KCSE Business Studies Past Papers and Marking Schemes For all years

KCSE Business Past Papers

 Business Studies KCSE Paper 1

KCSE 2010

1. In the spaces provided below, indicate the type of utility created by each of the following commercial activities: (4 Marks)

Commercial activity                                     Type of utility

1. Selling goods to customers …………………….
2. Transporting goods ………………………

• Storekeeping ………………………

1. Making a chair ……………………….

2. Give five reasons why the government may find it necessary to start a
3. Name the types of warehouses associated with each of the statements given below. (4 Marks)

Statement                                                                       Type of warehouse

1. Goods can be stored before payment of custom duty………………….… ii.Individual can hire storage facilities……………………………………… iii.Goods are stored from several manufacturers…………………………….. iv.Specialized goods are stored ………………………………………………

4. The figure below shows a shift in the supply curve of a given

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0                     Q0                    Q1                                  Quantity

 

Outline four factors that may have caused the shift in the supply curve from S0 to S1

 

(4 Marks)

5. The balances given below relate to Enotika Traders for the year ended 31^st December, 2008.

Capital	?
2 Year Bank Loan	230,020
Creditors	95,200
Fixed assets	480,000
Current assets	145,220

Prepare a balance sheet as at 31^st December, 2008. (5 Marks)

 

6. Give two reasons why a three column cashbook is used both as a journal and a ledger. (4 Marks)
7. The management of national debt, credit control and lender of last resort are some of the functions of the Central Bank. Match these functions with the statements given below. (3 Marks)

 

	Statement	Function
i.	Repayment of Government securities as they mature.
ii.	Receipt of treasury bills to secure loans.
iii.	Directing commercial banks on the preferred sectors to lend money.

 

8. State the meaning of the following terms of sale as used in international

(4 Marks)

1. LOCO………b) I.F……… c) F.A.S………d) F.O.Q…….

 

9. The manager of Tasa Limited constantly walks around various

 

State four merits of this style of management.                         (4 Marks)

 

10. State four reasons why the government should create an enabling environment for investors. (4 Marks)
11. Outline four differences between insurance and (4 Marks)

 

INSURANCE

ASSURANCE

12. State four factors that may influence the level of national (4 Marks)
13. Outline the difference between cash and credit (2 Marks)
14. The terms; capital employed, working capital, owner’s equity and borrowed capital are types of capital found in a Match each of the statements given below with the relevant type of capital. (3 Marks)

Statement                                                                          Type of capital

1. Resource invested into the business by the owner ………………..
2. Excess of current assets over current liabilities ………………..

• Amount invested into the business by outsiders ………………..

15. Outline four ways in which government expenditure may stabilize the economy of a country. (4 Marks)
16. State four problems associated with development ( 4 Marks)
17. State four services that a wholesaler may offer to a (4 Marks)
18. State four reasons why flower exporters would transport their produce by air rather than by sea. (4 Marks)
19. The diagram below represents the relationship between population and income per capita.

P (Axis)

20. The following information was extracted from the books of Helen

1/1/2008              31/12/2008

Shs                           Shs

Salaries pre-paid                   24,800                     52,400

Salaries paid                                –                           48,200

Prepare a salary expense account using the above information. (5 Marks)

 

21. State four circumstances under which one may decide to start a personal business. (4 Marks)
22. Highlight four ways in which a business idea can be (4 Marks)

 

23. Outline five measures that a manager can take to improve the working environment in the office. (5 Marks)
24. Highlight four challenges that a person may encounter when using a cellphone (mobile phone).(4 Marks)
25. The diagram below represents the long-run equilibrium of a firm under monopolistic (4 Marks) Name the curves represented by letters a,b,c and d.(i.) a is.…(ii.) b is…..(iii.) c is…. (iv.) d is….

 

Price

 

 

 

P0

 

 

 

 

 

 

0                                                                            S (Axis)

State what is represented by P and S axes, and letters R and Q. (4 Marks)

1. P (axis)………ii. S (axis)…….……iii. R…………iv. Q…………….

0                                  Q0                            Quantity

 

KCSE 2011

1. Identify the types of wholesalers described in the statements given

(4 Marks)

1. A wholesaler who trades in maize grain only…………………………………
2. A wholesaler who supplies goods to most of the traders in Kitui, Mbooni and Machakos districts in Eastern part of Kenya………………………………………………………….………………
3. A wholesaler who buys tomatoes from farmers in rural areas and sells the same to other wholesalers in urban areas…………………………………….
4. A wholesaler who trades in a wide variety of human medicine……………

2. Outline four factors that should be considered before buying office

(4 Marks)

3. Outline four malpractices by traders against which consumers may need protection by the (4 Marks)
4. State three features of an insurable (3 Marks)

 

5. Outline four ways of reducing the level of unemployment in (4 Marks)

 

6. State four services offered by a commercial bank to its (4 Marks)

 

7. List four sources of public (4 Marks)

 

8. Outline four reasons why countries may trade with each (4 Marks)

 

9. Outline four reasons why economic development is desirable to a

(4 Marks)

10. Indicate the reward associated with each of the factors of production in the table (4 Marks)

 

	Factor of production	Reward
a.	Land
b.	Labour
c.	Capital
d.	Entrepreneurship

11. Outline four circumstances under which a co-operative society may be (4 Marks)
12. Highlight four features of a bonded (4 Marks)

13. Outline four factors that may be considered when measuring the size of a

(4 Marks)

14. The following transactions were extracted from the books of Sarah Traders for the month of March 2006.

• March 10: purchased good on credit worth 200,000 from Salim Traders.
• March 25: sold goods on credit worth Ksh. 420,000 to Shah

Record the above transactions in ledger accounts below:                (4 Marks)

1. Salim Traders Account (b)Shah Traders Account

 

 

 

(c)Purchases Account                   (d) Sales Account

 

 

15. On 2^nd November 2006, Oromo received an invoice for Ksh. 12,000. Terms of payment were trade discount 5% and cash discount 10%. If payment is made within 30 days. Determine the amount paid if payment was made on 28^th November 2006. (4 Marks)
16. The following balances were extracted from the books of Nafula Traders as at 31^st December 2005.

Current Liabilities                150,000

Net profit                                  50,000

Total assets                            500,000

2 Year Bank Loan                 100,000

Calculate the rate of return on capital.                                                 (4 Marks)

17. The information given below was extracted from the books of Amina Traders on 31^st December 2006.

Purchases	260,000
Opening stock	75,000
Carriage on purchases	12,500

Closing stock                                  27,500

Goods were sold at a mark-up of   25%.

Using the information above, prepare Amina Traders’ Trading Account. (4 Marks)

 

18. State four benefits that a farmer may get by transporting produce to the market by (4 Marks)

Week 1 2 3 4 5 6 7 8 Quantity(Metric Tonnes) 505 485 430 375 340 290 215 195

• The table given below represents the supply schedule of sukuma wiki (kales) for eight weeks in the month of January 2009.

 

 

Outline four causes of the trend in the table.                                         (4 Marks)

20. Outline four ways in which households contribute to national income of a (4 Marks)
21. Outline four circumstances in which a trader may use oral

(4 Marks)

22. Outline four reasons why a firm may remain (4 Marks)
23. On 1^st January 2007, Muthoni Traders Cash Book showed a credit balance of Ksh. 150,000 at the bank and debit balance of 25,250 in hand. During the month, the following transactions took place:

January 5: Made cash sales for Ksh. 21,500

January 16: Received a cheque for Ksh. 360,000 from a debtor.

January 28: Paid a creditor Ksh. 100,000; partly by a cheque of Ksh. 80,000 and the balance in cash.

Prepare a Two-column Cash Book for the month.                           (5 Marks)

MUTHONI TRADER

Date Details Cash (Ksh) Bank (Ksh) Date Details Cash (Ksh) Bank (Ksh)

Dr.             CASH BOOK                                            Cr.

 

 

 

 

24. State four benefits that a trader may get by advertising products in a

(4 Marks)

25. The cost of consumer goods and services for a representative basket of an average family is given below.

Year 2006               2007

Prices (Ksh) 1,200              1,600

Determine the increase in Consumer Price Index using 2006 as the base year.

(4Marks)

KCSE 2012

1. Outline four circumstances under which cash with order may be

(4 Marks)

2. State four benefits that a farmer may derive from being a member of a Producer Co-operative (4 Marks)
3. Highlight three benefits of globalization to a business (3 Marks)
4. Highlight four ways in which consumers may protect themselves against exploitation by traders. (4 Marks)
5. Outline one circumstance under which each of the following telecommunication services may be used: (3 Marks)
   1. Paging………… Facsimile (fax)…… iii. Radio call……….
6. The following information was extracted from the books of Marigi Traders on 30^th June 2009. (4 Marks)

Item	Shs.
Purchases	720,000
Opening stock	165,000
Closing stock	?
Sales	980,600
Margin	20%

Prepare the Trading Account of Marigi Traders for the year ended 30^th June 2009.

 

7. Outline four tools of monetary policy that a government may use to reduce excess money in (4 Marks)
8. Outline one circumstance under which each of the following types of inflation may (4 Marks)

(i.)          Creeping inflation……………. (ii) Hyperinflation…………

9. State four forms of economic integration that may exist between

(4 Marks)

10. Highlight four problems of development planning that a country may (4 Marks)
11. Nyaboke operates a shop in a farming area. State four ways in which the farming community can benefit from the business activity. (4 Marks)
12. Outline four features of indirect (4 Marks)
13. State four factors that may lead to the success of a (4 Marks)
14. State four ways in which a good filing system may facilitate the operations in an office. (4 Marks)

 

15. Highlight four benefits that a country gets by encouraging trade among her (4 Marks)
16. Outline four challenges that may be encountered when measuring national income using the output approach. (4 Marks)
17. Highlight four measures that a government may take to reduce the mortality rate in a country. (4 Marks)
18. The following balances were extracted from the books of Highlife General Stores on 31^st December, 2008. (5 marks)

Item	Shs.
Land and building	650,000
Stock	470,000
Bank overdraft	80,000
Debtors	350,600
10 Year Bank Loan	500,000
Creditors	220,000
Cash	50,00
Motor van	150,000
Capital	?

 

 

Prepare the Balance Sheet of Highlife General Stores as at 31^st December, 2008.

 

19. Given the statements in the table below, indicate the type of entry to be made in the relevant ledger accounts: (4 Marks)

20. In the spaces provided in the table below, name the document Jambi Ltd would issue under the circumstance described: (4 Marks)

 

	Circumstance	Document to issue
i.	Jambi Ltd sold goods worth Sh. 54,000 on credit to Jamilar Traders.
ii.	Osuri Enterprise which had bought goods worth Sh. 27,000 was erroneously charged for only Sh. 25,000.
iii.	Guru Traders paid Sh. 33,900 by cheque to Jambi Ltd for goods which had been supplied.
iv.	Goods sold to Jamilar Traders had been overpriced by Sh. 4,000.

 

 

21. Outline four conditions under which a warehouse may be considered to be operating (4 Marks)
22. Highlight four advantages of promoting sales through the (4 Marks)

 

23. Zawadi operates a hardware business in her home Outline four methods she may use to determine prices for her goods other than the forces of demand and supply. (4 Marks)
24. Highlight four factors that a firm may consider when deciding on the goods to (4 Marks)
25. State four features of a perfectly competitive (4 Marks)

 

	Statement	Type of entry
i.	An increase in revenue.
ii.	A decrease in an asset.
iii.	An increase in an expense.
iv.	A decrease in a liability.

 

KCSE 2013

1. Outline four ways in which business studies may be of benefit to an

 

(4 Marks)

 

2. Highlight four external factors that may negatively influence the operations of a (4 Marks)
3. State four characteristics of a successful (4 Marks)

 

4. State four functions of an (4 Marks)

 

5. Fill the relevant branches of trade in the diagram given (3 Marks)

 

 

 

 

 

 

 

 

 

6. The participants in a two sector economy are households and Identify the relevant participant in each of the statements given below: (4 Marks)

 

	Statement	Participant
a.	Payment for goods and services	a………….
b.	Sale of factors of production.	b………….
c.	Payment for factors of production.	c…………..
d.	Sale of goods and services.	d…………..

7. The following balances were extracted from the books of Wekesa Traders on 31^st December, 2009.

Items                                  Shs.

Capital                                500,000

Cash in hand                        20,000

Buildings                            200,000

 

Furniture	25,000
Motor vehicle	400,000
Creditors	18,000
Debtors	36,000
Bank	100,000
Bank loan	263,000

 

Using the above information, prepare Wekesa Traders’ Trial Balance on 31^st December, 2009.                                                                  (5 Marks)

 

8. The following information relates to Karibu Traders for the year ended 31^st December, 2008.

Details                                  Shs.

Fixed assets                         1,840,000

Current assets                         400,000

6 Year Bank Loan                  600,000

Current liabilities                   150,000

 

Determine owner’s capital using the information given above. (4 Marks)

 

9. State the type of unemployment relating to each of the following descriptions:

 

(4 Marks)

 

• Caused by alternating trading patterns occurring at similar times……….

 

• Arises where workers have more skills and higher qualifications than the job requirements………………………………………………………………….
• Arises out of mismatch between the skills possessed by potential employees and the location of the jobs available…………………………………………………….
• Arises when people are unwilling to take up jobs due to low pay…………

 

10. Highlight four circumstances under which the capital of a business may

 

(4 Marks)

 

11. Below are some entries in the cash book of Romano Traders for the month of July

Dr.                          CASH BOOK                                                   Cr.

15. Outline four factors that may make a producer to by-pass the wholesaler when distributing (4 Marks)
16. Highlight four benefits that a country would get by developing her (4 Marks)

 

 

 

 

 

 

 

 

State the meaning of the following entries.

 

 

 

 

 

 

 

(4 Marks)

17. State four benefits of a bonded warehouse to the (4 Marks)

 

Date Details Cash (Ksh) Bank (Ksh) Date Details Cash (Ksh) Bank (Ksh) 2010 July 1   Bal b/d   15,000 2010 July 1   Bal b/d   100,000 July 6 Cash 20,000 July 6 Bank 20,000 July 20 Sales 15,000 July 15 Wages 5,000 July 28 Debtors 20,000 July 29 Stock 10,000 July 31 Bal c/d 10,000

• Outline four qualities of a successful (4 Marks)

 

19. Highlight four factors that may cause the supply curve to shift to the

(4 Marks)

20. Outline four positive effects that production activities may have on community

 

1. July 1, 2010 Balance b/d, bank column, 100,000……………
2. July 6, 2010 Cash 20,000 and bank shs. 20,000………………
3. July 28, 2010 Debtors 20,000…………………………………
4. July 31, 2010 Balance c/d 10,000……………………………..

12. Outline one circumstance under which each of the following source documents may be issued by a trader: (4 Marks)
    • Debit note…… ……………………………………

 

• Invoice…… ……………………………………….

 

• Credit note… ………………………………………

 

• Quotation……………………………………………

 

13. Name four documents that may be required by the registrar of companies in order to register a public limited company. (4 Marks)
14. Outline four measures that a country can take to reduce the level of

 

(4 Marks)

health.                                                                                                   (4 Marks)

21. State four basic features of a (4 Marks)

 

22. State four features of a (4 Marks)

 

23. Outline four circumstances in which the government may be involved in (4 Marks)
24. Highlight four factors that a trader may consider when choosing a means of (4 Marks)
25. State four reasons for privatizing public (4 Marks)

 

KCSE 2014

1. The following are descriptions of features of human Identify the features that relate to the description in the spaces provided. (4 Marks)

 

	Description	Feature
(a)	A person is unable to fully satisfy all wants.
(b)	Once satisfied, they have a tendency of being felt again.
(c)	Some wants are satisfied together.
(d)	The same want can be satisfied using different resources.

 

 

2. Name two occupations that relate to each of the production activities given below: (3 Marks)

 

(a)	Extraction	i.……………………… ii………………………
(b)	Construction	i.……………………… ii……………………….
(c)	Direct services	i.……………………… ii………………………

 

 

3. Outline four tasks that may be carried out by a receptionist in an

(4 Marks)

4. Highlight four circumstances in which a cheque may be used as a means of (4 Marks)
5. Highlight four activities that may be carried out in a stock exchange

(4 Marks)

6. Outline four features of liners in sea (4 Marks)
7. State five types of information that a manager may communicate to the

(5 Marks)

8. Explain the meaning of the following terms: (a)Insured….…(b) Insurance…..
9. In the spaces provided below, indicate whether the following factors cause movement along the demand curve or a shift of the demand (3 Marks)

 

	Factor	Movement along or shift of
(a)	Change in income.	…………………….. the demand curve.
(b)	Change in price.	…………………….. the demand curve.
(c)	Change in weather	…………………….. the demand curve.

10. Highlight four roles played by the broker in the chain of (4 Marks)
11. The following diagram represent the circular flow of income in a two sector closed economy. (4 Marks)

 

 

 

a                                                                          b

 

Identify two factors represented by each of the arrows labelled a and b.

12. Fill in the missing figures in the table below: (4 Marks)

 

	FA	CA	C	L
(a)	275,500	……………	315,000	115,500
(b)	182,000	108,700	………….	217,100
(c)	………….	76,400	123,100	91,900
(d)	313,450	211,340	189,170	………..

 

13. Mheshimiwa Ltd had the following ledger account balances as at 31^st May, 2010:

Details	Shs.
Purchases Sales Returns outwards Returns inwards D. Simola (Debtor) P. Mwende (Creditor) Wages Cash Capital	3,880 3,350 150 160 2,550 3,100 800 960 1,750

 

Required: PrepareMheshimiwa’s trial balance as at 31^st May, 2010. (5 Marks)

14. The following is a format of the debit side of a three-column cash

Dr.

DATE		V	W	X	Y

Name the column labelled V, W, X and Y.                                            (4 Marks)

 

15. Outline four functions of the International Bank for Reconstruction and Development. (4 Marks)
16. State four disadvantages of barter (4 Marks)
17. The following transactions relates to Jelimo Stores:
    1. 10^th October 2010: Sold unused stationery for Sh. 3,000 on credit to Likia.
    2. 23^rd October 2010: Bought a motor vehicle on credit from Onjwaria Motors for Sh. 700,000.

 

Required: Record the above transactions in the General Journal given below:

 

 

Date	Particulars	Folio	Dr.	Cr.
…….	……………	………	……..	…….

 

18. List four levels of (4 Marks)
19. Many countries in Africa, Latin America and Asia are considered to be under- developed. Outline four characteristics they have in common. (4 Marks)
20. Madam Emoro operates a matatu business. State four factors in the internal environment that may influence the (4 Marks)
21. Highlight four reasons for which businesses should observe ethical
22. State four merits of promoting products through personal (4 Marks)
23. The following information relates to Kiboko Traders as at 31^st December,

 

Details	Shs.
Total drawings	400,000
Added investments	800,000
Capital on 31st December, 2010	7,000,000
Profit	3,100,000

Calculate Kiboko’s initial capital.                                                        (3 Marks)

24. Outline four positive implications of youthful population to an
25. PQ Ltd had the following balances as at 31^st December, 2012. (4 Marks) Sales                                  23,498,000

Stock 1/1/2012              57,140

Returns inwards             27,200

Purchases                  16,290,000

Stock 31/12/2012            86,340

Prepare PQ’s Trading Account for the year ended 31^st December, 2012.

KCSE 2015

1. What are the reasons that would make an individual engage in business?

(4 Marks)

2. List four types of utility and the production activity associated with each of (4 Marks)
3. Outline four ways in which the office facilities effective handling of (4 Marks)
4. Highlight four factors that may influence a consumer to purchase products from a kiosk other than a (4 Marks)
5. State four circumstances under which hire purchase may be used to acquire (4 Marks)
6. Give four reasons for the increased use of mobile phones in (4 Marks)
7. Outline four methods that the Government of Kenya uses to regulate business (4 Marks)
8. State four disadvantages of using internet as a means of

(4 Marks)

9. State four differences between life assurance and general (4 Marks)
10. Give four reasons for observing ethical practices in product

(4 Marks)

11. The graph given below represents the demand and supply curves of

 

 

 

Price

 

 

 

 

Quantity dd/ss State four effects of a shift of the demand curve to the right.                         (4 Marks)

12. Outline four disadvantages that a manufacturer would suffer if wholesalers were eliminated from the chain of (4 Marks)

 

13. The following balance sheets was incorrectly

PEMBE TATU TRADERS BALANCE SHEET

FOR THE YEAR ENDED 31.12.12

Stock	5,000	Furniture Debtors Capital	50,000 7,000 66,000     123,00
Bank overdraft	5,000
Cash	9,000
	19,000

Prepare a corrected balance sheet.                                         (4 Marks)

 

14. The following figures relate to Jumbo Traders for the year ended 12.13.

 

Details	Shs.
Capital	940,000
Net Loss	20,000
Additional investment	420,000
Monthly drawings	5,000

Determine the capital as at 01.01.13. (4 Marks)

15. Identify the ledgers in which the following accounts are (5 Marks)

 

	ACCOUNT	LEDGER
i.	Pendo (Debtor)
ii.	Machinery
iii.	Rent
iv.	Capital
v.	Juma (Creditor)

 

16. List three levels of (3 Marks)

17. Name the documents described by the statements given below are used in International Trade: (4 Marks)
    1. Requests for payment before goods are delivered……..………………
    2. Shows ownership or title of goods imported…………………………..
    3. Shows the country of manufacture of goods….……………………….
    4. Shows the transportation charges for goods……………………………
18. The following Purchases Returns Journal relates to Farasi Traders:

 

PURCHASES RETURNS JOURNAL
DATE	DETAILS	CREDIT NOTE NO.	FOLIO	AMOUNT
2012
March				Ksh
1	Junior	R22	PL1	2,000
3	Mimi supplies	100	PL2	4,000
4	Kilimanjaro	30	PL5	5,000
			GL4	11,000

 

Post the information above to the relevant ledger accounts.             (4 Marks)

19. Outline four goals of development to a (4 Marks)
20. The following information relates to Kahawa Traders as at 31^st December,

Stock 01.01.12 Ksh. 80,000

Stock 31.12.12 Ksh.  120,000

Purchases           Ksh. 1,000,000

Margin                           20%

Required: Prepare a trading account.                                           (5 Marks)

21. State four reasons that make it necessary for firms to maintain a healthy (4 Marks)
22. Highlight four benefits of a business plan to an (4 Marks)

 

23. Outline four benefits of sea transport over air (4 Marks)

 

24. In which ways can an investor benefit from the stock exchange? (4 Marks)

 

25. State three clauses found in the Memorandum of (3 Marks)

 

KCSE 2016

1. State four external factors that may negatively influence the operation of a (4 Marks)
2. Highlight four benefits of a business plan to an (4 Marks)

 

3. State four ways in which a good filing system may facilitate the operations of an (4 Marks)
4. Highlight four activities that may be carried out in a stock exchange

(4 Marks)

5. Outline four circumstances under which a co-operative society may be (4 Marks)
6. Outline four methods that the government Kenya uses to regulate business (4 Marks)
7. State four ways in which a youthful population may be useful to an

(4 Marks)

8. Outline one circumstance under which each of the following telecommunication services may be used:
   1. Paging……ii. Facsimile (fax)……. Radio call……….. iv. Telex……
9. The following transactions relates to Jelimo Stores: (4 Marks)

• 10^th October 2010: Sold unused stationery for Sh. 3,000 on credit to Likia.
• 23^rd October 2010: Bought a motor vehicle on credit from Onjwaria Motors for Sh. 700,000.

 

Required: Record the above transactions in the General Journal given below:

 

Date	Particulars	Folio	Dr.	Cr.
…….	……………	………	……..	…….

 

10. State four features of an insurable (4 Marks)

 

11. State four features of (4 Marks)

12. The graph given below represents the demand and supply curves of

 

 

 

Price

 

 

 

 

Quantity dd/ss

State four effects of a shift of the demand curve to the right.     (4 Marks)

 

13. Outline four functions of World (4 Marks)

 

14. Outline four ways of reducing the level of unemployment in (4 Marks)

 

15. The following balances were extracted from the books of Highlife General Stores on 31^st December, (4 Marks)

 

Item	Shs.
Land and building	650,000
Stock	470,000
Bank overdraft	80,000
Debtors	350,600
10 Year Bank Loan	500,000
Creditors	220,000
Cash	50,00
Motor van	150,000
Capital	?

Prepare the Balance Sheet of Highlife General Stores as at 31^st December, 2015.

 

16. Outline four circumstances in which the government may be involved in (4 Marks)

ACCOUNT LEDGER i. Pendo (Debtor) ii. Machinery iii. Rent iv. Capital

• Identify the ledgers in which the following accounts are (4 Marks)

 

18. The following diagram represent the circular flow of income in a two sector closed (4 Marks)

 

 

 

a                                                                       b

 

 

 

 

 

Identify two factors represented by each of the arrows labeled a and b.

 

 

19. State four reasons for privatizing public (4 Marks)

 

20. State four reasons for the increased use of cell phones in (4 Marks)

 

21. List four sources of public (4 Marks)

 

22. State two situations in which each of the following types of inflation may

(4 Marks)

1. Creeping inflation………… ii) Hyperinflation……………

 

23. Outline four factors that may make a producer to by-pass the wholesaler when distributing goods. (4 Marks)
24. Outline four goals of development to a (4 Marks)

 

25. Outline four characteristics of (4 Marks)

KCSE 2017

1. State four elements of the demographic environment that may influence the operations of a business. (4 Marks)
2. Outline four circumstances under which goods may be transported by use of (4 Marks)
3. The following information was extracted from the books of Salome Traders: Capital Ksh. 1,119,300, Long Term Liabilities Ksh. 1,807,000 and Current Liabilities Ksh. 978,700.

Required:

• Determine Salome Traders rate of Return on Capital Employed if the business made a net profit of Ksh. 438,945. (4 Marks)
• State the importance of the rate of return on capital (1 Mark)

4. Highlight four indicators of economic growth that may be observed as a country progresses. (4 Marks)
5. Chem Chemi Ltd is a new cement Outline four factors that may encourage this company to be established in Athi River town where other cement manufacturers are located despite the obvious competition. (4 Marks)
6. Outline three ways through which a partnership may be (3 Marks)

 

7. State four features of land as a factor of (4 Marks)

 

8. State the principles of insurance described in the statements given below:

(4 Marks)

1. Restoring the insured’s financial position after suffering loss from insured risk…………………………………………………………
2. Existence of a very close relation between the loss suffered and the insured risk…………………………………………………………..
3. The insurer taking ownership of the remains of the destroyed property after the insured is duly compensated……………………………….
4. Proof that the insured will suffer direct financial loss if property is

destroyed…………………………………………………………..

 

9. Highlight four items that would be included in the measurement of national income using the income approach. (4 Marks)
10. The table below shows general price changes over a period of five

 

Year	Price (Ksh)	CPI
2010	90.00	–
2011	100.80	–
2012	103.50	–
2013	105.30	–
2014	108.00	–

 

Using year 2010 as the base year, determine the consumer price index of 2011,2012,2013 and 2014.                                                                                               (4 Marks)

11. List four forms of retail businesses that a school leaver may engage

(4 Marks)

12. State four benefits of using the internet for office (4 Marks)

 

13. The following information relates to Zawadi Traders rental income: 01.01.15: Had Ksh. 50,000 in the rent income account at the beginning of the

10.06.15: Received Ksh. 120,000 from tenants.

 

12.11.15: Refunded Ksh. 20,000 to a tenant who had vacated the premises.

 

Required: Prepare Zawadi Traders Rental Income Account.          (4 Marks)

 

14. State four means of payment that may be provided by commercial banks to their (4 Marks)
15. The equations given below relate to the quantity demanded and quality supplied at the equilibrium point.

𝑄𝑑𝑒 = 4𝑃 + 50

𝑄𝑠𝑒 = 8𝑃 + 30

Determine the equilibrium price and quantity.                                   (4 Marks)

16. Outline four ways in which the balance of payments of a country may be (4 Marks)
17. Identify the source documents into which the information given in the table below would be recorded. (4 Marks)

Information		Source document
a.	Payments received from debtors
b.	Purchases made on credit.
c.	Validating payments made by the cashier.
d.	Requesting for additional payments from a debtor.

 

18. Highlight four factors that should be considered by a firm when deciding on the method to use for promoting its products. (4 Marks)
19. Outline four features of money that enables it to facilitate the exchange of goods and services. (4 Marks)
20. Outline four benefits of proper filing to an (4 Marks)

 

21. Highlight four characteristics of a monopolistic competitive (4 Marks)

 

22. The aggressive campaign for citizens to plan their families seems to be causing a decline in the country’s population growth. Outline four possible effects of (4 Marks)
23. State four functions of commercial attachẻs. (4 Marks)

 

24. Outline four benefits that may be realized when two firms form a (4 Marks)
25. Shaban started a shop dealing in ladies clothing but failed after two

 

Outline four factors that may have caused this failure. (4 Marks)

 

KCSE 2018

1. Outline four features of labour as a factor of (4 Marks)

 

2. Outline four ways in which peace within a country may encourage entrepreneurial (4 Marks)
3. State four duties of the office (4 Marks)

 

4. The document shown below is used in home

 

 

1. Identify the document……………………………………………. (1 Mark)
2. Outline three circumstances under which the above document may be (3 Marks)

5. State four measures that may be taken by the government to control
6. State four measures that may be taken by the government to curb (4 Marks)
7. Highlight four benefits of national income statistics to the

(4 Marks)

9. State four categories in which the various types of business partners may be (4 Marks)
10. Highlight four ways in which the government creates an enabling environment for the conduct of business in the country. (4 Marks)
11. Outline four roles of transport in the facilitation of (4 Marks)

 

12. State three circumstances under which firms would form a (3 Marks)

 

13. Outline four conditions under which a manufacturer would distribute his products through the (4 Marks)
14. State four reasons for maintaining a cash book in a business

(4 Marks)

15. Apart from the forces of demand and supply, list four other ways in which the price of a product may be set. (4 Marks)
16. Outline four factors that would make two people taking the same type of life assurance policy with the same insurer to pay different amount of premium.
17. State the line of communication involved in each of the following: (4 Marks)

 

1. The manager of ABC Company Ltd talking to manager of XYZ Company Ltd…………………………………………………………………..
2. A secretary asking for time off from her boss……………………..
3. The Production Manager giving instruction to the Secretary of Sales Manager……………………………………………………………..
4. The Store Keeper giving explanations to the Chief Accountant………

18. List four books of original entry that may be used to record transactions

 

Business Assets (Sh) Capital (Sh) Liabilities (Sh) A 40,000 – 15,734 B – 158,300 61,500 C 17,670 5,680 – D 67,000 – 24,705

• Fill in the spaces in the table below: (4 Marks)

affecting stock.                                                                                    (4 Marks)

 

19. Highlight four external economies of scale that a firm may get when operating on large scale. (4 Marks)

 

20. The following information was extracted from the books of Leila Traders on 31^st July, 2016:

Details	Sh.
Capital	90,000
Fixed assets	80,000
Cash in hand	20,000
Current liabilities	20,000
Stock	20,000
Net profit	15,000
Drawings	5,000

Calculate: Capital owned………(2 Marks) (b) Acid test ratio……. (2 Marks)

21. Watamu Enterprises had the following assets and liabilities on 1^stMay

Particulars                          Sh.

Equipment                           800,000

Capital                               1,200,000

Creditors                              100,000

Debtors                                 200,000

Stock                                    250,000

KCSE 2019

1. State whether the commodity or service given in the table below would satisfy a basic human want or secondary human want. (4 Marks)

Commodity/service		Class of human want
(a)	A shirt
(b)	Education
(c)	Housing
(d)	A packet of milk
(e)	Entertainment
(f)	Haircut
(g)	Green grams
(h)	A car

 

2. Outline four factors that make office managers to communicate in writing to

 

Cash at bank                          50,000

The following transactions took place on 2^nd May 2014:

1. Bought good for re-sale 150,000 on credit.
2. A debtor paid 100,000 by cheque.

• Sold the equipment for Sh. 900,0000

 

Required: Prepare Watamu Enterprises balance sheet after above transactions.              (5 Marks)

 

22. Outline four merits of indirect (4 Marks)
23. Highlight four ways in which the technological environment may improve business performance. (4 Marks)
24. Identify the types of ledger in which each of the following accounts would be found: (4 Marks)

 

	Account	Type of ledger
a	Otieno (Buyer)
b	Carriage outwards
c	Mueni (supplier)
d	Cash at bank

25. Highlight four ways in which the introduction of money helped eliminate

their staff.                                                                                                   (4 Marks)

3. The information given below was extracted from the books of Birika Traders on 31^stDecember, 2014: (4 Marks)

Details                                   Amount (Ksh.

Furniture and fittings                234,000

Debtors                                         67,500

Capital                                      157,900

 

Commission eared	13,200
Creditors	34,750
Drawings	21,800
5 Year Bank Loan	114,450
Discount received	3,000

Required: Prepare Birika Traders Trial Balance as at 31^st December, 2014.

 

 

4. Highlight four functions of an office in an (4 Marks)

 

5. Outline four roles played by the Nairobi Securities Exchange in the Kenyan (4 Marks)

 

problems faced in barter trade.                                                             (4 Marks)

 

6. Name the basic concept in population described in the statements given below:

(4 Marks)

1. Population size that is adequate for the full utilization of available resources in a country………………………………………….
2. The average number of births per one thousand women in a year……………………………………………………………
3. When a country is experiencing higher death rates than birth rates…………………………………………………………………
4. Where a bigger proportion of the population is comprised of people who are above 55 years old………………………………………………………………
5. State the circumstance under which each of the following terms of trade would be applied in foreign (4 Marks)

(a) Franco… (b) Ex-works…… (c) In Bond… (d) Free Alongside Ship…

8. Complete the diagram below to illustrate the classification of (3 Marks)

 

 

9. Highlight four merits of using salespeople to promote the sales of a particular (4 Marks)
10. By use of book keeping equation, determine the missing values in the table (4 Marks)

FIXED ASSETS (Ksh)	CURRENT ASSETS (Ksh)	CAPITAL (Ksh)	LIABILITIES (Ksh)
1,593,600	a)    …………	900,900	1,151,600
812,700	1,953,750	b)  ……	2,172,100
c)    ………	781,295	1,010,000	664,030
1,320,920	1,450,050	1,260,860	d)  ……

11. Outline four features that may indicate a country’s state of

 

(4 Marks)

 

12. List four types of small-scale retail business that one can run without a

 

(4 Marks)

 

13. Highlight four functions of Department of External Trade in the Ministry of Industry, Trade and Co- (4 Marks)
14. Outline four factors that Chemi chemi Dairies would consider when selecting a channel to distribute their fresh milk. (4 Marks)
15. State the relevant book of original entry into which information extracted from the source documents given below would be recorded: (4 Marks)

 

Source documents	Books of original entry
(a) Incoming invoice	a)    ………………
(b) Outgoing credit note	b)  ……………….
(c) Outgoing cash sale slip	c)    ……………..
(d) Incoming debit note	d)     ……………..

16. Outline four features of co-operatives (4 Marks)

 

17. Highlight four factors which may lead to an increase in a country’s national income. (4 Marks)
18. The following information was extracted from the books of Jabali Traders on 31^st December, 2015.

Details	Ksh.
Purchases	84,375
Carriage out	7,400
Stock on 01/01/2015	67,900
Carriage in	9,170
Stock on 31/12/2015	17,970
Returns out	15,520

• Determine net purchases………………….………… (3 Marks)

 

• State two reasons for preparing the trading (2 Marks)

19. Identify the level of production into which the following workers belong:

(4 Marks)

 

Workers	Level of production
(a)     Carpenter	……………….
(b)     Nurse	……………….
(c)  Maize farmer	………………..
(d)  Mason	………………..
(e)  Wholesaler	………………..
(f)    Lumber	…………………
(g)  Road engineer	…………………
(h)  Insurer	………………….

 

20. Outline four characteristics of a good tax (4 Marks)

 

21. Highlight four contributions of entrepreneurs to the growth of an

(4 Marks)

22. Highlight four factors that may influence an individual’s demand for money in order to fulfill the transaction motive. (4 Marks)
23. Determine the excess demand and excess supply from the combined demand and supply schedules of oranges given below: (4 Marks)

PRICE (Ksh/Bag)	1800	1600	1400	1200	1000	800	600	400
Quantity Demanded (Bags)	280	400	500	650	700	850	950	1000
Quantity Supplied (Bags)	1400	1200	900	650	500	420	350	200
Excess Demand (Bags)
Excess Supply (Bags)

 

24. Outline four benefits of a bonded warehouse to the (4 Marks)

 

25. Apart from trains and motor vehicles, state four other means of transporting goods and people on land. (4 Marks)

KCSE 2020

1. List four external environmental factors that may influence the operations of a (4 Marks)
2. State four characteristics of direct (4 Marks)
3. Name the document described in each of the following statements: (4 Marks)
   • Used to demand for payment before goods are delivered…………….
   • Used to reply to a specific letter of inquiry…………………………..
   • Informs the buyer that goods ordered for have been dispatched…….
   • Used to correct an overcharge……………………………………….
4. Highlight four reasons for government involvement in (4 Marks)
5. State four factors that may lead to a shift in demand as shown in the diagram (4 Marks)

 

 

Price

 

 

 

 

• Quantity

 

6. Outline four circumstances under which a trader would prefer to transport goods by (4 Marks)
7. The following information was obtained from the books of Sindo Limited on 31^st December, 2015:

Details	Ksh.
Capital 24,000
Stock	1,500
Debtors	2,000
Machinery	20,000
Cash	4,000

Determine the total liabilities of the business.                            (3 Marks)

8. Highlight four services that commercial banks offer to their

(4 Marks)

9. Outline four reasons that may make Kenya restrict trade with other

(4 Marks)

 

10. Classify the following resources as natural, man-made or human: (4 Marks)

 

Resource		Classification
(a)	Architect
(b)	Boat
(c)	Soda ash
(d)	Driver

 

11. List four sources of capital that may be available to a sole

(4 Marks)

12. Highlight four circumstances under which a firm may be located near the source of raw materials. (4 Marks)
13. The following information was extracted from the books of Kombo Traders on 30^th April, 2018:

 

Details	Ksh
Land and buildings	150,000
Creditors	1,500
Motor car	120,000
Cash	25,500
Capital	311,000
Bank	4,000
Sales	5,000
Purchases	18,000

 

Required: Prepare Kombo Traders Trial Balance.                              (5 Marks)

 

14. Outline four reasons that would make an entrepreneur prepare a business

(4 Marks)

15. Identify the office equipment described in each of the statements below:

(4 Marks)

 

Description		Equipment
(a)	Used to make postage stamp impressions on envelopes.
(b)	Used to transmit verbal messages.
(c)	Used to store confidential documents and valuable items.
(d)	Used to record and store information in audio tapes.

 

16. State four sources of government (4 Marks)

17. Outline four measures which may be taken by a government to address the problem of (4 Marks)
18. Highlight four benefits of personal selling to a (4 Marks)

 

19. Outline four channels that may be used for distributing imported

 

20. State four merits of a bonded warehouse to the (4 Marks)

 

21. Identify the source documents from which the information posted in the following journals would be extracted: (4 Marks)

 

Journal		Source Document
a)	Sales Return Journal
b)	Purchases Journal
c)	Cash Receipts Journal
d)	Sales Journal

 

22. State four ways through which leakages of national income may happen in a

 

four-sector economy.                                                                        (4 Marks)

 

23. State four benefits of using computers in an (4 Marks)

 

24. Identify the factor of production that relates to each of the following

(4 Marks)

 

Resource		Factor of production
(a)	Supervision
(b)	Tractor
(c)	Trees
(d)	Owner

 

25. List four sources of business (4 Marks)

 

KCSE 2021

1. State four characteristics of a successful (4 Marks)

 

2. List four types of business (4 Marks)

 

3. Outline four challenges that may be faced in the satisfaction of human

(4 Marks)

4. Match four factors of production with their (4 Marks)

 

5. Highlight four factors that may be considered when choosing a means for transporting cash. (4 Marks)
6. State four ways in which the government may be involved in

(4 Marks)

7. Outline four benefits of a (4 Marks)

 

8. List four mailing services that facilitate (4 Marks)

 

9. On the diagram below, show the effects of increased (4 Marks)

 

 

Price Pe

12. Write the book-keeping equation for the business whose transactions are given (4 Marks)

-Started a business with Ksh. 10,000 cash.

 

-Acquired a loan of Ksh. 50,000 which was directly banked.

 

13. Outline four channels for distributing locally manufactured products to local (4 Marks)
14. Outline four limitations of barter (4 Marks)

 

15. State four features of an efficient tax (4 Marks)

 

16. Identify the book of original entry prepared from each of the following source (4 Marks)

 

Source document		Book of original entry
a)	Outgoing invoice
b)	Received receipt
c)	Copy of credit note
d)	Original invoice

 

17. List four types of capital in a (4 Marks)

 

18. Record each of the following transactions into their relevant ledger

 

 

 

 

 

 

0                            Qe                        Quantity

 

• 2^nd March: Started a business with 10,000 in cash.

(4 Marks)

 

 

10. Outline four factors that may influence a firms’s decision on the type of goods to produce. (4 Marks)
11. Highlight four benefits of localization of (4 Marks)

• 3^rd March 2021: Bought goods worth Ksh. 12,000 on credit from Mawa

19. Outline four reasons that would make an organization prefer a landscape office over (4 Marks)

 

20. The following information was extracted from the books of Adow Traders on 31^st December 2020.

Details	Ksh
5 Year Loan	256,700
Land	120,000
Cash	24,600
Creditors	37,400
Buildings	430,500

Prepare Adow Traders Balance Sheet as at 31^st December, 2020.        (4 Marks)

 

21. Jane decided to take an insurance cover for her car against theft from Sarufi Insurance Ltd. It was valued at Ksh.600,0000 and she was required to make month y payments of 6,000. Identify the appropriate insurance term for:

(4 Marks)

• 600,000………………………………….
• Jane……………………………………………
• Sarufi Insurance Ltd………………………….
• Theft………………………………………….

22. Outline four difficulties that a country with a young population may

(4 Marks)

23. Identify the retailers described in the statements given (4 Marks)

 

Statements	Retailers
(a) Sells goods by displaying them along the streets.
(b) Moves from one place to another on foot selling their goods.
(c) Dispenses goods with the use of coin operated machines.
(d) Meet on designated days in open grounds to sell their goods.

 

24. Highlight four benefits of inflation to an (4 Marks)

 

25. Outline four benefits enjoyed by countries that participate in international

(4 Marks)

KCSE 2022

1. Identify the component of Business Studies described in each of the statements below. (4 Marks)

 

Statements	Component
(a) Systematic way of recording business transactions for decision making.
(b) The study of trade and aids to trade.
(c) The study of how human beings strive to satisfy their endless wants using the available scarce resources.
(d) The process of identifying a business opportunity and getting necessary resources to start and run a business.

 

2. State four limitations of direct (4 Marks)

 

3. Kaimosi Traders owned a house whose book value was 1,000,000. They insured the house for Ksh. 800,000 against the risk of fire. Fire occurred and partly destroyed the house to the cost of Ksh. 800,000.

Required: (a) Work out the amount of compensation that Kaimosi Traders would receive.                                                                                                                      (3 Marks)

(b) State the reason for paying the amount as determined in 3(a) above. (1 Mark)

 

4. The diagram below represents the circular flow of income in a two-sector (4 Marks)

 

Goods and services

 

 

 

 

 

 

(d)

 

Identify what is represented by the letters (a), (b), (c) and (d)

 

Condition Market structure a) The firm is the industry b) Buyers and sellers have complete knowledge about market but cannot influence the market c) Few large firms that dominate the market d) Comprised of many sellers of differentiated products.

• Name the books of original entry in which the following transactions are (4 Marks)

11. Identify the market structure described by each of the conditions given below.

(4 Marks)

 

 

Source document		Book of original entry
a)	Bought goods on credit from Kamau wholesalers
b)	Received Kibisu a debtor, returned goods.
c)	Cash sales
d)	Sold an old tractor on credit

 

6. Outline three circumstances under which cash with order would be

(3 Marks)

7. State four non-tax sources of government (4 Marks)
8. Highlight four ways in which the economic environment may lead to business (4 Marks)

 

 

 

12.

 

13.

 

 

 

Outline four causes of cost-push inflation.

 

State four reasons for ethical practice in business.

 

 

 

(4 Marks)

 

(4 Marks)

 

 

9. Outline four circumstances under which a firm may be located near the market for its product. (4 Marks)
10. Explain the meaning of each of the following trends in business

(4 Marks)

• Holding company………………………………………………

 

• Amalgamation………………………………………………….

 

• Absorption………………………………………………………

 

• Cartel……………………………………………………………

14. State whether the transactions given in the table below will cause Decrease,

 

Increase or No effect on the totals of the balance sheet.                     (4 Marks)

 

 

Statement		Effect
a)	Bought furniture in cash
b)	Deposited some money into the business bank account from personal savings.
c)	Purchased goods on credit
d)	Withdrew money from the bank to pay the child’s hospital bill

 

15. Highlight four benefits of product promotion to the (4 Marks)

 

16. Name the type of unemployment described in each of the following

 

Statement		Type of unemployment
a)	Caused by change in production pattern during the year influenced by weather conditions.
b)	Occurs repeatedly at similar times.
c)	The number of people employed exceeds those that are required.
d)	Firms are willing to employ all people at thr prevailing wage rate but job seekers are not willing to take up the jobs.

 

17. Outline four differences between primary wants and secondary

(4 Marks)

 

18. The following information relates to Maji Mazuri Traders for the month of December 2021.

Details                           Ksh

20. Identify the type of financial institution described in each of the statements (4 Marks)

 

Statement		Type of financial institution
a)	Operates fixed deposit, savings and current accounts.
b)	Advances loans in proportion to one’s savings
c)	Sells houses through mortgages
d)	Offers finance to start and expand industrial enterprise.

 

 

21. Outline four benefits of electronic filing (4 Marks)

 

22. Highlight four benefits that Kenya may get from being a member of the East African Community. (4 Marks)
23. The following information relates to Roga Roga Traders for the year

 

 

Loan from Bank	24,000	Sales                         Ksh. 270,000
Stock	40,000	Margin                               40%
Cash	60,000	Rate of stock turnover      6 times
Debtors	12,000
Salaries	8,000	Required:    (a) Gross profit. (2 Marks)
Creditors	18,000	(b) Cost of goods sold. (1 Mark)
Furniture	16,000	(c) Average stock      (2 Marks)

 

 

Work out the net worth of Maji Mazuri Traders.                         (4 Marks)

 

 

19. Outline four reasons that may make the Government protect

(4 Marks)

24. Highlight four reasons for locating bonded warehouses at the border

(4 Marks)

25. Outline four services that retailers may offer to the (4 Marks)

 

 

 

KCSE 2010

Business Studies KCSE P2 (2010-2022)

 

 

 

• (a) Commodities A and B are Using two diagrams, explain how an increase in the supply of commodity A will affect the equilibrium price and quantity demanded of commodity B.

1. Explain five negative effects that inflation may have on the economy of a

• (a) Explain five principles that distinguish co-operative societies from other forms of business organizations.
  1. Explain five ways of making face-to-face communication
• (a) Given information and required to prepare (i) a TPL (ii) a Balance Sheet
  1. Explain three factors that should be considered when choosing a means of
• (a) Explain five befits that a member country may get from economic
  20. The information in the table below relates to product ZX whose unit price in the market is sh. 20.

 

 

 

 

 

 

 

 

 

 

 

Required: (i) Determine total costs, average costs and marginal costs at each level

(ii) Determine the units to be produced in order to maximize profits. 5 (a) Discuss five problems that a country may face when measuring her national

income using the output approach.

1. b) Explain five factors that an entrepreneur would consider when evaluating a business idea.

6 (a)    Discuss five benefits that a customer may get by using Automated Teller Machine (ATMs) for financial transactions.

1. b) Amina operates a fleet of Public Service Vehicles (PSVs). Explain five possible risks she can insure her business against.

KCSE 2011

• (a) Explain the following types of (i) Demand-pull inflation (ii) Cost- push inflation (iii) Imported inflation (iv) Structural inflation

1. b) Explain six factors that may hinder the development of a

• (a) Explain five circumstances under which containerization may be used to transport

1. b) Explain the procedure for taking an insurance claim

(ii) A farmer’s house valued at sh. 1,200,00 was insured against fire for sh. 900,000 under the “with average clause”. Fire occurred and damaged the house causing a loss of sh. 500,000. Determine the value of compensation due to the farmer.

• (a) Discuss five factors that may be considered when choosing a method for promoting a product.

1. b) Describe five features of economic

• (a) Explain five befits that may accrue to an organization that adopts an open

1. b) Discuss five circumstances under which a partnership may be

• (a) Amboseli Roses is a horticultural company producing Explain six

Unit produced (in tones) Total fixed cost Sh. Total variable cost Sh. Total cost Sh. Total average cost Sh. Marginal cost Sh. 0 200 0 10 200 50 20 200 80 30 200 100 40 200 140 50 200 200

factors that may influence the choice of a channel for distributing its products.

1. b) Give four reasons for maintaining books of original

• (a) Discuss five causes of unfavourable balance of payment for most developing

1. b) Given information and three transactions, required to prepare a balance sheet showing the items in their relevant classes.

 

KCSE 2012

• (a) Explain five benefits of division of labour to an

 

1. b) Explain five ways in which computer may be used in an office

 

Price (sh) Quantity demanded “000” tones Quantity supplied “000” tones 35 30 25 20 15 10 5 5 10 20 25 30 40 55 80 65 55 40 35 20 5

• (a) Given demand and supply schedules for product A in a week, required to draw demand and supply curves showing the market equilibrium for the product.

 

 

1. b) Explain five merits of direct taxes to the

• (a) Explain five disadvantages that a country would suffer if she restricted trade with other countries.

1. b) Discuss five factors that may promote entrepreneurship in 4 (a) Explain five characteristics of property insurance.
2. b) Explain five elements of effective

• (a) Given trial balance, required to prepare (i) a profit and loss account (ii) a balance sheet.
  1. Describe four characteristics of
• (a) A school leaver plans to start a retail Explain five types of small scale shops the person may start.
  1. Explain five circumstances in which a firm may acquire a monopoly

 

 

KCSE 2013

 

• (a) Explain five benefits that may accrue to a country with a large population of skilled labour force.
  1. Outline five characteristics of an efficient tax
• (a) Explain five benefits that Kenya may get as a member of
  1. Explain five factors that may hinder economic development in Kenya. 3 (a) Explain five benefits that may be realized by a country as a result of

government policy to relocate industries to rural areas.

1. Given information and gross profit margin as 40% and required to prepare
   • A TPL
   • A balance sheet

• (a) Explain five advantages of advertising to the
  1. Given opening balance and some transactions and required to prepare a duly balanced three column cash book.
• (a) Outline six circumstances under which a trader may use air
  1. Explain four ways through which a public limited company may be 6 (a) With aid of a diagram, explain the effects of an increase in supply of a

commodity while its demand remains constant.

1. b) Explain five features of

KCSE 2014

 

• (a) Explain five benefits a firm may enjoy by preparing a business
  1. Explain five demerits that a country may suffer when the government becomes a major investor in business.
• (a) Given opening balance and some transactions required to prepare a three column cash book,
  1. Explain four reasons for which traders observe ethical practices in product
• (a) Explain five objectives that may be achieved by establishing firms in different parts of a country.
  1. Describe five accounting documents that are used in home
• (a) Given balances and required to calculate financial ratios (i) turnover (ii) rate of stock turnover (iii) mark-up (iv) margin (v) net profit.
  1. Explain five guidelines that should be followed by the government in its
• (a) Explain five disadvantages that a developing country may suffer by liberalizing foreign trade.
  1. Explain five features of monopolistic
• (a) Apart from selling shares, explain five sources of finances for public limited
  1. There has been a decline on the demand for wooden furniture. Explain five factors that may have caused this trend.

 

KCSE 2015

 

1 (a) Explain five uses of national income statistics to a country.

1. b) Discuss five principles that would lead to effective uses of government 2 (a) Explain five ways in which the consumer may benefit from warehousing.
2. b) Given transactions to prepare a two column cash

 

3 (a) Describe five characteristics of monopolistic competitive market.

1. b) Explain five features of human 4 (a) Given trial balance to prepare a TPL.
2. b) Explain five methods of determining the price of a product other than price

• (a) Explain five trends in office
  1. Explain five advantage of government involvement in
• (a) Explain five benefits which may accrue to Kenya by being a member of African Development Bank (ADB)
  1. Explain five features that are common o underdeveloped

 

KCSE 2016

1 (a) Explain five factors that may promote entrepreneurship in Kenya.

1. b) Explain five circumstances under which a partnership may be 2 (a) Explain five advantages of government involvement in business.
2. b) Traders are required to observe ethical practices when carrying out product promotion. Explain five reasons for observing such ethical practices.

• (a) Explain five methods of determining the price of a product other than price
  1. Explain five benefits that may be realized by a country as a result of government policy to relocate industries to rural areas.
• (a) Given transactions to prepare a duly balanced three column cash
  1. Given assets, capital and liabilities and few transactions to outline the effects of transactions on items of the balance sheet.
• (a) Explain five guidelines that may be used by the government of a country to promote efficient use of her resources.
  1. Explain five disadvantages that a country may face if she restricted trade with other countries.
• (a) Given opening balances and few transactions to prepare a three column cash book and balance off.
  1. Outline five reasons that may influence the government to start a

 

KCSE 2017

• (a) Explain five ways in which the internal environment may contribute to the success of the business enterprise.
  1. Describe five channels of distribution that a Kenyan manufacturer would use to ensure his goods reach consumers in another country.
• (a) Explain five differences between chain stores and departmental
  1. Given trial balance to prepare
• (a) Explain five befits that a private limited company would get by converting to a public limited company.
  1. Explain five disadvantages of using direct taxes to raise government 4 (a) Given transactions to prepare a two column cash book
  2. b) Explain five factors that one may consider when selecting a means for
• (a) Explain five demerits of the output approach in measuring national
  1. Explain five circumstances under which a country may realize surplus in a balance of payments.
• (a) Explain five methods that the government may use to increase supply of goods in the market.
  1. Explain five factors that may promote the growth of entrepreneurship in

KCSE 2018

 

• (a) Explain five circumstances that may lead to existence of business opportunity to be exploited by the entrepreneur.
  1. Explain five factors that Chuma Steel manufacturer may consider when choosing a channel for distributing their products.
• (a) Explain five clauses that must be specified in Memorandum of Association of a public limited company.
  1. Given information and required: (i) to prepare trading account (ii) work out percentage mark-up (iii) calculate rate of stock turnover.
• (a) Explain demerits of using carts as a means of transport in
  1. Explain five types of direct taxes that the government may use to collect revenue from individuals and companies.
• (a) The demand for soft drinks has been on Explain five factors that may have contributed to this.
  1. Describe five forms of economic integrations that countries may join to promote international trade.
• (a) Explain five differences between an open office and an enclosed
  1. Given information and some transactions to prepare a balance
• (a) Explain five problems of using national income statistics to compare the living standards of citizens of Kenya and Tanzania.
  1. Given transactions to prepare two column cash

 

KCSE 2019

• (a) Explain five services that may be offered by wholesalers to retailers,
  1. Explain five differences between a sole proprietorship and a public limited
• (a) Explain five negative implications of young
  1. Given trial balance to prepare a TPL and find initial 3 (a) Explain five demerits of pipeline as a means of transport.
  2. b) Explain five measures that may be taken to increase the volume of
• (a) Given sales, cost of sales, average stock and expenses as 5% of Required to calculate: (i) Margin (ii) total expenses (iii) Net profit (v) rate of stock turnover.
  1. Outline five benefits of a business to the
• (a) Explain five advantages of locating firms in different parts of the
  1. Explain five government initiated methods of consumer 6 (a) Describe the procedure of obtaining insurance policy.

1. Outline five assumptions associated with the circular flow of income in a two sector economy.

 

KCSE 2020

• (a) Explain five measures that the government may take to solve youth unemployment in Kenya.            (10 Marks)
  1. Explain five reasons for consumer (10 Marks)
• (a) Explain five principles of Government (10 Marks)
  1. Explain five trends in office (10 Marks)
• (a) Given transactions to post on relevant ledger (10 Marks)
  1. Explain five benefits of intermediaries to the consumer in the chain of distribution. (10Marks)
• (a) Explain five benefits of savings account to a (10 Marks)
  1. Explain five ways in which a warehouse may promote (10 Marks) 5 (a) Given a trial balance to prepare: i) P&L account. (5 Marks)
  2. ii) A balance (5 Marks)
  3. b) Explain five benefits of communication to a (10 Marks)

6 (a)       Explain five reasons that may take it necessary for the government to promote entrepreneurship.                                            (10 Marks)

1. b) Explain five advantages of indirect production to the (10 Marks)

KCSE 2021

1 (a)       Explain five circumstances under which a producer may sell goods directly to the consumer.                                            (10 Marks)

• Explain each of the following terms of sale as used in international trade:

(10 Marks)

• Ex-works (ii) Cost and Freight (iii) FOB (iv) Landed (v) In Bond 2 (a) Explain five factors that may discourage entrepreneurship in Kenya.

(10 Marks)

(b) Explain five demerits of indirect taxes. (10 Marks)

• (a) Explain five errors that may not be detected in a trial

(10 Marks)

• Explain five documents prepared by the seller after receiving an order up to the point of delivery. (10 marks)

• (a) Explain five reasons that may make a firm operate on a small (10marks)
  • Given information to prepare (i) Profit and Loss (6 Marks)
  • (I) Working (1 Mark)

( II) Return on Capital Employed. (3 Marks) 5 (a)               Explain five reasons that make it necessary for the Government to train

business people.     (10 Marks)

(b)      Explain five problems that the Kenyan Government may experience when implementing the Vision 2030. (10 Marks)

6 (a)       Explain five advantages of written communication. (10 Marks)

(b)     Given transactions to prepare a Two-column Cash book. (10 Marks)

KCSE 2022

1 (a)       Explain five circumstances under which a bank may dishonour a cheque.        (10 Marks)

• Explain five factors that may lead to an increase in the level of National Income of a country. (10 Marks)

2 (a)       Explain five factors that may lead to dissolution of a co-operative society. (10 Marks)

• Explain five features of underdeveloped (10 Marks) 3 (a) Given opening balances and few transactions to;
  • Prepare ledger (8 Marks)
  • Extract Trial (4 Marks)

(b)      Explain four elements of a good transport system. (8 Marks)

4 (a)       Explain five ways in which employees may contribute to the success of a business. (10 Marks)

(b)    Explain five roles of the World Bank in promoting international trade.

(10 Marks) 5 (a)               Explain five limitations of mobile phones in communication.

(10 Marks)

(b)     Use the diagram given below to answer the questions that follow D1                D0

Price                                                                 S

Pe0                                                                                         e0

 

S

D1         D0

Quantity

 

• Explain four effects of the shift in demand curve from Do to (8 Marks)
• State what is represented by the shaded area. (2 Marks) 6 (a) Given a Trial Balance to Prepare a TPL and a Balance sheet. (12 Marks)

(b) Explain four reasons that may make Government departments adopt open office layout. (8 Marks)

 

Business Studies KCSE Paper 2 (2009-2020) Accounting Questions

 

 

KCSE 2009

2(b) The trial balance of Zakayo Traders as at 1 June 2008 is given below.

 

Details	DR (sh)	CR (sh)
Stock Creditors Debtors Bank Fixed assets Cash Capital Lighting due	76,500   350,000 260,400 970,200 120,500	450,400       1,300,000 27,200
	1,777,600	1,777,600

During the month, the following transactions took place.

June 5Paid a creditor sh. 228,000 by cheque in full settlement of a debt after deducting a 5% cash discount.

June 15Withdrew sh. 100,000 from bank for office use.

June 28Received sh. 160,000 cash from a debtor after allowing cash discount of sh. 40,000.

 

Required: Record the above transactions in their relevant ledger accounts and balancethem off. (10 Marks)

5 (b) Malamu Traders had the following balances as at 31 December 2008.

Repairs on buildings Repairs on furniture Repairs on motor vehicles General expenses Capital

60,000 72,030 300,000 102,100 1,400,000

 

Prepare: (i) Profit and loss account for the year ended 31 December 2008.

(ii) Balance sheet as at 31 December 2008. (12 Marks)

KCSE 2010

3(a) The following balances were extracted from the books of K100 Traders for the year ended 30^th June 2008.

 

 

 

 

 

 

 

 

 

Items Stock on 1stJuly 2007 Discount received Furniture Motor vehicle Returns inwards Returns outwards Debtors Creditors Purchases Carriage on sales Carriage on purchases Lighting Sales Insurance Repairs Water bills General expenses Cash Capital Bank Bank overdraft Shs. 80,200 7,500 3,000,000 690,000 5,800 20,800 316,800 510,400 1,120,000 12,700 40,000 15,000 1,880,000 4,000 230,000 250,000 56,700 80,000 4,000,000 520,000 2,500

Building Bank loan Debtors Creditors Furniture Gross profit Motor vehicle Discount allowed Lighting Interest on loan Closing stock Rent received 540,000 472,500 116,900 227,000 408,170 520,600 900,000 142,000 25,200 1,200 72,500 120,000

Additional information: Stock on 30^th June 2008 was valued at sh.120,000

Prepare:

(i) (i) Trading, profit and loss account for the year ended 30^th June 2008. (9 Marks) (ii       (ii) Balance sheet as at 30^th June 2008. (5 Marks)

 

 

BS KCSE 2010-2022 P1&P2 Questions compiled by Business Studies Guru, xmurigi@gmail.com||Murigi Michael 2023                                                                                                                         27

 

KCSE 2011

6(b) The following balances were extracted from the books of Rehema Traders on 1^st January, 2007.

 

Capital Creditors Motor van Furniture Stock Debtors Cash

Ksh. 600,000 180,000 200,00 200,00 60,000 80,000 240,000

 

The following transactions took place during the year ended 31^st December, 2007:

 

1. Sold furniture worth 60,000 for which Ksh. 40,000 cash was received and balance was due at the end of the year.
2. Purchased goods worth Ksh. 100,000 for which cash of Ksh. 70,000 was paid and the balance was still outstanding at the endof the year.

• Cash 10,000 was taken from the business by the proprietor to settle the spouse’s hospital bill.

Required:

 

Draw Rehema Traders’ balance sheet as at 31^st December, 2007 showing the items in their relevant classes.(10 Marks)

KCSE 2012

5 (a) The following Trial Balance was prepared by Laketi Traders on 31^st December, 2009.

 

Particulars	Dr(Shs)	Cr(Shs)
Premises	850,000
Debtors	650,500
Creditors		820,000
Motor vehicle	800,000
Equipment	550,500
Gross profit		1,960,200
Furniture	350,000
Stock	75,000
Bank	200,000
Cash in hand	150,000
General expenses	117,800
Discount received		66,100
Commission allowed	12,400
Insurance	7,500
Lighting	4,600
Salaries	78,000
Capital		1,000,000
	3,846,300	3,846,300

 

Using the information given above, prepare:

 

1. A Profit and Loss Account(7 Marks)
2. A Balance (5 Marks)

 

KCSE 2013

3 (b)The following balances were extracted from the books of Solo Traders on 31^st December, 2010.

 

Machinery Furniture Sales Opening stock Closing stock Purchases Rent income General Expenses Debtors Creditors Bank Cash Capital

Shs 360,000 430,500 500,000 75,000 ? 395,000 72,000 60,000 62,250 101,550 202,000 88,800 1,000,000

Additional information:

Gross profit margin is stated at 40%

Prepare: (i) Trading, profit and Loss Account for the year ended 31^st December, 2010. (5 ½ Marks)

(ii) Balance sheet as at 31^st December, 2010.(4 ½ Marks)

4 (b) On 1^st January 2011, Jumo Traders had Shs. 22,500 in cash and Shs. 250,000 at bank. During the month, the following transactions took place:

2^nd Jan: Made cash sales of Shs. 465,200

5^th Jan: Received a cheque for shs.451,250 from Kamau Traders in full settlement of their debt after allowing a 5% cash discount.

15^th Jan: Paid Ndaru Traders Shs. 184,000 in cash after deducting a cash discount of Shs. 16,000.

20^th Jan: Deposited Shs. 200,000 from cash till into the bank.

25^th Jan: Paid wages Shs. 144,000 in cash.

28^th Jan: Settled Mbago Trader’s account of Shs. 300,000 by cheque, less 15% cash discount.

29^th Jan: Withdrew Shs. 250,000 from the bank for office use.

30^th Jan: Deposited all the cash into the bank, except Shs. 59,700

Required: Prepare a duly balanced three column cash book.(10 Marks)

KCSE 2014

2 (a) on 1^st January, 2012 Ndovu Traders had shs. 30,000 cash and shs. 75,000 at the bank.

During the month, the following transactions took place:

January2^nd: Bought goods in cash worth shs. 15,500

January 5^th: Received cash from Chui shs. 23,750 after allowing 5% cash discount.

January 8^th:Withdrew shs. 8,900 from the bank for personal use. January 11^th: Maro, a debtor settled her account of shs. 16,800 by a cheque of shs. 16,000

January 15^th: Sales amounted to shs. 24,250 in cash. January 17^th : Paid Furaha Traders shs. 29,100 in cash in full settlement of their account less 3% cash discount.

January 20^th : Withdrew shs. 15,000 from the bank for business use. January 22^nd: Koko, a debtor, settled her account of shs. 40,000 by cheque less 2.5% cash discount

January 25th: Paid wages shs. 21,000.

Required:Prepare a duly balanced three column cash book.(12 Marks)

 

Details Stock 1st January 2012 Purchases Sales Carriage outwards Carriage inwards Returns outwards Returns inwards General expenses Insurance Stock 31st December 2012

Shs 430,000 930,000 1,155,000 25,000 10,000 20,000 30,000 100,000 25,000 470,000

4 (a) The following information relates to Bahati enterprises: Calculate:

 

1. (1 Mark)
2. Rate of stock turnover (3 Marks)

• Mark (2 Marks)

1. (2 Marks)
2. Net (2 Marks)

 

KCSE 2015

2 (b) The following balances were extracted from the books of Mamboleo Traders in the month of September, 2014.

 

-September 1: Had cash in hand, shs. 15,500 and a bank overdraft of shs. 9,700.

-September 3: Bought goods for sale shs. 12,300 on credit.

-September 5: Sold goods in cash shs. 8,500.

-September 9: Sold good on credit shs. 10,000

-September 12: Received a cheque of sh. 9,000 from a debtor.

-September 15: Paid a creditors shs. 10,000 in cash.

-September 17: Paid wages shs. 2,600 in cash.

-September 19: Received a cheque shs. 23,400 from Samson for goods sold in January.

-September 20: Received shs. 6.700 from a debtor in cash.

-September 23: Withdrew sh. 7,700 from the bank for office use.

-September 24: Paid electricity bills by cheque of shs. 1,200

-September 25: Received a cheque of shs. 11,500 from a debtor.

-September 26: Made cash sales of shs. 12,800

-September 27: Purchased goods worth 8,950 in cash.

-September 28: Deposited personal cash shs. 3,500 into the business account.

– September 30: Paid water bills by cheque sh. 2,800.

Required:Prepare a two-column cash book. (10 Marks)

Details DR (Ksh) CR (Ksh) Stock Bank Purchases Sales Returns Rent Insurance Creditor Carriage in Discounts 10,000 3,500 15,000   800   950   1,200 300     28,000 1,100 580   450   1,620 31,750 31,750

4 (a) The following trial balance relates to Chui Traders as at 31^st December, 2014.

Additional information:

 

• Closing stock was valued at 2,500.
• Carriage out was 1,200

 

Required:

 

Prepare Trading, Profit and Loss Account. (10 Marks)

 

KCSE 2016

4 (a) On 1^st January, Ndovu Traders had Ksh. 30,000 in cash and Ksh. 75,000 at the bank.

During the month, the following transactions took place. January 2:Bought goods in cash worth Ksh. 15,500

January 5: Received cash from Chui Ksh. 23,750 after allowing 5% cash discount.

January 8: Withdrew Ksh. 8,900 from the bank for personal use.

January 11: Maro, a debtor settled her account of Ksh.16,800 by a cheque of Ksh. 16,000.

January 15: Sales amounted to Ksh 24,250 in cash.

January 17: Paid Furaha traders Ksh 29,100 in cash in full settlement of their account less 3% cash discount.

January 20: Withdrew Ksh 15,000 from the bank for business use. January 22: Koko a debtor settled her account of Ksh 40,000 by cheque less 2.5% cash discount.

January 25: Paid wages Ksh 21,000 cash.

 

Required: Prepare a duly balanced three column cash book. (12 Marks)

 

4 (b) The following balances were extracted from the books of Rehema Traders on 1st January 2015.Ksh

KCSE 2017

2(b)The following Trial balance was extracted from the books of Ojwang Limited on 31^st December, 2013.

 

Capital 600,000 Creditors 180,000 Motor van 200,000 Furniture 200,000 Stock 60,000 Debtors 80,000 Cash 240,000

Ojwang Limited Trial Balance

Details Dr(Ksh) Cr(Ksh) Capital Opening stock   200,000 800,000 Purchases 680,000 Returns 50,000 80,000 Discounts 80,000 45,000 Carriage inwards 42,000 Debtors and creditors 200,000 105,000 Sales Motor vehicles   750,000 1,200,000 Furniture and fittings 250,000 Rent 50,000 60,000 Bank overdraft Carriage outwards   30,000 42,000

As at 31^st December, 2013

 

 

 

 

The following transactions took place during the year ended 31^st December 2015:

1. Sold furniture worth Ksh 60,000 for which Ksh 40,000 cash was received and the balance was due at the end of the year.
2. Purchased goods worth Ksh 100,000 for which cash of Ksh 70,000 was paid and the balance was still outstanding at the end of the year.

• Cash Ksh 10,000 was taken from the business by the proprietor to settle the spouse’s hospital bill.

Required: Outline the effect of each transaction on the items of the balance sheet. (8 Marks)

6 (a) On 1^st September 2015, Gondi had Ksh 55,000 in hand and Ksh 250,000 at bank. During the month, the following transactions took place:

 

• September 2: Cash sales banked Ksh 35,260
• September 3: Bought ribbons in cash Ksh 4,500
• September 8: Paid Wangila, a creditor Ksh 94,000 by cheque in full settlement of his account after deducting 6% cash discount
• September 12: Received a cheque for Ksh 58,800 from Wetu after allowing her a cash discount of Ksh 1,200.
• September 15: Paid salaries Ksh 34,000 in cash
• September 25: Withdrew Ksh 50,000 from bank for office use
• September 28: Anyango, a debtor paid her account of Ksh 75,000 by cheque less 10% cash discount
• September 30: Deposited all the cash into bank except Ksh 13,700

 

Required: Prepare a three-column cash book and balance it off. (10 M)

 

 

 

 

 

 

 

 

 

 

Additional information: Closing stock was valued at Ksh.80,000.

Required: Prepare a TPL account. (10 Marks)

4(a) The following transactions relate to Dagoreti Enterprises for the month of March 2016.

March 1: Started business with Ksh 15,300 in cash and a bank overdraft of Ksh 8,200.

March 3: Made cash purchases of Ksh. 10,200 in cash.

March 4: Harrison, a debtor settled his account of Ksh 18,000 by issuing a cheque of Ksh. 13,400 and rest in cash.

March 5: Paid wages by cheque, Ksh. 5,000.

March 6: Received a cheque of Ksh. 9,310 from Chebet. March 7: Received cash, Ksh. 7,720 from Otieno.

March 8: Paid Hassan Ksh. 5,450 in cash.

March 9: Deposited Ksh. 6,000 from the office into the business bank account. March 10: Paid insurance Ksh. Ksh. 3,700 by cheque.

March 11: Paid Ksh. 3,900 for repairs in cash.

March 12: Received Ksh. 8,570 in cash from Mwende. March 13: Received a cheque of Ksh. 11.200 from Makokha March 14: Paid water bill Ksh. 2,590 by cheque.

March 15: Paid rent Ksh. 6,500 by cheque.

March 29: Took all the cash that was in the office and deposited it into the business bank account.

Required: Prepare a two-column cash book for the month of March 2016. (10 Marks)

 

KCSE 2018

2 (b)The following information was extracted from the books of Kisababu Traders on 31^st December, 2014.

Details                           Ksh

Sales	84,000
Purchases	58,800
Opening stock	15,700
Stock on 31/12/2014	13,000
Returns out	1,500
Returns in Required:	9,000

2014. Prepare Kisababu Traders Trading Account for the period ending 31^st December, 2014. (5 Marks)
2015. Work out Kisababu Traders percentage Mark-up (2 Marks)

• Calculate Kisababu Traders Rate of Stock (3 Marks)

KCSE 2018

5 (b) The following balances were extracted from the books of Mageta Traders on 1^st July, 2016. ( 10 marks)

Details	Ksh
Furniture	56,000
Capital	80,000
Creditors	20,000
Debtors	25,000
Bank	11,000
Cash	8,000

The following transactions took place in the course of the month.

• Paid a creditor 4,500 in cash.
• Took 3,000 from the bank for family use.
• Bought stock 18,600 on credit.
• Acquired a 10 Year Bank Loan 165,000 which was credited to the business account.
• Purchased land worth 82,000 paying by cheque.
• Converted a family table worth 5,500 to business use.
• Received 7,300 in cash from debtor.

Required:

Prepare Mageta Traders Balance Sheet at the end of July 2016. (10 Marks)

KCSE 2018

6(b) Use the transactions given below to prepare Jawabu Traders two column cash book for the month of February 2015.(10 Marks)

 

1^stFeb: Had Sh. 12,500 cash and bank overdraft of Sh. 5,000.

 

2^ndFeb: Used cash to pay for water bill sh 800, electricity sh 1,100 and wages sh 4,700.

 

3^rdFeb: Received a cheque of sh 18,900 from a debtor. 5^thFeb: Sold goods worth sh 7,150 in cash.

7^thFeb: Paid for goods bought for resale worth sh6,400 by cheque.

 

9^thFeb: Received a cheque of sh 13,000 from the co-operative society as earnings from dividends.

 

10^thFeb: Withdrew sh2,500 from the bank for family use. 13^thFeb: Received sh 15,900 in cash from a debtor.

15^thFeb: Deposited sh 9,500 from the office into the business bank account.

 

17^thFeb: Paid a creditor by cheque sh 4,390.

 

27^thFed: Used all the money in the bank to purchase furniture leaving only a balance of sh. 2,010.

 

KCSE 2019

2 (b) The trial Balance given below was extracted from the books of Rakwaro Enterprises on 31 December 2015.

Rakwaro Enterprises Trial Balance

Details Dr (Ksh) Cr (Ksh) Capital Premises   400,000 720,000 Debtors Creditors Bank 388,800   176,000   240,000 Cash 24,000 Drawing 28,000 Purchases Sales Stock 1-1-2015 960,000   160,000   1,440,000 Returns inwards 16,000 Carriage inwards 6,800 Discount allowed 40,400 Salaries and wages 200,000 2,400,000 2,400,000

As at 31^st December, 2015

KCSE 2020

3 (a) Post the following transactions to the relevant ledger accounts and balance them off.(10 Marks)

1/3/2018— Started a business with Ksh. 100,000 at bank.

2/3/2018— Bought motor vehicle worth Ksh. 800,000 on credit from

General Motors.

4/3/2018— Withdrew Ksh. 20,000 from bank for office use.

6/3/2018— Bought stock worth Ksh. 30,000 paying by cheque.

10/3/2018—-Made cash sales of Ksh. 15,000.

10/3/2018— Took cash Ksh. 8,000 to pay hospital bills.

 

KCSE 2020

5 (b) The following is an extract of trial balance from the books of Adan Traders as at 31^st December, 2018.

 

 

 

 

 

 

 

 

Stock on 31 December 2015 was valued at Ksh. 280,400. Required: (i) Prepare Rakwaro Enterprises Trading Profit and Loss Account for the period ending 31 December 2015. (7.5 Marks)

(ii) Determine Rakwaro Enterprises initial capital. (2.5 Marks)

Adan Traders Trial Balance

As at 31^st December, 2015

Details                        Dr (Ksh)               Cr (Ksh)

Premises                               1,120,000

Cash at bank 80,000 Discounts 15,000 2,400 Salaries and wages 27,000 Commission 16,000 9,000 Power and lighting 11,700 Furniture Capital 49,000   1,301,800 Additional information:

Debtors and creditors                 55,00037,300 Cash in hand                           65,000

 

 

 

KCSE 2019

4 (a) The following information relates to Moyale Retailers for the month of july 2015:

Sales                          Ksh 50,000

Cost of sales              Ksh. 40,000

Average stock           Ksh. 20,000

Expenses were          5% of sales

Calculate:

1. Mark-up (2 Marks)
2. Margin (2 Marks)

• Total (2 Marks)

1. Net (2 Marks)
2. Rate of stock (2 Marks)

 

 

 

 

 

Stock of gods on 31 December 2018   Ksh. 25,000. Gross profit                                                         Ksh. 120,000.

Required:

• Prepare Adan Traders Profit and Loss Account for the periodended31 December 2018. (5 Marks)
• Prepare a Balance Sheet as at 31 December (5 Marks)

 

KCSE 2021

4 (b) The following information was extracted from the books of Ushirika Traders as at 31^st December, 2020. (10 Marks)

Details                               Ksh

Gross Profit                     94,000

Commission received       32,000

Carriage Outwards             8,000

General Expenses             15,000

Discount Received            29,000

Total Fixed Assets	1,110,000
Insurance	17,000
Capital	490,000
Drawings	37,000
Long Term Liabilities	610,000
Discount Allowed	12,000
Commission Allowed	4,000
Current Liabilities	162,000
Current Assets	192,000
Salaries	22,000

 

Prepare a profit and Loss Account. (6 Marks)

(ii) Determine: (I) Working Capital. (1 Mark)

(II) Return on Capital Employed. (3 Marks)

 

6 (b) Use the transactions given below to prepare Patel Traders Two Column Cash Bok for the Month of February, 2020. (10 Marks)

1^st Feb: Had Ksh 1,200ncash in hand and a bank overdraft of Ksh. 1,000 2^nd Feb: Used cash to pay water bill Ksh. 200, electricity Ksh. 100 qnd waages Ksh. 400

3^rd Feb: Received a cheque of Ksh. 14,000 from Daisy. 5^th Feb: Sold goods worth Ksh. 7,000 in cash.

7^th Feb: Paid for goods bought for resale worth Ksh. 5,000 by cheque. 9^th Feb: Received a cheque of Ksh. 10,000 from Co-operative Society as earning from Dividends.

10^th Feb: Withdrew Ksh. 2,000 from the bank for family use. 13^th Feb: Received a cheque of Ksh. 10,000 from Petro.

15^th Feb: Deposited Ksh. 1,000 from the office into the business bank account.

17^th Feb: Paid Manu by cheque Ksh. 1,000.

27^th Feb: used the money in the bank to purchase furniture leaving only a balance f Ksh. 2,000.

 

KCSE 2022

3(a) The following balances were extracted from the books of Mtito Andei Wholesalers on 1^st October, 2021. (10 Marks)

Details                                   Ksh

Bank                                    80,000

Cash                                     15,000

Juma (Creditor)                 24,000

ICDC Loan                          70,000

Motor Vehicle                   210,000

Stock                                    45,000

Mangu (Debtor)                  26,000

Capital                                237,000

The following transactions took place in the first week of the month: October 2^nd : Withdrew Ksh. 14,000 from the bank to pay Juma. October 3^rd : Mangu paid his debt of Ksh. 10,000 cash

October 4^th : Took loan from bank worth Ksh. 170,000 cash of which Ksh. 70,000 was used to clear Outstanding ICDC loan.

October 5^th : Purchased goods worth Ksh. 40,000 in cash.

Required:

• Record the above transactions into relevant ledger accounts and balance them off. (8 Marks
• Extract a trial balance as at 3th October, (4 Marks)

6 (a) The following trial balance was extracted from the ledgers of Ushindi Traders 30^th November, 2021. (10 Marks)

Ushindi Traders Tiral Balance

As at 30^th November, 2021

Details                                   DR (Ksh)             CR (Ksh)

Capital                                                                     58,300

Sales                                                                       200,000

Purchases                              111,000

Salaries                                     13,300

Rent Income                                                            40,000

Stock 1/12/2020	12,500
Insurance	10,500
Telephone	9,500
Advertising	14,000
Premises	100,000
Furniture	16,000
Debtors	33,500
Creditors		53,000
Cash in hand	18,400
Cash at bank	12,600
	351,300	351,300

Stock on 30^th November was valued at Ksh. 8,500

Prepare the Trading, Profit and Loss Account for the year ended 30^th November, 2021 and a Balance Sheet. (12 Marks)

KCSE Business Past Papers Answers.

 

 

 

 

 

 

KCSE 2010-2022 P1&P2

BUSINESS STUDIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

QUESTIONS

& MARKING SCHEMES

 

Business Studies KCSE 2010-2022 P1 Marking Scheme

7.          Matching functions of the Central Bank. (3 Marks)

 

KCSE 2010

1. Type of utility created. (4 Marks)
   • Possession utility (ii)Place utility
   • Time utility (iv) Form utility

2.     Reasons for government to start a parastatal. (4 Marks)

1. To increase revenue
2. To provide strategic goods and

• To encourage foreign

1. To reduce foreign
2. To address special social
3. To create more employment

• To take care of sensitive ventures like fire arms and printing money.
• To provide essential goods and services at low

1. To stimulate economic
2. To take care of business that requires a large initial capital

3.        Types of warehouses referred to are: (4 Marks)

• Bonded warehouse (ii) Public warehouse (iii)Wholesalers warehouse (iv) Manufacturers warehouse

4.        Factors that would have caused increase in supply.

1. Fall in cost of production
2. Fall in price of competitively produced

• Technological progress/Increase in level of/advancement in technology

1. Favourable weather/climatic conditions e.g. adequate rainfall
2. Favourable government policies like reduced tax and increased subsidies
3. Future expectations of fall in price of the commodity

• Entry of new firm in the industry
• Increase in factors of production

1. Longer time
2. Less strikes
3. Increase in the price of jointly supplied goods

 

5.            Enotika Traders balance sheet as at 31^st December, 2008. Enotika Traders

Balance Sheet

As at 31^st December, 2008

 

Fixed Assets    480,000	Capital                       300,000
Current Assets 145,220                         625,220	Long-Term Liabilities 2 Year Bank Loan 230,000 Current Liabilities Creditors                95,200   625,220

 

6. Why a three-column cashbook is used both as a journal and a ledger. (4 Marks)
7. Cash transactions are entered in three-column cash book directly as they occur
8. Cash and Bank columns in the cash book act as a ledger and total balances are used to prepare trial balance

• Both discount allowed and discount received columns acts as a journal and their total balances are transferred to the ledger.

1. Both of them have a ledger folio column for cross- referencing.

1. Repayment of Government securities as they mature-

Management of national debt.

1. Receipt of treasury bills to secure loans-Lender of last resort

• Directing commercial banks on the preferred sectors to lend money-Credit control

8.          Terms of sale as used in international trade. (4 Marks)

1. LOCO-this means that the price of goods quoted are as they are at the exporter’s warehouse/premises. The importer meets all other expenses of moving the good to his/her
2. I.F (Cost Insurance and Freight)- the price quoted includes the cost of goods, insurance and transport.
3. A.S (Free Alongside Ship)-the price quoted includes the

expenses from exporter’s premises to the dock including loading expenses. Importer meets other expenses.

1. O.Q (Free on Quay)- this means price quoted includes all expenses up to the quay.

9.          Merits of Management by Walking Around. (4 Marks)

1. Manager gets the first-hand information
2. Manager gets immediate feedback from

• It can help control misuse of resources since workers are cautious.

1. Manager can enhance interpersonal relations with works
2. Manager can address issues/problems as they arise
3. Manager can identify and manage absenteeism or

10.      Why government create an enabling environment for investors. (4 Marks)

1. To minimize cost of doing
2. To expand tax base and increase

• To enable them create more employment

1. To open new areas neglected by
2. To encourage utilization of local
3. To promote public-private sector relationship.

• To enhance country’s economic
• To spur economic

 

11.      Differences between insurance and assurance. (4 Marks)

 

INSURANCE	ASSURANCE
It deals exclusively with property	It deals exclusively with life
Cannot be used as a saving plan	Can be used as a saving plan
Has no surrender value	Has surrender value.
Has no maturity date	Has maturity date
Policy cannot be used as a security for a loan	Policy can be used as a security for a loan
In case of loss compensation is given to the insured	Compensation is given to beneficiaries in case of death of assured
Sum insured depend with value of property	Sum assured depends with assured’s ability to pay
Principle of subrogation and indemnity applies	Principles of subrogation and indemnity does not apply

 

12. Factors that may influence the level of national

(i)Availability of natural factors. (ii)Availability of (skilled) labour.

(iii) Level of technology.                   (iv)Political stability.

(v) Attitude of citizens towards work. (vi)Size of subsistence sector.

(vii) Level of foreign investment. (viii)Amount and quality of capital.

(ix) Entrepreneurial culture.            (x) State of Infrastructure

13.      Difference between cash and credit transactions. (2 Marks)

• In cash transaction goods and money are exchanged immediately/at same time while in credit transaction exchange of goods takes place and payment is done at a later
• Evidence used in cash transaction is cash receipt while in credit transaction an invoice is

14.      Matching types of capital. (3 Marks)

Statement                                                       Type of capital

1. Resource invested into business by the owner-Owner’s equity
2. Excess of current assets over current liabilities-Working capital

• Amount invested into the business by outsider-Borrowed capital

15.      Ways in which expenditure may stabilize the economy of a country. (4 Marks)

1. Provision of security which creates conducive environment for doing
2. Provision of social amenities to cater for social welfare of the citizens

• Spending on infrastructure to improve efficiency in economic activities.

1. Provision of essential goods and services to the public to meet high
2. Provision of incentives to local industries to encourage production.
3. Spending on general government administration for effective operation of the

16.      Problems associated with development planning. ( Marks)

(i) Inadequate funds.                   (ii) Political instability. (iii)Conflicts of interests.             (iv) Lack of political goodwill. (v)Lack of enough specialists.                        (vi) Overambitious plans. (vii)Natural catastrophes/calamities(viii) Inadequate/inaccurate data.

17.      Services offered by wholesaler to a manufacturer. (4 Marks)

1. Links the manufacturer to the
2. Breaks bulk on behalf of

• Provides storage of goods on behalf of

1. Help manufacturer on distribution of
2. Offers advice and valuable information to
3. Products promotion on behalf of

18.      Why transport flowers by air rather than by sea. (4 Marks)

1. Air transport is faster than sea transport in case flowers are urgently
2. Security of air transport is relatively higher than sea and thus flowers will be

• Flowers are light in weight and hence appropriate to use air transport.

1. Flowers are highly perishable hence air transport which is faster than sea transport.

19.      Letters represents (4 Marks)

P(Axis)-per capita income    R-Under population

S(Axis)-Population               Q-Optimum population

20.      Salaries Expense Account (4 Marks)

Balance b/d    24,800 Cash                48,200 Profitt and Loss a/c 20,600 Balance c/d                                   52,400 73,000 73,000

DR                  Salaries Expense Account               CR.

 

 

 

 

21.      Circumstances to start a personal business. (4 Marks)

1. Where there is need to create
2. When there is need for additional

• Where there is need to invest surplus

1. When there is need to utilize extra time
2. When one wants to be own
3. Where there is need to exploits one’s

22.      Ways in which a business idea can be implemented.(4 Marks)

1. By creating a new
2. By improving on an existing

• By improving the quality of

1. By expanding the range of services
2. By offering unique services/products.
3. By improving on process of production/inventing

23.      Measures to improve the working environment an office.

1. Provision of adequate space for
2. Provision of adequate equipments and

• Maintaining tidiness in the

1. Provision of proper and adequate
2. Provision of safety measures and
3. Provision of proper

• Discouraging unnecessary
• Decorating and beautifying the office to be

24.      Challenge for using a cell phone (mobile phone). (4 Marks)

1. Are relatively expensive to
2. It requires constant

• May experience network

1. May be damaging to the
2. There is possibility of been
3. May be relatively difficult to

• Calls or messages may be

25.      Monopolistic competition market curves. (4 Marks)

(i)  a-marginal cost curve       (ii) b-average cost curve

(iii) c-average revenue curve. (iv) d-marginal revenue curve

 

KCSE 2011

1.          Types of wholesalers described below. (4 Marks)

1. A wholesaler who trades in maize grain only-

Specialized Wholesaler

1. A wholesaler who supplies goods to most of the traders in Kitui, Mbooni and Machakos districts in Eastern part of Kenya-Regional Wholesaler
2. A wholesaler who buys tomatoes from farmers in rural areas and sells the same to other wholesalers in urban areas-

Rack Jobber

1. A wholesaler who trades in a wide variety of human medicine-General Line Wholesaler

2.          Factors to consider before buying office equipment.

• Space available
• Cost of the equipment
• Funds available
• Availability of manpower
• Availability of complementary resources eg. electricity
• Adaptability possibility of hiring rather than buying
• Effect on staff morale
• Durability of the equipment

3.          Malpractices consumers need protection by government.

• Overcharging
• Selling underweight goods
• Selling expired goods
• False advertisement/misleading
• Hoarding
• Breach of contract
• Selling sub-standard goods/poor quality

 

4.          State three features of an insurable interest. (3 Marks)

1. Presence of property rights or interest
2. Potential insurable risk must be present

• The property must have monetary value

1. The insurable risk must be legal
2. There must be possibility of suffering financial loss in case of occurrence of risk

5.          Outline four ways of reducing the level of unemployment in Kenya. (4 Marks)

1. Exporting surplus manpower
2. Adopting appropriate education system to instill relevant skills

• Encouraging informal sector (Jua Kali)/Encouraging self- employment

1. Increase government expenditure to expand economy
2. Population control to avoid overpopulation
3. Diversification of economy by encouraging different industries

• Delocalization of industries to ensure balanced regional balance
• To improve infrastructure to support economic activities

1. Encouraging foreign investment by giving foreign investors incentives
2. Adopting use of modern technology to increase production and reduce wastage

6.          State four services offered by a commercial bank to its consumers. (4 Marks)

1. Accepting deposits
2. Safekeeping of valuable items

• Advancing loans

1. Offering foreign exchange services
2. Offering advisory services on financial matters
3. Money transfer services

7.          List four sources of public finance. (4 Marks)

1. Taxes
2. Fines from courts

• License fees

1. Borrowing
2. Grants and foreign aid
3. Rent and rates for use of government property

• Dividends and profits from government investments
• Proceeds from sale of government property

1. Interest earned from loans advanced by government
2. Escheats

8.          Outline four reasons why countries may trade with each other. (4 Marks)

1. To dispose of their surplus
2. To acquire what they do not have

• To enhance bilateral ties/promote peace among trading partners

1. To enhance access of variety of goods for its citizen to improve their quality of life
2. To earn foreign exchange
3. To create employment for their

• To earn revenue through taxation

9.          Outline four reasons why economic development is desirable to a country.       (4 Marks)

1. To improve standards of living of the citizens
2. To improve infrastructure

• To create employment

1. To increase life expectancy of the citizens
2. To improve social welfare of citizens

10.      Indicate the reward associated with each of the factors of production in the table below. (4 Marks)

 

	Factor of production	Reward
a.	Land	Rent/Rates/Royalties
b.	Labour	Wages/salaries
c.	Capital	Interest
d.	Entrepreneurship	Profits

 

11. Outline four circumstances under which a co-operative society may be dissolved. (4 Marks)
12. Where there is a court order to dissolve
13. Where the objectives of the co-operative society have been achieved

• If majority of the members vote to dissolve it during AGM

1. In case of mass withdrawal of members leaving less than ten
2. If the co-operative society is declared bankrupt
3. In case of an order from commissioner of co-operatives to dissolve it.

• In case of continuous loss

 

12.      Highlight four features of a bonded warehouse.

1. i) They are usually located at the entry points. ii)Stores goods that are under bond.

• Goods are released on production of release

1. Storage fees are charged on all goods stored in the warehouse.
2. Goods can be prepared for sale while still in the
3. Goods can be re-exported while still on

13.      Outline four factors that may be considered when measuring the size of a firm. (4 Marks)

1. The volume of output
2. The number of employees

• The amount of capital invested

1. The floor area covered by the firm premises
2. The level of technology used/method of production used
3. The sales volume

• The market served

14. 1. Salim Traders Account (b) Shah Traders Account

 

 

(c) Purchases Account             (d) Sales Account

Mar 10 Salim Traders 200,000

 

15.      On 2^nd November 2006, Oromo received an invoice for Ksh. 12,000. Terms of payment were trade discount 5% and cash discount 10%. If payment is made within 30 days. Determine the amount paid if payment was made on 28^th November 2006. (4 Marks)

5

𝑇𝑟𝑎𝑑𝑒 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡 =        𝑥12,000 = 600      𝐴𝑚𝑜𝑢𝑛𝑡

100

= 12,000 − 600 = 11,400

10

𝐶𝑎𝑠𝑕 𝑑𝑖𝑠𝑐𝑜𝑢𝑛𝑡 =         𝑥11,400 = 1,140 𝐴𝑚𝑜𝑢𝑛𝑡 𝑃𝑎𝑖𝑑

100

= 11,400 − 1,140 = 𝐾𝑠𝑕 10,260

16. 𝐴 = 𝐶 + 𝐿

500,000 = 𝐶 + (150,000 + 100,000)

500,000 − 250,000 = 𝐶 => 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 = 𝐾𝑠𝑕. 250,000

 

1. vi) To reduce rural-urban migration

𝑅𝑂𝐶 =

𝑁. 𝑃

 

𝐶

50,000

=

250,000

𝑥100% = 20%

 

17. Amina Traders on 31^st December 2006

Amina Traders Trading Account

For the period ended31^st December, 2006

 

24. State four benefits that a trader may get by advertising products in a newspaper. (4 Marks)
    1. Wide coverage/message will/each many people
    2. It has reference/evidence of message

• Advertised message can last for a long

1. It allows detailed
2. Graphical details/pictures can be included.
3. Advertised message is readily acceptable by readers.
4. 𝐶𝑃𝐼 = 𝑝1𝑥100 𝐶𝑃𝐼 2006 = 100%

𝑝0

 

18.      State four benefits that a farmer may get by transporting produce to the market by road. (4 Marks)

1600

𝐶𝑃𝐼 2007 =

1200

1

𝑥100% = 133 %

3

1                       1

 

1. Transporting is relatively
2. It is readily available

• It is relatively flexible

𝐻𝑒𝑛𝑐𝑒,      𝐼𝑛𝑐𝑟𝑒𝑎𝑠𝑒 = 133

3

KCSE 2012

− 100 = 33 %

3

 

1. They are variety means of transport to choose
2. It is relatively cheap to hire

19.      Causes of decrease in supply of Sukuma Wiki. (4 Marks)

1. Fall in price of kales
2. Outbreak of kales destroying kales

• Prolonged drought

1. Increase in cost of farm inputs such as fertilizer/seeds
2. Use of inappropriate method of
3. Increased government taxation on

• Off peak seasons
• Increase in price of competitively produced products

1. Increase in price of substitutes such as cabbage making producers to shift to producing

20.      Outline four ways in which households contribute to national income of a country. (4 Marks)

1. Consumption of goods and
2. Savings and

• Provision of factors of

1. Payment of

21.      Circumstances in which trader use oral communication.

1. Where there is need to bargain/negotiate.
2. Where there is need to explain use and features of

• When selling over the

1. Where there is need to get immediate feedback from customers.

22.      Outline four reasons why a firm may remain small.

1. Where the nature of product requires small-scale production
2. Where market is small

• Lack of adequate funds for expansion

1. Lack of appropriate technology
2. Owner’s decision to remain small
3. Legal constraints/government policy

23.                                                        MUTHONI TRADER CASH BOOK

DR      FOR THE MONTH OF JANUARY 2007    CR

1. Outline four circumstances under which cash with order may be used. (4 Marks)
   1. Where the buyer is new to the
   2. Where the buyer’s credit worthiness is in

• Where CWO is the policy of the

1. Where the seller is operating a mail order store business.
2. Where the seller wants to avoid high cost of debt collection.
3. Where the seller needs working

2.          Benefits to a farmer by being a member of a Producer Co-operative Society. (4 Marks)

1. May get farm inputs such as fertilizers at fair
2. May get dividends from shares

• May get credit conveniently and at lower interest

1. May get education on best agricultural
2. The society may prepare goods for sale on behalf of the farmer.
3. May acquire skills on better methods of

• May get transport facilities for their produce from the society.
• May get storage facilities for their produce from the society.

3.          Benefits of globalization to a business enterprise.

1. The business accesses wider market.
2. It makes it possible for countries to share methods of production.

• Facilitates application of better technology for improved products.

1. Encourages collaboration among businesses from different
2. Facilitates sharing of research findings by businesses globally.
3. Enables business to take advantages of resources found in other parts of the world without

4.          Ways in which consumers may protect themselves against exploitation by traders. (4 Marks)

Date Details Cash Bank Date Details Cash Bank Jan 1 Bal b/d 25,250 Jan 1 Bal b/d 150,000 “ 5 Sales 21,500 “ 28 Creditor 80,000 “ 16 Debtor 360,000 “ 28 Creditor 20,000 “ 31 Bal c/d 26,750 130,000 46,750 360,000 46,750 360,000 Feb 1 Bal b/d 26,750 130,000

• Forming consumer

1. Complain through the media.

• Reporting cases of exploitation to relevant authorities.

1. Demonstrating peacefully against
2. Avoiding traders identified as exploiters by refusing to buy from
3. Enlightening themselves about their rights as consumers.

 

5.          Circumstance under which each of the following telecommunication services may be used: (3 Marks)

1. Paging-When there is need to call a person to attend to an emergency within an
2. Facsimile (fax)-Where there is need to send a copy of printed document

• Radio call-When there is need to give coordinated information through a central

6. Marigi Traders Trading Account for the year ended 30^th June Marigi Traders

Trading Account

For the year ended 30^th June 2009 Opening Stock                           165,000                                    Sales            980,600 Add: Purchases                     720,000

COGA4S                    885,000

Less: Closing Stock 100,520 Cost of goods sold      784,480

Gross Profit c/d        196,120                                      

980600                         980,000

7. Monetary policy tools that a government may use to reduce excess money in circulation. (4 Marks)
   1. Open market operations -Selling government
   2. Raising bank interest rates on loans

• Raising Cash/liquidity ratio for commercial

1. Giving directives for commercial banks to increase interest rates on loans
2. Increasing compulsory deposits for commercial bank in central
3. Selective credit control-restrict lending money to some sectors.

• Use of moral persuasion to ensure reduction of supply of money in the

8.          Outline one circumstance under which each of the following types of inflation may occur. (4 Marks)

1. Creeping inflation (a) Where general price levels rise gradually over a period of time usually at single

(b) Where the value of money tends to be stable over time and effects on the economy is not severe.

1. Hyperinflation– (a) Where the general price levels rise at a high rate usually more than two

(b) Where there is drastic loss in value of money and effects on the economy is very severe.

9.          State four forms of economic integration that may exist between countries. (4 Marks)

1. Common Markets-to have common currency to increase free trade and full mobility of
2. Free Trade Area-where barriers such as tariffs and quotas are

• Customs Unions-where member countries charge common external

1. Economic Unions-where common economic institutions like banks are set to deal with monetary

10.      Highlight four problems of development planning that a country may experience. (4 Marks

1. Lack of accurate adequate data for planning
2. Unreliable data which may not be useful in

• Overreliance on foreign donor

1. Lack of qualified planning experts/personnel
2. Private sector activities are not easily
3. Lack of political

• Failure to include local people in
• Rampant corruption where money meant for development planning is misused or

1. Natural calamities which disrupt the development

11.      Benefits of a single shop to Nyaboke farming community (4 Marks)

1. They can buy farm inputs from the
2. They can buy consumer goods from the

• They can buy goods on

1. They can sell some of farm produce to
2. The shop can be used as a communication
3. Nyaboke can employ some of

12.      Outline four features of indirect production. (4 Marks)

1. There is use of modern
2. Goods produced are meant for sale.

• Goods are produced in large

1. There is specialization in
2. Goods produced are of high
3. It encourages

13.      State four factors that may lead to the success of a business. (4 Marks)

1. Availability of adequate
2. Proper location of the business

• Good infrastructure.

1. Right choice of
2. Government support/Favourable government policies.
3. Aggressive

• Political
• Availability of skilled

1. Availability of
2. Proper debt
3. Availability of market/customers.

• Good management of the

14.      State four ways in which a good filing system may facilitate the operations in an office. (4 Marks)

1. It ensures easy retrieval of
2. It ensures office

• It ensures security/safety of

1. Facilitates quicker decision
2. It saves on office
3. It ensures confidentiality of information by limiting access to unauthorized

15.      Highlight four benefits that a country gets by encouraging trade among her citizens. (4 Marks)

1. Earns revenue from
2. Enhanced good relationship between communities/peace in the

• Improved standards of living of its

1. Increased job opportunities for its
2. Improved infrastructure in the
3. Development of rural areas/remote

• Country is able to dispose of its

16.      Challenges encountered when measuring national income using the output approach. (4 Marks)

1. Inadequate output
2. Problem of deciding on what to

• Problem of valuing output in subsistence

1. Price fluctuations/inflation.
2. Problem of illegal activities which are not included in measuring national
3. Problem of valuing government inputs are not factored in at market

• Problem of deciding on which prices to use for goods kept as

 

17.      Highlight four measures that a government may take to reduce the mortality rate in a country. (4 Marks)

1. Availing adequate modern medicines in
2. Improvement and equipping of health facilities to enhance their efficiency.

• Ensuring peace/political stability to avoid death of people.

1. Sensitization and civic education on personal hygiene.
2. Disaster preparedness to reduce fatalities in case of disaster
3. Enforce traffic laws to reduce road

• Control abuse of drugs by
• Development of social amenities e.g entertainment halls to improve quality of life of its

18.      Balance Sheet for Highlife General Stores as at 31^st December, 2008. (5 Marks)

Highlife General Stores Balance Sheet

Fixed Assets Land and Buildings   650,000 Capital                         870,000 Motor Van  150,000 Long Term Liabilities 800,000 10 Year Bank Loan 500,000 Current Assets

Stock 470,000 Current Liabilities Debtors 350,000 Creditors                 220,000 Cash 50,000 870,000 Bank overdraft           80,000                 1,670,000  1,670,000

As at 31^st December, 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

	Statement	Type of entry
i.	An increase in revenue.	Credit entry
ii.	A decrease in an asset.	Credit entry
iii.	An increase in an expense.	Debit entry
iv.	A decrease in a liability.	Debit entry

 

Circumstance Document to issue i. Jambi Ltd sold goods worth Sh. 54,000 on credit to Jamilar Traders. Invoice ii. Osuri Enterprise which had bought goods worth Sh. 27,000 was erroneously charged for only Sh. 25,000. Debit Note iii. Guru Traders paid Sh. 33,900 by cheque to Jambi Ltd for goods which had been supplied. Receipt iv. Goods sold to Jamilar Traders had been overpriced by Sh. 4,000. Credit Note

• Name the document Jambi Ltd would issue. (4 Marks)

 

 

 

 

 

 

 

 

 

 

 

 

 

21. Conditions under which a warehouse may be considered to be operating efficiently. (4 Marks)
    1. When it is conveniently
    2. When it has proper building

• When it has proper recording

1. When it has adequate handling
2. When it has adequate skilled
3. When it has good communication and transport

• When it has adequate storage
• When it has good security system in

22.      Advantages of promoting sales through the internet.

1. Access to world markets for increased sales.
2. It is relatively fast to promote sales through the

• Reduced cost of sales promotions since it is relatively cheaper.

1. It reduces paperwork of keeping
2. Instant receipt of order from all over the

23.      Methods used to determine prices of goods other than the forces of demand and supply. (4 Marks)

1. Bargaining/haggling
2. Recommended Retail price

• Tendering

1. Abiding to government set price/price control
2. Auctioning
3. Price collusion with other traders

24.      Factors that a firm may consider when deciding on the goods to produce. (4 Marks)

1. Profitability/returns
2. Government policy

• Availability of resources such as capital, raw materials, labour

1. Demand/market
2. Level of competition
3. Cost of production

25.      Features of a perfectly competitive market. (4 Marks)

1. Large number of buyers and sellers.
2. There is no government

• Products are homogeneous/identical

1. There is uniformity in buyers and sellers
2. The buyers have perfect knowledge of the
3. There is free entry and exit in the

• There is perfect mobility of factors of
• No transport cost is

1. Both buyers and sellers are price

 

KCSE 2013

1.          Ways in which Business Studies may be of benefit to an individual. (4 Marks)

1. It equips the individual with skills and knowledge to start and run a business successfully.
2. It prepares the individual for future career in

• It enables an individual to develop positive attitude towards the environment and care for it.

1. It enables an individual to develop positive attitude towards
2. It enables an individual to understand and appreciate the role of government in
3. It enables an individual to understand and appreciate the role of business in provision of goods and services in the society.

• It enables an individual to coexist peacefully with the members of their

2.          External factors that may negatively influence the operations of a business. (4 Marks)

1. Unfair/stiff
2. Insecurity

• Use of inappropriate

1. Unfavourable government
2. Political
3. Decrease in population leading to reduced customers

• Poor
• Unfavourable socio-cultural factors

1. Natural
2. Strong consumer bargaining

 

3.          State four characteristics of a successful entrepreneur.

(4 Marks)

1. Innovative and creative. (ix) Future oriented
2. (x) Information seeker

• Problem solver (xi) Desire for feedback

1. Time (xii) Independent
2. Self-confident. (xiii) commitment to work
3. Risk (xiv) Good decision maker

• Initiative
• Goal-oriented/desires to

4.          State four functions of an office. (4 Marks)

2. Filing

• Receiving and recording information

1. Distribution of information
2. Reproduction of documents
3. Safeguarding and controlling organizations property

• Communication centre
• Administration centre

5.          Classification of trade. (3 Marks)

Home trade/Local trade      International trade/Foreign trade Retail trade & Wholesale trade Import trade & Export Trade

6.          Relevant participants. (4 Marks)

 

	Statement	Participant
a.	Payment for goods and services	Households
b.	Sale of factors of production.	Households
c.	Payment for factors of production.	Firms
d.	Sale of goods and services.	Firms

 

7. Wekesa Traders’ Trial (5 Marks)

Wekesa Traders Trial Balance

As at 31^st December, 2009.

Particulars/Details	DR (Ksh)	CR (Ksh)
Capital		500,000
Buildings	200,000
Cash in hand	20,000
Furniture	25,000
Motor vehicle	400,000
Creditors		18,000
Debtors	36,000
Bank	100,000
Bank Loan		263,000
	781,000	781,000

 

8. Calculation of owner’s capital. (4 Marks)

𝐶 = 𝐴 − 𝐿

𝐶 = (1,840,000 + 400,000) − (600,000 + 150,000)

𝐶 = 2,240,000 − 750,000

𝐶𝑎𝑝𝑖𝑡𝑎𝑙 = 𝟏, 𝟒𝟗𝟎, 𝟎𝟎𝟎

9.          State the type of unemployment relating to each of the following descriptions: (4 Marks)

• Caused by alternating trading patterns occurring at similar times-Cyclical unemployment
• Arises where workers have more skills and higher qualifications than the job requirements-Disguised/hidden unemployment
• Arises out of mismatch between the skills possessed by potential employees and the location of the jobs available- Structural/Technological
• Arises when people are unwilling to take up jobs due to low pay-Voluntary/Real wage unemployment

10.      Circumstances under which the capital of a business may change. (4 Marks)

1. In case of
2. In case of drawings

• In case of

1. In case of additional

11.      Below are some entries in the cash book of Romano Traders for the month of July 2010.

Dr.                     CASH BOOK                                                  Cr.

Date	Details	Cash (Ksh)	Bank (Ksh)		Date	Details	Cash (Ksh)	Bank (Ksh)
2010 July 1	Bal b/d	15,000			2010 July 1	Bal b/d		100,000
July 6	Cash		20,000		July 6	Bank	20,000
July 20	Sales		15,000		July 15	Wages	5,000
July 28	Debtors	20,000			July 29	Stock		10,000
					July 31	Bal c/d	10,000

State the meaning of the following entries. (4 Marks)

1. July 1, 2010 Balance b/d, bank column, shs. 100,000-

Bank Overdraft

1. July 6, 2010 Cash shs. 20,000 and bank shs. 20,000-

Contra entry

1. July 28, 2010 Debtors shs. 20,000-Cash received from debtor
2. July 31, 2010 Balance c/d shs. 10,000-Closing cash in hand

12.      Circumstances under which documents may be issued by a trader: (4 Marks)

1. Debit Note-When correcting
2. Invoice-When demanding for payment of goods supplied.

• Credit Note-When correcting an

1. Quotation-When replying to a specific letter of

13.          Documents required by the registrar of companies in order to register a public limited company. (4 Marks)

1. Articles of
2. Declaration by

• Memorandum Of

2. List of
3. Statement signed by directors

14.      Measures a country can take to reduce level of inflation.

1. Reduce government
2. Increase personal income tax to reduce disposable

• Introduce compulsory saving schemes like Pension

1. Increase interest rates on loans to make borrowing expensive.
2. Raising compulsory deposits by the commercial banks to central bank to reduce money available for
3. Enforce wage control to prevent wage increase.

• Control level of prices through
• Reducing taxes to reduce cost of production by producers to enable them reduce

1. Restricting imports to curb imported
2. Selling government securities in open market operations to reduce supply of money in
3. Restricting terms of hire purchase and credit terms to discourage

• Regulate printing and minting of
• Use of buffer stocks to stabilize
• Giving subsidies to producers to reduce cost of production to enable them reduce

 

15.      Outline four factors that may make a producer to by- pass the wholesaler when distributing goods. (4 Marks)

1. Having own retail
2. Dealing in perishable goods like bread which require shorter channels.

• Dealing in technical goods which require elaborate after sales

1. Consumers and retailers buying in large
2. Need to keep price of goods
3. Limited geographical spread of the

• Government
• When the production is in small

1. Where the producer has enough storage
2. When goods are produced on

16.      Benefits that a country would get by developing her infrastructure. (4 Marks)

1. Attraction of foreign
2. Increased per capital/ income.

• Creation of employment

1. Easier/fast communication
2. Improved security.
3. Increased entrepreneurial activities

• Improved health.
• Enhanced industrialization

1. Increased production
2. Reduced cost of
3. Enhanced movements of goods and

• Equitable development

17.      Benefits of bonded warehouse to government. (4 Marks)

1. Enable the government to prevent entry of harmful goods into the country.
2. Enable the government to inspect goods while still under bond.

• Enables the government to regulate the quantity of imports.

1. Enables the government to prevent entry of illegal goods into the country.
2. It is a source of revenue for the government from customs
3. Enables verification of documents for goods on transit.

• Enables the government in checking of the quality of goods entering the

18.      Qualities of a successful salesperson. (4 Marks)

1. Has adequate knowledge about the product
2. Good listener

• Is a good

1. Have good command of
2. Is sensitive to customer
3. Is persuasive

• Has a high sense of integrity/honesty.
• Polite and courteous

1. Is presentable (neat and well groomed).
2. Persistent and patient
3. Has a high level of

• Optimism
• Confident
• Adaptable/flexible

19.      Factors that may cause the supply curve to shift to right.

1. Reduced cost of
2. Improved production methods/ improved technology

• Entry of new firms into the

1. Future expectation of price fall/decrease

1. Reduced price of substitute
2. Favourable government subsidies e.g subsidies

• Increase in price of complementary products
• Reduced incidences of industrial strikes

1. Increase in factors of production
2. Bumper harvest/Favourable seasons

20.      Positive effects that production activities may have on community health. (4 Marks)

1. Provision of safe
2. Provision of clean

• A source of income which can be used to access medical

1. Provision of labour/job which leads to reduced stress and a chance to keep fit while
2. Provision of health facilities as a social responsibility.
3. Provision of recreational

• Provision of health education to fight against diseases.
• Provision of sewerage disposal plants which boosts community

1. Planting trees to improve the

21.      State four basic features of a market. (4 Marks)

1. Availability of buyers and sellers
2. Availability of goods and

• A platform/place for exchanging goods and services/conducting

1. Availability of medium of
2. Freedom to buy and

22.      State four features of a parastatal. (4 Marks)

1. Provide essential
2. Not profit motivated.

• Is formed by an Act of

1. Is mainly funded by the
2. Is managed by government
3. Any surplus earned is surrendered to the government.

• Has limited
• It is attached to a government ministry.

1. Can be dissolved only through an act of

23.      Circumstances in which the government may be involved in business. (4 Marks)

1. When a business venture requires investment of large sums of money which individual entrepreneurs may not
2. When the goods or services to be provided are essential to the welfare of the

• When there is need to protect citizens from exploitation by private

1. When the government desires to create employment for the
2. When the government needs to generate income through revenue collection.
3. When there is need to safeguard national

• When the venture is strategic but provides low profits hence unattractive to private investors.
• Where there are monopolies in the economy, the government gets involved in business to increase competition.

1. Where there is need to balance regional
2. Where there is need to reduce foreign dominance in the
3. Where there is need to attract foreign

 

24.      Factors that a trader may consider when choosing a means of transport. (4 Marks)

1. Nature of goods – whether they are bulky/perishable/fragile.
2. Speed/urgency-where goods are to be delivered

• Cost of transport-should be

1. Distance to be covered.
2. Availability of the
3. Packaging requirements for the

• The risks
• Availability of

1. Reliability of the
2. Flexibility of the
3. Comfortability of the

• Need for special services.

25.      Reasons for privatizing public corporations. (4 Marks)

1. Reasons for privatizing public
2. To improve efficiency in their

• To generate revenue to the government through sale of shares and

1. To enhance
2. To increase public participation in economic activities of the
3. To reduce government

• To comply with conditions set by development partners and international donor agencies.
• To enable the government to concentrate on other state responsibilities.

1. To minimize political

KCSE 2014

1.     Features that relate to the description below. (4 Marks)

 

	Description	Feature
(a)	A person is unable to fully satisfy all wants.	Insatiable
(b)	Once satisfied, they have a tendency of being felt again.	Repetitive/ Recurrent
(c)	Some wants are satisfied together.	Complementary
(d)	The same want can be satisfied using different resources.	Competitive

2. Name two occupations that relate to each. (3 Marks)

 

(a)	Extraction	Mining, Fishing, Lumbering, Quarrying, Farming
(b)	Construction	Masonry, civil engineering,                                                  road construction, bridge construction, building houses
(c)	Direct services	Nursing, hair-dressing. Kinyozi, teaching, Entertainment, health care services

3. Tasks that may be carried out by a receptionist in
   1. Receiving visitors to the
   2. Receiving and routing telephone

• Taking and passing messages.

1. Dealing with simple petty cash for purchase of newspapers/tea
2. Supervising
3. Keeping simple

• Distributing publications by the

4.     Circumstances in which a cheque may be used. (4 Marks)

1. When the amounts involved is
2. When the seller insists on payment by

• When evidence of payment is

1. When payment is to be directed into the payee’s
2. When the terms of sale is cash with
3. When there is need to ensure safety of the money being transferred.

5.     Activities that may be carried out in a stock exchange market.      (4 Marks)

1. Buying and selling of
2. Mobilizing savings for

• Listing of

1. Issuing of new securities/raising
2. Publication of statistical
3. Advising

6.     Outline four features of liners in sea transport. (4 Marks)

1. Follow a regular time table /
2. Call at ports at regular

• Follow a regular

1. Charges are fixed regardless of
2. Form associations/conferences to protect themselves against unfair

7.     State five types of information that a manager may communicate to the juniors. (5 Marks)

1. Instructions and
2. Explain policies of the

• Give procedures to be followed in carrying out

1. Information on performance of juniors (evaluation).
2. Invitation to
3. Allocation/ delegation of

• Motivating/ inspiring
• Giving solutions to juniors’

8. Explain the meaning of the following terms: (4 Marks) (a)Insured– Is an individual or business that signs an insurance contract to be covered against a risk of loss and can therefore be compensated in the event of the loss occurring.

-Individual/organization taking the insurance cover.

(b) Insurance- Is an arrangement (contract) in which the insured pays premiums to the insurer so as to be compensated in case of loss occurring as a result of an insured risk.

9.    Movement along/shift of the demand curve. (3 Marks)

 

	Factor	Movement along or shift of
(a)	Change in income.	Shift of
(b)	Change in price.	Movement along
(c)	Change in weather	Shift of

 

10. Roles played by the broker in the chain of
    1. Linking the buyer and the
    2. Bargaining on behalf of the owner/seller.

• Passing information between the owner/seller and the client.
• Facilitating access to a variety of goods and services to the

1. Providing an avenue for the seller to access many buyers.
2. Giving advice to buyers and sellers on market

11.  Factors in a two sector closed economy   (4 Marks).

1. i) Payment for goods and
2. ii) Provision of factors of production.
3. i) Payment for factors of
4. ii) Provision of goods and services

12.  Fill in the missing figures in the table below: (4 Marks)

	FA	CA	C	L
(a)	275,500	155,000	315,000	115,500
(b)	182,000	108,700	73,600	217,100
(c)	138,600	76,400	123,100	91,900
(d)	313,450	211,340	189,170	335,620

 

13. Mheshimiwa Ltd Trial Balance As At 31^st May,

Mheshimiwa Ltd Trial Balance

As At 31^st May, 2010

 

Details	DR (Ksh)	CR(Ksh)
Purchases	3,880
Sales		3,350
Returns outwards		150
Returns inwards	160
D. Simila (Debtor)	2,550
P. Mwende (Creditor)		3,100
Wages	800
Cash	960
Capital		1,750
	8,350	8,350

14. Name the column labeled V, W, X and Y. (4 Marks) Dr.

DATE		V– Folio	W- Discount Allowed	X– Cash	Y– Bank

15. Functions of the IBRD/World Bank. (4 Marks)
    1. Provision of grants to member countries to foster economic
    2. Issuance of loans to developing countries at lower rates for development

• Provision of personnel/manpower to facilitate project appraisal.

1. Provision of experts to implement and manage identified projects.
2. Training of local personnel in project appraisal and implementation.
3. Supervise member countries’ management of public finance.

• Approving development plans from member countries for funding.
• Advising and recommending economic policies to be adopted by member

1. Promotes long term growth in international

16.  State four disadvantages of barter trade. (4 Marks

1. Lack of double coincidence of
2. Problem of indivisibility of some

• Perishability of some

1. Difficult to measure
2. Problems of portability of some
3. Lack of a standard for making deferred

• Lack of unit of

17.  Jelimo Stores General Journal.

18. List four levels of inflation. (4 Marks)
    1. Creeping/Mild/Moderate inflation
    2. Galloping/Rapid inflation

• Hyperinflation/Run-away inflation

1. Stagflation

19.  Outline four characteristics under-developed countries have in common. (4 Marks)

1. Low per capita
2. High population growth

• Poor standards of

1. Low literacy
2. High levels of
3. Poor health

• Low life
• Over reliance on primary level of production/high levels of subsistence

1. High dependency
2. Poor
3. Low technological

• Large income
• Low levels of labour

20.  State four factors in the internal environment that may influence the business. (4 Marks)

1. The management/structure.

• Capital/finances.

1. The
2. Marketing strategy/handling of
3. Research and

• Condition of the
• Business

21.  Highlight four reasons for which businesses should observe ethical practices. (4 Marks)

1. To ensure fair
2. To protect consumers/customers.

• To protect the

1. To protect the rights of
2. To promote social
3. To maintain a positive

• To abide by the country’s
• To maintain

1. To promote positive cultural

22.  State four merits of promoting products through personal selling. (4 Marks)

1. Enhances personal appeal between the buyer and the
2. Can effectively counteract customers negative attitudes towards the

Date Particulars LF Dr. Cr. 2010 Oct. 10   K.Likia a/c Stationery a/c (Being record of sale of stationery on credit) Motor Vehicle a/c Onjwaria Motors a/c (Being record of Purchase of motor vehicle on credit)   3,000     3,000 700,000 Oct. 23 700,000 703,000 703,000

• Questions and complaints from customers are channeled directly to employees of the company and not

1. Demonstration on the use of the goods can easily be
2. Flexibility in presentation to suit customer
3. Provide immediate feedback from and to the clients

• Effective in conducting market

23. 𝐹. 𝐶 = 𝐼. 𝐶 + 𝐴. 𝐼 + 𝑃 − 𝐷

7,000,000 = 𝐼. 𝐶 + 800,000 + 3,100,000 − 400,000

7,000,000 − 800,000 − 3,100,000 + 400,000 = 𝐼. 𝐶

𝐼. 𝐶 = 3,500,000

𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 = 𝐾𝑠𝑕. 3,500,000      (3 Marks)

 

24.  Outline four positive implications of youthful population to an economy. (4 Marks)

1. Less expenditure on social security and
2. Wider market for goods meant for the youth like clothing.

• Guaranteed continuous supply of

1. Flexibility and adaptability to technological changes which improve
2. Faster growth of some sectors like the music, fashion and fast-food
3. Increased innovation due to their adventurous nature.

25.  PQ’s Trading Account for the year ended 31^st December, 2012. (4 Marks)

PQ Ltd Trading Account

For the Year ended 31^st December, 2012.

Opening stock	57,140	Sales	23,498,000
Add: Purchases	16,290,000	Less: Returns	in     27,200
COGA4S	16,347,140	Net Sales	23,470,800
Less: Closing Stock	86,340
COGS	16,260,800
Gross Profit c/d       7,210,000 23,470,800		23,470,800

KCSE 2015

1. What are the reasons that would make an individual engage in business? (4 Marks)
   • Provision of goods and
   • Create
   • Exploitation of economic
   • Exploitation of individual’s creativity/innovation/talents/hobbies/skills.
   • To earn a profit/income/livelihood
   • To be self-reliant and independent/ to be own
   • To make use of leisure
   • To utilize idle resources
   • For prestige
   • To take advantage of government incentives eg.Hustler fund

2.      List four types of utility and the production activity associated with each of them. (4 Marks)

Utility	Production Activity
(i) Time utility	Storage/Warehousing
(ii) Place utility	Transport/Distribution
(iii) Possession utility	Buying/trading/exchange
(iv) Form utility	Processing/manufacturing/ construction

3. Outline four ways in which the office facilities effective handling of documents. (4 Marks)
4. Receiving documents
5. Recording documents

• Reproducing documents

1. Distributing/mailing documents
2. Storing/filing of
3. Employing qualified

• Safeguarding
• Provision of relevant

4.      Factors influencing consumer to purchase from a kiosk other than a supermarket. (4 Marks)

1. Kiosks may sell on
2. Kiosks bring goods closer to

• Kiosks provide sizes/quantities consumer can

1. Kiosk owners have personal contact/touch with
2. Kiosks may be accessed beyond the normal working routine when the need
3. Kiosks may allow for

• Kiosks may offer advice to their
• To promote the kiosk

5.      Circumstances under which hire purchase may be used to acquire goods. (4 Marks)

1. When the buyer does not have enough money to pay at once.
2. When the product is

• When the buyer wants to use the item immediately before completing

1. When the buyer is a salaried employee/has regular income.
2. When the buyer desires to own luxurious
3. When the buyer wants to save in the form of

• When the goods are durable in
• When the goods can generate income to pay the installments.

6.      Reasons for increased use of mobile phones in banking.

1. Paying through mobile phones is safer than carrying cash.
2. It is easier to transact over mobile phones.

• It is convenient because transactions can be conducted anywhere.

1. It saves on time since there is no travelling and queuing for the services.
2. The speed of transaction is
3. It reduces paper work by eliminating the need for physical files and other

• The use of PIN enhances
• Increased ownership of mobile phones/affordability of mobile

1. Transactions can be conducted at any
2. Reduced transaction
3. Easy access to transaction

7.      Methods that the Government of Kenya uses to regulate business activities. (4 Marks)

1. Licensing business activities
2. Setting up standards through KEBS

• Formulation of policies/enacting laws/legislation

1. Setting quotas
2. Enforcement of laws
3. Imposing bans

• Giving subsides to businesses/producers
• Taxation

1. Price

8.      Disadvantages of using internet in communication.

• It is prone to network overload (congestion).
• Most hardware required is expensive to
• Accessing/using the internet is expensive since it requires data bundles or WIFI
• Requires knowledge and skills to
• Prone to attack by fraudsters/hackers.
• Affected by lack / disruptions of network/links.
• It may be affected by computer
• Limited internet connectivity.
• It may be affected by power

 

9.      Differences between life assurance and general insurance.

 

LIFE ASSURANCE	GENERAL INSURANCE
It deals with life	It deals with property
It is usually a long-term contract	It is usually a short-term contract/annual
Can be used as a saving plan	Cannot be used as a saving plan
Has surrender value.	Has no surrender value
Has maturity date	Has no maturity date
Risk is certain/must occur	Risk may or may not occur
Policy can be used as a security for a loan	Policy cannot be used as a security for a loan
Compensation is given to beneficiaries in case of death of assured	In case of loss compensation is given to the insured
Sum assured depends with assured’s ability to pay	Sum insured depend with value of property
Principles of subrogation and indemnity does not apply	Principle of subrogation and indemnity applies

 

10. Reasons for observing ethical practices in product promotion. (4 Marks)
    • To ensure fair competition among
    • To ensure consumer’s interests are protected eg. No false advertisement or
    • To ensure that businesses comply with the
    • To protect the environment from
    • To improve the image of the
    • To maintain morality in the society/cultural/moral

11.      Effects of a shift of demand curve to the right. (4 Marks)

• The price will
• The quantity demanded will increase/demand will increase.
• The equilibrium quantity shifts to the right/increases.
• The equilibrium price shifts upwards/increases.
• The equilibrium shifts upwards to the

12.   Outline four disadvantages that a manufacturer if wholesalers were eliminated (4 Marks)

• Manufacturer will have to break bulk
• Manufacturer will have to incur cost of storage;
• Manufacturer will have to incur cost of transporting goods to the retailers;
• Manufacturer will have to incur cost of advertising / promoting products;
• Manufacturer will have to bear risks associated with distribution eg. damages, fall in prices;
• Manufacturer will have to prepare goods for sale packing, branding, sorting etc;
• Manufacturer will have to carry out market research;
• Manufacture will have to give credit to retailers who are

13.     The Balance Sheet As At 31^st December, 2012.

(4 Marks)

14. The following figures relate to Jumbo Traders for the year ended 12.13.

Details	Shs.
Capital	940,000
Net Loss	20,000
Additional investment	420,000
Monthly drawings	5,000

Determine the capital as at 01.01.13. (4 Marks)

𝐹. 𝐶 = 𝐼. 𝐶 + 𝐴. 𝐼 − 𝐿 − 𝐷

940,000 = 𝐼. 𝐶 + 420,000 − 20,000 − (5,000𝑥12)

940,000 − 420,000 + 20,000 + 60,000 = 𝐼. 𝐶

600,00 = 𝐼. 𝐶

𝐶𝑎𝑝𝑖𝑡𝑎𝑙 as at 01.01.13 was Ksh. 600,000

15.                    Identify the ledgers in which the following accounts are maintained. (5 Marks)

 

	ACCOUNT	LEDGER
i.	Pendo (Debtor)	Sales/Debtors
ii.	Machinery	General
iii.	Rent	Nominal
iv.	Capital	Private
v.	Juma (Creditor)	Purchases/Creditors

16. List three levels of inflation. (3 Marks)
    • Creeping/Mild/Moderate inflation
    • Galloping/Rapid inflation
    • Hyperinflation/Run-away inflation
    • Stagflation

17.   Name the documents described by the statements given below are used in International Trade: (4 Marks)

1. Requests for payment before goods are delivered-

Pro-forma invoice

1. Shows ownership or title of goods imported-

Bill of Landing

1. Shows the country of manufacture of goods-

Certificate of Origin

1. Shows the transportation charges for goods-

Freight Note

18. Post the information to the relevant ledger

(4 Marks)

Dr                   MIMI Supplies A/c                                 Cr

 

 

Dr                   Kilimanjaro A/c                                       Cr

 

PEMBE TATU TRADERS BALANCE SHEET

AS AT 31^ST DECEMBER, 2012.

Fixed Assets                            Capital                         66,000 Furniture              50,000

Current Assets                        Short Term Liabilities

Stock            5,000                    Bank Overdraft           5,000

Debtors        7,000

Cash             9,000 21,000

71,000                                          71,000

 

 

Dr                   Purchases Returns  A/c                            Cr

 

 

19.   Goals of development to a country. (4 Marks)

• Alleviation of poverty
• Attainment of high and sustainable economic
• Provision of adequate social amenities eg. health
• Diversification of the economy to reduce over-reliance on a few
• Alleviation of
• Reduce income disparities/inequalities/attain equitable income distribution
• Enhancement/upholding of human rights,self-esteem and freedom/democracy.
• Maintenance of political stability/good
• Attainment of food security for
• Provision of
• Alleviation of
• Technological
• Elimination of harmful cultural

20.   Kahawa Traders Trading Account. (5 Marks) Working

23. Benefits of sea transport over air transport. (4 Marks)

• Large carrying capacity which is ideal for bulky/heavy
• Sea transports large quantities of
• Low cost of transportation over long
• Special ships are available for carrying special
• Its more economical to

24.     In which ways can an investor benefit from the stock exchange? (4 Marks)

• Getting a variety of securities/shares to choose
• Getting information on share prices that guides him/her on when to buy /sell
• Access to a platform/market for buying or selling shares and other
• His/her interests being protected as quoted companies are required to maintain certain standards of
• Access to information on companies’ performance that help him/her to make investment decisions.
• Being encouraged to save in form of
• Spreading risks by buying different types of

 

20

𝑀𝑎𝑟𝑔𝑖𝑛 =

1                                       1         1

=     ,        𝑀𝑎𝑟𝑘 − 𝑢𝑝 =          =

 

25.   State three clauses found in the Memorandum of

 

100      5

5 − 1     4

Association. (3 Marks)

 

1         𝐺. 𝑃

𝑀𝑎𝑟𝑘 − 𝑢𝑝 =   =

4      960,000

𝐺. 𝑃 = 240,00

Sales= 𝐶𝑂𝐺𝑆 + 𝐺. 𝑃

𝑆𝑎𝑙𝑒𝑠 = 960,000 + 240,00 = 1,200,000

Kahawa Traders Trading Account

For the year ended 31^st December, 2012

Opening Stock               80,000      Sales               1,200,000

Add: Purchases        1,000,000

COGA4S                   1,080,000

Less: Closing Stock 120,000 Cost of goods sold 960,000 Gross Profit c/d                      240,000

 

1,200,000                            1,200,000

21. Reasons that make it necessary for firms to maintain a healthy environment. (4 Marks)
    • To enhance corporate/good image.
    • To protect/safeguard human health eg. employees, customers, surrounding
    • To maintain the ecological
    • To conserve natural resources / raw
    • For sustainable economic
    • For environmental
    • To comply with the set
    • As part of corporate social

22.   Benefits of business plan to an entrepreneur. (4 Marks)

• It acts as a motivational
• It helps to avoid
• It enhances proper allocation of
• It is a requirement by financiers/Facilitates acquisition of loans from financial institutions
• It is a requirement by the government/compliance purposes
• For adaptability/cater for future changes
• Provides guidance for opening new or expanding existing business.
• It acts as a management / monitoring/control tool for the business.
• It is a tool for evaluating business
• It lays the strategy to be used in marketing the
• It enhances the credibility of the

• Name clause
• Liability clause
• Capital clause
• Situation clause
• Declaration
• The Objects clause

KCSE 2016

1.          State four external factors that may negatively influence the operation of a business. (4 Marks)

• Unfair/unhealthy/stiff competition.
• Inadequate
• Political
• Unfavorable legal
• Unreliable supply
• Strong consumer bargaining
• Poor infrastructure.
• Low population
• Unfavorable socio-cultural factors
• Unfavourable climatic conditions/weather conditions
• Natural
• Unstable economic factors

2.          Highlight four benefits of a business plan to an entrepreneur. (4 Marks)

• It acts as a motivational
• It helps to avoid
• It enhances proper allocation of
• It is a requirement by financiers/Facilitates acquisition of loans from financial institutions
• It is a requirement by the government/compliance purposes
• For adaptability/cater for future changes
• Provides guidance for opening new or expanding existing
• It acts as a management / monitoring/control tool for the
• It’s a tool for evaluating business
• It lays the strategy to be used in marketing the products.
• It enhances the credibility of the

 

3.          State four ways in which a good filing system may facilitate the operations of an office. (4 Marks)

• It ensures/enhance easy retrieval of
• It ensures office tidiness/office is kept
• It ensures security/safety of
• It facilitates quicker decision
• It saves on office
• It ensures confidentiality of information by limiting access to unauthorized

4.          Highlight four activities that may be carried out in a stock exchange market. (4 Marks)

• Buying and selling of
• Mobilizing savings for
• Listing of
• Issuing of new securities/raising
• Publication of statistical
• Advising

 

5.          Outline four circumstances under which a co-operative society may be dissolved. (4 Marks)

• Where there is a court order to dissolve
• Where the objectives of the co-operative society have been
• If majority of members voluntarily decide to dissolve it during AGM.
• In case of mass withdrawal of members leaving less than
• In case of an order from commissioner of co- operatives to dissolve
• If the co-operative is declared

6.          Outline four methods that the government Kenya uses to regulate business activities. (4 Marks)

• Licensing
• Setting of standards through KEBS
• Taxation
• Price control
• Formulating of laws and policies/legislation.
• Bans, Quotas and Subsidies

7.          State four ways in which a youthful population may be useful to an economy. (4 Marks)

• Increased creativity and
• Wider market for good used by
• Guaranteed continued supply of
• Reduced government expenditure on social security and pensions.
• Faster growth of some industries such as fashion and
• Flexibility in embracing modern

8.          Outline one circumstance under which each telecommunication services may be used: (4 Marks)

• Paging-Where there is need to call person to attend to an emergency within a
• Facsimile (fax)-where there is need to send a printed document
• Radio call-Where there is need to give coordinated information through a central
• Telex-Where there is need to send and receive written messages urgently through

9.          The following transactions relates to Jelimo Stores:

(a) 10^th October 2010: Sold unused stationery for Sh. 3,000 on credit to K. Likia.

• 23^rd October 2010: Bought a motor vehicle on credit from Onjwaria Motors for Sh. 700,000.

Required: Record the above transactions in the General Journal given below:          (4 Marks)

 

Date	Particulars	Folio	Dr. (Ksh)	Cr. (Ksh)
2010 Oct. 10	K.Likia a/c Stationery a/c (Being a record of sale of stationery on credit) Motor Vehicle a/c Onjwaria a/c (Being a record of purchase of motor vehicle on credit)		3,000	3,000
			700,000
				700,000
Oct. 23			703,000	703,000

10. State four features of an insurable interest. (4 Marks)

• The insurable interest must be
• The property must have monetary
• Potential insurable risk must be
• Presence of property rights or interest (You can only insure your property)
• There must be possibility of suffering financial loss in case of occurrence of

11.      State four features of parastatal. (4 Marks)

• Formed to provide essential goods and services.
• Main source of capital is government
• Formed by an Act of
• Has limited
• Is managed by government
• Can be dissolved only through an act of
• It is not profit motivated

12.      Effects of a shift of the demand curve to the right.

• The equilibrium quantity increases/shifts to the
• The equilibrium price increases/shifts upwards
• The equilibrium point shifts upwards/ to the right
• The price will
• The quantity demanded will increase/demand will

13.      Outline four functions of World Bank. (4 Marks)

• Provision of finance to member countries to foster economic development.
• Provision of loans to developing countries at lower rates to finance development
• Provisions of grants to developing countries to finance social amenities.
• Training of local personnel in project appraisal and implementation.
• Approving development plans for member countries for funding.
• Advancing loans to member countries to correct balance of payment
• Providing technical assistance and personnel to help countries run their economic

14.      Ways of reducing the level of unemployment in Kenya.

• Adopting appropriate education system to instill relevant
• Encouraging informal sector (Jua Kali) to encourage self- employment.
• Increase government expenditure to expand the
• Population control to avoid over-population.
• Diversification of the economy by encouraging different sectors/industries.
• Delocalization of industries to ensure balance regional
• To improve infrastructure to support economic
• Encouraging foreign investments by government giving foreign investors
• Adopting use of modern technology to increase production and reduce

 

15.                                                             Highlife General Stores Balance Sheet

As at 31^st December, 2015

Fixed Assets                                    Capital                         870,000 Land and Buildings     650,000

Motor Van                    150,000      Long Term Liabilities 800,000     10 Year Bank Loan 500,000

Current Assets

Stock      470,000                                 Current Liabilities

Debtors 350,000                              Creditors                   220,000

Cash         50,000  870,000             Bank overdraft           80,000

               

1,670,000                                             1,670,000

16. Circumstances which may be involved in business.

• When a business venture requires huge investment which individual entrepreneurs may not
• When the goods or services to be provided are essential to the welfare of the citizens.
• When there is need to protect citizens from exploitation by private
• When the government desires to create employment for the citizens.
• When the government needs to generate income through revenue
• When the venture is strategic but provides low profits hence unattractive to private investors.
• Where there are monopolies in the economy, the government gets involved in business to increase competition.
• Where there is need to provide sensitive goods that cannot be left in hand of private sector e.g production and sale of firearms.
• Where there is need to balance regional
• Where there is need to reduce foreign dominance in the economy.
• Where there is need to attract foreign
• When there is need to safeguard national

17.      Types of Ledgers which the following accounts are kept.

 

	ACCOUNT	LEDGER
i.	Pendo (Debtor)	Sales/Debtors
ii.	Machinery	General
iii.	Rent	Nominal
iv.	Capital	Private

18. Two factors represented by arrows labeled a and b)i) Payment for goods and services.
19. ii) Provision of factors of production.
20. c) i) Payment for factors of production.
21. ii) Provision of goods and services

19.      State four reasons for privatizing public corporations.

• To improve efficiency in their
• To reduce government
• To enhance
• To minimize political
• To increase public participation in economic activities of the
• To generate revenue through taxation and sale of
• To enable the government to concentrate in other state responsibilities.

20.      Reasons for the increased use of cell phones in banking.

• Affordability of cell phones/ increased ownership of cell phones.
• They save on time since transactions are
• Easy access of one’s bank

• It is easy to access credit facilitates e.g M-Shwari loans
• They are convenient as transaction can be conducted any time.
• Use of PIN to access one’s account enhances
• It reduces costs such as traveling expenses, bank counter charges.
• They reduce paperwork by reducing need for physical documentation

21.      List four sources of public finance. (4 Marks)

• Taxes (viii) Fines from courts
• Borrowing loans (ix) License fees
• Grants and foreign aid (x) Escheats
• Rent and rates for use of government property
• Dividends and profits from government investments
• Proceeds from sale of government property
• Interest earned from loans advanced by government

22.      State two situations in which each of the following types of inflation may occur. (4 Marks)

1. Creeping inflation (a) Where general price levels rise gradually over a period of time usually at single

• Where the value of money tends to be stable over time and effects on the economy is not

1. Hyperinflation– (a) Where the general price levels rise at a high rate usually more than two

• Where there is drastic loss in value of money and effects on the economy is very

23.      Outline four factors that may make a producer to by- pass the wholesaler when distributing goods. (4 Marks)

• Having own retail
• Dealing in perishable goods like bread which require shorter channels.
• Dealing in technical goods which require elaborate after- sale
• Consumers and retailers buying in large
• Need to keep price of goods
• Limited geographical spread of the market.
• Government
• When the production is in small
• Where the producer has enough storage
• When goods are produced on order

24.      Goals of development to a country. (4 Marks)

• Alleviation of poverty
• Attainment of high and sustainable economic
• Provision of adequate social amenities eg. health
• Diversification of the economy to reduce over-reliance on a few
• Alleviation of
• Reduce income disparities/inequalities/attain equitable income distribution
• Enhancement/upholding of human rights and
• Provision of
• Maintenance of political stability/good
• Attainment of food security for
• Alleviation of
• Technological
• Elimination of harmful cultural

25.      Outline four characteristics of services. (4 Marks)

• They are
• They cannot be
• They cannot be
• Quality cannot be
• They are highly
• They cannot change possession/cannot be separated from provider

 

KCSE 2017

1.          Elements of the demographic environment that may influence the operations of a business. (4 Marks)

• The population
• The birth
• The population density
• The death/mortality
• Distribution of population by sex/gender.
• The population growth
• The distribution of population by
• Immigration and emigration rate

2.          Circumstances under which goods may be transported by use of containers. (4 Marks)

• Where goods are fragile and require
• Where goods are regular in shape and can be packed in containers.
• Where there is need to minimize handling of goods at port of entry and while in
• Where there is need to cut down on insurance cost since it reduces
• Where there is need to cut down on transport cost since containerization is
• Where goods are highly perishable and requires special attention.
• Where goods are of high value and need to be secure from theft while in

3.          (a) Salome Traders rate of Return on Capital Employed

𝐶𝐸 = 𝐶 + 𝐿𝑇𝐿 = 1,119,300 + 1,807,00 = 2,926,300

𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡

𝑅𝑎𝑡𝑒 𝑜𝑓 𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 =

𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑

5.          Chem Chemi Ltd is a new cement manufacturer. Outline four factors that may encourage this company to be established in Athi River town where other cement manufacturers are located despite the obvious competition. (4 Marks)

• Availability of raw materials in Athi River
• Skilled labour is readily available in Athi river
• Market is readily available in Nairobi and its environs
• There is ready supply/source of power
• Government policy encourages establishment of such firms in Athi River which is also an EPZ
• An established transport system that eases operations
• Availability of well-developed social amenities like schools, stadia, sewage system and water supply
• An established communication
• Availability of security
• Availability of auxiliary services like banks

6.          Outline three ways through which a partnership may be formed. (3 Marks)

• A simple written agreement between
• An oral agreement between the
• A signed legal agreement (partnership deed)
• Adopting provision of Partnership Act where there is no known
• Action by parties implying agreement to conduct business

7.          Features of land as a factor of production. (4 Marks)

• It is a basic factor of production
• It is a natural

 

𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡

=

𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑒𝑚𝑝𝑙𝑜𝑦𝑒��

= 438945 𝑥100%

2926300

= 15%

𝑥100%

• Its supply is
• It lacks geographical
• It is subject to the law of diminishing
• Its quality is not

 

(b)   Importance of the rate of return on capital employed.

• It enables the business to determine the rate at which net profit is generated in relation to the total investments into the business/rate of return on capital
• It helps to compare the performance of the business with similar
• It helps to compare the performance of the business over time.
• It helps the potential investors to know whether to invest or
• It shows whether the business finances have been invested

4.          Indicators of economic growth as a country progresses.

• Increased national income/GNP
• Increased provision of social amenities g.stadia
• Increased national output/GDP
• Reduced income disparities/inequalities
• Increased standards of
• Improved health care facilities
• Increased per capita
• Increased democracy/good governance
• Increased job
• Increased industries/industrialization
• Improved housing for the
• Reduction of negative cultural practices
• Reduced dependency/increased self-reliance
• Improved technology
• Increased literacy levels. Increased
• Increased entrepreneurial practices

• It is occupationally
• Its productivity can be varied by varying the
• Its reward is rent/rates/royalties.

8.          Principles of insurance described below. (4 Marks)

1. Restoring the insured’s financial position after suffering loss from insured risk-Indemnity
2. Existence of a very close relation between the loss suffered and the insured risk-Proximate cause
3. The insurer taking ownership of the remains of the destroyed property after the insured is duly compensated-Subrogation
4. Proof that the insured will suffer direct financial loss if property is destroyed-Insurable interest

9.          Items that would be included in the measurement of national income using the income approach. (4 Marks)

• Salaries/wages or personal earnings by households
• Interests received for use of capital
• Profits made by public enterprises
• Income from exports/ net income from abroad
• Payments for imports
• Transfer payments
• Depreciation on capital
• Dividends received by shareholders
• Rent received for the use of land
• Ploughed back profits by firms
• Stock appreciation

 

10.      Determine the consumer price index of 2011,2012,2013 and 2014.       (4 Marks)

Year	Price (Ksh)	𝑷𝟏 𝑪𝑷𝑰 =      𝒙𝟏𝟎𝟎% 𝑷𝟎
2010	90.00	90/90×100=100%
2011	100.80	100.8/90×100=112%
2012	103.50	103.5/90=115%
2013	105.30	105.3/90=117%
2014	108.00	108/90=120%

11. List four forms of retail businesses that a school leaver may engage in. (4 Marks)
    • Kiosks (viii) Roadside selling
    • Canteens (ix) Hawking
    • Tied shops (x) Peddling
    • Single shops (xi) Mobile shops
    • Market stalls (xii) Open market trading
    • Operating an Automatic Vending Machine
    • Selling through the internet/Online business/shop

12.      State four benefits of using the internet for office communication. (4 Marks)

• Reduced costs of communication
• Provides unlimited space for
• A fast means of
• Provides a source of information for
• Facilitates quick decision making /quick
• Reduce paperwork and the need for paper
• Accords convenience while communicating/easy to
• Communication can take place at all
• Information can be passed to many people in different places at the same time

 

13.      The following information relates to Zawadi Traders rental income:

01.01.15: Had Ksh. 50,000 in the rent income account at the beginning of the year.

10.06.15: Received Ksh. 120,000 from tenants.

12.11.15: Refunded Ksh. 20,000 to a tenant who had vacated the premises.

Required: Prepare Zawadi Traders Rental Income Account.

(4 Marks)

Dr                       Rental Income A/c                                Cr.

Date	Details	Amount	Date	Details	Amount
12.11.15	Tenants	20,000	1.1.15	Bal b/d	50,000
31.12.15	Bal c/d (P&L)	150,000	10.06.15	Tenants	120,000
		170,000			170,000

14. State four means of payment that may be provided by commercial banks to their customers. (4 Marks)
    • Cheques (vi) Telegraphic transfers
    • Bank drafts/bankers cheque (vii) Use of credit/debit cards
    • Standing orders (viii) Electronic funds transfer
    • Travellers cheques (ix) M-Banking/ E-Banking
    • Credit transfer (x) Direct cash deposit

15.      The equations given below relate to the quantity demanded and quality supplied at the equilibrium point.

𝑄𝑑𝑒 = 4𝑃 + 50

𝑄𝑠𝑒 = 8𝑃 + 30

Determine the equilibrium price and quantity. (4 Marks)

𝐴𝑡 𝐸𝑞𝑢𝑎𝑙𝑖𝑏𝑟𝑖𝑢𝑚, 𝑄𝑠𝑒 = 𝑄𝑑𝑒 8𝑃 + 30 = 4𝑃 + 50

8𝑃 − 4𝑃 = 50 − 30

4𝑃 = 20,        𝑃 = 5

𝑃𝑒 = 5,

𝑄𝑒 = 4𝑥5 + 50 = 70

16.      Outline four ways in which the balance of payments of a country may be improved. (4 Marks)

• Restriction of imports
• Diversification of exports
• Export promotion
• Devaluation of country’s currency/local currency
• Deflation/reduced money supply
• Value addition to increase the value of the exports
• Encourage foreign investments in the country
• Restriction of outflows of capital
• Encourage capital inflow

17.      Source documents into which the information given in the table below would be recorded. (4 Marks)

Information		Source document
a.	Payments received from debtors	Outgoing/issued/copy of receipts
b.	Purchases made on credit.	Incoming/received/purchases invoice
c.	Validating payments made by the cashier.	Cash payment voucher/payment voucher
d.	Requesting for additional payments from a debtor.	Debit note

 

18. Factors to consider when deciding on the method to use for promoting its products. (4 Marks)
    • Nature of the product
    • Availability of the promotional media
    • The competitor’s promotional strategies
    • Objective of the promoters
    • The cost of the method
    • Government policy/legal requirements
    • The target audience
    • Geographical coverage of the method
    • The level of demand for the product
    • Lifespan of the method
    • The urgency of the promotional message

19.      Features of money that enables it to facilitate the exchange of goods and services. (4 Marks)

• Cognizability/authenticity
• Stability in value
• Scarcity/Limited in supply
• General acceptability as a medium of exchange
• Durability
• Portability/easy to carry
• Malleability
• Made of homogeneous/uniform material
• Not easy to forge/difficult to imitate
• Divisibility/ can easily be converted to smaller denominations without losing value

20.      Benefits of proper filing to an organization. (4 Marks)

• Vital documents will be kept for future reference/evidence
• Easy retrieval and accessibility of documents
• Economic use of available space
• Documents are kept safe from damage
• Limits accessibility of documents to only authorized persons
• Aids in keeping office tidy/neat
• May help the organization to keep some documents for the length of time as specified in law
• Keeps the documents neat
• Documents are secured from loss

 

21.      Characteristics of a monopolistic market. (4 Marks)

• There are large number of buyers and sellers who act independently
• There are no barriers to entry and exit from the industry
• The sellers offer similar products that are only differentiated
• No single firm has control over the factors of production
• Firm sets their own prices
• Buyers and sellers have perfect knowledge of the market
• Firms incur large selling /promotional costs

22.      The aggressive campaign for citizens to plan their families seems to be causing a decline in the country’s population growth. Outline four possible effect.(4 Marks)

• Reduced pressure on land
• Shrinking market for goods and services/low market
• Reduced levels of unemployment
• Reducing government expenditure on the provision of social amenities
• Reduced dependency ratio
• Low labour supply
• Reduced social problems like crime, lack of housing
• Possibility of attaining optimum population
• May lead to increased savings and investments

23.      State four functions of commercial attaches. (4 Marks)

• Educating and advising exporters on trade regulations in other countries
• Expansion and diversification of exports
• Organizing for trade fairs and exhibitions of local goods in foreign markets
• Expansion and diversification of foreign markets
• Providing information about available selling opportunities in foreign countries to local producers
• Development of bilateral and multilateral trade agreements
• Select buyers, agents, and distributors of home country’s exports
• Assists sales mission from home country by organizing education tours for them
• Make detailed report on commercial activities that may help to improve exports
• Keep statistics of products like volume, packaging, and methods of manufacturing
• Research and analyze markets for exports from home country
• Attend meetings, seminars and workshop on trade pattern
• Publish and advertise their country’s exports in business journals and magazines

24.      Benefits that may be realized when two firms form a merger. (4 Marks)

• Increase in volume of output
• Increased control over suppliers
• Increased influence on the market/ customers
• Reduced cost of operation as a result of economies of scale
• Access to larger capital
• Increased ability to control prices of the product
• Elimination of unhealthy competition
• Ability to employ more qualified personnel
• Increase in quality of output
• Combined talents and skills which may result to better management.

25.      Factors that caused failure of women clothing business.

• Poor location of the business may have made it inaccessible to customers
• Stiff competition from other retailers
• Inadequate finances to meet the obligation of the business
• Shaban’s lack of commitment to the business
• Insecurity
• Improper management practices
• Poor customer relations
• Inappropriate pricing practices
• Political instability/wars
• Lack of market/low demand
• Unfavourable government policies
• Poor marketing strategies
• Inadequate stock
• Lack of suitable

KCSE 2018

1.          Features of labour as a factor of production. (4 Marks)

• It is a basic factor of production
• Labour is a human resource/has ability to think and get annoyed
• It is occupationally mobile
• It is geographically mobile/can move from one place to another.
• It cannot be stored
• It earns salaries or wages
• It is not separable from the labourer/provider
• The quality of labour is variable/cannot be
• Labourers sell their labour but not themselves

2.          Ways in which peace within a country may encourage entrepreneurial development. (4 Marks)

• Entrepreneurs are assured of the safety of their investment/lives hence encouraged to invest
• Funds are availed for investment instead of being spent on provision of security
• There is free movement of factors of production which motivates trade
• There is free interaction between people which encourage sharing of business ideas
• Reduced cost of insurance due to low risks
• Increased markets since even foreigners feel free to trade with the locals
• Stable complimentary institutions like banks and warehouses which encourage business
• More foreign investors will be attracted into the country

3.          State four duties of the office clerk. (4 Marks)

• Handling mails
• Operating various office machines
• Filing and indexing
• Record keeping/simple book-keeping/petty cash
• Helps in store-keeping
• Ordering/receiving/storing/issuing of stationery
• Reproduction of documents

4. a) Identify the document-Credit Note(1 Mark) b)Circumstances under which the document may be
   • When correcting arithmetic errors resulting to
   • Where the buyer has been charged higher prices than the recommended prices.
   • When items included in the invoice were not delivered

• When a deserved discount was not
• When the buyer has returned some goods e.g., damaged goods, poor quality
• When empty crates and containers included in invoice was returned.

 

5.          State four measures that may be taken by the government to control inflation. (4 Marks)

• Reduce government
• Increase personal income tax to reduce disposable income.
• Introduce compulsory saving schemes like Pension Fund.
• Increase interest rates on loans to make borrowing expensive.
• Raising compulsory deposits by the commercial banks to central bank to reduce money available for lending.
• Enforce wage control to prevent wage
• Control level of prices through
• Reducing taxes to reduce cost of production by producers to enable them reduce
• Restricting imports to curb imported
• Selling government securities in open market operations to reduce supply of money in
• Restricting terms of hire purchase and credit terms to discourage
• Regulate printing and minting of money.
• Use of buffer stocks to stabilize
• Giving subsidies to producers to reduce cost of production to enable them reduce

6.          Measures that may be taken by the government to curb unemployment. (4 Marks)

• Adopting appropriate education system to instill relevant
• Encouraging informal sector (Jua Kali) to encourage self-employment.
• Increase government expenditure to expand the economy.
• Population control to avoid over-population.
• Diversification of the economy by encouraging different sectors/industries.
• Delocalization of industries to ensure balance regional balance.
• To improve infrastructure to support economic activities.
• Encouraging foreign investments by government giving foreign investors
• Adopting use of modern technology to increase production and reduce

7.          Benefits of national income statistics to the government.

• It provides information that is used in planning/making policies.
• Provides statistics of measuring economic growth of the country.
• Provides information that is used to measure standards of living of
• Provides information that is used to compare economic performance of a country over
• It provides information that is used to compare economic performance of the country with other countries.
• Provides information used to compare standards of living f people in different

8.

Business Assets (Sh) Capital (Sh) Liabilities (Sh) A 40,000 24,266 15,734 B 219,800 158,300 61,500 C 17,670 5,680 11,990 D 67,000 42,295 24,705

Fill in the spaces in the table below: (4 Marks)

9. Categories for classification of partners. (4 Marks)
   • According to their age.
   • According to their liability in the business
   • According to their capital contribution to the
   • According to their role played in running the

10.      Ways in which the government creates an enabling environment for business in the country. (4 Marks)

• Provision of credit facilities at favourable
• Ensuring political stability/peace
• Training/educating the population to create a pool of skilled manpower.
• Marketing final products for producers
• Provision of essential social amenities like water and sewerage, health and
• Favourable policies / easy procedures like licensing, subsidies and favourable
• Provision of good
• Provision of
• Ensuring good governance/transparency and
• Providing loan guarantee to traders.

11.      Roles of transport in the facilitation of trade. (4 Marks)

• Facilitates movement of factors of production and other inputs like raw materials
• Enables goods to be moved to the market from their point of production /enables buyers to move to the market
• Adds value to goods and services by moving them to the point of consumption /utility
• Opens up new markets
• Makes it possible for the exploitation of natural resources
• Allows for specialization since it allows people to access goods produced elsewhere
• Promotes mass production since goods can be moved to be stored and sold
• Saves time and avoids

12.      Circumstances under which firms would form a cartel.

• Where there is need to control output by each firm
• When there is need to be in control of market prices
• Where there is need to eliminate stiff competition among the firms
• Where there is need to restrict entry of new firms into the market
• Where there is need to increase the firms bargaining power
• Where there is need to guarantee the income hence financial strength of the firms

13.      Conditions under which a manufacturer would distribute his products through the wholesaler. (4 Marks)

• When it is the dictate of a government
• When the manufacturer needs time to concentrate on production.
• When he wants to avoid the high costs of
• Where it is too expensive to distribute using the manufacture’s own outlet
• Where wholesalers prefer to market the product under their own brand names
• Where the manufacturer wants to avoid marketing risks like drop in
• When the wholesaler provides ready cash while purchasing in
• Where the manufacturer needs to free storage
• Where manufacturers requires wholesalers to prepare goods for
• Where the manufacturers requires wholesalers to undertake product
• Where market is widely spread

 

14.      State four reasons for maintaining a cash book in a business enterprise. (4 Marks)

• To reduce the number of entries made to the general
• To easily avail cash balances / show cash balances at a glance.
• To enhance specialization in book-keeping by allocating different ledgers to different workers.
• To easily monitor the cash inflows (receipts).
• To easily monitor the cash outflows (payments).
• To show discount allowed to
• To show discount received from

15.      Ways in which the price of a product may be set.

• Auction
• Haggling/Bargaining
• Retail price maintenance/Recommended Retail Price
• Tendering
• Through taxation and
• Price control/ legislation
• Price collusion

16.      Factors that would make two people taking the same type of life assurance policy with the same insurer to pay different amount of premiums. (4 Marks)

• Differences in their ages
• Differences in their
• Differences in their pace of
• Differences in their ability to pay
• Differences in their health
• Differences in maturity of their

17.      State the line of communication involved in each of the following: (4 Marks)

1. The manager of ABC Company Ltd talking to manager of XYZ Company Ltd-Horizontal communication
2. A secretary asking for time off from her boss-Upward vertical communication
3. The Production Manager giving instruction to the Secretary of Sales Manager-Downward diagonal communication
4. The Store Keeper giving explanations to the Chief Accountant-Upward diagonal communication

18.      List four books of original entry that may be used to record transactions affecting stock. (4 Marks)

• Purchases Journal
• Purchases Returns Journal/Returns Outward Journal
• Sales Journal
• Sales Returns Journal/Returns Inward Journal

19.      Highlight four external economies of scale that a firm may get when operating on large scale. (4 Marks)

• Access to skilled labour.
• Enjoy improved
• Improved
• Easy disposal of
• Ready market from surrounding
• Enjoy joint market
• Readily available complimentary services g warehousing, banking
• Government support/Favourable

20.      Calculate:

1. a) 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑜𝑤𝑛𝑒𝑑 = 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 − 𝑡𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

= (80,000 + 20,000 + 20,000) − 20,000

= 100,000                                (2 Marks)

1. b)𝐴𝑐𝑖𝑑𝑡𝑒𝑠𝑡 𝑟𝑎𝑡𝑖𝑜 = 𝑐𝑢𝑟𝑒𝑛𝑡  𝑎𝑠𝑠𝑒𝑡𝑠 −𝑠𝑡𝑜𝑐𝑘

𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

= 40,000−20,000 = 20,000 = 1 (2 Marks)

21.      Watamu Enterprises Balance Sheet As at 2^nd May, 2014

(5 Marks)

Watamu Enterprises Balance Sheet

As at 2^nd May, 2014

Current Assets Stock	400,000	Capital           1,300,000 Current Liabilities
Debtors	100,000	Creditors	250,000
Cash at bank	150,000
Cash	900,000
	1,550,000		1,550,000

22. Outline four merits of indirect taxes. (4 Marks)
    • Tax payment is voluntary/can be avoided
    • It is not easily
    • It is more convenient as it is paid in
    • It is
    • It stimulates effort to
    • It promotes equality
    • More revenue can be raised as it broad.

23.      Ways in which the technological environment may improve business performance. (4 Marks)

• Increased output/mass
• Lower cost per unit of production / reduced cost of production.
• Minimal incidences of fraud/theft.
• High quality
• Improved business image /
• Increased sales.
• Better communication.
• Wider market /
• Faster conduct of business transactions

24.      Identify the types of ledger in which each of the following accounts would be found: (4 Marks)

 

	Account	Type of ledger
a	Otieno (Buyer)	Debtors/Sales ledger
b	Carriage outwards	Nominal ledger
c	Mueni (Supplier)	Creditors/Purchases ledger
d	Cash at bank	Cash book

 

25. Ways in which the introduction of money helped eliminate problems faced in barter trade. (4 Marks)
    • Money eliminates the need for double coincidence of wants since it is a medium of
    • Stores the value of perishable goods by selling them and keeping the money for future
    • Ensures that commodities exchanged are of comparable values by offering a standard measure of
    • Helps in the exchange of indivisible commodities since it can be divided into smaller denominations without losing
    • Money provides a unit of account by which goods and services are valued unlike in barter trade.
    • Money is a standard of deferred payment whereas it was not possible to make payments in the future under the barter
    • Money enables exchange/transfer of fixed property like
    • Money helps to solve the problem of transporting heavy and bulky goods because is

 

20,000               20,000        1

 

KCSE 2019

1.          State whether basic human want or secondary human want. (4 Marks)

	Commodity/service	Class of human want
(a)	A shirt	Basic
(b)	Education	Secondary
(c)	Housing	Basic
(d)	A packet of milk	Basic
(e)	Entertainment	Secondary
(f)	Haircut	Secondary
(g)	Green grams	Basic
(h)	A car	Secondary

2. Outline four factors that make office managers to communicate in writing to their staff. (4 Marks)
   • Confidentiality-the confidentiality of the message is enhanced by written
   • Accuracy – the message is delivered in its original form.
   • Completeness of the message – written forms may be able to pass long/detailed
   • Future reference – the message may form the basis for decision making in
   • Reliability of the means – this is the trusted means of communicating in
   • Economical-it is cost effective since it is affordable

/ relatively cheaper.

• Accessibility – it is easily accessible to all staff members.
• Acceptability – it is the acceptable means of official communication in
• Evidence-it is a proof of
• Desired impression – shows the seriousness of the message

3.          Prepare Birika Traders Trial Balance as at 31^st December, 2014.

Birika Traders Trial Balance

As at 31^st December, 2014

 

DETAILS	DR (KSH)	CR (KSH)
Furniture and Fittings	234,000
Debtors	67,500
Capital		157,900
Commission earned		13,200
Creditors		34,750
Drawings	21,800
5 Year Bank Loan		114,450
Discount Received		3,000
	323,300	323,300

4. Functions of an office in an organization. (4 Marks)
   • Filing
   • Mailing
   • Reproduction of documents
   • Distribution/dissemination of information
   • Receiving and recording information
   • The communication centre for the organization
   • Safeguarding and controlling the organization’s property
   • An administration centre for the organization
   • Public relations centre for the organization/customer care

5.          Roles played by the Nairobi Securities Exchange in the Kenyan economy. (4 Marks)

• Sets the price / value of securities based on the forces of demand and
• Ensures safety of transactions since the financial health of listed companies is usually verified / safeguards

investor’s interest.

• Promotes saving and investment among the
• Raising revenue to the
• Creation of
• Provides useful information to
• Promotes economic growth through disinvestment and reinvestment.
• Promotes local ownership of companies through sale and purchase of shares.
• Provides ready market for (for sale and purchase) of shares hence improving
• Measure of the country’s economic performance as reflected in the prices of

6.          Name the basic concept in population described in the statements given below: (4 Marks)

1. Population size that is adequate for the full utilization of available resources in a country-Optimum population
2. The average number of births per one thousand women in a year-Birth rate
3. When a country is experiencing higher death rates than birth rates-Declining population
4. Where a bigger proportion of the population is comprised of people who are above 55 years old-Ageing population

7.          Circumstance under which each of the following terms of trade would be applied in foreign trade. (4 Marks)

• Franco : when the price quoted covers all expenses till goods reach the premises of the buyer/free of
• Ex-Works: when the price quoted only covers the cost of production and while they are within the

manufacturer’s warehouse.

• In bond: when the prices quoted covers all expenses until goods are delivered in a bonded warehouse in the country of
• Free Alongside Ship (F.A.S) : where the price quoted cover all expenses to the point where goods are next to the ship

8.          Complete the diagram below to illustrate the classification of trade. (3 Marks)

Home trade/ Local trade		International trade /Foreign trade
Retail trade	Wholesale trade	Import trade	Export trade

 

9. Merits of using salespeople to promote the sales of a particular product. (4 Marks)
   • It gives personal touch which elicits positive response from potential
   • It can be used to target specific group of
   • It is flexible since the message can be tailored to suit the needs of each
   • Allows for demonstration on product
   • Source for immediate feedback from the
   • Buyer’s questions / concerns are immediately addressed.
   • It leads to more sales since customers may be convinced by persuasive sales
   • Facilitates collection of

 

10.      By use of book keeping equation, determine the missing values in the table below. (4 Marks)

FIXED ASSETS (Ksh)	CURRENT ASSETS (Ksh)	CAPITAL (Ksh)	LIABILITIES (Ksh)
1,593,600	a)    458,900	900,900	1,151,600
812,700	1,953,750	b)    594,350	2,172,100
c)     892,735	781,295	1,010,000	664,030
1,320,920	1,450,050	1,260,860	d)    1,510,110

 

11. Features that may indicate a country’s state of underdevelopment. (4 Marks)
    • High disparities in income distribution
    • Underutilization of natural resources
    • High population growth rate
    • Poor infrastructure
    • High dependency ratio
    • High levels of illiteracy
    • Dominance of subsistence sector
    • Poor health facilities
    • High levels of poverty/low capita income
    • Poor governance
    • Low levels of savings and investment
    • Outdated cultural practices
    • High levels of unemployment
    • Over-reliance on developed countries
    • Low levels of technology
    • Low levels of industrialization
    • Low labour productivity due to inadequate co-operant factors

12.      List four types of small-scale retail business that one can run without a shop. (4 Marks)

• Hawking
• Peddling
• Roadside selling
• Open air market trading
• Automatic Vending by use of machines
• Online selling

13.      Functions of Department of External Trade in the Ministry of Industry, Trade & Co-operatives. (4 Marks)

• Develop bilateral and multilateral trade agreements to accord preferential treatment to Kenyan
• Educating Kenyan exporters on trade regulations and practices in other
• Intervene on behalf of Kenyan traders in resolving trade disputes between Kenyan traders and foreign clients.
• Arrange for trade fairs, shows and exhibitions for Kenyan goods in foreign
• Expand and diversify foreign markets for Kenyan goods.
• Inform Kenyan producers on the available selling opportunities in other

14.      Factors to consider when selecting a channel to distribute fresh milk. (4 Marks)

• Reliability of the
• Length of chance since milk is highly
• Government policies on distribution of
• The geographical spread of
• The cost of the
• The level of competition in sale of
• Role played by intermediaries e.g. cooling

15.      Book of original entry into which information extracted from the source documents given. (4 Marks)

 

Source documents	Books of original entry
(a) Incoming invoice	a) Purchases journal/ bought journal
(b) Outgoing credit note	b) Sales returns journal/ returns inward journal
(c) Outgoing cash sale slip	c)    Cash Receipts journal/ Cash book
(d) Incoming debit note	d) Purchases journal/ bought journal

16. Outline four features of co-operatives societies. (4 Marks)
    • Formed by a minimum of ten members and has no maximum membership
    • Managed/Run by a management committee
    • Governed using by-laws
    • Profit is distributed to members in form of dividends
    • It is a separate legal entity from the members
    • It has limited liability
    • It is formed by people with common interest
    • No single member is allowed to own more than 50% of the total share capital

17.      Factors which may lead to an increase in a country’s national income. (4 Marks)

• A stable political environment
• Technological advancement
• Vibrant entrepreneurship
• Increased supply of skilled labour
• Increased access to capital
• Optimal utilization of available natural resources /land
• Positive attitudes of citizens towards work
• Reduced level of subsistence sector
• Increased foreign investment

18.      Determine net purchases. (3 Marks)

 

1. b) State two reasons for preparing the trading account.

1. Enables the business to determine the cost of goods
2. It reveals the amount of revenue generated from the sale of stock in a given year/reveal net

• Helps to determine whether the business has made a loss or a profit from the sale of stock in a given

1. It can help to gauge the performance of a business if compared across different
2. It can help compare performance of a business with
3. To facilitate the preparation of a profit and loss

19.

Workers Level of production (a)Carpenter Secondary (b)Nurse Tertiary (c)Maize farmer Primary (d)Mason Secondary (e)Wholesaler Tertiary (f) Lumber Primary (g)Road engineer Secondary (h)Insurer Tertiary

Identify the level of production for the workers.(4Marks)

 

20. Characteristics of a good tax system. (4 Marks)
21. Equitably distribute the tax burden according to the payers’ ability to pay/equity
22. Certain and clearly defines what the payer is expected to pay/certainty

• Economical and allows the tax to be collected at the least cost/economical

1. Convenient and easy for the tax payer to meet the tax
2. Flexible enough to allow for adjustments according to prevailing conditions/flexibility
3. Diverse to capture as many sources as possible/diversity/broad based

• Simple enough to be understood by all tax payers/ simplicity
• Elastic and able to generate more revenue with improved economic conditions/elasticity

21.      Highlight four contributions of entrepreneurs to the growth of an economy.

1. They create employment by establishing businesses
2. They make use of locally available resources which would have been idle

• They improve the citizens’ standard of living by offering them a source of income

1. Their ventures become a training ground for local labour which then becomes skilled
2. They save the country foreign exchange which would have been spent on imports/saving on imports
3. Promote technological advancement through their creativity.

• Promote entrepreneurial culture by being eye openers to other people who start their own businesses
• Promote the accumulation of capital by ploughing back their profits /formation of capital

1. Promote development of infrastructure
2. Reduces rural-urban migration
3. Reduces foreign dominance of economy

• Source of government revenue e.g., Taxes and fees

22.      Factors that may influencing an individual’s demand for money for transaction motive. (4 Marks)

1. The individual’s level of income
2. The frequency of payments by the individual

• The individual’s spending habits

1. The rate of inflation/price of commodities
2. The number of dependents supported by the individual
3. Availability of credit

• The frequency of income / individual’s earning / interval between receipts of income

23.      Determine the excess demand and excess supply.

 

PRICE (Ksh/Bag)	1800	1600	1400	1200	1000	800	600	400
Quantity Demanded (Bags)	280	400	500	650	700	850	950	1000
Quantity Supplied (Bags)	1400	1200	900	650	500	420	350	200
Excess Demand (Bags)	–	–	–	0	200	430	600	800
Excess Supply (Bags)	1120	800	400	0	–	–	–	–

24. Benefits of a bonded warehouse to the
    • The importer can sell the goods before paying the duty hence transferring the burden to the buyer
    • Goods can be prepared for final sale while still in bond

e.g. branding, blending etc.

• Gives the importer time to arrange for payment of duty
• The importer can look for market while goods are still in bond
• Some goods like wine, can improve in quality and value while still in bond
• Security is provided for the goods while they are in bond
• Some goods may lose weight hence importer pays less tax

25.      Means of transporting goods and people on land.

• Use of animal transport
• Human porterage
• Use of carts/cartage
• Bicycles
• Motorcycles
• Pipelines
• Tuk-tuk/tri-cycles

KCSE 2020

1.          List four external environmental factors that may influence the operations of a business. (4 Marks)

• Legal/regulatory issues/government policy
• Political factors
• Economic factors
• Competitors/competition
• Socio-cultural factors
• Suppliers
• Technological factors/Technology
• Natural factors e.g. climate
• Infrastructure
• Market/customers
• Demographic considerations (population)
• Security

2.          State four characteristics of direct production. (4 Marks)

• Production is for own use/subsistence production
• Low level of technology is used in production
• Goods produced are often of low quality
• Goods are produced in small quantities /No surplus
• The producer is involved in all stages / process of production /lack of division of labour
• The producer strives to produce a variety of commodities/lack of specialization
• The producer’s living standards is low for lack of variety

3.          Document described in each of the following statements.

• Used to demand for payment before goods are delivered-Pro-forma invoice
• Used to reply to a specific letter of inquiry-Quotation
• Informs the buyer that goods ordered for have been dispatched-Advice Note
• Used to correct an overcharge-Credit Note

4.          Reasons for government involvement in business.

• To provide essential goods and
• To protect citizens from exploitation by
• To create
• To earn
• To attract foreign
• To stimulate economic
• To provide sensitive goods that cannot be left in hand of private
• To prevent foreign dominance of the
• To venture into businesses that requires huge investments beyond ability of private

 

5.          Factors that lead to a Decrease in Demand.(4 Marks)

• Decrease in consumer’s income
• Unfavourable government policies e.g.increased taxes
• Decrease in population
• Future expectation that price will decline
• Unfavourable seasons/off peak season for particular commodities
• Negative taste and preference for a particular product (out of fashion)
• Availability of better substitutes
• Reduced prices of substitute goods
• Increase in price of complimentary goods
• Unfavourable terms of sale

6.          Circumstances under which a trader would prefer to transport goods by air. (4 Marks)

• When the goods are perishable since it is
• When goods are urgently
• When goods are highly valuable since it is
• When accessing remote areas not accessible by other means
• When the business can afford to use
• Where it is the most easily accessible/available.
• When it is the policy of the business to transport goods by

7.          Determine the total liabilities of the business. (3 Marks)

𝐴 = 𝐶 + 𝐿

20,000 + 1,500 + 2,000 + 4,000 = 24,000 + 𝐿

27,500 = 24,000 + 𝐿

27,500 − 24,000 = 𝐿

3,500 = 𝐿; 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 = 𝐾𝑠𝑕. 3,500

 

8.          Services that commercial banks offer to their customers.

• Accepting deposits/safekeeping of customers money
• Lending money to customers/credit facilities
• Safekeeping of valuable items e.g. title deed
• Providing foreign exchange
• Offer money transfer
• Acts as guarantors when customers are taking loans with other institutions
• Offer trusteeship
• Offer financial advisory

9.          Outline four reasons that may make Kenya restrict trade with other countries. (4 Marks)

• To protect local infant industries from unhealthy competition
• To create employment opportunities
• To safeguard against overdependence on foreign firms for essential commodities
• To raise revenue through tariffs
• To curb against borrowing of unacceptable foreign culture
• To prevent dumping of substandard goods in the country
• To correct unfavourable balance of payments
• To restrict entry of harmful goods
• To protect strategic industries
• To make use of natural local resources

10.      Classify the following resources as natural, man-made or human: (4 Marks)

11. Sources of capital for sole proprietorship. (4 Marks)
    • Personal/Owner’s savings
    • Ploughing back profits/retained earnings(profits)
    • Donations from friends/relatives
    • Credit buying (trade credit/hire purchase)
    • Borrowing from financial institutions/friends
    • Inheritance
    • Renting and Leasing of property

12.      Circumstances under which a firm may be located near the source of raw materials. (4 Marks)

• Where it is cheaper to transport finished goods than raw materials
• Where the firm needs to ease handling of bulky raw materials
• When dealing with highly perishable raw materials to avoid spoilage
• If the government policy requires the firm to be located near the source of raw materials
• Where the raw materials are fragile/brittle
• Where the raw material is dangerous to carry over long distances
• Where the firm need to ease handling heavy raw materials

13.        Kombo Traders Trial Balance As at 30^th April, 2018.

(5 Marks)

Kombo Traders Trial Balance

As at 30^th April, 2018

 

DETAILS	DR (KSH)	CR (KSH)
Land and buildings	150,000
Creditors		1,500
Motor car	120,000
Cash	25,500
Capital		311,000
Bank	4,000
Sales		5,000
Purchases	18,000
	317,500	317,500

 

14. Reasons that would make an entrepreneur prepare a business plan. (4 Marks)
    • To foresee and avoid mistakes that could be committed in future
    • To identify strengths and devise ways of dealing with the weaknesses of the business
    • It is a requirement by financiers
    • To enable the business organization avoid goal blindness
    • To allocate resources appropriately
    • To use it as a monitoring tool (Tool of control)
    • To be able to motivate employees
    • To adapt to future changes/For adaptability

15.

Description Equipment a) Used to make postage stamp impressions on envelopes. Franking machine b) Used to transmit verbal messages. Telephone/ Radio call c) Used to store confidential documents and valuable items. Safe/Cabinet d) Used to record and store information in audio tapes. Dictaphone/ Dictating machine

Identify the office equipment described below.

 

	Resource	Classification
(a)	Architect	Human
(b)	Boat	Man-made
(c)	Soda ash	Natural
(d)	Driver	Human

 

16. State four sources of government revenue. (4 Marks)
    • Taxes
    • Fines from courts
    • License fees
    • Borrowing
    • Grants and foreign aid
    • Rent and rates for use of government property
    • Dividends and profits from government investments
    • Proceeds from sale of government property
    • Interest earned from loans advanced by government
    • Escheats

17.      Measures which may be taken by a government to address the problem of underdevelopment. (4 Marks)

• Increasing government investments to create more
• Control of population to reduce pressure on
• Improve infrastructure to support economic
• Improve technology to increase productivity and reduce wastage.
• Improve education system to alleviate illiteracy and impart appropriate
• Income redistribution to reduce income
• Improve and develop social amenities to foster welfare of citizens.
• Legislating against outdated/backward cultural
• Encouraging good governance to promote peace and stability.
• Provision of incentives to promote investments and saving culture.

18.      Benefits of personal selling to a trader. (4 Marks)

• The trader is able to reach both literate and illiterate customers
• Able to demonstrate the use and capabilities of a product
• The trader is able to get immediate feedback
• Can tailor the presentation to suit the needs of individual customers
• Facilitates the establishment of interpersonal relationship with clients which promotes repeat purchase/create customer loyalty
• Enables the trader to focus on a targeted group of customers
• Seller has the opportunity to get information on competitors from buyers
• May promote instant sales
• It is more persuasive and convincing to customers

 

19.      Channels for distributing imported goods. (4 Marks)

• Foreign producer Local consumer
• Foreign producer Retailer                Local consumer
• Foreign producer Wholesaler                Local consumer
• Foreign producer Wholesaler        Retailer         Local consumer
• Foreign producer Agent     Wholesaler     Retailer      Consumer

20.      Merits of bonded warehouse to government. (4 Marks)

• It is a source of revenue for the
• It helps the government to create employment opportunities.
• It enables the government to regulate the quantity of imports.
• It enables the government to regulate the quality of imports.
• It enables the government to prevent importation of harmful
• It enables the government to inspect goods while still on bond.
• It helps the government to curb tax

21.      Source documents from which the information posted in the following journals are extracted:                                                  (4 Marks)

 

Journal		Source Document
a)	Sales Return Journal	Outgoing/Issued credit note
b)	Purchases Journal	Purchases/Incoming/ Received invoice
c)	Cash Receipts Journal	Cash receipt/Copy of cash receipt/Receipt issued
d)	Sales Journal	Sales/outgoing/issued invoice

 

22. Ways through which leakages of national income may happen in a four-sector (4 Marks)
    • Savings by households
    • Government taxes on citizens and firms
    • Payments for imports
    • Transfer payments by government
    • Foreign aid and grants by government
    • Retained profits by firms

 

23.      State four benefits of using computers in an office.

(4 Marks)

• Facilitates easy communication through the internet
• They are efficient in preparation and reproduction of documents/saves time/Fast
• They reduce paperwork
• They are capable of storing huge volumes of information
• Facilitates easy access to information (retrieving of information)
• They facilitate e-commerce
• Its output is presentable/neat
• It enhances security of documents / information due to use of
• Its labour
• It is multipurpose as it can be used for various functions including

24.      Identify the factor of production that relates to each of the following resources. (4 Marks)

 

Resource		Factor of production
(a)	Supervision	Labour
(b)	Tractor	Capital
(c)	Trees	Land
(d)	Owner	Entrepreneurship

 

25. List four sources of business ideas. (4 Marks)
    • Print media e.g., Newspapers, journals and magazines
    • Electronic media e.g. television, radio, computer
    • Vocational training and Experience
    • Hobbies/talents
    • Listening to what people say
    • Unutilized waste materials
    • Observing established entrepreneurs / role models
    • Market research and surveys
    • Attending Shows, trade fairs and exhibitions
    • Spotting a market gap/ niche
    • Brainstorming
    • Attending business seminars and workshops

 

KCSE 2021

1.          Characteristics of a successful entrepreneur. (4 Marks)

• Innovative and creative. (ix) Future oriented
• (x) Information seeker
• Time (xi) Independent
• Self-confident. (xii) Commitment to work
• Risk (xiii) Good decision maker
• Initiative (xiv) Problem solver
• Goal-oriented/desires to
• Desire for feedback (xv) Patience/persistence

2.          Outline four types of business activities. (4 Marks)

• Extraction
• Processing of raw materials
• Manufacturing
• Construction
• Provision of services
• Trade/Trading

3.          Outline four challenges that may be faced in the satisfaction of human wants. (4 Marks)

• Scarcity of resources
• Unlimited number of human
• Human wants change with time, age and
• Human wants are repetitive/recurrent
• Human wants are habitual
• Human wants are complementary
• Unfavourable government policies on goods and services used to satisfy human

4.          Match four factors of production with their corresponding rewards. (4 Marks)

• Land-Rent/Royalties/Rates
• Labour-Salaries/Wages
• Capital-Interest
• Entrepreneurship-Profit

5.          Highlight four factors that may be considered when choosing means for transporting cash. (4 Marks)

• Urgency/speed-should be fast enough to deliver cash using shortest time
• Reliability of the means-should ensure cash reaches at right
• Security/safety-should protect cash from been stolen.
• Distance to transport cash-if to be transported over long distance, air transport is
• Affordability of the means/Cost of transport-should choose the one which is more affordable
• Availability/accessibility of the means-should choose the means which is readily available

 

6.          Ways in which government may be involved in business.

• As a consumer of goods and services
• As a producer of goods and
• As a distributor of goods and
• As a facilitator of business activities
• As a trainer of business people
• As an advisor of producers and
• As a promoter of business/trade
• As a regulator of business activities
• As a provider of an enabling environment
• As a protector of consumers against exploitation by traders

7.          Outline four benefits of a partnership. (4 Marks)

• Partnership can raise more capital unlike sole proprietorship.
• Work is distributed among partners and so reduces workload of each
• Consultation and sharing of ideas may lead to better decisions.
• Few legal formalities are required to form the business unlike in
• Losses and liabilities are shared among partners unlike sole proprietorship
• Different talents and ideas are combined hence efficiency in the business unlike sole proprietorship
• The business is relatively flexible as compared to other business such as

8.          Mailing services that facilitate communication. (4 Marks)

• Speed post
• Poste restante
• Registered mail
• Express
• Business reply
• E-mail
• Courier services
• Ordinary mail

9.          Effects of increased demand (4 Marks) Price

 

Pe₁ Pe

 

Quantity

1. Price increase from Pe to
2. Quantity demanded increases from Qe to
3. Equilibrium point shifts upwards from e to

10.      Outline four factors that may influence a firm’s decision on the type of goods to produce. (4 Marks)

• Profitability/returns
• Government policy
• Availability of relevant factors of
• Demand/ availability of market
• Level of competition
• Cost of production
• Level of technology available
• Financial capability

11.      Highlight four benefits of localization of firms. (4 Marks)

• Creation of
• Development of infrastructure around the
• Creation of pool of
• Availability of security in the
• Development of subsiadiary
• Waste disposal and management is easy
• Enhance interdependency among firms
• Availability of large market for finished products
• Joint research is possible

12. Book keeping Equation. (4 Marks)

𝐴𝑠𝑠𝑒𝑡𝑠 = 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 + 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

𝐴𝑠𝑠𝑒𝑡𝑠 = 𝑐𝑎𝑠𝑕 10,000 + 𝐵𝑎𝑛𝑘 50,000 = 60,000

𝐶𝑎𝑝𝑖𝑡𝑎𝑙 = 10,000

𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 = 50,000

60,000 = 10,000 + 50,000

60,000 = 60,000

 

13. Channels for local manufactured
14. Manufacturer Consumer
15. Manufacturer Retailer                Consumer

• Manufacturer Wholesaler                Consumer

1. Manufacturer Wholesaler        Retailer        Consumer
2. Manufacturer Manufacturer’s Outlet/Agent      Wholesaler Retailer       Consumer
3. Manufacturer Government Agency      Wholesaler     Retailer Consumer

14.      Outline four limitations of barter trade. (4 Marks)

• Lack of double coincidence of
• Problem of indivisibility of some
• Perishability of some
• Difficult to measure
• Problems of portability of some goods/difficulty to carry bulky
• Lack of a standard for making deferred
• Lack of unit of

15.      Features of an efficient tax system. (4 Marks)

• It should be equitable/equitable
• It should be certain/certainty
• It should be simple/simplicity
• It should be convenient/convenience
• It should be elastic(flexible)/elasticity/flexibility
• It should be economical/economical
• It should be diversified/diverse

16.

Source documents Books of original entry (a) Outgoing invoice Sales journal/Debtors journal (b) Received receipt Cash Payment Journal/   Cash Disbursement Journal/ Cash book (c) Copy of credit note Sales Returns Journal/ Returns inward journal (d) Original invoice Purchases journal/Creditors journal / Bought journal

Books of original entry. (4 Marks)

 

 

 

 

 

 

 

 

17. Types of capital in business. (4 Marks)
    • Working capital
    • Capital owned//Owners’ equity/Capital Invested
    • Capital Employed
    • Borrowed capital/Loan capital

18.      Ledger accounts (4 Marks)

19. Reasons that would make an organization prefer a landscape office over enclosed office
    • It promotes team work among employees as they work from same place and can share
    • Sharing of equipment is
    • Cost or construction and maintenance is low as compared to enclosed
    • There is easy location of workers as they are in one place.
    • It discourages absenteeism as one can be noted when absent.
    • Supervision of workers is easy as they are located in one
    • Decoration is easy and cheaper as compared to enclosed.
    • Flow of work is easy and faster
    • Avoids misuse of office equipments/resources
    • There is no wastage of time for moving from one office to another/saves on time
    • It discourages laxity in office as workers are easily monitored.

20.       Adow Balance sheet as at 31^st December, 2021. (4 Marks) Adow Traders

Balance Sheet

As at 2^nd May, 2021

Fixed Assets		Capital                 281,000
Land	120,000	Long Term Liabilities
Buildings	430,500	5 Year Loan      256,700
Current Assets		Current Liabilities
Cash	24,600	Creditors	37,400
	575,100		575,100

21. Terms used in insurance. (4 Marks)
    • 600,000-Value of property/Sum insured
    • Jane-The Insured
    • Serufi Insurance Ltd-The Insurer

(iv)     Theft-The Risk insured/Insured risk

22. Outline four difficulties that a country with a young population may face. (4 Marks)
    • High rate of unemployment as demand for jobs is
    • Increased in social evils such as crimes and prostitution as many are idle/do not have
    • Increased government expenditure to cater for youth

 

Dr                                     Cash A/c                                 Cr

 

 

 

 

Dr                                  Purchases A/c                           Cr

 

 

 

 

Dr                       Mawa Enteprises A/c                           Cr

welfare e.g provision of education.

• Reduced savings and investments as higher proportion of income is used in
• Low labour supply as many may not have attained age of working/lack
• High dependency ratio/levels as they depend on working population to provide for their
• Pressure on available social amenities/facilities.

23.

Statements Retailers (a) Sells goods by displaying them along the streets. Road side sellers (b) Moves from one place to another on foot selling their goods. Hawker (c) Dispenses goods with the use of coin operated machines. Automatic Vending Machine traders (d) Meet on designated days in open grounds to sell their goods. Open air Market Traders

Types of retailers. (4 Marks)

 

 

 

 

24. Benefits of inflation to an economy. (4 Marks)
    • May motivate people to work hard to meet their
    • May encourage proper utilization of resources to avoid wastage.
    • It promotes creativity and innovation with aim of increasing production.
    • It benefits debtors as they may pay
    • Traders may earn more profits as they buy goods when prices are low and sell when prices are
    • Leads to increased production

25.      Benefits enjoyed by country in international trade.

• A country enjoys access to wider variety of goods and services.
• A country is able to get what it does not
• A country earns revenue from taxes from importers and exporters.
• A country is able to dispose off its
• A country is able to create employment for its
• A country enjoys movement of factors of production across its
• A country earns foreign
• A country is able to fully exploit its resources as there is wider
• A country enjoys better and advanced technology imported from other
• A country enjoys peace and good relationship with trading
• In times of calamities, a country can get financial aid and grants from trading
• A country can specialize in areas in which they have comparative advantage in production.(Promotes specialization among countries)

KCSE 2022

1.          Components of Business Studies. (4 Marks)

1. Accounting (iii) Economics
2. Commerce (iv) Entrepreneurship

2.          Limitation of direct trade. (4 Marks)

1. There is higher distribution costs
2. It is limited to few products/not applicable to most products

• Producer may experience challenges in storage of adequate stock

1. Risks involved are borne by producer
2. Consumers may access few varieties of goods and services
3. Consumers may get poor/low quality of goods and services

• Producer may experience challenges of transporting the goods.
• Producer will have to bear cost of preparing goods for

1. It may be difficult to reach to consumers especially if are widely spread

3.          Calculation for Compensation. (4 Marks)

𝑆𝑢𝑚 𝐼𝑛𝑠𝑢𝑟𝑒𝑑𝑥𝐿𝑜𝑠𝑠

5.          Books of original entry

1. Purchases Journal/Creditors Journal/Bought journal
2. Sales Returns Journal/Returns Inwards Journal

• Cash Receipt Journal/Cash book

1. General Journal/Journal proper

6.          Circumstances under which CWO would be preferred.

1. Where the buyer is new to the seller.
2. Where the buyer’s credit worthiness is in

• Where CWO is the policy of the

1. Where the seller is operating a mail order store
2. Where the seller wants to avoid high cost of debt collection.
3. Where the seller requires cash urgently

• Where the seller want to avoid a lot of record keeping
• Where the seller needs working capital/ready

7.          Sources of government revenue other than tax. (4 Marks)

• Fines from courts
• License fees
• Borrowing loans
• Grants and foreign aid
• Rent and rates for use of government property
• Dividends and profits from government investments
• Proceeds from sale of government property
• Interest earned from loans advanced by government
• Escheats

8.          Ways in which economic environment may lead to business success. (4 Marks)

• Increase in consumers income which increases their purchasing power
• Increased government subsidies lowering cost of production
• Decrease in corporation tax encourage businesses to produce more
• Increase in personal income tax increases consumers purchasing power
• Decrease in interest rates ensures consumers have money to spend on goods and
• Low rate of inflation encourages consumers to buy more
• Low exchange rates encourage foreign trade (viii)Price stability leading to predictable income

(ix) Equitable distribution of income

9.          Circumstances under which firm may be located near the market. (4 Marks)

1. Where it is cheaper to transport finished goods than raw materials
2. If the government requires

• Where market is concentrated in one

1. Where there is need to save on transportation costs of finished goods.
2. Where the finished goods are highly
3. Where the finished goods are heavy and

• Where the finished goods are fragile
• Where level of competition is high so as to deal with consumers directly

10.      Meaning of term in Trends of Business Units. (4 Marks)

 

𝐶𝑜𝑚𝑝𝑒𝑛𝑠𝑎𝑡𝑖𝑜𝑛 =

√

𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑝𝑟𝑜𝑝𝑒𝑟𝑡𝑦

1. Holding company-It is a company that acquires fifty one percent shares or more of another

 

𝐶𝑜𝑚𝑝𝑒𝑛𝑠𝑎𝑡𝑖𝑜𝑛 = 800,000𝑥800,000            √

1,000,000

𝐶𝑜𝑚𝑝𝑒𝑛𝑠𝑎𝑡𝑖𝑜𝑛 = 𝐾𝑠𝑕. 640,000        √

(b) –The house was under insured/The house was insured for Ksh. 800,000 instead of Ksh. 1,000,000

4.          Circular flow of income. (4 Marks)

1. Firms
2. Households
3. Provision for factors of production
4. Payment for goods and services

1. Amalgamation-This is where two or more businesses combine and form a one new

• Absorption-This is where one business buys all assets of another business and the bought business ceases to

1. Cartel-It is a group of related companies that agree to work together to control output and market for their

11.      Market structures. (4 Marks)

1. Monopoly (iii) Oligopoly
2. Perfect competition (iv) Monopolistic competition

12.              Causes of cost-push inflation. (4 Marks)

 

1. Increase in wages and salaries
2. Increase in indirect taxes such as VAT

• Reduction/ withdraw in subsidies by government

1. Increase of profit margin by businesses
2. Increase in cost of utilities such as electricity
3. Unfavourable government policies making it expensive to run business

• Occurrence of natural calamities such as flood
• Increase in prices of raw materials

13.           Reasons for ethical practice in business. (4 Marks)

1. To ensure fair competition in business
2. To protect environment/avoid environmental degradation/pollution

• To ensure there is no discrimination in business

1. To eliminate use of unfair means of achieving business objectives like selling underweight
2. To protect consumers from
3. To ensure rights of workers/employees are upheld

• To enhance the public image of the business

14.              Effects of transaction on balance sheet totals. (4 Marks)

(i) No effect (ii) Increase (iii) Increase (iv) Decrease

15.                  Benefits of product promotion to the producer. (4 Marks)

1. To counter competition
2. To increase sales volume of a given product/expand market

• To create awareness about a product

1. To enhance customer loyalty
2. To persuade customers to try a new product
3. To remind customers about existence of a product in the market

• To avoid misinformation about a product
• To improve the business image

21.      Benefits of electronic filing. (4 Marks)

1. Requires little space/saves on office space as files are saved electronically
2. Easier and fast to operate

• More flexible/adaptable to future changes

1. Relatively cheap /saves on labour as few workers are involved
2. Enhance security as documents are protected with passwords
3. Reduces paper work

• Enhance tidiness/neatness in an office
• Enhance easy retrieval of documents

1. Provides for back-up system
2. Documents can be accessed through internet
3. It can be used to store large amount of information/wide storage

22.      Benefits Kenya get by being member of EAC. (4 Marks)

1. Kenya get access to wide market for her
2. Enables Kenya to dispose off surplus products

• Her citizen can gets employment opportunities from members of EAC

1. Kenya can specialize in producing what it has comparative advantage
2. Promotes peace and good relationship among members of EAC.
3. Can get products she does not produce at lower costs from members of

• Enables movements of factors of production such as labour
• Facilitates transfer of technology among EAC members

23. Financial ratios. (4 Marks) a) 𝑴𝒂𝒓𝒈𝒊𝒏= 𝑮𝒓𝒐𝒔𝒔 𝒑𝒓𝒐𝒇𝒊𝒕

𝒔𝒂𝒍𝒆𝒔

 

16.              Types of unemployment. (4 Marks)

• Seasonal unemployment (ii) Cyclical unemployment

𝟒𝟎

 

𝟏𝟎𝟎

= 𝑮𝒓𝒐𝒔𝒔 𝒑𝒓𝒐𝒇𝒊𝒕

𝟐𝟕𝟎,𝟎𝟎𝟎

 

(iii) Disguised/hidden               (iv) Voluntary/Real wage

17.                  Differences between primary wants and secondary wants

 

Primary wants	Secondary wants
One cannot do without them	One can do without them
They cannot be postponed	They can be postponed
They are felt needs	They are desired needs
They are universal	They are not universal
They are satisfied before secondary wants	They are satisfied after primary wants

18. Net worth of a Business (Capital Invested) (4 Marks)

𝑁𝑒𝑡𝑤𝑜𝑟𝑡𝑕/𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑒𝑑 = 𝐴𝑠𝑠𝑒𝑡𝑠 − 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

𝑁𝑒𝑡𝑤𝑜𝑟𝑡𝑕 = 40,000 + 60,000 + 12,000 + 16,000 − (24,000 + 18,000)

𝑁𝑒𝑡𝑤𝑜𝑟𝑡𝑕 = 128,000 − 42,000 = 𝐾𝑠𝑕. 86,000

19.          Reasons why government protect consumers. (4 Marks)

1. To ensure that products offered for sale are of good
2. To ensure that products offered for sale are of right

• To ensure health standards are maintained for good health of

1. To ensured consumers are not overcharged.
2. To ensure building construction and safety standards are maintained to avoid loss of lives and property in case they
3. To protect consumers from false advertising by traders who may give false

• To protect consumers from sale of harmful products that may adversely affect their
• To protect consumers against breach of contract from traders who may fail to honour terms and conditions of

1. To ensure traders do not hoard products causing artificial shortage/ensure commodities are readily available to

20.          Types of financial institutions. (4 Marks)

1. Commercial banks
2. Savings and Credit Co-operatives Societies/SACCOS

• Housing Finance companies

1. Development Banks/Development Finance institutions

𝑮𝒓𝒐𝒔𝒔 𝒑𝒓𝒐𝒇𝒊𝒕 = 𝟒𝟎𝒙𝟐𝟕𝟎,𝟎𝟎𝟎 = 𝑲𝒔𝒉. 𝟏𝟎𝟖, 𝟎𝟎𝟎

𝟏𝟎𝟎

1. b) 𝑺𝒂𝒍𝒆𝒔 = 𝑪𝑶𝑮𝑺 + 𝑮𝒓𝒐𝒔𝒔 𝑷𝒓𝒐𝒇𝒊𝒕

COGS=270,000-108,000 COGS=Ksh. 162,000

1. c) 𝑹𝑶𝑺𝑻𝑶 = 𝑪𝑶𝑮𝑺

𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑺𝒕𝒐𝒄𝒌

𝟔 =      𝟏𝟔𝟐,𝟎𝟎𝟎

𝑨𝒗𝒆𝒓𝒂𝒈𝒆.𝑺𝒕𝒐𝒄𝒌

𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑺𝒕𝒐𝒄𝒌 = 𝟏𝟔𝟐,𝟎𝟎𝟎

𝟔

𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑺𝒕𝒐𝒄𝒌 = 𝑲𝒔𝒉. 𝟐𝟕, 𝟎𝟎𝟎

24.      Reasons for locating bonded warehouses at border points

1. To ease collection of custom duties by the
2. To ease inspection of imported products by the government.

• To ease re-exportation of goods when

1. To ease inspection of goods before they are
2. To save on transportation costs to the bonded warehouses.
3. To avoid entry or exit of illegal goods into the country

• To control the quality of goods entering the
• To control the quantities of goods entering the

1. To avoid dumping of products into the country

25.      Services offered by retailers to consumers. (4 Marks)

1. They offer credit facilities to
2. They offer after-sale services such as transportation

• They stock variety of goods and services

1. They offer advice and information about the product
2. They break bulk/ divide commodities to small quantities convenient to
3. They avail commodities to places convenient for consumers.

• Ensure steady supply of products leading to stable prices
• They prepare goods for sale such as sorting,

 

Business Studies KCSE 2010-2022 P2 Marking Scheme

KCSE 2010

 

1.   (a) Market Equilibrium for Commodity A and B.(10 Marks)

 

Commodity A

• Discourages savings and investment since during inflation people tend to spend most of their earnings on basic needs leaving little or nothing to save or
• Leads to retardation/slow of economic growth as production are
• Leads to unfavourable balance of payments since imports are more than

 

 

 

 

P0

 

Price     P1

 

 

 

 

 

Explanation

 

 

 

 

 

 

 

0                         Q0     Q1                     Quantity

2 (a) Principles that distinguish co-operative societies from other forms of business organizations. (10 Marks)

• Democratic administration/control. Decisions are made by members on a one-man-one-vote
• Open and voluntary membership:-members can join or exit at will/freely.
• Limited number of shares to be held by any single member. This is to avoid dominance or control of the business by one or just a few
• Co-operation with other co-operatives. They do this in order to share ideas and experiences at different levels for

 

• Increase in supply of A causes decrease in price from P0 to
• Due to reduced price, consumers are likely to buy more of A as quantity increase from Q0 to Q1 and less of B as shown

Commodity B

 

 

P0

 

Price     P1

 

 

benefit of their members.

• Limited interest on share capital. The capital paid is meant for running the society’s affairs rather than generating
• Promotion of education to members. The co-operatives are obliged to educate their staff, management and the members in
• Provision/payment of dividends to members. They distribute their surplus income to members depending on shares/deposit.
• Political and religious neutrality. The co-operative societies are not supposed to favour, align or identify with any political or religious
• Offer of utmost service to members. They are formed to carter for members’ interests and welfare.

 

 

 

 

 

Explanation

0                 Q1  Q0                               Quantity

(b)    Ways of making face to face effective. (10 Marks

• Clarity of the message so as to avoid misunderstanding and ambiguity.

 

Demand for B decreases from Q0 to Q1 as the price decreases

from P0 to P1.

This causes a shift in demand curve from D0D0 to D1D1 creating a new equilibrium quantity Q1 and equilibrium Price P1 at equilibrium point e1

(b)    Explain five negative effects that inflation may have on the economy of a country. (10 Marks)

• It leads to loss by creditors as they lend money when the value is high and are paid when value is
• It leads to reduction in firms profits as sales volumes reduce since buyers buy
• It wastes time as a lot of time is wasted in shopping around for reasonable prices and also firms may waste a lot of time adjusting their price lists to reflect new
• It leads to industrial unrest/strikes as employees demand for pay rise to cope with increased
• It leads to decline in standards of living as consumers’ purchasing power decreases which may make them unable to cater for some of their human wants.
• Leads to unemployment as production activities are low due to low demand of goods and

• Use of non-verbal cues to clarify and reinforce verbal messages.
• Communicating parties being close to each other to avoid shouting/not
• Communicating parties to use of a common language thus enhancing understanding of the
• Making the message concise and brief to avoid unnecessary
• Good listening and being attentive so as to understand the message being
• Positive attitude between the communicating parties to avoid prejudice.
• Use of simple language and non technical terms to make it easy for the receiver to
• Having courtesy and respect between the sender and the receiver to avoid
• Tone variation to break monotony and sustain interest for the

 

3.   (a) (i) K-100 P&L Account. (9 Marks)

K-100 Traders

Trading Profit and Loss Account For the period ended 30^th June, 2008

 

Opening stock                         80,200   Sales                  1,880,000 Add: Purchases 1,120,000                                                          Less: Returns In              5,800 Add: Carriage in    40,000                                                   Net Sales 1,874,000 Less: Returns out 20,800 1,139,200

COGA4S                             1,219,400

Less: Closing stock              120,400

Cost of goods sold             1,099,400

Gross profit c/d                 774,800

1,874,000                               1,874,000

Expenses                                                  Gross Profit b/d  774,800

Water bill                              250,000    Discount Received  7,500

Repairs                                     23,000

Carriage on Sales                   12,700

Lighting                                    15,000

Insurance                                   4,000

General Expenses                   56,700

Net profit c/d                      213,900                                                

  782,300                                 782,300

 

(ii) K-100 Traders Balance sheet. (5 Marks)

K-100 Traders Balance Sheet

As at 31^st December, 2008

Fixed Assets                                            Capital                4,000,000

Furniture      3,000,000                          Add: Net Profit     213,900

Motor Vehicle 690,000 3,690,000                                 4,213,900

 

Current Assets                                         Current Liabilities

Stock                 120,000                        Creditors               510,400

Debtors             316,800                         Bank Overdraft        2,500

Bank                  520,000                                                         512,900

Cash                     80,000 1,036,800

4,726,800                                4,726,800

• Factors that should be considers in the choice of a means of transport. (10 Marks)
  • The nature of the commodity to be transported— durable, perishable, bulky or heavy goods can only be transported using particular
  • Cost of transportation — means chosen should be affordable/not too
  • Urgency/speed — urgently required goods requires fastest means of
  • Chose a means that is certain to deliver without fail/on right time and form for the goods.
  • The (geographical) distance to be covered. Some means are appropriate/convenient for long distances while others are appropriate/ convenient over short
  • Choose a means that is less prone to damage, loss or theft.
  • Choose a means that is able to deliver door to door services if you need so.
  • Availability of the means. Chose a means that can be readily found and is within your
  • Volume/quantity of the goods. Choose a means with the capacity to carry all the

4.   (a) Benefits that a member country may get from economic integration. (10 Marks)

• Large market — The country gets additional market to sell her goods and services.
• Promotion of peace — member countries have a deeper understanding of each other thus enhancing
• Increased mobility of factors of production. Labour, entrepreneurship and capital will move to and from other countries with minimum
• Improved infrastructure — There is likelihood that member countries will improve their infrastructure due to increased production
• Opportunity to deal with any deficits in production — Member countries can get what they don’t have from other countries.
• Increased variety of goods and services — due to increased range of gods at the disposal of the citizens of the member countries, they are able to satisfy varied needs since they have a wider
• Shared research information and common services — This reduces the cost of doing business and improves production by eliminating
• Creation of employment. This is a result of increased economic
• Encourages specialization. Member countries can concentrate on what they can produce
• Increased economic bargaining power. This may lead to better balance of payment and terms of

5.   (a) Problems that may be faced when measuring national income using the output approach.

• Inadequate or incomplete data — difficulties will be experienced in valuation due to unavailability or inaccuracy of output
• Difficulty in determination of goods and services to be included — there is difficulty in determining goods and services to include, for instance, do we include services for a housewife?
• Difficulty in evaluating output in subsistence sector — problem arises in the valuation of output of the subsistence sector since the goods are never
• Difficulty in valuing of stock — There is a problem on what to assign to the stock of goods to be included in the national income, whether it should be value at cost or at market
• Problem of Price fluctuation — prices of goods may vary from time to time hence there is a problem of deciding whether to attach historical cost or market price.
• Problem of double counting. It may be difficult to distinguish between primary and intermediate output or between intermediate and final
• Lack of qualified personnel who may be to compute and even collect
• Inadequate finance, capital equipment and technology to be used when gathering and compiling

 

(b) Factors that an entrepreneur would consider when evaluating a business idea. (10 Marks)

• Returns on investment/Profitability/profit margin to be earned from the investment. There should be a reasonable profit from the investment in order to cover all the operational expenses and get surplus.
• Existing attitudes, practices and beliefs of the target market. The new product, service or business idea must be in line with the people’s attitudes, practices and beliefs if it has to be accepted and hence marketed.
• Availability of appropriate technology. The technology to be used in producing the product or offering the service should be efficient and cost-effective.
• Size and availability of the market. There should be adequate consumers for the goods or services to be provided.
• Availability of an effective channel of distribution. This will ensure the product is available in the market do that customers buy it when they decide
• Ability of the product to satisfy the immediate need of the buyer. The new product must be of tangible or felt benefit to the buyer hence making it very
• The level of competition. The entrepreneur should look at the systems used by the competitors and strategize accordingly.
• The payback period. This should be reasonable to allow the investor break even and recoup/recover the capital invested.
• The risks involved. These should be manageable and minimal to avoid unnecessary losses.

6 (a) Benefits that accrue to a customer who uses ATMs.

• Customer can withdraw and deposit money at any
• Customers can deposit money or cheques at any time since it offers a twenty-four hour
• Customer can pay utility bills such as electricity through the ATMs.
• Fees charged for withdrawal is low compared to over-the- counter
• ATMs may be found even where banks are non-existent hence convenient and easily accessible to
• The customer has a pin number which guarantees confidentiality and safety for his/her
• Customer can use it to monitor his transactions with the bank by getting mini-statements.
• Customers can make interbank withdrawals by use of visa cards.
• ATM cards are secure and very easy to carry

b)   Possible risks that Amina can insure her PSV business against. (10 Marks)

• Accidents-She can insure her vehicles against road
• Fire — vehicle and other assets can be insured against
• Loss of cash in transit — can insure against loss of cash in transit to and from the
• Pilferage of goods — can insure against loss of cash and other valuables through theft by
• Occupational hazards — employees can be insured against physical harm while on
• Third party claims — can insure against injuries to third parties emanating from the fleet/vehicles.
• Theft and burglary to cover the vehicles and other property against been stolen/robbed.
• Loss of profit and consequential loss due to business interruptions.

KCSE 2011

1 (a) Explaining the types of inflation. (8 Marks)

• Demand-Pull inflation-Refers to a progressive increase in the general level of prices of products brought about by an expansion in demand. There is too much money chasing very few
• Cost-Push inflation– Refers to progressive increase in the general price levels brought about by a general increase in the cost of
• Imported inflation-Refers to a sharp rise/increase in prices of domestic products resulting from importation of primary goods and inputs at higher
• Structural inflation– Refers to a persistent increase in prices of products resulting from failure of the economy to meet the general increase in demand. (4 x 2 = 8 Marks)

 

(b)   Factors that may hinder the development of a country.

• Low demand for goods and services which discourages production activities hence interfering with
• Inadequate capital which leads to low levels of savings and investments by
• Negative socio-cultural practices which may hinder production and consumption of certain goods and services.
• Inadequate foreign exchange which limits access to imports hence affecting production and consumption.
• Limited entrepreneurial abilities resulting into inefficiency in
• Poor management of resources arising from inadequate skills, corruption and poor governance which limit the extent of growth and
• Poor nutrition and disease prevalence which renders some of the people unproductive as well as channeling much of the income into provision of health care instead of
• Use of inappropriate technology which compromises the quantity and quality of goods and services

 

2.   (a) Circumstances under which containerization may be used to transport goods. (10 Marks)

• Where bulky goods are imported. Bulky goods are usually transported by sea where containers are used.
• Where specialized equipment are available for handling
• Where container terminals are available- containerization require container terminals which are specially built to handle
• Where specialized means of transport like railways are
• Where security of goods need to be guaranteed. Goods of very high value and those that are risky require high level of security which is guaranteed by
• Where skilled personnel are available. The handling of containers requires specially trained workers to handle and manage

 

b)   (I) Procedure for making an insurance claim. (5 Marks)

• Notifying the insurer of the loss suffered. The insured should inform the insurer immediately or within 24 hours in case of occurrence of risk
• Filling a claim form from the insurer. The insurer issues an official claim form where the insured indicates details relating to loss suffered/occurred
• Carrying out investigation to determine or ascertain the cause of loss. Once they receive the claim form the insurer uses their experts (assessors) to determine the cause and extent of the
• Insurance company making a report. Assessors make reports of their findings in their
• Payment of the claim/Compensation-If claim is valid, the insured is compensated depending on the loss

𝑺𝒖𝒎 𝑰𝒏𝒔𝒖𝒓𝒆𝒅 𝑿 𝑳𝒐𝒔𝒔

4 (a) Benefits to an organization that adopts open office plan. (10 Marks)

 

• Easy supervision. It is easy to monitor employee’s performance since they are in the same
• Economy of space. More floor space is available since space has not been lost through
• Minimal cost. It is cheap to construct and
• Sharing of resources. It makes possible for joint use of office
• Easy communication. Communication between workers and departments is made easier and faster since there are no physical barriers between
• Easy reorganization. It is easy to re-arrange the office when need

 

(II) 𝑪𝒐𝒎𝒑𝒆𝒏𝒔𝒂𝒕𝒊𝒐𝒏 =

(5 Marks)

𝑽𝒂𝒍𝒖𝒆 𝒐𝒇 𝒑𝒓𝒐𝒑𝒆𝒓𝒕𝒚

• Enhanced teamwork. Employees work as a team and learn to be

 

900,000𝑥500,000

𝐶𝑜𝑚𝑝𝑒𝑛𝑠𝑎𝑡𝑖𝑜𝑛 =

1,200,000

= 𝐾𝑠𝑕 375,000

3.     (a) Factors to consider when choosing a method of promoting a product. (10 Marks)

• Cost of the method. The organization should choose a promotion method that is
• Geographical area of coverage. The organization should choose a method that will reach the customers in their various locations. Target group. The organization must choose a method that appeals to the relevant target group.
• Speed of the medium or method in relation to urgency of the message. The organization should choose a method that will reach the customers within the desired time
• Nature of the product. Different methods may be chosen depending on the nature of the product e.g. technical products may require demonstrations best achieved through personal selling.
• Nature of the promotional message. The organization should choose a method that will best present the various aspects of the

(b)    Features of economic resources. (10 Marks)

• They are scarce in supply. They are found in small quantities compared to the many uses into which they have to be put and hence not sufficient to satisfy all human
• They have monetary Value. They have a price attached to them which have to be paid for their use.
• They are unevenly distributed. They are not distributed uniformly in society; hence some people, regions or countries have more of the resources than
• They can be combined in various They can be used in different proportions to produce goods and services.
• They have utility/usefulness. They are used to satisfy human wants (have utility).
• They can change ownership/possession/ Transferability They may be transferred from one person to another in terms of

(b)    Circumstances under which a partnership may be dissolved include: (10 Marks)

• Where objectives of the business has been This is if partnership was formed for a definite time and for a particular objective.
• Where there is mutual agreement among partners to dissolve the business. Partners can agree to terminate the
• In case of bankruptcy, death or insanity of a general partner. This is because there would be no guarantee for creditors to be paid their
• In case of change in law that makes the operations of the partnership illegal.
• Where there is continued disagreement/Internal dissension among partners – where partners disagree irreconcilably, then the partnership may be terminated.
• In case of persistent/continuous loss making which renders the business unable to meet its financial obligations.
• In case of a court order to dissolve the business. For instance if court find out that the partnership has engaged in fraudulent activities.

5.   (a) Factors that may influence the choice of a channel for distributing flowers. (12 Marks)

• Nature of the flowers. Flowers are perishable and therefore need a short channel in order to be distributed
• Cost of distribution. The cost of different channels of distribution should be considered and choose cheapest channel.
• Nature of the market. If consumers are widespread, then agents/long channel may be necessary to reach
• Tastes and preferences of consumers. Consumers may have specific preferences which might require the personal attention of the producer hence use of a shorter
• Level of competition. Where competition is high, the producer will have to close to the consumers and will therefore use a short channel of
• Quantity of flowers. If the quantity of flowers to be sold is large, then more middlemen/long channel may be
• Availability of technical personnel. If the producer does not have the required technical personnel, then he may have to use a longer channel.
• Government policy. Flowers distributors must adhere to the government requirements in flower

 

(b)    Reasons for maintaining books of original entry.(8 Marks)

• Relieve ledger accounts from being too bulky. Journals reduce details to be recorded in the ledger
• Act as back-up data from which other information may be extracted if need
• Contain information which acts as reference such as units, trade discounts and terms of
• The general journal is used to correct errors made when recording
• May be used by business which does not keep complete record of accounts to start doing
• The three-column cash book is used as a book of original entry as well as a

6.   (a) Causes of unfavourable balance of payment for most developing countries. (10 Marks)

• Reliance on primary products for export. Most developing countries mainly export primary agricultural products which fetch low prices in the international
• Heavy importation of finished goods. Most developing countries import finished manufactured goods whose values are very high hence spending more on
• Use of low levels of technology in production. Most developing countries rely on low levels of technology in production which compromises the quality of their exports and also lowering their value
• Too much reliance on foreign borrowing. Most developing countries finance their development projects through heavy borrowing yet such loans are repaid with heavy
• Susceptibility/Prone to natural calamities. Many developing countries are easily affected by natural disasters like drought which adversely affect their production.
• Preference towards foreign goods. Most consumers in developing countries prefer goods manufactured in foreign countries in the belief that they are of better
• Unfavourable world economic order. The developing countries have very little say in international trade forums and cannot influence the world economic order in their

 

(b) Rehema Traders Balance sheet. (10 Marks)

Rehema Traders Balance Sheet

As at 31^st December, 2007

Fixed Assets                                          Capital                 1,000,000

Premises            850,000                       Add: Net Profit  1,806,000

Motor Vehicle  800,000                                                    2,806,000

Equipment       550,500

Furniture           350,000 2,5500,500

Current Assets                                         Current Liabilities

Stock               75,000                                Creditors          820,000

Debtors          650,500

Bank              200,000

Cash              150,000   1,075,000

3,626,000                               3,626,000

KCSE 2012

1 (a) Benefits of division of labour to an organization.

 

(10 Marks)

 

• Less time is spent in completing a job – there is less movement by workers while changing from doing one work to another.
• Increased production- people become more effective and efficient at their jobs as they do it repeatedly hence increasing
• Standardized goods – goods produced are of uniform quality which enhances customer satisfaction and the firm’s
• Increased use of machines – work can be automated leading to lower costs of
• Enhanced management – this facilitates control, co- ordination and
• High quality goods produced – people concentrate in doing jobs for which they are best suited which improves quality of
• Increased creativity and innovation – the organization may tap workers talents and skills which may help to modify existing products, develop new products, initiate new methods of production or discover new
• Improved efficiency due to better use of resources hence avoiding wastage.

 

 

(b)   Ways in which a computer may be used in an office.

(10 Marks)

• Data processing – data can be keyed into the computer which then sorts, organizes, analyzes and gives meaningful output.
• Storage of information/data – a computer has various storage devices where information can be kept for future reference.
• A tool for communication – A computer can be linked to the internet and other work stations to enhance sharing of information.
• Production of documents – can be used as a word processor to produce both soft and hard
• Assist in research – a computer provides a link with various sites where information can be sourced for research
• Assist in decision making – it has special programmes and models which may facilitate the decision making process for
• A tool of supervision can be used to monitor employee activities on-line.
• Can be used for training and staff development – it is a tool for training during staff orientation and
• Entertainment – the computer has accessories for games, music and movies’, which can be used for relaxation while working. (Any 5 x 2 = 10 Marks)

 

5 (a) Demand and Supply Curve. (10 Marks)

 

35

 

30

 

25

 

20

 

15

 

10

 

5

 

0       10       20      30     40     50      60      70      80 90

 

• Merits of direct taxes to the government. (10 Marks)

 

• Economical to collect – it provides higher revenue at lower costs of administration since collection is executed at the source e.g. PAYE.
• Tax revenue is certain – the government knows the amount of tax, the manner and time of payment, hence budget and plan for it. It is also difficult to
• Convenient for both taxpayer and the collector – it is collected from the source at regular intervals making it easy and very
• It enhances price stability – it is a useful tool for maintaining stable prices by affecting disposable income and consequently influencing aggregate
• Ensures equity – the progressive nature of direct taxes distributes tax burden equitably, thus the government is able to redistribute wealth by heavily taxing those who earn more as opposed to those earning
• Simple to determine – Every wage level falls into predictable tax
• Easy to administer -.It is very difficult to evade hence very easy to administer as the collection points are also fewer as opposed to collecting tax directly from individuals.
• It is elastic/flexible – it expands with increased income and population. (Any 5 x 2 = 10 Marks)

3 (a) Disadvantages that a country would suffer if she restricted trade with other countries. (10 Marks)

• Development of monopolies – Monopolies may emerge due to lack of competition from possible rivals exposing consumers to
• Reduced consumer choice – trade restrictions reduces the variety of goods and services available to consumers leading to lower standards of
• Trading conflicts – trading partners are likely to retaliate, leading to conflicts between the countries
• Poor quality goods – protected domestic industries may produce poor quality goods and services due to lack of competition from established
• Lack of growth of infant industries – overprotected infant industries may not grow from infancy always seeking for continued protection.
• Reduced production capacity – this results from the reduced market as a result of the trade restrictions hence under-exploitation of available
• Misallocation of resources – it may force a country to use her resources in areas where she has no comparative advantage.
• Costly to the government – this may happen if measures like subsidies are used to enhance restrictions by encouraging import
• Encourages smuggling which leads to entry of counterfeit goods and loss of government revenue.

 

(b)    Factors that may promote entrepreneurship in Kenya.

(10 Marks)

• Government support /Favourable government policies on funding and regulation of business activities may encourage the emergence and expansion of business ventures.
• Training in entrepreneurship – trainees are equipped with skills and knowledge to undertake entrepreneurial activities.
• Favourable cultural practices – some cultural practices encourage entrepreneurship through early exposure to business
• Availability of role models – interaction with successful business people may inspire
• Availability of capital – capital for starting and expanding a business may facilitate
• Positive peer group influence – people may be encouraged to venture into business if they associate with friends who encourage them to do
• Availability of adequate market – people venture into business to satisfy customers where there is a gap in their needs.
• Availability of good infrastructure – This facilitates access to markets.
• Political stability/security. This encourages investment and fosters security. (Any 5 x 2 = 10 Marks)

 

4 (a) Characteristics of property insurance. (10 Marks)

• The value of premium charged is dependent on the degree of risk. Higher premium will be paid for risks of high degree and vice versa.
• It is a contract of indemnity – the owner of the insured property is compensated for the loss of the property upon occurrence of the
• It is a short term contract – the insurance contract ends after a specific period of time usually one year and must be renewed for the policy to continue being in
• Cannot be assigned to beneficiaries. The owner of the property insured is the only one to be compensated – it cannot be assigned to a next of kin or to another individual.
• It has no surrender value – should the insured stop payment of premium before expiry of the contract, he/she is not entitled to any refund from the
• There must be an insurable interest in the property to be insured. The insured must be in a position to suffer financial loss in the event of the risk covered happening in order to claim
• There is a maximum limit to the amount of compensation

– This can be up to the value of the insured property in case of over insurance and the sum insured in case of under insurance.

• The risk insured is uncertain/involves pure risks – it may or may not

(b)    Elements of effective communication. (10 Marks)

• Sender – This is the source of the message. The person who send the
• Message – This is the information to be
• Channel – This is the medium to be used in conveying the information/message.
• Receiver – This is the party (person) to whom the message is sent/intended.
• Feedback – This is the receiver’s reaction or response to the
• Encoding – This is the process of forming / generating the message.
• Decoding – This is the process of interpreting the message so received. ( Any 5 x 2 = 10 Marks)

 

5 (a) i) Laketi Traders Profit and Loss Account. (5 Marks)

Laketi Traders

Profit and Loss Account

For the period ended 31st December, 2009

 

Expenses                                            Gross Profit b/d 1,960,000 Commission Allowed       12,400                                          Discount Received 66,100

Insurance                           7,500

Lighting                              4,600

Salaries                             78,000

General expenses         117,800

Net Profit b/d              1,806,000

2,026,000                                  2,026,000

Net Profit b/d 1,806,000

(ii)     Laketi Traders Balance Sheet (7 Marks)

Laketi Traders Balance Sheet

As at 31^st January, 2015

Fixed Assets                                          Capital                 1,000,000

Premises            850,000                       Add: Net Profit  1,806,000

Motor Vehicle  800,000                                                    2,806,000

Equipment        550,500

Furniture           350,000 2,5500,500

Current Assets                                         Current Liabilities

Stock               75,000                                Creditors           820,000

Debtors          650,500

Bank              200,000

Cash              150,000   1,075,000

3,626,000                               3,626,000

 

 

• Characteristics of services. (8 Marks)
  • Quality cannot be standardized. Varying quality over time hence it is difficult to standardize the service offered since the quality cannot be uniform from time to
  • Cannot be stored for future use – service is only consumed at the time it is being offered and any unused service capacity cannot be
  • Service cannot be touched – it is intangible and can only be felt or experienced. Service cannot be separated from the service provider – the provider must directly offer the service to the
  • Service is highly perishable – service can only be offered at the time the provider is
  • Is inseparable from provider/services cannot be owned by the buyer – ownership cannot be transferred from the provider to the buyer. The buyer only pays for the experience.

 

6 (a) Types of small scale retail shops that a school leaver may start. (10 Marks)

• Single/unit shops – where the person can sell a wide range of goods in a small fixed
• Kiosk – the person can put up a simple semi-permanent structure and sell fast moving
• Tied shop – the person can operate from a permanent building but sell products of a particular
• Market stall – the person can hire a permanent bench/stall from the county council/municipal market from where to sell
• Canteen – the person can rent a room from an institution and stock goods from different
• Mobile shop – the person can acquire or hire a vehicle from where to sell goods by moving from one place to
• Automatic vending machines – can hire or buy coin- operated machines for selling goods.

 

(b)    Circumstances in which a firm may acquire monopoly power. (10 Marks)

• If the firm has patent rights/copyright which bars other firms from producing/ selling the
• If the firm has control over strategic inputs. This makes the firm to have sole access to inputs used in the production of the
• If the firm is the only one with large capital required for the venture. Other firms may not be able to raise the capital leaving the field to one
• If the firm enjoys economies of scale. This enables the firm to produce at a lower cost than the other
• If the firm is set up as a parastatal and given exclusive rights of production of a particular product by the
• If firms merge and form one big firm/incase of mergers (amalgamation). When firms join together to form one large firm, this gives them advantage due to
• If it is the first firm in a small market that is served by one firm more economically. New firms entering the market may make losses due to low

 

KCSE 2013

1 (a) Benefits that may accrue to a country with a large proportion of skilled labour force. (10 Marks)

• Saving on foreign exchange that would have been used to pay expatriates/ imported
• Production of high quality goods/services as the workers are experts in their respective areas.
• Increased output of goods/services as the workers are competent due to exploitation of
• Reduction in cost of production since the labour tends to be efficient/less
• Increase in purchasing power/demand due to higher incomes/salaries
• Reduction in dependency ratio since the employment rate is
• Enhances creativity/innovation/research leading to new/improved/variety of goods/services.
• Promotes specialization/division of labour leading to faster
• Ease/simplify setting of wage/employment policy due to abundance/ availability of skilled labour/may reduce labour strife/unrest.
• Increased government revenue due to-income taxes levied.
• Increased foreign exchange due to export of skilled labour.
• Enhances entrepreneurial culture since skilled labour is more willing to undertake
• Adaptability/flexibility as they are ready to embrace changes. (Any 5x 2 = 10 Marks)

 

(b)    Characteristics of an efficient tax system.

• Equity – the tax should be fair and just/people should be taxed according to their income.
• Economical – it should be cheap and easy to administer/cost effective/cost of collecting should be lower than the
• Convenience – method of payment should be convenient to the tax payer/ favourable to tax
• Certainty – tax payer/collector should know what, when and how to pay/collect.

• Flexibility – where tax is used as an instrument of national policy, it should be adaptable to all
• Simplicity – it should be easily
• Elasticity – proceeds from taxation should be capable of expanding/contracting in line with changes in income/population.
• Diversity/wide base. There should be wide range/variety of taxes/should net many tax
• Difficult to evade. Should not create loopholes for people to avoid paying tax. (Any 5x 2 = 10 Marks)

2 (a) Benefits that Kenya may get as a member of COMESA.

• Expanded market for its goods and services as can trade with members of
• Reduced costs of operating businesses as a result of increased scale of
• Production of competitive/quality goods and services as Kenya is able to specialize in area which it can produce
• Promote peace and understanding/possibility of political cooperation among COMESA members due to improved peace and understanding as trade
• Increased variety of goods to choose from as can import from various trading
• Improved infrastructure as a result of increased economic activities which facilitate easy conduct of
• Creation of employment opportunities due to increased trading activities with COMESA
• Attracts investment due to greater
• Lower prices of goods due to abolition/decrease of tariffs among COMESA
• Encourages specialization where countries enjoy comparative advantage.
• Easy transfer of modern technology from COMESA members. (Any 5×2 = 10 Marks)

(b)   Factors that may hinder economic development in Kenya.

• Inaccessibility to appropriate technology leading to low quality/quantity.
• Inadequate research data. Which limits production activities in a country as their likely to use low level of
• Poor development
• Inadequate skilled labour force. Lack of enough skilled labour leads to low production limiting on economic development.
• Inadequate natural resource endowment. Inadequate natural resources such as minerals, crude oi affects country development
• Brain drain-where skilled manpower seek greener pastures in other countries.
• Low demand for goods/services which limits production activities.
• Negative socio-cultural practices which discourages some business activities as some businesses are likely to close down in those
• Inadequate/lack of foreign exchange which limits a country foreign
• Poor governance/corruption where public funds are misused, stolen or misappropriated. (Any 5 x 2 = 10 Marks)

 

3 (a) Benefits that may be realized by a country as a result of government policy to relocate industries to rural areas.

• Increased availability of variety of goods and services as a result of new businesses in the
• Availability of auxiliary services – citizens would enjoy more and better auxiliary services like
• Increased job opportunities – there will be more jobs available that would reduce
• Increased utilization of locally available resources – locally available factors of production will be used and the citizens would earn rewards associated with
• Improved standard of living as development of the rural areas increases the quality and variety of goods and services.
• Reduced congestion in towns – this would benefit the few citizens remaining in the
• Balanced economic development as economic activities are spread throughout the
• Transfer of technology to rural areas which leads to production of better quality goods/services.
• Creation of market for goods/services produced in rural areas.

(b) (i) Soilo Traders TPL. (5 ½ Marks)

Soilo Traders

Trading  Profit and Loss Account For the period ended 31^st December, 2010

 

Opening stock           75,000  Sales             500,000

Date Details D.A Cash Bank Date Details D.R Cash Bank 2011 2011 Jan 1 Bal b/d 22,500 250,000 Jan 15 Ndaru 16,000 184,000 Jan 2 Sales 465,200 Jan 20 Bank c 200,000 Jan 5 Kamau 23,750 451,250 Jan 25 Wages 144,000 Jan 20 Cash c 200,000 Jan 28 Mbago 45,000 255,000 Jan 29 Bank c 250,000 Jan 29 Cash c 250,000 Jan 30 Cash c 150,000 Jan 30 Bank c 150,000 106,000 Jan 31 Bal c/d 59,700 546,250 23,750  737,700 1,051,250 61,000 737,700 1,051,250 Jan 31 Bal b/d 59,700 546,250

Add: Purchases       395,000

COGA4S                   470,000

Less: Closing stock 170,000 Cost of goods sold 300,000 Gross profit c/d       200,000

500,000                            500,000

Expenses                                    Gross Profit b/d 200,000 General Expenses    60,000    Rent income    72,000 Net profit c/d          212,000

 272,000                                272,000

Net profit b/d   212,000

 

 

(ii) Soilo Balance Sheet. (4 ½ Marks)

 

Soilo Traders Balance Sheet

As at 31^st December, 2010

Fixed Assets                               Capital             1,000,000

Machinery 360,000                   Add: Net profit  212,000

Furniture   430,500   790,500                            1,212,000

Current Assets                             Current Liabilities

Stock         170,000                     Creditors            101,550

Debtors       62,250

Bank         202,000

Cash            88,800   523,050                                          

1,313,550                       1,313,550

• (a) Advantages of advertising to the consumers. (10 Marks)
  • Consumers become aware of existence of a product and where it can be
  • May help consumers to know offers available in the
  • Consumers enjoy high quality goods resulting from competitive advertising. /Producers seek to maintain very high standards of
  • Makes it easy for consumers to choose products from a variety offered in the market based on their advertised quality and
  • Protects consumers from exploitation since they are aware of prices and quality of items and can therefore enforce their rights.
  • Communicates changes about the producer like new product lines, change of name and physical address. This enhances convenience for the
  • Educates the consumers on the proper use of products where advertising messages involve demonstrations of product usage.
  • Entertainment by use of drama/music/plays used in various advertising media.
  • Aiding budget/planning as they are made to know about price and existence of
  • May enjoy lower prices due to high competition which may force some sellers to decrease
  • Correct misconceptions hence assist in making

(b)    Jumo Traders Three-Column Cash Book. (10 Marks)

Jumo Traders Three-Column Cash Book

For the Month of January, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

• (a) Circumstances under which a trader may use air transport. (12 Marks)
  • Where goods are highly perishable so that they do not go bad since air transport is
  • Where goods to be transported are highly valuable since air transport is more secure.
  • Where goods are needed urgently as air transport is
  • Where security of goods is needed as air transport is very safe and secure
  • Where other means of transport are not
  • When accessing areas which other means cannot access for instance on top of
  • Where distance to be covered is too large for instance from one continent to
  • Where the policy of the business is to transport goods by air. ( Any 6x 2 = 12 Marks)

 

(b)    Ways through which a public limited company may be dissolved. (8 Marks)

• Where there is a court order to dissolve it. A company can be dissolved if court orders so for instance if there is complaints from creditors or found culpable after law
• In case of a resolution by the shareholders to dissolve the company. Shareholders can agree unanimously or by majority vote to dissolve the
• Where there is change in law that renders the activities of the company illegal/
• In case of amalgamation/mergers of two or more companies to form one big company different from the previous ones. The companies that merged cease to
• In case of takeover/acquisition/absorption – a company may be dissolved if it is taken over (bought) by another
• When the company acts ultra-vires. A company may be dissolved if it engages in activities which it was not registered to
• In case of completion/fulfillment of task/activity/objective for which the company was formed hence making its continued existence unnecessary.
• In case of insolvency. Inability to repay financial debts makes the company insolvent and may therefore be dissolved.
• In case of continuous loss making which makes it difficult to run it
• Where the company has failed to commence the business within one year after incorporation thus contravening the Companies Act. (Any 4×2=8 Marks)

 

6   (a) The effect of an increase in the supply of a commodity while the demand remains constant. (10 Marks)

Price

 

 

P0 P1

 

 

 

0                          Q0     Q1                  Quantity

 

Explanation;

• The (equilibrium) price of a commodity will fall from Po to
• The (equilibrium) quantity supplied increases from Q0 to
• The equilibrium point moves downwards from E0 to E1. A new equilibrium point E1 is
• The supply curve shifts to the right from SoSo to
• The increase in supply causes excess supply/surplus. This lowers price to the new equilibrium price P1 and equilibrium quantity Q1. Diagram – 8 Marks

Explanation – 2 Marks    Total = 10 Marks

(b)    Features of oligopoly. (10 Marks)

• Firms are interdependent in decision making. Firms keenly observe each others’ actions/decision hence acting in any way triggers counter reactions (from other firms).
• Firms deal in similar but differentiated products. The products are close substitutes of each other and are only differentiated in terms of aspects like colour/packaging/ shapes/pricing/branding.
• Firms may engage in non-price competition/collusive oligopoly. Firms may engage in non-price competition such as aggressive advertising/after sales services/market segmentation/fixing
• Unpredictability of behaviour/uncertainty since firms under oligopoly keep reacting to market changes differently/actions taken by other firms within the market may take others by surprise.
• The market is made up of a few large firms since such firms operating under oligopoly tend to have a large capital outlay/make extensive use of modern technology in their production activities/control substantial share of the
• There are barriers to entry such as large capital requirement/investment required to be a player in this market/the level of technology involved may keep off possible entrants into the market/intimidation/collusion.
• Firms may engage in price wars/rivalry/cut throat competition which may lead to survival/collapse of some firms.
• May lead to price rigidity/kinked demand occasioned by fear of other firms’
• There may be price leadership where the dominant firm dictates the market price/rules the

KCSE 2014

1 (a) Benefits that a firm may enjoy by preparing a business plan. (10 Marks)

• It helps in sourcing for finance/capital/loans. It can be used to convince financial institutions and investors to fund the firm’s
• Used as a tool for evaluation. It can be used to determine whether the firm is achieving its goals and objectives/ help to make necessary adjustment/changes/ for supervision
• Used as a tool for management. It can be used for structuring the implementation of the functions /tool for planning, organizing, directing, staffing, coordinating budgeting/communicating.
• Gives the firm a competitive edge. It enables the firm to get a better understanding of the market and
• It helps in proper allocation of resources. Enhances efficiency in the use of the resources of the firm. It ensures that the resources available are allocated and used in the best way possible without
• Used as a motivational tool. It inspires the management

/employees /creates team work in accomplishing the objectives of the firm.

• Used as a framework /blue print/guide for implementing a new business, thus assisting management in decision/actions on the (possible) strengths, weaknesses, opportunities and threats on a day to day
• For adaptability. Helps in accommodating and incorporating future changes in the

 

(b) Demerits that a country may suffer when the government becomes a major investor in business. (10 Marks)

• Discourage private investment. The move may discourage private investment due to unfair competition and acquisition of monopoly powers/unfavourable
• Poor quality goods and services. The quality of goods and services may be compromised due to lack of competition. Government employees also lack enthusiasm since there is no profit
• Limited choices for consumers. Where the government is the only provider of good/service, consumers may be denied a variety to choose
• Inefficiency leading to low/poor productivity/continuous
• Burden to tax payers. The investments may drain public resources by increasing government expenditure in situations where the enterprise is not able to sustain itself/makes losses (burdening tax payers).
• Lack of accountability/transparency/corruption. Managers of government-run businesses tend to misappropriate and embezzle public funds/ misuse public
• Unstable management. Government-run businesses are prone to frequent changes in their management occasioned by changing political
• Political interference/patronage. Appointment of cronies/nepotism and unethical practices may lead to social discontent.
• Bureaucracy/red tape. Leading to rigidity/slow response to market changes. (Any 5 x 2 = 10 Marks)

2.   (a) Ndovu Traders Three Column Cash Book. (12 Marks)

Ndovu Traders

Three Column Cash Book

For the Month of January, 2012

Date Details D.A Cash Bank Date Details D.R Cash Bank 2012 2011 Jan 1 Bal b/d 30,000 75,000 Jan 2 Purchases 15,500 Jan 5 Chui 1,250 23,750 Jan 8 Drawings 8,900 Jan 11 Maro 800 16,000 Jan 17 Furaha 900 29,100 Jan 15 Sales 24,250 Jan 20 Cash c 15,000 Jan 20 Bank c 15,000 Jan 25 Wages 21,000 Jan 22 Koko 1,000 39,000 Jan 25 Bal c/d 27,400 106,000 3050 93,000  130,000 900 93,000 130,000 Jan 25 Bal b/d 27,400 106,100

Dr                                                                                                      Cr

 

 

 

 

 

 

 

 

 

• Reasons for which traders observe ethical practices in product promotion. (8 Marks)
  • To avoid misleading the consumers by not making false claims about their
  • To ensure that consumers are not offended by not making use of appeals that goes against their cultural
  • To avoid exploiting certain vulnerable groups like children since they lack the knowledge and experience to understand and evaluate the purpose of persuasive appeals.
  • To avoid negative influence on the consumers’ values and lifestyles that may lead to immorality and ill health like glorifying the image of alcohol and
  • To avoid portraying rival businesses negatively in an attempt to capture the market or gain undue
  • To create a positive image/reputation of business hence maintaining customer
  • To abide by the laws of the country to avoid lawsuits/ conflicts/frictions with law enforcement agencies/ government. (Any 4 x 2 = 8 Marks)

3.   (a) Objectives that may be attained by establishing firms in different parts of the country. (10 Marks)

• To reduce rural-urban migration. Setting up firms in several parts of the country may curb the influx of people from rural to urban areas. This helps to retain the productive population in the rural
• To utilize local resources/factors of production/untapped resources. Establishing firms in various parts of the country will enhance the use of idle resources in those areas.
• To create employment opportunities. This is a sure way of creating employment opportunities in several parts of the country which improves the standard of
• To provide balanced regional development. Creating firms in various parts of the country will ensure that all parts grow/ develop at the same rate/time.
• To promote development of infrastructure. Setting up of firms will encourage the growth of infrastructure like roads, power which promotes business activities.
• To promote development of social amenities such as schools and hospitals. When firms are set up in various parts of the country, social amenities will also be developed. This improves the social welfare of the
• To reduce social problems hence avoiding/minimizing pollution/crime/ prostitution/drug abuse/theft.
• To promote urban growth hence encouraging growth of market/economy/ commercial activities.
• To reduce congestion in certain areas in order to ease pressure on
• To reduce effects of concentrated pollution which may negatively affect the
• To minimize effects/impact of calamities/terrorism/catastrophe which may polarize the economy.
• To reduce income disparities/inequalities as people will be engaged in production

(b)    Accounting documents that are used in home trade.

• Invoice. This is a document sent by the seller to a buyer demanding for payment for goods supplied.
• Debit note. A document sent by the seller to the buyer to correct an undercharge. It is issued when the invoice shows a lesser amount than what is actually
• Credit note. A document sent by the seller to the buyer to correct an overcharge. It is issued when goods are returned to the
• Receipt. This is a document issued by the seller to the buyer when payment is made for goods /
• Statement of account. This is a document sent by the seller to the buyer showing details of transactions for the month with a running balance shown with each
• Consignment note supports hire of carriage services/shows transport charges
• Payment voucher. A document used to validate payment for service/goods rendered. It is issued by a cashier and signed by the service provider/ payee/
• Remittance advice note. This is a document that accompanies a cheque issued for settlement of a debt. It provides information on the
• A1E (Authority to Incur Expenditure). It is a written document with instructions allowing one to spend institutional funds up to a certain amount.
• Bank deposit slip – As a source document for cash book/evidence of payment into the bank

 

4 (a) Financial Ratios. (10 Marks)

1. 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 =  𝑆𝑎𝑙𝑒𝑠  −  𝑅𝑒𝑡𝑢𝑟𝑛𝑠 𝑖𝑛𝑤𝑎𝑟𝑑𝑠

= 1,155,000 − 30,000

= 𝑠𝑕𝑠 1,125,000

1. 𝑅𝑂𝑆𝑇𝑂 = 𝐶𝑂𝐺𝑆

𝐴𝑣𝑒𝑟𝑎𝑔𝑒  𝑆𝑡𝑜𝑐𝑘

𝐶𝑂𝐺𝑆 = 430,000 + 930,000 + 10,000 − 470,000 − 20,000

𝐶𝑂𝐺𝑆 = 880,000

430,000 + 470,000

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑆𝑡𝑜𝑐𝑘 =

2

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑆𝑡𝑜𝑐𝑘 = 450,000

𝑅𝑂𝑆𝑇𝑂 = 880,000  = 1.96 ≈ 2 𝑇𝑖𝑚𝑒𝑠

450,000

𝐺𝑃

III.       𝑀𝑎𝑟𝑘 − 𝑢𝑝 =

𝐶𝑂𝐺𝑆

1,125,000 − 880,000       245,000

=                                        =                 = 27.84%

(b)    Features of monopolistic competition. (10 Marks)

• Many sellers and buyers. The market is comprised of many sellers and buyers who operate
• Free entry and exit into the market. There are no barriers to entry into, or exit from the
• Commodities sold are very close substitutes. Firms sell similar products but which are highly differentiated by names, shapes, colour and
• All firms earn normal profits in the long run. Some firms may earn supernormal profits in the short
• Firms are independent. There is little interdependence in terms of pricing and quantities to
• Entry or exit of a firm does not significantly affect the market. None of the firms can influence the market supply by joining or leaving the
• No single firm has control over the factors of production. All

 

880,000

880,000

firms acquire the factors at the prevailing market rates and

 

𝐺𝑃

1. 𝑀𝑎𝑟𝑔𝑖𝑛 =

𝑆𝑎𝑙𝑒𝑠

245,000

=

1,125,000

= 21.78%

conditions.

• Perfect knowledge of the market. Buyers and sellers are aware

 

1. 𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 = 𝐺𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡 − 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠

= 245,000 − 25,000 + 100,000 + 25,000

= 95,000

(b) Guidelines/Principles of govt. expenditure. (10 Marks)

• Economy – requires proper planning to avoid

/minimize wastage/ensure maximum benefit.

• Sanction – Authority should be sought from relevant bodies/parliament before committing public
• Maximum /optimal social benefit – resources should be used only on projects that improve social welfare / quality of life of the citizens Ito benefit as many people as
• Flexibility – expenditure should be able to be adjusted to reflect the prevailing
• Good/proper financial management to ensure accountability/good governance/ transparency through proper record
• Equity – distribution of resources should be fair to all sectors/regions/ minimize incidents of inequalities /imbalances.
• Productivity – more resources should be spent on development projects than on nonproductive projects / on projects that yield high returns
• Elasticity-expenditure should be capable of being expanded/contracted depending on size of

5.   (a) Disadvantages that a developing country may suffer by liberalizing foreign trade. (10 Marks)

• May lead to dumping of inferior products into the country from developed
• May cause over exploitation of resources leading to their depletion.
• May lead to loss of jobs due to closure of firms due to high competition from big companies from foreign
• May contribute to deterioration of balance of payment as developing countries import more than they
• Cultural values and beliefs may be eroded due to unrestricted trade/interaction between locals and foreigners. May lead to borrowing of unwelcomed/foreign
• Entry of harmful goods such as beauty creams and illegal drugs which has adverse effects on consumers’
• May lead to slow economic development due to over dependence on other countries for supplies/raw
• May lead to brain drain as trained manpower move to developed countries that provide better pay and

of the prices, quantities and other market factors.

6.   (a) Sources of finance for a public limited company apart from the sale of shares. (10 Marks)

• Leasing and renting out properties which can be used to generate
• Borrowing from financial institutions in the form of loans, bank overdraft and
• Trade credit. Buying goods for re-sale on credit so as to pay at a later date.
• Buying properties on hire purchase. Buying goods and paying for them on installment
• Borrowing from members of the public for which interest is paid at a fixed rate and over a predetermined period of time.
• Sale and leaseback. Selling an asset like a building and then hiring it back for a specified period of
• Retained profits. Profits made are not shared out as dividends but ploughed back into the
• Discounting bills of exchange. Receiving payment from financial institutions at a discount against bills of exchange before their
• Use of reserves/ provisions. The company may make use of funds set aside for depreciation, tax and bad debts to finance its day to day operations. (Any 5 x 2 = 10 marks)

(b)   Factors that may have caused a decline in the demand for wooden furniture. (10 Marks)

• Decline in consumer incomes. This may reduce their purchasing power hence less able to afford the
• Fall in the price of substitutes. Furniture made from other materials like plastic and metal may be
• Increase in the price of wooden furniture. This makes the furniture to be out of reach for most
• Unfavourable government policy such as increased taxes on timber products hence making the furniture more
• Unfavourable change in tastes and preferences. Consumers may be purchasing more plastic and metallic
• Decline in population. A decrease in population will lead to reduced numbers of potential and actual
• Future expectations of price fall. Consumers may be anticipating a fall in price in the future hence currently suspend buying.

 

KCSE 2015

1.     (a)Uses of National income statistics to a country. (10 Marks)

• Indicator/measure of standard of living – an improvement/increase of national income indicates/improved welfare/improved standard of living / vice
• Comparison of standard of living between countries
  • countries with high national income are deemed to have high standard of living and vice
• Assessing performance of the economy over time – the period with high national income is considered to be better
• Economic Planning – comparing performance in different sectors and regions helps the government in planning for better/ efficient allocation/use of
• For investment decision – Data obtained can be used by entrepreneurs to make decision on the sector, when and amount of capital to
• Provide information on distribution/contribution of income
  • this helps the government to address income/production disparities e.g. through subsidies and tax
• To attract foreign aid/donor funding, when a country shows strong economic growth/when experiencing challenges to finance its development/for budgetary support.
• Calculate/determine per capita income – by dividing national income by the
• Compare standards of living in a country between different years/periods. The year/period the NY is high is said to have a high standard of living/vice versa. Any 5 x 2 (10 marks)

(b)    Principles that would lead to effective use of government resources. (10 Marks)

• Economy – requires proper planning to avoid

/minimize wastage/ensure maximum benefit.

• Sanction – Authority should be sought from relevant bodies/parliament before committing public
• Maximum /optimal social benefit – resources should be used only on projects that improve social welfare / quality of life of the citizens Ito benefit as many people as
• Flexibility – expenditure should be able to be adjusted to reflect the prevailing circumstances.
• Equity – distribution of resources should be fair to all sectors/regions/ minimize incidents of inequalities /imbalances.
• Productivity – more resources should be spent on development projects than on nonproductive projects / on projects that yield high returns
• Elasticity – expenditure should be capable of being expanded/contracted in line with the size of the economy.
• Good/proper financial management to ensure accountability/good governance/ transparency through proper record keeping. Any 5 x 2(10 marks)

2.  (a) Ways in which the consumer may benefit from warehousing. (10 marks)

 

• It helps maintain / improve quality of goods – this is mainly for goods that mature over time such as wine /for them to get goods when still fresh.
• It ensures constant supply of goods – facilitates release of goods in the market regularly which minimize shortages/so as to get goods as/ when needed.
• Preparation of goods for sale – goods are sorted, graded, packaged, blended and
• Availability of seasonally produced goods – consumers can access goods that are off season from the warehouse e.g. farm
• Stability in prices of goods – ensures constant supply of goods leading to stable prices throughout the year/due to minimal
• Creates time utility – ensures that the consumer accesses and uses goods at appropriate
• It enables the breaking of bulk – where he/she is able to buy goods in convenient /affordable
• Availability of seasonally demanded goods. That are produced but only come to use at certain times/such as gumboots/umbrellas.
• Availing a variety/different goods enabling him/her have a wider choice/satisfy different wants/tastes
• Providing security – to avoid loss due to theft/pilferage.

(Any 5 x 2=10 Marks)

(b)    Mambleo Traders Two-Column Cash Book. (10 Marks)

 

Mambleo Traders Two-Column Cash Book

Dr             For the Month of September, 2014                      Cr

 

Date	Details	Cash	Bank	Date	Details	Cash	Bank
1/9	Bal b/d	15,500		1/9	Bal c/d		9,700
5/9	Sales	8,500		15/9	Creditor	10,000
12/9	Debtor		9,000	17/9	Wages	2,600
19/9	Samson		23,400	23/9	Cash		7,700
20/9	Debtor	6,700		24/9	Electricity		1,200
23/9	Bank	7,700		27/9	Purchases	8,950
25/9	Debtor		11,500	30/9	Water		2,800
26/9	Sales	12,800		31/9	Bal c/d	29,650	26,000
28/9	Investment		3,500
		51,200	47,400			51,200	47,400

 

3. (a) Characteristics of a monopolistic competitive

(10 Marks)

 

• There are many independent buyers and sellers of the commodity.
• The products are close substitutes/differentiated /similar but differ by names shape/colour package/
• Free entry / exit – there are no barriers for new firms that require to supply the same commodity nor are there barriers for those wishing to exit the market. Firms’ decision to enter or leave is influenced by profits or
• Wide knowledge of market. As buyers /sellers are aware of price/output market factors
• Firms set their own prices – prices are set depending on cost incurred and demand in the
• No single firm controls any factor of production – firms acquire factors at prevailing market prices /
• Individual firms have highly elastic/gently sloping demand curve since commodities are close
• It is possible for a single/some firms to dominate/influence market price through extensive advertising/product promotion/differentiation.
• All firms earn normal profits in the long run since supper normal profits attract new firms/losses make forms to leave/quit. (Any 5 x 2=10 Marks)

 

(b)      Features of human wants. (10 Marks)

 

• They are numerous and unlimited – when one is satisfied another crops up to take its place/begin at birth and end at
• They continually change with time, age and What is required when it is cold may not be the same as what is required when it is hot.
• They are habit forming – once an individual develops taste for a commodity he/she tends to use it over and over
• Require resources – limitation in resources required means only a few human wants are fulfilled/require resources in order for them to be
• They are universal/common to all human beings – all human beings need goods and services for existence though quantities may
• They are competitive – wants compete for attention each yearning to be
• They vary in urgency and intensity – urgency/some wants are more felt than others eg. basic wants/ some may not be postponed.
• Some are complimentary – satisfaction of one creates a second want may lead to another. e.g if you buy a car you have to buy
• Insatiable – wants cannot be fully satisfied
• Recurrent/repetitive – once satisfied they are felt again.

4.  (a) Chui Traders; Trading Profit and Loss Account.

(10 Marks)

Chui Traders Trading Profit and Loss Account

For the period ended 31^st December, 2014

 

Opening stock                      10,000 Add: Purchases                               15,000 Add: Carriage in                                 1,200 Less: Returns Out  1,100     15,100		Sales                   28,000 Less: Returns In 800 Net Sales           27,200
COGA4S	25,600
Less: Closing stock	2,500
Cost of goods sold	22,600
Gross profit c/d	4,600
Expenses	27,200	27,200 Gross Profit b/d   4,600
Carriage outwards                 1,200 Discount Allowed                   300		Rent income            580 Discount Received 1620
Insurance	950
Net profit c/d	4350
	6,800		6,800

• Five methods of determining the price of a product other than price control. (10 Marks)
  • Bargaining/Haggling – terms of exchange is negotiated

/argued/debated between buyers and sellers.

• Demand and supply/price mechanism – Interactions between forces of demand and
• Auction – prices determined by the highest
• Tendering – prices determined by the lowest bidder who meets the required
• Price fixing/ retail price maintenance / recommended retail price – as producers / manufacturers / producer agree on the price of
• Prices collusion – where different market players (such as sellers/buyers) conspire to fix the
• Taxation/subsidies -which influences selling/buying
• Private treaty – sale of property at a price agreed on by the seller and buyer without an intervening

5.      (a) Trends in office management. ( 10 Marks)

• Location of offices in sub-urban areas – Organizations tend to move away from congested town centres to sub-urban
• Use of modern equipment/computer/automation – organizations have adopted modern equipment /computers for efficiency and to make work
• Adopting open office layout /landscaped – adopted to facilitate supervision and economize on floor space/ improve ambiance/comfort in the
• Engagement of multi skilled staff able to carry out different tasks/ to save on labour costs/ wage
• Use of innovative ways of motivating staff eg. tours, meals at work, capacity building to develop staff
• Use of biometric clocking system to control staff movement and save on
• Establishing customer care services/desk – to enhance customer satisfaction.
• HIV/AIDS awareness/policy to sensitize employees/ avoid discrimination.
• Stress management policies – to promote good health/coping of the work
• Engaging in corporate social responsibility – to give back to the
• Use of name tags/badges for easy identification of

(Any 5 x 2=10 Marks)

 

(b)    Advantages of government involvement in business.

• Provision of essential services/good at fair prices/affordable/reasonable.
• Provision of large capital investment – undertake ventures that require large sums which private sectors may not be able to raise which spur economic
• Protection of citizens – from exploitation/malpractice by businesses.
• Stimulation of economic development – by developing social amenities/ infrastructure roads / injecting funds into economy through development
• Creation of employment – to create jobs for its citizens to earn a living/improve their standard of
• Raising revenue for the government- to increase government revenue through licensing/taxation/ to finance public
• Stabilization of the economy through regulation/market intervention.
• Promotes equity/fairness in the distribution/use of resources.
• Control use of resources through conservation/legislative measures / to ensure their sustainability.
• Maintenance of law/order – for smooth operations of a country’s
• Promotion of best practices – through encouraging adoption of ICT/good governance/social programmes/inclusivity.
• Reduce foreign dominance / promote a country’s sovereignty by regulating foreign participation / encouraging local participation in the
• Promotion of entrepreneurship cultures by encouraging business ownership /training / funding
• Promotes investment in the country by creating an enabling environment. Any 5 x 2                                                            (10 Marks)

 

6.          (a) Benefits that Kenya may enjoy by being a member of the African Development Bank (ADB/AFDB).

• The country will obtain loans/credit for economic

/social advancement/ development.

• Kenya will get technical assistance /expert advice/consultancy to strengthen and execute development
• Kenya will get assistance in policy coordination / development formulation for effective implementation of
• The country will get technological assistance to utilize its economic
• The country will enjoy cooperation/support from regional economic institutions in Africa/internationally.
• The country will gain from capital funding for public/private investment that boost
• Promote better/effective use/management of funds/resources/accountability through oversight/monitoring by AFDB agencies,
• Boosts the country’s credibility/image/credit standing – thus enabling it access more funds (from international lenders/development partners) since AFDB can guarantee the country for
• Kenya can get international platform/opportunity

/forum – to promote its development agenda.

• Cheap affordable credit/easy terms – due to low interest rates/longer repayment

(b) Features of under developed countries. (10 Marks)

• High population growth rate – the growth rate of population is higher than
• High rates of unemployment – due to low levels of economic
• High levels of illiteracy – leading to ignorance/limited exposure
• High level of poverty – large proportion of citizens live below the poverty
• Poor governance – due to corruption/embezzlement/mismanagement of resources/misappropriation/lack of transparency/accountability.
• Low level of technology – due to lack of capital to acquire modern technology leading to low quantity/quality of output.
• Disparity in income distribution – much of the wealth is in the hands of few individuals while majority are
• Low levels of savings – due to low per capita income leading to low
• Negative social/cultural practices – which hinders production /consumption.
• Dominant large subsistence sectors – traditional subsistence sector such as agriculture tend to dominate the
• Under utilization of natural resources – natural resources remain under exploited due to lack of capital / appropriate technology / skills/knowledge.
• Low levels of investment due to limited markets/low savings/capital.
• Limited market/low demand – due to low levels of

 

KCSE 2016

1.          (a) Explain five factors that may promote entrepreneurship in Kenya. (10 marks)

• Government support/ favourable government policies/ funding regulation (of business activities) may encourage the emergence expansion of business
• Training/ in education entrepreneurship/ trainees are equipped with skills/ knowledge to undertake entrepreneurial activities to start
• Entrepreneurial culture/ cultural practices that encourage entrepreneurship through early exposure to business activities opportunities/ positive attitude towards
• Presence of role model interaction with successful business people who may inspire/ create interest in entrepreneurship/ business
• Availability of capital/ loans/ credit facilities for start expanding a
• Political stability/ non political interference that creates a conducive environment for starting/ running expanding business.
• Availability of market/ market information for buying goods and services
• Availability of security- that ensure safety of businesses/ property/ business
• Healthy/ fair competition that business owners can withstand/be safe with
• Availability of appropriate technology that can lead to the production of desired quality/ quantity of goods/services.

 

(b) Explain five circumstances under which a partnership may be dissolved. (10 marks)

• Where intended objective of the business has been completed. In case of a temporary
• Where there is mutual /voluntary agreement among partners / where the partners agree among themselves to dissolve the
• Where the business is declared
• In case of change in law/ government policy that makes the operation of the partnership
• In case of continued/irreconcilable disagreement among partners then the partnership may be terminated.
• In case of death, insanity, bankruptcy or terminal disease of a (real)
• In case of persistent losses in operation /where the business has continued making losses making it difficult to
• Where there is court order to dissolve the
• In case of a formal written request by one /some partners to dissolve the

 

2.          (a) Explain five advantages of government involvement in business. (10 Marks)

• Provision of essential services/good at fair

prices/affordable/reasonable.

• Provision of large capital investment – undertake ventures that require large sums which private sectors may not be able to raise / without which development would be
• Protection of citizens – from exploitation/malpractice by businesses.
• Stimulation of economic development – by developing social amenities/ infrastructure roads / injecting funds into economy through development
• Creation of employment – to create jobs for its citizens to earn a living/improve their standard of
• Raising revenue for the government- to increase government revenue through licensing/taxation/ to finance public
• Reduce foreign dominance / promote a country’s sovereignty by regulating foreign participation / encouraging local participation in the
• Promotion of entrepreneurship cultures by encouraging business ownership /training / funding businesses.
• Promotes investment in the country by creating an enabling
• Stabilization of the economy through regulation/market intervention.
• Promotes equity/fairness in the distribution/use of resources.
• Control use of resources through conservation/ legislative measures / to ensure their
• Maintenance of law/order – for smooth operations of a country’s
• Promotion of best practices – through encouraging adoption of ICT/good governance/social programmes/inclusivity. (Any 5 x 2=10 Marks)

(b)   Traders are required to observe ethical practices when carrying out product promotion. Explain five reasons for observing such ethical practices. (10 Marks)

• To ensure there is fair competition in business to promote business
• To protect consumers/customers against adverse
• To protect and conserve the environment and avoid environmental adverse effects such as global
• To protect the rights of employees and ensure are productive and happy in their
• To promote social responsibility of the business organizations and the society around
• To maintain a positive image of the business organization to the
• To abide by the country’s laws and avoid legal
• To maintain suppliers, creditors and financiers to ensure business run
• To promote positive cultural practices in the society and ensure positive interactions with the

 

3.      (a) Explain five methods of determining the price of a product other than price control. (10 Marks)

• Bargaining / haggling – where the price is agreed between buyers and
• Forces of demand and supply / price mechanism interactions between forces of demand and
• Auction – where the price determined through bidding and sold to the highest
• Tendering – where the suppliers are asked to submit their tenders and awarded to he (lowest) bidder who meets the required specifications.
• Recommended retail price/Retail price maintenance- where price is set/fixed by the manufacturers/producers.
• (Price) collusion – where different market players such as buyers / sellers conspire to fix the
• Through government taxation / subsidy – which will influence the selling / buying
• Private treaty – a sale of property at a price agreed on by the seller and buyer without an intervening

(b)      Benefits that may be realized by a country as a result of government policy to relocate industries to rural areas.

• Increased availability of variety of goods and services as a result of new businesses in the area,
• Availability of auxiliary services – citizens would enjoy more and better auxiliary services like transport,
• Increased job opportunities – there will be more jobs available because of many business activities which would reduce unemployment.
• Increased utilization of locally available resources – locally available factors of production will be used and the citizens would earn rewards associated with
• Improved standard of living as development of the rural areas increases the quality and variety of goods and services.
• Reduce rural-urban migration/Reduced congestion in towns – this would benefit the few citizens remaining in the
• Balanced economic development as economic activities are spread throughout the
• Transfer of technology to rural areas which lead to production of better quality goods/services.
• Creation of market for goods/services produced in rural areas.

 

4.          (a) Ndovu Traders Three-Column Cash book.

(12 Marks)

Ndovu Traders Three-Column Cash book

Date Details D.A Cash Bank Date Details D.R Cash Bank 2015 2015 Jan 1 Bal b/d 30,000 75,000 Jan 2 Purchases 15,500 Jan 5 Chui 1,250 23,750 Jan 8 Drawings 8,900 Jan 11 Maro 800 16,000 Jan 17 Furaha 900 29,100 Jan 15 Sales 24,250 Jan 20 Cash c 15,000 Jan 20 Bank c 15,000 Jan 22 Koko 1,000 39,000 Jan 30 Bal c/d 27,400 106,000  3,050  93,000  130,000 900   93,000 130,000 Jan 30 Bal b/d 27,400 106,100

Dr                         For the month of January 2015                    Cr

 

 

 

 

 

 

 

 

 

 

 

 

1. b) Rehema Traders

Balance Sheet

Fixed Assets Capital 600,000 Motor Van 200,000 Less: Drawings 10,000 Furniture    140,000 340,000 590,000   Current Assets Stock      160,000 Debtors 100,000 Cash       200,000   460,000 800,000   Current Liabilities Creditors                 210,000       800,000

As at 31^st January, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

5. (a) Principles that would lead to effective use of government resources. (10 Marks)

• Economy – requires proper planning to avoid

/minimize wastage/ensure maximum benefit.

Date Details D.A Cash Bank Date Details D.R Cash Bank 2015 2015 Sep 1 Bal b/d 55,000 250,000 Sep 3 Ribbons 4,500 Sep 2 Sales 35,260 Sep 8 Wangila 6,000 94,000 Sep 12 Wetu 1,200 58,800 Sep 15 Salaries 34,000 Sep 25 Bank c 50,000 Sep 25 Cash c 50,000 Sep 28 Anyango 7,500 67,500 Sep 30 Bank c 52,580 Sep 30 Cash c 52,800 Sep 30 Bal c/d 13,700 320,360    8,700   105,000    464,360   6,000   105,000   464,3600 Sep 30 Bal b/d 13,700 320,360

• Sanction – Authority should be sought from relevant bodies/parliament before committing public
• Maximum /optimal social benefit – resources should be used only on projects that improve social welfare / quality of life of the citizens Ito benefit as many people as
• Flexibility – expenditure should be able to be adjusted to reflect the prevailing
• Equity – distribution of resources should be fair to all sectors/regions/ minimize incidents of inequalities /imbalances.
• Productivity – more resources should be spent on development projects than on nonproductive projects / on projects that yield high returns
• Elasticity – expenditure should be capable of being expanded/contracted in line with the size of the economy.
• Good/proper financial management to ensure accountability/good governance/ transparency through proper record keeping.

(b)      Explain five disadvantages that a country may face if it restricts trade with other countries. (10 Marks)

• Reduced competition – leading to low quality goods and services.
• Reduced/ low consumer goods – trade restriction reduces the availability of goods and services available to consumer leading to low state of
• Retaliation/ trading partners are likely to retaliate – leading to loss of business (between two involved/ reduced export/ imports).
• Reduced/ low investment – due to limited trading opportunities
• Reduced limited market – hence under exploitation of available resources/ reduced production
• Inappropriate allocation of resources – It may force the use her resources in areas where she has no comparative interest/ not best suited in.
• Cost to the government – (This may happen) if measures are used (to enhance restriction /by encouraging import substitution) meet part of the
• Reduced revenue/ loss of government revenue which could have been earned from import and export of goods and services.
• Leads to increased unemployment due to reduced trading activities.
• Poor international relations which may lead to conflicts/ friction, among countries/ may not get assistance in times of
• Curtailed transfer of technology/ factors of production that may lead to poor quality goods low quantity of products.
• Reduced/ limited supply of goods/ services which may adversely affect consumers (access /examples of adverse effect as explanation)
• Encourages smuggling/ black marketing leading to loss of revenue/ entry of counterfeit goods/

 

6 (a) Gondi Traders Three-Column Cash book. (10 Marks)

Gondi Traders Three-Column Cash book

Dr                  For the month of September, 2015                  Cr

 

• Outline five reasons that may influence the government to start a parastatal. (10 Marks)
  • To provide strategic/essential goods and services to the public at affordable/low
  • To increase revenue collection to help to meet its expenditure.
  • To encourage import substitution industries so as to discourage
  • To encourage foreign investment into the country so as to increase production activities and create
  • To reduce foreign influence/dominance in a particular sector for the good of the
  • To invest in business that requires large initial capital which could not be available to private
  • To take care of sensitive ventures which cannot be left in hands of private
  • To create employment for its citizens
  • To stimulate economic development in the country and ensure balanced regional
  • To promote healthy competition with private sector for the good of the

 

KCSE 2017

1.          (a) Ways in which the internal environment may contribute to the success of a business enterprise.

• A functional / proper / good business structure: Formal arrangement of functions / the relationship of people that is directed towards achievement of organizational goals
• Employment of qualified / skilled / experienced / adequate personnel / when correct labour force is acquired /correctly matched to their jobs, then performance is
• Proper / appropriate allocation of available financial resources to ensure money is used where it most profitable.
• Adequate capital finances will enable a business to carry out its operations smoothly / expand
• Availability / access to relevant physical resources like buildings / machinery / furniture / other equipment to compliment human
• Innovativeness / inventions / creativity / research and development through continuous improvement on methods of production which boosts the quantity and quality of
• Positive business culture-productivity is enhanced when culture matches the expectations / beliefs / values of the
• Good objectives/setting good objectives that are measurable, specific and achievable to encourage staff.
• Good / proper management style through planning

/directing /organizing / coordinating / controlling activities of the organization.

• Motivated / supportive owners arising from fair returns on capital

(b) Channels of distribution that a Kenyan manufacturer would use to ensure their goods reach in another country.

• Local manufacturer Foreign consumer
• Local manufacturer Wholesaler                    Foreign consumer
• Local manufacturer Retailer                           Foreign consumer
• Local manufacturer Wholesaler               F. Retailer               Foreign consumer
• Local manufacturer Import Agent                      Foreign consumer
• Local manufacturer Import Agent                Retailer                Foreign consumer
• Local manufacturer Import Agent             Wholesaler             Foreign consumer
• Local manufacturer  Import Agent   Wholesaler   F. Retailer    Foreign consumer

2.          (a) Differences between chain stores and departmental stores. ( 10 Marks)

 

	Chain stores	Departmental stores
i)	Have many branches in different parts of the country	Have different shops under the same roof
ii)	Purchases are centralized	Purchases are made per department
iii)	Sales are decentralized	Sales are centralized
iv)	Have standard prices in all their branches	Prices vary in each department according to products sold
v)	They are uniform in outward appearance and interior layout.	Each department is different in outward appearance and interior layout.
vi)	They have centralized management	Each department has its own manager hence different managements
vii)	Slow moving goods in one branch can be moved to another where demand for them is higher	Slow moving goods in one department cannot be moved to another department
viii)	They sell similar products in all their branches.	Sell different products in different departments/shops.
ix)	Usually located in town centres	Usually located in outskirts/sub- urban areas.

• Ojwang Limited; Trading Profit and Loss

Ojwang Limited

Trading Profit and Loss Account

For the period ended 31st December, 2013

 

Opening stock                    200,000     Sales                   1,200,000 Add: Purchases 680,000                                              Less: Returns In 50,000 Add: Carriage in                       42,000                                                Net Sales                 1,150,000 Less: Returns Out 80,000 642,000

COGA4S                             842,000

Cost of goods sold 762,000 Gross profit c/d 388,000   Expenses 1,150,000 Carriage outwards 30,000

Less: Closing stock             80,000

 

 

1,150,000

Gross Profit b/d 388,000 Discount Received 45,000

Discount Allowed             80,000         Rent income         60,000 Net profit c/d      333,000

  493,000                                       493,000

Net profit c/d     333,000

 

3.          (a). Benefits that a private limited company would get by converting to a public limited company include:

• Ability to raise larger amounts of capital / converting to a public limited company it will enable the firm to access more funds by selling shares to members of the public through stock
• Easy transferability of shares / shareholders can freely transfer the shares bought in public limited companies when need arises / without consultations / restrictions..
• Increased transparency / accountability. The

shareholders must scrutinize / approve the company’s Annual audited Accounts / which must also be published.

• Increased public confidence / goodwill / positive image in the company. This is due to increased exposure to the public / control by the stock exchange.
• Freedom from interference from owners since owners has no direct managerial control.
• Increased professionalism / specialization in management. Since they can afford to attract / pay professional managers / staff to run the company on behalf of the
• Higher chances of continuity / survival / the firm are assured of continuity since shares can be freely transferred / membership can be changed without affecting the

Date Details LF Cash Bank Date Details LF Cash Bank 2016 2016 Mar 1 Capital 15,300 Mar 1 Capital 8,200 Mar 4 Harrison 4,600 13,400 Mar 3 Purchases 10,200 Mar 6 Chebet 9,310 Mar 5 Wages 5,000 Mar 7 Otieno 7,720 Mar 8 Hassan 5,450 Mar 9 Cash C1 6,000 Mar 9 Bank C1 6,000 Mar 12 Mwende 8,570 Mar 10 Insurance 3,700 Mar 13 Makokha 11,200 Mar 11 Repairs 3,900 Mar 29 Cash C2 10,640 Mar 14 Water bill 2,590 Mar 15 Rent 6,500 Mar 29 Bank C2 10,640 Mar 29 Bal c/d 0 24,560   36,190    50,550   36,190   50,550 Mar 29 Bal b/d 0 24,560

• Can enjoy more /larger economies of scale due to increased scale of production; (Accept examples of economies of scale as an explanation).

• Can be quoted / listed at the stock exchange leading to sound management / close supervision.
• Can advertise sale of shares to the (public) newspapers / mass media which can attract new / more investors / give it more
• Enhanced ability to borrow funds by sale of debentures / from the public / due to larger asset base / collateral ability
• Better management / policy direction since it is run by a more competent Board of Directors

/professionals

 

• Disadvantages of using direct taxes to raise revenue include: (Any 5 × 2 = 10 Marks)
  • It is paid in lump sum / at once / advance leading to taxpayers feeling the
  • Reduced ability to invest due to reduced profits.
  • Reduced purchasing power/Afford less goods / services / disposable income hence leading to low standards of living / poor
  • Not an adequate source of government revenue as most people in developing countries are low income earners. Limited amount of tax revenue from this source due to limited tax base / limited
  • Reduced ability to save as it reduces disposable income of the
  • High taxes may encourage capital freight / foreign investors may transfer capital to other countries due to decline in profit margin / high costs of doing business.

• It may cause labour unrest / strife as workers demand higher pay to absorb the higher
• It is complex / complicated due to many / numerous accounting / formalities to be
• It is compulsory to those whose income it is imposed / within the tax bracket leaving them with no
• Discourages hard work as it directly affects the taxpayers’ income / reduces disposable
• Direct taxes are very unpopular with the citizenry. The burden of paying this tax is borne directly with the individual tax payer. Thus no room to shift / share / transfer the burden.
• Gives the taxpayer motivation to evade tax payment / may easily be evaded. The taxpayer may falsify records in order not to pay tax/pay less
• Non-consultation of taxpayers in the determination of the tax rate / the determination of the rate / amount of tax to be paid is at the discretion of tax authorities which may overburden the taxpayer / discourage payment / encourage evasion.
• Taxpayers are not involved in the expenditure of the tax revenue / there is low civic involvement and call for government accountability / taxpayers do not make decisions on government expenditure hence leading to lack of accountability / poor governance .

 

4.            (a) Dagoretti Enterprises Two-Column Cash book. Dagoretti Enterprises

Two-Column Cash book

Dr                     For the month of March, 2016                         Cr

 

• Factors that one may consider when selecting a means of communication include: (Any 5 × 2 = 10 Marks)
  • Confidentiality / secrecy of the message. The means should safeguard the content of the message from being accessed by unauthorized
  • Accuracy / precision / preciseness of the means. The means should be able to deliver the message in its original form / without
  • Urgency of the message / speed of the means. The means should be fast enough to ensure timely delivery of the
  • Affordability / cost of the means. The sender must be able to meet the cost of the means chosen to ensure it is
  • Nature of the message. An appropriate means should be chosen if the message is very complex / detailed / technical.
  • Need for future reference / record. The means must be able to provide evidence if future reference will be required.
  • Reliability / certainty of the means. Should be able to deliver the information to the receiver as
  • Availability of the means. Means chosen should be readily available/you can only use what is
  • Distance / distribution of the audience / recipients means chosen should be capable of reaching / covering the audience / recipients wherever they
  • Security/safety of the message. The means should guard against loss / theft of information
  • Intended / desired impression. The means should be able to create the desired effect / impact /
  • Government’s policy. If the government requires that communication be done in a certain way he/she has no option.
  • Business / organization policy. If the business has prescribed ways of communicating, then the policy has to be
  • Type / nature of audience / recipients. The means chosen should be suitable / appropriate for the needs of the audience /
  • Size of the audience / number of recipients. The means chosen should be capable of reaching all the audience / recipients
  • Capacity of the means. Should allow the required volume of information to be passed / at an agreed speed.

5. (a) Demerits of the output approach in measuring National Income include: (Any 5 × 2 = 10 Marks)

• Problem of valuing government output / services since they may not be paid for / not sold at market price / are
• Problem of subsistence output /sector since goods / services are not offered for sale / marketed / difficult to value.
• Difficult of deciding what goods or services to include/ unpaid for household chores / do it yourself activities and yet they are produced using resources thereby leading to understating the national output / income.
• Difficult in valuing stock at the end of the accounting year / in store / unsold stock as it differs with their value at the production time / at the current moment / cost.

• Fluctuation in prices which may cause output to appreciate or depreciate in
• Problem of double counting / may be difficult to distinguish between intermediate and finished/final goods.
• It is difficult to determine / estimate the value /rate of depreciation hence failure to record accurately the value of capital goods / fixed
• Inaccurate / incomplete data. Leading to wrong valuation / overstatement / understatement of national output / due to poor record
• Inadequate finance / capital / equipment / technology that limits computation of
• Inadequate / unqualified personnel / unskilled personnel leading to inefficiency in collection / valuation / computation of output
• Problem of illegal products. Illegal products such as illicit alcohol and bhang generate income which is not included in calculation of national

(b)      Circumstances under which a country may realize surplus in its balance of payment include: (Any 5 × 2 = 10 Marks)

• When a country exports highly valued finished goods

/ manufactured products since they fetch higher prices in the international market.

• Reduced volume of imports which lowers expenditure of imported products.
• When the country aggressively promotes its

This will create more market for exporting goods thus increasing the country’s earnings

• When the country devalues its currency. This makes imports more expensive forcing consumers to buy locally produced goods / exports becomes more cheaper and are sold in large volumes
• When the country enjoys favourable economic order / bargaining power. The country may be able to influence the world market prices to favor its
• When the country diversifies its exports / the country increases the range of its exports. This makes the country to increase the volume of
• Increased volume / demand of exports thus higher export earnings
• Improved terms of trade hence high export earnings compared to import expenditure
• Devaluation of  foreign  currency   making exports cheaper / imports expensive
• Increased investments in the country which increases production for
• Political stability    which     creates    a     conducive environment to produce for
• Increased capital inflow such as receipt of foreign grants as compared to capital outflow (giving grants).

 

6.         (a) Methods that the government may use to increase the supply of goods in the market include: ( 10 Marks)

• Reduce the taxes / levies on producers / production / tax holidays. This causes a reduction in the cost of production hence motivating producers to increase production.
• Increase subsidies in production. The government meets part of production cost making production more

 

• Eliminating quotas in production. By not limiting the quantity of goods to be produced / the producers are free to supply as much as they can to the
• Setting favourable producer prices / the government fixes the prices of produce at a high level which encourages emergency of new producers / expansion of new businesses to supply more to the
• Improving access to credit / the government extends loans to producers through bodies like KIE and ICDC to boost investment in production / credit at low interest
• Facilitating marketing / government may form agencies that may produce to cushion producers / stabilize selling prices such as
• Availing new research findings / technology to producers / new methods of production from government research bodies like KARI and KEFRI to help boost
• Improve on infrastructure to facilitate production / movement of
• Ensure political stability which encourages production / boost investor
• Increased government expenditure on establishment of new / expansion of existing production
• Simplifying / ease the procedure of starting / engaging in business / production /reduced bureaucracy / red tape to boost

 

(b)   Factors that may promote the growth of entrepreneurship in Kenya include: (10 Marks)

• Good infrastructure which facilitates access to markets /
• Political stability / non-political interference that creates a conducive environment for starting / running / expanding a
• Availability of security that ensures safety of business property /
• Availability of market / market information / demand where people can sell goods / services to satisfy their
• Healthy / fair completion that business owners can withstand / cope
• Availability of technology that can lead to production of the desired quality / quantity of goods and services
• Development of a positive entrepreneurial culture that values individuals who are successful entrepreneurs / recognizes / holds them highly / through early exposure to business
• Adopting a relevant education / curriculum / training in business is made part of the curriculum hence preparing the youth at an early age to become entrepreneurs.
• Presence of role models / successful businessmen who are an encouragement / motivation / inspiration

to the youth / would be entrepreneurs to also go into business.

• Government support / favourable policies passed by the government that put in place institutions that support entrepreneurship like Youth Fund / Hustler Fund.
• Encouraging jobs in the informal sector such as jua kali / since formal employment is becoming difficult to secure entrepreneurship.
• Availability of finances / financial institutions support businesses / providing loans to entrepreneurs hence supporting the growth / expansion / operation of
• Positive peer influence / when people see their peers succeeding in business they get motivated /also try their hands at
• Good governance that ensures transparency / accountability in conduct of business

 

KCSE 2018

1.          (a) Circumstances that may lead to the existence of a business opportunity to be exploited. ( 10 Marks)

• Lack of some products / services / goods -Customers may need / require products / services which are not easily found in the
• Higher prices of goods / services -Existing market prices may be unnecessarily high hence offering them at relatively lower prices (would create an opportunity).
• Excess demand / shortage / inadequate supply (of goods or services -When the quantities of goods available in the market are not sufficient, an opportunity to supply more exist.
• Low / poor quality / substandard products -Hence creating a room for provision of better / high quality goods / services.
• Lack / poor / inadequate after sales services – An opportunity will exist where (better) services are offered after buying / selling of goods or services.
• Unmet socio-cultural needs / conditions / market niche – Goods / services which target the society’s existing attitudes / practices / beliefs which existing products may not be
• Innovation /invention / creativity – Discovery of new technology/ products which may lead to reduced costs of production / (general) efficiency (presents an opportunity).
• Need for variety / lack / limited variety – to widen

consumers’ choice / meet differing consumers’ needs.

• Where there is disaster / catastrophe / occurrence of disaster – which creates needs /
• Seasonal events /change in fashion – which creates needs

/ requirements.

• Exploitation of natural resources – which stimulates growth of business
• Implementation of development projects – which spurs business activities
• Growth of population – which creates demand for goods / services
• Change in government policy – which creates demand for goods and services/encourages establishment of new businesses.

 

 

(b)     Factors that Chuma steel manufacturers may consider when choosing a channel for distributing their products.

(10 Marks)

• The (geographical) spread of customers. If the customers are spread over a wide area, then a longer channel would be preferable / use of intermediaries / middlemen
• Size of market. Where it is small use direct / short channel.
• Cost of channel. Should choose / use channel that is affordable /
• Government policy. Chuma steel manufacturers must adhere to government regulation on the distribution of steel
• Marketing risks involved. Where marketing risks are

company. It also contains their personal information and number of shares held by each.

(b) (i) Kisababu Traders Trading Account. (5 Marks)

Kisababu Traders Trading Account

For the period ended 31st December, 2014

 

Opening stock	15,700	Sales	84,000
Add: Purchases	58,800	Less: Returns In	9,000

Less: Returns Out    1,500   57,300      Net Sales             75,000

COGA4S                                73,000

Less: Closing stock              13,000

Cost of goods sold                60,000

Gross profit c/d                   15,000

75,000                                   75,000

Gross Profit b/d  15,000

 

𝑮𝒓𝒐𝒔𝒔 𝑷𝒓𝒐𝒇𝒊𝒕

 

higher, more middlemen should be involved to spread

(ii) 𝑴𝒂𝒓𝒌 − 𝒖𝒑 =

(2 Marks)

𝑪𝑶𝑮𝑺

 

such risks.

• Durability of the steel products. Since steel products are not easily spoilt, long channel can be used in their distribution.
• Level of competition. Shorter channels should be used if

𝑀𝑎𝑟𝑘 − 𝑢𝑝 = 15,000 𝑥100

60,000

𝑀𝑎𝑟𝑘 − 𝑢𝑝 = 25%

(iii) 𝑹𝑶𝑺𝑻𝑶 =      𝑪𝑶𝑮𝑺

𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒔𝒕𝒄𝒌

 

 

 

(3 Marks)

 

there is stiff/high competition.

• Resources / size of the firm. If the firm has limited resources / small in size, then a longer channel is
• Availability of intermediaries. Chuma steel manufacturers can only use intermediaries which are
• Need to maintain pricing of steel products. Shorter channels will be preferred where the prices are to be kept low by avoiding the
• Volume / quantity of output. If large use a long
• Use a short channel to maximize / get higher profits

2.          (a) Clauses found in MOA of a PLC. (10 Marks)

• Name clause-states the name of the company which must end with the name ―Limited/Ltd‖. The name should be unique i.e. not used by any other
• The objects clause-states the objectives/activities of the company which is registered to
• Situation clause-states the physical location and addresses of the registered head
• Liability clause–informs the members of the public that shareholders have Limited
• Capital clause-states the amount of capital that the company is authorized to raise. The total share capital, value of each share and number of
• Declaration clause-it contains declaration by the directors (promoters) about their wish to register the

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑠𝑡𝑜𝑐𝑘 = 15,700+13,000 = 14,350

2

𝑅𝑂𝑆𝑇𝑂 = 60,000 = 4.181 times

14,350

3.          (a) Demerits of using carts as a means of transport in towns. (10 marks)

 

• Not suitable for transporting goods over long distances such as from one country to another since are pulled/pushed by humans or
• Not suitable for carrying very heavy / bulky goods / large volumes of goods since their carrying capacity is limited.
• They are slow. Carts are prone to delays occasioned by their slow
• Not suitable for transporting valuable goods. Lack of security as goods transported by carts are prone/exposed to theft / making it unsuitable means for transporting valuable
• Their movement is affected by extreme / adverse / poor weather conditions like rainfall leading to stoppage or delays.
• Carts offer minimal safety to goods against damage by elements of weather such as rain / hot sun / dust /wind.
• May cause traffic jam/accidents. Carts are a nuisance / inconvenience motor vehicles / other road users since they are slower / cause obstruction/ pulled
• Not suitable for use after night falls as it is not safe for the handlers/may be against

 

(b)    Types of direct taxes used by government to collect taxes from individuals and companies. (10 Marks)

• Personal income tax (PAYE)-this is tax levied on income of individuals such as salaries and wages.
• Corporate/corporation tax-this is tax levied on profits made by companies/businesses.
• Capital transfer tax/gift tax-this is tax levied on value of property transferred from one person to another as a
• Capital gains tax-this is tax charged when an asset is sold at a price higher than the book
• Stamp duty-this is tax charged on transfer of land from one person to another after sale.
• Estate/death duty-this is tax charged when property of dead person is transferred to another person/inheritor.
• Wealth tax-this is tax levied on personal wealth that goes beyond certain
• Withholding tax-this is tax levied on savings such as pension and dividends held by
• Residential rental income tax-this is tax charged on rents collected by landlords and
• Property tax/Land Rates-tax levied by the county government on improvement of land or buildings by land owner in the

NB: Must mention the word “tax/duty” to score.

4.          (a) Factors that may have contributed to increased demand for soft drinks. (10 Marks)

• Favourable pricing / fall in price. The soft drinks are priced at a value that consumers can easily
• Increasing consumer income. People are able to buy more products / have high purchasing power due to increased earnings.
• High prices of substitutes. Most of the products in the market that can serve as substitutes are highly priced hence not preferred by buyers / making buyers to prefer soft
• Favourable tastes / preferences / fashions / trends. More consumers now like soft drinks as compared to other drinks.
• Favourable government policies / lower taxed / increased subsidies. Which keep the prices of soft drinks down / stable / affordable (hence encouraging their consumption).
• (General) increase in population. With more people, more of the products are
• Equitable distribution of income among consumers. Since many people have access to income, they are able to buy more of the
• High / peak / festive seasons which make people to indulge in more consumption of soft
• Expectation of future increase in price hence making people to buy more
• Anticipation of future fall in supply which may make people to buy more
• Fall in price of complimentary goods since they are used jointly/together.
• Aggressive Marketing / Sales Promotion. More consumers are attracted to soft drinks due to intense advertising / other promotional

(b)    Forms of economic integration that countries may join to promote international trade. (10 Marks)

• Free Trade Area-This is economic integration where all trade barriers are removed between the member countries while each country retains its own barriers towards non-member
• Preferential Trade Area –In this form of integration, trade barriers are reduced among the member nations while the barriers are applied at normal rates for trading activities with non-member nations.
• Customs Union –In this form of integration, tariffs and other trade barriers are removed between member countries while their trade policies are harmonized with regard to treatment of trade with the rest of the
• Common Market –This integration goes beyond harmonizing trade policies and removal of trade barriers but also allows for free movement of labour and capital among member
• Economic Union –Member countries set up common institutions like central banks / adopt use of common currency (monetary system) / and have common public services like railway
• Political Union / Legislative Union / State union –This involves unification of countries / share a central government (recognized by other states as a

5.

Open office Enclosed office i) All/most staff works in one room. Each/few staff is allocated a room. ii) Encourages team work. Discourages team work. iii) Sharing of office equipment is possible. No sharing, each office has its equipments iv) Easy to supervise employees since are in one room. Difficult to supervise employees since they are in different rooms. v) Cheaper to construct since has few partitions Relatively expensive to construct since have many partitions. vi) Discourages absenteeism since one is easily noticeable. Encourages absenteeism since each worker has a room/office. vii) Does not guarantee safety for personal valuables Guarantee safety for personal valuables viii) Easy and cheap to decorate. Difficult and relatively expensive to decorate all offices. ix) Difficulty to keep the office tidy since is used by many people. Easy to clean and keep the office tidy. x) Easy flow of communication Slow flow of communication. xi) Easy location of staff since they are in one room. Difficult in location of staff since are in different rooms. xii) There may be overcrowding of employees There is no overcrowding of employees. xiii) Economical in use of floor space Uneconomical in use of floor space. xiv) There is lack of confidentiality in consultations/discussions. There is confidentiality in consultations/discussions.

(a) Differences between open office and enclosed office. (10 Marks)

 

(b)                        Mageta Traders           (10 Marks) Balance Sheet

As at 31^st July, 2016

Fixed Assets                          Capital                         82,500

Land        82,000                    Long Term Liabilities

Furniture 61,500  143,500  10 Year Bank Loan 165,000

(b) Jawabu Traders Two-Column Cash book.

Jawabu Traders Two-Column Cash book

Dr                       For the month of February, 2015              Cr

 

 

 

Current Assets

Stock      18,600

Debtors  17,700

Bank       91,000

Cash        10,800  138,100

281,600

Current Liabilities

Date Details LF Cash Bank Date Details LF Cash Bank 2015 2015 Feb 1 Bal b/d 12,500 Feb 1 Bal b/d 5,000 Feb 3 Debtors 18,900 Feb 2 Water Bill 800 Feb 5 Sales 7,150 Feb 2 Electricity 1,100 Feb 9 Co-op S.D 13,000 Feb 2 Wages 4,700 Feb 13 Debtor 15,900 Feb 7 Purchases 6,400 Feb 15 Cash C 9,500 Feb 10 Drawings 2,500 Feb 15 Bank C 9,500 Feb 17 Creditor 4,390 Feb 27 Furniture 21,100 Feb 28 Bal c/d 19,450 2,010   35,550    41,400   35,550   41,400 Feb 28 Bal b/d 19,450 2,010

Creditors                   34,100

 

 

 281,600

 

 

 

6. (a) Problems of using national income statistics to compare living standards of citizens of Kenya and Tanzania include; (10 Marks)

• The two countries may have used different currency whose values/ purchasing power differs (to calculate their national income) hence different standards of measure.
• One country could be having a large subsistence sector whose income may not have been included in the measure of their income /understating their national
• Disparity in income distribution / levels of income distribution in one country may be too skewed compared to the other which may have a fair income distribution.
• The countries may have different preferences / tastes hence lack of a common measure / due to different
• The two countries could be different in terms of resources endowment hence different abilities to generate
• The climatic conditions in the two countries may be different leading to difference in demand and
• Production activities may affect the health of citizens in the two countries differently hence have no time for leisure / spend more on
• The political realities /stability in the two countries could be different affecting security /peace of mind

/contentment of citizens.

• The degree of accuracy of national income statistics is also different in both countries due to inaccurate data / incomplete data / unskilled
• The two countries may have different economic priorities such as consumption versus development projects / consumption versus military
• The two countries may have different price levels / inflation which distorts the true value of goods /
• The two countries may have different working conditions which affect the quality of life in one country more than the

 

 

 

 

 

 

 

 

 

 

KCSE 2019

1.          (a) Services that may be offered by wholesalers to the retailers. (10 Marks)

• Availing a variety of goods from different producers relieving the retailers of the burden of visiting the producers’
• They break bulk into quantities desired by retailers. The retailers are able to purchase only in the quantities they can
• They offer storage services. This relieves the retailer from the risks of damage and cost of storage of
• They provide credit facilities to deserving retailers which act as a source of capital to
• They advertise goods to the benefit of retailers who obtain a ready
• They offer transport to the retailers relieving them of transportation costs and the hustle of looking for means of transport.
• They inform retailers on available offers for certain commodities. This may help retailers improve on their profit
• Prepare goods for sale to the benefit of the retailers by sorting, packaging, blending, packing and

 

(b) Differences between sole proprietorship and PLC.

(10 Marks)

(b) (i) Rakwaro Enrerprises TPL. (7 ½ Marks)

 

Sole proprietorship Public Limited Company i) Formed by one person. Formed by a minimum of seven promoters. ii) Proprietor has unlimited liability. Shareholders have limited liability. iii) Existence depends on the life of the sole trader. It has perpetual existence irrespective of death of shareholders. iv) Main source of capital is personal savings. Main source of capital is sale of shares. v) Managed by the sole trader. Managed by a board of directors. vi) Few legal formalities are required in formation. Formation procedure is long requiring many legal formalities. vii) Require little capital to start. Require huge amount of capital to start. viii) Quick decision making since there is no consultation. Slow decision making because there is consultation from shareholder and directors. ix) Maximum ownership is one person. No maximum number of owners. x) Starts trading after receiving business license. Starts trading after receiving certificate of incorporation.

Rakwaro Enterprises Trading Profit and Loss Account

For the period ended 31st December, 2015

 

 

 

Opening stock                                           160,000

Add: Purchases 960,000

Add: Carriage in 6,800 966,800

COGA4S                                         1,126,800

Less: Closing stock                                            280,400

Cost of goods sold                                            846,400

Gross profit c/d                                            577,600

1,424,000

Expenses

Discount Allowed                                               40,400

Salaries and Wages                                             200,000

Net profit c/d                                              337,600

  577,600

Sales               1,440,000

Less: Returns In   6,000 Net Sales            1,424,000

 

 

 

 

 

1,424,000

Gross Profit b/d 557,600

 

 

 

 

557,600

 

 

 

 

 

 

2. (a) Negative implications of a young
   • There is high dependency ratio since the working population is
   • It leads to unemployment since existing job opportunities do not match the
   • Leads to low labour supply since they may not have attained the working age or the required
   • It diverts government resources to cater for consumption of goods for the youth hence hindering implementation of other development
   • It creates pressure on social amenities e.g. schools hospitals, recreation
   • May lead to increased social evils such as crime and prostitution due to lack of jobs/idleness.
   • Increased rural —urban migration leading to the development of
   • There is low saving and investment due to high expenditure on
   • There is low investment leading to low production of goods and
   • Low per capita income due to high dependency
   • Possible political instability due to inability to control and maintain the growing

(ii) 𝑰𝒏𝒊𝒕𝒊𝒂𝒍 𝒄𝒂𝒑𝒊𝒕𝒂𝒍 = 𝑭𝒊𝒏𝒂𝒍 𝒄𝒂𝒑𝒊𝒕𝒂𝒍 − 𝑵𝒆𝒕 𝒑𝒓𝒐𝒇𝒊𝒕 + 𝑫𝒓𝒂𝒘𝒊𝒏𝒈𝒔

 

𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 = 720,000 − 337,600 + 28,000

𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 = 𝟒𝟏𝟎, 𝟖𝟎𝟎          (2 ½ Marks)

3.          (a) Demerits pipeline as a means of transport.

 

• Require heavy initial capital for laying pipes. It is expensive and difficult to lay pipes through mountainous and rugged terrain.
• Has limited uses. Can only be used to transport
• It is prone to sabotage during war or acts of It can easily be interfered with by malicious people.
• Leakage in remote areas may remain undetected for long. This may lead to enormous loss and a serious environmental
• It is not flexible. Once laid, it is difficult to be changed and can also not deliver goods to the door steps of the
• Different oil products cannot be transported at a go. It can only transport one product at a time to avoid contamination or loss of
• Difficult and expensive to monitor since it covers long distances and sometimes passing through remote places requiring expensive equipment to
• Unsuitable for small volumes since it will be uneconomical. (Any 5 x 2 = 10 Marks)

 

3 (b) Measures that can be taken to increase the volume of exports. (10 Marks)

• Through export compensation scheme where exporters are allowed to claim a certain percentage of the value of their exports.
• Diversifying foreign markets to expand the market for exports. This increases the selling opportunities for local products in other
• Lobbying for removal of trade restrictions imposed by trading partners on the country’s exports. This makes it easy to sell local goods in foreign
• Devaluation of a country’s currency which makes its exports cheaper hence more attractive to foreign
• Encourage foreign investments in the country e.g. EPZ’s. This ensures production of quality goods that meet specifications of foreign
• Reduction of bureaucracy in acquisition of export licenses. This makes it easy and attractive to engage in foreign
• Subsidizing export oriented businesses. This increases the profit margin for exporters making the foreign trade more attractive.
• Use of commercial attaches to promote the country’s products abroad. Aggressive promotion of the country’s exports leads to increased sales in those
• Customs draw back where part of import duty paid on imported raw material is refunded if used to produce goods for
• Lower export tax/duty to enable exports are sold at lower prices that attract foreign buyers. (Any 5 x 2 = 10 Marks)

4.          (a) Financial Ratios.( 10 Marks)

(i) Gross Profit= 𝑺𝒂𝒍𝒆𝒔 − 𝑪𝑶𝑮𝑺 Gross Profit= 500,000 − 40,000 Gross Profit= 𝐾𝑠𝑕. 10,000

𝑀𝑎𝑟𝑘 − 𝑢𝑝 = 𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡

𝐶𝑂𝐺𝑆

𝑀𝑎𝑟𝑘 − 𝑢𝑝 = 10,000 𝑥100

40,000

𝑀𝑎𝑟𝑘 − 𝑢𝑝 = 25%

(ii) 𝑴𝒂𝒓𝒈𝒊𝒏 = 𝑮𝒓𝒐𝒔𝒔 𝑷𝒓𝒐𝒇𝒊𝒕

𝑵𝒆𝒕 𝑺𝒂𝒍𝒆𝒔

𝑀𝑎𝑟𝑘 − 𝑢𝑝 = 10,000 𝑥100

50,000

𝑀𝑎𝑟𝑘 − 𝑢𝑝 = 20%

(b)      Benefits of a business to the society. (10 Marks)

• Provides goods and services required for the satisfaction of the needs of members of the
• Exploits available resources in the society. Such resources would otherwise remain
• Creates employment which enables people to earn This enables members of the society to afford their day-to- day needs.
• Avails variety of commodities which enables people to have high/improved living
• It leads to improvement in the infrastructure such as roads which facilitates trading
• It attracts other auxiliary firms such as banks, insurance and warehousing to the benefit of the
• Leads to development of better technology and new ideas for quality
• It encourages specialization which leads to better quality goods and services being produced and consumed in the society.
• Encourages development of social facilities such as stadia and cinema which improve
• Earns the government revenue through taxation in order to provide public
• Helps save on foreign exchange through local production of goods previously imported. (Any 5×2=10 Marks)

5.          (a) Advantages of locating firms in different parts of the country. (10 Marks)

• Curbs rural-urban migration. This eases pressure on social amenities which tend to be found in areas with a concentration of many
• Creates employment opportunities to rural dwellers enabling them to earn an
• It avails a variety of goods in all parts of the country which enhance consumer choice/improving living standards.
• Promotes even distribution of infrastructural development across the country. This is required to facilitate the operations of the firms in the different parts of the
• It leads to transfer of new technology and skills for better utilization of resources across the
• Leads to development of social amenities such as schools, hospitals and security in various parts of the country.
• Attracts auxiliary services such as banks and insurance in different parts of the
• Provides market for raw materials found in various parts

 

(ii) 𝑇𝑜𝑡𝑎𝑙 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠 = 5

100

𝑥 50,000 = 𝐾𝑠𝑕. 2,500

of the country. This broadens the income sources for locals in every part of the country.

 

(iv) 𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 = 𝑔𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡 − 𝐸𝑥𝑝𝑒𝑛𝑠𝑒𝑠

𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 = 10,000 − 2,500 = 𝐾𝑠𝑕. 7,500

(v) 𝑅𝑂𝑆𝑇𝑂 =       𝐶𝑂𝐺𝑆

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑆𝑡𝑜𝑐𝑘

40,000

• Reduce disparities in income distribution since people in all parts of the country are engaged in income generating activities.
• Balanced regional development that open up

 

𝑅𝑂𝑆𝑇𝑂 =

20,000

marginalized areas.

 

𝑅𝑂𝑆𝑇𝑂 = 2 𝑇𝑖𝑚𝑒𝑠

• Promotes growth of urban centres that encourage production (Any 5 x 2 =10 Marks)

 

(b)    Government initiated methods of consumer protection.

• Setting standards/KEBS to ensure that goods and services are of required quality and
• Licensing of firms to control the number of firms so as to eliminate unhealthy competition.
• Price control. Government sets price beyond which consumers should not be charged.
• Weights and Measures Act. This ensures that the commodities sold are of the correct weight and measurement.
• Foods and Drugs Act. This ensures that manufacturers do not include any harmful substances in food stuffs and drugs.
• Public Health Act. This ensures that public business premises/buildings are hygienic and adhere to safety standards.
• Rent and Tribunal Act. This protects tenants against hike of rent without
• Trade Description Act/Sale of Goods Act. This ensures producers indicate genuine contents of the product to avoid misleading
• Hire Purchase Act. Protects consumers against unfair repossession of
• Anti-Counterfeit Act. This protects consumers from being sold goods that are not
• Transport Licensing Act. This protects consumers/travelers/passengers from being ferried in unroadworthy vehicles and incompetent

6.          (a) Procedure for obtaining an insurance policy

• Filing a proposal form. The potential insured/proposer discloses all relevant material facts concerning the property or life to be
• Determination of premium to be paid — the insurance company calculates the monthly premiums taking into account the material facts disclosed in the proposal
• Payment of first premium — upon acceptance of the insurer to cover the risk, the insured is asked to pay the first
• Issuance of cover note/binder — upon payment of first premiums, the insured is issued with cover note/binder which serves as evidence that the insured is
• Issuance of the policy — it is issued within 30 days and contains all the terms and conditions of the

(b)    Assumptions associated with the circular flow of national income in a two sector economy. (10 Marks)

• There are only two sectors/players in the economy, that is, households and
• Households spend all their income on payment for goods and services without making any
• Firms spend all their revenues on factors of production without reserving any profits for
• There is no government interference through taxation and licensing.
• The economy is closed, that is, there is no international trade.
• All output (goods and services) produced by firms is purchased by
• No financial sector to inject income through investment or lending.

KCSE 2020

1.          (a) Measures that the government may take to solve youth unemployment in Kenya. (10 Marks)

• Adoption of relevant / changing / improving education system that equips the youth with relevant skills (e.g. artisan, carpentry) / makes the youth
• Adoption of policies that encourage use of labour intensive methods of production. To use / employ / absorb

/ more labour / increase job opportunities.

• Diversification of economic activities that provide variety of production activities (e.g. mixed agriculture, ICT) by encouraging / establishing different industries / sector.
• Increasing government spending in projects that employ the youth e.g. Kazi Mtaani/Kazi Kwa Vijana.
• Encouraging rural development / in order to attract firms / minimize rural-urban migration.
• Improve infrastructure in order to stimulate economic activities.
• Control population growth so as to have a labour force that the economy can absorb/sustain.
• Export labour by assisting the unemployed (youth) to acquire jobs abroad / countries with labour
• Lending / setting up a firm to assist the unemployed to start income generating activities /accept examples of a firm as a
• Protect local industries from foreign competition so that they can expand / absorb more labour.
• Encourage / promote the informal sector / Jua-Kali sector in order to promote self-employment.
• Delocalization / decentralization of firms that reduces rural urban migration / increased job opportunities in any part of the country / any value addition can be
• Income / wage policy to harmonize / eliminate differences between regions /
• Attract local / foreign investment to grow the economy / increase production
• Revive collapsed firms / industries / projects to increase production activities by injecting more funds to collapsed industries /firms.
• Establish employment policy to make it easy for the youths to get jobs /accept examples of employment policies as a mention.
• Encourage maximum utilization / better / full utilization of available (natural) resources to increase production activities.
• Setting up vocational / TVET institutions to train youths on practical
• Partner with the private sector to steer community based projects that involve the youth.

 

(b)    Reasons why consumers need protection. (10 Marks)

• To avoid unfair pricing by traders who may overcharge them.
• To prevent sale of Low / poor / inferior quality goods such as sale of counterfeits (instead of the original goods that do not meet the set
• To avoid misleading / false information/ advertising (about products) which may give wrong impression about the product / cheat on the performance of the product?
• To avoid unsafe structures / construction of substandard / structures / buildings that endanger / threaten life of consumers / that do not meet minimum safety
• To avoid hoarding of goods which is usually meant to increase prices/deny consumers access to goods/services.
• To prevent sale of harmful products e.g. selling skin lightening creams to ignorant client / that are unfit for consumption / can cause damage / problems to
• To prevent breach of contract, that is, failure to honour contracts on the part of
• To prevent sale of underweight / undersize goods / services where some traders sell goods below the weight / size paid for / give less service to consumers / cheat consumers on the weight/ size of the
• To prevent sale of socially unacceptable goods / services. Some traders sell offensive goods / services / that erode the morality of the
• To avoid sale of illegal goods / services. Some traders are unlicensed / unprofessional / unqualified to provide some goods and services.
• To ensure hygienic environment/premise. Ensures traders do not do their business in dirty environment which can endanger consumers

2.      (a) Principles of government spending. (10 Marks)

• Economy – requires proper planning to avoid

/minimize wastage/ensure maximum benefit.

• Sanction – Authority should be sought from relevant bodies/parliament before committing public
• Maximum /optimal social benefit – resources should be used only on projects that improve social welfare / quality of life of the citizens Ito benefit as many people as
• Flexibility – expenditure should be able to be adjusted to reflect the prevailing
• Good/proper financial management to ensure accountability/good governance/ transparency through proper record
• Equity – distribution of resources should be fair to all sectors/regions/ minimize incidents of inequalities /imbalances.
• Productivity – more resources should be spent on development projects than on nonproductive projects / on projects that yield high returns
• Elasticity – expenditure should be capable of being expanded/contracted in line with the size of the economy.

(b)   Trends in office management. (10 Marks)

• Location of offices in sub-urban areas – Organizations tend to move away from congested town centres to sub- urban areas/outskirts.
• Use of modern equipment/computer/automation – organizations have adopted modern equipments/computers for efficiency to make work
• Adopting open office layout /landscaped – adopted to facilitate supervision and economize on floor space/ improve ambiance/comfort in the
• Engagement of multi skilled staff able to carry out different tasks/ to save on labour costs/ wage
• Use of innovative ways of motivating staff such as tours, meals at work, capacity building to develop staff
• Use of biometric clocking system to control staff movement and save on
• Establishing customer care services/desk – to enhance customer satisfaction.
• HIV/AIDS awareness/policy to sensitize employees/ avoid discrimination.
• Stress management policies – to promote good health/coping of the work
• Engaging in corporate social responsibility – to give back to the community such as Wings To Fry
• Use of name tags/badges for easy identification of employees.
• Outsourcing – contracting out non-core activities service providers.
• Performance contracting to ensure set targets are
• Ethical practices to enhance good governance / zero tolerance to corruption.
• Branding / rebranding to enhance corporate image / identity.
• Increased use of internet / emails /social media / extranet / intranet for communication /conferencing / accessing information. (Any 5 × 2 = 10 Marks)

3   (a) Ledger Accounts. (10 Marks)

 

Dr                                             Capital a/c                                      Cr

 

Date	Details	LF	Amt	Date	Details	LF	Amt
30/3/18	Bal b/d		100,000	1/3/18	Bank		100,000
			100,000				100,000
				30/3/18	Bal b/d		100,000

 

Dr                                        Bank a/c                                             Cr

 

Date	Details	LF	Amt	Date	Details	LF	Amt
1/3/18	Capital		100,000	4/3/18	Cash		20,000
				6/3/18	Purchases		30,000
				30/3/18	Bal c/d		50,000
			100,000				100,000
30/3/18	Bal b/d		50,000

 

 

Dr                               Motor Vehicle a/c                                      Cr

 

 

 

 

 

 

Dr                                General Motors a/c                                 Cr

 

 

 

 

 

 

Dr                                             Cash a/c                                         Cr

 

 

 

 

 

 

 

Dr                                        Purchases a/c                                     Cr

 

 

 

 

 

Dr                                               Sales a/c

Cr

 

 

 

 

 

 

Dr                                         Drawings a/c                                     Cr

 

 

 

 

 

 

 

1. Benefits of intermediaries in the chain of
   • Breaking bulk / dividing goods into smaller quantities that can be conveniently be purchased by
   • Accumulation of bulk to ensure a steady supply of goods (throughout the year) / satisfy large
   • Avails a variety of goods (to the consumers) from different producers / that consumers can choose from / to satisfy different
   • They offer advisory services to the consumers about the goods in the market / usage / price /
   • Avails the goods closer to the consumers which relieves / saves the consumers the cost of travelling / transport /

• Provide storage / warehousing enabling the consumers to get goods at the time they need them / in good

Date Details LF Amt Date Details LF Amt 2/3/18 G. Motors 800,000 30/3/18 Bal c/d 800,000 800,000 800,000 30/3/18 Bal b/d 800,000

• Promote / advertises goods that creates awareness of availability / existence of good / that makes the consumers make informed choices / decision when buying
• Selling goods on credit enabling consumers to afford more / expensive
• May offers transport to consumers which relieves them the burden of transporting goods to their

Date Details LF Amt Date Details   LF Amt 30/3/18 Bal c/d 800,000 2/3/18 M.Vehicle 800,000 800,000 800,000 30/3/18 Bal b/d 800,000

• Offers after sale services such as installation to enhance product usage / increase customer
• Passing of (important) information / feedback (between consumers and producers) which improves the quality of goods produced / price / availability /

 

4   (a) Benefits of savings account to a customer. (10 Marks)

Date Details LF Amt Date Details   LF Amt 4/3/18 Bank C 20,000 10/3/18 Drawings 8,000 10/3/18 Sales 15,000 30/3/18 Bal c/d 27,000 35,000 35,000 30/3/18 Bal b/d 27,000

• Allows the customer to save by accumulating small amounts of money since withdrawals are
• Minimal fees are charged on the account making it more attractive / affordable compared to current account.
• Customers can earn interest on the account balance/deposits as an income / which increases the account

Date Details LF Amt Date Details LF Amt 6/3/18 Bank 30,000 30/3/18 Bal c/d 30,000 30,000 30,000 30/3/18 Bal b/d 30,000

• Requires little deposit to open which makes it accessible / use compared to other
• Customers may get bank loan on the basis of the savings
• Encourages customers to invest from the
• Deposits can be made into the account anytime to the convenience of the customer/compared to fixed account.

Date Details LF Amt Date Details   LF Amt 30/3/18 Bal c/d 150,000 10/3/18 Cash 15,000 15,000 15,000 30/3/18 Bal b/d 15,000

• Account holders are issued with identification cards which may also act as a debit

(b)    Ways in which warehousing may promote trade.

• Promote mass production / by allowing the producer to continue producing goods/ since there is space for storage of (finished) goods / raw

Date Details LF Amt Date Details   LF Amt 10/3/18 Cash 8,000 30/3/18 Bal c/d 8,000 8,000 8,000 30/3/18 Bal b/d 8,000

• Stabilizes prices by regulating the flow of goods / storing the surplus / releasing the goods when
• Ensures continuity of supply / steady supply of goods / by storing them and releasing them when need
• It facilitates the preparation / processing of goods for sale by branding /sorting /packaging.
• Creates time utility by ensuring that consumers get goods when
• Ensure safety of goods from physical damage /the damaging effects of weather /pests.
• May add value to some goods such as wine / some goods can improve in quality / taste (better) when they stay for long time/ fetch better prices / better satisfaction of
• Enables traders to look for market / sale goods while they are still in the
• Ensure seasonally demanded goods are stored until required.
• Bonded warehouses help to store goods awaiting clearance by customs authority /allow the importer to look for money to pay for custom
• Security of goods /since they are protected from theft / pilferage

 

5   (a) ( i)                              Adan Traders

Profit and Loss Account

Expenses Discount Allowed Salaries and Wages   15,000 27,000 Gross profit b/d    120,000 Discount Received                                     2,400 Commission Received 9000 Commission Allowed 16,000 Power and Lighting 11,700 Net profit c/d 61,100

For the period ended 31st December, 2018

 

 

 

 

 

 

 

 

 

131,400                              131,400

Net Profit b/d 61,100

(ii)                                       Adan Traders

Balance Sheet

Fixed Assets Capital 1,301,800 Premises 1,120,000 Add: Net profit 61,100 Furniture 49,000 1,169,000 1,362,900   Current Assets Stock               25,000 Debtors                         55,000 Cash at Bank 80,000 Cash in hand 65,000 225,000 1,394,000   Current Liabilities Creditors                 37,300          1,400,200

As at 31^st July, 2018

 

 

• Benefits of communication to a business. (10 Marks)

 

• Enhances coordination(between departments) ensuring they all work towards achieving objective of the
• Helps maintain a positive relationship with (other) stakeholders for smooth operation / reducing
• Facilitates the decision making process (within the business) for better
• Increased employee motivation due to clarification of goals /objectives
• Better performance / improved productivity due to clear targets setting and
• Increased sales due to effective product
• Improved harmony / peaceful understanding (in the business) due to minimal conflicts /since issues are clarified /challenges are

• Improved image / reputation (of the business) / corrects negative attitude / perception which elevate the standing of the business in the market / in the eyes of the
• Helps to clarify issues / points so as to avoid confusion / to be well
• Enables a business to get information / obtain / send information from internal / external sources (that can be useful to the business).
• Enhances / promotes teamwork through consultations / sharing of ideas /
• Facilitates / promotes research which helps to improve process / activities in the

6   (a) Reasons that make it necessary for the government to promote entrepreneurship. (10 Marks)

• Job / employment creation-Through trading / production activities / for others / may boost economic activities in the country / trading activities may boost employment opportunities in the
• Opening up of remote parts of the country-Trading activities may attract support industries / auxiliary services such as banks / development of infrastructure in some areas
• To raise living standards –Trade usually brings goods that some areas may not be in a position to produce hence (higher living standards) by availing a variety of goods to them.
• To reduce rural to urban migration –When (more) people engage in business activities in the rural set up / (it may serve to lower the rate of rural-urban migration).
• To promote innovation / creativity –Entrepreneurship encourages use /development of new technology / ideas / products which (in turn) results into high quality / quantity production.
• To make use of local resources –The government may desire to put all the available resources into proper use to increase production to avoid them being
• To save on imports /foreign exchange –By producing commodities locally (rather than buying from outside the country).
• To reduce foreign dominance for business in the country-By encouraging local people to invest in business
• To generate more revenue to the government –Where the business pay taxes to the
• To promote entrepreneurial culture –Where successful businessmen act as role models / mentors for future entrepreneurs.
• To encourage production of a variety of goods / services- So as to satisfy different consumer tastes / widen their choice.
• To encourage production of goods for exports Which generates foreign
• Promote capital formation / accumulation As a result of investment / savings. (Any 5 × 2 = 10 Marks)

 

 

(b) Advantages of indirect production to the society.

 

(10 Marks)

KCSE 2021

1 (a) Circumstances under which producers may sell goods directly to the consumers. (10 Marks)

 

• Access to enough quantity of goods due to surplus production.
• Improved living standards due to income / profit generated through trade.
• They have access to many choices due to a variety of goods produced in the
• Encourage competition leading to fair prices / quality goods and
• Availability of employment opportunities since many people are engaged in various stages of
• The society enjoys improved infrastructure / roads which may be put up to support business

activities / facilitate movement / production.

• Improves the social cohesion /peace / harmony since many people are brought together from different areas to trade / due to
• Maximum / optimum utilization of (available) resources since production is meant for sale/leading to increased production.
• High quality goods produced due to use (better) / (advanced) technology /
• It encourages specialization / division of labour which leads to efficiency in product / better quality
• The society enjoys improved social amenities such as schools and hospitals/which may be put up to support business
• The society enjoys improved auxiliary services suchs as banks and insurance which are put up to support business activities.
• Encourages trade / exchange many people to get what they cannot produce / leading to generation of income to owners / government through
• Can lead to steady supply of goods since there are many producers who may engage in similar production activities.
• Promote creativity / innovation which leads to new ideas / product / technology
• Encourages use of machines which makes production more (Any 5 × 2 = 10 Marks)

• When the sizes of the market served is small that the producer can access all the buyers/economically serve the entire
• If the product is highly perishable that can easily go bad if the long channel is
• If the producer wants to get immediate feedback about the performance of the
• If the product is technical in nature that requires demonstration/installation/maintenance/after sale
• If the product is tailored to meet customer satisfaction/produced according to the customer’s specification/made to order in order to satisfy individual needs/tastes/preferences.
• When the producer wants to avoid further increase in prices of the product/avoid high cost of distribution to make the product affordable/competitive.
• If its government’s policy which directs those goods should be distributed directly to the consumers and so the producer has to comply.
• If it is the policy of the business which requires that all goods must be sold directly to the consumers. That has to be adhered to/for whatever
• If the producer has enough /adequate resources. To set up retail outlets/distribution outlets/buy distribution vehicles/hire sales
• When goods are of very high value /expensive and middlemen are unwilling /unable to stock
• Where the consumer order / goes directly to buy from the producer /by being able to meet sales conditions / being in proximity with the
• If competition is stiff / high. In order to capture a higher share of the market.
• If there are no appropriate middlemen. The producer has no choice.
• If the market is concentrated at one place / near the It will be cheap to reach consumers / save on distribution costs.
• If the volume of the output is small. Making it uneconomical to involve
• If there is need to maximize profit: Avoiding the cost of using middlemen. (Any 5 × 2 = 10 Marks)

(b)    Terms of sale as used in international trade. (10 Marks)

• Ex-works /Ex-warehouse / Ex-factory-The price quoted includes only the cost of goods as they leave the place of manufacture / the warehouse of the exporter other expenses are to be met by the
• Cost and Freight-The price quoted includes the cost of goods, loading cost and freight charges up to the port of
• Free on Board (FOB)-The price quoted includes the cost of goods, handling and loading charges up to the ships. All other expenses are borne by the
• Landed-The price quoted includes all expenses up to the port of destination as well as offloading
• In bond-The price quoted includes all expenses of handling goods from the manufacturer’s premises until they are delivered in a bonded warehouse in the receiving

 

2 (a) Factors that may discourage entrepreneurship in Kenya.

• Unfavourable government policy/ imposing high taxes which discourage production of certain commodities / increases the cost of
• Poor entrepreneurial culture / lack of adequate role models in the society to inspire / motivate the would-be
• Inadequate / lack of market due to low purchasing power

/high level of poverty / low incomes.

• Poor transport network /infrastructure /utilities. Making it difficult/expensive to access raw materials /market.
• Insecurity in some areas that discourage entrepreneurs from investing /getting materials /accessing the market in such areas.
• Inadequate natural resource endowment / raw materials / land leading to low
• In availability /inaccessibility/inappropriate technology. That leads to production of poor quality/non competitive
• Political instability. May create unconducive /harsh

/unfavourable environment for entrepreneurs to invest.

• Unfair /unhealthy/stiff competition which makes investment very expensive /uncompetitive /from cheap /inferior
• Limited access to capital /inadequate capital /credit /finance is costly /hard to access which makes it difficult to start and run
• Corruption /poor governance which increases the cost of doing
• Poor education /training leading to lack of skills to start /run business.
• Unfavourable /negative cultural practices leading poor/negative consumption /practices /choices /discouraging starting / running of
• Bureaucracy /Red tape/ legal constraints /controls. Making it to complex /expensive / difficult to start /run business

(b) Demerits of indirect taxes. (10 Marks)

• Expensive in collection as it is collected from various points /the government is forced to employ many inspectors to enforce the
• There is uncertainty in revenue collection /revenue is collected only when goods /services are
• May lead to a reduction in demand since it increases the prices of the commodities/fuels inflation as it directly increases the prices of goods and services thereby erodes consumer’s purchasing
• Lack of civic awareness which makes tax payer not take active interest in government expenditure /since the tax amount is hidden in the price of the
• Encourages tax evasion / easy to evade as traders falsify records to avoid payment of the tax / to declare less tax collected.
• Low savings / investment as consumers spends more of their incomes on
• Less equitable / regressive / unfair as the burden falls heavily on the poor who spend a larger proportion of income on
• May lead to misallocation of resources as people buy more of the goods that are not
• Can be avoided by people not buying the taxed goods / services.

3   (a) Errors that may not be detected in a trial balance.

• Error of omission-Occurs when a transaction took place but not recorded at
• Error of original entry-Occurs when both the debit and credit entries are made using similar but erroneous figures recorded in the
• Error of principle-Occurs when entries are made correctly but in the wrong class of
• Error of commission –Occurs when entries are made in the wrong accounts of the same class with the correct amounts.
• Compensating errors-Occurs where the errors are such that in both the debit and credit balances are of equal magnitude so they cancel
• Transposition error-Occurs when the sequence of figures are
• Error of complete reversal of entries-Occurs where the entries are entered on the wrong sides of the relevant accounts. (Any 5 × 2 = 10 Marks)

(b)    Documents prepared by a seller after receiving an order up to the point of delivery. (10 Marks)

• Acknowledgement Note –To inform the buyer that the order has been received and appropriate action is being taken.
• Packing Note -The document shows the details of goods packed.
• Advice Note-Sent to inform the buyer when the goods are dispatched.
• Delivery Note –it show the details of goods to be delivered for verification
• Consignment Note – a document showing terms of carriage /used when means of transport is
• Pro-forma Invoice -Polite request for payment before the goods are

4   (a) Reasons that may make a firm to operate on a small scale.

• Little capital requirement-if the firm has a small amount of capital to operate
• Government policy favouring small-scale business- if the government policy that encourages existence of small enterprise in order to create more
• Need to retain control as the management /owner is in charge of all the activities of the
• Flexibility as small firms are responsive to changing market requirements that large firms may
• Type /nature of product /where business offers personal services /requires personal touch which can only be best provided by an individual / small
• Existence of a special market /small market/ niche market served by offering specialized services /appropriately / best handled by small scale
• Ease of management as small scale firms have few departments /workers /scale of operation /few crises to manage.
• Quick decision making due to few levels of managerial

/hierarchy/consultation.

• Legal constraints which may hinder the firm to expand /legal requirements which may be difficult to fulfill to enable the firm to
• Decision of the owner to operate on small scale out of his

/her own choice.

 

(b) Patel Traders Profit and Loss Account. (6 Marks)

Patel Traders

Profit and Loss Account

For the period ended 31st December, 2020

 

Expenses                                     Gross profit b/d            94,000 Carriage Outwards        8,000   Commission Received 32,000

Commission Allowed   4,000   Discount Received     29,000

Discount Allowed       12,000

Insurance                      17,000

Salaries                         22,000

General expenses       15,000 Net profit c/d             77,000

155,000                                       155,000

Net Profit b/d    77,000

 

 

1. i) 𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 − 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 = 192,000 − 162,000

𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 = 30,000

(b)    Problems the Kenya government may experience when implementing the vision 2030. (10 Marks)

• Inadequate /limited resources like skilled personnel/ human resource to interpret /translate plans into reality

/effectively implement the plans.

• Over reliance on foreign Aid /donor funding whose remittance is uncertain thus the plan may fail to take off

/completed.

• Failure by the local people to support the plan because they were not involved during the formulation of the
• Outbreak of natural calamities may lead to diversion of the funds meant to finance the
• Some unrealistic aspects of the plan /overambitious plan that are difficult to
• Inflation which makes the cost of implementation to rise

/increase beyond the allocated funds.

• Lack of political goodwill /if there is no political commitment to start /complete projects, it remains on paper.
• Non observance of sequence /timeliness of implementing the plan /the logical order is not followed leading to incomplete /stalling of projects /white
• Imported models /plans that are inappropriate for local situations / needs.
• Corruption /poor governance that leads to loss /misuse of funds meant for implementation of the

 

1. ii) 𝑅𝑂𝐶𝐸 = 𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡

𝑐𝑎𝑝𝑖𝑡𝑎𝑙 𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑑

𝑥100

• Political instability that derails / delays implementation

/destroys projects.

 

𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑 = 𝑊𝐶 + 𝐹. 𝐴

= 30,000 + 1,110,000

 

= 1,140,000

• Insecurity that may hinder / delay /derail implementation of
• Poor /lack of coordination /corporation among implementing parties /agencies.
• Inadequate /limited finance /capital to effectively fund

/pay for the plan.

 

77,000

𝑅𝑂𝐶𝐸 =

1,140,000

 

𝑅𝑂𝐶𝐸 = 6.754%

𝑥100

• Lack /inaccessibility of appropriate technology to implement /actualize
• Inaccurate /inadequate data leading to inaccurate
• Existence of a large private sector whose goals /objectives

may be in conflict with those of the government.

 

5   (a)       Reasons that make it necessary for the government to train business people. (10 Marks)

• To improve their skills by exposing them to basic management
• To expose /educate them on modern /current trend of business operations like effective methods of advertising/keeping books of accounts /stock-taking.
• To expose business people to possible solution /possible problems affecting them like raising capital/identify investment
• To impart proper business ethics so as to avoid consumer exploitation /ensure fair
• To educate them on efficient use of the available resources so as to minimize cost /maximize profit.
• To inform them on various available profitable business opportunities /market /gaps to be
• To sensitize business people on government initiatives that are beneficial to them like SME
• To educate them about government policies regarding business activities. (Any 5 × 2 = 10 Marks)

6.   (a) Advantages of written communication. (10 Marks)

• It is a permanent record that can be used for future reference.
• Suitable for official communication /formal communication where information has to be passed through prescribed channels /procedures.
• Secure the confidentiality of communication as it is accessed by the intended receiver only /can be used to pass secret/confidential
• It is more authentic /accurate /it retains its original content since it is not easily distorted/misreported.
• Suitable for detailed messages-Allows for inclusion of detailed /complex information as different forms can be used to reinforce/illustrate facts such as charts,
• It may be economical since forms of written communication are relatively cheap when used for mass communication

/use of e-mail.

• Can be addressed to many people as the original document can be reproduced into many copies.
• Can be used as evidence to settle disputes /in a court of law / to support facts / solve
• Suitable for the hearing / visually impaired persons to send / receive message /

 

(b) Patel Traders Two-column Cash Book. (10 Marks)

Patel Traders Two-column Cash Book

Date Details LF Cash Bank Date Details LF Cash Bank 2016 2016 Feb 1 Bal b/d 1,200 Feb 1 Bal b/d 1,000 Feb 3 Daisy 14,000 Feb 2 Water 200 Feb 5 Sales 7,000 Feb 2 Electricity 100 Feb 9 Co-op SD 10,000 Feb 2 Wages 400 Feb 13 Petro 10,000 Feb 7 Purchases 5,000 Feb 15 Cash C1 1,000 Feb 10 Drawings 2,000 Feb 15 Bank C1 1,000 Feb 17 Maru 1,000 Feb 27 Furniture 24,000 Feb 29 Bal c/d 6,500 2,000   8,200    35,000   8,200   35,000 Feb 29 Bal b/d 6,500 2,000

Dr                      For the Month of February, 2020                    Cr

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

KCSE 2022

• (a) Circumstances under which bank may dishonour a cheque. (10 marks)
  • If the cheque is post-dated. It is presented to the bank before the maturity
  • In case of insufficient funds in the account of the drawer.
  • When the amount in words differs from the amount in figures hence decision on which figure to pay arise
  • If there are alterations /changes on the cheque which are not countersigned
  • If the signature on the cheque differs from the specimen signature held by the bank thus its authenticity is in doubt
  • When the cheque is stale/outdated. It is presented six months after the date of
  • If the (account) holder is dead and the bank is aware of the fact/
  • If the drawer becomes bankrupt/insane thereby losing contractual capacity to transact/and the bank is
  • If the drawer’s account is closed/ not operational hence cannot be used
  • If the cheque has omissions thus making it invalid/accept examples of omissions as
  • If the cheque is forged and the bank is able to confirm/detect. If the cheque is defaced

/torn/dirty/making its contents illegible/doubtful.

• If the drawer instructs the bank not to pay(a particular cheque) based on the reason known to him

/her/accept examples of valid reasons as explanations.

• When a customer is presenting a crossed cheque to be paid across the counter instead of depositing in the account. (Any 5×2=10 Marks)

(b)    Factors that may lead to an increase in the level of National income in a country. (10 Marks)

 

• Political stability. Encourages investors/increased activities (thus high levels of national income).
• Use of appropriate /modern/better technology to produce high quality /quantity goods/services/increase
• (When citizens have) positive attitude towards work productivity is
• Increased foreign investments may bring more injections in the domestic economy/ increased production (thereby increasing the level of national income).
• Existence/availability of /well established entrepreneurial culture promotes (effective) exploitation of available resource endowment /to enhance productivity
• Availability of adequate/ sufficient capital will enhance production of high quantity /quality goods/services (which attract better returns).
• Discovery of natural resource to be exploited for production.
• Good governance /accountability/ transparency leading to better use of resources /efficient production /attract
• Reduced subsistence sector /increased market sector where most of what is produced is sold/ that will generate
• Favourable/ improved terms of trade leading to increased export

(xi)         Increase in skilled /trained labour/manpower

leading to increased/ /efficient/quality production.

• (Enhanced) security that encourages
• Improved infrastructure that leads to more

/efficient production / fast flow of goods/services/accept examples of improved infrastructure as a mention.

• Better/ maximum/ optimum/ increased use of existing / idle resources that leads to increased production of goods/services that creates a conducive.
• Favourable government policies that creates a conducive environment for production/

 

2   (a) Factors that may lead to dissolution of cooperative societies. (10 Marks)

• Persistent /continuous disagreements (among the members) to an extent that they cannot be reconciled
• Mutual agreement (among the members) to dissolve hence left with no option but to wind up/ one member requests for dissolution and his wish granted /for whatever reason
• Insolvency /bankruptcy .When the cooperative is unable to meet its financial obligation

(iv)      A court order (forcing dissolutions of the cooperatives)

/government may order for its dissolution in the interests of the public/its members/ for engaging in illegal activities.

• (Mass) withdrawal of members leaving less than ten/ minimum required by
• Change of law/ government policy that makes the activities of the cooperative

(vii)      If it has achieved its objectives (for which it was formed)

hence makes its continued existence unnecessary.

• If it has achieved its objectives (for which it was formed) hence make its continued existence unnecessary
• Amalgamations/mergers/absorptions to serve their members better/share resources /enjoy economies of scale

/which makes them loose their original identity

(b)    Features of underdeveloped countries. (10 Marks)

• overdependence /overreliance on foreign aid/countries to fund /finance development projects

/leading to political blackmail / vulnerability

• Underutilization/under exploitation of natural resources due to inadequate / inappropriate technology

/skills/knowledge

• High rates of unemployment due to low levels of industrial development/ low levels of life expectancy

/high mortality rates

• Inadequate health care/ malnutrition leading to low levels of life expectancy /high mortality rates
• Unfavourable balance of payments due to low/subsistence productivity /high rates of imports for producer goods/low value exports/ poor terms of trade
• Underdeveloped /poor infrastructure due to limited capital /which hinders mobility of goods/ services/accept examples of poor infrastructure as a mention.

• Large/ overdependence on subsistence sector due to inadequate skilled labour/capital necessary for production/ leading to low outputs/income/ accept causes /consequences of subsistence sector as a qualification/
• High population growth rate /overpopulation/ high birth rate where the growth rate is higher than the national output/ resources/accept negative consequences of overpopulation as a
• High levels of poverty /low per capita income where a large proportion of citizens live below poverty line/survive on less than a dollar a
• Low levels of technology due to lack of capital/ which leads to low quality/quantity of goods/services
• Unequal/ disparity in income distribution where much of the wealth/ income is in the hands of a few people/where the majority of the people are low
• Low levels of savings due to low per capita income

/leading to low investments

• Low levels of investments due to small/limited market/ low savings/ low capital
• Poor governance due to corruption

/embezzlement/lack of accountability /transparency / misappropriation/ mismanagement of resources

• Limited market/ low demand due to low levels of income
• Negative socio-cultural practices which hinder consumption /production.
• Political instability/insecurity which hinders investment/production
• Poor social amenities leading to poor services
• Large pool of unskilled labour due to inappropriate education system
• Poor plans/policies due to inadequate data/ being over ambitious
• Limited entrepreneurial skills/culture due to lack of role models/ entrepreneurial education
• High levels of illiteracy due to ignorance/ limited exposure

 

3   (a)  (i)                                Bank a/c                                  Cr

 

Date	Details	LF	Amt	Date	Details	LF	Amt
2021				2021
Oct 1	Bal b/d		80,000	Oct 2	Juma		14,000
				Oct 5	Bal c/d		66,000
			80,000				80,000
Oct 5	Bal b/d		66,000

 

 

Dr                                  Juma a/c                                           Cr

 

Date	Details	LF	Amt	Date	Details	LF	Amt
2021				2021
Oct 2	Bank		14,000	Oct 1	Bal b/d		24,000
Oct 5	Bal c/d		10,000
			24,000				24,000
				Oct 5	Bal b/d		10,000

 

Dr                                         Mangu a/c                                   Cr

 

Date	Details	LF	Amt	Date	Details	LF	Amt
2021				2021
Oct 1	Bal b/d		26,000	Oct 3	Cash		10,000
				Oct 5	Bal c/d		16,000
			26,000				26,000
Oct 5	Bal b/d		16,000

 

Date Details LF Amt Date Details LF Amt 2021 2021 Oct 1 Bal b/d 15,000 Oct 4 ICDC Loan 70,000 Oct 3 Mangu 10,000 Oct 5 Purchases 40,000 Oct 4 ICDC Loan 170,000 Oct 5 Bal c/d 85,000 195,000  195,000 Oct 5 Bal b/d 85,000

Dr                                       Cash a/c                                          Cr

 

 

 

 

 

 

 

 

Dr                                   Bank Loan a/c                                  Cr

 

Date	Details	LF	Amt	Date	Details	LF	Amt
2021				2021
Oct 5	Bal c/d		170,000	Oct 4	Cash		170,000
			170,000				170,000
				Oct 5	Bal b/d		170,000

 

Dr                              ICDC Loan a/c                                    Cr

 

Date	Details	LF	Amt	Date	Details	LF	Amt
2021				2021
Oct 4	Cash		70,000	Oct 1	Bal b/d		70,000
Oct 5	Bal c/d		0
			70,000				70,000
				Oct 5	Bal b/d		0

 

Date Details LF Amt Date Details LF Amt 2021 2021 Oct 5 Cash 40,000 Oct 5 Bal c/d 40,000 40,000 40,000 Oct 5 Bal b/d 40,000

Dr                                Purchases a/c                                   Cr

Dr                                Motor Vehicle a/c                            Cr

 

Date	Details	LF	Amt	Date	Details	LF	Amt
2021				2021
Oct 1	Bal b/d		210,000	Oct 5	Bal c/d		210,000
			210,000				210,000
Oct 5	Bal b/d		210,000

 

 

Dr                                             Stock a/c                                    Cr

 

Date	Details	LF	Amt	Date	Details	LF	Amt
2021				2021
Oct 1	Bal b/d		45,000	Oct 5	Bal c/d		45,000
			45,000				45,000
Oct 5	Bal b/d		45,000

 

 

Dr                                        Capital a/c                                     Cr

 

Date	Details	LF	Amt	Date	Details	LF	Amt
2021				2021
Oct 5	Bal c/d		237,000	Oct 1	Bal b/d		237,000
			237,000				237,000
				Oct 5	Bal b/d		237,000

 

3(a)(ii)             Mtito Andei Wholesalers

Trial Balance As at 5^th October, 2021

 

Details	Dr (Ksh)	Cr (Ksh)
Bank	66,000
Juma (Creditor)		10,000
Mangu (Debtor)	16,000
Cash	85,000
Bank Loan		170,000
Purchases	40,000
Motor Vehicle	210,000
Stock	45,000
Capital		237,000
	462,000	417,000

 

• Essentials/elements of a good transport system include
  • The unit of carriage. Any vessel/means/motor vehicles/ships/trains/ aero planes/bicycles/carts etc. used to transport /move goods from one place to another.
  • The way-Route/path/road/pipeline/air/airways/water/ railways/canals/seaways etc followed by the vessel from one place to the next.
  • Terminal. Loading/offloading/starting/ending places for the vessels/units of carriage/bus stops/railway stations/airports/sea ports/harbours /docks
  • Method of propulsion. Refers to the driving force /source of power /petrol/diesel/solar/engine/animal power/draughtsman etc. that make the unit of carriage to move.

 

• Safety to prevent damage/injury to goods/people
• Security to prevent theft/loss of goods/services
• Affordability /economical to reduce on costs/expenses of moving goods/services/people
• Availability /accessibility can easily be found /reached when needed
• Efficiency ability to provide quality goods/services with little/no
• Speed ability to deliver goods/services on time /without delay
• Convenience ability to meet the needs of (different) users
• Reliability ability to carry out its functions without
• Flexibility ability to adjust according to the needs of the user.

 

4   (a) Ways in which employees may contribute to the success of a business include:  (10 Marks)

 

• Qualified/skilled/trained employees will produce/offer quality goods/services
• Employees who have skills that match the job requirements lead to minimal wastage
• Proper time management by employees will enable the business to offer timely delivery of services/goods
• Employees who treat customers well. Improves the image of the business
• Disciplined / obedient employees do not need a lot of supervision /are responsible/lead to reduced operational costs
• Quality/good/proper decisions made in the interests of the
• Pass (positive) feedback (from customers) for improvement of the
• Innovative /creative employees lead to better /new goods/services.
• Committed /hardworking employees which leads to increased productivity.
• Loyalty/positive attitude protects the interests of the business.
• Teamwork which leads to harmony/synergy/cooperation.
• Goal oriented which leads to meeting of targets/objectives of the
• Self-driven/ self-motivated employees that perform tasks with minimal/no supervision/without
• Practicing integrity /ethical behaviour since they are able to do the right thing even when not observed

/supervised.

(b)    Roles of the World Bank in promoting international trade include. (10 Marks)

• Providing (medium and long term ) loans used in financing balance of payments deficit/development projects/budgetary support/ foreign
• Giving financial aid/grants to be used in producing goods (for the world market) / for development

• Set up international standards that must be met to access world market /so as to create fairness/ fair competition
• Advice (member countries) on the best suitable projects to invest in /to diversify their exports/on economic policies
• Act as a guarantor to member countries who want to obtain (bilateral) loans (for development/production of exports).
• Encourages technology transfer among member states to enable them exploit natural resources /in order to create wealth.

(vii)          Stabilizes/ control the major (world) currencies

/exchange rates to ensure international prices charged (for imports and exports) remain stable.

• Coordinate formation of partnerships/ integration to facilitate sharing of knowledge/ research findings/expertise (for mutual development)
• Provision of personnel /manpower/ experts to facilitate project appraisal / implementation / management / identification.
• Training of local personnel in project appraisal

/implementation/ management/ identification.

• Approving /evaluating development plans from member countries for
• Promote private investment/ investors by giving loans guaranteed by native / home countries
• Promotion of good governance to avoid loss/ misuse of public funds/resources/by fighting corruption/ embezzlement of
• Encourages economic reforms /structural adjustments to stimulate /spur economic growth/development/ productivity.

5   (a) Limitations of using mobile phones in communication.

• Poor Network coverage / transmission channel overload

may limit/hinders effective communication (in some areas).

• Not suitable for the deaf/dumb/hearing impaired as they may not be able to receive/ relay information on their
• May be a health hazard to the user as it exposes them to radioactive waves /due to prolonged
• May be distractive hence result into undesired consequences like wasting of working time /disrupts people’s
• Mobile phone usage may be restricted (in some areas/business premises) due to security reasons / may be a security threat in banks churches mosques
• Costly /expensive to operate since it requires regular top-up of air time /data upload
• Require regular charging thus may go off when needed the most (and there is no power)
• Costly/expensive to buy/acquire making it unaffordable (to some users)
• May lacks confidentiality since information /calls/may be tapped / intercepted /monitored/hacked
• Prone to theft leading to loss of handset/information/
• Prone to misuse / fraud by (owner/ others) leading to loss of funds /
• May be challenging to use /operate due to limited knowledge/complexity of

 

5 (b)( I) Effects of the shift in demand curve from D0 to D1.

• The equilibrium point will shift from E0 to E1 /to a lower position /level/where the new demand curve /D1 meets the supply curve
• The equilibrium quantity will fall/ moving from Qe0 to Qe1/ to a lower level/ at the point where the new demand curve/D1 meets the supply curve
• The equilibrium price will drop /move from Pe0 to Pe1/ to a lower level D1 /new demand curve meets the supply curve
• There will be excess supply /surplus in the market (as demand falls with supply remaining constant)
• Supply will have to reduce in the long run (due to suppressed prices) / discourage production / some suppliers may exit the
• There may be wastage /high cost of storage in the short run.

(ii) The shaded area represents excess supply /surplus (in the market)/ fall in total quantity demanded

 

6 (a)       (i) Ushindi Traders TPL. (7 Marks)

 

Ushindi Traders

Trading Profit and Loss Account

Opening stock 12,500 Sales 200,000 Add: Purchases 111,000 COGA4S 123,500 Less: Closing stock 8,500 Cost of goods sold 115,000 Gross profit c/d 85,000 200,000 200,000 Expenses Gross Profit b/d 85,000 Salaries 13,300 Rent Income 40,000 Insurance 8,000 Telephone 9500 Advertising 14,000 Total expenses 47,300 Net Profit c/d    77,700

For the period ended 30^th November, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

124,000                                   124,000

Net Profit b/d      77,700

 

( a)(ii)  Ushindi Traders Balance Sheet  (5 Marks)

Ushindi Traders Balance Sheet

As at 30^th November, 2021

1. Reasons that may make Government departments adopt open office layout. (8 Marks)
   • Encourage easy supervision of workers which improves the productivity (as they are aware they are being watched) /since they are in the same room
   • Low/minimal cost to construction/maintenance/ decorate/ due to few
   • Easy /fast to locate employees as everybody works in the same room/which saves
   • (Limited) office machines /equipment are shared which greatly reduces operation cost/wastage of resources/avoid duplication.
   • Discourages absenteeism /lateness/early departure as workers absence can be easily noticed/due to close supervision/ monitoring
   • Encourages team work as employees can consult (both formerly/ informally) /can share ideas/promote friendship/personal
   • Economy of space /more floor space is available due to few/no partitions/thus can accommodate more
   • Fast/easy communications between workers since there are no physical barriers between them /are found in the same
   • Flexibility since it is easy to reorganize/ rearrange/redesign the office (when need arises)
   • Faster flow of work due to reduced movement/ working close to one

(xi)      Minimizes /discourages laziness/idleness/laxity

since workers can see/check/monitor each other.

• May enhance better performance by senior staff as they act as role
• Reduces corruption/fraud/misuse of office resources as employees’ actions are easily monitored/does not give room for soliciting for bribes thus promoting accountability / integrity/ethical behaviour of employees

 

 

Debtors	33,500
Bank	12,600
Cash	18,400	73,000
		189,000