1.(a) Describe five factors that determine price elasticity of demand.(10mks)

(b) A farmer in Kitale has maize to transport to Mombasa. He could either use road or railway transport. Explain to him five merits of using road instead of railway to transport the maize.

(10mks)

1. (a) From the balances extracted from Malimingi Traders books, you are required to prepare statement of affairs as at 31/12/2005.

1/1/200531/12/2005

KshKsh

Stock200,000250,000

Debtors40,00050,000

Premises60,00050,000

Creditors 70,00040,000

Motor vehicle400,000350,000

Net profit_______40,000

Drawings_______10,000

(8mks)

(b) Explain five factors that influence the level of the National Income of a country.(10mks)

3. (a) Explain five roles of the central Bank of Kenya to the country.(10mks)

(b) From the following account balances extracted from the books of Mwema Traders for the year ended 31^st Dec. 2005. Prepare trading and profit / loss accounts.

shs

Rates50,000

Water60,000

Wages80,000

Discount on debtors6,000

Stock 1/1/2005 800,000

Stock 31/12/200540,000

Purchases600,000

Carriage on purchases100,000

Sales during the year2,000,000

Return into the business2,000

Commission received4,000

Carriage outwards1,000

General expenses6,000

Repairs to vehicles20,000

Bank loan interest5,000

(10mks).

4. (a) Explain five circumstances under which an insurance contract may be terminated.(10mks)

(b) Explain five negative consequences of a rapidly increasing population.(10mks)

5. (a) With the aid of diagrams, explain the relationship betweenthe industry's equilibrium and a firm's equilibrium under perfect competition.(10mks)

(b) Highlight five points on the importance of a local purchase order.(10mks)

6. (a) Explain any five principles of government expenditures.(10mks)

(b) The following are transactions of Sukuma Week business for the month of June 2005.

June

1^st Purchased stock for sh. 84,000 in cash and was given 2% cash discount.

2^nd paid workers' wages by cheque shs. 20,000

3^rdSold goods worth sh. 240,000 and received cash after allowing 4% cash discount.

4^th Received sh. 400,000 by cheque from a debtor after 2% cash discount allowed.

5^th Bought office furniture for sh. 20,000 in cash.

6^th sold an old business van for sh. 320,000 receiving the money through the bank

7^th Purchased more stocks worth sh.20,000 by cheque.

8^th Withdrew sh. 40,000 from bank to cash till.

9^th Took sh. 80,000 to bank from the business.

10^th Took stock of goods worth sh. 2000 from the business for personal use.

11^th Paid electricity bill worth sh 3750,in cash sh. 2000 and the rest by cheque.

12^th Received a cheque from Mwendwa a debtor worth sh. 60,000 in settlement of his debt

of sh. 66000.

13^th Was given a loan of sh. 100,000 in cash from his bankers.

14^th Received payment from a debtor Poro sh. 46,000 by cheque.

15^th All the cash at bank was taken to the business for office use except sh. 50,000.

Required: Enter the above transactions in the two-column cash book.(10mks)

1.a)Discuss FIVE functions of the budget as a planning tool.10mks

b)Explain five adverse effects of a large population on the economic development of a

country.10mks

2.a)ExplainFIVE reasons for trade restrictions.10mks

b)Highlight FIVE differences between a private limited company and public corporation10mks

3.a)Explain FIVE uses of national income statistics.

b)Discuss FIVE advantages of mobile phones in communication10mks

4.a)Describe FIVE steps followed in personal selling.10mks

b)Explain FIVE contributions of appropriate technology to the success of business enterprise.10mks

5.a)Discuss FOUR types of marine Insurance.8mks

b)Enter the following information to the relevant books of original and post to the ledger

10mks

Feb 1Sales to Ng'eno goods worth shs.4500 invoice no. 458

Feb 4Sales to Njuguna goods worth shs.7,200 invoice no 213

Feb 12 Credit sales Ng'eno shs.8,000 invoice no. 469

Feb 17Invoice no.214 to P.K Ndoto shs.9,200

Feb 24Credit note no.102 from J. Ngeno shs.450

6.aExplain FIVE shortcomings of self employment8mks

b)from the following trial balance of Utumishi enterprises, draw up a trading, profit and loss for the year ended 31^st December, 2004

Utumishi

Trial balance

As at 31-12-2004 *NDI*

General expenses41,700

Opening stock28,000

Motor expenses51,450

Salaries249,200

Insurance27,440

Purchases1,286,950

Sales1,877,050

Motor vehicle196,000

Creditors361,200

Debtor286,300

Premises1,400,000

Cash at bank96,250

Cash in hand1,750

Capital1,704,290

Drawings304,500

3,942,5403,942,540

Stock on 31^st Dec. 2004 was valued at sh.40,000

1.(a) Explain six circumstances which may make an insurance company not to compensate the

Insured in the event of loss. (12mks)

(b)Explain four factors that influence the incidence of tax.(8mks)

2.(a)Explain five monetary instruments used by the government to reduce the supply of money in

an economy.(10mks)

(b) Explain five reasons why firms with popular products find it necessary to continually advertise

the same products. (10mks)

3.(a)The Kenya shilling has been depreciating in relation to the Sterling pound.

(i)Define the term depreciation.(2mks)

(ii)Explain four disadvantages of this process to Kenya's economy.(8mks)

(b) Explain five assumptions of monopolistic competition.(10mks)

4.(a)Discuss five causes of unemployment in Kenya.(10mks)

(b) Air transport is popular among businessmen even though it is expensive. Explain five reasons

why businessmen opt for air transport. (10mks)

5.(a)Explain five characteristics of under-development.(10mks)

(b) Explain five advantages that accrue to a country as a result of foreign firms locating their

enterprises in the country. (10mks)

6.The following information relates to Soittara Enterprises for the year ending 31^stDecember 2005.

Sh.

Gross profit 18000

Transport out 3000

Discount allowed 2000

Rent received 5000

Sundry expenses 3000

Salaries 5000

Insurance 2200

Required:

a)(i) Prepare the profit and loss account for Soittara Enterprises for the year ending 31^stDecember

2005.(5mks)

(ii)Give the importance of the profit and loss account.(5mks)

b)Discuss five problems encountered when computing the consumer price index of commodities.