MERU SCHOOL

FORM THREE BUSINESS STUDIES HOLIDAY ASSIGNMENT 3RD TERM 2022

ANSWER ALL QUESTIONS

1. The following balances were extracted from the books of Chabi Traders from the month
ended 31st March 2005.

Kshs
Sales 420,000
Purchases 240,000
Motor van 300,000
Equipment 120,000
Debtors 80,000
Creditors 40,000
Expenses 160,000
Capital 140,000

Prepare trial balance of Chobi Traders for the month ended 31st March 2005. (6mks)

2. Outline six purposes of trial balance as used in book keeping. (6mks)

3. The following information was extracted from books of Mamboleo Traders in the month of
September 2014.
Sep 1 - Had cash in hand, Kshs.15,500 and a bank overdraft of Kshs.9,700.
Sep 3. - Bought goods for sale Kshs.12,300 on credit.
Sept 5 - Sold goods in cash Kshs.8,500
Sept 9 - Sold goods on credit Kshs.10,000
Sep 12 - Recorded a cheque of Ksh.9,000 form a debtor
Sept 15 - paid a creditor Ksh.s10,000 in cash.
Sept 17 - Paid wages Kshs.2,600 in cash
Sept 19 - Received a cheque Kshs.23,400 from Samson for goods sold in January.
Sept 20 - Received Ksh.6,700 from a debtor in cash.
Sept 23 - Withdrew Kshs.7,700 from the bank for office use.
Sept 24 - Paid electricity bills by cheques kshs.1200.
Sept 25 - Received a cheque of Khs.11,500 from a debtor.
Sept 26 - Made cash sales of Kshs.12,800
Sept 27 - Purchased goods worth Kshs.8,950 in cash.
Sept 28 - Deposited personal cash Kshs.3,500 into the business account.
Sept 30 - Paid water bills b cheque Kshs.2,880

Required: Prepare a two column cash book. (10mks)

4. Use the transactions given below to prepare Jawabu Traders two column cashbook for the
month of following 2015.
1st Feb - Had Kshs.12,500 cash and a bank overdraft of Kshs.5000
2nd Feb - Used cash to pay for water bills kshs.800, electricity kshs.1,100 and
wages kshs.4,700
rd
3 Feb - Received a cheque of Kshs.18,900 from a debtor.
th
5 Feb - sold goods worth kshs.7,150 in cash.
th
7 Feb - Paid for goods bought for resale worth kshs.6,400 by cheque.
th
9 Feb - Received a cheque of kshs.13,000 from the Co-operative Society as
earnings from dividends.
th
10 Feb - Withdrew kshs.2,500 from the bank for family use.
th
13 Feb - Deposited kshs.15,900 in cash from a debtor.
th
15 Feb - Deposited kshs.9,500 from the office into business bank account.
th
17 Feb - Paid a creditor by cheques kshs.4,390.
th
27 Feb - Used all the money in the bank to purchase furniture leaving only a
balance of kshs.2,010.
5. The following opening balances were extracted from the books of Mageta Traders on 1st
July 2016.
Details Kshs.
Furniture 56,000
Capital 80,000
Creditors 20,000
Debtors 25,000
Bank 11,000
Cash 8,000

The following transactions took place in the course for the month:

- Paid a creditor kshs.4,500 cash.

- Took kshs.3000 from the bank for family use.
- Bought stock kshs.18,600 on credit
- Acquired a 10 year bank loan kshs.165,000 which was credited to the business bank
account.
- Purchased land worth kshs.82,000 paying by cheque.
- Converted a family table wroth kshs.5,500 for business use.
- Received kshs.7,300 in cash from a debtor.
 Required: Prepare Mageta Traders balance sheet as the end of July 2016. (10mks)
6. Describe five channels of distribution that a Kenyan manufacturer would use to ensure her
goods reach consumers in another country. (10mks)
7. Explain 7 circumstances in which a firm may acquire monopoly power. (10mks)

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8. With the aid of a diagram, explain the effect of an increase in supply of a commodity while
its demand remains constant. (10mks)
9. State 6 differences between life insurance and general insurance. (10mks)
10. Outline six differences between assurance and insurance. (10mks)
11. Explain six government initiated methods of consumer protection. (10mks)
12. Explain six differences between a sole proprietorship and a Public Limited Company.
(10mks)
13. Explain six benefits a private limited company would get by converting to Public Limited
Company. (10mks)
14. Explain six clauses that must be specified in the Memorandum of Association of a Public
Limited Company. (10 mks)
15. Explain six features that differentiate a Public Limited Company from Partnership form of
business. (10mks)
Public Limited Company Partnership
i) i)
ii) ii)
iii) iii)
iv) iv)
v) v)
vi) vi)

16. a) Explain six factors may make it necessary for an insurance company to reinsure. (10mks)
b) Briefly explain the meaning of the following forms of advertising:
i) Celebrity advertising
ii) Product advertising
iii) Informative advertising
iv) Institutional advertising
c) Describe six causes of unemployment in Kenya. (12mks)
17. a) Explain six negative effects of high rate of inflation on the Kenyan economy. (10mks)
b) Explain six reasons that would make a producer to use informative advertising. (10mks)
c) Explain six circumstances under which a firm may lose its monopoly power. (10mks)
18. a) Describe 6 sources of finance that the government of Kenya can use to fund its recurrent
expenditure. (8mks)
b) Explain six ways in which the macro environment may lead to the closure of a business
enterprise. (12mks)
19. a) Explain six ways in which an efficient road transport network can enhance the growth of
a manufacturing industry in Kenya. (10mks)
b) Using a diagram, explain the circular flow of income in a two sector economy. (10mks)
20. a) Explain six problems that may be faced when measuring national income using the
output approach. (10mks)
b) State any six reasons for preparing trading accounts. (10mks)

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21. a) On September 2006, Gakii had Kshs.55,000 in hand and Kshs.250,000 at bank. During
the month, the following transactions took place:

September
2 Cash sales banked kshs.35,260
3 B--ought ribbons in cash Kshs.4,500
8 Paid Wangila, a creditor Kshs.94,000 by cheque in full settlement of
his account after deducting 6% cash discount.
12 Received a cheque for Kshs.58,800 from Wetu after allowing a cash discount
of Kshs. 1200
15 Paid salaries Kshs.34,000 in cash.
25 Withdrew Kshs.30,000 from bank for official use.
28 Anyango a debtor paid her account of Kshs.75,000 by cheque less 10% cash
discount.
30 Deposited all the cash into bank except Kshs.13,700.

 Prepare a three column cash book and balance it off. (10mks)

b) Outline six importance of rate of return on capital employed. (8mks)

22. a) Explain six features of oligopoly. (12mks)

b) Explain any six benefits of intermediaries to the consumer in the chain of distribution.
(10mks)
23. Describe any six principles that distinguish cooperative societies with other forms of
business. (12mks)

ADDITION ASSIGNMENT

WRITE NOTES ON THE TOPICS BELOW. NB: USE INVENTOR BOOK 4.

1. Money and Banking

2. Public Finance
3.

MERRY CHRISTMAS AND HAPPY NEW YEAR 2023