Describe five forms of economic integration that countries may join to promote international trade. (10 marks)

25/11/2020

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Forms of economic integration that countries may join to promote international trade

Forms of economic integration that countries may join to promote international trade include:

Preferential Trade Area.
In this form of integration, trade barriers are reduced among the member nations while the barriers are applied at normal rates for trading activities with non-member nations.
Free trade area.
This is economic integration where all trade barriers are removed between the member countries while each country retains its own barriers towards non-members.
Customs union.
In this form of integration, tariffs and other trade barriers are removed between member countries while their trade policies are harmonized with regard to treatment of trade with the rest of the world.
Common market.
This integration goes beyond harmonizing trade policies and removal of trade barriers but also allows for free movement of labour and capital among member nations.
Economic union.
In this form of integration, member countries set up common institutions like central banks, adopt use of common currency (monetary system) and have common public services like railways network.
Duty-free zones.
Member countries allow importation of raw materials without charging duty. Exports from these zones to member countries also attract no excise duty.
Political union.
In this form of integration, several states form a central government through which, share a central bank, the defense and core ministries that run their affairs.

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Use the transactions given below to prepare Jawabu Traders two column cash book for the month of February 2015. (10 marks)

24/11/2020

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1st Feb.Had Sh 12,500 cash and a bank overdraft of Sh 5,000
2nd Feb.Used cash to pay for water bill Sh 800, electricity Sh 1,100 and wages Sh4,700.
3rd Feb.Received a cheque of Sh 18,900 from a debtor
5th Feb.Sold goods worth Sh 7,150 in cash.
7th Feb.Paid for goods bought for resale worth Sh 6,400 by cheque.
9th Feb.Received a cheque of Sh 13,000 from the co-operative society as earnings from dividends.
10th Feb.Withdrew Sh 2,500 from the bank for family use.
13th Feb.Received Sh 15,900 in cash from a debtor.
15th Feb.Deposited Sh9,500 from the office into the business bank account.
17th Feb. Paid a creditor by cheque Sh4,390.
27th Feb.Used all the money in the bank to purchase furniture leaving only a balance of Sh2,010.

Expected Response

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Explain five problems of using national income statistics to compare the living standards of citizens of Kenya and Tanzania. (10 marks)

24/11/2020

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Problems of using national income statistics to compare the living standards of citizens of Kenya and Tanzania

Problems of using national income statistics to compare the living standards of citizens of Kenya and Tanzania include:

The two countries may have used different currency values to calculate their national income hence different standards of measure.
One country could be having a large subsistence sector whose income may not have been included in the measure of their income.
The levels of income distribution in one country may be too skewed compared to the other which may have a fair income distribution.
The two countries may have different references and economic priorities.
The two countries could be different in terms of resource endowment hence different abilities to generate income.
The climatic conditions in the two countries may be different leading to difference in demand and production.
Production activities may affect the health of citizens in the two countries differently.
The political realities in the two countries could be different affecting their stability and the security of citizens.
The degree of accuracy of the national income statistics are also different in both countries.

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The following opening balances were extracted from the books of Mageta Traders on 1 July 2016:

24/11/2020

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The following transactions took place in the course of the month:

Paid a creditor Sh4,500 in cash.
Took Sh3,000 from the bank for family use.
Bought stock Sh 18,600 on credit.
Acquired a 10 year bank loan Sh 165,000 which was credited to the business bank account.
Purchased land worth Sh 82,000 paying by cheque.
Converted a family table worth Sh5,500 to business use.
Received Sh 7,300 in cash from debtor.

Required: Prepare Mageta Traders Balance Sheet at the end of July 2016 (10 marks)

Expected Response

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Explain five differences between an open office and an enclosed office. (10 marks)

24/11/2020

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Differences between an open office and an enclosed office

Differences between an open office and an enclosed office include:

Open Office

All staff work in one large room.
There is no confidentiality in consultations and discussions.
Senior staff sit together with the juniors hence no status conferred.
Office equipment and machines are easily shared and cannot be misused.
Disruptions and noise from colleagues is high due to overcrowding.
Has fewer partitions hence cheap to construct.
It is easy to supervise the staff since they are all in one room

Enclosed Office

Each staff is allocated a room from where they work.
Discussions and consultations are done in confidence.
Confers status on tap level staff as they are allocated own offices.
Office equipment and machines like telephones are easily misused since they are located in particular offices.
Little noise and disruption from colleagues since each staff work from own offices.
Has more partitions hence costly to construct.
It is difficult to supervise the staff since they are in different rooms.

Vertical Divider

Explain five differences between an open office and an enclosed office

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The demand for soft drinks has been on the increase. Explain five factors that may have contributed to this. (10 marks)

24/11/2020

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Factors that may have contributed to increase of soft drinks

Factors that may have contributed to increased demand for soft drinks include:

Favourable pricing.
The soft drinks are priced at a value that consumers can easily afford.
Increasing consumer incomes.
People are able to buy more of the products due to increased earnings.
High prices of substitutes.
Most of the products in the market that can serve as substitutes are highly priced hence not preferred by buyers.
Favourable tastes and preferences.
More consumers now like soft drinks as compared to other drinks.
Favourable government policies which keep the prices of soft drinks down/stable hence encouraging their consumption.
General increase in population.
With more people, more of the products are consumed.
Aggressive marketing/sales promotion.
More consumers are attracted to soft drinks due to intense advertising and other promotional strategies.
Equitable distribution of income among consumers.
Since many people have access to earning, they are able to buy more of the products.

The demand for soft drinks has been on the increase. Explain five factors that may have contributed to this

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Explain five types of direct taxes that the government may use to collect revenue from individuals and companies. (10 marks)

24/11/2020

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Types of direct taxes that the government may use to collect revenue from individuals and companies

Types of direct taxes that the government may use to collect revenue from individuals and companies include:

Personal Income Tax (P.A.Y.E.).
This is tax charged on an individual’s income which may be from salaries, wages and profits made from businesses. This tax is usually progressive in nature.
Corporation Tax.
This tax is usually charged on the profits made by companies and other incorporated business. It is a fixed percentage of the profits.
Capital Transfer Tax.
This tax is charged when there is change of ownership of capital investment from one person to another.
Stamp duty.
This tax is charged on the transfer of land or securities from one person to another.
Capital gains tax.
This tax is charged when an asset is sold at a price that is higher than its book value.
Estate (death) duty.
This tax is levied when property is transferred to an inheritor/ heir after the death of the original owner.
Wealth tax.
This tax is levied on personal wealth that goes beyond a certain limit. This wealth may include realizableassets like land, houses, accumulated profits and even savings.
Withholding tax.
This tax is levied on savings like pension dividends and any moneys held by individuals.

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Explain five demerits of using carts as a means of transport in towns. (10 marks)

24/11/2020

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Disadvantages of using carts as a means of transport in towns

Demerits of using carts as a means of transport in towns include:

Carts are prone to delays occasioned by their slow speed.
Movement of carts is affected by extreme weather conditions like rainfall.
They are unsuitable for transporting goods over long distances as people and animals get tired when pulling them
Carts offer little protection to goods against damage by elements of weather such as rain.
Goods transported by carts are susceptible to theft making it an unsuitable means of transporting valuable goods.
Carts cannot carry very heavy and bulky goods since their carrying capacity is limited.
Carts inconvenience motor vehicles and other road users since they are slower.
Carts may be a cause of accidents since those pulling them usually disregard traffic rules.

Explain five demerits of using carts as a means of transport in towns

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The following information was extracted from the books of Kisababu Traders on 31 December 2014:

24/11/2020

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The following information was extracted from the books of Kisababu Traders on 31 December 2014:

Required:

i. Prepare Kisababu Traders Trading Account for the period ending 31 December 2014. (5 marks)
ii. Work out Kisababu Traders percentage mark up.(2 marks)
iii. Calculate Kisababu Traders Rate of Stock Turnover.(3 marks)

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Explain five clauses that must be specified in the Memorandum of Association of a public limited company. (10 marks)

24/11/2020

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clauses that must be specified in the Memorandum of Association of a public limited company

Clauses that must be specified in the Memorandum of Association of a public limited company include:

The Name Clause.
This clause states the name of the company and ends with the word “limited”. This name must be unique to the company and not shared with any other.
The Objects Clause.
This clause states the objectives of the company and specifies what the company has powers to do.
The Situation Clause.
This clause states the physical location of the company’s registered office.
The Liability Clause.
This clause states the extent to which members are liable to the debts of the company. Shareholders and members have “limited liability”.
The Capital Clause.
This clause states the amount of capital that the company is authorized to raise, the capital structure, the composition and the values of the shares.
Association and Subscriptions Clause.
This clause contains a declaration by the original members who registered the company about their desire to form a company, their objectives, the number of shares they will own and their personal details.

Explain five clauses that must be specified in the Memorandum of Association of a public limited company

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Explain five factors that Chuma Steel Manufacturers may consider when choosing a channel for distributing their products. (10 marks)

24/11/2020

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Factors that Chuma Steel Manufacturers may consider when choosing a channel for distributing their products

Factors that Chuma steel manufacturers may consider when choosing a channel for distributing their products include:

The geographical spread of customers.
If the customers are spread over a wide area, then a longer channel would be preferable.
Durability of the steel products.
Since steel products are not easily spoilt, long channels can be used in their distribution.
Level of competition.
Shorter channels should be used if competition is so stiff.
Resources and size of the firm.
If the firm has limited resources and only serves a small market, then a shorter channel is ideal.
Government policy.
Chuma steel manufacturers must adhere to government regulation on the distribution of steel products.
Marketing risks.
Where marketing risks are higher, more middlemen should be involved to spread such risks.
Availability of intermediaries.
Chuma Steel Manufacturers can only use channels where intermediaries are available.
Pricing of the steel products.
Shorter channels will be preferred where the prices are to be kept low by avoiding the intermediaries.

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Explain five circumstances that may lead to the existence of a business opportunity to be exploited by the entrepreneur. (10 marks)

24/11/2020

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Circumstances that may lead to the existence of a business opportunity to be exploited by the entrepreneur

Circumstances that may lead to the existence of a business opportunity to be exploited by the entrepreneur include:

Lack of some products/services.
Customers may need some products/services which are not easily found in their area.
Higher prices of goods/services.
Existing market prices may be unnecessarily high hence offering them at relatively lower prices would create an opportunity.
Excess demand.
When the quantities of goods available in the market are not sufficient, an opportunity to supply more exist.
Low quality products.
When customers expect better quality products then, this presents an opportunity to offer them.
Sub-standard services.
An opportunity will exist where better services are offered in the distribution of goods.
Un-met sociocultural needs/conditions.
Goods and services should target the society’s existing attitudes, practices and beliefs which existing products may not be addressing.
Innovation.
Discovery of new technology which may lead to reduced costs of production and general efficiency presents an opportunity.

Innovation

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Highlight four ways in which the introduction of money helped eliminate problems faced in barter trade. (4 marks)

23/11/2020

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Ways in which the introduction of money helped eliminate problems faced in barter trade

Ways in which the introduction of money helped eliminate problems faced in the conduct of barter trade include:

Money eliminates the need for double coincidence of wants since it is a medium of exchange.
Stores the value of perishable goods by selling them and keeping the money for future use.
Ensures that commodities exchanged are of comparable value, by offering a standard measure of value.
Help in the exchange of indivisible commodities since it can be divided into smaller denominations without losing value..
Money provides a unit of account by which goods and services are valued unlike in barter trade.
Money is a standard for deferred payment whereas it was not possible to make payments in the future under the barter system.
Money enables the exchange of fixed property like land.

ways in which the introduction of money helped eliminate problems faced in barter trade

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Highlight four ways in which the technological environment may improve business performance.(4 marks)

23/11/2020

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Ways in which the technological environment may improve business performance

Ways in which the technological environment may improve business performance include:

Increased output/mass production.
Lower cost per unit of production.
Minimal incidences of fraud.
High quality products.
Improved business image/reputation.
Increased sales.
Better communication.
Wider market/globalization.
Faster conduct of business transactions.

Highlight four ways in which the technological environment may improve business performance

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Watamu Enterprises had the following assets and liabilities on 1st May 2014:

23/11/2020

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Watamu Enterprises had the following assets and liabilities on 1st May 2014:

Particulars, Sh
Equipment, 800,000
Capital, 1,200,000
Creditors, 100,000
Debtors, 200,000
Stock, 250,000
Cash at bank, 50,000

The following transactions took place on 2nd May 2014:

(i) Bought goods for re-sale Sh 150,000 on credit
(ii) A debtor paid Sh 100,000 by cheque
(iii) Sold the equipment for Sh900,000 cash

Required: Prepare Watamu Enterprises balance sheet after the above transactions. (5 marks)

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Outline four factors that would make two people taking the same type of life assurance policy with the same insurer to pay different amounts of premium. (4 marks)

23/11/2020

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Factors that would make two people taking the same type of life assurance policy with the same insurer to pay different amounts of premium

Factors that would make two people taking the same type of life assurance policy with the same insurer to pay different premiums include:

Differences in their ages.
Difference in their occupations and the risks they are exposed to.
Difference in their sum assured.
Difference in their places of residence.
Difference in their health status.
Deferring maturity period of their policies.

Outline four factors that would make two people taking the same type of life assurance policy with the same insurer to pay different amounts of premium

Related 'Insurance' Resources

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Highlight four external economies of scale that a firm may get when operating on a large scale.(4 marks)

23/11/2020

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External economies of scale that a firm may get when operating on a large scale

External economies of scale that a firm may get when operating on a large scale include:

Ready market from the surrounding industries.
Access to skilled labour force.
Enjoy improved infrastructure.
Easy disposal of wastes.
Readily available complementary services like banking, insurance and warehousing.
Improved security.
Government support/favourable policies.

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State four reasons for maintaining a cash book in a business enterprise. (4 marks)

23/11/2020

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Reasons for maintaining a cash book in a business enterprise

Reasons for maintaining a cash book in a business enterprise include:

To reduce the number of entries made into the general ledger.
To easily avail cash balances/show cash balances at a glance.
To enhance specialization in book keeping by allocating different ledgers to different workers.
To easily monitor the cash inflow and outflow.
To show the sources of funds into the business.
To show the expenditure in the business.

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Identify the types of ledger in which each of the following accounts would be found: (4 marks)

23/11/2020

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Identify the types of ledger in which each of the following accounts would be found: (4 marks)

Account, Type of ledger
a Otieno (buyer)
b Carriage outwards
c Mueni (supplier)
d Cash at bank

Types of ledgers into which the accounts would be found are:
(a) Debtors ledger/Sales ledger.
(b) Nominal ledger/General ledger.
(c) Creditors ledger/Purchases ledger.
(d) Cash book.

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State the line of communication involved in each of the following: (4 marks)

23/11/2020

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(a) The Manager of ABC Company Ltd talking to the Manager of XYZ Company Ltd.
(b) A secretary asking for time off from her boss.
(c) The Production Manager giving instructions to the Secretary of the Sales Manager.
(d) The Store Keeper giving explanations to the Chief Accountant.

The lines of communication are:

a) Horizontal communication
b) Upward vertical communication
c) Downward diagonal communication
d) Upward diagonal communication

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Outline four merits of indirect taxes.(4 marks)

23/11/2020

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Merits of indirect taxes

Merits of indirect taxes include:

Tax payment is voluntary.
It’s not easily evaded.
More revenue can be raised/covers a wide range of items.
It is convenient / paid in bits.
It’s easy to collect at the selling point.
It promotes equality/paid by everyone who purchases the goods.
It’s flexible.
Can be used selectively.

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The following information was extracted from the books of Leila Traders on 31st July 2016:

22/11/2020

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The following information was extracted from the books of Leila Traders on 31st July 2016:

Vertical Divider

Details, Sh
Capital, 90,000
Fixed Assets, 80,000
Cash in hand, 20,000
Current liabilities, 20,000
Stock, 20,000
Net profit, 15,000
Drawings, 5,000
Calculate:
(a) Capital owned
(b) Acid test ratio

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List four books of original entry that may be used to record transactions affecting stock.(4 marks)

22/11/2020

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Books of original entry that may be used to record transactions affecting stock

Books of original entry that may be used to record transactions affecting stock are:

Purchases journal.
Sales journal.
Sales returns journal/Returns inwards journal.
Purchases returns/Returns outwards journal.

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Apart from the forces of demand and supply, list four other ways in which the price of a product may be set. (4 marks)

22/11/2020

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Other ways in which the price of a product may be set

Other methods of determining the price of a product apart from the forces of demand and supply include:

Auction
Haggling (Bargaining)
Price legislation/price control
Price discrimination
Tendering
Retain price maintenance

Apart from the forces of demand and supply, list four other ways in which the price of a product may be set

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Outline four conditions under which a manufacturer would distribute his products through the wholesaler. (4 marks)

22/11/2020

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Conditions under which a manufacturer would distribute his products through the wholesaler

Conditions under which a manufacturer would distribute his products through a wholesaler include:

When it is the dictate of government policy.
When the manufacturer needs time to concentrate on production.
When he wants to avoid the high costs of distribution.
Where it is too expensive to distribute using the manufacture’s own outlet.
Where wholesalers prefer to market the product under their own brand names.
Where the manufacturer wants to avoid marketing risks like drop in prices.
When the wholesaler provides ready cash while purchasing in bulk.
Where the manufacturer needs to free storage space.

four conditions under which a manufacturer would distribute his products through the wholesaler

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<<Previous

Forms of economic integration that countries may join to promote international trade

Expected Response

Problems of using national income statistics to compare the living standards of citizens of Kenya and Tanzania

Expected Response

Differences between an open office and an enclosed office

Open Office

Enclosed Office

Factors that may have contributed to increase of soft drinks

Types of direct taxes that the government may use to collect revenue from individuals and companies

Disadvantages of using carts as a means of transport in towns

clauses that must be specified in the Memorandum of Association of a public limited company

Factors that Chuma Steel Manufacturers may consider when choosing a channel for distributing their products

Circumstances that may lead to the existence of a business opportunity to be exploited by the entrepreneur

Ways in which the introduction of money helped eliminate problems faced in barter trade

Ways in which the technological environment may improve business performance

Factors that would make two people taking the same type of life assurance policy with the same insurer to pay different amounts of premium

Related 'Insurance' Resources

External economies of scale that a firm may get when operating on a large scale

Reasons for maintaining a cash book in a business enterprise

Merits of indirect taxes

Books of original entry that may be used to record transactions affecting stock

Other ways in which the price of a product may be set

Conditions under which a manufacturer would distribute his products through the wholesaler

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