KNEC business 2009 Exam past paper

Exam year:2009

High School Past Papers


1. State factors that may affect the geographical mobility of labour ( 4 mks)

2. Outline four ways in which commercial attaches may promote trade between their country and other countries ( 4 mks)

3. Amboseli Enterprises has been spending heavy on promotion for its products though its sales have consistently declined. Outline four measures that the company take to reverse the trend

4. Write the type of demand represented by each of the following statements

(i) Demand for a commodity causes an increase in demand for another


(ii) Demand for one commodity calls for demand of another commodity

5. The following balances were extracted from the books of Saku traders on 31 March 2008

Fixed assets 300,000

Current assets 123, 700

Creditors 84, 500

5 year loan 125,000

Determine the net worth of the business as at 31st March 2008 ( 4 mks)

6. Indicate the type of journal in which each of the following transaction would be recorded

Transaction Type of journal




Goods previously sold on credit were returned

Goods bought on credit

Goods sold for cash

Motor vehicle sold on credit

( 4 mks)

7. A trader has decided to take a loan to expand a manufacturing business. Give two reasons why it is beneficial to borrow from a non- bank financial institution

( 4 mks)

8. State four items that usually appear the credit side of the current account of a country ( 4 mks)

9. Outline four benefits that may accrue to a business from a country’s political stability ( 4 mks)

10. A lucrative manufacturing firm been constantly releasing toxic wastes into the neighborhood. Outline four measures you can take to stop the firm from such malpractice ( 4 mks)

11. Outline four factors that should be considered in the choice of a means of transporting perishable goods ( 4 mks)

12. Outline four circumstances which face to face communication may be ineffective

( 4 mks)

13. Highlight four benefits that would accrue to a firm located near other existing firms ( 4 mks)

14. Country X has been experiencing an upward trend in the price of petrol as a result of a rise in inflation. State four steps that can be taken to minimize expenditure on this product. ( 4 mks)

15. Outline four reasons why an increase in per capital income may not necessarily lead to a rise in the standard of living of the citizens ( 4 mks)

16. The bookkeeper of trade Traders extracted the following information from the accounting records

1.1 2007 31.12.2007

Kshs Kshs

Suppliers 465, 000 640,000

Discount received – 12,000

Purchases returns – 25,000

During the year ended 31.12.2007, suppliers were paid Kshs 1,500, 000 while cash purchases amounted to Kshs 800,000

Determine the purchases for the year (5 mks)

17. Outline four circumstances that would make an office manager to replace an existing machine with modern one ( 4 mks)

18. Outline four reasons why hypermarkets are becoming increasingly popular in Kenya ( 4 mks)

19. The graph below the rate of population growth of a given country

Outline four factors that may have contribute to the trend between s and t

( 4 mks)

20. Kazim maintains a petty cashbook on a weekly interest of Kshs 13,000 on 1st April 2007 the cash balance was Kshs 2,570

During the week of April, the following transactions took place


April 2 Received reimbursement from the main cashier

3 Paid Kshs 3,070 for cleaning materials

4 Paid Kshs 2,000 bus fare

6 Bought stationery worth Kshs 2,200

Prepare a petty cashbook to record the above transactions using cleaning stationery and bus fare columns ( 5 mks)

21. Highlight four circumstances under which business enterprises may choose to merge ( 4 mks)

22. The following information relates to Maji Mazuri Traders as 31. 12. 2008

Fixed assets 400,000

Stock 120,000

Current liabilities 60,000

Net profit for the current 100,000


  1. Rate of return on capital employed
  2. Current ratio ( 4 mks)

23. Highlight four factors that must be considered before incurring public expenditure ( 4 mks)

24. Outline four benefits that accrue to the government as a result of privatization of public enterprises ( 4 mks)





25. KAMAT owned a motor vehicle valued at Kshs 1,000,000. He comprehensively insured the car at Kshs 800,000. The motor vehicle was involved and declared a write off. Calculate the amount KAMAT should get from the insurer.

( 4 mks)


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

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

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

(b) The trial balance of Zakayo Traders as at June 2008 is given below


Kshs Kshs

Stock 76, 500

Creditors 450,400

Debtors 350,000

Bank 260,400

Fixed assets 970,200

Cash 120,500

Capital 1,300,000

Lighting due 27, 200

1., 777, 600 1, 777, 600

During the month, the following transactions took place


June 5 Paid a creditor Kshs 228,000 by cheque in full settlement of a debt after deducting 5% cash discount.

15 Withdrew Kshs 100,000 from bank for office use

28 Received Kshs 160, 000 cash from a debtor after allowing cash discount of Kshs 40, 000

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

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

  1. Name the curve represented by the gap WZ
  2. State Why the curve WZ is vertical to price axis
  3. Advice when the oligopolist can raise and lower the price of the commodity

( 10 mks)

(b) Explain five ways in which the government of Kenya may reduce the level of unemployment ( 10 mks)

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


(b) Analyze the following document issued by Sheikh Traders

Sheikh Traders P.O Box 235Y



No. 4262

12 October 2008


Kamau Limited

P.O Box Y 125


Terms: 10 per cent one month on furniture only

Quantity Rate Kshs Kshs Kshs




Dinning tables mvuli 4,000

Beds 2,000

Coffee Tables 1,000

Less Trade discount 10%

Floor carpets 2,500

Less Trade discount 10%


E & O.E














  1. Name the document above
  2. Calculate the amount paid for the goods, if the debtor paid on 28th October 2008
  3. Determine the net profit of the business if transaction (ii) above was Kshs 120.400 and the debtor paid for the goods on 15th November 2008

( 10 mks)

5. (a) Explain four services that the central Bank of Kenya may offer as a

Banker to commercial banks ( 8 mks)

(b) Malamu Traders had the following balances s at 31 December 2008


Building 540,000

Bank Loan 472,500

Debtors 116,900

Creditors 227,000

Furniture 408, 170

Gross profit 520,600

Motor vehicle 900,000

Discount allowed 142,000

Lighting 25,200

Interest on loan 1,200

Closing stock 72,500

Rent received 120,000

Repairs on buildings 60,000

Repairs on furniture 72,030

Repairs on motor vehicles 300,000

General expenses 102,100

Capital 1,400,000


    1. Profit and loss account for the year ended 31 December 2008
    2. Balance sheets as at 31 December 2008 ( 12 mks)

6. (a) The following table represents the price and quantity of a commodity

Month Price Quantity

January 80 2,000

February 40 5,000

  1. Plot the above information on a graph ( 5 mks)
  2. Calculate the price elasticity of demand ( 5 mks)

(b) Lunga, a sole trader, does not keep a complete set of accounting records. Information extracted from the records are as follows

1 January 2007 31 December 2007

Kshs Kshs

Stock 75,000 136,400

Pre- paid salaries – 8, 000

Creditors 142, 500 158,400

Debtors 120,000 335,000

Furniture & Equipment 820,000 754,400

18% loan from bank 200,000

Cash summary for the year was as follows

Cash Summary

Kshs Kshs

Balance b/d 460,800 Payment to creditors 660,500

Bad debts 16,000 Loan (31/12/2007 50,000

Receipts from debtors 750,000 Salaries 48,000

Purchases 135,400

Interest on loan 30,000

Balance c/d 302,900

1,226, 800 1,226,800

Additional information:

    1. Interest charged on debtors overdue accounts amounted to Kshs 2,000
    2. Bad debts written off amounted to Kshs 4,200

Prepare trading, profit and loss account for the year ended 31 December 2007 (10 mks)

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