1. (a) Explain five features of sole proprietorship form of business ( 10 mks)

(b) Explain five measures that the government may take to improve the volume of exports ( 10 mks)

2. (a) Explain five demerits that may be associated with water transport ( 10 mks)

(b) The trial balance of Zakayo Traders as at June 2008 is given below DR Cr Kshs Kshs Stock 76, 500 Creditors 450,400 Debtors 350,000 Bank 260,400 Fixed assets 970,200 Cash 120,500 Capital 1,300,000 Lighting due 27, 200 1., 777, 600 1, 777, 600 During the month, the following transactions took place 2008 . June 5 Paid a creditor Kshs 228,000 by cheque in full settlement of a debt after deducting 5% cash discount. 15 Withdrew Kshs 100,000 from bank for office use 28 Received Kshs 160, 000 cash from a debtor after allowing cash discount of Kshs 40, 000 Record the above transactions in the relevant ledger accounts and balance then off. ( 10 mks)

3. (a) The diagram below shows an oligopolist kinked demand curve DD and current price and quantity at P and Q respectively. .

(i) Name the curve represented by the gap WZ

(ii) State Why the curve WZ is vertical to price axis

(iii) Advice when the oligopolist can raise and lower the price of the commodity ( 10 mks)

(b) Explain five ways in which the government of Kenya may reduce the level of unemployment ( 10 mks)

4. (a) Using a diagram, explain the circular flow of income in a two sector economy .

(b) Analyze the following document issued by Sheikh Traders Sheikh Traders P.O Box 235Y Nairobi No. 4262 12 October 2008 Debit Kamau Limited P.O Box Y 125 MOLO Terms: 10 per cent one month on furniture only Quantity Rate Kshs Kshs Kshs . 60 4 50 4 Dinning tables mvuli 4,000 Beds 2,000 Coffee Tables 1,000 Less Trade discount 10% Floor carpets 2,500 Less Trade discount 10% Carriage E & O.E 240,000 8,000 50,000 298,000 29,800 10,000 1,000 Total 268,200 9,000 7,500 284,700 Required:

(i) Name the document above

(ii) Calculate the amount paid for the goods, if the debtor paid on 28th October 2008

(iii) Determine the net profit of the business if transaction

(ii) above was Kshs 120.400 and the debtor paid for the goods on 15th November 2008