Home trade Revision Questions and Answers

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

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

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

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