Suggested Answer CAP I Dec 2011

CAP-I, Fundamentals of Accounting, Dec.
2011
Suggested Answer
Maximum Marks - 100

Total No. of Questions - 6
Time Allowed - 3 Hours
Marks
Attempt all questions. Working notes should form part of the answer.
1. On 31st December 2010, the following balances appeared in the books of Mr. Ajit
Baral of Janakpur:
Account Balances Rs. Account Balances Rs.
Capital Account 1,00,000 Carriage Inward 2,000
Mr. Ajit‟s Current Account 15,000 Wages 60,000
Drawings during the year 12,000 Interest paid on loan from Mrs. 480
Ajit
Loan from Mrs. Ajit taken on 6,000 Salary of Works Manager 9,600
1st April, 2010 bearing interest
at 12 percent per annum
Investments (Market Value Rs. 16,250 Salaries 10,000
15,000)
Cash in Hand 2,500 Rates and Taxes on Building 3,200
Cash at Bank 15,700 Royalties paid (payable at 3,000
1percent on net sales)
Sundry Creditors 66,156 Advertisement 7,000
Sundry Debtors 35,000 Insurance of Building 2,000
Bad Debts Reserve 1,000 Insurance of Plant and 3,000
Machinery (includes one annual
Premium of Rs. 1,200 paid on
30th June, 2010)
Sales 3,25,700 Printing and Stationery 2,000
Purchase of Raw materials 1,15,000 Audit fee 2,000
Discount Received 1,100 Carriage outward 3,750
Purchases Returns 3,750 Bad Debts 3,000
Bills Payable 15,300 Loose Tools 5,000
Outstanding Sundry Expenses 9,300 Repairs of Plant and Machinery 3,000
as on 1st January, 2010
Outstanding Sundry Expenses 9,000 Furniture and Fittings 7,000
paid during the year
Sundry Receipts 74 General Expenses 2,000
Opening Balance as on 1st Plant and Machinery 55,800
January, 2010:
Raw Materials 25,000 Land and Building (3/4 in use 60,000
of the factory)
Work-in-Progress 9,800 Sales Returns 2,300
Finished Goods 57,000
From the balances and the under mentioned information, prepare the Manufacturing,
Trading and Profit and Loss Account of Mr. Ajit Baral for the year ending 31st
December, 2010 and the Balance Sheet as on that date: 20
a) Provide depreciation on land and Building at 5%. Plant and Machinery at 20%,
Loose Tools at 25% and Furniture and Fittings at 10%.
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b) Sundry Expenses outstanding as 31st December, 2010 amounted to Rs. 5,600.
c) Closing balance as 31st December, 2010 were:
Rs.
Raw Materials 22,000
Work-in-Progress 11,000
Finished Goods 38,000
d) Provision for Bad Debts should be maintained at 5%
e) Salaries include advance for the next period amounting to Rs. 600.
f) Advertisement includes Rs. 3,000 spent on Neon-signs.
g) It was discovered that stock sheet of Finished Goods as on 31st December 2010
were overcast to the extent of Rs. 1,000.
Answer No. 1
Manufacturing Account of Ajit Baral
for the year ending 31st December,2010
Rs Rs Rs
To Opening work –in- 9,800 By Work –in- 11,000
Progress progress(closing)
To Raw Material By Trading 2,08,610
consumed: A/c,transfer(cost of
goods manufactured)
Opening Stock 25,000
Add:Purchase(Net) 1,11,250
1,36,250
Less: Closing Stock 22,000
1,14,250
To carriage inward 2,000
To Wages 60,000
To Salary of Works 9,600
Manager
To Repairs,Plant and 3,000
Machinery
To Depreciation:
Land and Building 2,250
Plant and Machinery 11,160
Loose Tools 1,250
To Insurance:
Factory Building 1,500
Plant and machinery 2,400 3,900
To Rates and Taxes on 2,400
Building
2,19,610 2,19,610
Trading and Profit and Loss Account of Mr. Ajit Baral

for the year ending, 31st December,2010
Rs Rs Rs
To Opening Stock 57,000 By Sales less 3,23,400
Returns
To Manufacturing 2,08,610 By Closing 37,000
A/c, cost of goods Stock,Finished
produced Goods
To Gross Profit c/d 94,790
3,60,400 3,60,400
To Salaries 9,400 By Gross Profit 94,790
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b/d
To Rates and Taxes 800 By Discount 1,100
on Building
To Printing and 2,000 By Sundry 74
Stationery Receipts
To Depreciation:
Land and Building 750
Furniture& Fittings 1,000 1,750
To Insurance on 500
Building
To General 2,000
Expenses
To Audit Fee 2,000
To Carriage 3,750
Outward
To Royalties 3,234
To Advertisement 4,000
To Provision for
Bad and Doubtful
Debts:
Provision required 1,750
Add:Bad Debts 3,000
4,750
Less:Existing Prov. 1,000 3,750
To Interest on Loan 540
* To Expenses 5,300
Outstanding
To Provision for
investment 1,250
To Net Profit 55,690
95,964 95,964
*Rs 5,600 less Rs 300 credit balance of previous year less the amount paid.
Balance Sheet of Mr. Ajit Baral

as on 31st December, 2010
Liabilities and capital Assets

Rs Rs Rs Rs
Capital 1,00,000 Fixed Assets:
Proprietor‟s Current Land and Building 60,000
Account at:
Balance as shown 15,000 Less: Depreciation 3,000 57,000
Add Net profit 55,690 Plant & Machinery 55,800
70,690 Less Depreciation 11,160 44,640
Less Drawings 12,000 Loose tools 5,000
58,690 Less Depreciation 1,250 3,750
Liabilities Furniture and 10,000
Fittings
Mrs Ajit‟s Loan 6,000 Less Depreciation 1,000 9,000
Add :Interest due 60 6,060 Investments: 16,250
Less: Provision (1,250) 15,000
Sundry Creditors 66,156 Current Assets:
Bills Payable 15,300 Stock-in-Trade:
Outstanding Expenses 5,600 Finished Goods 37,000
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Royalties Payable 234 Work-in-Progress 11,000
Raw Material 22,000 70,000
Liabilities Sundry Debtors 35,000
Less:Provision for 1,750 33,250
Doubtful Debts
Cash in hand 2,500
Cash at Bank 15,700
Prepaid Expenses 1,200
252,040 252,040
2.
a) On 1st January, 2008 Mr. Hari Om purchased 6 machines costing Rs. 1,50,000
each. His accounting year ends on 31st December. Depreciation at the rate of 10%
on initial cost has been charged to profit and loss account and credited to a
separate depreciation provision account.
On 1st January, 2009 one machine was sold for Rs. 1,25,000 and on 1st July of the
same year, an improved model costing Rs. 2,80,000 was purchased. Again on 1st
January, 2010 another machine (purchased on 2008) was sold for Rs. 1,25,000.
The depreciation rate for the new machine was decided to be same as old
machines.
You are required to prepare for 3 years: 10
i) The Machinery Account;
ii) The Machinery Disposal Account; and
iii) Provision for Depreciation Account.
b) Cloud, Storm and Rain were partners in a firm sharing profits and losses in the
ratio of 5 : 3 : 2. Due to difference in opinion, they decided to dissolve the
partnership with effect from 1st April, 2011 on which date the firm's position was
as under:
Balance Sheet
As on 1st April, 2011
Liabilities Rs. Assets Rs.
Sundry Creditors 1,20,000 Plant and Machineries 80,000
Capital Accounts: Furniture & Fixtures 45,000
Cloud 60,000 Motor Car 25,000
Storm 40,000 Stock in Trade 30,000
Rain 30,000 1,30,000 Sundry Debtors 71,000
Current Accounts: Cash at Bank 14,000
Cloud 8,000 Current Account:
Storm 10,000 18,000 Rain 3,000
2,68,000 2,68,000
The following information is given:
i) Plant costing Rs. 40,000 was taken over by Cloud at an agreed valuation of
Rs. 45,000 and the remaining machineries realised Rs. 50,000.
ii) Furniture and Fixtures realised Rs. 40,000.
iii) Motor Car was taken over by Storm for Rs. 30,000.
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iv) Sundry Debtors included a bad debt for Rs. 1,200 and the rest portion was
realised subject to a cash discount of 10%.
v) Stock worth Rs. 5,000 was taken over by Rain for Rs. 5,200 and the rest
realised at 20% above their book value.
vi) A Creditor for Rs. 2,000 was untraceable and other Creditors accepted
payments allowing 15% discount.
vii) Realisation expenses amounted to Rs. 5,000.
You are required to show the Realisation Account and the Partner's Capital
Accounts on dissolution showing final payments to them. 10
Answer No. 2
a)
Machinery Account
Date Particulars Rs. Date Particulars Rs.
1.1.'08 To Bank 900,000 31.12.'08 By Balance c/d 900,000
900,000 900,000
1.1.'09 To Balance b/d 900,000 1.1.'09 By Machinery disposal a/c 150,000
1.7.'09 To Bank 280,000 31.12.'09 By Balance c/d 1,030,000
1,180,000 1,180,000
1.1.'10 To Balance b/d 1,030,000 1.1.'10 By Machinery disposal a/c 150,000
31.12.'10 By Balance c/d 880,000
1,030,000 1,030,000
1.1.'11 To Balance b/d 880,000
Machinery Disposal Account
1.1.'09 To Machinery A/c 150,000 1.1.'09 By Provision for dep. a/c 15,000
1.1.'09 By Bank a/c 125,000
31.12
By Profit & Loss a/c - loss 10,000
'09
150,000 150,000
Machinery Disposal Account
1.1.'10 To Machinery A/c 150,000 1.1.'10 By Provision for dep. a/c 30,000
31.12.'10 To Profit & Loss a/c 5,000 1.1.'10 By Bank a/c 125,000
155,000 155,000
Note: Machinery (asset) disposal account is not a continuous account like machinery account. It must be
prepared separately every time an asset is sold.
Provision for Depreciation Account

31.12.'08 To Balance c/d 90,000 31.12.'08 By Depreciation a/c 90,000
1.1.'09 To Machinery disp. a/c 15,000 1.1.'09 By Balance b/d 90,000
179,000 179,000
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1.1.'10 To Machinery disp. a/c 30,000 1.1.'10 By Balance b/d 164,000

252,000 252,000
1.1.'11 By Balance b/d 222,000
Working notes:
(i) Loss on disposal:
Rs.
Cost of the machine 150,000
Less: Depreciation @ 10% for 1 year 15,000
Book value 135,000
Sales value 125,000
Loss on sales 10,000
(ii) Profit on disposal:
Rs.
Cost of the machine 150,000
Less: Depreciation @ 10% for 2 year 30,000
Book value 120,000
Sales value 125,000
Profit on sales 5,000
(iii) Depreciation for 2009:
Rs.
Old machines (Rs. 150,000 × 5 × 10%) 75,000
New machine (Rs. 280,000 × 10% × 1/2 ) 14,000
Total depreciation 89,000
(iv) Depreciation for 2010:
Rs.
Old machines (Rs. 150,000 × 4 × 10%) 60,000
New machine (Rs. 280,000 × 10%) 28,000
Total depreciation 88,000
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b)
Realisation Account
Particulars Rs. Rs. Particulars Rs.
To Plant & Machineries 80,000 By Sundry Creditors 120,000
To Furniture & Fixtures 45,000 By Cloud's A/c – Plant taken 45,000
To Motor Car 25,000 By Storm's A/c – Motor taken 30,000
To Stock in Trade 30,000 By Rain's A/c – Stock taken 5,200
To Sundry Debtors 71,000 By Bank – Assets realised 182,820
To Bank – Creditors 100,300
To Bank – Expenses 5,000
To Capital A/c – Profit:
Cloud (1/2) 13,360
Storm (3/10) 8,016
Rain (1/5) 5,344 26,720
383,020 383,020
Cloud's Capital Account

Particulars Rs. Particulars Rs.
To Realisation A/c – Plant taken 45,000 By Balance b/d 60,000
To Bank 36,360 By Current A/c 8,000
By Realisation A/c – Profit 13,360
81,360 81,360
Storm's Capital Account

To Realisation A/c – Motor taken 30,000 By Balance b/d 40,000
To Bank 28,016 By Current A/c 10,000
By Realisation A/c – Profit 8,016
58,016 58,016
Rain's Capital Account

To Realisation A/c – Stock taken 5,200 By Balance b/d 30,000
To Current A/c 3,000 By Realisation A/c – Profit 5,344
To Bank 27,144
35,344 35,344
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Working notes:
1. Cash Book (Bank Column Only):

To Balance b/d 14,000 By Realisation A/c – Creditors 100,300
To Realisation A/c – Sale of By Realisation A/c – Expenses 5,000
Assets 182,820
By Partner's Capital A/c:
Cloud 36,360
Storm 28,016
Rain 27,144
196,820 196,820
2. Settlement of Creditors:
Particulars Rs.
Amount due 120,000
Less: Untraced creditors 2,000
Balance Creditors 118,000
Less: Discount @ 15% 17,700
Amount Paid 100,300
3. Realisation from sale of Assets:

Particulars Rs. Rs.
Plant & Machineries 50,000
Furniture & Fixtures 40,000
Sundry Debtors 71,000
Less: Bad debts 1,200
Balance 69,800
Realisation @ 90% 62,820
Stock in Trade 30,000
Less: Taken over by Rain 5,000
Balance 25,000
Realisation @ 120% 30,000
Total 182,820
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3.
a) Following information are obtained from the books of a retail business for the
year ended 31st March, 2011.
Rs.
Goods received from suppliers (subject to trade discount and taxes) 15,75,500
Trade Discount: 3%
Sales Tax: 11%
Packaging and Transportation Charges 87,500
Sales during the year 22,45,500
Closing Inventories (at Sales Value) 2,35,000
Find out the historical cost of inventories using adjusted selling price method. 5
b) Progressive Traders who carried on retail business opened a Butwal Branch on
1.1.2010 where all sales were on credit basis. All goods required by the branch
were supplied from the head office and were invoiced to the branch at 10% above
cost. The following were the transactions:
 Goods sent to branch 1,50,000
 Sales from the branch 1,35,000
 Cash received from debtors and remitted to head office 1,06,000
 Return to head office (invoice price to branch) 4,200
The closing stock of goods at branch on December 31, 2010 amounted to Rs.
53,400 at invoice price to branch.
Record these transactions in the head office books, showing balances as on
December 31, 2010 and the branch Profit or Loss Account. 10
c) Amar draws upon Bikas three Bills of Exchange of Rs. 30,000, Rs. 20,000 and
Rs. 10,000 respectively which were duly accepted by Bikas. A week later first bill
was mutually cancelled, Bikas agreeing to pay 50% of the amount in cash
immediately and for the balance plus interest of Rs. 1,000, he accepted a fresh bill
drawn by Amar. This new bill was endorsed to Chakra who discounted the same
with his banker for Rs. 15,000. The second bill was discounted by Amar at 5%.
This bill on maturity was returned dishonoured (Noting Charges Rs. 300). The
third bill was retained till maturity when it was duly met.
Give the necessary journal entries for recording above transactions in the books of
Amar. 5
Answer No. 3
a) Valuation of Closing Inventories:
Particulars Rs.
1. Determination of cost of purchases:
Goods received from suppliers 1,575,500
Less: Trade discount 3% 47,265
1,528,235
Add: Sales Tax 11% 168,106
1,696,341
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Add: Packaging and transportation charges 87,500
1,783,841
2. Determination of Gross Profit margin:
Sales during the year 2,245,500
Closing inventories at selling price 235,000
2,480,500
Less: Purchase price 1,783,841
Gross Profit 696,659
Gross Profit Margin 28.09%
3. Valuation of Closing Inventory:
Closing inventories at selling price 235,000
Less: Gross Profit @ 28.09% 66,012
Value of Inventory 168,988
b) In the Books of Progressive Traders (H.O)

DR Butwal Branch Account. CR
31.12.2010 To Goods send to branch 1,65,000 31.12.2010 By Goods sent to 4,200
A/c (Note 1) Branch A/c (Return)
31.12.2010 To Stock reserve (Note 3) 4,855 31.12.2010 By Bank A/c 1,06,000
31.12.2010 To General P & L A/c 37,363 31.12.2010 By Goods sent to 14,618
Branch A/c (Note 2)
31.12.2010 By Balance c/d:
Stock 53,400
Debtors 29,000 82,400
2,07,218 2,07,218
Dr Goods Sent to Branch Account Cr

31.12.2010 To Butwal Branch A/c 4,200 31.12.2010 By Butwal Branch A/c 1,65,000
(Return)
31.12.2010 To Butwal Branch A/c 14,618
(loading)
31.12.2010 To Purchase A/c 1,46,182
1,65,000 1,65,000
Working
Note 1. invoice price of goods sent to branch = 1,50,000*1.10% = 1,65,000
Note 2.Net loading on goods sent = 1,60,800(1,65,000-4,200) *10/110 = 14,618
Note 3. Loading on closing stock = 53,400*10/110 = 4,855
Note 4. Branch Debtors : Total Sales =1,35,000
Less: Received from Debtors =1,06,000
Debtors balance = 29,000
c) Journal entries in the books of Amar

Dr. Cr.
Particulars
Rs. Rs.
Bills Receivable A/c 60,000
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To Bikas A/c 60,000
(Being three bills for Rs. 30,000, Rs. 20,000 and Rs. 10,000
drawn on Bikas and duly accepted by him)
Bikas A/c 30,000
To Bills Receivable A/c 30,000
(Being bills received from Bikas cancelled for renewal)
Cash A/c 15,000

Bills Receivable A/c 16,000
To Bikas A/c 30,000
To Interest A/c 1,000
(Being 50% amount received on cancellation of the first bill,
along with a new bill for 50% of the amount plus interest)
Chakra A/c 16,000
(Being the bill endorsed in favour of Chakra)
Bank A/c 19,000
Discount A/c 1,000
(Being second bill for Rs. 20,000 discounted with the bank @
5%)
Bikas A/c 20,300
To Bank A/c 20,300
(Being second bill for Rs. 20,000 discounted with the bank
dishonoured, noting charges Rs. 300 paid)
Bank A/c 10,000
(Being amount received on maturity of third bill)
4.
a) Adarsh of Biratnagar and Laxman of Kathmandu entered into a joint venture for
purchase and sale of one lot of mopeds. The cost of each moped was Rs. 3,600
and the fixed retail selling price Rs. 4,500. The following were the recorded
transactions:
2010
Jan .1 Adarsh purchased 100 mopeds paying Rs 72,000 in cash on account.
Adarsh raised a loan from A. Bank for Rs 50,000 at 18% p.a. interest
repayable with interest on 1.3.2010.
Adarsh forwarded 80 mopeds to Laxman incurring Rs. 2,880 as
forwarding and insurance charges.
Jan.7 Laxman received the consignment and paid Rs. 720 as clearing
charges.
Feb.1 Adarsh sold 5 mopeds for cash. Laxman sold 20 mopeds for cash.
Laxman raised a loan of Rs. 1,50,000 from B. Bank, repayable with
interest at 18% p.a. on 1.3.2010
Laxman telegraphically transferred Rs. 1,50,000 to Adarsh incurring
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charges of Rs 50.
Adarsh paid balance due for the mopeds.
Feb.26 Adarsh sold the balance mopeds for cash.
Laxman sold balance mopeds for cash.
Adarsh paid selling expenses Rs. 5,000.
Laxman paid selling expenses Rs. 20,000.
Mar.1 Accounts settled between the ventures and loans repaid, profit being
appropriated equally.
You are required to prepare the Memorandum Joint Venture A/c. 5
b) The following information is taken from the accounting records of Harinder
Company on March 31(year end):
Debtors : Rs. 5,82,000 Dr.
Provision for Doubtful Debts : Rs. 9,380 Cr.
The ageing analysis of the debtors at March 31 is as follows:
Age category Amount (Rs.)
Not yet due 2,75,400
1-30 days past due 1,10,900
31-60 days past due 87,500
Over 120 days past due 15,300
Total 5,82,000
The company uses the % of Receivables Method to estimate bad debts. Based on
its analysis of customers‟ accounts on March 31 and past experience with
collections, the company estimates the following percentages of debtors to be
uncollectible in the various age categories:
Age category % Estimated Uncollectible
Not yet due 3
1-30 days past due 6
Over 120 days past due 50
Required:
Calculate the amount that should appear in the March 31 Balance Sheet as the
provision for doubtful debts. 5
c) The April 30 bank statement for Binoy Company showed a balance of

Rs. 6,873.40 On this date the Cash Account in the company‟s ledger was
Rs 2,994.70. Your review reveals:
i) Cheque under collection on April 30: Rs. 298.70.
ii) Outstanding cheques: Rs. 1,718.
iii) A cheque for Rs 2,194.90 issued to a supplier was recorded by the bank as
Rs. 2,914.90.
iv) A bill receivable of Rs 5,000 and interest of Rs 300 collected by the bank have
not been recorded in the company‟s accounts.
v) A cheque for Rs. 730.60 received from a customer was returned by the bank
owing to lack of funds with the bank.
vi) Bank service charges: Rs. 90.
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vii) In accordance with the company‟s standing instruction, on April 23 the bank
paid insurance premium of Rs. 1,300 for the company‟s car.
Required: 5
(a) Prepare a Bank Reconciliation Statement for Binoy Company for April.
(b) Prepare any journal entries necessary for Binoy Company as on April 30.
Answer No. 4
a)
Memorandum Joint venture Account

for the period Jan. 1 to March 1, 2010
Rs Rs Rs Rs
To Adarsh: By Sales
Cost of Mopeds 3,60,000 Laxman 3,60,000
80×4,500
Forwarding 2,880 Adarsh
&Insurance 20×4,500 90,000 4,50,000
Interest(2 months) 1,500
Selling Expenses 5,000
To Laxman:
Clearing Charges 720
Interest(one month) 2,250
Sundry
Expenses(Telegraphic
transfer charges) 50
Selling Expenses 20,000
To Net Profit to
Adarsh 28,800
Laxman 28,800 57,600
4,50,000 4,50,000
b)
(i)Calculation of provision for doubtful debts:
Age category Amount Percentage of Provision for

Estimated doubtful debts
Uncollectible
Not yet due Rs 2,75,400 3 8,262
1-30 days past due 1,10,900 6 6,654
31-60 days past 87,500 10
due 8,750
61-90 days past 65,100 15
due 9,765
91-120 days past 27,800 25
due 6,950
Over 120 days past 15,300 50
due 7,650
Total 5,82,000 48,031
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The amount that should appear as provision for doubtful debt as on 31 March, 2010 is Rs. 48,031.
c)
Bank Reconciliation Statement of Binoy Company

as on 30st April XXXX
Particulars Rs. Rs.
Bank balance as per cash book 2,994.70
Add: Cheque issued but not presented for payment 1,718

Add: Bills receivable & interest collected by bank 5,300
Less: Cheque deposited but not cleared 298.70

Wrong recording of cheque issued by bank 720
Bank Charges 90
Insurance premium paid by bank 1,300
Customer cheque dishonoured by the bank 730.60 3,139.30
-------------
Bank balance as per the statement 6,873.40
=======
(2) Journal Entries
Bank A/c Dr. 5,300

To Bills Receivable 5,000
To Interest Received 300
( Being bill & interest received by the bank)
Bank Charges A/c Dr. 90

To Bank A/c 90
( Being bank charges recorded)
Insurance Expenses A/c Dr 1,300

To Bank A/c 1,300
( Being insurance charges paid by the bank)
Customer A/c Dr 730.60

To Bank A/c 730.60
(Being cheque dishonoured by the bank)
5.
a) State with reasons whether the following statements are true or false: (5×2=10)
i) Provisions and Reserves both are charge against profit.
ii) The meaning of the term "Capital" is same to economists and accountants.
iii) Reliability is one of the qualitative characteristic of financial statements.
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iv) In the preparation of financial statements, accounting policies are applied
consistently.
v) Heavy advertising to introduce a new product or to explore a new market is
Capital Expenditure.
b) Briefly describe the various users of accounting information. 5

Answer No. 5
a)
i) Provisions and Reserves both are charge against profit.
The given statement is 'False'. Provisions are charge against profit. It means it is created before
arriving at Net Profit. On the other hand Reserves are appropriation of net profit which is created
either because of statutory requirements or for some specific purpose as decided by management.
ii) The meaning of the term "Capital" is same to economists and accountants.
The given statement is 'False'. The term has different meaning to economists and accountants. To
economists the term capital is used to mean those assets which are used to produce goods and
services. It comprises of physical assets like building, land, plant, machinery, equipments and
intangible assets like human skill, technology etc.
But in accounting "Capital" means all tangible and intangible assets both fixed and current less
external liabilities. But such assets and liabilities should be measurable in monetary terms.
iii) Reliability is one of the qualitative characteristic of financial statements.
The given statement is 'True'. Even if information is relevant, it could not serve user's purpose
unless it is reliable. Financial statements are believed to be the container of most objective
information. But fraud and misrepresentation regarding facts and figures included in the financial
statements make the information unreliable.
iv) In the preparation of financial statements accounting policies are applied consistently.
The given statement is 'True'. In order to enhance comparability of accounting data of different
periods, the accounting policies are consistently applied in the preparation of financial statements.
Changes in accounting policies can be made when it is required by statue or management believes
that such change would result in the better presentation of financial statements.
v) Heavy advertising to introduce a new product or to explore a new market is Capital Expenditure.
The given statement is 'False'. The effect of heavy advertising with regard to the launching of a
new product or to explore a new market will last generally for more than one accounting period.
But it does not create any property of tangible or intangible nature and so the expenditure is
spread over the period for which its effect would remain. This type of expenditure items are
termed as deferred revenue expenditure.
b) The users of accounting information are as follows:

 Owner or Investor – The owner or the shareholders supply the risk capital or equity to
the business. In the modern business practice, the owner and the management is
separate, therefore the owner or the investor need to know how their money being used
by the management. Similarly, they also need information whether to buy or sell their
investment. They are also interested to know about the earning capacity and the future
prospect of the enterprises. Therefore, the financial information help them to decide
about various decision making like further investment, disinvestment or continue to
hold or sell etc.
 Creditors- They are the supplier of the required raw material for the production. They
are also supplier of goods or services to the business. They supply raw material, goods
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and services on credit. They need information to assess the financial soundness and
profitability and solvency of the business which assured them to recovery of their dues.
 Government Agencies – They regulate the functioning of the enterprises, control price
and charge taxes and duties. Their main concern is that whether prevailing laws &
regulations are obeyed by the enterprises or not. They are also interested to know
whether the enterprises are paying taxes and duties regularly and in accordance with the
existing laws & regulation or not.
 Employees – They are interested to know the continuity and the profitability of the
business. This is because their earning depends upon the prospect of the business and
the earning of the enterprise. If the business is earning more profit and future prospect
is bright then the employees will get handsome salary, retirement benefits etc.
 Customer- Customers consist of producer, distributor, wholesaler, retailers and final
consumers. They all are interested for the regular and uninterrupted supply of goods &
services. If the goods & services are not supplied on regular basis then the business will
interrupt and effect their profitability.
 Public- The public at large is interested to know the smooth functioning of the business.
Business contributes for the economic growth of the country and it also contribute the
government revenue in the form of duties and taxes. Business provide employment
opportunity to the public.
6. Distinguish between any TWO of the following: (2×5=10)

a) Cash Basis and Accrual Basis of accounting
b) Periodic and Perpetual Inventory System.
c) Consignment and Joint Venture.
Answer No. 6
a)
Points of Difference Cash Basis Accrual Basis

1.) Time of recording Economic transactions are Economic transactions are
recorded as and when there recorded when obligation or
is movement of cash. right is established whether
movement of cash is there
or not.
2.) Scope Only few business entity is Mostly all entity is

following this method. For following this method. For
example: professionals, example:
I/NGOs etc. Companies(National/Multi
national), partnership firms
And individual firms.
3.) Matching concept It does not consider It considers matching

matching concept. concept.
4.) Reliable It does not depict the true It depicts the true profit or
profit or loss for a particular loss for a particular period.
period. And hence less
reliable.
NZM
(17)
5.) Popularity Less popular. More popular.
6.) Balance sheet It does not include more It includes more items like
items like debtors,creditors,prepaid
debtors,creditors,prepaid rent etc. on balance sheet.
rent etc. on balance sheet.
b)
Perpetual Inventory System: It is a system of stock control followed by the stores department. Under
this system, a continuous record of receipt and issue of material is maintained by the stores
department. In other words, in this system, stock control cards or bin cards and the stores ledger show
clearly the receipts, issues and balance of all items in stock at all times. This system facilitates
planning of production and ensures that production is not interrupted for want of materials and stores.
Periodic Inventory System (Continuous stock taking): It means physical verification of stores items
on a periodic basis to reveal the position of actual balances. Such a verification is conducted round the
year, thus covering each item of store twice or thrice. Any discrepancies, irregularities or shortages
brought to the notice, as a result of continuous stock verification are reported to the appropriate
authorities for initiating necessary rectification measures. This system works as a moral check as
stores staff and acts as a deterrent to dishonesty.
A perpetual inventory system is usually supported by a programme of continuous stock taking . That
is continuous stock taking is complementary to the perpetual inventory system. Sometimes the two
terms are considered synonymous but it is not so. The success of the perpetual inventory system
depends upon the maintenance and upto date writing up of (i) the stores ledger and (ii) bincards/stock
control cards, Continuous stock taking, ensures the veracity of figures shown by the above records.
c)
Points of Difference Joint Venture Consignment

1.) Relationship It is that of owners It is that of principal and
between Parties agent.
2.) Continuity of It is terminated as soon as It will be there even after

relationship between the venture is over. one transaction.
the parties
3.) Ownership of goods It remains with co- It remains with the

venturers. consignor.
4.) Profit earned It belongs to co-venturers. It belongs to the consignor.
5.) Account sale It is not sent by one co- It is sent by the consignee to
venturer to another. the consignor.
6.) Methods of keeping Four methods of keeping Only one method of

NZM
(18)
accounts accounts. keeping accounts..
NZM
CAP-I, Mathematics, Dec 2011
Suggested Answer
Maximum Marks – 100
Total No. of Questions – 5
Marks
Attempt all questions.
Section:-‘A’
1.
a) A man buys a house for which he agrees to pay $500,000 now and $5,000 at the
end of each month for 8 years. If money is worth 12% per annum compounded
monthly, what is the cash price of the house? 5
b) What do you understand by the base of number system? Find the square root of
in decimal form. Simplify in decimal form. (1+2+2=5)
Answer to Q 1 a
Given,
Initial deposit = $500,000
Periodic payment = $5,000;
Payment mode is monthly at the end of each year
Number of installments (n) = 8 x12 = 96
Rate of interest (i) = 12% per annum = 1% per month = 0.01
Present Value (PV) =?
We know, P
Cash price of the hours =
Answer to Q 1 b
The total number of symbols or digits in a number system is called a base. The base indicates
the total number of possible digits or symbols in a number system. For example; decimal
number system is known as base ten system because it uses ten different digits from 0 to 9.
= 78.08(approximate)
=8.83
Again,
FTH P.T.O.
(2)
2.
a) Define the term "permutation". How many 10 digits pre-paid mobile numbers can
be constructed with the digits 0,1,2,3,4,5,6,7,8,9. If each number starts with 9841
and no digit appears more than once? (1+4=5)
b) A student has read a 426-page book. He finds that he reads faster as he gets into
the subject. He reads 19 pages on the first day, and his rate of reading then goes
up by 3 pages each day. How long does he take to finish the book? 5
Answer to Q 2 a
Permutation is arrangement of some or all objects out of given number of objects, considering the
order of arrangement. Out of 'n' objects, 'r' can be arranged at a time by ways.
Given number of objects =10

Number of digits of each per paid mobile number= 10
Number of digits already taken=4
Hence n=10-4=6
r=10-4=6
Now the required number of 10 digit pre paid mobile numbers each starting with 9841 is
Hence 720 different mobile numbers can be constructed.
Answer to Q 2 b
We have given that

a = 19, d = 3 and S = 426
1
Since, S  n  2a  (n  1)d 
2
1
426  n  38  (n  1)3
2
3n  35n  852  0
2
Using the quadratic formula,

35  352  4  3  (852) 35  107
n 
23 6
35  107 72
Since n is positive, n    12
6 6
He will finish the book in 12 days.
FTH P.T.O.
(3)
3.
a) A manufacturer sells a product at Rs. 8 per unit, selling all that is produced. Fixed
22
cost is Rs. 5,000 and variable cost per unit is Rs. .
9
i) Find the total output and the revenue at the break-even point. 3
ii) Find the profit when 1,800 units are produced. 2
b) Define "exponential function".
If , then
Prove that
Answer to Q 3 a
(i) Let the total units produced be x units.
Total revenue (TR) = 8x
Total cost (TC) = VC+FC
22
= x  5000
9
At the Break-Even point, TR = TC
22
8x  x  5000
9
x  900.
Hence, the desired output is 900 units, resulting in a total revenue is Rs 8(900) = Rs 7200.
(ii) Since, Profit  Total revenue - Total Cost
 22 
 8(1800)   (1800)  5000
= 9 
 5000.
The profit is Rs. 5,000 when 1800 units are produced and sold.
Answer to Q 3 b)
Any function
Y=ax is called exponential function where base a>0 is constant and power x is variable.
Also
FTH P.T.O.
(4)
Also =k
4.
1 2 3
a) Find A if A   2 3 2 
1
 3 3 4 
Hence, solve the system of following equations by using above obtained A1 .
x  2 y  3z  4 , 2 x  3 y  2 z  2 , 3x  3 y  4 z  11 (2+3=5)
b) A manufacturing company manufactures two different products. The production
capacity of the company‟s plant is severely limited. This limitation exists from the
fact that the manufacturer of the products involves the utilization of three scarce
resources: raw material, labor and machine time. Each unit of product A requires
4 units of raw materials, 3 units of labor and 2 units of machine time. Each unit of
product B requires 2 units of raw materials, 3 units of labor and 5 units of
machine time. The firm has a daily supply of 24 units of raw materials, 21 units of
labor and 30 units of machine time. Express the case using linear inequalities and
draw the graph of these inequalities and then shade the common region. 5
Answer to Q 4 a
Now,
1 2 3
A  2 3 2  1(12  6)  2(8  6)  3(6  9)  67  0
3 3 4
 A is non-singular and A1 exists. Therefore the system AX = B has a unique
solution. the cofactors of each elements are given by
A11  6, A12  14, A13  15
A21  17, A22  5, A23  9
A31  13, A32  8, A33  1
FTH P.T.O.
(5)
 6 14 15  6 17 13 
T

adj. A  17 5 9    14 5 8

13 8 1   15 9 1
 6 17 13 
adj. A 1 
A 1
  14 5 8
A 67
 15 9 1
Now X  A1B
The equations are
x  2 y  3z  4
2x  3y  2z  2
3x  3 y  4 z  11
 x  4 1 2 3
 AX  B Where X   y  , B   2  and A   2 3 2 
 z   11   3 3 4 
 6 17 13   4 
1 
  14 5 8  2 
67
 15 9 1  11 
 24  34  143  201   3 
1 
56  10  88   134    2 
1

67  67    
 60  18  11   67   1 
 x  3, y  2, z  1
Answer to Q 4 b
Let x unit of product A and y be the unit of product B respectively.
Inequality Boundary Two boundary Testing Conclusion

Line points Point
(6,0), (0, 12) (0,0) 0 12, True
(7,0), (0, 7) (0,0) 0 7 True
2x + 5y = 30 (15, 0), (0, 6) (0, 0) 0 True
Again, x 0 represent the half plane right to x = 0.
And y 0 represent the half plane above y = 0.
This means feasible region lies in first quadrant.
FTH P.T.O.
(6)
The shaded region OABCD is the common solution region.

5.
a) Prove that:
i) 2
ii) 3
FTH P.T.O.
(7)
b) A retailer has determined that the annual cost C of purchasing, owning, and
maintaining one of its products behaves according to the function
where q is the units of each order purchased
from its suppliers. What order quantity results in minimum annual cost? What is
the minimal annual cost? 5
Answer to Q 5 a
(i) LHS =
(ii)
Putting
Answer to Q 5 b
(i) Annual cost
Then
For minimum annual cost,
We neglect the negative value of q because it is not possible.

Thus q = 200 units
Now,
FTH P.T.O.
(8)
When q = 200,
Which shows that the annual cost is minimum for order size q = 200 tons.
(ii) Minimum inventory cost can be found by substituting q = 200 in the cost function.
Thus minimum inventory cost
FTH P.T.O.
CAP-I, Statistics, Dec 2011
Suggested Answer
Roll No……………. Maximum Marks – 100

Total No. of Questions – 10 Total No. of Printed Pages - 3
Marks
Section:-‘B’
6. The daily wages (in Rs.) of 75 workers in a factory is given below. (3+3+3+1=10)
400 350 480 320 720 640 428 400 650 425 650 850 580 710 700
920 380 590 490 900 620 635 740 880 405 230 940 639 910 820
370 470 820 520 850 530 760 450 600 460 640 480 480 510 445
420 850 370 770 825 750 749 640 635 610 520 525 475 480 380
590 405 545 650 430 700 620 340 750 580 730 740 625 520 570
a) Construct a frequency distribution choosing a class interval of 100.
b) Make a histogram and draw a frequency polygon.
c) Draw an Ogive and calculate how many workers receiving Rs. 500 or higher
wage?
d) How many workers are receiving Rs. 400 and above but less than Rs. 750?
Answer to Q 6
a) Taking class interval of 100 and starting from 200 we may have 8 different classes. The table
also shows the cumulative frequency (c.f) distribution.
less than more than
frequency c.f c.f Tally bar
200-300 1 1 75 I
300-400 7 8 74 IIII II
400-500 18 26 67 IIII IIII IIII III
500-600 12 38 49 IIII IIII II
600-700 14 52 37 IIII IIII IIII
700-800 12 64 23 IIII IIII II
800-900 7 71 11 IIII II
900-1000 4 75 4 IIII
b) Histogram & Frequency Polygon
FTH P.T.O.
(2)
c) The ogive curves are given below. From the more than c.f. column we can see that 49 workers are
receiving Rs 500 or higher wages.
d) Assuming that the frequencies are uniformly distributed within the class interval.
FTH P.T.O.
(3)
The number of workers receiving wage 400 and above but less than 750 is given by
=18 + 12 + 14 +
= 18+12+14+6
=50
7.
a) Define the term “Statistics” and discuss its Functions and limitations. 5
b) The arithmetic mean of runs scored by three batsmen, Vijay, Subhash and Kumar
in the series of 10 innings are 50, 48 and 12 respectively. The standard deviations
of their runs are respectively 15, 12 and 2. Who is most consistent of the three? If
one of the three is to be selected, who will be selected? 5
Answer to Q 7 a)
The word “statistics” is derived from the Latin word status which means a political
state. The word statistics has been defined into two different senses by different
statisticians. They are:
I)Singular sense and (ii) plural sense.
If we go to the precise definition of statistics in the singular sense we may observe the
definition given by croxton and cowden. According to them statistic may be defined
as the science of collection, presentation, analysis and interpretation of the numeral
data but in plural sense the most suitable and comprehensive definition is given by
professor Horace Secrist, according to him by statistic we mean and aggregate of
facts affected to a marked extend by a multiplicity of cause, numerically expressed,
enumerated or estimated according to a reasonable standard of accuracy collected in a
systematic manner for a predetermined purpose and placed in relation to each other.
Functions:
Function of statistics given as:
(I) It simples complex data.
(II) It presents the fact in or defined form.
(III) It provides technique of comparison.
(IV) It makes plans, programmers, and other polices.
(V) It helps in forecasting.
Limitations:
Beside the importance of statistic, it has following limitations:
(I) It deals with aggregates and not with individual.
(II) Statistical laws are not exact.
(III) Statistics laws are true only on average.
(IV) Statistics is only a mean.
(V) Statistics does not deal with qualitative phenomenon.
Answer to Q 7 b)
Let X 1 , X 2 , X 3 be the means and  1 ,  2 ,  3 the standard deviation of the runs scored
by Vijaya, Subhash and Kumar respectively. Then we are given:
FTH P.T.O.
(4)
X 1  50, X 2  48, X 3  12
 1  15,  2  12,  3  2
And
100 1
C.V. of runs scored by Vijaya =  1500 / 50  30
X1
100 2
C.V. of runs scored by Subhash =  1200 / 48  25
X2
100 3
C.V. of runs scored by Kumar =  200 / 12  16.67
X 31
The decision regarding the selection of player may be based on two decisions:
i) If we want a consistent player (which is statistically sound decision), then Kumar
is to be Selected, since C.V. of the runs is smallest for Kumar
ii) If we want to select a player whose expected score is the highest, then Vijaya will
be selected.
Kumar is most consistent.
8.
a) A store manager selling TV sets observes the following sales on 10 different days;
calculate the regression of sales on number of representative. Predict the sales
when the store hires 3 sales representatives. (4+1=5)
sales 3 6 10 5 10 12 5 10 10 8
No. of representatives 1 1 1 2 2 2 3 3 3 2
b) In a meat packaging plant, machine A and B account for 60% and 40% of the
plant output, respectively. It is known that 1% and 2% of the packages from
machine A and B respectively are improperly sealed. (2+3=5)
i) If a package is selected at random, what is the probability that it will be
improperly sealed?
i) If a package selected is improperly sealed, what is the probability that it came
from machine A?
Answer to Q 8 a)
Let X and Y are the variables representing number of representatives and sales
respectively.
Then the fitted regression line will be calculation
The coefficients are determined as

Y X XY X2
bˆ =
∑( X - X )(Y - Y ) and 3 1 3 1
∑( X - X )2 6 1 6 1
10 1 10 1
FTH P.T.O.
(5)
aˆ = Y - b̂X 5 2 10 4
= 7.9 – 1(2) = 5.9 10 2 20 4
12 2 24 4
5 3 15 9
Where X =
∑X and Y =
∑Y . 10 3 30 9
= =1
n n 10 3 30 9
The fitted equation is now 8 2 16 4
79 20 164 46
The predicted sale when X=3
=
Answer to Q 8 b)
Let A and B are representing the events that the items are produced from machine A and
B respectively. Then the respective probability are written as
P(A) = 0.6 and P(B)= 0.4.
Let D be the event for improper packaging. Then the conditional probabilities are given
as
P(D/A) = 0.01 and P(D/B) = 0.02 .
i) If a package is selected at random then the probability of improper package is given as
P(D) = P(A) P(D/A)+ P(B) P(D/B)
=0.6x0.01 + 0.4 x 0.02
=0.014.
ii) If the selected package is improperly sealed then the probability that the package is from machine
A is given as
P ( A) P ( D / A)
P( A / D) =
P( D)
0.006
= = 0.428 .
0.014
9.
a) The sales of a Readymade garment industry is presented in the table below:
Year Sales (Rs in Billions)
2001 7.5
2002 8.0
2003 8.8
2004 8.5
2005 7.5
2006 9.2
2007 9.8
2008 11.0
2009 11.4
2010 10.3
Find the sales of the Readymade Garment industry for 2015. 5
b) The quarterly sales (Rs. in millions) of a Toy International Inc. is given below:
Year Winter Spring Summer Falls
FTH P.T.O.
(6)
2005 3.0 4.8 7.5 8.0

2006 4.0 5.2 7.8 8.5
2007 5.5 6.0 10.0 9.6
2008 6.6 6.5 9.5 10.0
2009 7.8 7.5 9.9 11.5
Determine quarterly seasonal index with average method. 5
Answer to Q 9 a)
Year Sales (Rs

in
Billions)
Year (T) Y×T T×T
2001 7.5 1 7.50 1
2002 8 2 16.00 4
2003 8.8 3 26.40 9
2004 8.5 4 34.00 16
2005 7.5 5 37.50 25
2006 9.2 6 55.20 36
2007 9.8 7 68.60 49
2008 11 8 88.00 64
2009 11.4 9 102.60 81
2010 10.3 10 103.00 100
92 55 538.80 385
Least square method, Y=a+bT a = Y¯ – b T ¯,
 b = ( N∑ TY - ∑X ∑ T ) / ( N ∑ T2 - (∑T)2 )
= (10 × 538.80 – 92 × 55}/ (10 × 385- 55 ×55) = (5388.0 – 5060)/ (3850 – 3025)
= 328 / 825 = 0.3975
 a = 9.2 – 0.3975 × 5.5 = 9.2 – 2.186 = 7. 014
 Y = 7.014 + 0.3975 T
 Hence, Y-estimate for 2015 = 7.014 + 0.3975 × 15 = 12.9675
Answer to Q 9 b)
Year Winter Spring Summer Falls
2005 3.00 4.80 7.50 8.00
2006 4.00 5.20 7.80 8.50
FTH P.T.O.
(7)
2007 5.50 6.00 10.00 9.60

2008 6.60 6.50 9.50 10.00
2009 7.80 7.50 9.90 11.50
Total 26.90 30.00 44.70 47.60
Average 5.38 6 8.94 9.52 Grand Total 29.84
Grand Average 7.46
Seasonal Average 72.118 80.429 119.839 127.614 400.00
The seasonal average = (Average / Avg of Avg) ×100
10.
a) An enquiry into the budget of middle class families in Kathmandu gave the
following information:
Expenses on Food Clothing Rent Fuel Misc.
45% 20% 10% 15% 10%
Price on 1990 250 125 75 55 25
Price on 1999 360 210 80 20 50
What changes in the cost of living figure of 1999 have taken place as compared to
1990? 5
b) Fill in the blanks with suitable answers: (5×1=5)
i) The sum of deviation taken from mean is ………
ii) The formula for calculating mean deviation about median for a discrete
frequency distribution is ………
iii) In tossing three coins at a time, the probability of getting at most one head
is…………
iv) Histograms can be drawn only for …………distribution.
i) If the relation P01P10 = 1 holds, it means that the price indices satisfy
………… test.
Answer to Q 10 a)
Items W P0 P1 P1 PW
P *100
P0
Food 45 250 360 144 6480
Clothing 20 125 210 168 3360
Rent 10 75 80 106.67 1066.7
Fuel 15 55 20 36.36 545.4
Misc. 10 25 50 200 2000
∑W=100 ∑PW=13452.1
Cost of living index number =

 PW 
13452.1
 134.521
W 100
Therefore, the cost of living index has been increased by (134.521-100) which is 34.521%
FTH P.T.O.
(8)
Answer to Q 10 b)
i) Zero
ii)
 f | X M d |
N
iii) or
iv) Continuous frequency
v) time reversal test
FTH P.T.O.
CAP-I, Fundamentals of Economics, Dec 2011
Suggested Answer
Maximum Marks - 100

Marks
Part – 'A'
11. Answer the following questions (Any Two):

a) Define demand function. How can demand analysis be used in business
decision making? (3+7=10)
b) Illustrate the law of returns to scale with example. 10
c) What is short run cost? Explain with its types. (2+8=10)
Answer No.1
a) Demand function shows the functional relationship between price of a commodity (as an
independent variable) and demand for the same commodity (as a dependent variable). It is
also defined as a schedule of quantity demanded at various prices. Mathematically, it is
expressed as , Qx = f(Px), where,
Qx = demand for x goods, f = function, and
Px = price of x goods
But, demand for a commodity is also affected by other determinants such as income of the
consumer, prices of related goods, advertisement expenditure, and so on. It also establishes
functional relationship between all determinants of demand and demand for a commodity.
. It can be expressed as,
Qx = f(Px, Y, Py, T,A, W, Sp, Tr),
where, Qx= demand for x goods, f = function, Px= price of x goods, Y= income of the
consumer, Py = price of Y goods, T= taste and A = advertisement expenditure, W= weather,
Sp= size of population , Tr= Tax rate
Demand function can be classified as linear and non-linear.

Linear Demand Function: A demand function is said to be linear when the slope of the demand
curve remains constant throughout its length. It is expressed as, Qx = a + bPx, Where,
Qx= demand for x good
Px = price of x good
a = intercept or autonomous demand based on other determinants of demand except price and
b = slope demand curve (or, rate of change in demand)
Non-Linear Demand Function: Demand function is said to be non-linear when the slope of a
demand curve changes along the demand curve. A non-linear demand function is generally
expressed in power function as follows:
Qx = aPx
P.T.O.
(10)
Importance of demand analysis
i) Profit Maximization: - The objective of the business unit has to maximize profit. Making
profit is a very difficult task. Every business firm needs good idea about consumer‟s
behaviour, their purchasing power, etc. On the basis of consumer‟s behaviour, status, cost of
production, market situation, government policies, the producer tries to maximize his profit.
For this objective, the producer needs idea about demand analysis.
ii) Sales forecasting: - The demand forecasting is the expectation of the future demand for the
goods of the firm and is prepared with the help of past experience and statistics. This demand
forecasting serves as the foundation of the whole planning of a business firm. Each firm
prepares production and sales planning on the ground of this demand forecasting. Thus
business firm also forecast demand for solving the problems of over-production, under
production with the help of this tool.
iii) Investment decision: - Financial management is essential for the expansion of business
organization. Financial investment expands production capacity of business organization.
Hence, investment forecasting of business organization depends on demand analysis. If
demand analysis indicates that there will be rise in demand for good due to increase in size of
population and enlargement of size of market or change in fashion and preference of
consumers, the firm has to make a financial decision for the expansion of business and
production according to need of the market.
iv) Production decision: - A producer should decide about the ratio and amount of
production. Therefore, a producer should decide about what to produce, how to produce, for
whom to produce. The demand analysis helps to solve all the mentioned questions.
Therefore, demand analysis plays an important role for production forecasting also.
v) Market forecasting: - Business organization has to take appropriate decision for business
promotion. In recent complex marketing network, a producer should decide about
appropriate and effective marketing strategy to pull consumer‟s attraction for the production.
Hence, demand analysis takes vital role for the market forecasting.
b) It explains the production behavior of the firm with all factors variable. The law of returns to
scale describes the relationship between inputs and output when all the inputs or factors are
increased in the same proportion. It analyses the effects of scale on the level of output. This
behavior of output with the increase in scale of operation is termed as increasing returns to
scale, constant returns to scale and diminishing returns to scale. These three laws of returns
to scale are now explained, in brief, under separate heads.
(1) Increasing Returns to Scale:
If the output of a firm increases more than in proportion to an equal percentage increase in all
inputs, the production is said to exhibit increasing returns to scale.
For example, if the amount of inputs are doubled and the output increases by more than
double, it is said to be an increasing returns to scale. When there is an increase in the scale of
production, it leads to lower average cost per unit produced as the firm enjoys economies of
scale. Figure 1 shows the case of increasing returns to scale. In the figure, the various iso –
quant IQ1, IQ2 and IQ3 are drawn that show producer‟s scale of preferences. It can be seen
that distances between the successive iso – quant decrease as the producer expands the output
by increasing the scale.
Fig. 1
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Y
P
Quantity of Capital
c
b
a IQ³
IQ²
45° IQ¹
O X
Quantity of Labor
(2) Constant Returns to Scale:

When all inputs are increased by a certain percentage, the output also increases by the
same percentage, the production function is said to exhibit constant returns to scale.
For example, if a firm doubles inputs, it doubles output. In case, it triples output. The
constant scale of production has no effect on average cost per unit produced. When
constant returns to scale occurs, the successive iso – quant lie at the same distances along
a straight line OP through the origin, which is represented in the figure 2.
Fig. 2
Y
P
Quantity of Capital
b IQ³
a IQ²
IQ¹
45°
O X
Quantity of Labor
(3) Diminishing Returns to Scale:

The term 'diminishing' returns to scale refers to scale where output increases in a smaller
proportion than the increase in all inputs.
For example, if a firm increases inputs by 100% but the output decreases by less than
100%, the firm is said to exhibit decreasing returns to scale. In case of decreasing returns
to scale, the firm faces diseconomies of scale. The firm's scale of production leads to
higher average cost per unit produced. When decreasing returns to scale occurs, the
successive iso – quant will lie at increasingly greater distances along a straight line OP
through the origin.
Fig.3
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Quantity of Capital
c
IQ³
b
a IQ²
45° IQ¹
O X
Quantity of Labor
b) Short run is the time period when we can change the production only by changing the
variable factors, keeping fixed factor fixed. Thus, all types of cost incurred on short-run
production function are known as short-run cost. Short run total costs are classified as
follows:
1. Total costs:
i) Total Fixed Cost or Indirect cost or Overhead cost (TFC): It is that part of total cost which
does not vary with changes in output per period of time. Fixed cost is to be incurred even if the
output of the firm is zero. It includes cost on fixed inputs such as salary to permanent staffs,
expenses on machinery, rental cost etc. TFC curve is a horizontal straight line showing whatever
the production it will remain constant, shown in following figure.
Y TC
TVC
Cost TFC
O X
Output
Fig.
ii) Total Variable Cost or Direct cost or Prime cost (TVC): It is the cost that varies directly
with the level of output (i.e. increases at a diminishing rate initially and at an increasing
rate later. It includes expenditure on variable inputs like wages, cost on raw materials, etc.
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Hence, TVC curve is upward sloping from left to right as inverse S shaped and starts from
origin, shown in above figure.
iii) Short run Total Cost (STC): It is the sum of TFC and TVC. It follows the trend of TVC
at positive level of output. Hence, it is upward sloping from left to right as inverse S
shaped and starts from Y-axis, shown in above figure.
12. Short run average costs
i) Average Fixed cost (AFC) – It is per unit fixed cost. It decreases at a diminishing rate as
output increases. Hence, it slopes downwards to the right as rectangular hyperbola, shown
in given figure.
ii) Average variable cost (AVC) -- It is per unit variable cost and is of “U” shaped, shown in
given figure. It implies that it falls at first, reaches to minimum and rise due to the
production capacity of the factors.
iii) Average Total Cost (ATC)
It is per unit cost and is of “U” shaped, shown in given figure. It implies that it falls at first,
reaches minimum and then rise. Mathematically, it is written as: ATC = STC / Q or ATC =
AFC + AVC. It implies that ATC is influenced by the trend of AVC and AFC.
13. Short run Marginal Cost (SMC)

It is the increase in the total cost that results from producing one extra unit of production.
Therefore,
SMC = ∆TC/ ∆Q or, ∆VC/ ∆Q
It is also considered as 'U' shaped, as shown in given figure, implies that it falls initially, reaches
at its minimum and rises later.
Fig.
SMC AVC
ATC
Cost
AFC
O X
Output
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2. Answer the following questions (Any Three):
a) Explain various uses of micro economics. 5
b) Discuss the shape of AR curve under monopoly. 5
c) How can price and output be determined under monopoly in short run? 5
d) Explain the risk theory of profit. 5
e) Show the difference between gross profit and net profit. 5
Answer No.2
a) The main uses of microeconomics are:

1. To understand the functioning of free economy: It gives us the knowledge of the working
of a free enterprise economy. It helps to explain the nature of the interrelationships and
interdependence between economic variables by which we understand the complex
economic system. Microeconomics explains the conditions of efficiency in both
consumption and production in order to have clear understanding of the working of the
economic system.
2. Policy formulation: It provides tools to formulate economic policies for the promotion of
mass welfare. It is on the tenets of microeconomics that we ascertain the effects of
government policies on the allocation of resources and pricing of certain public utilities
like postal service, railways, water supply, etc. For instance, if the government tries to
impose a new tax on a commodity without analyzing the demand and supply curves, the
tax revenue may not increase, instead it may decrease. So microeconomic theories can
also be applied to examine the implications and effectiveness of the policies adopted by
the government.
3. Efficient allocation of resources: Microeconomics provides various laws, such as the law
of substitution by which a consumer will maximize his satisfaction, where the ratio of
utilities is equal to the ratio of their prices. Similarly, a producer will maximize the profit
when the ratio of marginal product of factors of production is equal to the ratio of their
prices. This situation will be the situation of maximum welfare on micro level. Hence,
microeconomics provides way of efficient utilization of resources.
4. Understanding of international trade: The study of microeconomics enables us to estimate
gains from international trade, and the determination of the foreign exchange rate. It is
the microeconomics that helps to analyze the relative elasticity of demand for each
other‟s product and also to determine the gains from international trade. Similarly, the
rate of foreign exchange in a free market is determined by the demand for and supply of
foreign currency.
5. Useful in Business Decision – making: Price theory can be applied to solve certain
operational problems continually faced by business enterprises. It helps business to
achieve maximum production with the given amount of resources. With the help of
microeconomics, business firms can make decisions in demand analysis, cost analysis
and methods of calculating prices.
b) Monopoly is a market structure in which there is a single seller, there are no close substitutes
for the commodity it produces and there are barriers to entry. Under monopoly, the seller has
full control over the supply of the commodity. A monopolist is a price maker and he
determines the price of his product on the basis of law of demand, thus the seller can sell
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more units of the outputs only at lower price. Due to the negative relationship between sales
and price, the demand curve of firm (or AR curve) slopes downwards from left to right.
However, it has three different shape, as shown in following figure.
Fig.
Y Y
AR
AR
AR
AR
O X O X
Quantity Quantity
Fig.1 Fig.2
Y
AR
AR
O X
Quantity
Fig.3
In figure 1, AR curve slopes downward to the right as linear form.

In figure 2, AR curve slopes downward to the right as convex to the origin.
In figure 3, AR curve slopes downward to the right as concave to the origin.
c) The monopoly is market form where a single seller producer produces a product with no
close substitutes. Since there is only one seller or producer in the monopoly market, the
firm is also constitutes the industry. A monopolist has two obligations:
i. to determine the level of output, and
ii.to determine the price of the product.
In short run, the monopolist has no sufficient time to expand its size of the plant. In other
words, market supply cannot be adjusted according to the change in the market demand.
In short run, the equilibrium of a firm under monopoly refers to the situation when the
monopolist either earns maximum profit or suffers minimum losses. The equilibrium
principle of a monopoly firm is also the same as a firm under perfect competition, i.e.,
MC = MR and MC cuts MR from below. For this monopolist compares his MR and MC.
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So long as MR exceeds MC, the monopolist can maximize his profit by increasing his
production. On the contrary, if MC exceeds MR at a particular level of output the
monopolist can minimize his losses by reducing his production. So a monopolist
determines the price and output at a point where MC is equal to MR.
The level of profit depends upon the efficiency of firm and market demand. A monopoly
firm has to realize three possibilities when it produces any level of output at a point
where two conditions of equilibrium are satisfied. They are: (i) If AR>AC, firm obtains
excess profit as shown in figure (a). (ii) If AR=AC, firm obtains normal profit as
indicated by figure (b). (iii) If AR<AC, firm bears loss as shown in figure (c). In case of
losses, price must cover at least the average variable cost (AVC). Otherwise, the firm will
stop production. The cases of monopoly equilibrium are shown through the figure drawn.
Fig.
Y Y
Fig. „A‟ MC Fig. „B‟ Normal Profit
Abnormal Profit
MC AC
AC
Price and Cost

Price and Cost
a a
P P
C b
e e
AR
MR AR MR
O Q X O Q X
Output Output
Y
Fig. „C‟ Loss
AC
MC
b
Price and Cost
P a
MR AR
O X
Q Output
In figure „A‟, the firm is in equilibrium at point „e‟ where the firm satisfies both the
equilibrium conditions i.e., MC = MR and MC cuts MR from below.
Thus, equilibrium level of output = OQ
Price per unit = OP (Qa)
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Per unit cost = OC (Qb)
Total revenue (TR) = P x Q = OP x OQ = Area of OPaQ
Total cost (TC) = C x Q = OC x OQ = Area of OCbQ
Total profit ( ) = TR – TC = Area of OPaQ – Area of OCbQ = Area of PabC
In figure „B‟ the firm is in equilibrium at point „e‟ where both conditions are fulfilled as in
figure „A‟, but the demand conditions are different. Therefore the firm obtains only normal
profit. Thus, equilibrium level of output (Q) = OQ
Price per unit (P) = OP (Qa)
Total revenue (TR) = P x Q = Area of OPaQ
Total cost (TC) = C x Q = OPxOQ = Area of OPaQ
Since total revenue equals to total cost, the firm gets only normal profit.
Similarly, in the figure „C‟, the firm is in equilibrium at point „e‟ where, again, both
conditions are fulfilled. Thus, the equilibrium level of output (Q) = OQ
Price per unit = OP (Qa)
Per unit cost = OC (Qb)
Total revenue (TR) = P x Q = OP x OQ = Area of OPaQ
Total cost (TC) = C x Q = OC x OQ = Area of OCbQ
Therefore, at point „e‟ total cost is greater than total revenue, the firm incurs loss.
d) F. B. Hawley, in his famous book Enterprise and Productive Process published in 1907, has
given a complete explanation regarding profit as a function of risk bearing. Every business
involves some kind of risk. According to Hawley, there are two kinds of risks: avoidable and
unavoidable risks. Some kind of risk can be avoided by insurance, but one cannot get rid of
all risks by means of insurance. There are risks, which can not be insured, and therefore they
have to be borne by the entrepreneur, like output decision, price decision, and cost condition
and product variation. So, according to Hawley risk taking is an essential function of
entrepreneur and is the basis of profit.
Criticism
(1) Carver has pointed that profit arises not because risks are borne by the entrepreneur
but because the entrepreneur is able to reduce them.
(2) Knight has pointed out that there are two type of risks, insurable and not-insurable.
No insurable risk is borne by the entrepreneur. The nut-insurable risks are
uncertainties. According to him risk should be applied only for those, which are
known. Profit is said to arise for uncertainty bearing.
(3) Entrepreneur earns profit not only due to risk bearing but also for the original ability.
This leads to reduction in the production cost.
e) Profit is the reward of entrepreneurial function. Gross profit is the difference between total
receipts and total expenditure of a firm. Generally the term profit is used to denote gross
profit. Gross profit is the sum of net profit, implicit cost, depreciation charges, etc.
Net profit is one of the constituents of gross profit. It is the reward of entrepreneur for taking
risk, uncertainty bearing, coordinating the work of production etc. It means net profit is gross
profit minus implicit costs, minus explicit costs etc.
Net profit may be positive or negative. If total receipts exceeds total expenditure (implicit as
well as explicit cost), the net profit will be positive and vice versa
3.
c) Justify the following statements with appropriate reasons. (5×1=5)
i) Choice is a method to address scarcity problem.
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ii) Demand curve always slopes downward from left to right.
iii) Supply curve is downward sloping.
iv) Long run average cost curve is also called envelope curve.
v) A competitive firm only earns normal profit in long run.
d) Write short notes on (Any Four): (4×2.5=10)

i) Production Possibility Curve
ii) Average Revenue and Marginal Revenue
iii) Total Fixed Cost (TFC)
iv) Demand Forecasting
v) Conditions for Monopolistic Competition
Answer No. 3
a)
i) Because, though human wants are unlimited but resources are scarce. However, the
consumers want to maximize welfare. L. Robbins mentioned choice to find out best
option for resource allocation.
ii) Because, the demand curve is downward sloping from left to right due to price,
income and substitution effects. Besides, it is also due to operation of law of
diminishing utility in consumption.
iii) Because, the supply curve always slopes upwards due to the positive relationship
between price and supply of the commodity. In other words, when price increases the
sellers are willing to increase their sales to increase their profits.
iv) It is also called envelope curve because it encloses the whole family of short run cost
curves from below.
v) As there is freedom of entry and exit of firms into the industry, the entire competitive
firm only earns normal profit in long run. When firms will be earning profits, other
firms enter into and if firms suffer from the loss, other firms exit from the industry.
b)
i) Production possibility curve (PPC) is a graph that shows different possible
combinations of inputs for different level of production with the limited resources
during a certain time. This curve is concave to the origin. This approach represents a
number of economic concepts, such as scarcity of resources, opportunity cost (or
marginal rate of transformation), productive efficiency, allocation efficiency,
and economies of scale.
This curve shows all possible combinations of two goods that can be produced
simultaneously during a given time period in a country, ceteris paribus. When we
have to increase the production of one good, the production of the anther good must
be sacrificed. Here, rice production must be sacrificed in order to produce more
wheat.
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Fig,
Rice
D
B
C E
A
O
Wheat
Let us take two products, rice and wheat. We have the limited resources, which can be
allocated to produce of these products (rice and wheat). When rice is produced at D, the
production of wheat must be sacrificed. Similarly, when wheat is produced at E,
production of rice should be sacrificed.
This is applicable in micro and macro economy for choosing production combination for
getting efficient resource allocation.
ii) It is the outcome of the total revenue divided by the total output. In other words, it is the
per unit revenue. AR = TR/Q or, AR = P x Q/Q = P. Therefore, AR = P. AR curve is the
demand curve of the firm.
Marginal revenue (MR) is defined as the addition made to the total revenue by selling
one more unit of output. In other words, it is the ratio of the change in the total revenue
with the change in the total sales quantity. It reflects the total change in total revenue. MR
= ∆TR / ∆Q or, MR = TRn – TRn-1.
In perfect competition market average revenue will be equals to marginal revenue. So AR
curve coincide with MR curve and be a horizontal. In monopolistic and monopoly
market both average revenue and marginal revenue decrease. The decreasing rate of MR
is more than decreasing rate of AR. So both AR curve and MR curve slopes downward
from left to right and MR curve will lie below the AR curve.
iii) TFC: - Total fixed cost is the cost corresponding to the fixed factors. It is also called
overhead cost. It affects the level of output indirectly. In other words, the TFC
remains constant and positive even if output is zero. The TFC includes:
a. Rent,
b. Wear and tear of machinery,
c. Salaries of administrative staff etc.,
d. Insurance premium,
e. Government fees,
In figure, TFC curve is parallel to horizontal axis implying that TFC is constant for all
level of output.
Fig.
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Costs
P TFC
O X
Output
iv) Demand forecasting is predicting future demand for a product on the basis of present and
past demand. The information regarding future demand is essential for planning and
scheduling production, purchase of raw material, acquisition of finance and advertising.
The information regarding future demand is essential also for the existing firms for
avoiding under or over – production. Since demand forecast plays an important role in
planning to acquire inputs, men and material, organizing production, advertizing the
product, and organizing sales channels, it becomes indispensable for the large firms to
have at least a rough estimate of the demand prospects.
There are many techniques of forecasting the demand, but the choice of a suitable method
is a matter of experience and expertise. The different methods are: survey method,
opinion poll method, statistical method, etc.
v) The following are the main conditions of monopolistic competition:
1. There are a large number of buyers and sellers, but the largeness is in limitation. This
implies that each of the firm produces a small share of the market.
2. Under monopolistic competition firms produce differentiated products. They are
similar enough to be regarded as the same commodity but are sufficiently different so
that consumers tend to regard them different from each other. Product are
differentiated from each other (i.e. due to the physical and chemicals components of
the products, difference in quality, size and design, brands, packing and design, etc.)
3. All firms are free to enter the market and also they are free to exit market.
4. 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 advertising expenditure, etc.(i.e., known as non-price
competition)
5. Firm has a negative sloping demand curve (AR curve).
Part – 'B'
4. Answer the following questions (Any Two):

a. Define inflation. What will be appropriate measures to control it? (3+7=10)
(21)
b. Explain the objectives of fiscal policy in under developed countries like
Nepal. 10
c. Define central bank and discuss its various roles. (2+8=10)
Answer No. 4
a) Inflation is an increase in the overall price level persistently at appreciable level. Gardner
Ackley, H. Johnson regarded as a phenomenon of rising prices. According to Crowther,
“Inflation is a state in which the value of money is falling, i.e., the prices are rising.”
Neoclassical economists, Friedman, Coulborn and Hawtrey regarded it as a monetary
phenomenon. Coulborn defines inflation as, “too much money chasing too few goods.”
Keynes defined, “Inflation as a phenomenon of full employment.”
It is a dynamic long-term economic process. It is caused by action, reaction and
counteraction between macro-economic forces, i.e. aggregate demand and aggregate supply.
In fact, the essence of inflation is excess AD over AS.
In general, there are three major remedial measures. They are monetary policy, fiscal policy
and other measures, described below:
1. Monetary Policy: Monetary policy aims at controlling the supply of money by
influencing the availability and cost of bank money or bank credit. It is essential to adopt
restrictive or dear monetary policy to combat inflation. Restrictive monetary policy is
characterized by reducing the availability of bank credit and increasing the cost of credit.
The main instruments are: selling securities in open market, increase in bank rate,
increase in cash reserve ratio and adoption of appropriate selective measures. By such
measures, flow of currency in circulation will decrease. As a result aggregate demand
will decrease and then price level will decrease.
2. Fiscal Policy: Fiscal policy can also be used to control inflation. Fiscal policy is the
policy of the government expenditure and government revenue. Contractionary fiscal
policy can be used to reduce the aggregate demand and thereby control demand – pull
inflation. Contractionary fiscal policy is the policy of reducing government expenditure
and increasing government revenue through taxes. The main tools of fiscal policy are: a)
Reduction in unproductive public expenditure, b) Increase in taxation and c) Raising
public borrowing. By such measures, flow of currency in circulation will decrease. As a
result aggregate demand will decrease and then price level will decrease.
3. Direct Controls: Direct controls include price control and rationing, increase in the
availability of goods by increasing the production of inflation sensitive goods, domestic
production of essential goods, indexation, etc.
b) The objectives of fiscal policy may suffer 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 objectives of
fiscal policy in developing countries are to maintain the existing growth rate. The main
objectives of fiscal policy are as follows.
i. Economic growth- To 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 saving and investment. The
role of the fiscal policy in this regard is to create condition for increase in private saving
and investment and to enhance investment in public sector. In order to promote saving,
private and corporate sector is provided with a number of incentives and concessions
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include tax holidays, high depreciation allowances, investment subsidies, exemption of
import duties on capital import and so on. Similarly, government also increases its
spending for building infrastructure which creates conductive environment for the private
investors. In this way, either by providing the incentive to the private investors or direct
spending of governments, both increased the aggregate demand and this increased AD
increases the national output by multiplier process.
ii. Higher level of employment or full employment –Maintaining full employment in the
developed countries and creation of employment opportunities for million of unemployed
people 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
place of economic growth promote employment also. In order to increase the
employment level in a country , government can increase spending on goods and services
, provides transfers to the low income groups and can reduces tax rates. All of these three
efforts would lead to an increase in AD so that employment may increase.
iii. Stability in price. –The price instability denotes both inflation and deflation. But the
pressure of inflation is high in developing countries . in developing countries , public
expenditure is increasing rapidly due to the development programmed. On the other hand,
production is increasing slowly due to technical rigidity, low efficiency of labor and
deficiency of productive input. It has created high rate of inflation.
Inflation can be controlled either by reducing government spending or by increasing tax
rate or some combination of both. Therefore to combat inflation, contractionary fiscal
policy is used. Due to reduction in government spending and increase in tax rate,
aggregate demand would be reduces and control inflation.
iv. Stabilizing balance of payment – Balance of payment is in disequilibrium when
external payment obligation exceeds the foreign exchange earning. When the gap
between foreign payment obligation and the external earning is of a large magnitude and
if it increases over time, it becomes a matter of serious concern and has serious effect on
economy. This gap arises mainly due to decreasing trade balance or current account
deficits. Fiscal policy is used to correct the adverse balance of payment by promoting
exports and discouraging imports. Fiscal policy, especially tax policy, can be used as an
effective tool of restoring the balance of payment equilibrium. The fiscal measures that
are adopted this purpose are : a) subsidization of export by providing tax exemption,
concession, and subsidy , and b) imposition of heavy import duty , especially on import
of consumer goods.
v. Reduction in economic inequality-There exist a great inequality in income and wealth
in developing countries. Economic disparity beyond a level is, however, socially
economically and politically undesirable. Therefore, economic disparity beyond a level
is, however, socially economically and politically undesirable. Therefore economic
disparity needs to be curbed to its socially acceptable level.
An appropriate fiscal policy should be adopted in order to reduce the economic
inequality. Both taxation and expenditure measures are used to reduce income and wealth
gap between the rich and poor. Tax policy aimed at economic equality includes the
following measures:
i. Taxation of personal and corporate income at progressive rate;
ii. Imposition of wealth and properly tax; and
iii. Taxation of high prices and luxury goods at higher rates.
iv. Government expenditure policy includes the following measures :
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v. Spending government money on such projects that enhance the earning capacity
of the low income people like free education and medical facility;
vi. Re-allocating capital expenditure so as to enhance the employment opportunities
for unemployed and underemployed people;
vii. Making provision for financial aid for the unemployed for their self employed ;
and
viii. Making provision for unemployed relief and unemployment insurance.
These tax and expenditure measures make two way attacks on economic disparity. Tax
measures limit the growth of incomes in the high income groups and transfer a part of
rich people‟s income to the government treasury which enhance government resources to
help poor. Expenditure policy, on the other hand, creates condition for the growth of
incomes in low income groups.
c) Central bank is an important central monetary and financial institution of every country in
modern times. It is an apex institution of the economy‟s banking system. It plays an active
role in implementing government‟s economic policy in the country. Although some central
bank had been established more than two centuries, it is mostly a product of the nineteenth
century. Nepal Rastra Bank (NRB) is the central bank of Nepal.
It is difficult to give the precise definition of central bank as different economists had defined
it differently according to its different functions.
Vera Smith defined central bank as, “It is a banking system in which a single bank has either
a complete or a residuary monopoly of note issue.”
Hawtrey, “Central bank is the lender of last resort.”
Similarly, according to Kisch and Elkin, “Central bank is a bank whose essential duty is to
maintain stability of monetary standard.”
In short, central bank is the central monetary institution which performs the function of
banker‟s bank, government‟s bank, issues the notes, lender of last resort, custodian of foreign
exchange reserve etc. Important role of the central bank are as follows:
A. Traditional Role:
a) Note Issue: Central bank enjoys the monopoly power of bank note issue. This function
allows it to control over the excessive credit expansion in the economy, it makes the
note uniform.
While issuing the note it has to follow rules laid down by the law. The rule differs from
country to country. In Nepal note is issued in accordance with the proportional reserve
system in which it has compulsorily maintain reserve of gold and silver and valuable
currencies like dollar and pounds in 50% and rest of 50 % can be domestic currencies
to inspire confidence among the people on notes.
b) Government‟s Bank: Central bank in all countries acts as the fiscal agent, banker and
advisor of the government on all important financial matters. It manages the banking
accounts of government. It gives short term loans to the government. It provides advice
to the government on important matters of economic policy.
c) Banker‟s Bank: Central bank is the banker‟s bank as it keeps the cash reserve of
commercial and other banks of the economy, it discounts the bills for the commercial
banks, provides advice to other banks etc.
d) Lender of last resort: Central bank acts as a lender of last resort in times of emergencies.
In difficulties time for the financial institution there will be no hope to get help from
any competition institution. So ultimately they reach to central bank.
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e) Credit control: It controls the credit i.e. regulating the volume and direction of bank loan.
It means central bank expands and contracts credit according to necessary of the
economy.
f) Clearing Agent: Central bank clears, transfers and settles the mutual claims between the
different banks as all the banks have to send its daily account in central bank. This
function helps in regulating and supervising the banking industry.
g) Custodian of foreign exchange reserve: Central bank acts as a custodian of foreign
exchange reserve as it can be used in adverseness at any time in countries balance of
payment position and maintenance of exchange rate stability.
B. Developmental Role
The central bank performs the following developmental roles:
a) Helps to maintain internal stability
b) Development of financial market
c) Expansion of bank branch services
d) Development of banking habits
e) Training facilities
f) Formulation of proper interest rate structure
g) Helps in developmental programmes such as poverty alleviation programmes.
5. Answer the following questions (Any Three):

a) Differentiate between GDP and GNP. 5
b) What are the causes of cost push inflation? 5
c) “Saving is vice not a virtue” illustrate. 5
d) Explain causes of trade deficit in Nepal. 5
e) What are the problems of foreign trade in Nepal? 5
Answer No. 5
a) GDP and GNP are two important concepts of macroeconomics. These concepts measures
aggregate production activities of the country. GDP and GNP seem to be synonymous
concepts but actually they are different.
 Gross domestic product (GDP) is the total money value of all the final goods and
services produced by national economy at market price within the territory of the
country in a year. In other words, GDP is income generated (or earned)by factors of
production within the country from its own resources. Domestic Income includes
wages and salaries, rent of house and land, Interest income, dividend, undistributed
corporate profits, mixed income, net indirect taxes etc.
GDP in accordance with the world bank measures the total outputs of goods and
services for final used produced by residence and non-residence regardless of the
allocations of domestic and foreign claims. Mathematically, it can be expressed as
GDP=C+I+G+X-M
Where,
C=Consumption expenditure,
I= Private investment expenditure,
G=Government expenditures on consumption and investment,
X=Value of exports,
M= Value of imports,
 GNP is Gross National product. GNP is total measure of total final goods and
services produced by national residents inside and outside of the country at market
price in a year. GNP in accordance with the world bank measures the total outputs of
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goods and services for final used produced by residence and non-residence regardless
of the allocations of domestic and foreign claims. Mathematically, it can be expressed
as
GNP=GDPMP + Net receipts (R – P)
We can conclude that the main difference between GDP and GNP are that, GNP includes
net income derived from abroad. In other words, if we add net income derived from
abroad in GDP, we get GNP.
b) The main causes of cost push inflation are as follows:

1. Increase in wages – Trade unions always give pressure to like wages and
salaries at high rate. But increase in wages rate more rapidely than
productivity of labor result rising cost of production and commodity price.
2. Increase in profit margin- Oligopolistic and monopolistic competitive firms use
their monopoly power to increase their profit margin which result into rise in
price and inflation.
3. Supply shock- Supply shock is a sudden, unexpected disturbance in the supply
position of some major commodities or key industrial input. The sudden rise
in the OPEC oil prices during 1970S due to Arab- Israel war is the famous
example of the supply suck inflation.
4. Rise in price of raw material – Rise in the price of raw material increases the
cost of production and commodity price.
5. Natural calamities- supply of agricultural product is adversely affected at the
time of natural calamities like flood, drough, etc.This creates the shortage of
food and raw material which result the inflation.
6. Artificial scarcities – Artificial scarcities creates by hoarders and speculators
who indulge in black marketing, reduce the supply of goods and raise the
price.
c) Saving is a vice not a virtue:

An interesting paradox can arise when households attempt to increase their savings.
Thrift (i.e., the desire to save more) is considered to be a virtue in most of the societies
and it is regarded as an act of prudence on the part of individuals to save for meeting
future crises or for maintaining better life in future. The paradox of thrift is paradoxical
because it contradicts the widely held belief that „a penny saved is a penny earned‟.
According to Classical economists, saving is a private virtue because every individual
must save something for his difficult days. Moreover, when an individual saves, he
accumulates a fortune by maximizing earnings and minimizing expenditures on
consumption. Since, saving is a positive function of the rate of interest and investment is
a negative function of rate of the interest, fluctuation in the rate of interest maintains the
equality between saving and investment. So more saving leads to more investment, and
more investment leads to more income. Since increased savings by all individuals mean
increased savings in the community as a whole, saving is also beneficial to the society.
Thus, according to the Classical economists, saving is both a private as well as social
virtue.
To Keynes, this is a wrong approach because savings depend upon income and increased
savings in the community are possible only when the total income of the community
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increases. Keynes has showed that if all people in a society decide to save more, they may
actually fail to do so but nevertheless reduce their consumption. Since, one man‟s
expenditure is another man‟s income, increased savings on the part of some individuals
lead to a decline in the income and expenditures of some other individuals. Moreover,
increased savings means less expenditure and hence, less of effective demand, which
leads to reduction in income, output and employment in the economy. Thus, Keynes came
to the conclusion that savings is a social vice. Stated briefly, “the paradox of thrift”
focuses our attention on the fact that any attempt on the part of consumers to save more
out of any given income results in the actual decrease in the amount they succeed in
saving and vice versa.
Fig.
S1
A S
Saving and Investment
E2
I I
E1
S
1
S
Y2 Y
O 1
200 300
Income
Consider the figure, where SS is the saving curve and II is the planned investment curve. It
is seen that saving and investment curves intersect each other at point E1 and determines
level of income equal to Y1 or Rs. 300 crore. Now suppose that expecting hard times ahead
all people try to save more by the amount of Rs. 50 crore which would cause an autonomous
downward shift in the consumption function. This downward shift in the consumption
function brings about an upward shift by 50 crore or E1A in the saving function curve to
S1S1. This new saving function curve S1S1 cuts the planned investment curve at point E2
according to which new equilibrium level of income falls to Y2 or Rs. 200 crore. This
explains the paradoxical feature of an economy gripped by recession. This is paradoxical
because in their attempt to save more the people have caused a decline in their income and
consumption with no increase in the saving of the society at all.
d) Trade deficit is negative trade state in which import exceeds export trade in terms of
volume, value and size. In Nepal, Trade deficit growth was 61.2 percent in 2010. Import and
export trade share was 86.2 percent and 13.8 percent respectively. It was alarming trade
scenario to the small economy, Nepal. There are various reasons: ineffective trade policy,
weak industrialization, no trade diversification and lower value exportable items.
 Export trade policy is ineffective to promote exportable items in international markets
and to diversify exportable items and countries. Value and volume of export trade is
found lower. Its consequence is trade deficit.
 Trade deficit growth is natural in Nepal because of weak industrialization. It is
supplemented by political instability, weak business environment, 18 hours load shedding
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and issue of law and order. A few numbers of Industries are in the state of either closed
down or shifting in India. Remaining operational industries are still under production.
FDI inflow has become critical. The supply lag of domestic products and of exportable
items can be revealed. Subsequently, export GDP ratio is lower than import GDP ratio.
 It is supplemented by few exportable items having lower value and volume. Handicrafts
products such as carpet and garment are major high value items. Primary products such
as agro products and mineral products (stones) are lower value items having higher
volume. However, Nepal imports high valued finished products such as necessary
(capital products and consumption) and luxury items at higher volume.
This trade deficit growth has negative implication in trade balance and balance of
payment. It makes huge pressure to keep reserve of foreign currency. This is very
difficult issue to the government and economy.
e) The main problems of the foreign trade in Nepal are as follows:
1. Land – locked country:- Nepal is a landlocked country situated between India and
China in one. It is surrounding by India in three sides and China in one side. Due
to geographical difficulties and remote sea port, trade through China is very
limited. So, for foreign trade Nepal has to depend only in India. Due to it‟s over
dependence on India for foreign trade, it is difficult to freely trade with overseas
countries and to adopt independent trade policy. Similarly, cost of goods would
increase due to imposition of different kinds of tax and duty by India and hence
lower the competitiveness of Nepalese goods in the international market.
2. Concentrated on few goods and countries:- Though in Nepal adopted the trade
diversification policy since 60s decade, Nepal‟s export trade is limited on few
commodities ( woolen carpet, readymade garment, handicraft etc. ) and few
countries ( India , Germany and US) . So , Nepalese export trade becomes
vulnerable due to concentration on few goods and countries.
3. Slow development of industries:- Industries development in Nepal is very slow.
Due to slower development of industries, exportable industrial goods are very
limited which obstacle the export trade of Nepal.
4. Low quality goods:- The goods produced in Nepal are of inferior quality. It is due
to low state of technology, lack of skilled manpower, lack of capital and so on.
These low quality goods can not compete in the international market.
5. Lack of studies and research:-Sufficient research and study should be carried out
in order to find out the strength, weakness, opportunities and threat of our foreign
trade. Due to lack of such studies and research, we can not explore potential
market to our goods and we are unable to know what should be produced.
6.
a) Justify the following statements with appropriate reasons. (5×1=5)
i) The MPC of the poor is greater than that of the rich.
ii) Employment in the economy is determined by wage rate according to
Keynes.
iii) Negative Balance of payment is always good.
iv) Nepal Rastra Bank is the lender of the last resort for commercial banks
in Nepal.
v) Monetary policy is issued and implemented by finance ministry in
Nepal.
b) Write short notes on (Any Four): (4×2.5=10)
i) National income or NNP at factor cost
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ii) Poverty
iii) Income Tax
iv) Human Development Index (HDI)
v) Principles of SAFTA
Answer No. 6
a)
i) Because, the poor are unable to satisfy even their basic needs. Therefore, they tend to
spend larger amounts of their increased income on consumption.
ii) Classical economist believes that wage rate determines the level of employment.
Cutting of wage rate would increase employment in an economy but according to
Keynes the level of employment in any society depends upon the size of the effective
demand. Effective demand and employment have a positive relationship.
iii) Because, negative balance of payment or deficit balance of payments is not good for
macroeconomic stability
iv) It is correct because Nepal Rastra Bank provides financial assistance for commercial
banks of Nepal during the period of need and emergency.
v) It is incorrect because, monetary policy is formulated and implemented by Nepal
Rastra bank in Nepal. Ministry of finance formulates the fiscal policy.
b)
i) NI is the synonyms of net national product at factor cost. It is the sum of all income
payment made to the factor of production. NI may also be regarded as the total
income earned by the factor of production or by persons supplying the service or
resources used in production. These payments take the form of wages, rent, interest
profits and mixed income of self employed. Net receipts is also added with domestic
factor income receipts..
NI (NNP at FC) = GNP at MP – Depreciation - indirect taxes + subsidies.
Since NI is the sum total of all incomes earned by factors of production, we can write
NI = r + w + i + p + (mixed income of self employed) + net income derived from
abroad.
ii) Poverty is a state of being poor i.e. the state of not having enough money to fulfill the
basic needs such as food, clothing, shelter, clean water, and health services etc.
Poverty may be absolute and relative. Absolute poverty is that when human beings
are not been able to consume sufficient necessities to maintain life. Human beings
who are homeless or malnourished suffer from absolute poverty. This can be
eradicated from society. The largest concentration of absolute poverty is to be found
in the third world. Relative poverty is defined as relatively low of existing living
standard for the average individual. It is always present in the society. There is no
exact measurement of relative poverty.
The main causes of poverty are listed as: (1) overpopulation, (2) the unequal
distribution of resources in the economy, (3) inability to meet high standards of living
and costs of living, (4) inadequate education and employment opportunities, (5)
environmental degradation, (6) certain economic and demographic trends, and (7)
lack of welfare incentives.
iii) A type of direct tax is income tax. The burden of such taxes cannot be shifted from
one person to another. Income tax is a taxation tool of public finance. It is imposed to
the people who have income more than income tax ceiling. Income tax is imposed in
the individual when they have higher annual income than income ceiling.
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The main advantages are: economical, certainty, civic consciousness, reduction in
inequality, elastic, etc.
The main disadvantages are: unpopular, inconvenience, uneconomical possibility of
evasion, etc.
iv) This is the most recent approach in relation to the measurement of economic progress.
The UNDP defines human development as a process of „Enlarging people‟s choices.‟
This index includes three things like an income for the better standard of living, an
attainment of education and a life expectancy. Among these three things, an income
for the better standard of living is an income index and other two are the social
indicators. So, it is also called a composite index. While constructing this composite
index, various countries are ranked from 0 to 1. It ranks low human development
from 0 to 0.5, medium human development from 0.51 to 0.79 and high human
development from 0.8 to 1. This index indicates that the HDI of any country may be
high even if the per capital income is low.
v) South Asian Free Trade Area (SAFTA) has come into effect from January 1, 2006,
among eight members of SAARC.
SAFTA is an agreement under where there is free flow of goods and services among
member counties without any barriers. This implies that members of free area
eliminate tariffs and non- tariff restriction on products of member countries.
SAFTA is governed by following principles.
1. Government by the provision of agreement,
2. Affirm Existing Rights and Obligation,
3. Overall reciprocity,
4. Free movement goods,
5. Adoption of Trade facilitation and other measures,
6. Reorganization of the heads of LDCs.
CAP-I, Business Communication, Dec 2011
Suggested Answer
Roll No:……….. Maximum Marks-100
Total No. of Questions-8 Total No. of Printed Pages - 2
Time Allowed -3 Hours Marks
All questions are compulsory.
1. What do you mean by business communication? Discuss the role of communication

in business organization. 15
Answer No.1
Communication is neither transmission of message nor message itself. It is the mutual exchange
of understanding, originating with the receiver. Communication needs to be effective in business.
Communication is essence of management. The basic functions of management (Planning,
Organizing, Staffing, Directing and Controlling) cannot be performed well without effective
communication. Business communication involves constant flow of information and feedback is
integral part of it. Organizations these days are very large and involve a number of people. There
are various levels of hierarchy in an organization. Greater the number of levels, the more
difficult is the job of managing the organization. Communication here plays a very important
role in process of directing and controlling the people in the organization. Immediate feedback
can be obtained, and misunderstandings if any can be avoided. There should be effective
communication between superiors and subordinated in an organization, between organization
and society at large(for example between management and trade unions). It is essential for
success and growth of an organization. Communication gaps should not occur in any
organization.
Business Communication is goal oriented. The rules, regulations and policies of a company have
to be communicated to people within and outside the organization. Communication is regulated
by certain rules and norms. In early times, communication was limited to paper-work, telephone
calls etc. But now with advent of technology, we have cell phones, video conferencing, emails,
satellite communication to support it. Effective communication helps in building goodwill of an
organization.
Communication plays a very important role in an organization. In fact, it is said to be the life
wire of the organization. Nothing in the universe, human or any other thing can remain aloof
from communicating, though the means of communication may be very different.
Communication is very crucial and unavoidable since we have intentions which we want to pass
across to another person, group or even to the outside world.
Communication in an organization is inevitable. Departments communicate from time to time in

respect to daily activities and the organization's relationship with the external world. It says what
it intended via written and unwritten means, either planned or impromptu. It could be
hierarchical, that is, from top to bottom or vice versa. It could be formal or informal; vertical,
horizontal or diagonal. Whichever means, modes or types of communication, what matters is that
communication takes place.
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The basic functions and roles of the management could not be performed without
communication. Planning, organizing, coordinating, budgeting, monitoring, controlling, staffing,
delegation; and including marketing, production, financing, staffing (human resource managing),
research and development, purchasing, selling, etc could not be well coordinated without
effective communication.
At meetings, communication plays a key role. The effectiveness of an organization also depends
on the success of its meetings where goals to be achieved, targets to be met, and activities to be
carried out are ironed out and discussed. If the ideas are not well understood at the meeting, then
one needs to be sure that the workers will mess up everything. Thus, the chairman of the meeting
must be an effective speaker or capable of ensuring that everyone got what has been discussed
correctly. This will help eradicate rumor and grapevine and likewise help achieve set standards,
goals and/or objectives.
In conclusion, everyone in an organization needs to have good communication skill, not the boss
only, but also the subordinates. It is what all of us (workers) need to jointly strive to achieve the
set goals. Remove communication in an organization, we are going to have dead entity, good for
nothing and worth been shut down. Communication is the backbone for organization's success.
2. Write an essay in about 250 words on „Prosperity through tourism'. 15
Answer No.2
Prosperity through tourism

Every nation has its goal to gain maximally prosperity and welfare. National prosperity and
welfare can be achieved in many ways. The policy makers and planners make typical
programs and strategies for the national development according to the condition of their
nation. Some countries may concentrate on industries, some others on information
technology, and so on. There are may countries in the world that have potential in prosperity
through tourism. These countries including Nepal have attempted to promote tourism as an
industry that can ensure prosperity and welfare of the people through economic as well as
social development. Tourism is seen as a vehicle for economic growth.
Tourism requires two basic components: accessibility and accommodation. Accessibility

refers to the facility of getting to the tourism destination. This includes transportation
facilities such as air transportation, road transportation and so on. When the places are
accessible, the tourists may easily reach there. But, the tourists do not tend to be attracted
towards the inaccessible places though these are naturally or culturally rich. Similarly,
another important component is accommodation which refers to the facility for the tourist to
live and dine during their journey. We can better manage accommodation by making hotels,
resorts, restaurants, etc. The tourist may also expect for the facilities of communication,
health service, etc.
Obviously, tourism gives us prosperity and welfare but it is important to consider that we
have to make basic facilities such as accessibility, accommodation, communication,
entertainment, etc. for the tourists. Because of tourism a large number of people become
employed. The nation can be prosperous through business as well as employment. We can
earn from the cultural and natural resources. Tourism assures for prosperity in different ways.
The tourists may visit a destination for various reasons such as religion, sports, education,
nature, culture and so on. The countries which are intended to gain prosperity through
tourism are required to consider seriously in order to draw attraction of the global people
through different aspects of their country such as culture and nature.
P.T.O.
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3. Answer any THREE of the following questions: (3×5=15)
a) Discuss some of the significant barriers to effective communication.
b) Describe how formal and informal communication networks operate in an
organization.
c) Why is it important for business professionals to develop their presentation skills?
d) How does one establish businesslike atmosphere at a meeting?
Answer No.3
a. barriers to communication
i. The main barrier to effective communication is language. If the two parties
involved in the communication don't understand each others language perfectly then
some degree of misunderstanding will take place.
ii. A second barrier is distance. In the days before the telephone and the internet it
could take many days for a letter to reach its destination. In the Middle Ages it
could take weeks. Even phone calls need to take into account the time difference
between caller and recipient - no-one wants a call in the middle of the night.
iii. A third barrier is the reliability of the communication method used. Letters are not
always delivered and phone lines or e-mail systems can be down or faulty, causing
misunderstanding or delay.
iv. A fourth barrier is security. Some communication is secret. This involves the use of
codes and cyphers (encryption) for the written word or scrambling for the spoken
word in case the messages are intercepted.
v. A final barrier is cost. The volume of mail in Britain increased enormously when
the idea of a standard prepayment of one penny was introduced and had dropped off
again since cheaper e-mails were made possible. Similarly voice contact by phone
has increased enormously since the costs of telephone calls were reduced by the use
of communication satellites and other technology.
b. formal and informal network

A formal structure identifies individuals who are the official sources of information and the
information that is their special concern. This has been the traditional view of managers and
professional business communicators. Since relationships are determined by one's role,
structure is viewed by managers as a static entity which conforms to a top down
configuration (Monge & Eisenberg, 1987). This perspective, which has been termed the
configurational view, emphasizes the authoritative coordination of work in the service of
stated organizational objectives (Dow, 1988). Recent reviews suggest that formal
approaches focus on the configurations resulting from formal authority relationships
represented in the organizational hierarchy (Dow, 1988; Jablin, 1987), from differentiation
of labor into specialized tasks (Dow, 1988; Jablin, 1987), and from formal mechanisms for
coordination of work (Dow, 1988). These characteristics, along with the notion of goal or
purpose, have been seen by Schein (1965) as representing the very essence of an
organization.
On the other hand, informal approaches recognize that a variety of needs, including social
ones, underlie communication in organizations and that, as a result, the actual
communication relationships in an organization may be less rational than formal systems
(Johnson, 1993). Informal structures function to facilitate communication, maintain
cohesiveness in the organization as a whole, and maintain a sense of personal integrity or
autonomy (Smelser, 1963). The coactivational perspective recognizes that communication
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relationships are not solely based on the positions individuals occupy within formal
organizations. Informal groups often arise out of a combination of human needs and formal
factors (Schein, 1965). For example, increasingly business communicators have focused on
the role of informal communication in generating innovations within organizations
(Johnson, 1990).
c. oral presentation skills for business professionals
These are the three cornerstone skills for developing and making effective business
presentations.
 The key to successful business presentations is preparation. The first step in preparation
is to find out everything you can about your audience‟s interests and needs from your
presentation. This gives you a solid foundation upon which you can build.
 Knowledge of the requested topic is also critical; if you don‟t know the topic well, the
amount of time you spend in preparation and the amount of stress you experience will
multiply - possibly past your ability to do an effective business presentation. Only accept
and do business presentations that you are confident you can handle. Don't try to be a
super hero. But, you also need to occasionally push the window of your comfort zone, or
you won't continue your own growth.
 A straight-forward business presentation of dry, factual information can make your
audience's eyes and ears glaze over. In addition to the facts, your knowledge, and your
research for your business presentation, you need to spice up the material.
d. businesslike atmosphere at a meeting
A meeting needs to have following characteristics to make it businesslike:
- It must have a clear purpose which requires the presence of all the participants.
The meeting should achieve its purpose and let everyone get back to their work
- It should stick to its purpose. A chairperson is needed to keep the meeting on track.
This is usually the team leader. Where the participants are all equals a chairperson
should be selected
- The meeting must start and end on time. Starting late encourages lateness and wastes
people's time. If the meeting goes on too long people get tired or leave to
fulfill other commitments
- Participants should be prepared for the meeting
- Decisions should be recorded. Someone should take minutes and circulate them.
4. Being based on the essay „Mass Media and Society‟, present critically your view on
the roles of mass media in the development of children. 10
P.T.O.
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Answer No.4
There has been a radical change in mass media because of the development in technology.
The societies are obviously influenced by mass media such as film, radio, television, internet,
etc. Basically, younger citizens rather than the older ones are more influenced by the mass
media. Views have been found both in favour and against the role of mass media in the
development of children and youths. On one hand, mass media are so popular among these
age groups and they have very creative and dynamic roles on them. On the other hand, many
perversions have been seen among children and youths because of the abuse of mass media.
In the essay „Mass Media and Society‟ it is suggested that in every technologically advanced
society, film, radio and television have made striking changes in the patterns of people‟s
everyday life. These media have been observed as the vehicle for positive and negative
effects. Critically we can argue that the people have become more passive and violent
through these media. For example, the viewers of television programs may be trying to
manage their time at any cost for those programs. If they are school children they may give
up school home work and other project works just for watching television. The films with
varied intentions may lead the children to violence and sexual abuse. These have long term
effects on the thought and emotions of the children. The internet has also nightmare results
that we have seen among the youngsters today. They make various types of internet abuse.
Such behaviours of the modern children have been observed because of the inappropriate
trend of using mass media.
However, wise use of mass media is always advantageous for the children as well as for
youths and adults. The children may be more educated through the awareness programs,
music and sports. They may find out different resources for their study and daily behaviours.
Internet resources are examples of this. In this way, how we train our children about the use
of mass media is more important to consider than how badly they have been influenced by
those media.
5. Attempt these questions: (7+8=15)
a) Draft a memo requesting co-workers in the department to donate money to the
company‟s charity organization that operates weekend camp for the physically
challenged children.
b) Write an e-mail message to a customer informing him that one of the books he
ordered over the internet is out of stock.
Answer No.5
The content will vary from student to student. Care should be taken to see that the memo
or the email is properly formatted and the content is relevant to the topic.
6. Answer these questions: (2×5=10)
a) What is non-verbal communication? Briefly explain three common types of non-
verbal communication.
b) What is a report? Mention three major objectives of report writing.
Answer No.6
a) The communication techniques in which words are not used are known as non-verbal
communication. Instead of words we use signs and signals in non-verbal communication.
P.T.O.
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The non-verbal communication such as facial expression, gestures, etc. can be more
effective than verbal communication to express emotions and reactions.
Three common types of non-verbal communication are:

1. Body language
2. Sign language
3. Space language or Proxemics
Body language refers to the gestures, postures and bodily expressions used to
communicate different messages. For example, we move our head, sake our hands, use
facial expressions as the non-verbal communication techniques. The body language
differs from one culture to another. Similarly, sign language refers to the use of various
signs to communicate meaning in context. It includes visual signs such as maps, traffic
signs, etc. and audio signs such as buzzers, sirens, etc. Finally space language refers to
the way of expressing relationship with the help of distance between speaker and listener.
b) Reports communicate information which has been compiled as a result of research and
analysis of data and of issues. Reports can cover a wide range of topics, but usually focus
on transmitting information with a clear purpose, to a specific audience. Good reports are
documents that are accurate, objective and complete. They should also be well-written,
clearly structured and expressed in a way that holds the reader's attention and meets their
expectations. The true value of the research may be assessed through a report since the
written report may be the "only tangible product of hundreds of hours of work. Rightly or
wrongly, the quality and worth of that work are judged by the quality of the written report
- its clarity, organization and content" (Blake & Bly, 1993: 119). Often reports are
structured in a way that reflects the information finding process and the writing up of the
findings: that is, summary of the contents, introduction or background, methods, results,
discussion, conclusion and/or recommendations. The inclusion of recommendations is
one reason why reports are a common form of writing in industry, as the informed
recommendations are useful for decision making. Three major objectives of report
writing are:
i. To present a record of work accomplished.
ii. To keep the research findings documented.
iii. To recommend for future actions.
7. Answer the following questions:

a) Complete the following sentences choosing the best option from the given
alternatives. (5×1=5)
i) The brand that we had mentioned in the demand-sheet is entirely
different………… the one that you‟ve sent us. (from, than, as)
ii) The candidates are required to……….an oral and a written examination.
(give, take, participate)
iii) If you don‟t pay up, we……….take legal action. (shall, would, are)
iv) Let……….have order according to the agreement. (he, his, him)
v) The news……….nothing to do with our organization. (is, has, have)
b) Rewrite the following sentences as directed in the bracket: (5×1=5)

i) There are four rules that should be observed. (Eliminate the surplus words)
P.T.O.
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ii) It is essential that the income be used to retire the debt. (Eliminate the
roundabout construction)
iii) Please endorse your name on the back of this check. (Eliminate repetition)
iv) Job rotation is when you train people by moving them from job to job.
(Improve the illogical construction)
v) Smoking is not permitted anywhere except in the lobby. (Change into positive
construction)
Answer No.7
a)
i. The brand that we had mentioned in the demand-sheet is entirely different from the one
that you‟ve sent us.
ii. The candidates are required to take an oral and a written examinations.
iii.If you don‟t pay up, we shall take legal action.
iv. Let him have order according to the agreement.
v. The news has nothing to do for our organization.
b)
i. There are four rules that should be observed. (Eliminate the surplus words)
Four rules should be observed.
ii. It is essential that the income be used to retire the debt. (Eliminate the roundabout
construction)
The income must be used to retire the debt.
iii. Please endorse your name on the back of this check. (Eliminate repetition)
Please endorse this check.
iv. Job rotation is when you train people by moving them from job to job. (Improve the illogical
construction)
Job rotation is a training method in which people are moved from job to job.
v. Smoking is not permitted anywhere except in the lobby. (Change into positive construction)
Smoking is permitted in the lobby only.
8. Write short notes on any FOUR of the following: (4×2.5=10)

a) Press release
b) Meaning of group dynamics
c) Steps for writing good précis
d) Persuasive letter
e) Bad news memo
Answer No.8
a) Press release
P.T.O.
(2)
A press release, news release, media release, press statement or video release is a written or
recorded communication directed at members of the news media for the purpose of announcing
something ostensibly newsworthy. Typically, they are mailed, faxed, or e-mailed to assignment
editors at newspapers, magazines, radio stations, television stations, and/or television networks.
Websites have changed the way press releases are submitted. Commercial, fee-based press
release distribution services, such as news wire services, or free website services co-exist,
making news distribution more affordable and a level playing field for smaller businesses. Such
websites hold a repository of press releases and claim to make a company's news more
prominent on the web and searchable via major search engines.
The use of press releases is common in the field of public relations (PR). Typically, the aim is to
attract favorable media attention to the PR professional's client and/or provide publicity for
products or events marketed by those clients. A press release provides reporters with an
information subsidy containing the basics needed to develop a news story. Press releases can
announce a range of news items, such as scheduled events, personal promotions, awards, new
products and services, sales and other financial data, accomplishments, etc. They are often used
in generating a feature story or are sent for the purpose of announcing news conferences,
upcoming events or a change in corporation.
A press statement is information supplied to reporters. This is an official announcement or

account of a news story that is specially prepared and issued to newspapers and other news
media for them to make known to the public.
b) Meaning of group dynamics
Group dynamics is the study of groups, and also a general term for group processes. Relevant to
the fields of psychology, sociology, and communication studies, a group is two or more
individuals who are connected to each other by social relationships. Because they interact and
influence each other, groups develop a number of dynamic processes that separate them from a
random collection of individuals. These processes include norms, roles, relations, development,
need to belong, social influence, and effects on behavior.
In organizational development (OD), or group dynamics, the phrase "group process" refers to the
understanding of the behavior of people in groups, such as task groups, that are trying to solve a
problem or make a decision. An individual with expertise in group process, such as a trained
facilitator, can assist a group in accomplishing its objective by diagnosing how well the group is
functioning as a problem-solving or decision-making entity and intervening to alter the group's
operating behavior.
Because people gather in groups for reasons other than task accomplishment, group process
occurs in other types of groups such as personal growth groups (e.g. encounter groups, study
groups, prayer groups). In such cases, an individual with expertise in group process can be
helpful in the role of facilitator.
Well researched but rarely mentioned by professional group workers, is the social status of
people within the group (i.e., senior or junior). The group leader (or facilitator) will usually have
a strong influence on the group due to his or her role of shaping the group's outcomes. This
influence will also be affected by the leader's sex, race, relative age, income, appearance, and
personality, as well as organizational structures and many other factors.
P.T.O.
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c) A well-written précis should be a serviceable substitute for the original work. The goal is to
preserve the core essence of the work in a manner that is both clear and concise. At a
minimum, the précis should include the topic or main thesis, the purpose of writing it, what are
the ideas discussed, how they are presented, what results (or insight) were gained, and a
conclusion. Following are the steps of Précis-writing:
a. Reading the given passage thoroughly.
b. Identifying the main theme,
c. Writing down the title and headings,
d. Making notes from the passage,
e. Making the first draft using the notes and
f. Making the second (final) draft, reducing the first draft into one-third of the original
length.
d) Persuasive letter
Persuasive Letters present positive information to the reader, but they also request the reader take
some action. Types of persuasive letters include special requests for assistance or information
and marketing of goods, services, or ideas. The writing approach most commonly used is called
Attention-Interest-Desire-Action (AIDA).
-Opening paragraph gets the reader's attention; sometimes it begins with a question.
- Body paragraphs emphasize the reason the reader should respond positively to the request.
Closing paragraph explains action and appeals to reader's interest.
People in business must often write persuasive letters. They may wish to persuade a vendor to
provide a lower price or another company to co-sponsor an advertising campaign. Most often,
business letters are intended to persuade a potential client to purchase the company‟s goods or
services. Regardless of the audience or the intent, all persuasive letters must persuade someone
to do something.
Format your persuasive letter as you would any other business letter. Include an address block
for your company, unless you are writing on company letterhead that already bears the
company‟s name and address. Date the letter. Then write the name and address of the person to
whom you are writing the letter. Begin the letter by saying “Dear Mr. Client” or “Dear Client
Company.” Include a signature space at the bottom.
e) Bad news memo
A memo that delivers or announces negative message is bad news memo.

Since a negative message creates resistance in the readers mind and disappoints them, the writer
is supposed to deliver the message emphasising the positive words. For example, while denying
an offer or request, we should shy „no‟ without using the word „no‟. The point is, the bad news is
supposed to be implied, rather than stated.
P.T.O.
CAP-I, Management & Organizational Relations, Dec 2011
Suggested Answer
Maximum Marks - 100

Marks
14. Read the following and answer the question accordingly: (4×5=20)
The Rastriya Bitaran Company is the largest marketer and distributor of food service
products in Nepal. It has more than 750 suppliers come from different districts. It has
about 10 operating units selling 100 varieties of food products to one million
customers. In 2007 the company expanded its customer base and product offering to
include medical supplies. Basically it tried to use its strength of contact with grass-
root level individual at remote areas.
The image created by lower level managers was of food experts. Some time, their
salespersons give advice of type of food one should take at time of certain illness.
Consumers have trust on expertise of salespersons and habituated to take the food as
advised by them. But the new medical supplies had been added in its business line
without taking opinion of the lowest operating level staffs. The plan of distributing
medical supplies had been developed at headquarters and provided the policies and
guidelines at lower level. There are so many interrelated factors that new plan could
be implemented successfully. Actually it ignored the process of planning and did not
analyze the internal and external environmental forces. The company did not
determine the goal and identify the alternatives in process of developing plan.
The decentralized system is necessary to ensure the effectiveness in implementation.
It added the medical supplies in its distribution line without identifying the premises.
Customers began to ask the salespersons about the use of those medicines and most of
them expected their advice even to take medicines. The availability of medical
doctors was limited and they are not habituated to take medicine after doctors'
prescription. So the consumers asked directly to salespersons and as the salespersons
expressed that they do not know about it, their trust and faith began to be lost. It
affected the sales of other food product too. Now the Rastriya Bitaran Company is
facing the challenge of decreasing sales volume.
a) What is the basic problem of the Rastriya Bitaran Company?
b) Explain the planning system and hierarchy of plans.
c) Which method has been followed by the company to develop the plan?
d) Do you think the planning process is appropriate in above case?
Answer to Q 1 a)
The basic problem of the Rastriya Bitaran Company is the weakness in the planning function
of its management. Planning is the basis for all other managerial functions. It is suddenly
made decision to expand its customer and product lines. But in absence of serious planning,
it faced the problem of low volume of sales even of the old product line.
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It could not add new customer but began to loose trust and faith of present customer. The
company should just develop the grand plans but it designed the operational plans for lower
levels. The top managers could not scan the external environment for opportunities and
threats to the organization. It could not meet the aim to match internal strength and weakness
to changes in the external environment in order to create new opportunities. It seems that the
above company faced the problem even in defining its mission and goal. What exactly the
business should be it has been ignored in this process. As it serving the customer with
advisory role of salespersons, it lost its image as they could not been able to advise in field of
medicine. So in short, well planning is the problem of above company.
Answer to Q 1 b)
Planning is a sub system of the overall management system of the company. Therefore,
planning should be viewed as part of the management system. As with any system, the
planning system includes inputs, process and output. The basic inputs of the planning system
are information, equipment, manpower and financial resources. These input factors provide
the bases for the processing of planning activities. The process components of the planning
system comprise information processing, environmental scanning, forecasting, analysis of
internal forces, etc. Finally, the outputs of the planning system are the goals, strategies,
policies, procedures and budget.
All inputs, process and output elements of the planning system act together to formulate
goals and plans. The output of the planning system are interlinked in a hierarchy from the top
mission, goal, objective, plan and programs. First of all mission defines organizations
business. Goals are developed to achieve the mission providing direction to the activities
with targets. An objective is a specific statement of what will be done to achieve a goal. A
plan is the action or means the organization intends to use to achieve the objectives. At the
bottom programmes and activities are developed and ranked in order of priority and allocate
resources.
Answer to Q 1c)
Generally, one can consider two methods of plan. These are top down planning and bottom
up planning. Bottom up planning is decentralized planning where the lowest operating levels
inform top management what they expect to do. But the Rastriya Bitaran Company did not
make any consultation with subordinates and lowest operating level staffs. The plan has been
developed by the headquarter at central level. The company followed the top down planning
method which are called centralized planning. In top down planning, the central office of the
company develops and provides guidelines, which include economic and social objectives,
financial assumptions, content of the plan and other special issues.
As the lower level management are directed to follow the plan without involving them in the
plan formulation process, it is the top down planning method. It is clear in above case that the
company plan was not sensitive to local conditions of units and branches. If the company had
followed the bottom up planning, the opinions of bottom line come up to the top management
and these are consolidated, discussed, analyzed and compared with the vision and mission of
the organization before finalizing the plans. But it did not followed bottom up planning
method.
Answer to Q 1 d)
The planning process may be thought of as series of activities and it relies on feedback to
adjust plans to reality and change. After defining its mission and quantification of goals,
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external environmental forces and internal environmental forces should be analyzed before
developing plan. But in above case, they develop the plan without environmental analysis. As
it seems to be skipped of analytical phase of environment basically the internal forces, the
planning process could not be said appropriate.
Firstly the planning process require a thorough analysis of external forces including forecast
of the uncontrollable factors. An analysis of internal forces would include both a situational
analysis and a forecast. What are the strengths and weakness? What are the market
opportunities? What are the human and financial resources? Where are the company
heading? Proper analysis of internal forces like the qualities of sales person gives the
management answers to these questions. Only after, completion of this internal audit, the
management would be ready to begin planning activities. They did not consult others who
are involved in implementing plans and it is a mistake in planning process.
15.
a) Define organization. Explain the conditions of goal succession in organizations. (3+7=10)
b) Define scientific management. What are the major contributions made by F. W.
Taylor? (3+7=10)
Answer to Q 2 a)
People have goals. Goals if not fulfilled by individual effort, need joint efforts through organization.
People have varieties of needs and to fulfill these needs they set goals. Organizations provide
employment, goods, services, ideas, and peace etc. to satisfy individual and group needs.
Organizations are human associations for achieving common goals.
Different types of organizations/ associations are established to fulfill people's goals and
needs- business, religious, social, political, academic/ educational, health, non-government
and government, etc. People either join or establish organizations that satisfy their needs &
goals. Mooney and Reiley define organizations as “…the form of every human association
for the accomplishment of a common purpose." A-Etzioni has defined, “Organizations are
planned units, deliberately structured for the purpose of attaining specific goals.” The three
authors Stoner, Freeman and Gilbert view," An organization is a pattern of relationships-
many interwoven, simultaneous relationships-through which people, under the direction of
managers, pursue their common goals.” Gene Burton defines, "Organization is a group of
two or more people who work together in a structured setting to achieve common goals."
In conclusion, organization may be defined as a planned and systematic relation of people
who try together to fulfill some common goals.
Conditions of Goal Succession in Organizations
1. Achievement of original goals: If goals set in the past have already been achieved, it is
usual process to set more progressive higher order goals for the remaining period.
2. Assessment that original goals are unattainable: If goals set in the past is found quite
unattainable, new goals is set as a compromise to situations.
3. Environmental adaptation needed: Changing environment demands revision in the
original assumptions about the future premises. Newer goal setting may require.
4. Change in legislation: State legislature must be accepted and followed. Any change or
new provision made by law affects organization‟s goals, policies and steps.
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5. Identification of new and more progressive opportunities: If management recognizes
better opportunities of long-term business gain, less profitable goal already been activated
also may be formally dropped.
Answer to Q 2 b)
The stream of management thought can be divided into six basic categories as classical,
human relations, decision theory, management science, systems and contingency. Each
school of thought emphasizes a some what different approach to management. The classical
management perspective is the first well developed frame work of management emerged
after the industrial revolution. The classical management perspective represent two
approaches: scientific management and administrative management.
Productivity emerged as a serious business problem in early years. The industrial revolution
led to the emergence of industrialization and big factories were established with great
potential for mass production of goods, Managers began to search for different ways to
utilize existing labour more efficiently. In response to this, experts began to focus their
research on ways to improve the performance of individual workers. Their work led to the
scientific management. Scientific management was developed to solve two major problems:
how to increase the output of the average worker and how to improve the efficiency of
management. Scientific management is defined as that kind of management, which conducts
a business by standards established by facts or truths gained through systematic observation,
experiment, or reasoning. Scientific management advocated the application of scientific
methods to analyze work and to determine how to complete production tasks efficiently.
One of the earliest advocates of scientific management was Federick W. Taylor (1956-1915).
His pioneering works on production and efficiency provided the foundation to modern
management. F.W. Taylor is known as the father of scientific management. What he
observed is that production and pay were poor and inefficiency and waste were high. Those
companies had tremendous unused potential and workers work at slow pace. Inefficiency
caused in the work system due to absence of standardized tools, tasks and work process. To
overcome the problem of inefficiency, he emphasized on the application of scientific
management techniques at the shop-floor. Taylor used techniques such as time and motion
studies. He stressed the need for hiring and training workers. He advocated standardization of
tools and enough rest to reduce fatigue. Another significant element of Taylor's approach was
the use of different piece rate system. He assumed that providing monetary incentives could
motivate workers.
Taylor considered each worker a separate economic man who was motivated by financial
needs. He suggested for workers be educated to understand that their economic needs can be
fulfilled by producing more at a lower cost. Taylor's entire approach to scientific
management was the idea that there is one best way of doing every thing. The main
principles contributed by F.W. Taylor in scientific management were standardization of
work, time and task study, systematic selection and training, pay incentives, close co-
operation between managers and operatives. Taylor's argument is that both workers and
management would benefit from such an approach. Taylor's work has had an enduring effect
on the management of production system.
16.
f) “All managers should be leaders". Do you agree with this statement? Explain the
qualities of good leadership. 10
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g) What is strategic planning? Explain the features of strategic planning. (1+4=5)
Answer to Q 3 a)
One of the basic function of management is leading. So the manager must know how to lead
people. If the manager has to lead obviously he should be leader. But it does not mean that
lacking of perfection in leadership ability is a handicap to be a manager. It is true that all
managers should ideally be leaders. Besides being a leader manager should be planner,
organizer and controller too. The definition of leader signifies people who are able to
influence others. Managers are people who possess managerial authority. By taking
management authority managers make plan, give direction, enforce policies co-ordinat the
things, make decisions and involves in control process. A manager as a leader formulate a
vision, mission, goal and share with group members and subordinates. The leadership
function of management include directing, supervising, coaching, motivating,
communicating, maintaining and mediating. Managers need to have technical, human and
conceptual skills. Human skills involves the ability to communicate, coordinate and lead too.
Human skills reflect the leadership abilities of a manager. If the managers are ideally leaders,
performance of management function will be efficient and effective. But it is hard to prove
and difficult to agree with hundred percent that all managers should be leaders. It is also true
that managers should possess the qualities of good leadership.
Leadership is the key to make organizational life not only productive but also more humane.
Effective leaders have some qualities and these qualities are a clear sense of purpose, good
judgement, self knowledge, objectivity, initative, emotional maturity, cooperativeness, a
perpetual desire for learning, integrity, and adaptability. The leader must be clear about the
purpose of the organization of what it wants to achieve. A clear sense of purpose is the ability
to define and share the vision and mission with subordinate good judegment is the ability to
understand the effect of one's actions on coworkers, on the organization and on customers,
suppliers, and the community at large. Leaders should have quality of self knowledge that he
would be aware of one's own strengths and abilities and know how to maximize and use
them. Another quality that a good leadership should possess is objectivity that all sides of
situation could be seen and be impartial in reaching conclusion. Initiative is a quality of being
self starter and overcoming obstacles to achieve organizational goals. One who have quality
of emotional maturity can acknowledge the importance of individuals and their opinion. The
quality of cooperativeness supports to work well with others and foster team work to achieve
goals. A good leader should have ability to continue their own professional development,
learning about their own organizations and developing the skills necessary to their
organization's continued success. One who is honest, trustworthy and fair in implementing
organizational policies and decisions, can achieve the success. The leader must have the
ability to adjust to changing situation. Possessing the appropriate qualities makes it more
likely that the manager will be an effective leader. To get success in leadership, the
behaviour pattern of the leader and his situational adaptability also play vital role. So all
these individual trait, behaviour norms and situational adaption of ability of manager leads to
success in performance of leadership function.
Answer to Q 3 b)
Strategic planning is formulated by a company, for example, to merge with other similar
company or to acquire a new business or to transfer skills from one business to another
business unit. The main features of strategic planning are:
 Master planning: This is a kind of main strategic plan with long-term perspectives
generally formulated in the head office or in the country office of a business organization
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in the initiation of the Planning Department. This includes details of the roles of
departments and business units.
 Top-down approach: A strategic plan is made with the full involvement of the Planning
Office. The plan made by the Planning Office should be finally ratified by the chief
executive officer and will be cascaded to the middle and lower level management. Once
strategic planning is formulated and ratified, it will be ready for implementation.
 Highly prescribed: Strategic planning is prescriptive in nature. By way of strategic
planning the top management prescribes the details of roles and responsibilities for
branches, divisions and subdivisions. All of them have to work on the prescribed roles
and responsibilities.
 Detailed control: The Head Office or Country Office of an organization is supposed to
keep control of activities of all branches, divisions and departments. A centrally
controlled mechanism is developed to monitor the activities in different parts of the
organizations.
17.
a) Explain the components of task environment of business. 5
b) Why delegation of authority and responsibility occurs in organizations? 5
c) Describe the existing management practice in Nepal. 5
Answer to Q 4 a)
The business environment is the seen total of all internal as well as external forces
surrounding and influencing the operation and life of organization. The external environment
can further be classified into the general environment and task environment. The task
environment is the micro environment of the particular business which is also called the
competitive or operating environment . The task environment involves factors in the
immediate competitive situation of a particular organization. Forces in the task environment
results form the action of suppliers, distributors, customers, and competitors.
1. Customers: A customer may be an individual, a family, a business house or an
institution. They are not only linked with the business firm for the purchase of goods and
services, they are also an important source of ideas, opinions, information and reaction.
2. Suppliers: As the quality and price of the raw materials received from the suppliers
determine the quality of output, the business organization try to obtain lower prices,
better quality work and faster deliveries. This strengthens their competitive position.
3. Government: The role of government is to regulate business systems and to protect the
interest of the consumers and general pubic. The policies and regulations of the
government have a major impact on the functioning of the business system.
4. Social interest groups: The special interest groups like unions, consumer advocates,
environmentalists and professional organization, exert pressure on the business firm to
advance their position on issues like quality service, price, environmental protection etc.
5. Media: The media keeps an eye on the vital decisions or actions of the business
organization having general public interest. Manager need to maintain good
communication with the media and external audiences and deal with them effectively and
promptly.
6. Financial Institutions: The terms and conditions of loans and advances, and the quality
and promptness of their services have an impact on the performance of a business.
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Mainating effective working relationships with the financial institutions is essential for
business organization.
7. Competitors: Competition is inevitable. So information on market behaviour and
competitors' strategies should be gathered and analyzed to identify future opportunities
and threats.
Answer to Q 4 b)
Without delegating authority and responsibility to managers and from managers to their
subordinates, it is difficult to perform, coordinate and control their functions. To delegate
authority and responsibility means providing authority from superior employees to the
subordinates in order to complete the given assignments. The expert argued that "Delegation
is the process by which a manager assigns a portion of his or her total work load to others."
One manager can not accomplish all assignments. Therefore, authority is delegated to the
subordinates working in different assignments. Delegation of authority also means tying the
positions from top level of management to the bottom level. This will help to strengthen the
hierarchy of management. Delegation facilitates to get more work done. It also helps to ease
the burden of managers. There are some problems which are difficult to address just with a
manager and that can be addressed by the special skills of the subordinates. With delegating
authority, a trustful environment can be established. Subordinates will be responsible and
accountable for accomplishing assignment. It also helps to develop and train employees at
work.
Answer to Q 4 c)
Nepalese management lacks professionalism. Nepal's business and industrial enterprise
operate on traditional lines. Modern management concepts and practices are relatively new
for Nepalese business organization. The traditional top-down approach is widely in practices.
Managers plan and give instructions to implement. Poor planning has been a problem for
most organization. Plans are poorly implemented, monitored and evaluated. Decision making
is unnecessarily centralized. Delays in decision making is creating problem in productivity
and competency. The top management is often very authoritarian. The style of management
prevents younger managers from being creative and innovative.
Leadership practices are still predominantly paternalistic. The participative attitudes that
manager adopt in the management of people have proved to be a barrier against effective
management.
Communication systems are defective. Lack of effective interpersonal skills in managers

often leads to problem of conflict and misunderstanding. Upward communication is often
ignored. Human resources are one of the poorly managed area of Nepalese management.
Most business organizations face behavioural problems, such as lack of motivation and trust,
negative attitudes to work, difficult interpersonal relations and increased incidence of stress
and conflict. Managers are more concerned about thin own survival rather than
organizational effectiveness.
18. Write short notes on followings (Any Five): (5×3=15)

a) Matrix organization structure
b) Hierarchy of Needs theory
c) Work teams
d) Management Information System (MIS)
e) Components of HRM system
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f) Time management techniques
Answer to Q 5 a)
A matrix organization structure indicates bi or multi- functional relations to gain swift

progress to achieve project goals. The employees in regular duty are hired for dual duty or
role at a time. Functional experts hold the leadership of the project matrix. The supporting
staffs are from different departments. The employees, apart from their regular duty,
accomplish project duty at a time. If management intends to use the potentials of competent
employees for extended duty, matrix structure is designed.
General Manager
Engineering Operations Financial Others

Functional Responsibility
Project manager Project Responsibility

(X)
Project manager
(Y)
Project manager
(Z)
Matrix Organization
(Figure: A Matrix Organization)
The permanent structure is the functional organization. The extended duty combined with the
structure, it becomes the matrix. All the project manpower- from project manager to
employees- is selected from the functional structure. The employees under the project have
double chain of command- one the regular functional manager, and another, the project
manager. This design is in contrast to the principle of unity of command. Even then, it is
regarded as one of the best structural relationship to effectively use competent manpower
available in the organization for new projects. The new structural relation is temporary, it
dissolves after the mission or project is completed. But the regular functional organization
remains as usual.
Answer to Q 5 b)
Abraham Maslow studied human needs. His study result was classified order of needs. He
put forward certain assumptions while developing hierarchy of needs theory:
(i) needs have hierarchies in five scales,
(ii) only unsatisfied needs motivate,
(iii)needs do not repeat,
(iv) needs come into activation one after another,
(v) needs are unlimited and
(vi) needs are scaled as lower order and higher order in category.
 Physiological Needs- Food, sex, air, water, rest, etc. that decide life and death are
physiological needs. All living creatures including human being compulsorily should get
these needs fulfilled, the volume may differ.
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 Security needs-They are physical, psychological and emotional environment
determining safety and security. Housing, clothing, job security, old-age pension,
medicine, insurance, etc. are some common examples.
 Belongingness Needs- Love, affection, mix-up with peers, communication, sharing of
joy and sorrow, community relations, team work, etc. make an individual a social partner
everybody needs.
 Esteem/ Ego Needs- Ego needs relate with desires that keep oneself better-up and
superior than others specially the group in which he/she belongs. Its examples are self-
image, self-respect, respect from others, prestigious job title, nicely decorated office,
higher job content, leading role, etc.
 Self-actualization Needs- It is intrinsic satisfaction and feeling from work, not from
outer intervention. Participation in decision making, learn new things, contribute more to
others, etc. are some examples that do not relate with gain for oneself
Answer to Q 5 c)
A team is small group of people who may or not have specialized on specific part of the job
but contribute collectively to the attainment of the certain common objectives. Management
coordinates the efforts of team members and encourages them for effective team-work.
Members for a team may or may not be selected from only one unit, section or department.
Any team is formed for a single purpose or task. It is complement to the original hierarchical
working structure. Management formulates teams for specific purpose. After the purpose is
attained, the team is dissolved.
A team is autonomous with authority to implement solutions and fully responsible for
planning the work and working the plan. It needs no supervision and control form non-team
members or managers. Such teams may be formulated at functional levels. The purpose of
forming teams is to attain speedy work, improve productivity, economize cost of operation,
attain higher quality, improve customer satisfaction, and enhance member satisfaction.
Answer to Q 5 d)
MIS is a system that develops, interrelates, analyzes and provides information for managerial
decision-making ranging from planning to control. It modifies the primary raw data into
suitable information for managerial works. Top level uses it for strategic, and middle &
lower level for operational purposes.
Weihrich and Koontz observe MIS as “…a formal system of gathering, integrating,
comparing, analyzing and dispersing information internal and external to the enterprise in a
timely, effective and efficient manner”
Features of MIS
1. It deals with well-structured problems. The structure of information therefore is
predetermined.
2. It is need-based. The user‟s need determines the type of information to be developed and
analyzed. Level and functional group differ, information also differs. Departmental/
functional requirements analyzed, necessary information may be added to the system.
3. Classified information. Information classification is made on the basis of importance to
managers as: A class for essential, B class for desirable, C class for optional, etc.
4. Flexible design. The designing is so flexible that it is easily modified according to the
changing environment or need of managers or users. Data entry made in the past may be
rearranged to suit the changed demand.
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5. Understandable. Appropriate columns, rows tables, graphs, charts, etc. are arranged
under easy to understand headings.
Answer to Q 5 e)
An organization is a social system composed of different integral and complement parts:
production, finance, marketing, human resource, research & development, etc.
Environment Environment Environment
Inputs Process Outcomes
Organization‟s plan Acquisition Goals achievement

Human competencies Development Quality of Work Life
Human resource plan Utilization Productivity
Management maintenance Profits
inventory Readiness for Change
Job analysis Constituency
Labour market satisfaction
Environment Feed-back Environment
(Figure: Systems approach to HRM)
Each of these components has interdependence and supportive relation. According to the
systems perspective, HRM is an integral element of management as a system adjusting and
interacting with the environment. Management functions are so linked and dependent to
each-other that delay or defect in any of these affects the total accomplishment of its goals.
The systems perspective takes HRM itself as a system, where acquisition, development,
utilization and maintenance are its integral sub-systems. Acquisition sub-system involves the
processes of, recruitment, selection, placement and socialization of employees. Development
sub-system involves training need assessment, employees‟ training, management
development and career development. Utilization sub-system includes motivation, job
design, performance appraisal, and reward management maintenance sub-system is a set of
activities like labour relations, employee discipline, grievance handling, and employee
welfare.
1. Inputs – Organization receives inputs from the environment it exists in. inputs are
organization‟s plan, capabilities of human resource it has, HRP, management inventory,
job analysis and labour market.
2. Process – HRM process involves the programmes & activities on acquisition,
development, utilization and maintenance of human resource for the organization.
3. Outcomes – The outcomes/ end results expected of HRM are/ may be any or all of
quality of work life, productivity, profits, readiness for change, and constituency
satisfaction.
4. Feed-back – The feed-back mechanism (component) is necessary to identify the
strengths or weaknesses, if any, in the other components of the system and take necessary
corrective steps so as to minimize the repetition of such flaws.
5. Environment – The environment (both external and internal) influences the HRM
policies and programmes. The environment should be analyzed before deciding about
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HRM policies, strategies and programmes. Environment may have both positive and
negative impact over the business policy and strategy.
Answer to Q 5 f)
Managers have heavy work load, responsibilities and challenges every day. They have to
perform and get people perform various activities. They plan, implement, control, sit-in for
important contracts& alliances, and make effective decisions. If they are too busy, they may
be mentally tired and fall stress. So they should wisely divide important time between work,
rest and refreshment so that they maintain their mental health & creativity.
Time of managers can be managed through certain techniques as below:
I. List and Group Daily Tasks- Managers are suggested to group activities that must
be performed, activities that should be performed, and optional things that can be
postponed/ delayed or delegated. Those activities should be placed in order of
importance.
II. Use First Half of Daily Hour: Divide daily working hours wisely. Do urgent and
valuable tasks at the first half, because they are fresh-minded during that time, and
allocate later half for meetings with client & employee.
III. Delegate- Managers should trust over the competence and sincerity of subordinates
and delegate routine and operational activities.
IV. Maintain Diary- Managers should develop a habit of making important notes in the
diary and use frequently for reminder of urgent things to do.
V. Avoid Less Important Meetings- They should concentrate in valuable tasks and
avoid „time stealers‟. They should say „no‟ or reject unnecessary formal meetings/
functions.
19. Distinguish between (Any Five): (5×3=15)

a) Social responsibility of business and business ethics
b) Management science theory and systems theory
c) Programmed and non-programmed decisions
d) Autocratic and laissez-faire leadership styles
e) Feed-forward control and feed-back control
f) Economic globalization and cultural globalization
Answer to Q 6 a)
Social Responsibility
Organizations have many stakeholders such as managers, employees, investors, customers,
suppliers, the community, and the government. Managers must keep harmonious relations
with, and must be responsible toward the stakeholders in different ways. The existence,
growth, and wellbeing of the organization/ business depend on the wellbeing of the society.
So managers should be responsible towards society.
Modern organizations should include social responsibility in the list of their goals. If
organizations try to fulfill certain social obligations,, the society also accepts organization as
its integral part.
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SR is the totality of managerial decisions and actions guided by the firm‟s social
concern.
Business Ethics
The borderline between good, bad, right and wrong is the outcome of the principle, also
known as ethics. Ethics is a broader frame or outline for guiding managerial decisions that
affect employees, consumers, organization and society in general. It is the moral duty and
discipline that binds managers to act or make decisions under certain guidelines. Keith Davis
and W. C. Fredrick wrote, “Ethics commonly refers to a set of rules or principles that define
right and wrong conduct.”
Managers decide and act on behalf the business firm. Any of such decision and action should
be tested on the perspective of contemporary ethical standards. Contrast to ethical values
invites social and government aggression.
Answer to Q 6 b)
Management Science Theory
Management Science or Mathematical Theory is useful guideline for managers to make
perfect and appropriate decisions. Quantitative technology to management is suitable in
deploying employees, choosing plant location and planning warehouses, etc. This approach
suggests managers to use different appropriate mathematical, statistical, financial and other
relevant models to solve complex managerial problems.
The techniques supporting the quantitative approach are operations research, linear
programming, queuing theory, game theory, simulation, model building, PERT (Program
Evaluation Review Technique) etc. The computer technology has made this theory popular.
Systems Theory
“A system is an interrelated set of elements functioning as a whole”. The systems approach
to management views the organization as a unified, goal-seeking unit of interrelated &
interactive functions directed toward the common purposes. This approach advises the
managers to apply the holistic approach and also consider it as a part of the large external
environment. The contributors to this school are L. Bertalanffy, Kenneth Boulding, Norbert
Weinus, and Chester Bernard, etc.
Sub-systems, synergy and open interaction with internal plus external environmental forces
are some of unique features of a systems perspective. Open system has flexible boundary
with continuous inflow of information, capital, equipment, human, technology, materials and
energy etc. from the external environment. The input is taken for transformation process
within the system and the final result is output that goes out in the environment, feedback
from which is taken as the key to control.
Answer to Q 6 c)
Programmed Decisions –
Programmed decisions are structured. Routine problem solving is through programmed
decisions whereby the nature of problem, the procedures, the potential solution, etc. repeat.
Middle level managers make routine-type decisions. There is very little need for deep
analysis of the decision context (environment). It is a conventional / routine job for managers
where managers know the problem and the right solution well. In simple term, it is guided
decision. Plan, policy, strategy, rules, etc provide given decision situations for managers.
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They also know the result of the decision. They are assertive. There is no complexity for
managers.
Non-programmed Decisions –
Problems not encountered before need be decided with no past guideline and experience and
precedence. Non-routine type of problem must be solved through non-programmed decision
process. The need of such decisions is very rare. Most of such problems seldom repeat and in
case they repeat, the situations do not remain the same. Decisions are not structured &
refined. High concentration on deep analysis of different factors is needed. The assistance of
experts also may require. Different determinants should be explored to draw meaningful
solution. Questions relating to long term investment, strategic planning, long term fund
raising, resource deployment, etc. are some examples of non-programmed decisions. Top
level executives make such decisions. Managerial judgment, intuition, creative thinking, etc.
are required for such decisions.
Answer to Q 6 d)
Autocratic Leadership:
Autocratic leader uses dictatorship, does not regard others and uses force & formal authority
to mobilize people for what he thinks. He is task-oriented, makes all the decisions and
dominates subordinates. Leader uses pressure and dictation to get things done.
Generally, this style is not a good way to get the best performance from a team.
However, this style may be appropriate when urgent action is necessary or subordinates
actually prefer this style, or subordinates are stubborn, lazy and inefficient.
Laissez-faire Leadership:
Leader who just facilitates subordinates to make analysis and decisions without his/ her
direction or intervention or framework is laissez-faire- also called free-rein- leader. He/she
is employee-oriented, whereby he/she encourages team members to function
independently and solve their problems by themselves, although he or she is available
for advice and assistance anytime in need. The leader usually has little or negligible
control over team members, leaving them to sort out their roles, define their span of
authority, and tackle their work assignments without personally participating in these
processes. Laissez-faire is appropriate if the team is self-motivated, highly skilled, and
has a record of producing excellent work.
Answer to Q 6 e)
Feed-forward Control-
It is the active anticipation of problems and their timely prevention, rather than after-the-fact
reaction. There is a saying, “measure twice, and cut once.” Feed-forward control addresses
the issue, “what can we do ahead of time to help the plan succeed?” Careful analysis to
the future courses and standards followed by procedures, etc. may be lengthy and costly, but
this type of preparation and preventive measure increases the probability of attaining desired
results.
Feedback Control-
It is gathering information about an activity completed, evaluating that information, and
taking steps to improve similar future activities. The records of past performance are studied
to recommend ratifications in the future activities. It is like “closing the gate after the Horse
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is gone”. The actions performed and its result is evaluated to improve future plans,
programmes and decisions.
Answer to Q 6 f)
Economic globalization
Globalization means different things to different people. Globalization is multi-dimensional

process. It has four important dimensions –economic, cultural, political and environmental.
Economic influence is the most obvious part of globalization. Economic globalization is
contributed by liberalization, privatization and declining costs of transport and
communication. This form of globalization indicates increased global inter- linkages of the
markets in goods, services, capital, trade and finance. A free-trade doctrine removes the
barriers to the flow of goods between countries. The formation of the World Trade
Organization (WTO) has given impetus to this process. Multinational companies are another
force to boost up economic globalization.
Cultural globalization
The expanding process of globalization has brought the 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.
Reliable system of communication is now possible with any location in the world that created
opportunity to know and transform national beliefs, values and norms. Similarly the fast
movement of people by the growth of commercial jet travel and watching television program
of other countries have made people aware of other cultures and languages. These have
reduced the cultural distance between countries which can be called cultural globalization.
The process of cultural globalization has increased mutual understanding and learning from
each other's experiences.
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CAP-I, Information Technology, Dec 2011

Suggested Answer
Roll No………. Maximum Marks - 100
Total No. of Questions -10 Total No. of Printed Pages – 1
Time Allowed - 3 Hours Marks
1. Fill in the blanks: (5×2=10)
a) Binary 1111 when added to binary 1111, the result in binary is -------------
b) Decimal 10.75 is represented in binary system by ----------------
c) If a microprocessor has a 64 K memory, the hexadecimal notation for last
memory location is --------------
d) OSI reference model consists of ------------ layers and TCP/IP reference model
consist ---------- layers.
e) Network topology in which each terminal is connected to central device is-----
---- topology and network topology in which each terminal is connected to every
other terminal is called ------------- topology.
Answer No. 1
a) Binary 1111 when added to binary 1111, the result in binary is 11110
Working note:
Carry 1 1 1 1 
No. 1 1 1 1 1
No. 2 1 1 1 1
Sum 1 1 1 1 0
( 1 + 1 = 0 with carry 1)
b) Decimal 10.75 is represented in binary system by 1010.11

Working note:
10 is represented by binary 1010 (1*8+0*4+1*2+0*1=10)
0.75 is represented as follows
0.75 = 0.5 + 0.25
= 1*(1/2) + 1*(1/4)
= .11 (binary)
Hence, (10.75)10 = (1010.11)2
c) If a microprocessor has a 64 K memory, the hexadecimal notation for last memory

location is FFFF
Working Note:
1-bit addressing can address 2 locations
4-bit addressing can manage 16 locations or bytes
8-bit addressing can manage 256 locations or bytes
Hence, accordingly, a 16 bit address can manage maximum of 216 addresses which
is equivalent to 64k.
d) OSI reference model consist 7 layers and TCP/IP reference model consist 5 layers
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e) Network topology in which each terminal is connected to central device is Star

topology and network topology in which each terminal is connected to every other terminal
is called Mesh topology.
2. What do you mean by weak entity set and strong entity set? Draw an E-R diagram
representing the database design of information Student (Student_ID, Student_name,
Student_City, Student_Street, Student_phone) borrowing Book (Book_no,
Book_name, Book_author). 10
Answer No. 2
Weak entity set-The entity set that is dependent upon some other entity set is called weak entity
set. The existence of a weak entity set depends upon the existence of some other entity set. In other
words, an entity set that does not have a primary key of its own is a weak entity set.
Strong entity set- On the other hand, a strong entity set does not depend upon another entity set for
to exist. It can exist on its own. In other words, the entity set having primary key is called strong
entity set.
E-R diagram for Student burrowing book.
Student_id Student_Name
Book_no
Student _City Book_author
Student _street
Student _phone
Student Borrow Book
Book_name
3. Mention the advantages of computer network in modern organization and design a

network to connect 24 computers in a lab room of ABC College. Assign IP address
for the computers also. 10
Answer No. 3
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Some of the main advantages of computer Network for modern business can be listed out as
follows:
 Facilitating communications. Using a network, people can communicate efficiently and

easily via e-mail, instant messaging, chat rooms, telephony, video telephone calls, and
videoconferencing.
 Sharing of hardware. In a networked environment, each computer on a network can
access and use hardware on the network. Suppose several personal computers on a
network each require the use of a laser printer. If the personal computers and a laser
printer are connected to a network, each user can then access the laser printer on the
network, as they need it.
 Business and Corporate Related Systems: computer networks are also critical in
implementing most of the business management and operation systems such as
Enterprise Resource Planning, Customer Management, Revenue Collection, Supply
Chain Management, Inventory Management, Electronic Commerce etc on which all the
modern businesses are dependent in one way or the other. Without network
connectivity, such system cannot be imagined.
 Sharing files, data, and information. In a network environment, any authorized user can
access data and information stored on other computers on the network. The capability
of providing access to data and information on shared storage devices is an important
feature of many networks.
o Sharing software. Users connected to a network can access application programs on
the network.
32-port Switch
…………………… So on
`
` `
` `
Computer 24
Computer 3 Computer 4 192.168.10.25
Computer 1 Computer 2 192.168.10.4 192.168.10.5
192.168.10.2 192.168.10.3
(Four marks for the advantages of computer network. Four marks for network design and
two marks for assignment of IP address.)
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4. Write a program in C using loops to display the pyramid like below: 10

55555
4444
333
22
1
Answer No. 4
#include <stdio.h>
#include <conio.h>
void main( )
{
clrscr( );
int i,j;
for ( i=5;i>=1;i--)
{
for (j=1; j<=i; j++)
{
printf(“%d”,i);
}
printf (“\n”);
}
}
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5. What is the importance of looping statement in programming? Explain about different

loops used in C programming with example. (3+7=10)
Answer No. 5
A special mechanism used in programming which reduces the need of writing a number of similar
codes many times to do the same task. By using looping, single set of syntax can be used to do a
number of similar repeated tasks. Thus to make program simple, bug-free and to reduces the
memory occupancy, looping is used.
Different types of loops used in c programming are:
For Loop:
The syntax of the FOR loop is
For (initialize expression; test expression; increment/decrement expression)
{
}
e.g
for (c=0; c<=20;c++)
{
While Loop:
The syntax of the while loop is
Initialization expression
While (test expression)

{
operation
}
e.g
count =0;
While (count<10)
{
count++;
}
Do while loop:
The syntax of the do while looping is

Do
{
operation
}
while (test expression)
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Similarly if one loop is included inside another loop, the process of using loop is called nested
loop.
6. What do you mean by Program flowchart? Draw a flow chart to find the largest of
three numbers x, y and z. (2+8=10)
Answer No. 6
A program flowchart is a pictorial representation of the flow of the computer program. It uses
different shapes and symbols to indicate input, output, processes, logical decisions, start and end of
the program flow. The main benefit of the flowchart is that it is pictorial and a person with no
knowledge of programming can easily understand the logic and steps of the program and what it
does. For a programmer, it is a very helpful tool as it helps to create a complete flow of the
program and analyze the logic before actual coding can begin. A flowchart is a very good guide for
a program coder who actually does the programming whereas actual design and process flow can
be done by a different person.
The following is the flowchart for finding the maximum of the three numbers given as input:
Start
Read 3
numbers –
X, Y and Z
Yes No Yes Yes
Y>Z? X>=Y X>Z?
No No
Z is largest
Y is largest X is largest
End
7. What is file organization? Explain sequential, direct and index file organization with
their merit and demerits. (1+3 3=10)
Answer No. 7
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File organization is the methodology which is applied to structured computer files. Files contain
computer records which can be documents or information which is stored in a certain way for later
retrieval. File organization refers primarily to the logical arrangement of data (which can itself be
organized in a system of records with correlation between the fields/columns) in a file system. It
should not be confused with the physical storage of the file in some types of storage media. There
are certain basic types of computer file, which can include files stored as blocks of data and
streams of data, where the information streams out of the file while it is being read until the end of
the file is encountered.
Three types of file organization are used on secondary storage devices. They are Sequential,
Indexed-sequential, and Direct file. Files stored on tape are processed as sequential files. Files on
disk are usually direct or indexed-sequential files.
Sequential File
Sequential files can be stored on a sequential access device such as tapes or a random access
device such as a disk. In a sequential file, records are arranged one after another, in a
predetermined order. For example, an employee file can be organized by employee ID number. If
this file is stored on a disk or tape, the employee record with the smallest ID number would be the
first record in the file.
Merits of sequential files
1. File design is simple

2. Location of records requires only the record key
3. When the activity rate is high, simplicity of the accessing method makes processing
efficient
4. Low cost file media such as magnetic tapes can be used for storing data
Demerits of sequential files
1. Updating requires that all transaction records are stored in the record key sequence
2. A new master file, physically separate and exclusive, is always created as a result of
sequential updating
3. Addition and deletion of record is not simple
Direct access files
A Direct access file provides the fastest possible access to records. ISAM also provides users with
direct access to individual records. Direct file is typically the best when access time is critical and
when batch processing is not necessary. Note: Access time is the interval between the moment at
which an instruction control unit initiates a call for data and the moment at which delivery of the
data is completed. For example, direct access memory is faster than sequential access memory. A
Direct file uses a formula to transfer the primary key to the location of each record. This formula is
called a Hashing algorithm. Therefore, no index is needed to locate individual records. Many
hashing algorithms have been developed. One popular procedure is to use prime numbers in the
formula process. In general, the primary key value is divided by a prime number, which
corresponds to the maximum number of storage locations allocated for the records of this file. The
reminder obtained in this division is then used as the relative address of a record, but relative
address can be translated into physical locations on the storage medium.
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Merits of direct access files
1. Immediate access to record is possible

2. Up to date information will always be available on the file
3. Several files can be simultaneously updated
4. Addition and deletion of record is not very complex
5. No new master file is created for updating a random access file
Demerits of direct access files
1. Less efficient in the use of storage space

2. Uses a relatively expensive medium
3. Not well suited for batch processing
4. Data security is less due to direct access facility
Indexed Sequential
An indexed-sequential-access (ISA) file allows both sequential and direct access to data records.
Thus, files must be on a direct access storage device such as a disk. In indexed-sequential files,
records are usually physically arranged on a storage medium by their primary key, just as they are
with sequential files. The difference is that an index also exists for the file; it can be used to look
up and directly access individual records. Files set up to allow this type of access are called ISAM
(Indexed-sequential method) files. Many Database Management Systems (DBMS) use ISAM files
because of their relative flexibility and simplicity. These are often the best type of files for
business applications that demand both batch updating and on line processing.
Merits of index sequential file
1. The main advantage of index sequential file organization is that it is suitable for both
sequential and on line or direct access processing
Demerits of index sequential file
1. Less efficient in the use of storage space

2. Addition and deletion of records are more complex as they effect both the index and the
record number in the file.
(One mark for the definition of file organization and three-three marks for explanation
of each file organization technique.)
8. Why is it important to ensure data security in modern business? What are the
methodologies of data security? (2+8=10)
Answer No. 8
In the modern business scenario the dependency of the business is highly on the information
technology and its tools. The functioning of information system is based on the data provided and
reports and business intelligence generated which are called as the data resources of the
organization. These data resources are equally important as other organizational resources like
money and materials. Because any loss of data which may be leakage or deletion may result
immense harms from the prospects of credibility, finance, time, competitiveness and customers
rights. E.g. What will happen the customer account information of a bank is completely lost, or
passengers information is completely lost while peoples are waiting for the boarding of a flight.
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So the data needed to be secured with due importance. There are following concepts about the
security of the data:
 Data Back Up
 Network Firewalls
 Encryption and Decryptions during transmission
 Authorization and Authentication of system
Data back up:
Data backup is mainly related with multiple storage of the same data in different drives, devices,
building, places and countries. This is done to restore the same data in case of any natural or
manmade catastrophe.
Network Firewalls:
This is related with the protecting the network system from the unauthorized access by keeping
network watchdog. Firewalls scans and check the authorize connection to its network. It permits
the connection to the authorize request and block the unauthorized.
Encryption and Decryptions:
It is mainly associated with the protection of data from leakage, stealing or unauthorized access
during the process of transmission and reception. According to encryption the data are converted
into other form by some algorithms which will not be understandable to other person even in case
of stealing. But the target receiver will regenerate the exact data by reversing the process. This
process of converting the data into un-understandable form is called encryption and regenerating
original data from the encrypted data is called decryption.
Authorization and Authentication:
This is the process of assigning the users access rights and securities policies to use the system
applications and data base. Different members of the same organizations are given different
privilege to use the system. Moreover the access to the system is also the password protected.
9. What are input/output devices? Briefly explain following input/output devices:

i) Digitizer ii) Light pens iii) Impact and Non-impact printers iv) Image Scanners. (2+4 2=10)
Answer No. 9
Input/output devices are the means through which Microprocessor unit communicate with the
outside world. The Microprocessor accepts binary data from the devices such as keyboards and
A/D converters and send data to output devices such as LEDs or printers.
Digitizers
A common device for drawing, partitioning or interactively selecting co-ordinates positions on

an object is digitizer. These devices can be used to input co-ordinate values in either a 2D or
3D space. One type of digitizer is the graphics tablet which is used to input 2D co-ordinates by
activating a hand cursor at selected positions on a flat surface. A hand cursor contains cross
hairs for sighting positions, while a stylus is a pencil shaped device that is pointed at positions
on the tablet.
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Many graphics tablets are constructed with a rectangular grid of wires embedded in the tablet
surface. Electromagnetic pulses are generated in sequence along the wires, and an electric
signal is induced in a wire coil in an activated stylus or hand cursor to record a tablet position.
Acoustic (or Sonic) tablets use sound waves to detect the stylus position. 3D digitizers use
sonic or electromagnetic transmissions to record positions.
Light Pens
Light pens are pencil shaped devices are used to select screen positions by detecting the light
coming from points on the CRT screen. They are sensitive to short bust of light emitted from
the phosphor coating; at the instant the electron beam strikes a particular point. Other light
sources are not usually detected by a light pen.
An activated light pen, pointed at a spot on the screen as the electron beam lights up the spot,
generates on electrical pulse that causes the co-ordinate position of the electron beam to be
recorded. As with cursor-positioning devices, recorded light pen co-ordinates can be used to
position an object or to select a procession option.
Impact and non-impact printer
Printers produce output by either impact or non-impact methods. Impact printers‟ press formed
character faces against an inked ribbon onto the paper. A line printer is an example of an
impact device, with the typefaces mounted on bands, chains, drums, or wheels. Non-impact
printers and plotters use laser techniques to get images onto paper.
Character impact printers often have a dot-matrix print head containing a rectangular array of
protruding wire pins, with the number of pins depending on the quality of the printer.
Individual characters or graphics patterns are obtained by retracting certain pins so that the
remaining pins from the pattern to be printed.
In a laser device, a laser beam creates a charge distribution on a rotating drum coated with
photoelectrical methods such as selenium. Toner is applied to the drum and then transformed to
paper.
Image Scanners
Drawings, graph, photos or text can be stored for computer processing with an image scanner
by passing an optical scanning mechanism over the information to be stored. The objects are
stored in and array, these representations of a picture, can be transformed like rotation, scaling
and enhancements.
(Two marks for the definition of input/output device and two marks for the explanation of
each input/output device)
10. Write short note on (Any Two): (2×5=10)

a) Array in C programming
b) O
SI layer
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c) N
ormalization
Answer No. 10
a) Array is a collection of same type elements under the same variable identifier referenced by
index number. Arrays are widely used within programming for different purposes such as
sorting, searching and etc. Arrays allow you to store a group of data of a single type.
Arrays are efficient and useful for performing operations. We can use them to store a set of
high scores in a video game, a 2 dimensional map layout, or store the coordinates of a
multi-dimensional matrix for linear algebra calculations.
Arrays are of two types single dimension array and multi-dimension array. Each of this
array type can be of either static array or dynamic array. Static arrays have their sizes
declared from the start and the size cannot be changed after declaration.
/* Introducing array's, */
#include <stdio.h>
main()
{
char word[20];
word[0] = 'H';
word[1] = 'e';
word[2] = 'l';
word[3] = 'l';
word[4] = 'o';
word[5] = 0;
printf("The contents of word[] is -->%s\n", word );
}
Sample Program Output

The contents of word[] is Hello
b) The OSI known as the open system of interconnection is developed by the International
organization of standardization to establish a common model of the networking and data
communication. Any organization which develops the networking software or hardware
has the follow all the process and protocols that are proposed under this model. This
enables the global possibility of the computer networking without any sorts of conflict.
The according OSI model the communication process of the data from the source to
destination has to undergo through the seven accepted layer. These layers are:
 Application layer: This layer is mainly concentrated on execution of the application
program which are directly accessible to the common users. http, smtp etc are the
protocol which runs on this layers.
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 Presentation layer: This layer is mainly responsible in the syntax an Symantec of the
data transmission process.
 Session layer: This layer establishes the session between two computers between which
the data transmission process has to be carried out. It also does the data encryption and
decryptions.
 Transport layer: It is mainly responsible in breaking of the big file size into small
chunks which are to be delivered through the data path.
 Network layer: This layer helps in defining of the optimum data path between source to
destination which may have numerous alternatives.
 Data link layer: This layer helps in the error detection and correction of the
transmission process, formation the frame for transmission and defining of the channel.
 Physical layer: It defines the physical property of the data communication. The timing
and voltage binary data are represented by this layer. It defines the modulation
mechanisms of communication process.
c) Normalization is the process of efficiently organizing data in a database. There are two
goals of the normalization process: eliminating redundant data (for example, storing the
same data in more than one table) and ensuring data dependencies make sense (only storing
related data in a table).
The Normal Forms:
First Normal Form (1NF)

First normal form (1NF) sets the very basic rules for an organized database:
 Eliminate duplicative columns from the same table.

 Create separate tables for each group of related data and identify each row with a
unique column or set of columns (the primary key).
Second Normal Form (2NF)

Second normal form (2NF) further addresses the concept of removing duplicative data:
 Meet all the requirements of the first normal form.

 Remove subsets of data that apply to multiple rows of a table and place them in
separate tables.
 Create relationships between these new tables and their predecessors through the
use of foreign keys.
Third Normal Form (3NF)

Third normal form (3NF) goes one large step further:
 Meet all the requirements of the second normal form.

 Remove columns that are not dependent upon the primary key.
MNC

Suggested Answer CAP I Dec 2011

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Suggested Answer CAP I Dec 2011

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CAP-I, Fundamentals of Accounting, Dec.

Maximum Marks - 100

Trading and Profit and Loss Account of Mr. Ajit Baral

Balance Sheet of Mr. Ajit Baral

Liabilities and capital Assets

Provision for Depreciation Account

1.1.'10 To Machinery disp. a/c 30,000 1.1.'10 By Balance b/d 164,000

Cloud's Capital Account

Storm's Capital Account

Rain's Capital Account

1. Cash Book (Bank Column Only):

3. Realisation from sale of Assets:

b) In the Books of Progressive Traders (H.O)

Dr Goods Sent to Branch Account Cr

c) Journal entries in the books of Amar

Cash A/c 15,000

c) The April 30 bank statement for Binoy Company showed a balance of

Memorandum Joint venture Account

Age category Amount Percentage of Provision for

Bank Reconciliation Statement of Binoy Company

Particulars Rs. Rs.

Bank balance as per cash book 2,994.70

Add: Cheque issued but not presented for payment 1,718

Less: Cheque deposited but not cleared 298.70

(2) Journal Entries

Bank A/c Dr. 5,300

( Being bill & interest received by the bank)

Bank Charges A/c Dr. 90

Insurance Expenses A/c Dr 1,300

Customer A/c Dr 730.60

(Being cheque dishonoured by the bank)

b) Briefly describe the various users of accounting information. 5

b) The users of accounting information are as follows:

6. Distinguish between any TWO of the following: (2×5=10)

Points of Difference Cash Basis Accrual Basis

2.) Scope Only few business entity is Mostly all entity is

3.) Matching concept It does not consider It considers matching

5.) Popularity Less popular. More popular.

Points of Difference Joint Venture Consignment

2.) Continuity of It is terminated as soon as It will be there even after

3.) Ownership of goods It remains with co- It remains with the

4.) Profit earned It belongs to co-venturers. It belongs to the consignor.

6.) Methods of keeping Four methods of keeping Only one method of

Cash price of the hours =

Given number of objects =10

Hence 720 different mobile numbers can be constructed.

We have given that

Using the quadratic formula,

Inequality Boundary Two boundary Testing Conclusion

The shaded region OABCD is the common solution region.

(i) Annual cost

We neglect the negative value of q because it is not possible.

Thus minimum inventory cost

Roll No……………. Maximum Marks – 100

b) Histogram & Frequency Polygon

Kumar is most consistent.

The coefficients are determined as

2005 3.0 4.8 7.5 8.0

Year Sales (Rs