1. (a) Explain four negative effects of economic development (8mks)

(b) Outline six factors that influence decisions on what goods and services to produce

(12mks)

2. (a) Use the demand and supply schedule given below to draw a diagram showing the following

Demand and supply curves

Equilibrium quantity, equilibrium price and equilibrium point

Excess demand and excess supply

Price

Quantity demanded

Quantity supplied

(8mks)

(b) Explain six functions of micro finance institutions (12mks)

3. (a) Describe five features of perfect competition (10mks)

(b) Outline five factors that influence the level of national income (10mks)

4 (a) Explain five factors influencing the choice of distribution channel 10mks)

(b) The following transactions were carried out by Kiplangat traders during the month of July 2005.

July 1: Started a business with Shs. 10,000 in cash

2: Opened a bank account for the business by depositing Shs. 20,000 from personal savings

10: Bought goods worth Shs. 10,000 and paid by cheque

20: Sold goods worth Shs. 20,000 which were paid for in cash

26: Paid Shs. 5,000 as salary to a worker by cheque

27: Took Shs. 5,000 in cash for personal use

Enter the above transactions in their respective ledger accounts and balance them off

(10mks)

5. (a) Explain six measures to solve unemployment problems in Kenya (12mks)

(b) The following table shows relationship between output, total cost, marginal cost, the average fixed cost, average variable cost and total cost

Unit of output

Total fixed cost Shs.

Total variable cost Shs.

Total cost Shs.

Average fixed cost Shs.

Average variable cost Shs.

Marginal costs Shs.

0

100

0

-

-

-

0

1

100

110

(a)

(e)

(j)

-

2

100

260

(b)

(g)

(k)

(m)

3

100

380

(c)

(h)

(l)

(n)

4

100

460

(d)

(i)

(m)

(o)

6. Draw a similar table and use the information provided to complete it (8mks)

7. (a) Enter the following transactions in the petty cash book of Maendeleo stores for the month of July 2003 using the following analysis columns

8. Telephone and postage, office stationary, traveling expenses and office expenses. The business operates the petty cash book on an imprest system of 4000/= replenished on a weekly basis

July 1st-Received a cheque from the cashier to start the imprest

July 1st-Paid for taxi hire250/= and 130/= for office cleaning

July 2nd-Bought postage stamps for 210/= and a ball of string for use in the office 100/=

July 3rd-Postage of a parcel cost 100/= and paid a telephone bill 900/=

July 4th Purchased envelopes for 150/= and one ream of photocopying paper 500/=

July 5th-Paid for bus fare 500/= and made a telephone call costing 50/=

July 6th-purchased a window cleaning cream for 250/= paid bus fare 200/=

July 8th-Received a cheque to replenish the imprest

July 8th-Bought various office stationary for 400/=

July 9th-Purchased postage stamps for 210/= and paid 950/= telephone bill

July 10th-paid train fare 600/= and taxi fare 250/=

July 11th Paid for office cleaning 150/=

July 12th- Purchased two reams of writing paper 600/= and office dusters 300/=

July 14th - Obtained a cheque from the cashier to replenish the imprest

Required

9. Prepare the petty cash book for the two weeks 8mks)

The following trial balance relates to Leshao traders for the year ended 31st January 2005

PARTICULARS DR CR

Capital 110,000

Land and buildings 70,000

Machinery 21,600

Furniture 20,000

Debtors 78,000

Creditors 50,000

Opening stock 1,100

Bank 60,000

Cash 9,000

Sales 15,400

Sales returns 400

Purchases 8,000

Purchases returns 1,200

General expenses 1,200

Carriage inwards 400

Carriage outwards 900

Rent received 2,500

Commission received 1,000

Salaries and wages 6,000

Electricity 700

Insurance 1,500

Postage 300

Drawings 1000

Bank loan 100,000

Total 280,100 280,100

Note: Closing stock on 31st January 2005 was valued at Kshs. 2,500

Prepare

10. Trading, profit and loss account for the year ended 31st January 2005 (8mks)

Balance sheet as at 31st January 2005 (4mks)