Chris Andika

1. (a) Advantages of overpopulation in a country include

I. Creates a wide market for (finished) goods / services due to increased demand/needs
II. Better utilization of resources where people are careful to avoid waste/so as to meet increased needs/ accept
examples of resources as a mention
III. It stimulates creativity/innovation/invention where entrepreneur come up with a variety of commodities ( to
satisfy people’s needs) / that leads to better/quality/ quantity goods/ service/ better technology
IV. Stimulates investment due to (available) ready market/large market (which enables investors to earn profit)
V. It creates a large pool of labour force which is affordable for firms to hire /which avails a variety of skills
required
VI. Promote labour mobility as people move to look for jobs which enhance national cohesion/peace
VII. Increase foreign exchange due to increased export of labour
VIII. Increased government revenue due to increased taxation/leading to provision of better public utilities
IX. Reduced average cost/cost per unit in provision of (government services due to economies of scale

(b) Reasons for the growth of SACCOs in Kenya

I. Cheap loans, SACCOS are cheaper source of funds/loans where interest rates are lower ( compered to
bank)/make it affordable
II. Investment opportunities – SACCOS have different development projects that their members can invest in /
accept examples of development projects as expansion
III. Limited liability where members (can rest easily knowing their liability is limited to their saving/ capital.if SACCOS
get bankrupt/insolvent the members personal assets remain secure
IV. Emergency loans / SACCOS offer emergency loans within a short time
V. SACCOs give dividends/ interest to their members from profit/ surplus gained
VI. Educate their members on financial matters/ SACCOs matters / through AGM / workshop/seminars /Open day
/ visit
VII. In case of the death of the borrower,loan is written off since loans are insured / burden is not transferred to
beneficiaries/next of kin
VIII. Offer a variety of loans to improve members welfare/ accept types of loans as expansion
IX. Easy to acquire loans since it doesn’t require collateral/security/ require few formalities/ favorable terms
X. ( In case of deaths of a member) the beneficiaries are refunded double the amount saved since saving are
insured/ give beneficiaries more financial stability/ security
XI. Government support by creating favoureble condition to enhance operation/ accept examples of favourable
condition as expansion
XII. To encourage saving for future use / through check off system
XIII. Offer FOSA that provide limited banking services/ accept examples of FOSA as expansion
XIV. Demographics administration where members have equal opportunities to SACCOs/accept examples of equal
opportunities as expansion
XV. Open/ voluntary membership and where one if free /join leave

2. (a) Factors that may make a business to make payments by use of a cheque
i. Need for evidence of payment for future reference
ii. Making entries into books of account/as a source document that facilitate preparation of accounts
iii. Enhance security/safety (in the office) that would result from the risks of theft of cash since cheque have
security features/ can not easily be cashed if stolen/where large amount are involved
iv. If it’s the business payment policy to enhance it’s operation/ that must be followed
v. Drawing/writing a cheque is faster than counting Large sums of money
vi. Postdated/discounted cheque may be used where the business lack cash ( in the meantime)

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vii. The business operates a current account which is operated by use of a cheque
viii. Accountability since it’s easy to monitor/ audit the flow of revenue/expenses
ix. Portable they are convenient to carry
x. Cheaper to use in (making payments) since charges are low
xi. Payment can be made without traveling which saves time /avoid inconvenience of traveling
xii. Cheque are negotiable making it easy to transfer payments
xiii. A cheque is the only means (of payment) therefore there is no option
xiv. If the payee requires payments by a cheque and the business/ drawer complies
xv. Many people to be paid which can be done through credit transfer cheque/ reduce cost / inconvenience
of payment

(b) (i) working capital= current assets – current liabilities

CW=CA-CL✓

CA=Stock+debtors+cash + stationery ✓

CA=90000+58000+20000+12000

=Sh. 180000✓

CL= creditors+salaries owing

= 47000+21000

=68000✓

CW=Sh.180000-Sh.68000

= 112000✓

(ii) return on capital

Return on capital= net profit/capital investment*100

28200/900000*100✓

31.33%✓

(iii) current ratio= current assets/current liabilities

180000/68000✓

45/17 =45:17 ✓

Capital employed= capital owned +long term liabilities

1182000+40000✓

1582000✓

Or

Capital employed =fixed asset+ working capital

1470000+112000✓

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1582000✓

Or

Capital employed =capital owned+ borrowed capital

1182000+40000✓

1582000✓

Or

Capital employed = total assets-current liabilities

1650000-58000✓

1582000✓

(v) borrowed capital= long term liabilities

loan= 400000✓

3. (a)Factors that could lead to an increase in supply of potatoes in the market include
I. Increase/high prices of potatoes leading to increase profit/production
II. Decrease/low cost of production making it cheaper to produce/encourage production
III. Decrease/low prices of substitute which encourage production if potatoes/makes potatoes more
attractive/profitable to produce
IV. Favourable climatic/weather conditions/natural factors this will lead to increased production of
potatoes in the (market ) accept examples of favourable natural factors as a mention
V. Mordan/better technology increases the production of potatoes ( which results in the increase
in supply)/accept examples of improved technology as a mention example use of fertilizer/quality
seeds
VI. Favourable government policy which makes it cheaper/profitable to produce/accept examples
of favourable government policy as a mention
VII. Better transport condition/facilities that makes potatoes to be available/supply on
time/cheaply/in large quantities
VIII. Entry of new Firms into the industry/many firms which increase production/due to expanded
market/more profit /accept any relevant entry as expansion
IX. Increased availability of /access to factor of production availability of land and other inputs will
increase supply of potatoes leading to more production /reduce cost of production/ continuous
production/accept examples of increased factors of production as a mention
X. Expectation of future decrease in / low prices of potatoes leading to increased supply now to
(avoid future loses)
XI. Expectation of future increase in/high prices of potatoes leading to increased production
(increase supply in future)
XII. Expectation of future increase in future demand of potatoes leading to increase in production
XIII. Decision by potatoes producers /farmers to produce more for whatever reason/accept any
relevant reason as expansion
XIV. Favourable/haversting season where farmers dispose off surplus /accept reason of disposal as
expansion

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XV. Increase in /high prices of jointly produced that leads to more production of potatoes
XVI. Improved /better skills/training of farmers leading to more production
XVII. (Better) security/political stability which encourage production of potatoes

(b) Ways in which transport contribute to economic development of a country include

I. Leads to development of industries in different parts of the country/delocalization because its easy/cheap to
transport raw materials/finished goods
II. Creates employment opportunities to drivers /contractors /where people generate income/improve living
standards/accept examples of job created as expansion
III. Growth of towns/it promotes urbanization (along the means of transport) which encourage business/trading
activities
IV. Facilitates trade by enabling buyers to meet sellers ( hence enabling exchange) linking producers to consumers
V. It promotes specialization (in production) which leads to better quality commodities (which improve people’s
living standards)/accept benefits of specialization as expansion/ where people concentrate on what they can
produce best/easily
VI. It facilitates mobility of labour hence expatriates can bring in necessary technical know how (to develop the
country) by moving labour force to places of work and transfer of skills
VII. It creates utility by moving goods /services from their place of production to where they are required/facilities
movement of (finished) goods to the market
VIII. Leads to increased production of goods as a result to easy /cheap access to raw materials/market
IX. Lead to wider market (for goods/services)by enabling producers to move goods to new areas
X. Steady supply of goods /services there for avoiding shortage/stabilize prices
XI. Facilitates exploitation of natural resources by opening up area
XII. Avails varieties of goods/services for consumers to choose from/leading to improved standards of living
XIII. Facilitates movement of capital to areas of production/leading to more production
XIV. Help avoid wastage by delivering perishable goods to the market on time /enabling surplus goods to reach the
market
XV. Promote development of industries by moving raw materials to firms/finished goods to the market
XVI. Promote tourism which earns a country revenue
XVII. Earns the government revenue through taxes/used to finance development projects
XVIII. Promote peace/good relation by enabling people to meet/interact/trade
XIX. Creates investment niopportunities where profit/income is generated /through injection of
capital/skills/technology
XX. Facilitates access to auxiliary/social services/ ancillary which enhance productivity/trading activities/accept
examples of social amenities as expansion
XXI. Facilitates movement of entrepreneur to areas of investment/set up production units /business
XXII. Facilitates movement of raw materials to areas of production

4. (a) Ways in which insurance companies promote the development of the Kenyan economy include
i. Proving employment opportunities thus improving the people’s standards of living/enables people to
earn an income
ii. Insurance companies finance (economic/development) projects/invest in real estates / mortgage/stock
/corporate/government bonds using surplus fund/accept examples of investment as expansion
iii. Insurance companies help business mitigate risks /create confidence in investors enabling them to
invest in risk business/recover loses

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iv. Insurance companies act as a source of funds/loans ( for individuals /business organization/government)
for financing various economic activities/business/development opportunities activities
v. Insurance companies act as a source of revenue to the government through taxation/for financing
provision of public goods/services
vi. It encourages saving (as the amount contributed as premium Amy be )used for investment/through
regular contribution/premium
vii. Allow for continuity of business/life after occurrence of risk through compensation
viii. Spread risks to various people through sharing the burden of loss /which reduces the burden of loss
ix. Contribute to social for the insured /beneficiaries/accept examples of social welfare as expansion
x. Life assurance policy can be used as securities to acquire loans
xi. Promote loss preventions by advising/educating their clients on how to reduce occurrence of
risks/rewarding those who don’t make claim(over a certain period)

(b) Monetary policies used by the central bank of Kenya to control money in circulation include
I. Use(influence)interest rates /bank rates/borrowing rates /lending rates lower interest rates
/Bank rates tend to increase borrowing/high interest rates /bank rates discourages borrowing
II. (Engage in) Open Market Operation ( OMO)by buying government securities which increases
money supply/selling government securities which reduces money supply
III. Decrease (set the ) reserve requirement / compulsory deposit/Special deposit decrease money
in supply
IV. Directives ( by central bank to commercial Bank) to reduce/create money in supply/
V. (Through) selective credit control by freezing/lending to some sectors of the economy/
liberalization Lending
VI. Cash /liquidity ratio can be raised/lowered ( for commercial banks) to decrease/increase the
amount of money in circulation
VII. Moral persuasion banks can be encouraged/convenience to increase/decrease lending
VIII. Marginal requirements increasing/decreasing margin required increase decrease. Encourage
/discourages borrowing
5. (a) from trial balance, record relevant ledger accounts
Cash a/c
July Bal. b/d✓ 120500✓ July Bal. 380500✓
1st 30th c/d✓
15th Bank✓ 100000✓
29th Debtors✓ 160000✓
380500 380500
Bank a/ c
July Bal 260400✓ July Creditors✓ 228000✓
st
1 b/d✓ 5th
30th Bal 67600✓ 15th Cash ✓ 100000✓
c/d✓
328000 328000
Debtors a/c

July Bal. 350000✓ July Cash✓ 160000✓

1st b/d✓ 29th
29th D/allowed✓ 40000✓

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30th Bal b/d ✓ 150000✓
350000 350000
Creditors a/c

July Bank ✓ 22800✓ July Bal 450400✓

5th 2st b/d✓
5th D/received✓ 12000✓
30th Bal c/d✓ 210400✓
450400 450400
Discount allowed a/c

July Debtors 40000✓ July PSL 40000✓

29th ✓ 30th a/c✓
40000 40000
Discount received a/c

July PSL 12000✓ July Creditors 12000✓

30th a/c✓ 5th a/c✓
12000 12000
(b)Benefits of international trade include

i. Increase revenue/ generate income/ revenue through importation/exportation of goods

ii. Promote the mobility of factor of production (such as ) labour/capital/entrepreneurship which/enhance
production/ between countries
iii. Disposal of surplus goods / a country may have outlet to dispose off it’s surplus goods that it is unable to sell in
it’s home market/that could otherwise go to waste
iv. There is greater variety of goods ( available for consumption)/international trade bring in a varieties of
particular products form different destinations this gives consumers (a wide array of ) choices /improve
standards of living
v. Efficient allocation/better utilization of resources since countries tend to produce goods in which they have a
comparative advantage/due to specialization/thus wasteful duplication of resources is prevented /due to wider
market for goods/services
vi. (More) employment could be generated/created as the market for the country’s goods widen ( through trade )
/due to increase economic activities
vii. It improves the quality of goods /services due to competition ( between the imported and locally produced
good/services
viii. Fosters peace/ good will/ mutual understanding ( among nations) due to interaction (between people of
different countries) /interdependence among countries
ix. Lower/fair prices due to competition/access to cheaper factors of production
x. Facilitates transfer of technology/skills ( between countries) leading to better/ m niore / cheaper production
xi. Generate revenue for the government through taxation (import/export ) /use to provide public goods
xii. Countries can acquire goods / services they can’t produce from other countries/ to satisfy local demand
xiii. Acquisition of positive culture habit due to interaction
xiv. Assistance/protection ( from other countries) in times of need/ accept examples of needs as expansion
xv. Increased production of goods/services due to increase investment/production activities/larger market
xvi. Encourage specialization where countries concentrates on production of goods/ services they are best at /
production where they produce cheaply
xvii. Improved infrastructure ( between countries) due to increased production activities/which facilitates
trade/cheaper/faster movement of goods/services / accept examples of infrastructure as a mention

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6. (a) Factors to consider when choosing a choosing of distributing dry maize include
I. Nature of the product/dry maize dry maize is not perishable, hence a longer channel can be used
II. Need for the intermediaries/middlemen if there is need for the channel to perform the services related
to the maize being sold (packing)a longer channel can be used/if services of middlemen is not required a
shorter channel can be used
III. Nature of the market where the market is concentrated in one area/localized direct selling is
appropriate/a longer channel is preferred where market is widely spread
IV. Government policy the channel chosen should be able to meet regulations set by the government
V. Resources of the firm if the producer has insufficient resources longer channel would be
appropriate/the producer has sufficient financial resources can use a shorter channels
VI. Channels used by competitors if a firm want it’s mainze to compete favourably in the market,then the
firm can use similar channels/different channels to avoid competition/ if competition is high/stiff use
short channel
VII. Marketing risks if a firm wants to avoid risks related to distribution,it may opt for using middle men/
intermediaries/if a firm can afford marketing risks can use a shorter channel of distribution
VIII. Environmental characteristics economic/political/legal /social/cultural/ technological factor that (may
affect the channel selection) if favourable a short channel can be used / if unfavourable along channel
can be used
IX. Business/company policy on the distribution channel for maize should be adhered to
X. Spread of the channel /urgency of maize choice of the channel should ensure that maize reach at the
required time/use a shorter channel if maize is urgently required/use a longer channel if maize is not
urgently required
XI. Availability of middlemen intermediaries where middlemen are available,can can be used /if not direct
selling/short channel can be used
XII. Cost of the channel use a channel that is cheap/ affordable/ cost effective/does not make the price of
maize high
XIII. Size of the firm/ scale of production if production is small scale/production is low short channel is
preferred /if production is on a large scale a longer channel can be used
XIV. Nature/ preference/teste of consumer consumer with specific needs may require the attention of
producer/use of direct selling channel
XV. Distance/ proximity to the market if consumers are far,along channel may be used to reach them/ if
they are near a short / direct channel may be used
XVI. Profitability if producers wishes to make more profit a shorter channel or avoid many intermediaries
XVII. Size of market/ number of consumer where consumers are few a shorter channel can be used / if
consumers are many market is large longer channel can be used
XVIII. Pricing of product shorter channel can be used where there is need to keep the price low by avoiding
intermediaries

(b) Merits of preparing a journal in a business include

I. To relieve the ledgers of too many details: it summarizes details of transactions for posting to the ledgers/
reduce bulkiness/ size of the ledger
II. It forms a basis / provide information for preparation of ledger using totals from the journal
III. It gives details of not found in the ledger accounts / for example source document/ narration
IV. It helps in detections of errors as one can confirm/ rectify the errors ( made during posting)/ recording of the
transaction in the ledger
V. May be used for reference in future / when there is need for verification/ as a backup data
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VI. Minimizes chances of fraud hence enhances efficiency/ accountability/ since it’s kept by somebody different
from the one who keeps the ledger/ facilitates internal checks / division of labour
VII. Used to prepare control/ total that assist in preparation of final account/ statements
VIII. Act as diaries since they record transaction as they occur/ help maintain accuracy of transaction
IX. They ensure double entry rule is adhered to thereby minimizing errors
X. Save time by making it fast / quick to record transaction in ledger accounts