OCT. /NOV. KCSE 2020


  • a) Write your name and index number in the spaces provided above.
  • (b) Sign and write the date of examination in the spaces provided above.

  • (c) Answer all the questions in the spaces provided in the question paper.

  • (d) Non-programmable silent electronic calculators may be used

  • (e) This paper consists of 12 printed pages. Candidates should check the question paper to ascertain that all the pages are printed as indicated and that no questions are missing.

  • ( (g) Candidates should answer the questions in English.


1.List four external environmental factors that may influence the operation of business include;

  1. Legal/regulatory issues/government policy
  2. Economic factors
  3. Sociocultural factors
  4. Technological factors
  5. Physical facilities/infrastructure
  6. Demographic considerations(population)
  7. Political environment
  8. Competitors
  9. Suppliers
  10. Natural factors e.g climate
  11. Market/customers
  12. Security

2. state four characteristics of direct production include;

  1. production is for own use/subsistence production
  2. low level of technology is used in the production
  3. goods produced are often of low quality
  4. goods are produced in low quantities
  5. the producer is involved in all stages/processes of  production/lack of division
  6. the producer earns no extra income
  7. the producers living standard is low for lack of variety
  8. the producer strives to produce a variety of commodities/lack of specialization

3. Name the documents described in each of the following statements:

(a) Used to demand payment before goods are delivered

  • proforma invoice

(b) Used as a reply to a specific letter of  inquiry

  • quotation

(c) informs the buyer that the goods ordered has been dispatched

  • advice note

(d) Used to correct an overcharge

  • credit note

4.Highlight four reasons for government involvement in business ;

  1. to provide subsidized essential service
  2. to protect citizens from exploitation
  3. to create employment
  4. to earn revenue
  5. to stimulate economic growth
  6. to venture into businesses requiring large capital investments beyond the capability of private investors
  7. to provide commodities that are too sensitive to be left in hands of private investors e.g printing of money and manufacture of firearms
  8. to prevent foreign dominance of the economy
  9. to provide commodities that private investors are  unwilling to venture into due to low profit
  10. safeguard national interest by controlling strategies
  11. to attract foreign investment

5. Factors four factors that may lead to a shift in demand as shown below. (i.e a negative shift in demand)

  1. Decrease in consumer’s income
  2. Unfavourable government policies (increased taxes, strict  licensing)
  3.   Decrease in population
  4. The future expectation that prices will decline
  5. Unfavourable/off-peak season for particular commodities
  6. Negative taste & preference for particular products
  7. Availability of better substitutes
  8. Reduced prices of substitute goods
  9. Increase in price of complementary goods
  10.  Unfavourable terms of sales

6.Outline four circumstances under which a trader would prefer to transport goods by air include:

  1. When the goods are perishable
  2. When goods are urgently required
  3. When securing highly valuable goods
  4. When accessing remote areas (not accessed by other means)
  5. When goods are to be delivered over along distance
  6. When the business can afford to use it
  7. Where it is the most easily accessible
  8. When it is the policy of the business to transport goods by air

7.The following information was obtained from the books of Sindo Limited on  31 Dec 2015.

Determine the total liabilities of the business

Total asset= 20,000+1,500+2,000+4,000=27,500

Capital= 24,000

Assets= capital + liabilities

Liabilities= assets – capital



8.Highlight four services that commercial banks offer to their customers

  1. Accepting deposits
  2. Lending money to clients
  3. Safekeeping of valuable items
  4. Effects payment for clients
  5. Providing foreign exchange services
  6. Giving investment advice to clients
  7. Guarantor to their customers when taking loans with other official institutions

9. Outline four reasons that may make Kenya restrict trade with other countries:

  1. To protect local infant industries from unhealthy competition
  2. To safeguard against overdependency on the foreign firms for essential commodities
  3. To raise revenue through tariffs
  4. To prevent the dumping of substandard goods in the country
  5. To curb against borrowing of unacceptable foreign culture
  6. To correct unfavourable balance of payment

10. Classify the following resources as man-made, natural or human

classification of resources;

  1. Human
  2. Man-made
  3. Natural
  4. Human

11. List four sources of capital for a sole proprietorship.

a) owners saving

b)contribution from friends/relatives

c] borrowing from friends institutions/friends

d] credit buying

e] ploughing back profit

f] inheritance

g] leasing of assets

h] renting of assets

12.Highlight four circumstances under which firms may be located near the source of raw materials include;

A] where it is cheaper to transport finished goods than raw materials

B] where the firm needs to ease handling of bulky raw materials

C] when dealing with highly perishable raw materials to avoid spoilage

D] if the government policy requires the firm to be located near the source of raw materials

E] where the firm wants to control an important raw material

F] where the raw materials are fragile

G] where the raw materials are dangerous to carry over long distances

13.  Kombo traders trial balance as of 30th April 2018.

Required: Prepare Kombo Traders trial balance


Dr. shs.

Land and building



Motor car







































14. Outline four reasons that would make an entrepreneur prepare a business plan;

a] To foresee and avoid mistakes that could be committed in future

b] To identify strengths and devise ways of dealing with weaknesses of  the business

c] It’s a requirement by financiers

d] To help determine required resources

e] To enable an entrepreneur to identify potential market

f] To enable the business organization to avoid gaol blindness

g] To allocate resources appropriately

h] To use it as a monitor tool

i] To able to motivate employees

j] To adapt to future change

15. Identify the Office equipment described in each of the following statements;

a] franking machine

b] telephone/radio call

c] safe/cabinet

d] dictaphone/dictating machine/ recorder

16. State four sources of government revenue;

a] Court fines

b] Rent and rates received for use of government property

c] licence

d] Dividends and profit earned from  it’s an investment

e] Taxes

e] Internal borrowing

f] External borrowing

g] Proceeds from sales of government property

h] Grants and donations

17. Outline four measures that may be taken by the government to address the problem underdevelopment 4mks;

A] increasing [government] investments to create more job opportunities

B] control population explosion to reduces overdependence and pressure on resources

C] improve infrastructure to ease communication, movement and access to inputs

D] improve the education system to alleviate illiteracy and impart appropriate skills

E] income redistribution

F] encourage good governance to promote self-reliance

G] improve technology for maximum utilisation of natural resources

H] provision of incentives to promote a culture of savings

18.Highlight four benefits of personal selling to a trader ;

A] The trader is able to reach both literate and illiterate  customers

B] Able to demonstrate the uses and capabilities of the product

C] The  trader is able to get immediate feedback

D]  Can tailor the presentation to suit the needs of individual customer

E] Create customers loyalty

F] Enables the traders to focus on a targeted group of a products

G] Seller has the opportunity to get information on competitors from the buyers

H] May promote instant sales

I] It’s more persuasive and convincing to customers

19.outline four channels that can be used to distribute imported goods.


Foreign producer agent→wholesaler→retailer→customer


Foreign producer→local wholesaler→retailer→consumer


Foreign →local consumer


Foreign producer→local wholesaler→consumer



Foreign producer→local retailer→consumer


20.State four merits of a bonded warehouse to the government;

a) Enables the government to earn revenue

b) Enables enables the government to control the equality of goods imported

c) Helps the government to prevent the importation of harmful commodities

d) Enable the government to curb evasion

e)  Help the government to collect statistics on imported goods/goods on transit

f) Enables the government to inspect goods entering the country/types of goods

g) It help the government solve the problem of unemployment

21. The source documents are;

a)Outgoing credit notes

b) Purchase invoice/incoming invoice

c) Copy of cash sales receipt/cash

d) Sales invoice/outgoing invoice

22.State four ways through which leakages of national income may happen in a four sectors

a) Savings by households.

b) Government taxes on citizens and firms

c) Payment for imports

d) Transfer payments by government

e) foreign aid and grant by the government

f) Retained profits by firms

23.State four benefits of computers in an office ;

a)Facilitates easy communication through the internet

b) They are efficient in preparation and reproduction of document/saves time

c) They reduce paperwork

d) They are capable of storing huge volumes of information

e) Facilitates easy access to information(retrieving of information)

f) They facilitate e-commerce

g) It is labour-saving

24. Identify four factors of production that relate to each of the following resources


a) Labour

b) Capital

c) Land

d) Entrepreneurship

25.state four sources of business ideas.

a) Print media e.g newspaper, journals and magazines

b)Electronic media e.g television,computer

c) Vocational training

d) Hobbies/talents

e)Listening to what people say

f)Unutilized waste materials

g) Observing established entrepreneurs/role models

h) Experience

i) Research and development/surveys

j) Shows and exhibitions

k) Suporting agreat gap/inche

l) Brainstorming

m) Business seminar/workshops