Instructions to candidates:
- Write your name, admission number and class in the space provided above.
- Write your index number, date of the exam, signature and teacher in the space provided above
- This paper contains six questions with equal marks.
- Answer only five questions in this paper in the space provided after question six.
- Answer should be written in English.
For examiners use only
Question |
Maximum score |
Candidate’s score |
Total Score |
QUESTIONS
-
- Outline five ways through which the government of Kenya encourages entrepreneurship in the country. (10 Marks)
- Explain five merits of direct taxes. (10 Marks)
-
- Outline five circumstances under which a public limited company may be dissolved. (10 Marks)
- Explain five methods in which the central bank of Kenya may use to reduce money circulation in the economy. (10 Marks)
-
- Explain five factors to consider when choosing the means of communication to use. (10 Marks)
- Post the following transactions to the relevant ledger accounts and balance them off. (10 Marks)
1/1/2019 - Started a business with Sh 120,000 in cash.
6/1/2019- Bought goods worth Sh 10,000 from Shah Traders on credit.
8/1/2019 – Deposited Sh 100,000 into the business account.
10/1/2019 – Bought furniture worth Sh 80,000 paying by cheque.
16/1/2019 – Paid water bill Sh 10,000 in cash.
24/1/2019 – Took cash Sh 5,000 to pay school fee for his son.
-
- Explain five external factors that would contribute to the success of a business enterprise (10 Marks)
- Explain five circumstances under which a producer may use a direct channel in distributing his goods. (10 Marks)
-
- Explain five factors to consider before buying office equipment. (10 Marks)
- Explain five disadvantages that a developing country may suffer by liberalizing foreign trade. (10 Marks)
-
- Explain five benefits of high population to a country. (10 Marks)
- The following information relates to Kilima traders for the year 2018
Turnover sh 400,000
Mark-up 25%
Rate of stock turnover 5 times
Opening stock sh 60,000
Expenses sh 36,000
From the information given above, calculate- Margin (2Marks)
- Gross profit (2Marks)
- Cost of goods sold (2Marks)
- Net profit (2Marks)
- Closing stock (2Marks)
MARKING SCHEME
-
- Ways in which the government of Kenya encourage entrepreneurship in the country.
- Favourable policies/low taxation/increase in subsidies encourage growth/expansion of businesses
- Provision of infrastructure facilitate movement of goods/services/F.O.P/access to market
- Provision of appropriate education to equip youth with necessary skills for running business
- Political stability by creating conducive environment for doing business
- Availing credit/loans/finances/capital to start/run business
- Provision of adequate security for smooth running of business
- Provision markets for goods/services produced
- Merits of direct taxes.
- Economical /cheap to collect since it provide higher revenue at lower cost/it is collected from the source/involve less personnel.
- Certainty as the government knows the amount of tax/ manner/time of payment /budget/ plan for it/it is difficult to evade.
- Convenient as it is deducted at source making it easy/ convenient to collect
- Simple to understand/calculate as every wage level falls into predictable tax bracket
- Easy to administer as the collection points are few as opposed to collecting tax directly from individuals/ less documentation.
- Flexibility as it can easily be changed to suit government needs/economic situations.
- Price stability as it affects the disposable income and hence influencing the aggregate demand
- Equity/progressive in nature hence able to redistribute wealth by taxing high income earners as opposed to those earning less.
- It is elastic as it can expand with increased income/population/with change in income/population/contracts with decreased income/population.
- Ways in which the government of Kenya encourage entrepreneurship in the country.
-
- Circumstances under which a public limited company may be dissolved.
- A resolution by shareholders to dissolve the company /decision by shareholders-to dissolve the company during the annual general meeting.
- Change in the country’s law rendering the activities of the company illegal/unlawful/bars certain activities that a company may have been involved in.
- Inability to repay finance/debts/creditors may go to court/if the debt are not paid.
- Acquisition /absorption/take over/amalgamation/mergers hence redirection of its activities/loss of identity/change of status.
- Realisation of sustained /continuous losses to the extent of not being able to meet it recurrent expenditure.
- Court order on infringing law /granted to a complaint raised by stakeholder/acting ultra-vire.
- Completion/fulfilment of task/activity/objectives which it was formed hence making it continued existence unnecessary /unreliable.
- If the company does not commence business a year since its incorporation.
- Method through which central bank of Kenya may take to reduce the amount in circulation.
- Increase compulsory/special deposit the reduces the amount of money available for lending in commercial banks
- Raising bank/ lending interest making bank loans /credit unattractive /expensive to borrowers
- Selling securities in open market operations (OMO) thereby reducing the amount of money with members of public
- Raising the cash ratio which leaves commercial bank with less to lend
- Selective credit control by only giving loans to only selected sector of the economy thus limiting the sectors/how much it’s to lend
- Moral persuasion to commercial banks to reduce amount they lend
- Directives to commercial banks to reduce credit creation
- Reducing government expenditure by suspending some projects
- Circumstances under which a public limited company may be dissolved.
-
- Factors to consider when selecting a mean of communication to use.
- Confidentiality of/ secrecy of the message it should safeguard the content of the message from being accessed by unauthorised hands
- Precision /accuracy of the means should be able to deliver the message in its original form/without distortion
- Need for feedback should allow for response/action where necessary
- Urgency/speed of the message/means should be fast enough to ensure timely delivery of the message
- Cost/affordability of the means the sender must be able to meet the cost of the means so chosen
- Nature of the message an appropriate means should be chosen
- Need for future reference/record must provide evidence if future reference will be required
- Capacity of the means it should allow the required volume of information to be passed/at an agreeable speed
- Availability of the means it should be readily available
- Intended/desired impression it should be able to create the desired effect /impact/ image
- Government policy and hence must be adhered to/ has no option
- Business policy if the has a prescribed way of communicating the it has to followed
- Type/nature of audience /recipients should be suitable/ appropriate for the need of the audience
- Size of the audience /number of the recipients the means chosen should be capable of reaching all the recipients/audiences
- Security of audience/number of recipients the means should guard against loss/theft of information
- Safety of message the means should guard against damage of information
- Reliability/ certainty of the means the means should be able to deliver the information to the receiver as intended
-
Dr Capital a/c Cr Date
Details
Amount
Date
Details
Amount
31/1/2019
Bal c/d
120,000 √
1/1/2019
Cash
120,000 √
Dr Cash a/c Cr Date
Details
Amount
Date
Details
Amount
1/1/2019
Capital
120,000 √
8/1/2019
Bank
10,000 √
16/1/2019
Water bill
10,000 √
24/1/2019
Drawings
5,000 √
31/1/2019
Bal c/d
5,000 √
120,000
120,000
Dr Purchases a/c Cr Date
Details
Amount
Date
Details
Amount
6/1/2019
Shah traders
10,000 √
31/1/2019
Bal c/d
10,000 √
Dr Shah traders Cr Date
Details
Amount
Date
Details
Amount
31/1/2019
Bal c/d
10,000 √
6/1/2019
Purchases
10,000 √
Dr Bank a/c Cr Date
Details
Amount
Date
Details
Amount
8/1/2019
Cash
100,000 √
10/1/2019
Furniture
80,000 √
31/1/2019
Bal c/d
20,000 √
100,000
100,000
Dr Furniture a/c Cr Date
Details
Amount
Date
Details
Amount
10/1/2019
Bank
80,000 √
31/1/2019
Bal c/d
80,000 √
Dr Water bill a/c Cr Date
Details
Amount
Date
Details
Amount
16/1/2019
Cash
10,000 √
31/1/2019
Bal c/d
10,000 √
Dr Drawings a/c Cr Date
Details
Amount
Date
Details
Amount
24/1/2019
Cash
5,000 √
31/1/2019
Bal c/d
5,000 √
- Factors to consider when selecting a mean of communication to use.
-
- External factors that influence success of a business.
- High population- provide customer for goods/services
- Stable good economic environment- which increases the purchasing abilities/power of the consumer
- Favourable political factors/political stability- create a conducive environment for smooth running of business
- Positive socio-cultural factors which influence consumption/production of goods
- Favourable government policies/legal factors/laws encourage expansion /growth of business
- Reliable suppliers ensure timely production of quality goods/services
- Loyal customers guarantees market for goods/services
- Availability of intermediaries/ middlemen ensure goods reach the market
- Adequate/ appropriate /good advanced technology lead to high quality/quantity goods/service
- Fair competition which business can cope with/survival
- Circumstance under which a producer may use direct channel to distribute his goods.
- If the producer deal with perishable goods which are likely to get bad easily if the follow long channel.
- If the market is localised/concentration in one area hence not economical to involve intermediaries.
- If the producer has adequate finance/fund to have their own distribution outlet/facilities.
- When the volume of goods produced is small and the producer can afford to distribute them to consumers directly.
- Where goods are technical in nature and hence require after sales services/spare parts/installation.
- When the competition in the market is high hence wants to keep a direct link with the customer.
- Where goods are produced on customers specification hence unnecessary to involve intermediaries.
- Where the size of the market is small/has a few consumers hence no need to engage intermediaries.
- Where there are no intermediaries has no other option/alternative
- Where it is a government policy and hence has to adhere/ follow it
- External factors that influence success of a business.
-
- Factors to consider before buying office equipment.
- Workflow should ensure continuous flow of documents
- Minimal/ease movement to save time/reduce distraction
- Supervision of staff should ensure easy/ quick access of staff
- Working space to allow ease movement of staff
- Proximity to equipment to avoid unnecessary movement/wastage of time
- Office appearance should be attractive to boost the morale of workers
- Communication should allow the flow of information to help in decision making
- Legal requirement/compliance should adhere to law of the land
- Disadvantages that developing country may by liberalising trade
- May lead to dumping of inferior/substandard/cheap products into the country.
- May cause overexploitation of natural resources leading to their depletion/degradation /shortage /exhaustion.
- May lead to loss of job/ unemployment due to closure of firms/due to unfair competition.
- Contribute to worsening B.O.P as developing countries have fewer/lowly valued exports/due to expensive imports.
- Cultural values/beliefs/morals may be eroded due to copying/aping negative/bad foreign habits/lifestyles /culture.
- Entry of harmful goods/services e.g. beauty creams/drugs may find their way into the country which may affect people health.
- Slow economic development/the country may stagnate due to influx of foreign goods/services/ declining demand for local goods/services.
- Brain drain/loss of skilled personnel to developed countries that provide better pay/social amenities/ working condition.
- Entry of contra band goods/services which may negatively affect security /health/ economy/ stability.
- May encourage over dependence/over reliance on imports/foreign countries which may lead to political blackmail/vulnerability
- May lead to imported inflation due to importation of overpriced goods/services.
- Factors to consider before buying office equipment.
-
- Benefits of a large population to a country.
- Increased labour supply that increase productivity/ production
- Increase market for goods/services
- Diverse talents from the large population increase production
- Technological advancement which lead to high quality/quantity of goods/ services
- Proper/efficient use of local resources without wastage due to optimal use
- Increased government revenue due to increased trading activities/taxes
- Increased investments due to increased demand of goods/services
-
- Margin = (25√)/(25+100 √) x 100% = 20% √√
- Gross profit = 20% √ x 400,000 √= sh 80,000 √ √
- COGS = Sales- Gross profit
= 400,000√ - 80,000√ = sh 320,000 √ √ - Net profit = Gross profit – Expenses
= 80,000 √- 36,000 √ = sh 44,000 √ √ - (Opening stock+closing stock)/2=320,000/5=64,000
Opening stock = 64,000x2√ - 60,000 √ = sh 68,000 √ √
- Benefits of a large population to a country.
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