Question

1. (a) Explain five features of sole proprietorship form of business ( 10 mks)

(b) Explain five measures that the government may take to improve the volume of exports ( 10 mks)

2. (a) Explain five demerits that may be associated with water transport ( 10 mks)

(b) The trial balance of Zakayo Traders as at June 2008 is given below DR Cr Kshs Kshs Stock 76, 500 Creditors 450,400 Debtors 350,000 Bank 260,400 Fixed assets 970,200 Cash 120,500 Capital 1,300,000 Lighting due 27, 200 1., 777, 600 1, 777, 600 During the month, the following transactions took place 2008 . June 5 Paid a creditor Kshs 228,000 by cheque in full settlement of a debt after deducting 5% cash discount. 15 Withdrew Kshs 100,000 from bank for office use 28 Received Kshs 160, 000 cash from a debtor after allowing cash discount of Kshs 40, 000

Record the above transactions in the relevant ledger accounts and balance then off. ( 10 mks)

3. (a) The diagram below shows an oligopolist kinked demand curve DD and current price and quantity at P and Q respectively. .

(i) Name the curve represented by the gap WZ

ii) State Why the curve WZ is vertical to price axis

(iii) Advice when the oligopolist can raise and lower the price of the commodity ( 10 mks) (b) Explain five ways in which the government of Kenya may reduce the level of unemployment ( 10 mks)

4. (a) Using a diagram, explain the circular flow of income in a two sector economy .

(b) Analyze the following document issued by Sheikh Traders Sheikh Traders P.O Box 235Y Nairobi No. 4262 12 October 2008 Debit Kamau Limited P.O Box Y 125 MOLO Terms: 10 per cent one month on furniture only Quantity Rate Kshs Kshs Kshs . 60 4 50 4 Dinning tables mvuli 4,000 Beds 2,000 Coffee Tables 1,000 Less Trade discount 10% Floor carpets 2,500 Less Trade discount 10% Carriage E & O.E 240,000 8,000 50,000 298,000 29,800 10,000 1,000 Total 268,200 9,000 7,500 284,700 Required:

i) Name the document above

(ii) Calculate the amount paid for the goods, if the debtor paid on 28th October 2008

(iii) Determine the net profit of the business if transaction

(iv) above was Kshs 120.400 and the debtor paid for the goods on 15th November 2008 ( 10 mks) .

5. (a) Explain four services that the central Bank of Kenya may offer as a Banker to commercial banks ( 8 mks) (b) Malamu Traders had the following balances s at 31 December 2008 Kshs Building 540,000 Bank Loan 472,500 Debtors 116,900 Creditors 227,000 Furniture 408, 170 Gross profit 520,600 Motor vehicle 900,000 Discount allowed 142,000 Lighting 25,200 Interest on loan 1,200 Closing stock 72,500 Rent received 120,000 Repairs on buildings 60,000 Repairs on furniture 72,030 Repairs on motor vehicles 300,000 . General expenses 102,100 Capital 1,400,000

Prepare: (a) Profit and loss account for the year ended 31 December 2008

b) Balance sheets as at 31 December 2008 ( 12 mks)

6. (a) The following table represents the price and quantity of a commodity Month Price Quantity January 80 2,000 February 40 5,000

(i) Plot the above information on a graph ( 5 mks)

(ii) Calculate the price elasticity of demand ( 5 mks)

(b) Lunga, a sole trader, does not keep a complete set of accounting records. Information extracted from the records are as follows 1 January 2007 31 December 2007 Kshs Kshs Stock 75,000 136,400 Pre- paid salaries - 8, 000 Creditors 142, 500 158,400 Debtors 120,000 335,000 . Furniture & Equipment 820,000 754,400 18% loan from bank 200,000 Cash summary for the year was as follows Cash Summary Kshs Kshs Balance b/d 460,800 Payment to creditors 660,500 Bad debts 16,000 Loan (31/12/2007 50,000 Receipts from debtors 750,000 Salaries 48,000 Purchases 135,400 Interest on loan 30,000 Balance c/d 302,900 1,226, 800 1,226,800 .

Additional information:

(i) Interest charged on debtors overdue accounts amounted to Kshs 2,000

(ii) Bad debts written off amounted to Kshs 4,200 Prepare trading, profit and loss account for the year ended 31 December 2007 (10 mks)