have
certain specific skills. So the skill, managers need to have to be effective, is called
managerial skills. Managerial skills are prerequisites to managerial success. One study of
managers identified four important types of managerial skills: technical, interpersonal,
conceptual and diagnostic.
The technical skills are necessary to accomplish or understand the specific kind of work
being done in the organization. Managers also need interpersonal skills that is the ability
to communicate with, understand and motivate individuals and groups. Conceptual skills
depends on the managers ability to think in the abstract. Successful mangers also posses
diagnostic skills that enable a manager to visualize the most appropriate response to a
situation.
b) Internal environment and external environment

Answer
Every organization is a subsystem of an environment that provides resource inputs and
utilizes to organization's outputs. Organization must understand the basic elements of its
environment to properly maneuver among them. Basically the environment can be
classified into two group: internal environment and external environment.
The internal environment consists of conditions and forces within the organization. Its
major components include its employees, structure, corporate culture, share holders and
unions. The internal environment has been made by its own human resource factor,
structure and services. The internal environment is controllable to some extent.
A host of external and often largely uncontrollable factors influence an organization's
choice of direction and action and ultimately, its organizational structure and internal
process. Thus the organization is subjected to a complex set of external forces which are
called external environment. The external environment can further be classified into two
interrelated sub-categories: general environment and task environment. General
environment is composed of a set of forces that are outside the organization's operating
system like political, economic, social, legal and technological factors. The task
environment involves factors in the immediate competitive situation of a particular
organization. So its also called competitive or operating environment. Forces in the task
environment result from the actions of customers, suppliers, distributors and competitors.
The components of internal environment create the strength and weaknesses of the
organization. The external environment of the organization defines its opportunities and
threats. The management has some control over the internal forces as it has been formed
by own people, structure, culture, network and product. But the management has no
direct control over the external forces though it can exert some influence. The external
environmental forces are commonly called uncontrollable.
c) Matrix Vs committee type of organization

Answer
Matrix organization is the functional structure diided in each unit as well as linked to the
central function in a diversified/multi-activity organization.
Committee organization is the organization of equals for task specific manner.

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d) Systems and contingency theories

Answer
System theory views the organization as a unified whole composed of interacting and
interrelated parts. It looks at the "big" picture and aims for synergy.
Contingency theory states that management practice is situation specific. There are no
universal principles of management.
e) Goal formation and succession

Answer
Goal formation involves environmental scanning, formation of overall goals, formation
of specific goals. Goals should be smart.
Goal succession is intentional change in goals. The reasons can be achievement of
organizational goals, unachievable present goals or environmental adaptation.
f) Leadership and management

Answer
Leadership is guiding and influencing people to achieve goals willingly and

enthusiastically. It has leader, follower and situational context. Management is getting the
jobs done through people to achieve goals.
All leaders are managers but all managers are not leaders.

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Suggested Answers of Information Technology

Marks

Fill in the blanks in the followings: (5×1=5)
i) Binary Number System uses only two digits ………… and …………….
ii) The communication line between the CPU memory and peripherals is called
a…...........................
iii) RDBMS stands for ……………………………………………
iv) HTML stands for ……………………………………………..
v) The two main types of networks are ………………….. and …………………
Answer
i) Binary Number system uses only two digits …0… and …1..
ii) The communication line between the CPU . Memory and peripherals is called a
……Data Bus….
iii) RDBMS stands for ……Relational Database Management System …
iv) HTML stands for..…Hyper Text Markup Language.…
v) The two main types of networks are ..local-area networks(LANs)… and … wide-
area network(WANs).

Write the full form of the following abbreviations: (5×1=5)
i) EBDIC
ii) EPROM
iii) ASCII
iv) ENIAC
v) OCR
Answer
i) EBCDIC Extended Binary Coded Decimal Interchange Code
ii) EPROM Erasable Programmable Read Only Memory
iii) ASCII American Standard Code for Information Interchange
iv) ENIAC Electronic Numerical Integrator & Computer
v) OCR Optical Character Recognition
Question No. 2
What is a Database Management System? Why do you need a Database Management
System? 10
Answer
A DBMS is a collection of programs that enable you to store, modify, and extract
information from a database. There are many different type of DBMS, range from small
systems that run on personal computers to huge system that run on mainframes. The
following are some examples of database application – Computerized Library systems,
automated teller machine, flight and railway reservation system, payroll system,
inventory system etc.
From a technical standpoint, DBMS can differ widely. The terms relational, network, flat,
and hierarchical all refer to the way a DBMS organizes information internally. The
internal organization can affect how quickly and flexibly you can extract information.
The information from a database can be presented in a variety of formats. Most DBMS
include a report writer program that enables you to output data in the form report. Many
DBMS also include a graphic component that enables you to output information in the
form of graphs and charts. Some examples of database management systems are DB2,
Oracle, Sybase, Informix, MS-SQL Server, MS –Access, etc.
A DBMS provides a secure and survivable medium for the storage and retrieval of data.
If the users and applications do not share data among themselves and if the longevity of
the data is only till the end of process or application that created it, and then there is not
much need for a DBMS. But in real world, the data is shared and is persistent (that is, the
data has a life beyond the boundaries of the programs and applications that created it).
Also, the real world data have a structure. It is related to one another and has constraints.
These features are well represented and can be efficiently managed using a DBMS. Also,
the different users of the data need to create access and manipulate the data. The DBMS
provides mechanisms to achieve these objectives without compromising the security and
integrity of the data. Therefore, if the data is shared, if it is persistent, if the users want it
be secure and easy to access and manipulate, then use of a database management system
is the best available alternative.
Question No. 3
What is network topology and what are the different types of network topology? 10
Answer
Topology is the logical way of defining how computers are connected to each other and
shows physically how are they linked. Generally, it is the cabling system in the network.
The major goal of topology is to find out the most economical and efficient way to
connect all the users to the network resources while providing adequate capacity to
handle user demands, maintain system reliability and minimize delay. There are many
types of topologies, because networking engineers select it as per the efficiency and
capability of the system. But broadly classifying, topology can be classified on the
following types.

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a) Bus topology
Diagram: Bus
Characteristics:
i) A single cable connects each nodes/computers
ii) The single cable at the middle of all the computers is called „Bus‟. From which other
nodes are connected by some connectors. So all the computers commonly share the
bus.
iii) Server is located on either sides and a terminator is located on other side of the bus to
indicate that the networking is not available beyond that point.
iv) It is based on broadcasting architecture.
Advantages:
i) It is simple, reliable, and easy to use.
ii) If any of the computers in network is down, then other computers can continue their
work.
iii) It is more flexible because we can connect any number of computers by using a
connector in the bus.
Disadvantages:
i) Since all the data are transmitted from the central wire (bus), data traffic is high.
ii) Data collision is high.
iii) Finding out fault and troubleshooting is hard.
b) Star topology
Hub/Switch
Diagram: Star
Characteristics:

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i) A central connecting device known as „Hub‟ or 'Switch' connects all the computers in
the network to each other, which is connected to a powerful central computer known
as server or file server.
ii) Based on „broadcasting‟ architecture.
i)
ii) Advantage:
iii) Easy to add new computer and remove existing one. So, it is flexible.
iv) Easy to diagnose fault because of the use of „hub‟.
v) If any of the computers in the network is down, then other computers can carry out
their functions as usual.
Disadvantages:
i) Failure of the central computer (server) or the hub makes whole system unavailable.
ii) Cost of cable is more because all the cables from all the clients must be pulled to the
server or hub.
iii) At the time of broadcasting, all the nodes remain busy. All the data transmission must
be filtered and serviced by the hub and central server, which in turn increases network
traffic.
c) Ring topology
Diagram: Ring
Ring
Topology
Characteristic:
i) Each computer is connected in a circular structure. Each computer is connected to
other two computers in either side.
ii) Based on peer-to per architecture rather than broadcasting
Advantage:
i) There is no dependence on the central server. So, each computer is capable of acting
as server as well as client.
ii) Since data travels in one direction, there is less chance of collision and there is less
chance of data-traffic.
iii) Every computer has equal access facility to the resources.
Disadvantage:
i) Failure of any one of the computers on the network makes the whole network down.
ii) Very hard to find out the errors and troubleshooting.

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iii) Non-flexible because adding new computer on the network and removing existing
computer is very hard.
d) Mesh topology
Diagram: Mesh topology
Characteristics:
i) Each node connected to all other
ii) Full mesh of connectivity among the node
Advantages:
i) Problem in one node does not affect network
ii) Communication between two nodes does not depend upon other nodes
Disadvantages:
i) Too many connection wires, ports needed.
ii) Very difficult to manage troubleshoot
iii) Network can not grow in size easily.

What is the difference between Batch Processing and On-Line Processing? 5
Answer
Batch Processing refers to a situation where transactions are “batched”, i.e. accumulated
over a period of time and then processed in a single computer software run when output
is needed. Batch processing is an economical method for processing large volumes of
data on a routine basis. An example of batch processing is the processing of overtime
claims in a payroll system. Non-interactive & scheduled jobs generally used batch
processing.
On-Line Processing
Online processing refers to a situation where devices called terminals are connected
directly to the computer so that input may be made at any time and the user is able to
immediately and directly access data stored in the computer. One example is when each
department in a company has several terminals and these are connected to the computer
via cables. In most systems today, online processing is done on a multi-user basis,
although there is no reason why it cannot be done on a stand-alone basis by a single user
either. Many systems today are online systems. Interactive system such as ticket
reservation, departmental store sales counter etc use online processing mechanism.

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What is the difference between System Software and Application Software? 5
Answer
Systems Software
This is the set of instructions or programs which create a computer environment within
which the applications software can work. Example: Operating System (Linux, Windows
XP, Windows Vista etc.)
System software is independent of application software.
Application Software
This is the set of instructions or programs which make the computer performs a particular
task which will satisfy a processing requirement of the user. An example is the inventory
system. Example: Word Processing (MS-Word), Spread Sheet (MS-Excel) etc.
Application software requires system software for its functioning.
Therefore, application software determines what processing is done by the computer.
Systems software determines how that processing will be done by the computer.
Question No. 5
Draw a basic digital computer block diagram and explain each block in brief. 10
Answer
Input Unit
Computers need to receive data and instruction in order to solve any problem. Therefore
we need to input the data and instructions into the computers. The input unit consists of
one or more input devices. Keyboard is the one of the most commonly used input device.
Other commonly used input devices are the mouse, floppy disk drive, magnetic tape, etc.
All the input devices perform the following functions.
 Accept the data and instructions from the outside world.
 Convert it to a form that the computer can understand.

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 Supply the converted data to the computer system for further processing.
Storage Unit: The storage unit of the computer holds data and instructions that are
entered through the input unit, before they are processed. It preserves the intermediate
and final results before these are sent to the output devices. It also saves the data for the
later use. The various storage devices of a computer system are divided into two
categories.
a) Primary Storage: Stores and provides very fast. This memory is generally used to
hold the program being currently executed in the computer, the data being received
from the input unit, the intermediate and final results of the program. The primary
memory is temporary in nature. The data is lost, when the computer is switched off.
In order to store the data permanently, the data has to be transferred to the secondary
memory.
The cost of the primary storage is more compared to the secondary storage. Therefore
most computers have limited primary storage capacity.
b) Secondary Storage: Secondary storage is used like an archive. It stores several
programs, documents, data bases etc. The programs that you run on the computer are
first transferred to the primary memory before it is actually run. Whenever the results
are saved, again they get stored in the secondary memory. The secondary memory is
slower and cheaper than the primary memory. Some of the commonly used secondary
memory devices are Hard disk, CD, etc.,
Output Unit
The output unit of a computer provides the information and results of a computation to
outside world. Printers, Visual Display Unit (VDU) are the commonly used output
devices. Other commonly used output devices are floppy disk drive, hard disk drive, and
magnetic tape drive.
Arithmetic Logical Unit:

All calculations are performed in the Arithmetic Logic Unit (ALU) of the computer. It
also does comparison and takes decision. The ALU can perform basic operations such as
addition, subtraction, multiplication, division, etc and does logic operations viz, >, <, =,
etc. Whenever calculations are required, the control unit transfers the data from storage
unit to ALU once the computations are done, the results are transferred to the storage unit
by the control unit and then it is send to the output unit for displaying results.
Control Unit:
It controls all other units in the computer. The control unit instructs the input unit, where
to store the data after receiving it from the user. It controls the flow of data and
instructions from the storage unit to ALU. It also controls the flow of results from the
ALU to the storage unit. The control unit is generally referred as the central nervous
system of the computer that control and synchronizes its working.
Central Processing Unit:

The control unit and ALU of the computer are together known as the Central Processing
Unit (CPU). The CPU is like brain performs the following functions:
• It performs all calculations.

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• It takes all decisions.

• It controls all units of the computer.
Question No. 6
What is the difference between sequential and direct – access file processing? 10
Answer
Computer data is processed in two fundamental ways: file processing and database
processing. With file processing, data is stored and processed in separate files. There are
two types of file processing – sequential and direct – access.
Sequential File Processing: - Sequential file processing stores and accesses records in
sequence. Such processing can be accomplished by using tape storage. To perform
sequential file processing, records are sorted before they are processed. Sequential
processing is used in situations where data can be processed in batches and where a
substantial portion of the master file is changed with the processing of each batch.
Payroll processing is a classic example of sequential processing. In sequential processing,
only required file or data can not be directly accessed and processed. It is like serving
people in a queue where the queue order has to be maintained. People in the middle of
the queue can not be served before people in front of them are served.
Direct- Access File Processing:- In Some cases, where it is impractical to process the data
sequentially, direct-access file processing is required . Consider the problem of
authorizing credit card purchases. When you make an expensive purchase with a credit
card, the merchant is required to verify your credit card and limit. To do this, merchant
accesses, a computer system that maintains a file of credit card numbers, status (valid,
lost, stolen, etc.), and the available credit. It is impractical to store this data sequentially.
Both you and merchant would become quite impatient if you had to wait 30 minutes for
the computer system to sequentially process the file down to the point of your record.
Clearly, direct access to your record is required. In direct access, only required file or
data can be directly read and processed. Queues and orders do not need to be maintained.
This is faster for random and distributed processing. Computer file systems on hard disk
or CD are direct access system.
There are many ways of organizing a file for direct-access. First, the file must be stored
on a direct-access device like a disk, so that the records need not be processed in
sequence. Second, some means must be developed for determining the location of a
particular record. Indexes are one common means.
Question No. 7
Write a short program to ask user for three numbers. Your program should sort the three
numbers in descending order (i.e. from biggest to smallest) and print them out to the
screen. 10
Answer
#include <stdio.h>
main()
{
int num1, num2, num3, temp;

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printf("three numbers please\n");

scanf("%d%d%d" ,&num1, &num2, &num3);
if (num2 > num1) /* first we make sure num1 and num2 are in order*/
/* If they aren't we switch them*/

{
temp = num1;
num1 = num2;
num2 = temp;
}
if (num3 > num1) /*Now we make sure that num1 and num3 are in order. If not, we
switch them.*/
{
temp = num1;
num1 = num3;
num3 = temp;
}
/*At this point the biggest of the three numbers MUST be in num1.*/
if (num3 > num2)
/*Since num1 is the biggest we only need to be sure num2 and num3 are in the right
order*/
{
temp = num2;
num2 = num3;
num3 = temp;
}
printf("Done sorting\n%d, %d, %d", num1, num2, num3);
return;
}
Question No. 8
What is the importance of fiber optics in communication system? 10
Answer
Fiber optics can be described as a transmission medium employing a light –emitting
source –turned on and off rapidly by electrical impulse- whose emissions are sent through
a glass pipe to a light-sensitive receiver to convert the changing light intensities back into
electrical impulses. The importance of fiber optics in communication system
 Less expensive – Several mile of optical cable can be made cheaper than equivalent
lengths of copper wire.
 Thinner – Optical fibers can be drawn to smaller diameter than copper wire.
 Higher carrying capacity – Because optical fibers are thinner than copper wires, more
fibers can be bundled into a given-diameter cable than copper wires. This allows
more phone lines to go over the same cable or more channels to come through the
cable into your cable TV box.

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 Less signal degradation - The loss of signal in optical fiber is less than in copper
wire.
 No Interference – Unlike electrical signals in copper wires, light signals from one
fiber do not interfere with those of other fibers in the same cable.
 Low power – Because signals in optical fibers degrade less, lower power transmitters
can be used instead of the high-voltage electrical transmitters needed for copper
wires.
 High bandwidth/data rate – Optical fibers can operate at very high data rate. So, they
can provide gigabits per second of bandwidth on a single fiber strand.
 Digital signals – Optical fibers are ideally suited for carrying digital information ,
which is especially useful in computer networks.
 Non- flammable – Because no electricity is passed through optical fibers, there is no
fire hazard.
 Lightweight – An optical cable weighs less than a comparable copper wire cable.
Fiber-optic cables take up less space in the ground.
Question No. 9
What is flowchart? Write a program in C to determining weather a given integer is odd or
even. (4+6=10)
Answer
A flowchart is a common type of chart, that represents an algorithm or process, showing
the steps as boxes of various kinds, and their order by connecting these with arrows.
Flowcharts are used in analyzing, designing, documenting or managing a process or
program in various fields.
There are many different types of flowcharts. On the one hand there are different types
for different users, such as analysts, designers, engineers, managers, or programmers. On
the other hand those flowcharts can represent different types of objects. Sterneckert
(2003) divides four more general types of flowcharts:
 Document flowcharts, showing a document flow through system
 Data flowcharts, showing data flows in a system
 System flowcharts showing controls at a physical or resource level
 Program flowchart, showing the controls in a program within a system
#include<stdio.h>
#include<conio.h>
main( )
{
int number , rem;
clrscr( );
printf(“Enter an integer number :”);
scanf (“%d”, &number);
printf(“\nNumber is %d\n”, number);
rem= number %2;
if (rem= =0)
printf(“ the number %d is even.\n”, number);
else
printf (“the number %d is odd.\n”, number);

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Question No. 10
John Ships owns a large shipping business. He asks you to develop a program to track his
ships.
a) State one advantage of creating structures. 1
b) You would like to label each of John‟s ship with an identification code. Create a
structure called Ship Code Type that stores the following information:
 Type : a 1-character category type that represents, for example 'C' for
cargo ships
 ID : a 3-digit integer number 2
c) John would like to store the following information for each of his ship:
 SCode : of ShipCodeType above
 Desc : can store up to a maximum of 30 characters describing the
ship
 Num Passenger : integer showing the number of passenger the ship can
accommodate
 Weight : float
 Height : float
 Length : float
Create a structure called Ship Rec that stores the above information. 5
d) Declare an array called Ship Array that can store up to 1000 Ship Rec records. 2
Answer
a) So that related fields can be manipulated logically as a whole unit.
b) struct ShipCodeType
{
char Type;
int ID;
}
c) struct ShipRec
{
struct ShipCodeType SCode;
char Desc[31];
int NumPassenger;
float Height;
float Weight;
float Length;
};
d) struct ShipRec ShipArray[1000];

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The Institute of Chartered Accountants of Nepal

Suggested Answers of Accounting

CAP I Examination – June 2009

Balance Sheet of Mr. B. Birat

The Institute of Chartered Accountants of Nepal

Prepaid Rent 7,500

The Institute of Chartered Accountants of Nepal

Question No. 2 ‘a’

Answer In the Books of GVK

The Institute of Chartered Accountants of Nepal

(Being Royalties Receivable transferred to

Question No. 2 ‘b’

Purchase of equipment NRs. 12,000

The Institute of Chartered Accountants of Nepal

Debit Joint Venture Account Credit

Debit Ram A/c Credit

Debit Hari A/c Credit

The Institute of Chartered Accountants of Nepal

To Joint Venture A/c 4,000 By Joint Bank A/c 30,000

Question No. 2 ‘c’

Question No. 3 ‘a’

Debit A's Capital Account Credit

The Institute of Chartered Accountants of Nepal

Total 64,200 Total 64,200

Debit B‟s Capital Account Credit

Dr C's Capital Account Cr.

Debit Realization Account Credit

The Institute of Chartered Accountants of Nepal

Debit Bank Account Debit Credit

WN 3: Calculation of Total Assets as on 31/3/2009

Question No. 3 ‘b’

The Institute of Chartered Accountants of Nepal

Sales NRs 69,000

The Institute of Chartered Accountants of Nepal

Prepare Income statements for Year 1st and Year 2nd. 8

Answer Income Statements

Calculation of Advertisement Expenses for Year 1 and Year 2

Year 1 advertisement expenses = 500+ 3,000/2 = NRs. 2,000

Calculation of Salaries Expenses for Year 1 and Year 2

Salaries expenses for Year 1 = 12 * 1,000 + 3 * 1,000 = NRs.15,000

Calculation of Rent Expenses for Year 1 and Year 2

The Institute of Chartered Accountants of Nepal

Rent expense for Year2 = NRs. 10,000/2= NRs. 5,000

Question No. 4 ‘b’

Average days = Product / Amount

Question No. 4 ‘c’

The Institute of Chartered Accountants of Nepal

a) Valuation of assets of a business is dependent on going concern basis.

c) Inventories are valued using LIFO method as per Accounting Standard.

d) Ledger book is popularly known as subsidiary book of accounts.

e) Crossed cheque is not a negotiable instrument.

f) Patent right is in the nature of Personal Account.

g) The total of the sales is posted to credit of the purchase book.

The Institute of Chartered Accountants of Nepal

i) Quick assets are also known as liquid assets.

The Institute of Chartered Accountants of Nepal

f) Straight line method

The Institute of Chartered Accountants of Nepal

CAP I Examination – June 2009

Attempt all the questions