FORM 1-4 TOPICAL REVISION

BUSINESS STUDIES
A Series of KCSE Prediction Questions right from
form 1 to form 4.

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 FORM 1 WORK
KCSE TOPICAL REVISION

CONTACT MR MACHUKI 0724333200/

0795491185/ 0768321553 FOR MARKING
SCHEMES

OR

SUBSCRIBE TO OUR WEBSITE

www.kenyaeducators.co.ke and get access
to the marking schemes and more other
resources.

Compiled and Distributed by Kenya Educators Consultancy, P.O.BOX 15400-00500, Nairobi.

Tel 0724333200 E-mail kenyaeducators@gmail.com. ORDER MARKING SCHEMES AT
www.kenyaeducators.co.ke or Contact 0724333200/0768321553/0795491185
01- INRODUCTION TO BUSINESS STUDIES
The topic entails;
Emphasis on the meaning and importance of Business studies to day-to-
day activities around school and society in general.

1. State four importance of business activities to an economy

02. -BUSINESS AND ITS ENVIRONMENT

The topic entails;

(i) Meaning and purpose of a business
(ii) Explain Business environment with clear distinction between internal and
external business environments.
(iii) Understanding of what makes up a healthy business environment.

1. Identify the importance of the following types of environment to a business.

i) Intermediaries
ii) Technological
iii) Demographic
iv) Competitors
2. State four environmental effects that may result from the depletion of Kenya’s forest

cover

3. Name the internal environments whose effects are described by the following

statements:

EFFECT INTERNAL
ENVIRONMENT
(a) Allows duties to be allocated to the right people thus resulting in
higher productivity
(b) Helps the business achieve its objectives e.g. higher production level
of goods and services
(c) Makes employees to acquire norms and code of conduct that is
acceptable to all

4. Outline four ways in which the government creates enabling environment for business

5. Mr. Mirugi has opened a retail outlet at Lukoye Trading centre. Advise him on four

ways of creating an enabling business environment for the prosperity of his business

6. Mention four benefits of recycling waste production

1
7. Outline four adverse effects of production activities on environment and community

health

8. Outline four elements that may comprise the internal environment of a business

9. The table below contains various categories of members of the society. In the spaces

provided indicate the activity of social responsibility that a firm should undertake to each

group

Category Activity of social responsibility

a) Employees
b) Customers
c) Community
d) Owners
10. Give four ways in which Arid lands can be made more productive in any given country

2
03. -SATISFACTION OF HUMAN WANTS
The topic entails:
• Meaning and characteristics of human wants with clear distinction
between wants.
• Discussion of the meaning and characteristics of economic resources.
• Clear distinction among wants should be emphasized.
• Define and explanation of the concepts of scarcity, choice and opportunity
cost.

1. State four factors that may limit an individual ability to satisfy his basic wants

2. Identify four sources of energy available in Kenya

3. Indicate whether the following resources are renewable or non-renewable

Resource Classification
1. Limestone
2. Natural rubber

3. Solar energy
4. Biogas
5. Rivers
6. Wildlife
7. Soda ash
8. Forest
4. Outline four benefits that accrue to a company by using a prize winning
competition to promote
its products

5. State four reasons why choice should be made in satisfying human wants

6. Outline four circumstances under which some human wants can fully be
satisfied
7. Highlight four reasons why human wants are not easily satisfied

8 State four characteristics of basic human wants

9. Classify the following items into either basic wants or secondary wants
 ITEM WANT
(a) Furniture
(b) Medical care
(c) Sausages
(d) shelter

10. Highlight four problems faced in the satisfaction of human wants

05. ENTREPRENEURSHIP
The topic entails:
• Understanding the meaning and importance of entrepreneurship.
• Discussing the characteristics a successful entrepreneurs must have.
• Discussing the factors that inhibit enterpreneual development.
• Discussing the possible causes of business.

1. What are the factors that have contributed to the growth of entrepreneurship in
Kenya.
2. Outline four reasons for establishment of a business enterprise

3. Enter the following transactions in the ledger accounts of Onyango Traders for
the month of
May, 2004

May 1: Started business with shs.150,000 cash

2: Bought goods on credit from Kamau for shs.40,000
4: Sold goods for cash shs.34,500
5: Returned some of the goods purchased from Kamau for Kshs.4,500

4. State four reasons to consider when evaluating a viable business opportunity

5 A surgeon set up a clinic in a distant rural centre. The business was closed
after six months.
Identify four possible causes for the failure

6. State four reasons why the government of Kenya is encouraging

entrepreneurial knowledge in
schools

Q. Identify four benefits of entrepreneurship to the developing economies such as

Kenya
05. ENTERPRENEURSHIP
1 The government of Kenya though the Ministry of Trade and Industry has
developed
policies to promote entrepreneurship. Explain five importance of such
initiative to the
economy of Kenya

2 Entrepreneurship is becoming the driving force behind most economies in the

world and
most governments support it. Explain why entrepreneurship is important to
these economies
3 Explain five factors that may hinder entrepreneurship development in Kenya

4 Discuss five causes of the persistent balance of payment disequilibrium in East

African
countries

5 Explain any five reasons why a new business may fail

04 – PRODUCTION
The topic entails:-
• Definition of production.
• Definition of utility and give the various types of utilities
• Identifying types and levels of production and stating the rewards.
• Differentiation between division of labour and specialization in
production process
• Discuss the concept of mobility and factors of production process
• Discuss the concept of mobility and factors that influence mobility of
factors of production.
• Attempt , classification and distinction between goods and services.

1. For each of the following production activities, indicate whether it is direct or

indirect type of
production

Activity Type of production

i) An individual washing his own clothes
ii) An individual supplying beef in an area
iii) An individual operating a food kiosk
iv) An individual producing maize for his family
consumption

2. Write in full the following abbreviations:

i) Franco
ii) O.N.
iii) C.W.O
iv) I.O.U
3. Explain the factors that have led to dominance of subsistence production
despite development
in technology in Kenya.

4. Identify the type of utility created in the following circumstances

Activity Utility
a) Carpentry
b) Selling bread to students
c) Warehousing of goods imported
d) Carriage of cargo to the market

5. Outline four ways in which the productivity of land can be improved

6. State four ways in which a society benefits from indirect production

7. Outline four disadvantages of division of labour and specialization

8. Distinguish between the following types of utilities:-

(a) Form utility

(b) Place utility
9. A worker has been working as a mechanic for two years. However, he thinks
of changing to
another occupation

10. List four features of land as a factor of production

11. Highlight four factors that could influence mobility of capital as a factor of
production
12 Highlight four types of utility and identify how each is created by production

13. Give four characteristics of indirect production

04 – PRODUCTION

1. Outline five differences between direct production and indirect production

07- THE OFFICE
The topic entails:
• The meaning and importance of an office.
• Discussion of functions of an office and how they influence business
activities.
• Discussion of various office layouts and circumstances under which each
is appropriate. The advantages and disadvantages of each layout should
be brought out.
• Identification of different equipments in an office and how they are used
to enhance the running of an enterprise.
• The advantages and disadvantages of each equipment is discussed.
• The role of a good filing system in an office for effective running of
business enterprises is discussed.
• The office staff is also discussed n terms f categories and essential
qualities the various office staff.
• Trends in office management is discussed especially the use of
information and communication technology.

1. Name four equipment that can be available in the accounts office

2. Identify four qualities of a personal secretary

3. Give four characteristics of a good memo

4. Outline four duties of a company secretary

5. Mwita has introduced computers in his business operations, outline four

benefits that he may
experience

6. Highlight four ways in which an open office lay-out can contribute to

efficiency in office
operations
7. State four reasons why an organization should keep stock records for its office
stationery
8. State four limitations of adoption of new technology by a business

9. Highlight four factors to be considered when selecting a method of re-

producing documents
10. State four factors to consider when choosing an office layout

11. Outline four modern trends in office management

12. Enumerate four demerits of an open plan office

07. -THE OFFICE

1 Explain five importance of filing documents in an organization

2 Explain five factors that an organization should consider when buying an

office
machine /equipment

3 Most companies have a closed office layout. Explain five problems that are
faced by
such companies

4 Discuss four benefits of using the electronic filing system in an organization

5 Explain five factors to be considered when buying office equipment and
machines
08 - HOME TRADE
The topic entails:-
• Explanation of the meaning of trade and importance of trade.
• An attempt of classification of trade and why its done.
• Discussion of type sand functions of various retailers and wholesalers.
• Meaning, importance, source, destination and functions of various
documents used in home trade are discussed.
• Meaning and main terms of payment used in home trade
• Meaning, various and merits and demerits of means of payment.

1. Write in full the following abbreviations:

i) Franco
ii) O.N.
iii) C.W.O
iv) I.O.U
2. Outline the difference between the following types of wholesalers:

i) Rack jobbers and drop shippers

ii) Specialized and generalized wholesalers.

3. State four circumstances under which a customer would prefer to be paid by a

banker’s cheque
4. Give four contents of a statement of account

5. State four limitation of hawking

6. State four disadvantages a person may experience when using credit cards

7. Name four commercial services which are useful to a manufacturer

8. Give four disadvantages of barter trade

9. Show how the following transactions may affect the items of balance sheet,
stating whether it is
an increase , decrease or no effect

Transaction Assets Capital Liabilities

 (a) Additional investment in cash
(b) Purchase of stock by credit
(c) Pre-paid loan in cash
(c) Took a loan to pay another loan

10. Identify the type of wholesaler described in each of the following cases in the
table below:
Description Type of
wholesaler
(a) They sell a wide range of goods within one line of products
(b) They stock their products in vehicles and move around selling to other traders
(c) They stock particular types of goods and sell to other specialized traders
(d) They operate on a self-service basis where other traders pick, pay and
transport goods on their own

11. Differentiate between the following documents used in home trade:

(a) Consignment note and delivery note

(b) Credit note and Debit note

12. A trader sold a bag of sugar at Kshs.4000. The buyer was allowed a trade
discount of 10%. If he
pays the debt in two weeks and cash discount of 3% if payment is made within
one month.
Calculate the amount the trader received if the buyer paid within 15days

13. In the spaces provided below, state the business document, to which each of
the following
statement relates

Statement Document
a) Gives a description of the goods and the prices at which the seller
can supply the goods to the buyer
b) Accompanies the goods and it contains the list of goods delivered
c) To inform the buyer that goods have been dispatched
d) To correct an under- charge
14. State four circumstances under which a proforma invoice can be used

15. State four benefits of selling goods on hire purchase terms

16. List four advantages of hire purchase to the buyer

17. List four essentials of a bill of exchange

18. State four factors that determine the period for which documents should be
stored
19. Identify four essentials of a valid bill of exchange

20. Mama Cindy purchased 100 packets of sweets worth kshs1625.if she was
allowed a 5%
quantity discount and 2 ½% cash discount, calculate the price she paid per
packets of sweets
 FORM 2 WORK
KCSE TOPICAL REVISION

CONTACT MR MACHUKI 0724333200/

0795491185/ 0768321553 FOR MARKING
SCHEMES

OR

SUBSCRIBE TO OUR WEBSITE

www.kenyaeducators.co.ke and get access
to the marking schemes and more other
resources.

Compiled and Distributed by Kenya Educators Consultancy, P.O.BOX 15400-00500, Nairobi.

Tel 0724333200 E-mail kenyaeducators@gmail.com. ORDER MARKING SCHEMES AT
www.kenyaeducators.co.ke or Contact 0724333200/0768321553/0795491185
09 - FORMS OF BUSINESS UNITS
The topic entails:
• The basis of classification of business units e.g. sole proprietorship.
• Classification of business units on the basis of meaning, features,
ownership, formation, sources of capital, merits and demerits,
circumstances under which each form will be dissolved.
• Trends in business ownership.

1. State four requirements necessary to secure a loan from the SACCO’s

2. Give four hitches faced by the government of Kenya in the endeavor to

privatize state
firms

3. Outline five benefits of becoming a member of a savings and credit

cooperative society
(SACCO)

4. In the spaces provided below, write the type of partner described by each of
the following
statements

(i) One who is below 18years of age

(ii) One who has unlimited liability
(iii) One who gets involved in the daily running of the business
(iv) One who allows his/her name to be used in the business
5. Otwoma intends to start a business. Give four reasons why it is advisable for
him to start a
retail business shop instead of buying shares in a public limited company

6. State four circumstances that may lead to the dissolution of a partnership

7. State four features of incorporated business units

8. List four documents that are required before a public limited company is
allowed to operate
in the country

9. List four documents that are required before a public limited company is
allowed to operate
in the country

10. Highlight four ways in which the running of public corporations is ineffective
in this country
11. You have been charged with a duty of preparing an article of Association for
your company;
state four items that you will include in your article of Association

12. Honey intends to join a consumer Co-operate society; Highlight four benefits
she would get by
being a member of the society

13. State four features of multinational corporation

14. State four type of partnership businesses

09. -FORMS OF BUSINESS UNITS

1 Explain five advantages that Melinda could derive by investing in shares of a
public limited
2 The following information was extracted from books of Chunga Traders for
the period ending
31/12/2000:- Fixed assets – 350,000
Drawings – 50,000
Creditors – 50,000
Cash – 60,000
Discount received 4,000
Rent – 12,000
Bank overdraft – 10,000
Debtors – 20,000
 Stock (31/12/2000)-30,000
Commission received – 6,000
Gross profit – 80,000
Electricity – 3,000
Stock (11/1/2000) – 50,000
Salaries – 20,000
Calculate:- (i) Working capital

(ii) Capital employed

3 Distinguish between a public corporation and a public ltd company

4 Describe the procedure that a shareholder would follow in selling share

through the stock
exchange.

5 Challenges faced by the savings and credit cooperative societies

6. The Kenya Government has been privatizing its parastatals to would be

investors. Explain any
five benefits of the privatization process to the government

7. Explain five differences between private limited companies and public limited
companies
8 Discuss five benefits that the Kenyan government may get by privatizing a
state corporation
9 Describe five circumstances under which limited liability companies may be
liquidated
10 Describe five distinctions between a public ltd company and public
corporation
11 Distinguish between a public limited company and a private limited company

12 Katwaa is a member of Bidii savings and credit Co-operative. (SACCO).

What benefits
does she enjoy for being a member of the SACCO
10. - GOVERNMENT AND BUSINESS
The topic entails:-
• Reasons to why the government involves in business and various ways
through which
• Merits and demerits of government in business activities
• Discussion of meaning of consumer protection, the rationale for it and
the various methods by which consumers may be protected.

1. State four reasons why the government issues licenses to businesses

2. State any four limitation of consumer initiated methods in compating

exploitation.
3. Highlight four services offered by the local authorities in Kenya

4. Outline four ways in which the government creates enabling environment for
business
5. Local leaders would like to see more business enterprises established within
Ugenya.
Outline four measures the government can take to encourage investments in
this region
6. Limitations of consumer initiated methods of consumer methods
7. State four reasons why some local authorities in Kenya find it difficult to
provide public utility
8. List four types of complaints that a consumer organization may receive from
consumer
9. State four reasons why some local authorities in Kenya find it difficult to
provide public utilities
10. State four ways in which the government is involved in business activities

10. - GOVERNMENT AND BUSSINESS

1. Explain four methods used by the government to protect consumers

2. Explain four methods used by the government to protect consumers

3. Name and explain four ways in which the government gets involved in
business
activities

4. Discuss five ways in which the Kenyan government can provide an enabling
business
environment to encourage the young upcoming entrepreneurs

5. Outline five ways in which the department of external trade promotes a

country’s external trade
11 - TRANSPORT
The topic entails:
• Definition/meaning and importance of transport
• Discussing the various essential elements of transport
• Differentiate between mode and means of transport
• Discussing the advantages and disadvantages of the various means of
transport
• Identifying factors considered in choice of an appropriate means of
transport and implication of each factor to business.
• Trends in transport in relation to business.

1. State four circumstances that make rail transport more desirable than road

2. Highlight four measures that the government can take to make road transport
in our
country to be more efficient

3. Marine transport is one of the important means of transport is Kenya. Give

four disadvantages
of this form of transport

4. Outline three features of tramps that distinguish them from other sea
transporters
6. Outline four factors that have limited adoption of containerization in Kenya

7. G4S Limited Company offer courier services to provide safe transportation

services.
Highlight four other services offered by G4S Limited

8. Outline four differences between liners and tramps as in sea transport

9. Bucket ltd is an international pharmaceutical company. Under what

circumstances can the firm
send its products to customers by air transport?
11. -TRANSPORT
1 Explain five benefits that will accrue to a country due to use of pipeline in
transporting
oil products

2 Highlight five circumstances under which a trader may choose to transport

goods by rail.
3 Discuss the factors that influence the choice of distribution channel

4 Kenya and Uganda are making efforts to improve their railway transport
system. What are
the benefits of this form of transport

5 Discuss the advantages of pipeline as a mode of transporting oil products

12 - COMMUNICATION
The topic entails;
- Meaning of communication
- Discussion of how communication contributes towards the success of
business.
- Distinguishing between form and means of communication
- Various means of communication and circumstances under which they
are used.
- Advantages and disadvantages of the various means.
- Discussion of factors that hinder effective communication.
- Discussion of factors to consider in choice of a means of communication.
- Identifying services that facilitate communication and circumstances
under which they are used.
- Identifying trends in communication e.g. cell phones, internet etc.

1. The following are special delivery services provided by the post office:-post
rest ante,
speed post, business reply service, express delivery. Match each
description with the term
a) The arrangements to deliver the mail starts at the sender’s post office
b) The arrangement to deliver the mail starts at the addressees post office
c) Services offered to travelers who wish to receive correspondence while
away from home
d) Service that relieves the customer of postage expenses
2. State four advantages of sending parcels using courier firms

3. Outline four reasons why communication may not be effective

4. State four essential components for communication to take place

5. List four forms of communication

6. State four circumstances under which verbal communication may be preferred

to written
communication in a business enterprise

7. State any four current trends in communication in Kenya today

PSE
 12. -COMMUNICATION
1. Explain five positive effects of introducing mobile phones in communication
industry in Kenya.

2. Explain any five benefits that may accrue to an organization that uses
effective communication

3. Outline five disadvantages of sirens as a form of communication that is

popular with ambulances and the police

4 Discuss five advantages of mobile phones in communication

5 Explain five factors which may hinder effective communication

PSE
13- WAREHOUSING
The topic entails;
- Meaning and importance of warehousing to business
- Outline the essentials of a good warehouse
- Distinction between the various types of \warehouses as well as the
advantages and disadvantages of each type of warehouse.

1. State four functions of warehousing

2. Under what circumstances can the location of a warehouse be seen to be

inappropriate
3. State four reasons why it is suitable to locate a bonded warehouse at the point
of entry of a
country

4. Outline four benefits of a bonded warehouse to the government

5. Outline four circumstances that would hinder a warehouse form functioning

effectively
6. State four reasons why goods may delay in a warehouse

7. State four functions of the purchases department of a ware house

8. State four advantages of warehousing to a retailer

13. -WAREHOUSING
1. Discuss five ways of improving the efficiency of a warehouse
Ness

14.- INSURANCE
The topic entails;
- Meaning, purposes and principals of insurance.
- Discussion of classes of insurance and the basis of the classification
- Distinction between Re-insurance and contribution and circumstances
under which each may be necessary.
- Explain the procedure for obtaining an insurance policy and claiming of
compensation.

1. Kazi moto insured a motor vehicle against fire with MotoMoto company by
paying
Kshs.300.000. later the car was destroyed at a garage and a compensation of
Kshs. 400,000
were paid. Using insurance terms, state what each of the following stand for ;

a) Kazi Moto
b) Fire
c) Kshs 300,000
d) Moto Moto Company
2. Give the significance of the following principles to both the insurer and
insured
i) Utmost good faith
ii) Indemnity.....
iii) Contribution
iv) Insurable interest..
3. The following are description of various insurance policies. Identify the name
of the policy
described by the statement:

Description Policy
1 Covers an organization against losses which
might arise as a result of debtors failure to
pay their debts
2 Covers for the loss of profit due to
interruption of business activities as a result
of fire
3 Covers employees who may suffer injuries
while on official duties
 4 Covers partial or total physical disability
caused to a person due to injury

4. State four reasons why few Kenyan take out life assurance policy

5. Define the following types of marine insurance losses:-

(a) Total constructive loss

(b) General average loss
6. State four conditions necessary for the operation of the principle of indemnity
in insurance
7. Highlight four characteristics of an insurable scheme

8. Outline four benefits of the “Pooling of risks” to an insurance company

9. Describe the procedure of acquiring an insurance policy

10. A private warehouse owner insured his warehouse valued at Kshs.400, 000 for
Kshs600, 000 against risk of fire. The warehouse was later destroyed
completely by fire including goods worth shs 100,000.
Required:

i) Determine the amount of compensation paid by the insurance company

ii) Give a reason for your answer in (i) above

14.- INSURANCE
1. Under what circumstances can an insurance company fail to compensate the
insured in the
event of occurrence of the insured risk?

2. Describe the procedure for taking up an insurance policy

3. Your father wants to insure his life with British American Insurance
Company. As a Business
Studies student, explain to him five benefits of life assurance

4. Explain five principles of insurance

15. - PRODUCT PROMOTION
The topic entails:
(i) Meaning and purpose of product promotion and its impact on the
business performance.
(ii) Discussion of the various methods of production with
characteristics of each method; advantages and disadvantages of
each method.
(iii) Discuss factors that influence choice of a product promotion
medium as well as advantages and disadvantages of each.
(iv) Discuss ethical issues in product promotion and how these issues
affect the business.
(v) Discuss the emerging issues and explain their impact on the
business.

1. Below are terms used in sales promotions:-

-Competitive advertising
-Product advertising
-Informative advertising
- Institutional advertising
-Primary demand advertising
Identify the most appropriate term described in each of the following case,

i) Aims at increasing the sales volume of the company’s entire range of

products
ii) Provides relevant information about producers products
iii) Seeks to popularize the business enterprise offering goods for sale
iv) Seeks to promote the sale of a new variety of a company’s creations

2. Outline four benefits that accrue to a company by using a prize winning

competition to promote
its products

3. Outline four steps involved in personal selling

4. State any three forms of after sales services offered to customers

5. State the functions of advertising agencies to the producers

6. Elgon industries a producer of sweets and chocolates wants to launch its
products in the
market. Outline four factors the firm should consider when choosing an
appropriate medium
for promotion

7. List four after sale services that a seller may offer to attract more buyers for
his products

15.- PRODUCT PROMOTION

1. Highlight five benefits that a firm gets from the use of customers care
services as part
of its operation

2. Highlight five circumstances under which persuasive advertising may be used

3. Explain five benefits that consumers are likely to enjoy from product
differentiation
4. Jogoo business enterprise has been using salesmen to market their products.
Highlight
five benefits of this strategy to the company

5. Explain five circumstances under which personal selling would be the most
appropriate
method of promoting a product

6. A manufacturer exhibited his goods in a local trade fair. However, his sales
didn’t increase
significantly thereafter. Outline five reasons that may have led to lack of
significant sales
increase
7. Highlight five sales promotional methods which may be used by traders to
increase their sales
8. Advertising in the newspapers is one way of promoting sales of goods.
Highlight five limitations of advertising goods in newspapers
 FORM 3 WORK
KCSE TOPICAL REVISION

CONTACT MR MACHUKI 0724333200/

0795491185/ 0768321553 FOR MARKING
SCHEMES

OR

SUBSCRIBE TO OUR WEBSITE

www.kenyaeducators.co.ke and get access
to the marking schemes and more other
resources.

Compiled and Distributed by Kenya Educators Consultancy, P.O.BOX 15400-00500, Nairobi.

Tel 0724333200 E-mail kenyaeducators@gmail.com. ORDER MARKING SCHEMES AT
www.kenyaeducators.co.ke or Contact 0724333200/0768321553/0795491185
16- DEMAND AND SUPPLY
The topic involves:-
- Definition of demand and discussing factors that influence the demand
for a product
- Identify various types of demand
- Discuss the concept of demand and demand curve and derive demand
curve form demand schedule.
- Explain clearly, movement along a demand curve and a shift in demand
curve.
- Define elasticity and categorize elasticity of demand and explain
importance of the concept.
- Define supply and discuss factors that influence the supply of goods and
services.
- Define supply schedule and curve; and derive supply curve from supply
schedule.
- Differentiate between shift and movement along a supply curve.
- Define elasticity of supply and their various categories.
- Meaning of equilibrium price, point and quantity.

1. Outline four factors that influence both demand and supply of a commodity

2. State four factors that may result into an increase in the supply of a product in
the market
3. State three circumstances under which a fall in the price of a commodity
would lead to a fall in
demand for a commodity

4. The following graph shows a shift in demand from D0D0 to D1D1

D0
D1

Price

D0
D1

Quantity
State four possible reasons for the above shift

PSE
5. The table below represents a farmer’s supply of cabbage in a local urban
centre
Year Quantity of cabbages (Kgs)
2001 20,000
2002 15,000
2003 10,000
Assuming the price remained constant state four reasons for the trends in the supply
of cabbages
6. Outline four circumstances that would cause a commodity to have inelastic
demand
7. State four causes of abnormal demand

8. Explain four circumstances under which the law of demand may be

undermined
9. The table below shows changes in price of a product X and the changes in
quantity demanded in Product X and product Y
Price of x Demand for x Demand for Y
140 20,000 15,000
150 16,000 19,000
Calculate the loss elasticity of demand of product Y

PSE
18 - PRODUCT MARKETS
The topic entails:-
- Meaning and types of product markets
- Show clearly price and output determination in all markets
- Discuss the causes of various types of market situations
- Discuss other methods of price determinations.

1. State four reasons why the government should control activities on monopoly

2. The following diagram shows how price and output is determined under
monopolistic competition

Name the curves:

3. The diagram below represents the short-run equilibrium of a firm in

monopolistic competition.
Label the curves and show the best output and price on the graph

4.
 State four circumstances under which the phenomenon exhibited above can be
experienced in a
market structure

5. State four sources of Monopoly power

6. The diagram below relate to a market structure

i) Name the market structure represented in the diagram shown above

ii) Name the curves marked

7. Give four reasons why market research is important to a trader

18.-PRODUCT MARKETS
1. Explain five characteristic of a monopolistic market.

2. By use of a diagram, explain how price and output are determined in a

collusive oligopoly
(centralized cartel) market situation
3. Highlight five differences between perfect competition and monopolistic
competition
4. Using a well labeled diagram, explain how a monopolist enjoy a supernormal
profit in
both short and long run

5. Highlight five distinctions between perfect competition and monopolistic

firms
6. a) With the aid of a diagram, explain how a firm under monopolistic
competition is at
equilibrium in the short run

b) With the aid of a diagram, explain the difference between perfect

competition and monopoly
revenue curves
 19. - CHAIN OF DISTRIBUTION
The topic entails:-
- Explain, the meaning of distribution; chain of distribution and channel of
distribution.
- Discuss the role of the intermediaries in the distribution of goods.
- Discuss the factors to be considered in choice of a distribution channel
and circumstances under which each channel will be preferable for
various types of products.

1. Identify the type of utility created in the following circumstances

Activity Utility
a) Carpentry
b) Selling bread to students
c) Warehousing of goods imported
d) Carriage of cargo to the market

2. State four roles played by intermediaries in the chain of distribution

3. Highlight four consequences of eliminating a wholesaler from a chain of

distribution
4. Outline four factors used to determine the distribution of Omo, as a common
household detergent
in Kenya
5. State four circumstances under which it would be advisable for a
manufacturer to sell directly
to consumers

6. Dady a traders at Kibigori trading centre wishes to import goods from Brand
kamp , a Germany
Describe four channels of distribution that Dady’s goods are likely to take to
reach his consumers
at Kibgori

7. Kenya co-operative creameries (KCC) sell its dairy products directly to

retailers. Highlight four
factors that were considered in the choice of this channel of Distribution

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19. CHAIN OF DISTRIBUTION
1. Explain five possible effects that would result if wholesalers were eliminated
from a
chain of distribution

2. Manufacturers distribute their products to the final consumers through various

channels.
3. Explain circumstances under which a producer would sell directly to retailers
4. Discuss the factors that influence the choice of distribution channel

5. Outline six circumstances under which a manufacturer may prefer to sell

goods
directly to consumers

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20. NATIONAL INCOME
The topic entails:-
- Meaning of national income as a measure o f money value of goods and
services resulting from productive activities of a country in any one year.
- Explain the circular flow of factors of production to business, and flow of
goods and services back to households; and payments made for them.
- Measurements and uses of national income. Mention the three
approaches and components of each.

1. Outline four reasons why an increase in per capita income may not necessarily
lead to a rise
in the standard of living of the citizens

2. State four factors that affect the circular flow of income in an economy

3. Identify four factors that may be contributing to income disparity between the
rich and poor
citizens in Kenya

4. Account for the difference between the gross National Income figures between
Kenya
and Uganda

5. Name three approaches for measuring national income

6. Highlight four problems associated with income approach

7. Highlight four problems associated with the output approach in computation

of National income
8. Highlight four uses of National Income statistics in any given country

9. Outline four circumstances under which per capita income would be a good
indicator
20. NATIONAL INCOME
1. Explain five uses of national income statistics to an economy

2. The gap between the rich and the poor is so wide In Kenya. Highlight five
factors that
contribute to this disparity in income distribution.

3. Explain five limitations of using per capita income as a measure of the

standard of living
in a country

4. Outline five problems that are encountered in measuring National income in

your country
5. (a) Explain five limitations of using per capita income to compare living
standards of people
in different Countries

(b) High national income may not necessarily mean better welfare for the
citizens of
that country. Explain five reasons to support this argument

7. a) A newly industrialized country with a population of 40 million people, had

its national
income estimates during the year 2009 as follows:

Value in Kshs (million)

Exports 250000
Consumption expenditure 624000
Investment 300000
Government spending 416000
Imports 210000
Depreciation 10000
Net indirect taxes 50000
Required:
 a) (i) Calculate the GNP per capital of the country

ii) Outline limitations of using GNP pr capita in measuring the standard

of living of accounts
b) Discuss five problems that are encountered in measuring National
income in your country.
21. POPULATION AND EMPLOYMENT
The topic entails:-
- Meaning and importance of population
- Explain the demographic concepts such as fertility and explain how they
influence business activities and the growth of the economy in general.
- Discussing implications of the number of people as well as the structure of
the population in a country and their implications on economic
development.
- Meaning of employment and unemployment and their implication to the
economy.
- Discussing the various types of unemployment and their specific causes.
- Solutions to the various types of unemployment problem in Kenya i.e.
control measures to unemployment

1. Explain the following terms as used in business

i) Census
ii) Unemployment
iii) Mortality...
iv) Optimum population.
2. Highlight four negative implications of a rapid population growth in
developing countries
3. State five causes of unemployment in Kenya

4. Highlight four challenges passed to a country by a rapidly growing population

5. The table below shows a change in population size in country X for a period
of four
years

Year Total population

(000 000)
2001 40
2002 26
2003 13
2004 9
6. Give four reasons to account for this trend

7. Give four advantages of high population growth rate

21. -POPULATION AND EMPLOYMENT
1. Explain five circumstances under which a high population growth may be
desirable.
2. Explain four shortcomings of self employment

3. Explain five implications of an ageing population in a country

4. Explain four steps that Kenya can take to solve her employment problems
24. THE LEDGER
The topic entails:
• Meaning and purpose of ledger
• Record information in relevant ledgers
• Explain the concept of double entry as the basis of making entries into the
ledger.
• Discussing the rule of recording transactions in various ledger accounts.
• Discussing procedure of balancing ledger accounts and explain the uses of
the various columns.
• Preparation of trial balance from the ledger account balance.
• Discuss purpose and limitations of a trial balance.
• Classify ledger accounts and discuss the various types.

1. Prepare Betty’s trial balance from the following information

Items ksh
Purchases 130,000
Capital 150,000
Sales 165,000
Debtors 45,000
Creditors 40,000
Motor vehicles 120,000
Stock 50,000
Cash at bank 10,000
2. Identify the situation in which the following types of ledgers are appropriate:

i) Creditors ledger
ii) Private ledgers
iii) Normal ledger

3. The following balances were extracted from the books of Nyatike Traders
Limited as at
31st January 2010 Kshs.
Discount allowed 5,000
Buildings 250,000
Return outwards 6,000
Purchases 74,000
Creditors 20,000
Drawings 16,000
Capital 319,000
Required: Prepare Nyatike Traders Ltd trial balance as at that date
]4. The following information relates to Kebirigo Traders as at 31st December,
2009
Kshs.
 Buildings 100,000
Debtors 54,000
Capital 136,000
Sales 85,000
Purchases 48,000
Stock 1 Jan.2009 25,400
Creditors 35,700
General expenses 31,800
Bank overdraft 2,500
Prepare a trial balance as at 31st December, 2009

5. The following trial balance was prepared by an incompetent book keeper thus
failed to
balance

Account Dr. Cr.

Fixed assets 250,000
Purchases 80,000
Sales 120,000
Debtors 22,000
Stock 60,000
Creditors 45,000
Capital 247,000
449,000 375,000

6. Outline four errors in a trial balance although present it would still balance

7. Given below is a list of subsidiary ledgers:

General ledger
Nominal ledger
Purchases ledger
Sales ledger
Cash book
Indicate in which ledger the following accounts should be recorded

8. Record the following transactions in the relevant ledger accounts for the
month of June, 2009
June 1: invested shs.100,000 cash in a retail business
June 2: Obtained a co-operative loan of Shs.20,000 cash
 June 3: bought furniture Shs. 70,000, paying Shs.40,000 cheque and the
balance in cash

Account Subsidiary ledger

a) Return inwards
b) Discounts received
c) Drawings
d) Juma a supplier
e) Ombichi a distributor
f) Bank

9. The following transaction took place in the business of Highlands Retail in the
month
of June 2008
1.6.2008-commenced business with Kshs. 120,000 in cash
4.6.2008-transferred kshs66, 000 from business till to the bank
13.6.2008-brought his private furniture worth kshs. 15,000 into the business
for business use
28.6.2008-borrowed a loan in cash kshs.40, 000

Required: Post the transactions into the relevant ledger account

24. -THE LEDGER

1. Mr. Omanda started a business in January 2000 with cash in hand 100,000.
The following
transactions took place during the year:-
January: Bought stock by cash Kshs.20,000
February: Sold goods on credit Kshs.30,000
March: Opened a bank account by banking cash Kshs.60,000
April: A debtor returned goods worth shs.5,000
May: Bought goods Kshs.70,000 on credit
June: The owner took cash Shs.10,000 to pay his children school fees
2. Record the following transactions in the relevant ledger accounts, balance the
account
and extract a trial balance

Date Transaction
 1/4/2007 Mary started business with shs.80,000 cash
2/4/2007 Bought stationery for shs.4,000 and paid in cash
3/4/2007 Opened a bank account and deposited shs.50,000 from
the cash till
4/420007 Bought motor vehicle worth shs.250,000 from Lucy
motors on credit
5/4/2007 Bought postage stamps for shs.60 in cash

3. The following information relates to Ndhiwa resort traders for the month of
November 2009:-
November, 1.started a business with shs 160,000 cash
2. Purchases shs.120,000
3. Made sales in cash shs.126,000
4. Paid for electricity shs.1000 in cash
5. Received rent of shs.37 500 in cash
6. Gave discount of shs.6,000 in cash
Required :- i) Post the above information in the relevant ledger accounts
and balance them off
ii) Extract a trial balance
25. CASH BOOK
The topic entails:
- Explaining meaning of cash book and the types of transactions recorded
in the cash book.
- Discussing the purpose of a cash book
- Types of cash book when used and format
- Explain the concept contra-entry.
- Preparation of the various types of cash books.

1. The following cash book relates to Baraka enterprises

Date Details Cash Bank Date Details Cash Bank

2004 2004
Jan 1 Bal. b/d 10,000 Jan Bal b/d 15,000
Jan 10 Sales 18,500 1 Bank 12,000
Jan 15 Cash 12,000 Jebet 6,000
Bal. c/d 3,000 Jan Bal. c/d 10,500
28,500 15,000 15 28,500 15,000

Jan
20

2. State the transactions that took place on the above cashbook on the following
dates
Jan 1
Jan 10
Jan 15
Jan 20
3. Identify four uses of the cash book.

4. The following transactions took place in the business of Kiprono during the
first week of Jan.
2003
Jan 1st Balance brought down
Cash = Kshs12,000.00
Bank= Kshs.35,000
Jan 2nd Sold an old piece of furniture for Kshs.8,000 cash
Jan 3rd Cash sales Kshs.10,000 paid directly to the bank
Jan 4th Purchased goods worth Kshs.20,000 , paid Kshs.5,000
cash and the balance
to be paid later
th
Jan 5 Kiprono took cash Kshs.1,500 for personal use
Jan 6th Bought goods worth Kshs.15,000 paying partly by cheque
Kshs.10,000 and

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 the balance in cash
Required: Prepare Kiprono’s two column cash book for the month of
January and balance it of
5. The following transactions relate to Kabela Traders for the month of Dec.
2004.
2nd Dec cash sales shs.30,000
8th Dec. Banked shs.15,000
10th Dec. withdrew shs.10,000 from bank for office use
Prepare a cash book

6. Ondiko Traders had Kshs. 100000 cash in hand and Kshs.243000 cash at bank
during the month
of March 2008. The following transactions took place in that month:
March 3 – paid rent Kshs.5000 cash
March 11- cash sales Kshs.14000
March 14-purchased equipment worth Kshs. 37000 paying by cheque
March 20- Deposited shs. 30000 into bank from cash till
March 31- Took Kshs. 10000 cash for personal use
Prepare Ondiko traders’ two- column cash book for March 2008

7. Record the following transactions in a double column cash book of JABER

traders and balance
it off as at 12th June 2009:-

June 1: Balances : Cash shs.5500

Bank shs.18000 (Cr)
June 3: Purchases shs.4500 was made being paid by cheque shs.4000,
balance later
June 7: Sold goods for cash shs.6000
June 12: took shs.7000 to bank
June 13: Credit purchases from Ombogo shs.3000
June 14: paid Alweny shs.1000 cash
8. State the meaning of the following terms as used in a cash book:
a) Contra- entry

b) Folio column

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9. The following information was obtained from Laban traders during the month
of February 2010
Feb. 4: goods returned by Otange traders amounted to kshs. 4 000, credit note
no.214
8: Akamba traders returned goods worth kshs. 15 000 and was issued
with credit note no.316
15: received goods worth ksh.6,000 from punch line traders. Credit note
510
28: goods returned by Viva traders’ kshs. 9 600. Credit note no. 440
Prepare the relevant journal for Laban traders

10. Omondi had the following transaction in the year ending 30th June 2008:-

Shs
st
Debtors as at 1 July 2007 113 000
Cash received from debtors in the year 651 500
Debtors as at 30th June 2008 138 500
Bad debts in the year 1 700
Discounts allowed in the year 2 600
Cash sales 800 000
Calculate the total sales for the year

11. Give three documents from which information entered in cash receipts and
cash payments
Journals may be obtained

12. The following information was available for the year 2009:-
2009 Accrued rent Prepaid rent
Jan 1 Shs.20,000 Shs.40,000
Dec 31 Shs.36,000 Shs.3400
Rent expense paid in the course of the year amounted to shs.121,200.
Prepare the rent account and show the amount charged to profit and loss
account

25. -CASH BOOK

1. On March 2007, Doris had cash in hand shs.87,000 and cash at bank
shs.25,000. During this
month, the following transactions took place:
March 2nd : Cash sales shs.60,000
3rd: Paid salaries shs.101,500 by cheque

PSE
 7th : Received a cheque of shs.76,000 from Henry after allowing a
cash discount of 5%
13th: Bought office furniture by cheque shs.86,000
17th: Settle marital account for shs.34,200 in cash having deducted
shs.8,000 cash discount
20th: Received a cheque for shs.165,000 in respect for cash sales
22nd: Paid wages shs.25,000 in cash
24th: Withdrew shs.32,000 for bank for office use
25th : Withdrew shs.4,000 cash for personal use
29th: Received shs.17,000 cash form Alvin in settlement of his account
less shs.1000
cash discount
st
31 : Deposited all the money into the bank except shs.24,600
Required: Prepare a three column cash book duly balanced

2. Enter the following transactions in the petty cash book of Makavale stores for
the month of
July 2009 using the following analysis columns: Telephone and postage;
office
stationery, traveling expenses and office expenses. The business operates the
petty cash book
on an imprest system of 4000/= replenished on weekly basis
July 1st – received a cheque from the cashier to start the imprest
1st – paid for taxi hire 250/= and 130/= for office cleaning
2nd – bought postage stamps for 210/= and a ball of string for use
in the office 100/=
3rd – postage of a parcel cost 100/= and paid a telephone bill
900/=
4th – purchased envelopes for 150/= and one ream of
photocopying paper 500/=
5th – paid for bus fare 500/= and made a telephone call costing
50/=
6th – purchased a window cleaning cream for 250/= and bus fare
200/=
8th – Received a cheque to replenish the imprest
8th – bought various office stationary for 400/=

PSE
 9th – purchased postage stamps for 210/= and paid 950/ telephone
bill
10th – paid train fare 600/= and taxi fare 250/=
11th – paid for office cleaning 150/=
12th – purchased two reams of writing paper 600/= and office
dusters 300/=
14th – obtained a cheque from the cashier to replenish the imprest
Required:. Prepare the petty cash book for the two weeks

3. Mumji Enterprises maintain a petty cash book on an imprest system with

weekly float of Kshs.40,000.
The following information relates to the week ended 7th June 2009:-
1st cash in hand was Ksh.7000
1st receives reimbursement from the chief cashier
1st paid wages Ksh.5500, bus fare Ksh.1250,Sugar sh.220 and stamps
shs.150
2nd Bought stationery Ksh.5000
3rd Paid postage shs.200
4th Bought tea leaves shs.80 and shs.2000 for type writer repair
5th Bought coffee shs.340 and milk shs.800
7th Bought a ribbon for type writer shs.500, stencils shs.350 and bus
fare shs.900
Required: - Prepare a petty cash book duly balanced on 7th June with the
following columns.
Traveling, Wages, Stationary, Postage, tea and miscellaneous

4. The following transactions relate to Furaha traders for the month of July,2008

July 1 : Balance brought down cash sh.16,250 and Bank Shs.19,847

July2 : Sold goods worth Shs.1,348 to Patel and received a calculator
in exchange
July 5 : Paid transport by cheque Shs.2,000
July 6 : Issued a cheque to Kerio Traders setting an invoice for
Shs.10,000 deducting 2%

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 cash discount
July 10: Transfer Shs.15 000 from cash till to bank
July 12: Sold goods for cash Shs.12,000 less 2% cash discount
July 13: Sold goods to Onyango on credit worth Shs.15, 000
July 14: The owner of the business withdrew Shs.3000 in cash to buy
a present for his
daughter
July 16 : Received a cheque from Kuria Shs.2,500 less 5 % cash
discount
July 22 : Bought furniture from Babu Traders on credit worth
Shs.16,500 and cash
discount of 10% if payment is made within 2 weeks
July 24: Withdrew cash from bank for office use Shs8,000
July 26: The owner brought into the business Shs.9,000 cash
July 27: Issued a cheque to Babu Traders for amount due
July 28: Sold goods to Kuria worth Shs.5,000 for Shs.3,800 and
received payment by
cheque
July 30: Banked all cash and remained with Shs.100 in the cash till
Required; Prepare Furaha Traders three column cash book for the month
of July, 2008
5. During the month of March 2010 the petty cashier of Nyangija distributors
made the following payment after receiving an imprest of shs12, 000 from the
general cashier.
March 3 traveling 3500
March 6 office expenses 1000
March 8 postage 1200
March 15 staff tea 800
March 19 stationery 2000
March 22 office expenses 800
March 24 staff tea 1000
March 26 sundry expenses 700
March 31 F. Benson a creditor 900

PSE
 Required : Using the analytical columns below prepare a petty cash book of
Nyangija distributors
 Traveling
 Office expenses
 Postage
 Stationery
 Staff tea
 Sundry expenses
 Ledger accounts

6. A petty cashier of Mugirango traders operates his petty cash book on an

imprest system
of sh. 2500. On I February 2009, he had cash in hand of Sh. 500 and was
reimbursed the
difference by the main cashier to restore his cash float. The following
transactions took
place during the same month of February 2009:
Feb 2nd paid taxi fare sh.150 and wages sh250
4th Bought five reams of paper for sh25 each and stamps for sh.30
7th Paid wages sh.250 and bought envelopes for sh.40
20th Bought tea for staff sh.70 and paid for water bills sh.56
28th Paid for electricity sh.80 and stamps sh.40
Required: Prepare a petty cash book using the following analysis columns;
• Wages
• Traveling
• Stationery
•Postage
• Miscellaneous

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 FORM 4 WORK
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26.- SOURCE DOCUMENTS AND BOOKS OF ORIGINAL ENTRY
The topic entails;
- Meaning of source documents; identify source documents and explain
how they are used in recording business transactions
- Meaning a book of original entry
- Discussing the various types of books of original entry
- The journal as the main book of original entry and how to record
information from source documents into relevant journals.
- Posting information from the journals to relevant accounts.

1. The following data was extracted from the books of Mwauri Traders:

31-12-2002 31-12-2003
Shs. Shs.
Salaries accrued 46 000
Salaries prepaid 150 000
For the year ended 31-12-2003, salaries paid amounted to sh.200 000.
Prepare the salaries account as at 31st Dec. 2003

2. State four conditions necessary for the operation of the principle of indemnity
in
Insurance

3. On 31st December,2009 details extracted from Khetia’s Ltd. showed

commission received for the
year as Kshs. 60,000. Commission received in advance by 1st January,2009
was Kshs.12,000. Whereas commission received in advance as at 31st
December, 2009 was Kshs. 24,000. Determine the commission income for
the year 2009 that is posted to the profit and loss account
4. State the journal that deals with each of the following types of transactions

TYPE OF TRANSACTION JOURNAL

i) Credit sales
ii) Return of goods by customers
iii) Return of goods to suppliers
iv) Cash cheques received
v) Credit purchases
vi) Sale of fixed assets on credit
vii) Purchase of a motor van on credit from general motors
viii) Correction of errors
5. From the following information prepare debtors control account for the year
 ended 31st Dec 2007
Shs
Debtors balance 1-1-07 11,000
Credit sales ?
Bad debts written off 5,000
Return inwards 1,600
Receipts from debtors 31,000
Dishonoured cheque 2,800
Discount allowed 3,400
Debtors balance 31-12-07 25,300

26. SOURCE DOCUMENTS AND BOOKS OF ORIGINAL ENTRY

1. Journalize the following transactions which took place in the business of W.
Wanjala during
the month of June 2009:-
June 1 Balance B/f from May 2009 were:-
Office furniture shs.50,000 and motor vehicle
shs.100,000
June 2 Purchased office furniture on credit for shs.65,000 from
Mwema furniture
June 10 Sold an old vehicle on credit to Omwami garage for
shs.200,000
June 25. Discovered that a motor vehicle that had been bought
on credit from Kanyere motor for Kshs.750,000, had
been recorded in purchases account
June 28 Sold an old computer to classic academy on credit for
ksh. 15,000
June 29 : Sold an old tractor whose book value is Kshs. 200,000
for Khs.250,000
to Goseta

2. Mr. Osodo, a sole trader in Mumias town does not keep complete set of
accounting
books. However, the following information was obtained from his general
operation book for
the year ending 31/12/209
 Shs.
Debtors balance on 1/1/2009 24000
Bad debts 2000
Creditors balance 1/1/2009 68000
Debtors balance on 31/12/2009 72000
Discount allowed 18000
Creditors balance on 31/12/2009 83600
Returns inwards 5600
Cash paid to creditors 590000
Returns outwards 10200
Cash received from debtors 298000
Discount disallowed 1000
Dishonored cheques 36000
Discount received 6000
Additional information
He also disclosed that he had paid cash purchases amounting to Shs.483400
and received cash sales of Shs.70000 for the year
Required; i) Prepare total debtors account and total creditors account

ii) Calculate total purchases and total sales for the year

3. On 1st June 2009, Nyamira Traders had cash in hand shs.87,000 and cash at bank
Shs.250,000.
During the month, the following transactions took place:-
2009 June 2:-Cash sales shs.50,000 issued Receipt No.063
3:- Paid salaries and wages shs.101,500 by cheque ; cheque no. 083
6:- Received a cheque for shs.76,800 from Kemunto, after allowing
her a cash discount
of 4% issued a receipt No. 064
12:- Settled Omwabo’s account of shs.40,000 in cash, having
deducted shs.800 cash
discount. Received recipt no. 0656
18:- Withdrew shs.30,000 from bank for office use
 21:- Received shs.16,500 cash from Manwari in settlement of his
account less shs.660
cash discount. Receipt No. 065
22: - Bought office furniture by cheque shs.85,000. Receipt No. 734
23:- Paid wages Shs.24,000 in cash receipt No. 801
28:- Withdrew shs.5000 cash for private use
30:- Received a cheque for shs.150,000 in respect of cash sales .
Receipt No. 066
Required: Prepare:- (i) A cash receipts journal

(ii) A cash payment journal

4. The following is a trial balance of JAO traders as at 31/12/2009

Dr Cr
(Shs) (Shs)
Capital 170000
Opening stock 60000
Equipment at cost 125000
Purchases 161000
Sales 208000
Discounts 2000 8000
Returns 27000 25000
Salaries 20000
Telephone charges 5000
Water bills 2100
Creditors 15100
Debtors 21000
Electricity expenses 2000
Insurance paid 1000
426000 426000
Additional information
i. Closing stock was valued at Shs.72000
ii.Telephone charges prepaid was Shs.1000 and outstanding water bills
was Shs.1300
iii.Depreciation on equipment is 10% p.a on cost
iv.Carriage inwards was Shs.11000 and carriage outwards Shs.10000
Prepare trading and profit loss account for the year ending 31/12/2009
5. During the month of March 2010 the petty cashier of Nyangija distributors
made the following payment after receiving an imprest of shs12, 000 from the
general cashier.

March 3 traveling 3500

March 6 office expenses 1000
March 8 postage 1200
March 15 staff tea 800
March 19 stationery 2000
March 22 office expenses 800
March 24 staff tea 1000
March 26 sundry expenses 700
March 31 F. Benson a creditor 900

Required: Using the analytical columns below prepare a petty cash book of
Nyangija distributors
o Traveling
o Office expenses
o Postage
o Stationery
o Staff tea
o Sundry expenses
o Ledger accounts

6. The following extracted from the books of Mogusii Ltd. 2005

March 1. Credit purchases from Obwocha Sit 1200
Agwata sh. 3,000 and Nyauamba sh.2,500
March 5 Credit sales to Okero Sit 2,000, Michieka sh.4,300 and
Omwenga sh. 1500
March 10 Credit purchases from Onyancha Sh.2700
Obwocha sh 6600 and Ombaki sh.3300
“ 20 Returned goods to Obwocha sh.250 and Onyancha 703
26 Credit sales to Bundi sh.850. Tendu sh.630 and Okero-sh.900
“ 30 GoodswereretumedbyBundish.I50andMichiekasitl30
Required: Enter the above transactions in their relevant day books
27.- FINANCIAL STATEMENTS
The topic entails:
- Explaining the meaning of a financial statement and identifying basic
financial statements and discuss purpose of each.
- Prepare basic financial statements as per the relevant formats.
- Discuss the various types of capitals and their implication on performance
of business
- Identify basic financial ratios and compute the various ratios form
financial statements
- Discussing the importance of each financial ratio.

1. The following information was extracted from the books of Klub traders
Kshs.
Opening stock 160,000
Closing stock 200,000
Purchases 1,800,000
Margin 20%
Calculate klubs sales

2. The following balances were extracted from the books of Masai retailers on
14th July 2000

Shs.
Opening stock 30 000
Purchases 800 000
Closing stock ?
Sales 1 000 000
Return inwards 20 000
Return outwards 15 000
Maasai retailers sell goods at a mark up of 20%
Prepare the trading account for the period ended 14th July 2000

3. The following account balances were obtained from Omenda traders on 31st
December 2002
Kshs.
Stock (1/1/2002) 120,000
Purchases 170,000
Return inwards 30,000
Stock (31/12/2002) 110,000
Sales 300,000
Calculate: (i) Margin
(ii) Rate of stock turn over
4. The following information relates to Kafupi business enterprise:-

Average stock Shs.120,000

Rate of stock turnover 3 times
Margin 25%
From the data above, determine;
(a) The cost of goods

(b) Gross profit

(c) Sales

5. The following information was extracted form the books of Bondo Traders as
at 31st Dec. 2004
Opening stock 2,500
Purchases 46,000
Closing stock 1,500
Mark up 20%
Prepare a trading account

6. Identify four methods that a government can use to finance a national budget
deficit
7. The information below relates to Half-Bilha Traders for the year ended 30th
September 2009;
Net sales 300,000
Cost of sales 150,000
Bad debts 30,000
Wages 25,000
Discount received 25,000
Rent 6,000
Carriage inwards 18,000
Carriage outwards 12,000
Prepare a profit and loss account for the business

8. The following information related to Virusi Trader for the year ended June
28th 2009
Shs
 Sales 5 400 000
Expenses 800 000
Mark up ration 2:3
Stock turnover ratio 6times
Required:-
Calculate: i) Gross profit
ii) Cost of sales
iii) Net profit
9. The following information relates to Mandu enterprises limited

Stock (1.1.2009) 40000

Stock (31.1.2009) 60000
Purchases 500000
Margin 20%
Prepare Mandu Enterprises Limited Trading account for the year ended 31st
December, 2009
10. The following balances were extracted from the books of Wanga traders as at
30th June,2009
Current assets 320000
Capital 525000
Net profit 95000
Creditors 88200
Accrued expenses 10800
Calculate: a) Working capital

b) Return on capital

11. The following relates to Atis traders

Stock (1-7-2007) shs. 22,000

Purchases 100,000
Mark –up 10%
Stock (30-6-2008) 26,000
Prepare her trading account

12. The following balances were extracted from the books of Shah Traders on 30th
June, 2010
Shs
Opening stock 65,000
Sales 280,000
 Purchases 190,000
Purchases returns 10,000
Sales returns 4,200
Closing stock was Kshs. 70,000 as at 30th June, 2010. Prepare the trading
account for the period
ended 30th June, 2010

13. The following balances were extracted from the books of Chombo wholesalers
for the year
ended 31st December, 2009
Kshs.
Sales 500,000
Purchases 320,000
Opening stock (1:1:2009) 80,000
Closing stock (31:12:2009) 40,000
Debtors 140,000
Creditors 90,000
Calculate;- a) Margin
b) Current ratio

c) Rate of Stock turnover

14. The following information was obtained from Maganda Enterprises for the
year ended
31st Dec 2003:-

Opening stock kshs. 40,000

Purchases kshs. 400,000
Gross profit kshs. 100,000
Goods were sold at a marked-up of 25%
Required;
Calculate: i) Sales for the year
ii) Rate of stock turn over

27. FINANCIAL STATEMENTS

1. The following information was extracted from Jaribu traders on 31st
December 2009
Stock turnover 5
Mark up 25%
Cost of sales 60,000
 Closing stock 8,000
Required: i) Net sales

ii) Average stock

iii) Opening stock
iv) Net
purchases
2. The following trial balance was extracted from Vumilia traders as 31st
December 2006
Dr
Cr
Capital
125,000
Purchases 45,000
Carriage on sales 2,000
Stock 25,000
Sales
120,000
Carriage on purchases 1,200
Insurance 5,900
Salaries 12,450
Discount allowed/ Discount received 3,400
1,950
Debtors/creditors 25,000
15,500
Bank 14,500
Machinery 128,000
262,450
262,450
Additional information:
-closing stock 25,000
-Outstanding salaries 450
-Insurance 900 has been paid in advance
-Depreciate machinery by 10% on cost
 Required: i) trading, profit and loss a/c
ii) Balance sheet

3. The following balance sheet was prepared by the accounts clerk of Mapato
traders:-

Mapato traders
Balance sheet
As at 31st dec 2009
Fixed assets
Land and building 300 000 capital 422 930
Furniture and fittings 51 500 +net profit 220 500
Machinery 140 000 643 430
Motor vehicle 190 000 -drawings 175 000
681 500 468 430
Current assets long term liabilities
Stock 124 500 mortgage loan 30
000
Debtors 103 650 bank loan 400
000
Cash at bank 54 850 430
000
Cash at hand 3650 current liabilities
286 650 creditors 99 730
968 150 968 150

Requirements:
Calculate the following
i) Working capital
ii) Return on capital
iii) Current ratio
iv)
Capital employed
v) Borrowed capital

4. The following information was extracted from books of Chunga Traders for
the period ending
 31/12/2000:-
Fixed assets – 350,000
Drawings – 50,000
Creditors – 50,000
Cash – 60,000
Discount received 4,000
Rent – 12,000
Bank overdraft – 10,000
Debtors – 20,000
Stock (31/12/2000)-30,000
Commission received – 6,000
Gross profit – 80,000
Electricity – 3,000
Stock (11/1/2000) – 50,000
Salaries – 20,000

(a) Prepare:- (i) Their profit & loss account

5. The following graph shows a shift in demand from D0D0 to D1D1

(i) State four possible reasons for the above shift

(ii) Their balance sheet

5. The following balances were extracted from the books of Nyamaiya Traders
on
31st May 2009:-
shs.
Gross profit 400,000
Equipment 900,000
 Furniture 500,000
Provision for depreciation on furniture 65,000
Power & lighting 24,000
Commission received 170,000
Stock (31.05.09) 35,000
General expenses 240,00
Debtors 350,000
Provision for bad debts 3,000
Creditors 550,000
Discounts allowed 29,000
Discounts received 40,000
Cash in hand 150,000

Additional information
(i) Depreciation to be provided as follows: – Equipment 20% on cost
– Furniture 10% on book value
(ii) Adjust provision for bad debts to shs.3500
(iii) Commission received in advance amounted to shs.10,000

Required: Prepare:- (i) Profit and loss account for the year ended 31st
May 2009 (ii) Balance sheet as at 31st
May 2009

6. The following trial balance was extracted from the books of Fula Traders on
Dec. 31, 2005

FULA TRADERS
TRIAL BALANCE
AS AT DEC. 31, 2005
Dr. Cr.
Shs. Shs.
Sales 600,000
General expenses 60,000
 Rent expenses 10,000
Commission received 20,000
Motor vehicle 600,000
Furniture 240,000
Cash 50,000
Creditors 180,000
Debtors 120,000
Purchase 400,000
Sales returns 20,000
capital 700,000

1,500,000
1500,000

Additional information
I. Stock at Dec. 31, 2005 was valued at shs.60,000
II. Depreciation to be provided as follows:
(a) Motor vehicle 20% per annum on cost
(b) Furniture 10% per annum on cost
Required:-
(i) Trading profit and loss account for the year ended Dec. 31, 2005

(ii) Balance sheet as at Dec. 31, 2005

7. The following information relates to Joy Traders for the year ended Dec. 31,
2006
Turnover 270,000
Margin 40,000
Rate of stock turnover 6times
Expense 40,000

Calculate: (i) Gross profit

(ii) Cost of sales
 (iii) Net
profit
(iv) Average stock
(v) Mark –up

8. The following information relates to Kipgaa traders for the year 2006:-
Kshs.
Turnover 270,000
Margin 40%
Rate of turnover 6 times
Expenses 40,000
From the information given above,
Calculate: (i) Gross profit

(ii) Cost of goods sold

(iii) Average stock

9. (a) Two firms X and Y engage in similar lines of business had the following
records in 2009;
Firm X Firm Y
Average stock at cost shs.8,000 shs.7000
Rate of stock turnover 6.4times 6.5times
Average mark-up 20% 20%
Expenses shs.5,632 shs.4,186
Capital shs.30,720 shs.24,570

(a) For each firm, calculate: (i) The cost of sales

(ii) Gross profit

(iii) Rate of return on capital

(b) Giving a reason, state the firm which is better
10. The following information relates to Ladopharma Chemist as at 30th
November 2008
Dr (shs)
Cr (shs)
Stock (30th Nov 2007) 23 910
Capital 30
955
Drawings 8 420
Bank 3 115
Cash 295
Debtors 12 300
Creditors 9
370
Motor vehicles 4 100
Equipment 6 250
Sales 130
900
Purchases 92 100
Returns inwards 550
Carriage inwards 215
Return outwards
307
Carriage outwards 309
Motor expenses 1 630
Rent 2 970
Telephone charges 405
Wages 12 810
Insurance 492
Office expenses 1 377
Sundry expenses 284
171 532
171,532
Stock as at 30th November 2008 was shs 27 475
 Required: prepare
i) The trading, profit and loss account

ii) A balance sheet as at 30th November 2008

11. The following is a trial balance of JAO traders as at 31/12/2009

Dr Cr
(Shs)
(Shs)
Capital
170000
Opening stock 60000
Equipment at cost 125000
Purchases 161000
Sales 208000
Discounts 2000
8000
Returns 27000
25000
Salaries 20000
Telephone charges 5000
Water bills 2100
Creditors
15100
Debtors 21000
Electricity expenses 2000
Insurance paid 1000
426000
426000
Additional information
(i) Closing stock was valued at Shs.72000
(ii) Telephone charges prepaid was Shs.1000 and outstanding water
bills was Shs.1300
(iii) Depreciation on equipment is 10% p.a on cost
(iv) Carriage inwards was Shs.11000 and carriage outwards
Shs.10000
Prepare trading and profit loss account for the year ending 31/12/2009
12. The following trial balance relates to Jakobura Stores

DR
CR
Gross profit
85,000
Debtors 95,500
Motor vehicle 150,000
Furniture 30,000
Bank 62,000
Stock 52,500
Provision for depreciation on
Motor vehicle
16,000
Provision of depreciation on
Furniture
2,620
Salaries 64,000
Building 180, 000
General expenses 45,200
Creditors
75,000
Commission received
42,800
Equipment 55,200
Electricity 15,420
Capital
528,400
749,820
749,820

Additional information
(i) Profit margin was 20%
(ii) Stock as at 1st January was valued at Ksh. 48,000
(iii) Depreciation was provided as follows:
(a) Motor vehicle 25% p.a on cost
(b) Furniture 7% p.a on cost
(iv) On 31st Dec 2006, equipment was valued at Ksh. 48,576 and
general expenses
outstanding were Ksh. 1,200
 (v) A bill of Khs.340 which was paid for a private residence was
included in the electricity
account .
Required:-. Prepare a trading profit and loss account for the year ended
31st Dec 2006

13. The following information relates to Odongo Traders for the year ended
31.Dec. 2008.
Land shs.50,000
Capital shs.94,000
Machinery shs.20,000
Motor vehicles shs.30,000
10 year bank loan shs.20,000
5 year AFC loan shs.10,000
Stock shs.10,000
Debtors shs.6,000
Creditors shs.6,000
Accrued expenses shs.2,000
Cash at bank shs.10,000
Cash in hand shs.2,000
Drawings shs.4,000

Required:
i) A balance sheet as at 31st Dec. 2008
ii) Calculate -borrowed capital
-current ratio
-capital owned
14. Prepare a trading and profit and loss account for the year ended 30th June 2008
and a balance
sheet as at date from the following trial balance;

Bosongo wholesalers
Trial balance as at 30th June 2008
Stock on 30/6/2007 400 13,870
Capital and drawings 600 7,000
Purchases and sales 3,500
Furniture and fittings 2,000
Motor vehicles 15,000
Debtors and creditors 800 1,200
Returns 150 200
Discounts 90 80
Rent 100
Insurance 210
Bank 300
22,750 22,750

Closing stock shs. 5.00

29 - MONEY AND BANKING
The topic entails:
(i) Explanation of meaning of barter and highlight its major limitations
in facilitating trade.
(ii) Explaining the meaning of money and its characteristics
(iii) Discussing function of money and how each of the characteristics of
money facilitate these functions.
(iv) Discuss the factors that influence the demand and supply of money.
(v) Meaning of banking and discuss the role of banking in an economy.
(vi) Discuss the development of banking
(vii) Discuss the various types of accounts offered by commercial banks
(viii) Discuss the functions of non-bank financial institutions bringing out
the differences between commercial banks and non-bank financial
institutions.
(ix) Discuss the role played by the central ban in an economy
(x) Identify trends in banking.

1. Give four circumstances under which a trader would operate a fixed deposit
account
2. Give any four functions of money

3. Highlight four reasons why loans advanced by commercial banks in Kenya

may not appeal to many people

4. Give four disadvantages of barter trade

5. Identify the motive of holding money in each of the circumstances below:-

(a) Need to hold money to cater for future unforeseen eventualities

(b) Need to have money to cater for daily expenses
(c) Need to have money with hope that prices will fall in future in order to
purchase more
6. Identify four roles of the Central Bank as a government banker

7. E-banking is a method of banking through electronic systems. Give four

reasons to account
for the rising popularity of this banking system
8. Mention four ways in which individuals can hold money

9. State three motives of holding money

10. Outline four differences between commercial banks and non- bank financial
institutions
11. Identify four roles played by the international monetary fund in international
trade

29. MONEY AND BANKING

1. Explain five characteristic of a monopolistic market.

2. Highlight any five modern trends in the Banking industry in Kenya

3. Explain five ways in which commercial banks have enhanced the development
of business
activities in the country

4. Explain five ways through which the central bank of Kenya can expand the
supply of
money in an economy

5. Explain five methods of payments offered by commercial Banks in Kenya

6. Explain five factors that can lead to a cheque being dishonoured

7. Explain four emerging trends in the banking system

8. Banking has played a major role in Kenyan’s economic development. Explain

five
current trends in banking sector
30. - PUBLIC FINANCE
The topic entails:
- The meaning of public finance and the purpose
- Identifying various sources of public finance.
- Categorizing public/government expenditure and explain various ways
the government uses public finances and their influence on business
activities in an economy.
- Discuss taxation and its contribution to public finance
- Discuss the purpose and principles of taxation laying emphasis on
characteristics of a good tax system.
- Classify taxes and outline the merit and demerits of each.
- Meaning of the budget and discuss the role of a budget as a tool for
planning.

1. Outline four short comings of a country borrowing heavily from internal and
external sources
2. Mention four cannons of taxation

3. State four reasons why government levy taxes

4. Identify four methods that a government can use to finance a national budget
deficit
5. Match the following types of taxes with the appropriate description given
below:-
Corporate tax, Customs duty, Estate duty, Excise duty
Tax Description
(a) Is a tax levied on manufactured goods
(b) Is a tax levied on wealth of a person after
his death
(c) Is a tax levied on entry of goods into a
country
(d) Is a tax levied on profits of business
enterprises

6. Highlight any four features of a good tax system

7. Outline five principles of taxation

8. Differentiate between progressive and regressive taxation giving an example

of each
9. Highlight four advantages of direct tax

10. Highlight four sources of revenue to the local authorities

30. PUBLIC FINANCE

1. Discuss five principles of taxation

2. Outline five sources of non- tax public revenue

3. Explain five principles of public expenditure

4. Highlight five reasons for imposition of tax by the government

5. Discuss five characteristics of a good tax system

6. Outline five reasons why the Kenya government must impose tax.
31. -INFLATION
The topic entails:
- Explaining the meaning of inflation bringing out clearly how that affects
the economy.
- Computation of the price index
- Discussing different types of inflation and how they may occur in real life
situation and their consequences to an economy.
- Discuss the levels of inflation
- Discussing how to control the various types of inflation and how the
government controls inflation rates so as to provided conducive
environment for business to perform and contribute to the general growth
and development of the economy.

1. A country’s domestic currency has been depreciating over time highlight five
disadvantages
of this to the country

2. State four negative effect of inflation to a country

3. State any four causes of demand-pull inflation

4. State four non-monetary methods of controlling inflation in a country

5. Mention four desirable effects if inflation

6. Highlight four negative effects of inflation in Kenya

7. Highlight four negative effects of inflation in Kenya

31. INFLATION
1. Explain five negative effects of inflation to an economy

2. Explain five positive inflation effects of inflation to the economy.

3. Explain five causes of inflation in an economy

4. Write short notes on the following strains of inflation;

i) Mild inflation

ii) Hyper inflation

iii) Demand-pull inflation

iv) Cost push inflation

v) Imported inflation
32. - INTERNATIONAL TRADE
The topic entails:
- Meaning and importance of international trade
- Clear distinction between balance of trade, and balance of payment.
- Computation of balance of trade.
- Accounting for the differences in terms of trade of various countries
- Identifying components of balance of payment account and their
preparation
- Discussing causes of disequilibrium in the balance of payment and
measures to resolve them.
- Discussion on the terms of sale used in international trade and their cost
implication of each to the seller and the buyer.
- Discussing the meaning of economic integration and distinguish between
the various forms of integration.
- Discuss the benefits as well as the disadvantages of integration.
- Discuss free trade outlining case for and against free trade.
- Discuss merits and demerits of trade restrictions.
- Discuss the benefits of trade agreements such as A.G.O.A
- Meaning of exchange rates and comparison between salient features of
flexible and fixed systems.
- Discuss reasons for various development.

1. Write in full the following abbreviations:

i) Franco
ii)O.N.
iii)C.W.O
iv)I.O.U
2. State any four economic benefits Kenya may derive from the recently revived
East African
cooperation (E.A.C)

3. Highlight four trade measures that can be undertaken by a country to correct

balance of
payment disequilibrium

4. Highlight four difficulties encountered in international trade

5. The following statement shows the various level of economic integration.

Against this statements,
give the level that suits each:
Statement Level
 (a) Member countries imposes common tariffs
on non-
member states
(b) Member countries have joint economic
institution
and common monetary and fiscal policies
(c) Member countries agree to either abolish or
relax
tariffs and other barriers
(d) Member countries allow free movement
factors of
production
6. Outline four ways in which Kenya benefits by being a member of Common
Market
for East and Southern Africa States (COMESA)

7. The table below gives descriptions of some documents used in international

trade complete the
table, by indicating the name of the document that corresponds to each
description
Description Document
i) Requests the exporter to supply the importer with the items indicated
ii) Acknowledges the receipt of goods on board a ship
iii) Authorizes the bank to resell goods being exported
iv) Gives details of exported goods and name of country of origin
8. Highlight four factor that may hinder the success of East African Co-
operation (E.A.C)

32. INTERNATIONAL TRADE

1. Explain five benefits that will accrue to a country due to use of pipeline in
transporting
oil products

2. Explain five advantages that a country may experience from imposing trade
restrictions in
trading partners.

3. Explain five benefits that the Kenyan government desires to achieve by being
a member of
 the East African Union

4. Discuss five reasons why many countries tend to prefer free trade

5. Discuss five causes of the persistent balance of payment disequilibrium in East

African
countries

6. Explain five measures that the Government of Kenya may take to control her
persistent
Balance of payment deficit

7. Explain five advantages of economic integration to a member state.

33. -ECONOMIC DEVELOPMENT AND PLANNING
The topic entails:
- Distinction between economic growth and economic development.
- Discussion of characteristics of under development.
- Discussion of the goals of development and factors that hinder
development
- Discuss the meaning and importance of planning in an economy.
- Outlining common features of a development plan.
- Outline problems encountered in development planning.

1. Outline any four problems encountered in development planning in Kenya

2. Mention any four obstacles faced by the Kenyan government in realizing its
development
planning .

3. Outline four indicators of underdevelopment

4. Highlight four circumstances under which a country may be classified as

underdeveloped
5. Highlight three goals of development

6. Describe four reasons why it is important for Kenya to prepare a proper

development plan
7. Highlight four characteristics of good development plan

33. ECONOMIC DEVELOPMENT AND PLANNING

1. Discuss five principles of taxation

2. Highlight distinguishing features between developing and developed

countries.
3. Explain five obstacles in the implementation of development plans in the
developing
countries
4. Every third world country aspires to develop but it is faced with some
obstacles. Explain five
of such obstacles to economic development

5. Every third world country aspires to develop but it is faced with some
obstacles. Explain five
of such obstacles to economic development

6. Explain five factors that have frustrated economic development in a

developing country
like Kenya for the last few decades

7. The national budget is drawn before the beginning of every financial year by
the government
discuss five functions it plays as a planning tool

8. Explain five challenges that Kenya is facing in the implementation of her

development plans
9. a) Explain five changes that may take place when a country is experiencing
economic
development