1.a)Discuss five importances of entrepreneurship to an economy(10mks)

b)Explain five measures that the government may take to curb inflation.(10mks)

2.a)Discuss five problems linked to rapid population growth.(10mks)

b)Explain five factors that may hinder economic development.(10mks)

3.a)Explain the differences between non-banking financial institutions and commercial banks.(10mks)

b)Discuss five circumstances under which an insurance company would not compensate the insured in the event of loss.(10mks)

4.a)Highlight five situations where demand may increase with increase in commodity price.(10mks)

b)Give five reasons for differences in terms of trade between countries.(10mks)

5.a)Explain five benefits of localization of industries.(10mks)

b)Explain five reasons why consumers need protection against malpractices by some traders.(10mks)

6.a)Explain five ways in which the government can influence the price of a commodity.(10mks)

b)Oriabengi shop sells all its goods at a margin of 20%.For the year ended 30^th April 2006,its trading activities were as follows:

Purchases800,000

Sales950,000

Net profit 5% of sales

Closing Stock200,000

Calculate:-

(a)The gross profit

(b)Opening stock

(c)Mark-up percentage

(d)Net profit

1.a)Artur is an importer of an assortment of goods from different countries.

Explain five benefits he may enjoy while his goods are stored in a bonded warehouse.10mks

b)Explain five principles of taxation.10mks

2.a)Explain five reasons to justify the use of economic barriers to control free trade.

10mks

b)Explain five emerging trends related to product promotion.10mks

3.a)By use of a well labelled diagram, explain the case of a firm earning above normal

profitsin a perfectly competitive market structure.8mks

b)Explain six demerits of inflation to a developing country.12mks

4.a)Explain five ways in which the central bank of Kenya regulates the operationsofbanks

in Kenya.10mks

b)Explain five factors which are likely to influence the level of national income in Kenya.10mks

5.a)Explain four challenges facing the transport industry in Kenya today.8mks

b)Enter the following transactions in the purchases Journal of silver springs Agrovet and post to the ledger for the month of October 2004

October 1^st :Purchased a stock of 100 bags of Maclick at sh. 1200 per bag on credit from

Muraya Traders; Invoice no.100.

4^th :Purchased on credit from Unga feeds 50 bags of bran animal feed at sh. 2000

per bag; Invoice no 115.A trade discount of 15% was allowed.

11^th :Purchased 70 packets of Ridomil on credit from Alpha Ltd at sh. 300 per

packet.A trade discount of 10% was allowed; Invoice no.169.

24^th :Bought on credit 30 bags of layers marsh at sh. 4000 each from Chick point at

atrade discount of 20%; Invoice no. 132.12mks

6.a)The following trial balance was extracted from the books of Kitika traders as at 30/06/2005.

KITIKA TRADERS

TRIAL BALANCE

AS AT 30/06/2005

Sales

Purchases

Return inwards

Return outwards

Carriage inwards

Carriage outwards

Stock (1^st July, 2004)

Rent

Delivery van

Bank

Creditors

Debtors

Discount allowed

General expenses

capital

DR (SHS)

600,000

80,000

40,000

3,000

100,000

60,000

180,000

60,000

120,000

18,000

7,000

CR(SHS)

900,000

20,000

170,000

178,000

1,268,000

1,268,000

Additional information

(i) Stock on 30/06/05 was valued at shs 135,000

(ii) Outstanding Rent shs 7000

Required

Prepare the profit and loss account for the year ended 30/06/2005 and the balance sheet12mks

b)Perth a management consultancy firm has adviced Ponda Mali Company Ltd. to adopt a comprehensive code of conduct.Explain four significances of this on Ponda Mali Company Ltd.8mks