Instructions to Candidates
- This paper consists of 6 questions.
- Answer ANY FIVE questions in the spaces provided
- Candidates should answer the questions in English
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- Explain five methods used by central bank to increase money supply in the economy. (10mks)
- Discuss five ways in which the government can reduce unemployment levels in Kenya (10mks)
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- Explain five factors that may limit the use of containers as a method of transporting goods in a developing country. (10mks)
- The following Trial balance was extracted from the books of Kabaka traders as at 30/6/2018.
Kabaka Traders
Trials balance as at 30/6/2021
Particles Dr Cr Sales PurchasesReturn inwardsCarriage inwardsReturn outwardsCarriage outwardsStock 1st Jul 2017RentDelivery vanBankCreditorsDebtorsDiscount allowedGeneral expensesCapital____________600,00080,00040,000____________3,000100,00060,000180,00060,000____________120,00080,00018,000____________1,268,000900,000 ________________________20,000_____________________________________________170,000___________________________178,0001,268,000
Required:
Prepare Kabaka Traders Trading profit and loss A/c.
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- Explain five advantages of government involvement in Business. (10mks)
- Discuss five factors that may influence entrepreneurial practices positively in the country (10mks)
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- Apart from selling of shares, explain five other sources of finance for public limited company. (10mks)
- Explain five features of oligopoly. (10mks)
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- Muema is planning to construct a warehouse for renting. Explain five measures that he may take to ensure its smooth operation. (10mks)
- Outline five measures that the Kenya government may take to reduce unemployment. (10mks)
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- Explain five methods used to distribute imported manufactured goods. (10mks)
- The following transactions relates to Konate Traders for the month of December 2010.
Dec 1st Started a business with sh. 200,000 in the Bank account.
2ndBought furniture for sh, 50,000 and paid by cheque
3rdSold goods on credit to Tila shs, 20,000; Katu 10,000
4th Bought goods on credit from Kahamash 30,000; Kanga shs. 40,000
5thReturned faulty goods to Kahamash 5,000
6thPaid Kahama on account by cheque less 10% cash discount.
7thReceived faulty goods from Katushs. 2000
8thReceived payment due from Tila and Katu by cheque less 5% cash discount.
9thCash sales shs. 100,000
10thPaid for wagesshs. 20,000 by cash and electricity shs.10,000 by cheque.
11thDeposited all the cash in hand into the bank account.
Required:
Prepare a three-column cash book duly balanced (10mks)
MARKING SCHEME
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- Methods used by central bank to increase money supply
- Reducing bank rates
- Reducing liquidity ratio
- Buying government securities
- Reductions on compulsory deposits
- Opening credit to all sectors in the economy
- Directives to increase credit lending
- Moral persuasions to banks to increase credit lending
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- Population control to have labour force that economy can absorb.
- Reviving collapsed industries hence increased production activities.
- Establishing of more labour intensive industries.
- Expanding market for goods and services.
- Diversification of economy hence create more employment opportunities.
- Increasing government expenditure to expand size of the economy.
- Exposing labour to assist unemployed acquire jobs abroad.
- Encouraging informal/Juakali sector in order to promote self – employment.
- Encouraging self employment/entrepreneurship through low taxes, subsidies.
- Methods used by central bank to increase money supply
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- Special equipments for handling are expensive to buy and maintain.
- Use of modern technology which is not available in developing countries hence it slows down handling of containers.
- Requires skilled personnel which may not be available in developing countries.
- Initial capital to set up the system/ buy containers man not be available since the cost is high.
- Low volume of goods/irregular shaped goods may not call for use of containers.
- KABAKA TRADERS
TRADING PROFIT AND LOSS A/C
FOR THE YEAR ENDED 30/6/2021
Opening stock 100,000 Purchases 600,000Carriage inwards 40,000Return outwards 20,000C.O.G.A.F.S 720,000Closing Stock 135,000C.O.G.S 585,000Gross profit c/d 235,000820,000ExpensesCarriage outwards 3,000Rent 60,000Discount allowed 18,000General expenses 7,000Net profit c/d 147,000235,000Sales 900,000 Return inwards 80,000Net sales 820,000820,000Gross profit b/d 235,000Net profit B/d 147,000
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- Protection of citizens from exploitation/malpractices
- Provision of essential goods/services at fair prices
- Help solve unemployment problems hence improve standards of living.
- Provision of investments which are essential but require large capital.
- Creates competition forcing private sector to provide quality capital
- Help reduce foreign domination of the country’s economy.
- Promote fairness in distribution/use of resources
- Control use of resources through conservation thus ensuring sustainability.
- Income generation through taxation, licensing to finance government expenditure.
- Factors that influence entrepreneurial practices
- Positive/ good societal attitude
- Government support
- Good peer influence
- Proper education and training
- High number of successful entrepreneurs
- High number of financial institutions
- High level of personal motivations
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- Loans – borrowing from banks and other financial institutions.
- Ploughing back profit/Retained profit – profit not shared but used to expand/ run the business.
- Trade credit/buying goods on credit so as to pay at a later date.
- Hire purchases – buying goods and paying them on installment basis.
- Debentures to the members of the public.
- Sale of idle assets – to run business activities/ meet its financial obligations.
- Bank overdraft –To finance short term obligations.
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- Interdependent in decision making to avoid counter reactions from other firms.
- Deal in similar commodities which have been differentiated through colour, packing , pricing.
- Engage in non-price competition through aggressive advertising market segmentation, after sale services etc.
- Few-large firms which control substantial share of the market.
- Engage in price rivalry/competition which may lead to survival or collapse of firms.
- Price rigidity due to fear of selling above or below kinked demand curve.
- Price leadership where the dominant firm dictates market price which rules the market.
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- Suitable location to receive and issue goods
- Proper buildings suitable to the type of goods to be stored
- Equipment and facilities for handling goods such as forklifts
- Safety equipment for protection of goods against water and sunshine and personal protection
- Accessibility to its users near transport system
- Enough space for easy movement and accommodation of goods
- Well trained staff for proper management
- Requirement of the law
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- Increase government expenditure to stimulate aggregate demand, hence the level of production
- Encourage local private investment to increase productivity
- Diversify the Kenyan economy
- Protect local industries from foreign competition in order to maintain employment level
- Find market for locally produced goods through aggressive export promotion in order to expand production capacities of local industries
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- Five channels for distribution of imported manufactured goods .
- Foreign manufacturer → local consumer
- Foreign manufacturer → Foreign agent/exporter → local consumer.
- Foreign manufacturer → Foreign agent → local agent → local consumer.
- Foreign manufacturer → local agents/importers → local consumer.
- Foreign manufacturer → Foreign agent → local agent/import merchant → local wholesaler → local consumer.
- Foreign manufacturer → Foreign agent → local agent→ local wholesaler → local retailer →local consumer.
- Foreign manufacturer → local agent/import merchant → local wholesaler → local retailer → local consumer.
- Foreign manufacturer → local retailer → local consumer.
- Foreign manufacturer → local wholesaler→ local consumer.
- Foreign manufacturer → local wholesaler → local retailer→ local consumer.
- Foreign manufacturer → foreign agent → local wholesaler → local consumer.
- Foreign manufacturer → Foreign agent → local wholesaler→ local retailer → local consumer.
- Foreign manufacturer → own retail outlet → local consumer.
- Konate Traders
Three column cash book
As at 31st Dec 2010
Date Details L.F D.A Cash Bank Date Details LF DR Cash Bank 1st /123/128/129/1231/12CapitalTilaKatuSalesCash
c
1000
400
1400
100000
100000200000
19000
7600
80000
3066001st/12
2/12
6/12
10/12
11/12
31/12
31/12Furniture
Purchases
Kahama
Wages
Electricity
Bank
Balance
c
c/d
2500
2500
20000
80000
10000050000
40000
22500
10000
184100
306600
- Five channels for distribution of imported manufactured goods .
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