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  1. State four external factors that may positively influence the operations of a business (4mks)
  1. Outline four circumstances under which producers may prefer to sell goods directly to the consumers. (4mks)
  2. Name four ways through which consumers can be cheated in their dealings with traders (4mks)
  1. The following information relates to Tamu Traders for the year ended 31st 2011
    Fixed Assets                    5,000,000
    Current Assets                 650,000
    Net profit                        300,000
    Current liabilities              650,000
    Sales                               2,000,000
    Closing stock                    100,000
    Opening stock                   200,000
    Gross profit margin           20%
    Calculate;                      (4mks)
    1. Current ratio
    2. Gross profit mark up
    3. Rate of stock turn over
    4. Capital employed.
  1. Outline four circumstances under which a credit note may be issued. (4mks)
  2. The equation given below relate to quantity demanded and the quantity supplied at equilibrium price.
    Qde = 4P + 50
    Qse = 8P + 30
    Determine the equilibrium price and quantity                                                                        (4mks)
  1. Kendi started a shop dealing in ladies clothing but failed after two years. Outline four factors that many have caused this failure (4mks)
  2. Name the type of warehouse described below


    Type of warehouse 

    a)Goods can be stored before payment of custom duties


    b)Individuals can hire storage facilities


    c)Goods are stored from several manufacturers


    d)Specialised goods are stored

  1. State four ways in which the nature of goods would influence the choice of transport (4mks)
  1. Outline any four circumstances under which human wants may be fully satisfied (4mks)
  1. Highlight four ways in which business studies is useful to a community (4mks)
  2. State the books of original entry in which the following documents are used. (4mks)
    1. Incoming invoice 
    2. Incoming receipt 
    3. Outgoing credit note 
    4. Outgoing invoice
  3. State the type of ledger into which the following accounts would be found. (4mks) 
    1. Capital 
    2. Mueni (debtor)
    3. Kariuki (supplier) 
    4. Bank 
  1. Outline any four advantages of operating in an open office layout. (4mks)
  2. George operates a petrol station in Nakuru. He insured his stock worth Ksh 2.4 million for ksh 2 million. Later in the year stock worth ksh 600,000 was destroyed by fire. Calculate the amount he was compensated and give a reason. (4mks)
  1. State four characteristics of money (4mks)
  2. Name the rewards for the following factors of production (4mks)

    Factor of production 


    a) Employee


    b) Machine


    c) Minerals


    d) Farmer

  1. Outline four challenges that may be experienced by a country whose population is made up of a large proportion of young people (4mks)
  1. Highlight any four characteristics of perfect competition type of market structure (4mks)
  2. State the line of communication involved in each of the following. (4mks)
    1. The manager of ABC company Ltd talking to the manager of XYZ company Ltd
    2. A secretary asking for time off from her boss 
    3. The production manager giving instructions to the secretary of the sales manager
    4. The store keeper giving explanations to the chief accountant
  3. State the effect of each of the following transactions on the balance sheet totals by writing increase or decrease or no effect in each case. (4mks)



    a) Bought machinery on credit


    b) Withdrew cash from the bus for personal use


    c) Purchased stock in cash


    d) Paid outstanding loan by cheque

  1. Outline the assumptions that the circular flow of income in a closed economy work under(4mks)
  1. The following balances were extracted from the books of Wanji traders for the year ended 30th June 2005. (4mks)
    Debtor                                    120,000
    Creditor                                  60,000
    Machinery                               450,000
    Cash in hand                           70,000
    Cash at bank                           180,000
    5 years bank loan                     270,000
    Stock                                       60,000
    Prepare a balance sheet of Wanji traders as at 30th June 2005.
  1. Outline four reasons for maintaining a cash book in a business enterprise. (4mks)
  2. Highlight four factors that should be considered when choosing a method of promoting a product.    (4mks)


    • Increase in customers income
    • Increase in population
    • Political stability
    • Favourable climatic conditions
    • Lack of competition
      Any other relevant 4 x 1=4mks
    • Where market is concentrated in e area/localized.
    • Where the product is of technical nature
    • Where the product is of high value
    • Where the product is perishable
    • Where the producer has high own retail outlet
    • If the goods are produced as per customer’s specification
    • If the producer requires immediate feed back
    • When the consumer can but in bulk.
      Any other relevant 4 x 1=4mks
    • Very high prices for products
    • Hoarding of products
    • False advertisement
    • Harmful products
    • Breach of contract
    • Inferior quality goods
      Any other relevant 4 x 1=4mks
    • Incase of overcharge in invoice
    • If goods have been returned
    • If one was charged for goods not supplied.
    • If cost of empty containers was included in the invoice
    • If merited discount has not been deducted for the invoice
      Any other relevant 4 x 1=4mks
  1. Qde = 4P + 50
    Qse = 8P + 30
    Qde = Qse
    4P + 50 = 8P + 30
    50-30 = 8P -4P
    • Poor location of the business (4mks)
    • Stiff competition from other retailers
    • Inadequate finances to meet the obligation of the business
    • Kendi’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
    • Any other relevant 4 x 1=4mks
    1. Bonded warehouse
    2. Pubic warehouse
    3. Wholesaler
    4. Manufacturer’s
    • Bulky goods (4mks)
    • Perishable goods /Durability
    • Flammable /inflammable
    • Fragile
    • Expensive/value of goods
    • Heavy
    • If resources are not scarce (4mks)
    • If wants are not complimentary
    • If want s are not habitual
    • If wants are not competitive
    • If wants are not recurrent
    • If wants don’t very in urgency and intensity
      NB: A candidate must use circumstantial words such as if, when, where and incase to earn a mark.
    • It enables one to acquire knowledge and skills to start and run a business. (4mks)
    • It equips on with basic economic concepts
    • It enables one to understand and appreciate the importance of business activities in the society
    • Makes the members of society to appreciate the need for business management practices.
    • Assist individuals to acquire self discipline and positive attitude towards work.
    • Equips individuals with abilities to promote co-operation in society than trade.
      Any other relevant 4 x 1=4mks
    1. Purchases journal (4mks)
    2. Cash payment journal
    3. Return inwards/sales returns journal
    4. Sales journal
    1. Private/general ledger (4mks)
    2. Sales/debtors ledger
    3. Purchases/creditors/bought ledger
    4. Cash book
    • Easy supervision of workers (4mks)
    • Construction cost is low because partitions are few
    • Easy location of workers
    • Staff movement is minimized thus saving time used in passing information
    • Office equipment and machinery are not misused due to close supervision of workers.
    • Promotes teamwork among employees
    • Maintenance cost low
    • Floor space is saved
    • It is cheap to decorate
      Any other relevant 4 x 1=4mks
    • Divisibility (4mks)
    • Scarcity
    • Malleability
    • Acceptability
    • Durability
    • Portability
    • Recognisability
      Any other relevant 4 x 1=4mks
    • Salary (4mks)
    • Interest
    • Rents/rates /loyalties
    • Profit
    • Increased dependency ratio on the young who may not yet fit in the job market.                                                                                           (4mks)
    • The labour supply in the market will be low as many young people may not have attained working age.
    • Move resources are used to feed the young and less is available for savings and investment.
    • Most expenditure is diverted to providing goods and services for the young and other vital sectors are neglected
    • Many young people being released on the job market may create unemployment.
    • Young people particularly if they are idle tend to engage in social evils such as crime.
      Any other relevant 4 x 1=4mks
    • Perfect knowledge of the market by both the buyer and the seller. (4mks)
    • Homogeneous product
    • No government intervention
    • Factors of production have perfect mobility
    • Free entry and exit of the players in the market.
      Any other relevant 4 x 1=4mks
    • Horizontal communication (4mks)
    • Upward vertical communication
    • Downward diagonal communication
    • Upward diagonal communicateon
    1. Increase
    2. Decrease
    3. No effect
    4. Decrease
    • Household spend all their income in buying the goods and services from the firm and none is saved. (4mks)
    • The firms sell all their goods to the households.
    • There is no government intervention in the circular flow.
    • There is no leakage or withdrawals from the closed economy.
    • The firms spend all income renewed on production of goods and services.
    • The firms spend all income on production of goods and services.
    • To reduce the number of entries made into the general ledger (4mks)
    • To easily oral cash balances/show cash balances at a glance.
    • To enhance specialization in book keeping by allocating different ledgers to different workers.
    • To easily monitor cash inflow (receipts)
    • To show the sources of funds into the business
    • To show the expenditure in the business
    • To easily monitor the cash outflow (payment)
    • To show discount allowed to the debtor
    • To show discount received from creditors
    • Cost of the method (4mks)
    • Geographical area to be covered /extent of the market/distance to be covered.
    • Target group/type of consumers/nature of the market segrement
    • Speed of the medium /urgency of the message/time
    • Nature /type of the product
    • Intended impression/impact
    • Methods used by competitors
      Any other relevant 4 x 1=4mks
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