BUSINESS STUDIES FORM ONE TO FOUR FREE NOTES FOR ALL TOPICS. READ NOW.
The law of demand applies ‘ceteris penbus’ all other factors held constant ). Highlight
four circumstances under which this law may not hold. (4mks)
As the transport manager of a busy company. Highlight four factors you would consider
before choosing a mode of transport for your goods and services. (4mks)
The following balances were extracted from the books of Beauty Care Enterprises on
31st of March 1997.
Shs.
Fixed Assets 42,000
Stock 48,000
Debtors 50,000
Bank overdraft 25,000
Creditors 40,000
Cash in hand 2,000
During the month of April the following transactions took place.
Bought Motor Vehicle on credit valued at kshs. 80,000 from General motors.
With drew Sh. 28,000 for personal use.
Required: Prepare a balance sheet as at April 30th 1997. (5mks)
Give four reasons why an office may prefer storing information in Micro-films instead
of files. (4mks)
Name four documents used in home trade. (4mks)
Mention four reasons to justify that the Central Bank is not a Commercial Bank. (4mks)
Give four reasons why people prefer using a cheque to cash when effecting payment. (4mks)
The following information relates to Sis Mis traders for the year ended 31st Dec 1996.
Opening stock
Closing stock turnover 8 times
Sales for the year 293,000
Determine:
Cost of sales
Purchases
Gross profit or Gross loss. (5mks)
Give four advantages of personal selling as a means of sales promotion. (4mks)
Mention four of the contents in articles of association. (4mks)
International trade improves the economic welfare of a country. The recent opening
of the East African co-operation seeks to diversify International trade. Highlight four
factors that may hinder this good intention. (4mks)
The following balances relates to a business for the year ended 31 Dec 1990.
Capital as at 31 December 1990 170,000
Drawings for the year 5,000
Net profit for the year 5,000
Extra capital introduced 52,000
Purchases 20,000
Determine the amount of capital as at 1 Jan. 1990 (3mks)
(ii) Net profit ratio. (2mks)
Give four functions of commercial attaches. (4mks)
Mention four investment services offered by the Kenya Posts and Telecommunications.
(4mks)
Name four file covers used in an office. (4mks)
TEST PAPER I
MARKING SCHEME
– Its Expensive
It leads to unnecessary competition
It doesn’t lead to sales increases it turns out to be a waste
Most advertisements are brief thus they may be misinterpreted.
– Called – up capital
Paid – up capital
Registered capital
Issued capital
– Voluntary Association – Service motto – serve its members
Democratic management
Division of profits
State control
– Bad debts – profits & loss A/C
Carriage inwards – Trading account
Returns inwards –
Discounts given – profit and loss
Gross profit – profit and loss
Purchases – Trading account
Drawings – Balance sheet
Prepaid rent – profit & loss
– By investing their funds
From differences in claims
From forfeited funds by policy holders
By charging those who bleach the contract of the Policy – a certain amount is deducted when one quits the policy before agreed time.
– Reducing prices to increase sales
Reduce the cost of production
Increase prices of products
Expand production and market
7.
Current ratio = Current Assets
Current liabilities
Current Assets: Current liabilities = 82,000
Debtors 52,000
Stock 5,000 Current ratio = 157000
Cash at bank 100,000 82000
= 1.914
Quick ratio = Current assets – Stock = 152,000 = 1.853
Current liabilities 82,000
– Truck wholesalers
Regional wholesalers
General wholesalers
Specialized wholesalers
Nationwide wholesalers
Cash and carry wholesalers
– Letter openers – opening mail
Franking machines – stamping letters
Parcel scales – weighing parcels before dispatch
Shredding machine – Shredding unwanted paper
Guillotine machine – trimming papers to the required size
Stapling machine – a fixing pages together
– When the prices of other products change
Tastes and preferences of individuals change
When products don’t have substances.
Incase of primary products that must be consumed
Incases of monopolies who are the only producers.
– Cost of the transport mode.
Distance to the covered
Type of goods to be transported
Modes of transport available
Quantity of goods to be transported.
12.
Beauty Care
Balance Sheet
As 31st March 1997
Capital 77,000 Fixed Assets 42,000
Less drawings 28,000 Motor Vehicle 80,000
Net capital 49,000 122,000
Loan 28,000
77,000 Current Assets
Current liabilities 25,000 Stock 48,000
Bank overdraft 40,000 Debtors 50,000
Creditors 1 80,000 Cash in hand 2,000 100,000
Creditors 2 222,000 222,000
13 .- They are more confidential than files
More durable compared to files
They take less space
Easy to move about and convenient to carry.
– Letter of inquiry
Catalogue
Proforma Invoice
Delivery note
Promising note
Credit note
Debit note
– Does not rent money to individuals
Doesn’t receive deposits from individuals neither does it run accounts for individuals.
Not an agent to the stock exchange
Does not discount bills of exchange
Doesn’t offer money transfer services for individuals.
– Cheque is more secure than cash
It also acts as evidence of payment
Its convenient instead carrying large sums of money
Saves ones time as they may not have to go withdraw money to make payment
17.
Rate of stock turn – over Gross loss
= Cost of sales = Sales – Cost of sales
Average stock = 293000 – 464000
8 x average stock) = cost of sales. = 171,000
8 x (opening stock + closing stock) = cost of sales
2
8 x (52000 + 64000) = C.O.S
2
8 x 58000 = C.O.S
464,000 = C.O.S
Purchases + Opening Stock – Closing Stock = C.O.S
464,000 – 52,000 + 64,000 = 476,000
– Personal contact with the customers
Immediate feedback on customers feelings about a certain product
Salesman goes to the particular group targeted.
Salesman can persuade and convince people to buy.
– Classes and rights of shareholders.
Issue and transfer of shares
How alterations in the capital could be treated
General meeting procedures & sorting rights
Qualifications , Duties , and powers of directors
Auditing of books
Borrowing , dividends and reserve policies.
– Some countries may feel they aren’t benefiting much
Political differences
Instability in neighbouring countries
Influx of refugees
Different currencies used.
21.
Capital owned at the end of the year
= initial capital + Net profit – Drawings – Additional capital
= 170,000 + 5,000 – 100,000 + 52,000
= 222,000 – 105,000
= 122,000
Net profit ratio = Net profit x 100
sales
Sales = Purchases + Net profit
= 20,000 + 5,000
= 25,000
Net profit ratio = 5,000 x 100 = 20%
25,000
22 .- Search for Kenyan markets abroad
Inform businesses abroad of Kenyan goods
Negotiate to expand Kenyan Market abroad
Liase with the ministry of Commerce to educate Kenyan producers/manufactures.
– Sell bearer and premium bonds
Operate savings accounts
Operate SAYE (Save As You Earn) scheme
Have fixed deposit facilities
– Box files
Flat files
Lever arch files
Loose leaf binders
Ring binders
TEST PAPER II
(a) Marketing boards are producer organizations set up to encourage and control the
selling of agricultural products. Discuss five functions of these organizations.
(10mks)
(b) Discuss five differences between a bank statement and a bank pass book. (10mks)
(a) Despite major development in the transport sector. Many people are still using
carts (both those driven by animals and those pushed by human beings).
Discuss five reasons to show why this type of transport is still preferable to others.
(10mks)
Money evolved through several stages to get to the currency notes and coins we
have today. However “ Modern – day trade may compare negatively with barter
trade”. Discuss this statement giving it your support. (10mks)
(a) A business enterprise should keep a budget other than the other statements it
keeps. Discuss reasons why this activity is important. (10mks)
You are the sales manager of ‘speed’ Industries Ltd. that manufactures tyres.
You are faced with the decision to choose an appropriate channel to distribute the
product. Discuss the factors you consider in your choice. (10mks)
(a) Mail order business is whereby customers place their orders through mail and goods
are also send through mail. This business is however not popular in Kenya.
Discuss five reasons to encourage your colleagues to start this type of business. (10mks)
Discuss the factors that influence the choice of a filing system in an organization. (10mks)
(a) Briefly explain the following terms as used in Capital structure of a company.
Registered capital. (2½ mks)
Called – up capital. (2½ mks)
Issued capital. (2½ mks)
Paid – up capital. (2½ mks)
Specialization is the separation of jobs, activities and processes so that every individual concentrates on what they can do best. Name and explain four major such divisions.
(12mks)
(a) Discuss five benefits that the Kenyan government gets from Binded Warehouses. (10mks)
Mwachai BINA’s books disclose the following information for the period ended
31 Dec. 1996.
Opening Stock 21000
Purchases 40000
Closing Stock 10000
Sales 82000
Returns inwards 2000
Motor Vehicle 10000
Rent 3000
Sales expenses 18000
Discount received 3000
Required: Draw up Mwachai’s trading profit and loss account for the period ended. (10mks)
TEST PAPER II
MARKING SCHEME
(a) – Encourage and control marketing of agricultural products by purchasing them from
farmers.
Encourage stable prices and incomes by keeping prices fairly fixed and store
unsold goods to act as buffer stock.
Offer loans for farm input purchasing.
Help government to regulate, license and impure major export crops e.g. tea.
Provision of a wide range of experts dealing with agricultural products
They do research work to improve yield.
– A bank statement is issued after an account holder has requested for it whereas a bank pan
book is issued after one opens an account.
Pass book can be used to withdraw money whereas a statement cannot.
A bank pass book contains all the particulars of a person e.g. a passport size. Whereas a bank statement doesn’t have
A bank statement is seasonal that is its issued from time to time whereas a pass book is more permanent.
A bank statement shows only the transactions that were undertaken in a certain period of time but a passbook may contain all the transactions since the account was opened.
A bank statement may be given to anyone who holds either a savings or current account but pass book may be given only to those with savings account where cheque facilities aren’t available.
(a) – Carts are cheap to buy and maintain
They are cheap and negotiable
They are flexible – can be used where there aren’t any roads
Convenient for short distances
Can deliver at the doorsteps
Readily available.
(b) – Trading procedures have become complicated
Increased fraud and cheating over money
Trade has become risky due to theft and carrying of large sums of money
Trade has become expensive where one has to bank money, pay interest for loans etc.
It has been dominated by only a few leaving out the majority.
(a) – Business is done to compare the actual results with the budgeted plans.
Aids in communication e.g. employees are fully aware of tasks to undertake within a certain period of time i.e. time budget.
Increase efficiency as everyone want to accomplish what is expected of them.
Evaluation of performance to know what was achieved according to the budget
and what was not and why.
Avoid time and money wastage as each is accounted for at the end of the period.
Know output of employees as each departments achievement are seen.
– Cost – choose channels which are not too expensive so that profits aren’t reduced.
Nature of my produce – Requires middlemen with tyre knowledge.
Size or Nature of market – if the market is large enough around the factories
the short channels are chosen.
Marketing risks – to minimize these then middlemen will be involved
Government policy – If there is any directive according to the state law as to who should sell tyres.
Competition – If we are forcing steep competition then its advisable to market the goods ourselves to take care of our customers and convince them to buy.
4 . (a) – It is cheap as its not necessary to maintain expensive showrooms.
Doesn’t require a fleet of transport vehicles
Salesmen may not be required and few employees can handle the mail.
Distributor may contain complete control over the products on his own.
Goods sold for cash checks on bad debts
Can operate with little capital as its unnecessary to have huge stocks of goods.
(b) – Number of files & documents to be kept
Simplicity – to be understand easily by new employees
Flexible to accommodate more information without having to change existing documents .
Easy reference and minimum risk of misfilling.
Documents shouldn’t be filed more than once in different subjects.
Must be affordable.
(a) Registered capital – Maximum amount of capital a company expects to raise from
its shares and its also the amount stated in the Articles of Association.
Called – up capital – once the shares have been put to the public for subscription they may be called upon to pay for either all the shares or only a certain amount. The total of the amount that will be paid is called – up capital.
Issued capital – Although the company has registered capital it may decide to put only a portion of these to the public to start with. The total amount released then is issued – capital.
Paid – up capital – The total amount received from subscribers by the company out of the called – up capital.
(b) Trade divisions (professions division)
A person concentrates on the professional trade or service e.g. teaching , fishing.
Process division – Although in the same trade different people have their work being divided into a number of stages, activities or processes each being undertaken by a different group of people.
Regional or Territorial specialization – Two or more firms on the same product to complete the production process e.g. firm may undertake the processing of cotton whereas as B does the packaging.
Nationalized specialization – Based on soils , climates , skills and costs of production. Applied in International trade whereas a country concentrates on the production of a particular commodity or supply of service e.g. Kenya is known for coffee production.
(4 x 2 ½) = 10 mks
6 (a) – Collecting of duties which the government revenue.
Checks on imports – Quantity and equality
Checks on illegal trade e.g. drugs / firearms
Use them to compile statistical data or imports.
Use them to keep confiscated goods that would later be government property.
(b)
MWACHAI’S BINA
Trading profit and loss account for the year ended Dec. 31 1996
Opening Stock 21,000 Sales 82,000
Purchases 40,000 Returns 2,000
G.A.S 61,000 inwards
Less Closing Stock 10,000
Cost of sales 51,000
Gross profit 29,000
80,000 80,000
Rent 3,000 Gross profit 31,000
Sales expense 18,000 b/f
Net profit 13,000 Discount received 3,000
34,00034,000
20 times ½ = 10mks
TEST PAPER III
Distinguish the following terms: 6mks
Free goods and economic goods
Consumer goods and producer goods
Business wealth and personal wealth
State four advantages of a bonded warehouse 4mks
Name the factor of production that each of the following resources relate to. 5mks
Resource Factor of production
Teacher ______________________________________
Computer ______________________________________
Water ______________________________________
Sole proprietor ______________________________________
Forest ______________________________________
Mention any four methods used for sending money through the post office. 4mks
Using the book keeping equation, indicate the correct figure in the empty spaces provided.
Assets
Capital
Liabilities.
180,000
50,000
200,000
90,000
45,000
38,000
150,000
50,000
The following information was drafted from the books of Rayrose college on 31st Jan 2002.
Item Amount (Kshs)
Opening stock 400,000
Sales 700,000
Closing stock 10,000
Purchases 150,000
Sales returns 20,000
Purchase returns 50,000
Salaries and wages 80,000
Rent 70,000
Income 80,000
Calculate:
Gross Profit 4mks
Net profit 4mks
Mark-up percentage 2mks
State any four conditions under which a proforma invoice may be used.
Highlight any four services rendered by retailers to consumers. 4mks
Outline any four functions of the Kenya External Trade Authority by (K.E.T.A.) 4mks
Mention four limitations of advertising as a means of sales promotion 4mks
As the transport manager of a busy company highlight four factors you would consider
before choosing a mode of transport for your goods and services. 4mks
“Most secondary schools maintain that students should pay fees with cheques and not cash” Account for this statement. 4mks
Indicate the account in which the following entries are made.
Entry
Account
Carriage inwards
Carriage outwards
Incomes receivable
Return inwards expenses.
List four features of co-operative societies. 4mks
Outline any four barriers that hinder effective communication. 4mks
Highlight any four problems or challenges that businesses would face due to adoption
of the decentralization policy. 4mks
Give any four benefits that a farmer would reap from being a member of a producer cooperative. 4mks
Outline any four features of multiple shops. 4mks
With the aid of a tree diagram, show the main divisions of trade. 3mks
What is meant by the following abbreviations as used in the study of commerce. 4mks
O. R __________________________________________________________
O . M . O __________________________________________________________
I . F ___________________________________________________________
W. O ___________________________________________________________
State any four methods that the government of Kenya uses to protect its consumers. 4mks
Give any three characteristics of money as a medium of exchange 3mks
What is a ‘bill of exchange’ 2mks
Highlight any three demerits of the barter system of trade. 3mks
TEST PAPER III
MARKING SCHEME
Distinguishing Concepts.
a) Free goods – Those things which are given free by nature eg air. Have utility but
no economic value.
Economic goods – Those things which are scarce when compared to human wants and
human effort required to obtain them. Have utility and economic
value (price)
b) Consumer goods – Goods meant for direct consumption and they satisfy economic
wants may be perishable or durable.
Produce goods – Goods that help in further production of consumer goods. They
assist in production eg machinery.
c) Business Wealth – Goods of value (assets) that belong to a business eg. Premises.
Personal Wealth – Consists of items that belong to an individual person eg clothes,
TV, etc. 1 x 6
Advantages of a bonded warehouse.
Goods can be prepared for sale while in bond
If goods are sold on bond, the duty passes to the buyer
The owner can look for market first before paying the duty
Some goods lose weight so the duty paid becomes lower if its based on weight
Ensures that no duty is evaded since the goods cant be released without payment
Enables the government to check on prohibited goods and smuggling.
Any other relevant point.
Resource Factor of production
a) Teacher Labour
b) computer Capital
c) Water Land
d) Sole proprietor Enterprenuer
e) Forest Land 1 x 4
Methods of sending money through post office.
Telegraphic money order
Ordinary money order
Registered mail
Postal order. 1 x 4
Assets
Capital
Liabilities
180,000
50,000
130,000
200,000
110,000
90,000
83,000
45,000
38,000
150,000
100,000
50,000
1 x 4
a) Calculating gross profit
Rayrose College
Trading account
For the year ended 31st Jan 2001
Kshs. Kshs.
Opening stock 400,000 Sales 700,000
Add purchases 130,000 Less sales returns 20,000
Less purchases 50,000100,000 Net sales 680,000
500,000
Less closing stock 10,000
Cost of goods sold 490,000
Gross profit c d 190,000
680,000680,000
Gross Profit b d 190,000
4mks
Calculating Net profit.
Net profit = (Gross profit + income) – expenses
Income = 80,000
Expenses = Salaries & wages + rent
= 80,000 + 70,000
= 130,000
hence N.P = ( 190,000 + 80,000) – 150,000
= 270,000 – 150,000
= kshs. 120,000 4mks
Calculating mark-up percentage.
Mark – up = Gross profi x 100
Cost of goods sold
= 190,000 x 100
490,000
= 38.8% 2mks
When a proforma invoice may be used.
When the seller wants to request for payment before goods are delivered
When the seller does not want to give credit to the buyer
Issue to an agent who sells goods on behalf of the seller
Used by importers to get customs clearance before the goods are sent
Serve the purpose of a quotation
Sent to the buyer to show him what he would have to pay if he bought goods sent on approval. 1 x 4
Services rendered by retailers to consumers
Selling goods to consumers in affordable units
Display goods to enable consumers know which alternatives exist.
Advise the consumers on use. Servicing and maintenance of goods
Stock a large variety from different manufacturers as per the needs of consumers
Provide credit facilities to worthy customers
Offers after sales services on technical goods to the consumers
Any other relevant point. 1 x 4
Functions of K.E.T.A.
Marketing of Kenyan products in foreign markets
Advise manufacturers on how to improve the quality of their products in order to get bigger markets overseas.
Providing training facilities on export matters
Arrange trade fairs and exhibitions in foreign countries to introduce Kenya products in foreign countries.
Publishing information on the possibilities of the expansion of exports
Encourage the production and marketing of handicrafts
Provide trade facilities and negotiate with transport companies on behalf of exporters.
1 x 4
Limitations of Advertising.
Its expensive to the producer who may have to go through advertising agencies.
May be misleading or deceitful since they create unproductive competition.
The consumer is penalised in terms of prices since advertising costs are passed over to him
Creates mechanical buying particularly for permanently advertised products
Some advertisements are nasty and dirty hence leads to decay of good morals
Any other relevant point. 1 x 4
Factors to consider when choosing mode of transport.
The cost of transport
Speed and time taken
Nature of goods
Flexibility
Packing requirements
Distance to be covered
Insurance risks. 1 x 4
Advantages of cheques.
Secure since if stolen they can be traced
Convenient to carry than coins and notes
Payment can be made without the need to travel
Acts as evidence of payment.
Any other relevant point. 1 x 4
Entry
Account
Carriage inwards
Trading account
Carriage outwards
Profit and loss
Incomes receivable
Profit and loss
Return inwards
Trading account
Features of cooperatives.
Voluntary Association ie open to all
Service motto ie serves its members and that profit is not the only motive
One for all and all for one ie self help through mutual help
Democratic management
Division of profit is done on the basis of service rendered
State control ie state exercises chose control. 1 x 4
Barriers to effective communication
The language used
The medium used
Willingness of the receiver to listen
Noise
Attitudes of the communicators
Poor planning
Improper timing Any other relevant point. 1 x 4
Problems of decentralization.
Lack of trained personnel
Lack of basic infrastructures such as roads
Basic services like banking may not be found in all areas
Inadequate market
Certain benefits eg entertainment may not be found in the decentralized industries.
Any other relevant point. 1 x 4
Benefits from co-operatives.
Fair price for his her produce
Reduced costs of transport, processing and marketing
Get ideas regarding quality improvement, better methods of cultivation, etc
Secure credit on reasonable terms than an individual could
Purchasing farm equipment’s at reasonable prices
A farmer is assumed of a stable price for his produce. 1 x 4
Features of multiple shops.
Uniformity of the premises, external shop front, internal layout, etc
Control is vested in the central organisation
Buying if centralised and selling is decentralized through several branches.
Deal only in a particular set of goods
Sales are strictly cash
Selling prices are fixed by the central organisation.
Any other relevant point. 1 x 4
Divisions of trade.
Trade
Home trade Foreign trade
Retail Wholesales Import Export
Meaning of abbreviations.
i) O.R – Free On Rail
ii) N. O. – Or Nearest Offer
iii) C. I. F – Cost, Insurance and Freight
iv) W. O – Cash With Order.
Government methods of consumer protection.
Setting up standards eg Kenya Bureau of Standards
Price control
Licences
Food and Drugs Acts.
Sale of Goods Act.
Public Heath Act.
Characteristics of money
Acceptability
Portability
Divisibility
Durability
Homogeneity
Stability
Scarcity
Cognizability 1 x 3
A bill of exchange is an unconditional order from one party to the other to pay on demand or at a stated future date the sum on the bill. It must be signed by the drawer and be accepted by the drawee. 2mks
Demerits of barter trade.
Lack of double coincidence of wants
Lack of standard measure of value
Indivisibility of some products
Bulkiness of some products
Lack of storage facilities. 1 x 3
TEST PAPER IV
a) Explain the role played by the Jua Kali sector in the development of Kenya today 10mks
b) Explain the problems experienced by cooperative societies. 10mks
a) Discuss the factors that may influence the growth of a business unit. 10mks
b) Discuss the factors that you would consider when choosing the mode of transport. 10mks
a) The following information relates to demand and supply schedule for good.
Price per unit (Kshs.) Quantity demanded Quantity supplied.
70 100 1000
60 500 800
50 500 400
30 800 400
20 900 300
10 1000 100
On the graph paper provided, draw the demand and supply curve on the same graph
and determine equilibrium price and quantity. 10mks
What would happen if the price of good X was increased from shs. 50 to shs. 70. 2mks
What would happen if the price of good X was decreased from shs. 50 to shs. 10. 2mks
b) Outline the disadvantages if sole proprietorship. 6mks
a) Explain the differences between private limited company and public limited
company. 10mks
b) Explain the role played by warehousing as an aid to trade among others. 10mks
a) Explain the problems that Kenya experiences due to concentration of industries
in the urban centres. 10mks
Discuss the main functions of the accounts department in any business enterprise.
10mks
a) Discuss the main factors that influence the demand for a particular good or service.
10mks
b) Explain the factors to consider when choosing means of communication. 10mks
TEST PAPER IV
MARKING SCHEME.
a) Role played by the Jua Kali sector in the development of Kenya today
Source of income to individuals
Source of employment both to owners and others
Provide market for raw materials produced in rural areas.
Earns foreign exchange eg curios and sold abroad
Government gains revenue from taxes
Provide goods at affordable prices to the locals
Provides investment opportunities
Promotes communal development as evidenced by women groups.
Any other relevant point 2 x 5
b) Problems experienced by cooperative societies.
Limited supply of goods and services since they concentrate on pure or main goods for export
Managerial problems due to inefficient committees, who lack appropriate education and relevant experience.
Financial problems due to embezzlement of funds by leaders.
Scattered population and poor basic infrastructures such as roads and other communication network.
Political interference since the government does not let the co-operatives to operate independently
Corruption particularly in recruitment of personnel which leads to inefficiency.
2 x 5
a) Factors that may influence the growth of a business unit.
Availability of sufficient capital
Availability of market for the product
Favourable legal factors
Mature of product service
Minimal costs of production leading to high profits
Availability of transport and communication facilities.
Any other relevant point 2 x 5
b) Factors that you would consider when choosing the mode of transport.
Cost freight rate: Amount of money paid to transport companies and should be maintained at lowest levels possible.
Speed and time: Time required to transport goods from source to destination. Fast moving goods need a means of transport that is fast e.g newspapers.
Nature of goods: Bulky goods are transported by sea or rail while valuable and perishable goods are transported by road or air.
Flexibility: Ability of a mode of transport to reach its destination. Road transport is the most flexible.
Distance: The length of the journey for which goods have to be transported. Short journeys are more economical by road.
Packing requirements: This is how goods have to be packed to meet a particular mode of transport. Special packing might add to the cost and become expensive.
Convenience: This is the certainity that goods will reach the expected destination in required form.
Availability: This deals with how possible it is to get a certain mode of transport.
2 x 5.)
3) Combined dd ss Curve for good X
70
60
50
40
30
20
10
100 200 300 400 500 600 700 800 900 1000
Qty demanded supplied.
E . P = 50 shs.
E . Q = 500
i) From 50 to 70 shs. = at 50 sh: Qd = 500QS = 500
at 70 shs: QD = 100 Q5 – 1000
Excess supply of 900 units
Supply > dd by 900 units
Due to price increase.
ii) From 50 to 10 = at 50 – QD = 500 QS = 500
at 10 sh = Qs = 100 Qd = 1000
shortage of 900 units
demand increase from 500 to 1000 units
excess demand but these is a shortage
due to price decrease. 1 x 6
b) Disadvantages if sole proprietorship.
Meets the losses of the business alone
Unlimited liability
Insufficient capital for expansion
Inability to carry out research
Jack of all trade (over working)
In case of death, the business collapses
No economies of scale. 1 x 6.
a) Differences between private limited company and public limited company.
Private ltd Co.
Public Ltd Co.
– Membership is from 20 and limited to 50
– No transfer of shares
– Commences trading after receiving a certificate of registration
– The final accounts are private and confidential.
– The directors do not need to be specified on formation
– Aim is to have limited liabilities and safeguard personal properties
– They comprise family business owned by friends
– They are not quoted in the Nairobi stock Exchange.
– Membership is from 7 and there is no limit
– There is transfer of shares.
– Commences trading only after receiving a certificate of incorporation
– The final accounts have to be audited by a certified public accountant.
– A list of directors and their portfolios have to be stated on formation.
– Aim is to raise required capital from the public
– The only relationship is that of business.
– Quoted in the Nairobi stock Exchange.
1 x 10
Role played by warehousing as an aid to trade among others.
Preserves surplus, stabilizes prices and helps to save huge quantities of good which would otherwise be wasted.
Goods can be prepared for sale while in the warehouse in terms of sorting, weighing, packing etc
Provide temporary accommodation of goods for producers with no sufficient room for storage.
Acts as a reservoir enabling trade to continue throughout the year.
Deferred payment on highly taxed goods enables the importer to look for a market for the good
Enables the government to get revenue through duty paid. 2 x 5
a) Problems that a Kenya experiences due to concentration of industries in the urban
centres.
Rural urban influx
Increase in criminology
Increased environmental pollution
Unbalanced regional development
Increase in unemployment in urban areas
Development of slums
High cost of living in urban areas
Inadequate social goods like schools
Destruction of road network
High dependence ratio if the rural folks on those who work in town.
Any other relevant point. 2 x 5
Functions of the accounts department in any business enterprise.
Maintain the accounting records
Prepare and send invoices to the customers
Prepare the budget and plan the activities of the organisation
Receive money and make payments on behalf of the organisation
Calculate and make payments on behalf of the organisation to the employees
Prepare final accounts at the end of the year.
Analyse the financial position of the business
Carrying out internal audit. 2 x 5
a) Factors that influence the demand for a particular good or service.
Own price of the commodity
Price of related goods ie substitutes and complements
Income levels of consumers
Tastes, fashions and preferences
Weather conditions eg demand for umbrellas and gumboots increases during the rainy season.
Government policy.
Expected changes in price of goods. 2 x 5
b) Factors to consider when choosing means of communication.
Speed: When the message is urgent, telex, telephone or telegram is the best
Cost: Refers to expenses incurred in sending a message. Generally, the letter is cheaper to send messages.
Confidentiality: The ability of the message to reach to the intended person. Letters are better than telephone for confidence purposes.
Distance: Represents the geographical gap between the sender and the recipient
Evidence: Refers to the record of the message conveyed. All means of written communication provide evidence.
Reliability: The assurance certainity that the message will reach the intended recipient, at the intended time, place and the right form. Face to face is the best for this purpose.
2 x 5
TEST PAPER V
Distinguish the following pair of concepts (6mks)
Transport and communication
Warehouse and warehousing.
Cheque and bankdraft
Explain the role played by transport as an aids to trade (4mks)
Outline any four circumstances under which a manufacturer would sell goods directly to
consumers (4mks)
Highlight any four reasons why a government may set up parastatals to supply essential
goods to its people (4mks)
Mention any four factors that account for the high demand for cellphones/mobile phones in
Kenya today (4mks)
State any four characteristics of human wants (4mks)
The table below shows various forms of production. Indicate using a tick the correct
classification in the appropriate column (5mks)
Form of production
Primary
Secondary
Tertiary
Transportation
Farming
Food processing
Retailing
Lumbering
Outline four sources of capital to co-operative societies (4mks)
Mr Ryan had he following assets and liabilities on 30th April 2002.
Kshs
Cash at bank 23,100
Cash in hand 3,250
Debtors 45,300
Stock 48,200
Furniture 11,600
Motor-vehicle 65,000
Creditors 56,000
Bank loan 25,000
a) Calculate his capital (4mks)
Outline any four services rendered by a public warehouse (4mks)
Mention four ways in which commercial attaches in our foreign embassies help out our
traders (4mks)
Explain any three parties to a cheque (3mks)
Outline any four essentials of a warehouse (4mks)
Highlight any four forms of after-sales service that may be extended to a consumer. (4mks)
Outline any three qualities of an office worker (3mks)
Outline any four ways though which co-operatives help Agricultural development in
Kenya. (4mks)
The following balances were extracted from the books of Abdi Traders.
Kshs
Opening stock 22000
Closing stock 26000
Purchases 349000
Expenses 120000
Sales 500000
Capital 200000
Calculate :
(a) Margin percentage (3mks)
(b) Stock turn over (3mks)
(c) Cost of sales (2mks)
List any four principles of insurance (3mks)
Highlight any four reasons why international trade is said to be of great importance to a
developing country (4mks)
Outline any four factors that have promoted the growth of commerce over the years (4mks)
Account for the popularity of supermarkets in Kenya today (4mks)
Why in your opinion do you think oral communication lost popularity in Kenya today.
(4mks)
Other than commercial banks, mention any other four financial institutions that provide
financial services in Kenya (4mks)
Name any three factors of production and their respective rewards (3mks)
TEST PAPER V
MARKING SCHEME
Distinguishing concepts.
Transport – The process of moving goods or people from one place to another.
Communication – The process of disseminating information /message from one person to another.
Warehouse – Is a building where goods are received and stored prior to being despatched to the people who require them
Warehousing – Is the process of receiving goods into warehouses, storing them and dispatching them to the users
Cheque – Is an order by a depositor/ drawer to the bank/drawee to make a specific payment to the person named /payee
Bank draft- A cheque drawn by a bank in favour of a married person and serves as a guarantee of payment . (1 x 6 = max 6 marks)
Role of transport
Facilitates movement of materials from their source places to the factories/industries
Movement of finished goods from factories to consumers
Increases utility of goods and services
Enhances movement of bulky goods
Avoids wastage since surpluses are transferred to areas where they are scarce
Makes possible exploitation of resources
Any other relevant point ( 1 x 4 = max 4marks)
When a manufacturer sells directly to consumers
When goods require sufficient after-sales services
When goods are very expensive e.g. motor cars.
When goods are branded and widely advertised
When goods are highly fashionable with high profit margin
When goods are highly fragile e.g. glass materials
When goods are highly perishable e.g. fruits and vegetables .
When the manufacturer wants to exercise some control during the distribution process. Any other relevant point ( 1 x 4 = max 4 marks)
Why government sets up parastatals to provide essential services
Prevent exploitation of the public by private businessmen
Provide goods and services that private enterpreneurs are unwilling to venture due to low profits involved
Provide large amount of capital(initial) where private organisation are not able to finance
Provide essential goods and services that are too sensitive to be left in the hands of a private sector
Stimulate economic development of the country by providing the essential social overhead capital
Establish monopolies in areas of interest where high profits are involved
(any other relevant point ) ( 1×4 = max 4 marks )
Factors accounting for high demand of cellphones
They are highly portable
Convenient since the owner can be reached anywhere and anytime
They are cheaper since the cost of calling a trunk call or otherwise is the same .
They are time saving since one does not have to travel to receive or make a call
They are easier and takes less time to install
Serves as a diary since telephone numbers can be stored
(any other relevant point) 1×4 max = 4 marks
Characteristics of human wants
They are insatiable
They are habit forming
They are competitive
They are recurring
Particular wants can be satisfied
(Any other relevant point) 1 x4 max = 4marks
Form of production
Primary
Secondary
Tertiary
Transportation
√
Farming
√
Food processing
√
Retailing
√
Lumbering
√
1 x 5 max 5 marks
Sources of capital to co-operatives
Membership contributions
Retained profits
Credit facilities
Entrance fees
Surplus and reserves (1 x 4 max 4marks)
Capital = Assets – Liabilities
Assets = ( Cash at bank + cash in hand +debtors + stock + Furniture + motor-vehicle)
(23100 + 3250 + 45300 + 48200 + 11600 + 65000)
= 196450
Liabilities = Creditors +Bank loan
= 56100+ 25000
= 81000
Hence capital = 196450-81000
= 115350
Services rendered by a public warehouse
Provide storage facilities
Serves as a place for preparation of the goods for subsequent use by a change in their condition e.g. ripening of bananas
Renders a warrant which is a document of title issued to the merchant owning the goods
Offers protection by insurance against loss by fire, theft, etc
Prepares sample for report and market usage
( any other relevant point ) 1x 4 = max 4
Role of commercial attaches
Explore new markets for more export opportunities
Study and analyse markets for exports for their home countries
Research and keep data for new markets
Publish and advertise their countries exports
Select buyers agents, agents and distributors of the home country’s exports
Inform traders in their home countries of the standards required for exports .
Organise visits to trade fairs and exhibitions for businessmen from their home countries. (any other relevant point ) 1 x 4 = max 4 points
Parties to a cheque.
The drawer – the account holder who drafts the cheque
The drawee- The bank that is to make payment.
The payee – The named person who is to receive payments
(½ x 6 = 3marks)
Essentials of a warehouse
Ideal location where goods are produced in greater quantity
The building must be suitable and of large size appropriate to store goods efficiently
Properly equipped with necessary facilities to store goods for a longer time without getting spoilt
Efficient and well trained staff with ability to protect goods against damages by fire, water or bad weather.
Should have efficient transport system to enhance movement of goods into and out of the warehouse.
Should have adequate protection measures
(any other relevant point) 1 x 4 = max 4 marks.
Forms of after-sales services
Free of charge repair for specific period of time
Cleaning or servicing of the equipment at regular intervals free at very reasonable rates.
Provide technical advice regarding he use of equipment if the customer has some problem.
Ensure availability of spares
(Any other relevant point ) 1 x 4 = 4 marks)
Qualities of an office worker
Personal attribute e.g. neatness, cleanliness.
Office etiquette e.g. respect courtesy
Personal knowledge and skills
16. How co-operatives help Agricultural development
Help farmers get better prices for their produce
Assist farmers seeds free or at reduced prices
Fertilisers, farming tools and implements are provided at subsidised rates
Offer useful advice on farming
They sometimes grant loans to farmers for development .
Provide a channel of distribution of loans offered by the government to relevant members. (any other relevant point) 1 x 4 = max 4 mks)
Post office savings bank. Any other relevant point 1×4
Factor Reward
– Land rent
– labour wages
– Capital interest
– Enterprenuership profit ½ x 6
TEST PAPER VI
a) Explain six reasons why a businessman would choose to operate a current account instead
of a savings account. 12mks.
b) Highlight any four circumstances under which a businessman would communicate to the
customers by letters rather than telephone. 8mks.
a) Discuss the main challenges/problems that face the small scale industry in Kenya today 10 mks
Explain the factors that a seller should take into account when choosing the best medium
for advertising his products 10mks
a) Explain the benefits that Kenya is likely to enjoy for being a member of the common
market for East and Southern Africa (COMESA)
b) Clearly describe the services rendered by wholesalers to growers, producers and
manufacturers 10mks
a) Clearly describe how the central bank limits the credit creation of the commercial banks. 10mks
b) Explain the role played by marketing boards 10mks
(a) The following information relates to African Retail Traders for the year ended
31st Dec 1999
Gross profit 600000
Opening stock 285000
Sales 2400000
Purchases 1830000
Expenses 360000
Net profit 240000
Closing stock 315000
Fixed assets 400000
Debtors 900000
Cash at bank 35000
Current liabilities 438000
a) Calculate
Cost of goods sold
Mark –up percentage
Debtors ratio
Current ratio 12mks
b) Outline any four reasons that may lead to dissolution of a partnership business 8mks
6 . a) What arguments can be advanced for state ownership of business understandings 10mks
b) Write short notes on the following terms as used in insurance
Indemnity
Utmost good faith
Proximate cause
Insurable interest
Subrogation 10mks
TEST PAPER VI
MARKING SCHEME
a) Why a businessman would choose to operate a current account
Excellent means of settlement of accounts speedily and economically avoiding the use of the legal tender
Can be used for direct receipt of, regular, sums by direct credit instead of legal tender
Withdrawals can be effected on demand without notice
It is a basis for obtaining loan funds or of overdraft facilities
Provide means to effect regular payment at stated intervals of time by standing order eg rent.
Safety, reliability and ready availability of funds kept in this way.
Provides periodic bank statements issued which schedule all bank transactions completed for the period. Any other relevant point = 2 x 6
b) Circumstances when a businessman would communicate to customers with letters than
telephone.
When permanent records for future reference are required
When communication needs to be highly confidential
When communication need to reach many people at a time when he/ she needs to accommodate complex messages such as tables and graphs for illustrations.
When the customer is far away and it may be two expensive to call.
Any other relevant point = 2 x 4
a) Problems facing small scale industry.
Lack of sufficient capital
Lack of proper market information
Poor management due to low education levels
Lack of credit facilities due to lack of proper securities
Poor financial control since most owners do not know how to keep clean records.
Lack of tenacity / persistence since most owners expect returns overnight.
Any other relevant point = 2 x 6
Factors to consider when choosing the best medium for advertising.
The ‘reach’ of the media ie the proportion of the target audience that can be contacted.
The relative cost per unit cost should be low
The impact of the media ie the extent to which the message is effectively taken in.
The permanence of advertising
The selectivity of the media.
The product being advertised. Any other relevant point = 2 x 5
a) Benefits that Kenya reaps from COMESA.
High quality products
Fairly priced products
Wide variety of products
Access to a wider market.
Wider consumer choices
International peace and understanding. Any other relevant point = 2 x 5
Services rendered by wholesalers to growers, producers & manufacturers.
Market to purchase all their products, providing warehousing in preparation for subsequent distribution to retailers.
Provision of transport services: often packing for despatches of the goods: prompt settlement: display and advertising of the product.
Link with retailers and consumers’ demands to facilitate production in anticipation of demand and with fore knowledge of changes in consumers’ selection, taste and requirements.
Relieves the suppliers off the problem of finding diverse markets, finance and storage problems.
Provides for further services necessary in preparation for retail marketing eg. Grading, blending, refining, etc
Fulfils the manufacturers’ needs for a steady supply of raw materials or semi – finished goods to ensure continuity of his production lines.
Any other relevant point = 2 x 5
a) How Central Bank limits credit creation of Commercial Banks.
Open market operations
Bank Rate Policy
Margin Requirement
Selective Credit Control
Rationing of Credit.
Direct Action, Moral persuasion and publicity. 2 x 5
Role of marketing boards.
Buying and selling produce at fair prices
Control of production
Collection of produce and transportation
Storage of produce
Financing functions
Research and advisory services
Advise the government on matters related to the produce they handle
Promote interests of the farmers / growers by supplying fertilizers, seeds etc to enhance productivity and good farming.
High quality products
Fairly priced products
Wide variety of products
Access to a wider market.
Wider consumer choices
International peace and understanding. Any other relevant point = 2 x 5
a) Cost of goods sold.
= opening stock + purchases – closing stock
= 285,000 + 1,830,000 – 315,000
= 1,800,000
Mark-up percentage
= Gross profit x 100
Cost of sales
= 600,000 x 100
1,800,000
= 33 1/3 %
Debtors ratio
= Debtors x 365
sales
= 9 00,000 x 365
2,400,000
= 136.9
= 137days.
Current ratio.
= Current Assets
Current Liabilities
= Stock + Debtors + Cash at bank
Current Liabilities
= 315,000 + 900,000 + 35,000
438,000
= 1,250,000
438,000 = 3.08 : 1 + 3 . 1 : 1. 1 x 3
Reasons that may lead to dissolution of partnership.
Completion of the intended purpose
Loss of one partners
Request of dissolution by one partner
A change in the country’s law disqualifying the business
A court order
Insolvency of the business. Any other relevant point = 2 x 4
a) Arguments for state ownership of business undertakings.
They promote general welfare of the public by providing social goods such as medical facilities, sewerage, etc
Avoid wastage and inefficiency since some establishments are nationalised to avoid duplication.
They encourage private investment in activities which require heavy capital but take long to bring returns.
They provide services to the public at fair prices since the interest of the public is the main consideration.
Encourages democratic control through the state and local authority and profits are not to a limited number of shareholders.
Any other relevant point = 2 x 5
Short notes:
Indemnity : A principle of insurance which states that an individual should only be compensated upto the actual monetary loss caused by the event insured against. The maximum one can get is the value of the property insured when there is total loss caused by the risk insured against. Hence the insured should never benefit / gain.
Utmost good faith – this principle requires that the insured person must disclose all the material facts about the insured property to the insurance company.
Proximate cause – This principle states that for an insurer to be liable, the loss must be dominantly and effectively resulting from a risk for which the insurance policy was taken out.
Insurable interest – This principle states that an insurance claim cannot be valid unless an insured person can prove that he has suffered a financial loss because the insured event has occurred. The insured person must not gain from the occurrence of the insured event hence should only insure upto the amount that you can claim when the event occurs.
Subrogation – This principle maintains that after the one insurer has indemnified the insured, the rights in the remains of the damaged proper by pass on to the insurer. 2 x 5
TEST PAPER VII
Highlight any four problems that a country may experience when it has decentralized its industries. 4mks
Highlight any four characteristics of money that enables it to serve its purpose efficiently. 4mks
Explain any four problems that Kenya would experience from participating in international trade. 4mks
Outline any four importance’s of advertising as a sales promotion method. 4mks
Highlight any four ways in which insurance companies make profits. 4mks
Mention four of the contents in the articles of association. 4mks
In the spaces provided, name the type of business organisation described by each of the following features. 4mks
Description Business organisation
Each member has only one vote ………………………………………
The business enjoys perpetual succession ………………………………………
Each member may act on behalf of the business ………………………………………
Formed by an act of parliament ………………………………………
Identify four services that can be conveniently paid for using standing orders (bank orders) 4mks
Give any four reasons why the Kenyan government is actively involved in licencing
business activities. 4mks
Outline any four main principles of investment 4mks
Explain the meaning of the following terms. 4mks
Par value
Blue chips
Cum right or Ex-Right
Tilt Edged securities
The following is a summary of transactions for Ryan Traders for the month of April 2002.
2nd April – Commenced business with shs. 12,000 in cash and shs. 150,000 at the bank
3rd April – Made cash sales amounting to shs. 6,000
5th April – Received cash shs. 16,000 from a debtor
12th April – Paid for motor expenses shs. 7,000 in cash
13th April – Drew shs. 30,000 from bank for office use
15th April – Paid salaries in cash amounting to shs. 15,000
17th April – Bought furniture worth shs. 18,000 paying by cheque.
18th April – Paid expenses amounting to shs. 15,000 by cash
19th April – Cash sales of shs. 40,000 received by cheque
23rd April – Paid shs. 20,000 cash into the bank
25th April – Paid a creditor shs. 16,000 by cheque
You are required to prepare a two-column cash book for Ryan Traders for the month of April 2002. 8mks
Highlight any four reasons why the Kenyan government finds it necessary to train businessmen. 4mks
The following balances were extracted from the books of A & B Co. as at 1st April 2002.
Capital shs. 200,000
Fixed Assets shs. 180,000
Current Assets shs. 40,000
Current Liabilities shs. 20,000
During the month, the following took place.
Goods worth 50,000 were taken away from the business for personal use.
Net profit of shs. 80,000 was realized.
Calculate capital as at 30th April 2002. 4mks
Other than advertising, mention any other four methods of sales promotion. 4mks
Highlight any four reasons why most businessmen do not prefer transferring their goods
via canals. 4mks
Alex is an employee of an advertising firm as a sales executive. He receives a salary of
Kshs. 10,000 plus commission of the following basis:-
On the first sales of shs. 100,000 – 2%
On the next shs. 200,000 – 5%
On the balance of sales – 10%
He sold an advertising space worth shs. 450,000 during the month of January 2002.
Calculate his total income for the month. 4mks
Highlight any four methods that the government can use to influence the quantity of a commodity supplied. 4mks
Indicate the type of resource represented by the following. 4mks
Type of Resource
Forest …………………………………………………………….
Road …………………………………………………………….
Doctor …………………………………………………………….
Wildlife …………………………………………………………….
Outline any four methods of determining prices in the market.
Write short notes on the following types of partners. 4mks
Active Partners
Minor partners
Quasi partner
Outgoing partner
“The office performs a fundamental role in any business organisation.” Account for this statement. 4mks
Outline any four factors that an investor should consider before setting up a small scale
retail shop in a town. 4mks
TEST PAPER VII
MARKING SCHEME
Problems of decentralization.
Spread of industrial pollution
Strain / over – utilization of a country’s natural resources
Certain special services may not be available in the rural areas
Incentive offered by the government to the firm is a burden to the tax payer
Decentralized firms may not enjoy benefits that other firms realize in urban areas.
Any other relevant pointany four pts 1mks each
Characteristics of money.
Portability
Homogeneity
Divisibility
Scarcity
Cognizability
Durability
Acceptability
1 x 4mks
– Inferior products may be imported.
Over dependence
Balance of payment problems
Loss of cultural values and prestige
Moral decay
Lack of cultural values and prestige
Moral decay
Lack of development skills for countries that specialize in production of primary products.
Any other relevant point any four pts 1mks each
Importance of advertising.
Informs the prospective customers that a certain product has been placed in the market
Help consumers to make a more informed choice on the goods they intend to buy
Increases the volume of sales hence realization of higher profit levels
Acts as an aid to product identification since an advert clearly shows the brandname and colour of the product.
Assists in planning production as it plans a significant role in reducing sales fluctuations
Helps to inculcate customers goodwill particularly the reminder advert which keeps customers aware that the product is still in the market.
Any other relevant point 1 x 4
How insurance companies make profits
Investing their funds
Differences in claims
Forefeited funds by policy holders
By taking whatever remains after compensation eg remains of a car.
Any other relevant point 1 x 4 mks
Contents of the articles of association
Classes and rights of shareholders
The issue and transfer of shares
Methods of dealing with any alterations on the capital
Qualifications, duties and powers of directors
Borrowing, dividend and reserve policies
Rules regarding preparation and auditing of accounts.
Any other relevant point 1 x 4 mks
Description Business Organisation
a) Each member has only one vote
b) Business enjoys perpetual succession
c) Each member may act on behalf of the business
d) Formed by an act of parliament
Co-operative
Soleproprietorship
Partnership
Parastatal
Services that can be paid for by standing orders
Rent payments
Subscriptions
Insurance’s
Hire purchase payment
Loan payments
Mortgage repayments
Any other relevant point 1 x 4 = any four pts 1mks each
Why the Kenyan government is involved in licencing.
Regulate the number of businesses in any one line of activity to control unhealthy competition.
Ensure that traders engage in only those business activities for which they have licences.
Control illegal businesses in the country
Ensure that those who engage in professional activities meet the requirements
Control the type of goods that should enter or leave the country.
any four pts 1mks each
Principles of investment.
Should be secure
Liquidity ie ability to be converted into cash
Ability to grow over a period of time
Should generate income / returns
Ability to spread risks over several types of securities. 1 x 4
Par value – This is the face value or nominal value of a share
Blue chips – Refers to high grade equity shares ie the ordinary shares of a company which have had a good dividend record extending over the years.
Cum Right or Ex – Right – Used in reference to a new rights issue attaching to the shares. Ex-right refers to that right retained by the seller while cum – Right is the right transferred to the buyer.
Gilt Edged Securities – Refers to securities sold by the government considered absolutely safe. 1 x 4
Ryan Traders
Cash book for the month
of April 2002.
Date
2/4/ 02
3/4/ 02
5/4/ 02
19/4/ 02
23/4/ 02
25/4/ 02
25/4/ 02
Particulars
Bal b/f
Sales
Debtors
Sales
Cash ( c)
Bal c/d
Bal b/d
Cash
12,000
6,000
16,000
23,000
57,000
Bank
150,000
40,000
20,000
210,000
146,000
Date
12/4/ 02
13/4/ 02
15/4/ 02
17/4/ 02
18/4/ 02
23/4/ 02
25/4/ 02
25/4/ 02
25/4/02
Particulars
Motor expenses
Office
Salaries
Furniture
Expenses
Bank ( c)
Creditor
Bal c/d
Bal b/d
Cash
7,000
15,000
15,000
20,000
57,000
23,000
Bank
30,000
18,000
16,000
146,000
210,000
8mks
Why the government trains businessmen.
Expose businessmen to modern developments in management
Educate businessmen of efficient methods of operating business eg effective methods of sales promotion
Identify and discuss current problems facing businesses and look for possible solution
Import proper business ethics eg good customer relations
Educate businessmen on how to use available resources to minimize costs and maximize profits
Inform businessmen on various available profitable business opportunities in their surroundings
Expose them to government policies regarding business activities in the country
1 x 4 = any four pts 1mks each
Calculation of capital
Initial capital 200,000
Less Drawings 50,000
150,000
Add net profit 80,000
Net capital 230,000 1 x 4 mks
Other methods of sales promotion
Free samples
Gifts
After – sales service
Credit facilities
Price reductions Any other relevant point 1 x 4 mks
Problems of canals.
Canals lack speed hence cant be used to transport perishable or urgently required goods
Canals can only serve a limited area where water exists
Canals may dry in drought seasons and freeze in very cold seasons
Maintenance charges are high
Any other relevant point 1 x 4mks
Calculation of total income.
Shs. Shs.
Basic Salary 10,000 10,000
On the first sales of 100,000 2/100 x 100,000 2,000
On the second sales of 200,000 5/100 x 150,000 10,000
On the balance of sales 150,000 10/100 x 150,000 15,000
Total income 37,000 1 x 4mks
Methods used by government to influence supply.
Taxes
Subsidies
Price control
Production quotas
Creation of monopolies through licencing 1 x 4mks
Item Type of Resources
Forest Natural
Road Man-made
Doctor Human
Wildlife Natural 1 x 4 = any four pts 1mks each
Methods of price determination.
Haggling ie bargaining over a price range
Auction
Price mechanism
Government policy
Short notes.
Active partner – One who takes an active role in the running of the partnership business
Minor partner – One who is under 18 years of age, shares profits but cant take part in management.
Quasi partner – One who does not contribute capital but allows the firms to use his name as a partner. Shares profits but not losses.
Outgoing partner – One who is retiring from a partnership business with the consent of all other partners or in accordance with any previous agreement.
any four pts 1mks each = 1 x 4
Functions of an office
Collecting and recording information
Distributing information
Mailing
Reproduction of documents
Storing information
Safeguarding an organisations property
Factors to consider when setting up a small scale retail shop in town.
Extent of demand / market
Level of competition
Security level
Accessibility
Type of business
Availability of raw materials
Availability of water and power Any other relevant point 1 x 4
TEST PAPER VIII
a) Explain any five methods that the Kenyan government may adopt in order to control
the volume of imports. 10mks
b) Discuss the main sources of capital to small scale enterprises. 10mks
a) What do you understand by economies to scale. Discuss any four internal economies
of scale 10mks
Clearly define the term sales promotion. Discuss the importance of Trade Fairs as
part of sales promotion. 10mks
Opportunities exist for purchasing of necessary durable goods by installment.
Describe two methods commonly used for this purpose. 4mks
Mention three advantages of each to:
The manufacturers 6mks
The consumer 6mks
Give any two differences of the two methods. 4mks
Prepare a trading profit and loss account for 2000 and a balance sheet as at 31st Dec 2000 from the following trial balance.
Kabas Co.
Trial Balance
As at 31st Dec 2000
Capital
Land and buildings
Motor vehicle
Drawings
Furniture and fittings
Debtors
Creditors
Stock on 1st Jan 2000
Purchases
Sales
Returns inward
Transport
Return outwards
Telephone and Electricity
Rates and Insurance
Licence and Legal expenses
Rent income
Salaries
Advertising
Carriage inwards
Stationery and office expenses
General expenses
DR (Kshs)
50,000
38,000
32,485
11,200
38,459
37,129
273,538
7,832
35,223
9,835
4,942
1,956
37,280
6,342
12,345
950
2,484
600,000
CR (Kshs)
150,000
46,253
384,803
10,544
8,400
600,000
Cost of unsold stock on 31st Dec 2000 was Kshs. 43,210. 20mks
a) Explain any five functions of commercial banks. 10mks
Assume that you are a policy maker in Kenya today, explain the reasons which would
make you recommend rural industrialization policy. 10mks
a) Account for the low bargaining power of trade unions in Kenya today. 10mks
Outline any five benefits that a person may derive from being a member of savings
and credit cooperative society. 10mks
TEST PAPER VIII
MARKING SCHEME
a) Methods of controlling volume of imports
Tariffs – Involves levying import duty on goods that are entering a country.
Quotas – Is a quantitative restriction permitting only a given number of units of a
commodity to be imported during a specific period.
Exchange control – Refers to control by the government on the exchange value of the currency of a country. Importers can only import goods when they seek permission for acquiring foreign exchange.
Trade agreements – is an agreement between different countries regarding the foreign trade under this system, goods can only be imported from some specific countries only.
Total ban/ Embargo – Involves imposing a complete ban on import of some specific commodities. 2 x 5
Sources of capital to small scale enterprise
Personal funds / owners capital
Borrowing from friends and relatives
Members contribution
Loan from banks and other non bank financial institutions
Going public ie borrowing from the public by the use of stocks
Venture capital ie a group of rich people with a pool of financial resources which they led to viable small scale business. Any other relevant point
a) Economies of scale refers to the benefits that a firm enjoys due to expanding its scale of
production.
Internal economies
Administration: When a firm expands, its administrative expenses are distributed over greater output and the per unit cost decreases.
Financial: Large firms have a good reputation hence can get loans from financial institutions.
Marketing: Large firms sell their products easily since they are able to engage in sales promotion methods
Technical: Due to their financial capacity, large firms can afford capital goods that enables them to produce superior products. 2 x 4
b) Sales promotion: refers to the process whereby the demand for the products of a
business enterprise is created in an attempt to increase sales. It
has to do with informing the consumers about the existence of a
particular product, its quality and features, places of availability as
well as the price of the product. 2mks
Importance of Trade fairs.
It’s a means of advertising products to the wholesale and retail trade
Brings new products on view to create a demand
Builds up an advance order book within the trade and hence ensure continuity of production over a period of time
Enables new business contacts to be made Any other relevant point 2 x 4
a) Methods of buying goods in instalment.
– Hire purchase – A system where the buyer agrees to pay for the commodity in
instalments. The buyer obtains the possession of the article on the down payment (deposit) but the title of ownership remains wit the seller until the last instalment is made.
Credit sales / Deferred payment – under this system the article becomes the property of the
buyer with the payment of the first instalment. The buyer is supposed to pay
the remaining amount in instalments. 2 x 2
Advantages of Hire Purchase to:
The manufacturer.
He is able to increase his volume of sales.
Profit earned on hire purchase is higher than profit earned on cash basis.
Goods belong to the seller until the last instalment is paid.
The buyer.
He takes possession of goods and their use immediately after down payment.
Instalments to be made are predetermined enabling him to plan and budget for payment of the amounts.
He is able to acquire goods he could not have afforded on cash terms
The buyer can possess more goods including expensive items. 1 x 6
Advantages of credit sale to:
The manufacturer
He is able to increase his volume of sales
Profits realized are higher since customers must pay higher prices
He can reclaim the amount due from the buyer under a court order.
The buyer
He is able to buy expensive goods on credit
Ownership of the article posses to the buyer after the first instalment
He is able to plan on acquisition of certain goods.
Any other relevant point 1 x 6.
Differences:
Hire purchase
– Goods can be repossessed if the buyer breeches the contract
– Ownership remains with the seller till the last instalment is made
Credit sale
– Goods cant be repossessed but the buyer can be sued for damages
– Ownership posses to the buyer when the first instalment is affected.
Any other relevant point 1 x 4
Kabs Co
Trading, Profit and loss A/c
For the year ended 31st Dec 2000
Shs.
Shs.
Shs.
Shs
Opening stock
Add: purchase
– Returns outwards
+ Carriage inwards
Goods available for sale
Less closing stock
Cost of goods sold
Gross profit c/d
Expenses.
Transport
Telephone & Electricity
Rates and Insurance
Licence and legal expenses
Salaries
Advertisement
Stationery & office expenses
General expenses
Net profit c/d
273538
12345
35223
9835
4942
1956
37280
6342
950
2484
37129
312468
43210
269258
107713
376971
99012
17101
116113
Sales
Less returns inwards
Net sales
Gross profit b/d
Add Rent income
Net profit b/d
384803
7832
376971
376971
107713
8400
116113
17101
Kabs Co
Balance sheet
At at 31st Dec 2000
Shs
Shs
Shs
Shs
Fixed Assets
Land & Building
Motor vehicle
Furniture
Current assets
Debtors
Stock
50000
38000
11200
38459
43210
99200
81669
180869
Capital
Less Drawings
Add Net profit
Net capital
Add creditors
150,000
32485
17101
134616
46253
180869
a) Function of commercial Banks
Receiving deposits
Advancing loans
Transferring money
Agents of the stock exchange market
Custodian of valuable items.
Any other relevant point 2 x 5
Reasons for rural industrialization policy.
Creation of job opportunities in rural areas
Provision of market for raw materials produced in rural areas.
Balanced growth in the economy
Reduced rural – urban migration / influx
Increase incomes of rural population
Rural population will get modern facilities like electricity, piped water, etc.
Any other relevant point.
a) Problems of trade unions.
Poor management
Political interference
Insufficient funds
Lack of strike benefits
High levels of unemployment
Lack of patience during the negotiation period.
Any other relevant point 2 x 5
Benefits of savings and credit co-operative society (SACCO)
Education
Sharing of additional profits
Loans can be advanced
Savings
Improved living standards
Credit facilities eg Bank overdraft.
Any other relevant point 2 x 5
TEST PAPER IX
Explain the following terms as used in commerce 4mks
Registered capital
Subscribed capital
Issued capital
Paid up capital
Outline any four circumstances under which a credit note may be used. 4mks
The main objective of commerce is profit maximization. Highlight any four ways in
which businesses can achieve this objective. 4mks
Give any four functions of commercial attaches. 4mks
Mention four investment services offered by the Kenya Postal Corporation. 4mks
Give any four reasons that may lead to dishonour of a cheque. 4mks
Highlight any four benefits that accrue to a seller who uses personal selling as a method
of sales promotion. 4mks
Give any four categories of goods that are suitable for direct distribution from producers
to retailers. 4mks
Highlight four ways in which Insurance companies make profits. 4mks
State any four sources of capital to co-operative societies. 4mks
The following balances relates to a business for the year ended 31st Dec 2000.
Capital as at 31st Dec 2000 170,000
Drawings for the year 5,000
Net profit for the year 5,000
Extra capital introduced 52,000
Purchases 20,000
Determine the amount of capital as at 1st Jan 2001. 3mks
Calculate the Net profit ratio 3mks
Outline any four features of a fixed deposit account. 4mks
Give any four reasons why most business people prefer to transport their finished
products via road transport. 4mks
Give any four benefits that you may reap as a consumer from an advertising campaign. 4mks
Mention any four remittance services offered by the post office. 4mks
Give four reasons why an office may prefer storing information in micro-films instead
of files 4mks
Assume that you want to start photocopying business in your nearest town. Cite any
four factors you would consider before buying your copies. 4mks
The following machines are found in a mailroom. State the function of each. 5mks
Machine
Functions
Addressing machine
Shredding machine
Guillotine
Franking machine
Composite machine
Give any four reasons why the use of Electronic mail (E-mail has become very popular
in Kenya today. 4mks
The following balances were extracted from the books of MM traders on 31st January 2002.
Item Amount
Sales 10,000
Purchases 6,000
Bank loan 2,000
Buildings 30,000
Machinery 40,000
Premises 60,000
Debtors 5,000
Creditors 4,000
Opening Stock 7,000
Capital 132,000
You are required to prepare a trial balance for MM traders as at 31st January 2002 from
the above information. 6mks
Outline any four functions of money as a medium of exchange. 4mks
Give any four reasons why the government would need to train businessmen. 4mks
Identify three reasons that can lead to dissolution of partnership. 3mks
TEST PAPER IX
MARKING SCHEME
i) Registered Capital – Amount of capital that a company can raise from its registered
members
ii) Subscribed Capital – The portion of issued share capital that has been accepted by the
shareholders
iii) Issued Capital – The portion of the authorised share capital that has been offered to
the shareholders.
iv) Paid up capital – The amount of subscribed share capital paid up by the shareholders of a
company.
When to use a credit note:
When there are damaged goods
When packing cases and containers are returned
When there is overcharge resulting from an arithmetic error.
When goods delivered are not in accordance with the order.
1 x 4
How to achieve profit maximisation objective.
Reduce prices to increase sales
Reduce the cost of production
Diversify and expand production
Expand market
Increase prices of products
Increase sales promotion campaigns. 1 x 4
Functions of commercial attaches.
Search for Kenyan market abroad
Inform business abroad of Kenyan goods
Negotiate to expand Kenyan market abroad.
Liase with the ministry of commerce to educate Kenyan producers/ manufacturers.
1 x 4
Investment services by posta corporation.
Premium bonds scheme
Operate S.A.Y.E. (save as you earn)
Have fixed deposit facilities
Have saving facilities
Why cheques are dishonoured
Insufficient funds
Post – dated cheque
Stale cheque.
Amount in words differ from amount in figures.
Signature of the account holder may differ from the specimen in the bank
Alterations that have not been signed against
The drawer has stopped payment of the cheque.
If any one of the requirements for a properly drawn cheque is missing or wrongly written.
A crossed cheque will be dishonoured if the depositor does not abide by the conditions of the crossings. 1 x 4
Benefits of personal selling.
Creates a personal touch between the seller and the buyer
The seller explains to the buyer since he/ she can ask questions regarding the products
The seller gets to know how to improve the quality of his products depending on lamentations made by the buyer
The buyer knows exactly whom to turn to incase of any problem.
The seller can sell on credit to the credit worth customers
Any other relevant point 1 x 4
Goods suitable for direct distribution.
Goods which require sufficient after –sales service eg electronics
Goods which the manufacturer wants to exercise some control during distribution
Goods with high profit margin and the retailers purchase in bulk
Goods which are very expensive eg motor vehicles
Goods which are highly perishable eg milk.
Branded goods and goods which are widely advertised eg coca-cola.
Any other relevant point 1 x 4
How insurance companies make profits
Investing their funds
Differences in claims
From forfeited funds by policy holders
By charging those who breach the contract of the policy.
Any other relevant point 1 x 4
Sources of capital to co-operative societies.
Members contributions
Retained profits
Entrance fee deposits
Credit facilities
Surplus and reserves. 1 x 4
Capital = ( opening capital + Extra capital introduced + net profit)
= ( 170,000 + 52,000 + 5000) – 5000
= 227,000 – 5000
= 222,000
Net profit ratio.
NPR = Net Profit x 100
Sales
Sales = Net profit + purchases
= 5,000 + 20,000 = 25,000
\ N.P.R = 5000 x 100
25,000 = 20% 1 x 3
Features of a fixed deposit account.
Opened for a specific period of time
Opened with a specific amount for a specific period
Higher interest rates are paid
Used by commercial bank to advance loan to others
Can be used as a security to apply for an overdraft against the current account of the same person. 1 x 4
Why road transport is preferred.
Its cheaper and faster for short distances
All areas including remote areas can be accessed by road.
Suitable for delivering perishable goods like vegetables
Handling is minimal hence cuts down breakage and pilferage
Its flexible hence goods may be sold on route.
Insurance charges are lower compared to sea transport
Convenient since vehicles need not run on scheduled time like with rail transport.
Any relevant point. 1 x 4
Advantages of advertising to the consumer.
Getting information about what is available in the market
Information about price, quality, size and other features of the product.
Explanations on the use and value of the product.
The consumer gets to know quickly what he/she wants to buy
Enables the consumer to compare prices and other features of different products
Gets entertained by the advertising compaign.
Any relevant point. 1 x 4
Remittance services offered by the post office.
Postal order
Money order
Telegraphic money order
Registered mail
1 x 4
Advantages of micro-films.
Saves space and weight since bulky files are replaced by compact carbons of films.
Documents can be sent abroad more cheaply
More durable compared to files
Little risk of misplacing
Saves filing equipment and also floor space.
Can be enlarged on paper to provide quick and accurate duplicate copies of the original documents
Provides a more permanent record since its more.
Any relevant point. 1 x 4
Factors to consider when buying a copier.
the cost ie both initial and operating cost
availability for the intended purpose
likelihood of obsolescence
Room for expansion or to accommodate higher work load
Availability of credit or hire purchase terms offered by the supplier.
Any relevant point. 1 x 4
Machine
Function.
Addressing machine
Print names and addresses of customers
Shredding machine
Destroy unwanted materials
Guillotine
Cutting and trimming papers
Franking machine
Print postal stamp impressions on the envelop.
Composite machine
Fold document, insert in envelops and seal the envelops.
1 x 5
MM Traders
Trial balance
As at 31st January 2002
Details
Debit (Kshs.)
Credit (Kshs)
Sale
10,000
Purchases
6,000
Bank Loan
2,000
Buildings
30,000
Machinery
40,000
Premises
60,000
Debtors
5,000
Creditors
4,000
Opening stock
7,000
Capital
132,000
148,000
148,000
½ x 12
Importance of a balance sheet.
Helps the shareholders to know whether the business is in a position to meet its claims
Helps the investor to determine whether their funds are invested wisely
Helps to compare the performance of the business with that of previous years or similar business’s.
Helps the government to determine the tax to impose on the business
Help potential investors in making informed decisions on the share to buy in the stock exchange market.
Helps the management of the business to identify where urgent actions needs to be taken in order to promote the business. 1 x 4
Functions of money.
Medium of exchange
Standard measure of value
Store of value
Unit of account
Standard of deferred payment. 1 x 4
Why businessmen need to be trained.
Expose them to modern development and management
Import efficient business operating methods
Identify problems facing businesses and look for solutions
Import proper business ethics and good customer relations
Educate them on how to utilize the scarce resources
Instil in them the need to minimize costs inorder to maximise profits
Any other relevant point 1 x 4
Reasons for dissolution.
Completion of the intended purpose or period agreed upon
Loss of one partner
Request of dissolution by one partner
A change in the country’s law disqualifying the business.
A court order.
Inability of the business to meet its claims / liabilities.
Any other relevant point 1 x 3
TEST PAPER X
a) Discuss the factors that should be considered in choosing a channel of distribution
for any particular product. 10mks
b) Explain any five types of wholesalers who may be found in our country today. 10mks
a) Assume that you are the sales manager of Kenya Breweries limited. Explain the
qualities you would look for every time you are recruiting your sales executives. 12mks
What do you understand by the term production. Explain any four factors of
production. 8mks
a) The following balances were extracted from the books of spikes Ltd on 31st Dec 2001.
Shs.
Fixed Assets 42,000
Stock 48,000
Debtors 50,000
Bank overdraft 25,000
Creditors 40,000
Cash in hand 2,000
Capital 77,000
During the month of January, the following transactions took place.
Bought motor vehicle on credit valued at Kshs. 80,000 from General motors.
Withdrew sh. 28,000 for personal use.
Prepare a balance sheet as at 31st Jan 2002 for spikes Ltd.
c) Give any five reasons to justify that the central Bank is not a Commercial Bank.
10mks
a) Discuss circumstances under which a wholesaler may be eliminated from the chain
of distribution. 10mks
b) Explain the essentials of a good warehouse. 10mks
a) Advertising media refers to the means used to convey the sales message to the customers /
users of any given product. Explain any five. 10mks
b) What do you understand by ‘containerization’. Briefly explain the benefits associated
with containerisation. 10mks
a) Explain the role played by consumer co-operative societies in Kenya today. 10mks
b) To a certain extent, public corporations are to considered desirable. Explain 10mks
TEST PAPER X
MARKING SCHEME
a) Factors considered in choosing a channel of distribution for any particular product.
– Nature of goods: Technical, Industrial, Perishable or goods that require servicing and
installation should be sold directly to ultimate consumers or through retailers.
Marketing costs: Goods that require special marketing facilities like storage, refrigeration, etc should be sold through intermediaries in order to cost share the marketing costs.
Size of the market: where the size of market is large enough, direct selling is preferred.
Nature of the market: where the market is local and the producer can reach his customers with ease and make large sales then direct selling is the best.
Scale of production: Small producers like small scale farmers should sell their products directly
Marketing risks: Where these risks are high such as spoilage and fall in value, its advisable to sell through intermediaries in order to distribute these risks.
Any five well explained points ( 2 x 5)
b) Types of wholesalers who may be found in our country today.
National wholesalers – set up by government to distribute a specified product in the country. Have branches all over the country e.g K.M.T.C.
Regional wholesalers: Cover a given region such as province, districts, etc. and distribute a given product in that region. No other party is allowed to distribute similar goods in the region.
Specialised wholesalers: Sell a particular type of a product eg books but offer great variety within their particular field.
General wholesalers: Stock a variety of related goods eg a hardware shop stocks nails, iron sheets, cement, etc.
Truck wholesalers: Carry only a limited range of stock and combine selling, delivery and collection function in one operation.
Cash and carry: Operate as self service stores. Require retailers to come to the wholesale shop, pick their requirements, pay and carry away their own purchases.
Rack jobbers sell particular products to certain types of retail stores.
2 x 5
a) Qualities of Sales Executives.
Attractive personality
Ability to assess the customers
Politeness and courtesy
Thorough knowledge of the product
Aggressiveness
Any other relevant point 2 x 5
b) Production refers to the process of creating finished goods from raw materials to satisfy
human wants.
Factors of production.
Land: Includes all natural resources that are given to man free of charge eg soil, water, forest
etc paid rent.
Labour: Physical and mental human effort employed in the process of production eg. Teacher,
manager, etc paid wages
Capital: Man made goods that assist in the process of production increases productivity of
land and labour. Eg machinery paid interest.
Enterpreneurship: Ability to organise other factors of production in appropriate proportions for
effective production. Paid profit.
4 well explained points 2 x 4
a) Spikes ltd
Balance sheet
At at 31st Jan 20
Kshs. Kshs.
Fixed Assets 42,000 Capital 77,000
Motor vehicle 80,000 Less Drawings 28,000
Net capital 49,000
Current Assets Current Liabilities
Stock 48,000 Bank overdraft 25,000
Debtors 50,000 creditors 40,000
Cash in hand 2,000 loan (withdrawal) 28,000
222,000 222,000
1 x 10
b) Why central Bank is not a Commercial Bank.
Does not advance loans to individuals
Does not receive deposits from individuals nor run accounts of individuals
Does not discount bills of exchange
Does not offer money transfer services
Its not a custodian of valuables. 2 x 5
a) When wholesaler may be eliminated.
When prices of goods are high like those of motor vehicles, the wholesaler may be eliminated since the manufacture can bear both selling and distribution costs.
Where goods are highly perishable eg milk
Where goods are branded and widely advertised
Where goods have high profit margins.
Any other relevant point 2 x 5
b) Essentials of a good warehouse.
Ideal location where goods are produced in greater quantity to be used later.
Suitable building which is large enough and appropriate to store goods of different kinds more safely
Should be well equipped with necessary facilities to store goods for a longer period
Should have well trained and efficient staff to ensure that goods are protected against losses and damages
Good transport system to enhance movement to and from the warehouse
Should have appropriate protection measures to elleviate losses, damages and other calamities. 2 x 5
a) Advertising media
The press
Radio
Television
Outdoor publicity
Window display
Fair and exhibitions Any five well explained points 2 x 5
b) Containerization refers to the packing of the cargo in standardised containers which are
sealed by the exporter or his agent. The sealed containers are loaded on to the
ship and delivered to the importer sealed. 2mks
Benefits:
Takes little space since containers are of standardised sizes.
Enhances simple and cheep movement of goods
Enables the use of modern cargo – handling machinery
Safe since containers are sealed
Insurance premium is low due to lower risks involved
Assists road transport
Convenient since different containers are for specific goods. 2 x 4.
a) Role of consumer co-operatives.
Provide members with goods and services at fair prices and of good quality
Protect members against exploitation, inefficient and dishonest trade practices by individual retailers
Provide channel through which ideas regarding quality and use of products can be propagated
Bring services to remote areas where independent traders are afraid.
Accept members deposits and assists them to buy or acquire land by purchase or lease.
Remove excess profits enjoyed by independent traders and pass the same to the members.
2 x 5
b) Problems associated with public corporations
Poor services and low quality goods due to absence of competition
Wastes are encouraged since losses are financed by tax payers.
Poor bad business decisions are likely to be made due to political motives
Where rival private firms exist, they are subjected to unfair terms and conditions
Fear of political repercussions may lead to avoidance of risky yet important projects
Though inefficient, they may not be criticized openly due to fear of political influences.
Any other relevant point. 2 x 5
TEST PAPER XI
State any four advantages of a wholesaler to a consumer 4mks
List four qualities of good filing system 4mks
Study the diagram below and answer the questions that follow
What type of demand is potrayed by curve DD 2 mks
Outline the two causes of this curve 2mks
Why would an exporter prefer to use container services as a method of transport 4mks
State any four after sales services business firm selling electronic goods sets can offer
to the customers 4mks
The following information was extracted from the books of a trader :
Creditors sh 60,000
Cash at bank 20,000
Debtors 40,000
Stock 70,000
Calculate :
Current ratio 3mks
Quick ratio 2mks
Give four reasons why the budget is an important government tool of control to the economy 4mks
Differentiate between Balance of trade and Balance of payments 4mks
The following information was extracted from the books of Roadside kiosk as at
Sept 30th 1999:
Cash at hand Shs. 30,000
Capital 170,000
Creditors 40,000
Stock 70,000
Purchases 150,000
Sales 205,000
Debtors 65,000
Motor vehicles 100,000
Prepare a trial balance as at 30th Sept 1999. 5mks
What are the four methods of personal selling carried out by salesmen 4mks
In the recent past many countries have adopted trade liberalization as the way forward to development. Highlight any four adverse effects that such nations may experience due
to liberalization 4mks
12.Outline any four functions of the Nairobi stock exchange 4mks
List four methods used by the central bank of Kenya in credit control 4mks
Consumer protection is safeguarding consumers from exploitation by producers and businessmen . Give four reasons why this is necessary 4mks
The following is a demand/ supply schedule for kerosene. Draw a diagram to illustrate
using your own scale 5mks
Also find the equilibrium price / quantities
Price Quantity Demanded Quantity Supplied
Per day Per day
5 60 10
7 50 15
10 40 20
15 35 25
20 30 30
25 25 35
30 20 40
Name four characteristics that should be posed by goods in order for them to be described
as wealth. 4 mks
Limited companies are Large Organizations which attract large profits. However these undertakings are still not popular in Kenya and sole proprietorship seems to be more
popular. Give four reasons to explain this 4 mks
Give four reasons why most organization prefer oral interviews whenever they are
recruiting new employees/staff 4 mks
The law of demand states that ‘Other things being equal, a fall in price will lead to an
increase in quantity demanded .’Highlight any Four circumstances under which this
law may not hold. 4 mks
In the spaces provided below indicate the level of production that relates to each of the following activities
Activity Level of production
Selling goods in a shop __________________________________
Fishing from a river __________________________________
Growing maize __________________________________
Making leather belts __________________________________
4 mks
Enter the following transaction into a cash book and balance it as at 20th March 1995.
March 2nd started business with Kshs. 28,000 of which Kshs. 8000 was banked .
March 4. Bought stock from Nekesa worth Kshs 2000 and paid by cheque.
March 6. Paid wages in cash Ksh 4000.
March 10.Received a cheque for Kshs. 3000 from a debtor
March 20. Deposited cash in bank from cash till Kshs. 3000. 5 mks
State any four benefits accruing as a result of SmithKline Beecham merging with Glaxowellcome 4 mks
The sales from Mambo stores for the year 1999was Ksh 99,000. Given that goods are
usually sold at a margin of 20%, what was the gross profit for the year. 3 mks
Differentiate between
W.O and C.O.D 2 mks
O.B and F.A.S 2 mks
TEST PAPER XI
MARKING SCHEME
Breaking of bulk
Offers a variety of goods
Price stabilisation
Advertising creates awareness
Steady supply – (storage)
After sales services ( 1×4 = 4mks)
– Simplicity
Compactness
Accessibility
Safety
Elasticity/ flexibility/ Expansion
Cross reference
Economy (1 x 4 = 4marks)
a) An abnormal demand curve
b) (i) Geffen goods
(ii) Conspicuous consumption /luxurious
iii) Speculative demand – Future expectations of a rise or fall in prices
(1 x 2 = 2mks)
– Easy handling of goods – containers are designed to enable use of machinery
Less damage to goods
Safety – They are sealed until they reach the importers
Low premium insurance costs, this results due to less risks
Use of specially designed containers for special goods (.e.g tankers)
Reduced inspection hence less disturbance to the goods
(1 x 4 = 4marks )
– Availability of spare parts
Guarantee- repair of the articles for a specific period of time after purchase
Technical advise to the consumer on the use of items
Helping to install machinery or equipment
Servicing of goods from time to time
Delivery / transporting the goods to customers premises.
( 1 x 4 = 4 marks)
(i) Current ratio = Current assets / Current liabilities
= 130000 / 60000
= 2.2 / 1
» 2 :1
Quick ratio = Quick assets
Current liabilities
= 130000- 70000
60000
= 60000
60000
= 1:1 ( ½ x 4 = 2marks)
– A necessary aspect of planning
A tool for correcting development plans that are not feasible
A standard measure of government performances
Forces the government to prioritise its projects and plans
Reflects government monetary policies used to control the supply of money
Evaluates the success and failures of the economy
Motivates the facilitators to meet the set objective by working hard
( 1 x 4 = 4 marks)
Balance of trade : The difference between the values of visible exports and visible imports of a country over a given period ( 2mks)
Balance of payments : The difference between the record of a country’s visible and invisible exports against the value of her invisible imports over a period .
ROADSIDE KIOSK TRIAL BALANCE AS AT 30TH SEPT .
CR.
Purchases 150,000
Capital 170,000
Sales 205,000
Debtors 65,000
Creditors 40,000
Motor vehicles 100,000
Stock 70,000
Cash at bank 30,000
415000415000
(½ x 10 tics = 5marks)
10 – Show room sales
Display of goods in a room attendants
Provision of detailed information about the products
Trade fairs and exhibitions
Manufacturers / Agriculturist stalls ( outlets)
Visiting customers in homes or towns (e.g insurance)
Posting sales girls / boys in supermarkets shops .
( 1 x 4 = 4 marks )
– Encourages single sided development since industries with comparative
advantage develops to the neglect of others
Substandard and harmful products may be produced and traded leading to dilution of social welfare
Dumping is encouraged which discourages development of local industries
May lead to exploitation and colonisation
Promotes unproductive competition which leads to closure of infant industries
Presupposes the existence of leissez faire and working of price mechanism under perfect market which are unrealistic ( 1x 4 = 4 marks)
– Marketing of securities which facilitate flow of new capital into the industry.
Protect investors by maintaining rules and discipline of the brokers.
Advise and guide companies seeking capital
Publishes information regarding prices of securities
Transfer the title to any quoted security ( 1 x 4 = 4 marks)
– Open market operation
Bank rate method
Margin requirement
Selective credit
Reserve requirements
– Ensure goods are of good quality
Ensure the right quantity and size
Ensure health standards are met
Ensure safety standards are met
Ensure fair pricing
Protect them against breach of contract
Protect from false advertising
15 –
Equilibrium quantity 30 units
Equilibrium price 20 shillings
– Must have utility
Should be scarce
Must have money value
Should be transferable
– Profits in sole proprietorship aren’t shared
In sole proprietorship there is personal contact with customers unlike in joint stock companies
Formation procedure is easier in single owned business than joint stock companies
Decision making in single owned business are easier than in joint sock companies ( 1 x 4 = 4marks)
– Immediate feedback
Leaves no room for alteration /misinterpretation of the message
Creates a personal touch or healthy relationship between the interviewer and the interviewee.
Saves time since information is passed on and a response to it received instantly enabling a decision to be made
Enables the interviewer to access extra information about the interviewee by asking probing questions.
The interviewer is able to assess the confidence levels of the interviewee
( 1 x 4 = 4marks)
– Incase of the essential goods that must be consumed
Ostentatious goods that must be consumed
Luxurious goods like cars
Inferior goods i.e goods for the poor
Geffen goods e.g bread ( 1 x 4 = 4marks)
– Tertiary level
Primary level
Secondary level
CASH BOOK
Date Particulars Cash Bank Date Particulars Cash Bank
March 2nd B/f 20,000 8,000 4th Purchases 2000
Wages 4000
10th Debtors 3,000 Bank 3000
20th Cash 3,000 Balance c/d 13000 12000
20th Bal c/d 20,000 14,000 20,000 14,000
13000 12000
– Higher production leading to low cost of goods per unit thus higher profits
Large market due to lower prices and no competition
Reduced competition increases sales
Advantages of specialisation
Better management as a result of combined pool of specialist / specialised labour
Cheap purchases of raw materials as a result of bulk buying at a discount
Will be able to attract external finance easily for expansion
Control of prices due to information of cartel .
Sales = Shs. 100,000
Margin = Gross Profit x 100
Sales
= GP x 100
100,000
GP = Ksh 20,000.
a) W.O – Cash with order – The buyer must pay for the goods when he makes an order.
C.O.D – Cash on Delivery – Payment is effected when goods are delivered to the buyer.
O.B – Free on board . Prices quoted includes expenses from the sellers warehouse up to the
docks .
TEST PAPER XII
A company intends to promote its products by arranging a prize winning competition through the media. Prizes can only be won through buying the products.
Explain five benefits that the company would get by using this method of sales promotion 10mks
(b) Explain four factors determining the market prices of commodities. 10mks
(a) The government of Kenya has been adopting the policy of privatisation of firms.
Discuss some of the benefits that the Kenyan people reap from this policy 10mks
The following balance were extracted from the books of Charles & Sons
as at May 31st 2002 .
Capital 600,000
Net profit 130,000
Plant fixtures 160,000
Equipment’s 100,000
Buildings 240,000
Office furniture 10,000
Stock 192,000
Cash 118,000
Debtors 158,000
Pre-paid expenses 22,000
Creditors 130,000
Outstanding expenses 20,000
Bank overdraft 110,000
Required :
(i) Prepare a balance sheet as at 31st may 2002 7mks
Calculate
Working capital
Current ratio
Net profit as percentage to capital 3mks
(a) Explain five circumstances under which an insurance company would not compensate
the insured in the event of loss 10mks
(b) Odhiambo’s publishing company recently joined the Nairobi stock exchange.
Describe five benefits 10mks
Opportunities exist for purchasing of necessary durable goods by instalment
Describe two methods commonly used for this purpose 4mks
Mention three advantages of each to:
Manufacturers
Consumers 12mks
(c) Give any two differences of the two methods 4mks
(a) Explain any five methods that the Kenyan government may adopt in order to control the
volume of imports 10mks
(b) Discuss the main sources of capital to small scale enterprises 10mks
(a) Explain five reasons why it is necessary for a country to control international trade
10mks
(b) Explain five diseconomies that may be suffered by firms due to large scale production
10mks
TEST PAPER XII
MARKING SCHEME
– Increased awareness of the consumers of the product advertised
– Increased sales volume of the product
– More customers / wider market to the goods
– Retention /loyalty of the already existing customers
– Increased market due to large market and consumers
– Better quality due to competition created by advertising
– Price mechanism- The interaction of demand and supply in the market .
– Government policy – Through taxation subsidies and price controls
– Auction – Prices suggested by prospective buyers
(Mentioning 1 mk) (Explanation 1 mk)
(a) Benefits of privatization
Kenyans enjoy improved products and services due to research carried out by privatised firms
The spirit of competition enhances good management hence efficiency
Consumers enjoy fair prices of products and services due to minimal wastes if any.
Privatisation calls upon many firms entering the market leading to product diversity hence Consumers have a wide variety to choose from.
Due to stiff competition, privatised firms engage in aggressive sales promotion methods which keep consumers informed of the products in the market.
The need for greater profits makes them engage in risky projects which may be of great importance to the consumers.
Working capital = Current Assets – Current liabilities
= 490,000 – 260,000
= 230,000
Current Ratio = Current Assets
Current liabilities
= 400,000
260,000
= 49.26 (1mk)
Net profit as a percentage to capital
= Net Profit x 100 = 140,000 x 100
Capital 600,000
= 23.3%
3 a) – Losses caused by the insurers carelessness i.e not accidental
Incase the insured has no insurable interest in the property
Incase of accident / loss is not directly related to the risk insured
Incase the insured has not paid premiums as expected
If on investigation the insurance company realises that false information was given by the insured
A car accident which is caused by a third person who is not insured.
– The company knows value of its shares in the market
The company may sell more shares since its is known to the public.
The company raises more capital by floating more shares in the stock exchange
The company uses more information gathered from stock exchange to improve its performances
Helps to attract competent personnel in the company
Promotes company image .
HIRE PURCHASE :- A system where the buyer agrees to pay for the commodity in installment. The buyer obtains the possession of the article on the down payment (deposit) but the title of ownership remains with the seller until the last installment is made .
CREDIT SALES/DEFFERED PAYMENT- Under this system the article becomes
the property of the buyer with the payment of the first installment. The
buyer is supposed to pay the remaining amount in installments. (2 x 2 )
Advantages
Manufacturer.
He is able to increase his volume of sales .
Profit earned on hire purchase is higher than profit earned on cash basis
Goods belong to the seller until the last installment is paid .
The buyer.
He takes possession of goods immediately after down payment
Installments to be made are predetermined enabling him to plan and budget for payment of the amounts
He is able to acquire goods he would not have afforded on cash terms.
The buyer can possess more goods including expensive items.
(1 x 6 = 6marks)
Advantages of credit sale to:
The manufacturer:
He is able to increase his volume of sales
Profits realised are higher since customers must pay higher prices
He can reclaim the amount due from the buyer under a court order.
The buyer
He is able to expensive goods on credit
Ownership of the article passes to the buyer after the first installment .
He is able to plan on acquisition of certain goods ( 1 x 6 = 6 marks)
Differences
Hire purchase Credit sale
– Goods can be repossessed if the – Goods cant but the buyer can be sued for
buyer breaches the contract. damages
– Ownership remains with the seller – Ownership passes to the buyer installment is
when the first till the last installment is effected.
Is made. Any other relevant 1 x 4 = 4 mks.
a) Methods of controlling volume of imports
Tariffs – Involves levying import duty on goods that are entering a country
Quotas – Is a quantitative restriction permitting only a given number of units of a commodity to be imported during a specific period
Exchange control – Refers to the control by the government on the exchange value of the currency of a country. Importers can only import goods when they seek permission for acquiring foreign exchange.
Trade agreements – Is an agreement between different countries regarding the foreign trade.
Total ban / Embargo – Involves imposing a complete ban on import of some specific commodities . 2 x 5 = 10marks.
Sources of capital to small scale enterprises.
Personal funds /owners capital
Borrowing from friends and relatives
Members contribution
Loans from bank and other non bank financial institutions
Going public i.e borrowing from public by use of stocks.
Venture capital i.e a group of rich people with a pool of financial resources which they lead to viable small scale businesses.
(any other relevant point)
To enable infant industries to grow without interference from foreign industries.
To avoid entry into the country of commodities which might be harmful to the moral culture and health standard of its people.
To eliminate dumping of inferior or substandard goods in country.
To correct balance of payment deficit .
To enable a country to fully exploit its resources which otherwise might be idle from undue competition .
To raise revenue for government projects in the country
To reduce the dependency of a country on another which might mistreat her incase of misunderstanding between them .
To protect key industries which promotes faster development and lead to establishment of other industries
To diversify industrial growth by allowing production of different commodities to prevent dependence on other countries .
Decision making take too long
Size of market may be too small
Complexity of the organisation may create difficulty in management
Lack of enthusiasm due to size which kills commitment- no personal contact
High risks due to change in fashion, taste or falling prices .
Formation of monopolies leading to exploitation of consumers
Poor staff and employee welfare are due to large number.
By Editorial Team
The Education News Hub Editorial Team is made up of vibrant and experienced editors. Brian Yano is an accomplished longtime Digital Media Journalist at Educationnewshub.co.ke with a great passion for research and fact-checking. He delivers engaging content across diverse topics, with a special interest in Education matters. On her part, Yvonne Kemunto is a journalist, dedicated to unraveling stories that matter. With a keen eye for detail and a passion for storytelling, she brings a fresh perspective to the world of media. Her commitment to detail and excellence shines through in every piece she crafts. Our newest member of the Editorial Team is Jennifer Mumbo. She is a Seasoned Multimedia Journalist with several years' experience; dating back to 2018. Jennifer has a passion for education, sports, tech, politics and entertainment. You can reach the editors at educationnewshub3@gmail.com.
