(a)Explain six circumstances which may make an insurance company not to compensate the Insured in the event of loss.

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

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

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

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

(i)Define the term depreciation.

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

(b) Explain five assumptions of monopolistic competition.

(a)Discuss five causes of unemployment in Kenya.

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

why businessmen opt for air transport.

(a)Explain five characteristics of under-development.

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

enterprises in the country.

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

Sh.

Gross profit18000

Transport out3000

Discount allowed2000

Rent received5000

Sundry expenses3000

Salaries5000

Insurance2200

Required:

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

2005.

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

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

1. a) Discuss FIVE reasons for the existence of small firms in an economy.

b) Discuss FIVE causes of inflation in a country.

2.a) Explain FIVE benefits that would accrue to a business person who transports goods by liners rather than tramp streamers.

b) Explain FIVE sources of finance open to Kenya government.

3. a) Highlight FIVE indicators used to evaluate a country's economic development. Prepare duly balanced three column cash book from the following information. Jan 1: Balance b/d cash shs.4,000 bank shs 27,000 " 4 Settled Olweny creditors account of shs. 8,000 by cheque having deducted 6% cash discount. " 8: Received shs. 6000 cash from Mutoma traders " 16: Deposited shs. 4,500 to the bank account " 24: Withdrew shs. 9,200 from the bank for private use. " 29: Received shs. 19,950 from Kawawa by a cheque after allowing 5% discount. " 31: Banked all the cash leaving only sh 1,500 in the office. 10mks 4. a) Explain FIVE methods of trade restriction. 10mks Highlight FIVE problems encountered when measuring the national income of country. 5. a) Discuss FIVE roles played by commercial banks in facilitating home trade.

The following information relates to the business of Omondi for the week ended 3oth May, 2004. 2004 May 25: Started business with shs.24,000 " 26: Bought goods for shs. 18,000 " 27: Cash sales shs. 18,900 " 28: Paid for rent sh. 150 cash " 29: Received cash shs. 5625 from sales " 30: Paid commission shs. 900 Required: Ledger accounts to record the transactions above. Trial balance as at 30th May, 2004.

6. a) Outline FIVE reasons why a business would like to operate its own warehouse.1.

a) Discuss FIVE reasons for the existence of small firms in an economy.

b) Discuss FIVE causes of inflation in a country. 10mks

2. a) Explain FIVE benefits that would accrue to a business person who transports goods by liners rather than tramp streamers. 10mks b)

Explain FIVE sources of finance open to Kenya government. 10mks

3. a) Highlight FIVE indicators used to evaluate a country's economic development. 10mks Prepare duly balanced three column cash book from the following information. Jan 1: Balance b/d cash shs.4,000 bank shs 27,000 " 4 Settled Olweny creditors account of shs. 8,000 by cheque having deducted 6% cash discount. " 8: Received shs. 6000 cash from Mutoma traders " 16: Deposited shs. 4,500 to the bank account " 24: Withdrew shs. 9,200 from the bank for private use. " 29: Received shs. 19,950 from Kawawa by a cheque after allowing 5% discount. " 31: Banked all the cash leaving only sh 1,500 in the office. 10mks 4. a) Explain FIVE methods of trade restriction. 10mks Highlight FIVE problems encountered when measuring the national income of a country. 10mks 5. a) Discuss FIVE roles played by commercial banks in facilitating home trade. 10mks The following information relates to the business of Omondi for the week ended 3oth May, 2004. 2004 May 25: Started business with shs.24,000 " 26: Bought goods for shs. 18,000 " 27: Cash sales shs. 18,900 " 28: Paid for rent sh. 150 cash " 29: Received cash shs. 5625 from sales " 30: Paid commission shs. 900 Required: Ledger accounts to record the transactions above. Trial balance as at 30th May, 2004. 10mks 6. a) Outline FIVE reasons why a business would like to operate its own warehouse.

b) The following Trial balance was extracted from the books of Likoni Traders on 31st December 2004. Likoni Traders Trial balance as at 31st December, 2004 Dr Cr Shs Shs Purchases 70,000 Capital 88,800 Returns inwards 1,500 General expenses 5,200 Cash in hand 2,500 Return outwards 2,400 Bank Overdraft 7,500 Salaries 14,000 Debtors 10,500 Creditors 8,500 Fixed Assets 82,000 Sales 95,000 Stock (1:04) 12,500 Bad debts 4,000 202,200 202,200 Additional information Closing stock was valued at shs. 6,500 Salary outstanding was shs. 2,800 Prepare Trading, profit and loss account for the period ended 31st December, 2004. 6mks Balance sheet as at 31st December 2004 4mks