KCSE Business Studies Topical Questions and Answers

Highlight four features of abounded warehouse.

18/9/2021

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Give any four features of abounded warehouse

Features of abounded warehouse include:

mostly located at points of entry into a country like the ports
guarantees payment of customs duty to customs authority
very spacious to accommodate even bulky goods like motor vehicles
must issue release warrants to owners of goods for customs clearance
works hand in hand with customs officials for inspection of goods
Goods can be re-exported while in the bonded warehouse
Storage charges are made on all goods stored in the warehouse
Goods can be sold while still under bond
Goods can be inspected or prepared for sale that is they can be repacked, branded and blended while in the warehouse.
Goods are released only on the production of a release warrant.

Highlight four features of abounded warehouse

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The following balances were extracted from the books of Rehema Traders on 1st January. 2007.

17/12/2020

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The following balances were extracted from the books of Rehema Traders on 1st January. 2007.

The following transactions took place during the year ended 31 st December, 2007:
(i) Sold furniture worth Ksh. 60,000 for which Ksh. 40,000 cash was received and the balance was due at the end of the year.
(ii) Purchased goods worth Ksh.100,000 for which cash of Ksh. 70.000 was paid and the balance was still outstanding at the end of the year.
(iii) Cash Ksh. 10,000 was taken from the business by the proprietor to settle the spouse’s hospital bill.
Required:
Draw Rehema Trader’s balance sheet as at 31st December, 2007 showing the items in their relevant classes. (10 marks)

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Discuss causes of unfavourable balance of payment for most developing countries,

17/12/2020

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Discuss causes of unfavourable balance of payment for most developing countries,

Causes of unfavourable balance of payment for most developing countries include:

Reliance on primary products for export. Most developing countries mainly export primary agricultural products which fetch low prices in the international market.
Heavy importation of finished goods. Most developing countries import finished manufactured goods whose value are very high hence spend more on them.
Low levels of technology. Most developing countries rely on low levels of technology in production which compromises the quality of their exports and also lowering their value.
Too much reliance on foreign borrowing. Most developing countries finance their development projects through heavy borrowing yet such loans are repaid with heavy interests.
Susceptibility to natural calamities. Many developing countries are easily affected by natural disasters like drought which adversely affect their production.
Preference towards foreign goods. Most consumers in developing countries prefer goods manufactured in foreign countries in the belief that they are of better quality.
Unfavourable world economic order. The developing countries have very little say in international trade forums and cannot influence the world economic order in their favour.

Discuss causes of unfavourable balance of payment for most developing countries,

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Give reasons for maintaining books of original entry.

17/12/2020

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Give reasons for maintaining books of original entry.

Reasons for maintaining books of original entry include:

To reduce details to be recorded in the ledger accounts.
Act as back-up data from which other information may be extracted if need arise.
Contain information which act as reference such as units, trade discounts and terms of sale.
The general journal is used to correct errors made when recording transactions.
The three-column cash book is used as a book of original entry as well as a ledger

Give reasons for maintaining books of original entry.

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Amboseli Roses is a horticultural company producing flowers. Explain six factors that may influence the choice of a channel for distributing its products.

17/12/2020

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Amboseli Roses is a horticultural company producing flowers. Explain six factors that may influence the choice of a channel for distributing its products.

Factors that may influence the choice of a channel for distributing flowers include:

Nature of the flowers - flowers are perishable and therefore need a short channel in order to be distributed quickly.
Cost. The cost of different channels of distribution should be considered and the cheapest channel used.
Nature of the market. If consumers are widespread, then agents may be necessary to reach them.
Tastes and preferences of consumers. Consumers may have specific preferences which might require the personal attention of the producer hence use of a shorter channel.
Competition. Where competition is high, the producer will have to close to the consumers and will therefore use a short channel of distribution.
Quantity. If the quantity of flowers to be sold is large, then more middlemen may be required.
Availability of technical personnel. If the producer does not have the required technical personnel, then he may have to use a longer channel.

Amboseli Roses is a horticultural company producing flowers. Explain six factors that may influence the choice of a channel for distributing its products.

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Discuss circumstances under which a partnership may be dissolved.

17/12/2020

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Discuss circumstances under which a partnership may be dissolved.

Circumstances under which a partnership may be dissolved include:

Expiry of time or accomplishment of purpose. Where the partnership was formed for a definite time or a particular purpose, the expiry of time and accomplishment of purpose terminates the partnership.
Mutual agreement among partners - where the partners agree among themselves to terminate the partnership.
Bankruptcy of a general partner - where a court declares the value of one of the general partner’s property insufficient to settle his or her debts.
Change in law that makes the operations of the partnership illegal.
Permanent inability of a general partner to perform or fulfil his part of the partnership agreement either as a result of disease, insanity or death.
Internal dissension among partners - where partners disagree irreconciliably, then the partnership may be terminated.
Persistent losses in operation - where the business has continued to operate at a loss, then it is terminated.
Fraud, mistake or misrepresentation - where the partnership was formed under fraud, mistake or misrepresentation, a Court of Law may order its dissolution.

Discuss circumstances under which a partnership may be dissolved.

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Explain benefits that may accrue to an organization that adopts an open office plan.

17/12/2020

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Explain benefits that may accrue to an organization that adopts an open office plan.

Benefits that may accrue to an organization that adopts an open office plan include:

Easy supervision. It is easy to monitor employee’s performance since they are in the same room.
Economy of space. More floor space is available since space has not been lost through partitions.
Minimal cost. It is cheap to construct and maintain.
Sharing of resources. It makes possible for joint use of office facilities.
Easy communication. Communication between workers and departments is made easier and faster since there are no physical barriers between them.
Easy reorganization. It is easy to re-arrange the office when need arises.
Enhanced teamwork. Employees work as a team and learn to be together.

Explain benefits that may accrue to an organization that adopts an open office plan.

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Describe features of economic resources.

17/12/2020

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Describe features of economic resources.

Features of economic resources include:

Scarcity. They are found in small quantities compared to the many uses into which they have to be put and hence not sufficient to satisfy all human wants.
Monetary Value. They have a price attached to them which have to be paid for their use.
Uneven distribution. They are not distributed uniformly in society, hence some people, regions or countries have more of the resources than others.
Combinability. They can be used in different proportions to produce goods and services.
Usefulness. They are used to satisfy human wants (have utility).
Transferability. They may be transferred from one person to another in terms of ownership.

Describe features of economic resources.

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Discuss factors that may be considered when choosing a method for promoting a product.

17/12/2020

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Discuss factors that may be considered when choosing a method for promoting a product.

Factors to consider when choosing a method of promoting a product include:

Cost of the method. The organization should choose a promotion method that is affordable.
Geographical area of coverage. The organization should choose a method that will reach the customers in their various locations.
Target group. The organization must choose a method that appeals to the relevant target group.
Speed of the medium or method in relation to urgency of the message. The organization should choose a method that will reach the customers within the desired time frame.
Nature of the product. Different methods may be chosen depending on the nature of the product e.g. technical products may require demonstrations best achieved through personal selling.
Nature of the message. The organization should choose a method that will best present the various aspects of the message.

Discuss factors that may be considered when choosing a method for promoting a product.

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A farmer’s house valued at Ksh. 1,200,000 was insured against fire for Ksh. 900,000 under the “with average clause”. Fire occurred and damaged the house causing a loss of Ksh. 500,000. Determine the value of compensation due to the farmer.

17/12/2020

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A farmer’s house valued at Ksh. 1,200,000 was insured against fire for Ksh. 900,000 under the “with average clause”. Fire occurred and damaged the house causing a loss of Ksh. 500,000. Determine the value of compensation due to the farmer..

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Explain the procedure for making an insurance claim.

17/12/2020

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Explain the procedure for making an insurance claim.

Procedure for making an insurance claim
Notifying the insurer of the loss suffered.
Filling a claim form from the insurer.
Carrying out investigation to determine or ascertain the cause of loss.
Insurance company making a report.
Determination and payment of the claim.

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Explain circumstances under which containerization may be used to transport goods.

17/12/2020

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Explain circumstances under which containerization may be used to transport goods.

Circumstances under which containerization may be used to transport goods include:

Where bulky goods are imported. Bulky goods are usually transported by sea where containers are used.
Where specialized equipment are available for handling containers.
Where container terminals are available - containerization require container terminals which are specially built to handle them.
Where specialized means of transport like railways are available.
Where security of goods need to be guaranteed. Goods of very high value and those that are risky require high level of security which is guaranteed by containers.
Where skilled personnel are available. The handling of containers require specially trained workers to handle and manage them.

Explain circumstances under which containerization may be used to transport goods.

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Explain six factors that may hinder the development of a country.

17/12/2020

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Explain six factors that may hinder the development of a country.

Factors that may hinder the development of a country include:

Low demand for goods and services which discourages production activities hence interfering with development.
Inadequate capital which leads to low levels of development
Negative sociocultural practices which may hinder production and consumption of certain goods and services.
Inadequate foreign exchange which limits access to imports hence affecting production and consumption.
Limited entrepreneurial abilities resulting into inefficiency in production.
Poor management of resources arising from inadequate skills, corruption and poor governance which limit the extent of growth and development.
Poor nutrition and disease prevalence which renders some of the people unproductive as well as channeling much of the income into provision of health care instead of investment.
Use of inappropriate technology which compromises the quantity and quality of goods and services produced.

Explain six factors that may hinder the development of a country.

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Explain the following types of inflation:

17/12/2020

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Explain the following types of inflation:

(i) Demand-Pull inflation

Refers to a progressive increase in the general level of prices brought about by an expansion in demand. There is too much money chasing very few goods.

(ii) Cost-Push inflation

A progressive increase in the general price level brought about by a general increase in the cost of production.

(iii) Imported inflation

Refers to an increase in domestic prices resulting from importation of primary goods and inputs at higher prices.

(iv) Structural inflation

Refers to a persistent rise in prices resulting from failure of the economy to meet the general increase in demand.

(i) Demand-Pull inflation Refers to a progressive increase in the general level of prices brought about by an expansion in demand. There is too much money chasing very few goods. (ii) Cost-Push inflation A progressive increase in the general price level brought about by a general increase in the cost of production. (iii) Imported inflation Refers to an increase in domestic prices resulting from importation of primary goods and inputs at higher prices. (iv) Structural inflation Refers to a persistent rise in prices resulting from failure of the economy to meet the general increase in demand.

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The cost of consumer goods and services for a representative basket of an average family is given below.

17/12/2020

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The cost of consumer goods and services for a representative basket of an average family is given below.

Determine the increase in Consumer Price Index using 2006 as the base year.

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State four benefits that a trader may get by advertising products in a newspaper.

17/12/2020

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State four benefits that a trader may get by advertising products in a newspaper.

Benefits that accrue to a trader who advertises products in a newspaper include:

wide coverage - message can reach a lot of people
evidence of the message exists
graphical details can be included
a trader has a chance to compete with other traders
a trader has a chance of increasing sales.

State four benefits that a trader may get by advertising products in a newspaper.

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On 1st January 2007, Muthoni Traders Cash Book showed a credit balance of Ksh 150,000 at the bank and a debit balance of Ksh 25,250 in hand. During the month, the following transactions took place:

17/12/2020

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On 1st January 2007, Muthoni Traders Cash Book showed a credit balance of Ksh 150,000 at the bank and a debit balance of Ksh 25,250 in hand. During the month, the following transactions took place:

January 5: Made cash sales for Ksh 21,500
January 16: Received a cheque for Ksh 360,000 from a debtor.
January 28: Paid a creditor Ksh.100.000; partly by a cheque of Ksh 80,000 and the
balance in cash.

Prepare a Two-column Cash Book for the month. (5 marks)

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Outline four reasons why a firm may remain small.

17/12/2020

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Outline four reasons why a firm may remain small.

Reasons why a firm may remain small include:

Target market is small
Limited production capacity
Nature of the product
Owner’s decision to remain small
inadequate appropriate technology

Outline four reasons why a firm may remain small.

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Outline four circumstances in which a trader may use oral communication.

17/12/2020

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Outline four circumstances in which a trader may use oral communication.

Circumstances in which a trader may use oral communication include:

when there is need to negotiate a deal
when there is need to explain the use and features of a product
when there is need for immediate feedback
when there is need to give an immediate compliment
when selling over the counter

Outline four circumstances in which a trader may use oral communication.

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Outline four ways in which households contribute to national income of a country.

17/12/2020

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Outline four ways in which households contribute to national income of a country.

Ways in which households may contribute to national income of a country include:

consumption of goods
payment of taxes
provision of factors of production
provision of savings for investment

Outline four ways in which households contribute to national income of a country.

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The table given below represents the supply schedule of sukuma wiki (kales) for eight weeks in the months of January and February 2009.

17/12/2020

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The table given below represents the supply schedule of sukuma wiki (kales) for eight weeks in the months of January and February 2009.

Outline four causes of the trend in the table. (4 marks)

Causes of the declining supply of sukuma wiki include:

fall in the price of kales (sukurna wiki) may have discouraged producers (farmers) as they opt to produce other goods
there may have been an outbreak of diseases affecting the sukuma wiki
there may have been prolonged drought which affects the sukuma wiki
there may have been increased cost of farm inputs like fertilizer and seeds
the farmers could be using inappropriate technology to produce the sukuma wiki
this may just be the ploughing time and many farmers have not yet planted sukuma wiki

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State four benefits that a farmer may get by transporting produce to the market by road.

17/12/2020

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State four benefits that a farmer may get by transporting produce to the market by road.

Benefits that a farmer may get by transporting her produce to the market by road include:

Relatively flexible
Relatively cheap .
Relatively available
Relatively fast
Variety of means of road transport

State four benefits that a farmer may get by transporting produce to the market by road.

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The information given below was extracted from the books of Amina Traders on 31st December 2006.

17/12/2020

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The information given below was extracted from the books of Amina Traders on 31st December 2006.

Ksh

Purchases 260,000
Opening stock 75,000
Carriage on purchases 12500
Closing stock 27,500
Goods were sold at a mark-up of 25%.

Using the information given above, prepare Amina Traders’ Trading Account. (4 marks)

The information given below was extracted from the books of Amina Traders on 31st December 2006.

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The following balances were extracted from the books of Nafula Traders as at 31 December 2005.

17/12/2020

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The following balances were extracted from the books of Nafula Traders as at 31 December 2005.

Ksh
Current Liabilities 150,000
Net profit 50,000
Total assets 500,000
2 years Bank loan 100,000

Calculate the rate of return on capital. (4 marks)

The following balances were extracted from the books of Nafula Traders as at 31 December 2005

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On 2nd November 2006, Oromo received an invoice for Ksh 12,000. Terms of payment were trade discount 5% and cash discount 10%. if payment is made within 30 days. Determine the amount paid if payment was made on 28th November 2006.

17/12/2020

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On 2nd November 2006, Oromo received an invoice for Ksh 12,000. Terms of payment were trade discount 5% and cash discount 10%. if payment is made within 30 days.Determine the amount paid if payment was made on 28th November 2006.

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Give any four features of abounded warehouse

The following balances were extracted from the books of Rehema Traders on 1st January. 2007.

Discuss causes of unfavourable balance of payment for most developing countries,

Give reasons for maintaining books of original entry.

Amboseli Roses is a horticultural company producing flowers. Explain six factors that may influence the choice of a channel for distributing its products.

Discuss circumstances under which a partnership may be dissolved.

Explain benefits that may accrue to an organization that adopts an open office plan.

Describe features of economic resources.

Discuss factors that may be considered when choosing a method for promoting a product.

A farmer’s house valued at Ksh. 1,200,000 was insured against fire for Ksh. 900,000 under the “with average clause”. Fire occurred and damaged the house causing a loss of Ksh. 500,000. Determine the value of compensation due to the farmer..

Explain the procedure for making an insurance claim.

Explain circumstances under which containerization may be used to transport goods.

Explain six factors that may hinder the development of a country.

Explain the following types of inflation:

The cost of consumer goods and services for a representative basket of an average family is given below.

State four benefits that a trader may get by advertising products in a newspaper.

On 1st January 2007, Muthoni Traders Cash Book showed a credit balance of Ksh 150,000 at the bank and a debit balance of Ksh 25,250 in hand. During the month, the following transactions took place:

Outline four reasons why a firm may remain small.

Outline four circumstances in which a trader may use oral communication.

Outline four ways in which households contribute to national income of a country.

The table given below represents the supply schedule of sukuma wiki (kales) for eight weeks in the months of January and February 2009.

State four benefits that a farmer may get by transporting produce to the market by road.

The information given below was extracted from the books of Amina Traders on 31st December 2006.

The following balances were extracted from the books of Nafula Traders as at 31 December 2005.

On 2nd November 2006, Oromo received an invoice for Ksh 12,000. Terms of payment were trade discount 5% and cash discount 10%. if payment is made within 30 days.Determine the amount paid if payment was made on 28th November 2006.

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