INSTRUCTIONS TO CANDIDATES
- Answer ALL the questions.
- ALL answers must be written in the spaces provided in this booklet.
- Do not remove any pages from this booklet.
- Outline four elements that comprise the internal environment of a business. (4 marks)
- Highlight four ways in which the nature of goods influences the choice of the method of transport (4 marks)
- Outline four factors that may positively influence the level of national income in Kenya. (4 marks)
- Identify four characteristics of a country that maybe undergoing a persistent rise in general price levels. (4marks)
- Identify four ways that an office can be used in an organization (4marks)
- The following balances were extracted from the books of Penuel Traders for the month ended 31 December 2011.
Shs
Sales 210,000
Purchases 120,000
Capital 220,000
Motor van 150,000
Expenses 80,000
Equipment 60,000
Debtors 40,000
Creditors 20,000
Prepare trial balance of Penuel Traders for the month ended 31 December 2011. [4marks] - Highlight four benefits that could accrue to a customer who buys goods from Nakumatt Stores (4 marks)
- State four reasons why one would prefer an email to a telephone conversation to send a message. (4marks)
- Highlight four roles of entrepreneurship to an economy. (4marks)
- Outline four strategies that a small- scale firm would adopt to expand so as to benefit from economies of scale. (4marks)
- The following are descriptions of accounts available to customers in the Kenyan banking industry. Give the account that corresponds to each of the descriptions given below. [3marks]
Description Type of account (a) Account holders require depositing a specific initial amount as well as maintaining a minimum balance. (b) Account holder may deposit and withdraw money whenever they want without maintaining a minimum balance. (c) Banks pay interest on deposit at comparatively higher rates. - On the diagram below show the effect of a decrease in the cost of production (4marks)
- The following information relates to Wanjau enterprises as at 31st December 2011. (4marks)
SHS
Closing capital 700,000
Net loss 90,000
Additional investment 90,000
Drawings 30,000
Calculate Wanjau’s initial capital. - Outline four circumstances under which rail transport may be preferable to road transport. (4marks)
- For each of the following transactions in the table below, indicate in the spaces provided, the source document from which the transaction would be recorded [4marks]
No. Transaction Source document (a) Sales of goods on credit (b) Correction of undercharges (c) Goods returned (d) Credit purchases. - Give four factors affecting birth rate in a country (4marks)
- List four principles that do not relate to life insurance.
- Highlight four assumptions of monopolistic competition. (4marks)
- Outline four benefits that may accrue to a multi-national business that uses video-conferencing meetings over the traditional ways of holding meetings among managers (4 marks)
- Highlight four statutes that the government has enacted in order to protect consumers. (4 marks)
- Outline four advantages of setting up a franchise. (4marks)
- Pox’s books of accounts had the following balances on 31st July 2010.
Shs
Cash in hand 20,000
Debtors’ 40,000
Bank overdraft 140,000
The following transactions took place in the months of September:
September 2: Cash sales of Shs. 300, 000 of which Shs. 200, 000 was paid by cheque.
6: Received a cheque of Shs. 180,000 from Omollo after allowing him a 10% Cash discount
14: Juma a debtor, settled his account of Shs. 60, 00 by cheque less 5% cash discount.
26: Paid insurance cost of Shs. 20, 000 by cheque.
29: Took all cash to the bank leaving a balance of Shs. 20,000.
Required:
Extract a three column cashbook and balance it off. (5marks) - The following balances were extracted from the books Ongwete retailers for the year ended 31 March 2011.
Shs
Sales 1,000,000
Purchases 640,000
Opening stock (1.1.2011) 160,000
Closing stock (31.12.2011) 80,000
Debtors 280,000
Creditors 180,000
Calculate- Margin
- Current ratio
- Rate of stock turnover [4marks]
- Highlight the four major stages of a commercial transaction. (4marks)
- Outline four advantages of drilling oil in Kenya. (4marks)
MARKING SCHEME
- Outline four elements that comprise the internal environment of a business.
- Business structure
- Business culture
- Business physical resources eg machinery
- Business financial Resources
- Business Objectives
- Management policies and styles eg action plans
- Business Human resource/employees
NB. Business owners should not be taken as a point
Candidates must qualify their answer to get the full mark
1*4=4mks
- Highlight four ways in which the nature of goods influences the choice of the method of transport.
- For urgently required goods choose fast means
- For bulky goods choose means with space
- For perishable goods choose fast means
- For high valuable goods choose secure means
- For fragile goods choose methods that have smooth passage and less handling
- For flammable goods choose a secure means of transport
1*4= 4mks
- Outline four factors that may positively influence the level of national income in Kenya.
- Highly skilled/trained manpower/working population
- High levels of technology available
- Exploited natural resources/gifts of nature/land
- Availability of capital/ manmade resources
- Good governance/ political stability
- Increased investment from abroad
- Increased savings /incomes and investment
- Increased government expenditure
- Presence of entrepreneurial culture
- Efficient/ Good infrastructural development
- Favourable balance of payments
- Identify four characteristics of a country that maybe undergoing a persistent rise in general price levels.
- Reduced savings
- Increased levels of unemployment
- Reduction of investment/ low production
- Social unrest/ labour disputes over salaries
- Reduction / fall in standards of living/ low purchasing power/low disposable income
- Four ways that an office can be used in an organization
- It facilitates the production and reproduction of documents
- It coordinates all organization activities/nerve centre of the organization
- Administration i.e making policies, decision and personnel supervision
- It safeguards the organizations’ property
- It facilitates effective filing/ storage of information/good record keeping
- It facilitates the receipt, processing and distributing of information/mailing
- Trial balance of Penuel Traders for the month ended 31 December 2011.
Particulars Dr Cr
Sales 210,000
Purchases 120,000
Capital 220,000
Motor van 150,000
Expenses 80,000
Equipment 60,000
Debtors 40,000
Creditors 20,000
450,000 450,000 - Four benefits that could accrue to a customer who buys goods from Nakumatt Stores
- One can save time by shopping under one roof
- One can access a variety of goods and services
- Have ample parking space
- Use of credit and debit cards thus reliving the customer the bother of carrying cash
- Fixed prices/ price tags help the customer to budget/plan their expenditure
- Access to new/unique products/information
- Access to after sale services eg packaging of goods
- Four reasons why one would prefer an email to a telephone conversation to send a message
- Provides evidence of communication
- Can be filed for future reference
- It is relatively cheap
- It is convenient to send detailed information
- One can send many copies at the same time
- Appropriate for confidential information especially through the use of passwords
- Appropriate for complex messages such as tables, graphs etc
- The message can be received at all times /when the receiver is not present
- Four roles of entrepreneurship to an economy.
- It creates employment/ job opportunities by establishing businesses hence earning profits/ salaries
- It promotes innovation/creativity/technology hence production of better/ quality goods/services
- Utilization of resources which would otherwise be idle or wasted
- Development of an entrepreneurial culture by inspiring more people to start businesses
- Creation of a wide range of goods / services to satisfy human wants
- Generation of government revenues through payment of taxes
- Capital formation by ploughing back profits that are used to expand the business
- N.B: Give direct consequences
- Reject reduced foreign dominance
- Reduced imports
- Development of infrastructure/reduced rural urban migration
- Reject reduced foreign dominance
- Four strategies that a small- scale firm would adopt to expand so as to benefit from economies of scale.
- Entering into mergers/ amalgamations/integration in order to expand the capital base
- Diversification/ variety of products inorder to increase market share
- Buying or acquiring other similar businesses to widen the scope of activities
- Adopting appropriate technology to increase the quality and quantity of products/ services
- Forming cartels to monopolise the market with similar businesses inorder to control the price and output
- To secure loans/credit to expand its capital base
- Ploughing back profits to finance its operations
- Expand the markets through extensive product promotion in order to increase the volume of sales
- Rationalise operations so as to cut down on wasteful expenditure by concentrating on its core activities and outsourcing the non-core areas.
- Arrange for franchising by acquiring rights to produce or sell goods under the name of another company.
-
Description Types of account (a) Account holders require depositing a specific initial amount as well as maintaining a minimum balance. Savings Account (b) Account holder may deposit and withdraw money whenever they want without maintaining a minimum balance. Current Account (c) Banks pay interest on deposit at comparatively higher rates. Fixed/Term Deposit Account - On the diagram below show the effect of a decrease in the cost of production
- Show the price quantity combination E1 thus equilibrium price for S1 is Ep1 which is the initial equilibrium price
- Decrease in the cost of production results to S1S1 curve shifting outwards /rightwards to curve S2S2. New equilibrium price /quantity combination shifts to E2 . Thus equilibrium price reduces to EP2
- CC = IC + AI − LOSS − DRAWINGS
700,000 = x + 90,000 − 90,000 − 30,0000
700,000 − 90,000 + 60,000 − 30,000 = 640,000 - Four circumstances under which rail transport may be preferable to road transport
- Where goods are bulky
- Where one wants to save on costs
- Where one needs a large carrying capacity thus saving on space
- Where the distance is long
- Where goods are not urgently needed
- Where the rail terminus are closer to the user than the roads
-
No. Transaction Source document (a) Sales of goods on credit Invoice Issued/ Outgoing Invoice (b) Correction of undercharges Debit note (c) Goods returned Credit note (d) Credit purchases. Invoice received - Four factors affecting birth rate in a country
- Use of contraceptives
- Level of women education/career development
- Socio- economic considerations
- Government policy
- Technological advancement
- Availability of health services
- Cultural beliefs
- Natural disasters/epidemics/wars/
- Tough economic times/financial constraints/cost of child care expense/upbringing
- Principles that do not relate to life insurance. (4mks)
- Proximate cause
- Subrogation
- Indemnity
- Contribution
- four assumptions of monopolistic competition
- Firms are independent in production ,marketing and pricing
- Freedom of entry and exist of firms
- Sellers have perfect knowledge of the market
- Products are close substitute of each other
- There are many buyers and sellers in the market place none of whom is large enough to influence the prices
- many sellers none of whom can influence a significant portion of the market
- product differentiation takes place: real or imaginary differences between producers creating customer loyalty
- Four benefits that may accrue to a multi-national business that uses video-conferencing meetings over the traditional ways of holding meetings among managers.
- Saving on costs of meeting venues, accomodation and travel and time
- Companies are able to have meetings with branches that are far away
- Meetings do not require large room facilities
- Time saving and convenient as one does not need to travel
- Record of the meeting can be saved
- One is able to see and hear the other and their body language
- Critical meetings can be held in less time
- Able to display charts during meetings
- Faster decision making
- Managers can meet more frequently
- Four statutes that the government has enacted in order to protect consumers.
- Food and Drug act
- Trade descriptions act
- Weights and measures act
- Sales of Goods act
- Kenya Bureau of Standards
- Building safety standards
- Rent tribunal Act
- Public health act
- Four advantages of setting up a franchise.
- Limited capital requirements.
- Limited overhead.
- Limited time requirements.
- Sufficient capital generated to sustain growth.
- Franchisee’s capital does not have to be repaid.
- Improved opportunities for future financing.
- Improved financial condition of the company.
- Enhanced corporate image, company prestige and visibility.
- Diversification and increased liquidity and personal wealth.
- Management of operations through franchisees.
- Franchisee responsible for day to day management.
- Higher likelihood of success since a proven business formula is in place
- Corporate image and brand awareness is already recognized
- Relationship with suppliers has already been established
- Benefits from sharing ideas and receiving support from other franchisees in the market
- Products are advertised by the main franchise companies at both local and international levels
- Three column cash book
Date Details DA Cash Bank Date Details DR Cash Bank 1.7.10 Bal b/d 20,000 1.7.10 Bal b/d 140,000 2.7.10 Sales 100,000 200,000 26.7.10 Insurance 20,000 6.7.10 Omollo 20,000 180,000 29.7.10 Bank C 10,000 14.7.10 Juma 3,000 57,000 31 Bal c/d 20,000 377,000 29.7.10 Cash C 100,000 5,000 120,000 120,000 537,000 - Margin
Gross profit × 100
Sales
Gross profit = net sales – cost of sales= 1,000,000 − (160,000 + 640,000 − 80,000) = 280,000
Margin = 280,000 × 100 = 28 %
1,000,000
Current ratio
Current assets = 80,000 + 280,000 = 2:1
Current liabilities 180,000
Rate of stock turnover
cos = 720,000 = 6.55 times
avg.stock (160,000 + 80,000/2) - the four major stages of a commercial transaction
- Inquiry
- Order
- Delivery
- Payment stage
- four advantages of drilling oil in Kenya
- Creation of employment opportunities in Kenya
- Utilization of idle resources
- Reduction on expenditure on crude oil
- Reduction in general price level of goods and services due to reduced cost of production
- Earn foreign exchange through exploitation of oil and other products to other countries
- Earn government revenue through taxation
- Development of infrastructure and other auxiliary services in the areas oil is being drilled
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