INSTRUCTIONS TO CANDIDATES
- This paper consists of six questions.
- Answer any five questions.
- All questions carry equal marks.
-
- Explain any five measures a country may adopt to increase its volume of exports. (10 marks)
- Explain five factors that encourage entrepreneurial development in Kenya. (10marks)
-
- Dr Korir a surgeon opened up a clinic in his rural home of Chepalungu. The business closed after six months. Explain five reasons for the business failure.
- Uhuru Highway Ltd started business on 1st May 2018 with Shs. 250,000 consisting of:
Cash at bank Shs.200,000,
Cash in Hand Shs. 30,000
Furniture Shs. 20,000
The following transactions took place during the month of May.
3rd May 2014, Motor Van worth Shs. 85,000 and stock of Shs. 25,000 were bought on credit
6th May 2014, more stock worth shs.10,000 was bought by cash
9th May 2014, withdrew money from bank sh 50,000 for office use
15th May 2014, Sold stock at cost to a customer on credit for shs. 18,500
19th May 2014, received a cheque for the full settlement of a debt owed from the transaction of 15th may 2014
23rd May 2014, paid Shs. 65,000 by cheque for the motor van bought earlier on credit
31st May 2014, paid Shs. 20,000 cash for the stock bought on credit
Required:
Prepare the balance sheet of Uhuru Highway Ltd as at 31st May 2019. (10marks)
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- Explain five measures that Kenya Government should adopt to solve the widespread cases of unemployment. (10mks)
- Give four differences between a private limited company and a public corporation.(10mks)
-
- Explain FIVE Money transfer facilities provided by Commercial Banks (10 s)
- On 1st May 2010 Musa Traders had sh. 15, 000 cash in hand and Sh. 160, 450 at bank. During the month, the following transactions took place.
May 2 Bought goods for Sh. 5, 400 and paid by cheque.
May 8 Received sh. 7, 200 cash from a debtor
May 15 Paid a creditor Sh. 18, 300 by cheque
May 16 Paid salaries sh 4, 200 in cash
May 18 Sold goods for sh. 9, 200 and was paid by cheque
May 20 Withdrew sh. 30, 000 from bank for office use
May 25 Received sh.8, 000 cash from a debtor
May 28 Paid general expenses sh. 4, 000 cash.
May 29 Deposited sh.10, 000 cash in bank
May 30 Paid for electricity sh. 2, 500 by cheque
Record the above transactions in a two column cash book and balance it off. (10 Marks)
-
- Outline FIVE causes of Balance of payments disequilibrium (10 mks)
- Describe FIVE channels of distribution that may be followed by imported manufactured goods (10 mks)
-
- Explain five functions of the stock exchange market. (10mks)
- VP Shah shop sells all its goods at a margin of 20%. For the year ended 30th April 2006, the trading activities were as follows.
Purchases sh. 80,000
Sales sh. 950,000
Net profit 5% of sales
Closing stock sh. 200,000
Calculate- The gross profit
- The opening stock
- Mark up percentage
- The net profit.
MARKING SCHEME
-
- Measures a country may adopt to increase its volume of export
- Engaging in international trade fair/exhibition to promote the home products
- Devaluation of its own currency to make export cheap
- Lowering taxes on exports to make them cheap
- By diversifying on its exports to increase the market.
- Offering subsidies to firms that are involved in production of export goods
- Reducing the length /procedure for acquiring licenses for exporting products
- Adopting modern technology to export products to make them fashionable/High quality/more attractive to customers
- Offering customs drawbacks – The government refunds either in full or part of custom duty paid on imported raw materials if finished product is exported.
- Lobbying/Negotiate with trading partners for removal of trade restrictions placed on the country’s exports
(Any 5 well explained x2=10marks)
- Engaging in international trade fair/exhibition to promote the home products
- Factors that encourage entrepreneurial development in Kenya
- Improved infrastructure; good roads, adequate security, availability of water, electricitywill encourage entrepreneurial development.
- Favorable government policies such as lessening tax burden by providing tax holidays, providing incentives and simplifying procedures and cost of obtaining relevant legal documents required
- Availability of market for goods and services/Expanding market due to devolution of services
- Increased accessibility to education and training/Expanded capacity to provide training for better skills to entrepreneurs.
- Availability of resources/Increased accessibility to credit from commercial financial institutions and also from the government through government initiated projects like uwezo fund and women enterprise funds.
- Political stability/absence of political chaos/No inter-clan fighting creates a conducive environment for entrepreneurs to venture into varied investments with confidence.
- Favorable natural conditions/enough rainfall for agro-based businesses.
(Any 5 well explained x2=10marks)
- Improved infrastructure; good roads, adequate security, availability of water, electricitywill encourage entrepreneurial development.
- Measures a country may adopt to increase its volume of export
-
- A surgeon set up a clinic in a distant rural centre. The business was closed after six months.
Identify four possible causes for the failure- Inadequate capital
- Poor working strategies
- Unfavorable government policies
- Insecurity in the area
- Inadequate academic and technical knowledge
- Inadequate business management knowledge
- Inadequate demand market
- Poor record keeping
- Poor customer relations
- Large drawings from firm
- Lack of self discipline and poor moral character
- Poor planning
- Changes in technology
- Changes in business environment
- Uhuru Highway
Balance Sheet
As at 31st May 2014
Ksh.
Fixed Assets:
Equipment 24,000
Furniture 6,000
30,000
Current Assets:
Stock 49,980
Debtors 45,770
Bank 38,760
Cash 1,200 135,710
165,710Ksh. Capital 128,440
Add Net profit 27,320
Less Drawings 20,500
135,260
Short term Liabilities:
Creditors 30,450
165,710
- A surgeon set up a clinic in a distant rural centre. The business was closed after six months.
-
- Measures used to solve unemployment cases in Africa.
- Encouraging investment by Private sectors through offering subsidies to increase employment opportunities.
- Use policies that encourage use of labour intensive methods of production.
- Ensure political stability – attract foreign investment into the country.
- Delocalise firms to prevent / reduce urban unemployment brought about by rural-urban migration.
- Encourage use of family planning methods to reduce rapid population growth.
- Provide appropriate education and training methods that equips citizens with relevant skills and knowledge required by firms.
- Increases in Government expenditure to create job employment
- Encourage use of local resources to create employment (5 x 2 = 10mks)
- Give five differences between a private limited company and a public corporation.
Public corporation Private limited company It is formed by an act of parliament It is formed under the company’s act It is not profit – motivated provides services to the general public It is profit motivated It is financed by the government Capital is raised through the sale of share Board of directors is appointed by the government Directors are elected by shareholders Losses are subsidized/ borne by the government Losses may lead to collapse of business It is owned by the government It is owned by shareholders
- Measures used to solve unemployment cases in Africa.
-
- Money transfer facilities provided by the Commercial Banks
- Standing order- Instruction to the bank by the A/C holder to make regular payment to the A/c holder to make regular payment to a name client for an agreed period of time.
- Credit transfer – Method of paying many people using one cheque
- Telegraphic transfer – Method of remitting money fast and safely from one person to another
- Electronic Funds transfer (EFT) – Transferring money from one account to another using computers
- Cheques- Written order by the drawer to the Bank to pay on demand a specified amount of money to the named person on the cheque.
- Banker’scheque – Written order by a bank to another to pay a stated amount of money to the payee.
- Two column cash-book
DR MUSA TRADERS CR
Date Details Folio Cash Bank Date Details Folio Cash Bank 2010
May 1
8
18
20
25
29Bal b/d√1
Debtor√½
Sales√½
Bank√½
Debtor√½
Cash√½
C
CSh.
15,000
7,200
30,000
8,000
60,200
42,000Sh.
160,450
9,200
10,000
179,650 ✓1
123,450 ✓12010
May 2
15
16
20
29
30
31
Purchases√½
Creditor√½
Salaries√½
Cash√½
Gen.exp.√½
Bank√½
Electricity√½
Bal c/d√1
C
CSh.
4,200
4,000
10,000
42,000
60,200Sh.
5,400
18,300
30,000
2,500
123,450
179,650
- Money transfer facilities provided by the Commercial Banks
-
- Causes of B.O.P disequilibrium
- Fill in volume of exports
- Deterioration in the country’s terms of trade
- Increase in volume of imports
- Restrictions by Trading partners
- less capital inflow compared to outflow
- Over-valuation of domestic currency
- Devaluation of currency by a Trading partner
Mention 1mark otherwise 2x10 = 10 marks
- Channels of distribution of imported manufactured goods.
- Foreign Manufacturer → Agents → Wholesaler → Retailer → Local Consumer.
- Foreign Manufacturer → Wholesaler → Retailer → Local Consumer.
- Foreign Manufacturer → Local Consumer.
- Foreign Manufacturer → Manufacturer’s Representative → Wholesaler → Retailer → Local Consumer.
- Foreign Manufacturer → Wholesaler → Local Consumer.
- Foreign Manufacturer → Retailer → Local Consumer.
NB. Candidate should mention Foreign Manufacturer and Local Consumer
5 x 2= 10mks
- Foreign Manufacturer → Agents → Wholesaler → Retailer → Local Consumer.
- Causes of B.O.P disequilibrium
-
- Functions of the stock-exchange market.
- It assists investors to buy shares by providing appropriate information to them.
- It assists shareholders who want to dispose of shares by giving them relevant information.
- It assists companies that need to raise money by floating shares to the public.
- It compiles business information that would be used by interested parties to make decisions on the investment.
- It vets the standard of performance of Company that intends to be quoted in the stock market.
- It sets the prices of shares for the general public investors.
- It list / delists companies that are viable / not viable.
- Generates revenue for the government through taxation.
- Creation of employment.
(5 x 2 = 10mks)
-
- The gross profit
Gross profit = sales – costs of sales – ½
margins = G.P × 100
sales
20% = G.P × 100
950000
G.P = 190000 ½ - The opening stock
C.O.S = O.S + purchase = C.S ½
C. O. S = sales – G.P
C.O.S = 950,000 – 190,000 ½
= 760,000
O.S = 760,000 – 80,000 + 200,000
= 680,000 + 200,000 = 880,000
760,000 = opening stock + 600,000 ½
760,000 – 600,000 = O.S ½
160,000 = opening stock ½ - Mark up percentage
Mark − up = G.P × 100
C.O.S
= 190000 × 100
760000
= 25% - The net profit = 5% of sales
N.P = 5/100 × 950000 ½
= 47,500 (10x1)=10mks
- The gross profit
- Functions of the stock-exchange market.
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