2. a) By the use of diagram, explain the effects of excess supply over demand on quantity demanded and supplied

(10marks)

b) The following balances relate to Brian traders as at 31st December 2013

Shs.

Salaries

70,000

Stock (1/1/2013)

30,000

Creditors

35,000

Capital

700,000

Purchases

150,000

Insurance

10,000

Electricity

40,000

Debtors

60,000

Sales

350,000

Stock (31/12/2013)

20,000

2 year bank loan

200,000

Returns inwards

15,000

Required:

(i) Prepare trading, profit and loss account for the year ending 31st December 2013

(5 Marks)

(ii) Calculate the following ratios

(a) Margin

(1 mark)

(b) Rate of stock turn over

(2 marks)

(c) Rate of return on capital

(2 marks)

3. a) The per capita income in country A is considerably higher than that in country B. Discuss Five reasons why the citizens of

country A may not necessarily enjoy higher standards of living than citizens of country B.

(10 Marks)

b) Explain five circumstances under which the nature of goods may influence the choice of appropriate means of transport

(10 marks)

4. a) Highlight five ways in which the Central Bank acts as a banker to the government

(10 marks)

b) Explain five characteristics of under development

(10 marks)

5. a) Highlight five reasons why Kenyan government encourages the development of small business enterprises (10Marks)

b) Explain five circumstances under which personal selling is appropriate

(10 marks)

6. a) Explain four services rendered by retailers to consumers

(8 marks)

b) On 1st July 2014 moshi traders had cash in hand Ksh.560,000 and a bank overdraft of Ksh. 175,000.

The following transactions took place during the month:

July 9:

Paid the following creditors by cheque after deducting 10% cash discount:

Betty Ksh. 140,000

Mary Ksh. 98,000

July 12:

Settled kithekas account Ksh.70, 000 by cheque after deducting 10% cash discount

July 16:

Received cheques from the following debtors after deducting 10% discount in each case:

Ali Ksh. 350,000

Hassan Ksh.105,000

July 23:

Received the following cheques from debtors after having deducted cash discount of 2%

In each case:

Joseph Ksh. 411,600

Daniel Ksh. 123,480

July 29:

Received the following amounts in cash from debtors having deducted cash discount of 2%

Josephine Ksh.82, 320

Fatuma Ksh.246, 960

Required:

Record the above transactions in a three column cash book and balance it off at the end of the month

1.a) Explain five reasons why motorcycles (Boda Boda) are becoming a common means of transport.b) Outline five disadvantages of specialization. 20 marks2.a) Discuss the importance of entrepreneurship to an economy.b) Given the following trial balance of Nungari Pamoja Enterprise, draw a balance sheet showing clearly.i. Capital owned.ii. Capital employed.iii. Working capital.iv. Borrowed capitalv. Fixed capitalAdditional informationClosing stock was valued at sh. 20,000 while net profit was valued at 100,000 20 marks3.a)i) Explain the procedure for making an insurance claim.ii) A farmer's house valued at Ksh.1,200,000 was insured against fire for ksh.900,000 under the "with average clause". Fire occurred and damaged the house causing a loss of Ksh.500,000.Determine the value of compensation due to the farmer.b) Describe five features of economic resources. 20 marks4.a) By use of a diagram, show the effect of an increase in demand on equilibrium price and quantity of a product.b) Explain five factors that may limit the operations of an open air market operator. 20 marks5.a) Outline five differences between a perfect competition market and an oligopoly market.b) Discuss measures the government may use to create enabling environment 20 marks6.a) Explain four reasons why personal selling is increasingly being used as a method of product promotion.b) The following balance sheet was extracted from the books of Kirui traders on 1st April 2014