WAEC Commerce 2009 past questions and answers

A patent gives an inventor the sole right to make and sell his invention.

A proforma invoice asks for payment before goods are sent.

Multiple (chain) shops have branches with the same design, layout and stock.

Life cannot be valued in money, so life assurance is not indemnity.

A stale cheque is more than six months past its date, so it is overdue.

A standing order tells the bank to make regular payments.

Government taking over private businesses is nationalisation.

Rate of turnover is how many times stock is sold and replaced in a period.

A consignment note goes with goods handed to an independent carrier.

A sole trader has unlimited liability for business debts.

Devaluation makes imports dearer, so a country buys fewer imports.

Public relations builds goodwill and understanding between a firm and the public.

A prospectus invites the public to buy shares.

Excise duty is levied on locally produced goods.

R/D means 'refer to drawer': the bank has refused (dishonoured) the cheque.

Pipelines carry liquids and gases such as oil and gas.

A sole trader can borrow from friends; he cannot issue shares or debentures.

Tramps have no fixed route or timetable.

Demurrage is the charge for staying beyond the allowed time.

They are all securities.

Trade discount is a reduction off the catalogue (list) price given to traders.

The certificate of origin states where the goods were produced.

The articles of association contain the internal rules of a company.

Every retailer sells to final consumers.

Shares in a private company cannot be freely transferred.

Specialisation creates surpluses that people exchange.

Carts are land transport.

The market value is above the nominal value, so the shares sell at a premium.

Under hire purchase the buyer gets possession at once but ownership (title) only after the last instalment.

Fidelity guarantee is accident insurance against employee dishonesty, not marine.

Shareholders own a public limited company.

Public enterprises exist mainly to provide essential services.

Debenture holders are creditors, not members, so they cannot vote.

The IBRD (World Bank) lends to member countries for reconstruction and development.

Only the central bank issues currency.

Trade is divided into home trade and foreign trade; P stands beside foreign trade, so it is home trade.

Home trade divides into wholesale and retail trade, so V is retail trade.

Government-paid services to the whole community, such as the police and army, are classed as indirect services.

Buying, pricing, selling and promotion are all marketing functions; the other lists include production or personnel work.

A term policy pays only if death occurs within the stated term.

An advice note tells the buyer that goods have been sent.

Poste restante holds letters at a post office for travellers to collect.

Entertaining is not an entrepreneurial function.

Dutiable goods are kept in a bonded warehouse until duty is paid.

(a) Industry is the production of goods through extraction, manufacturing and construction; commerce is all activities that move the goods produced to the final consumer (trade and aids to trade).
(b) Any four, explained: trading (buying and selling at home and abroad); transport (moving goods and people); communication (passing information between buyers and sellers); banking (saving, lending, payments); insurance (cover against risks); advertising (informing buyers); warehousing (storage until needed).

Each commercial activity should say what the workers do.

Benefits (any five, explained): more capital from the new partners; shared risks and losses; wider skills and experience; division of work/specialisation; easier to get loans; continuity when one partner is absent; more ideas and better decisions; business can expand.
Losses (any five, explained): loss of sole control; profits must be shared; slower decisions; possible disagreements; still unlimited liability, now also for partners' acts; loss of secrecy; partnership may end on death/withdrawal of a partner; difficulty withdrawing his capital.

Explain each benefit and each loss in a sentence.

(a) Personal selling is face-to-face contact between a seller and a prospective buyer to present a product and persuade him to buy.
(b) Any six, explained: television (sight and sound, wide reach); radio (sound only, reaches rural and non-literate people); newspapers and magazines (printed, can be kept); billboards/hoardings (outdoor, seen by passers-by); posters and handbills; cinema; trade fairs and exhibitions; neon signs; catalogues; internet/social media; banners; loudspeakers/town criers.

Explain each medium with one feature.

(a) Fixed assets – long-lasting assets bought for use in the business, not for resale, e.g. buildings, machinery, vehicles.
(b) Certificate of trading – document from the Registrar allowing a public company to start business after meeting legal requirements.
(c) Dividend – the part of a company's profit paid to shareholders on their shares.
(d) Authorised capital – the maximum share capital a company may issue, as stated in its memorandum of association.
(e) Promoters – persons who take the steps to form a company, e.g. preparing documents and registering it.

Define each term in one or two sentences.

(a) Consular invoice – an invoice certified by the importing country's consul in the exporting country; used to confirm the value of goods for customs duty.
(b) Bill of lading – document issued by the shipowner listing goods shipped; used as a receipt, evidence of the contract of carriage and a document of title to claim the goods.
(c) Certificate of origin – document stating the country where the goods were made; used to fix duty or claim preferential tariffs.
(d) Bill of sight – a provisional declaration made by an importer who cannot fully describe the goods; used to allow customs to inspect them before full entry is made.

Give both a description and one use for each document.

(a) Any five, explained: collects import, export and excise duties; prevents smuggling; stops importation of prohibited goods; supervises bonded warehouses; compiles trade statistics; enforces trade policies/quotas; examines and clears goods and documents.
(b) Any five: countries get goods they cannot produce; specialisation and lower costs; wider markets for local goods; earns foreign exchange; raises standard of living; promotes international co-operation; transfer of technology; creates jobs.

Customs functions centre on duties and control of goods.

(a) Backwardation – the charge a bear pays to postpone delivery of shares he has sold to the next settlement period.
(b) Bear – a speculator who sells shares expecting prices to fall, hoping to buy them back cheaper.
(c) Jobber – a dealer on the stock exchange who buys and sells securities on his own account, dealing only with brokers.
(d) Jobber's turn – the jobber's profit: the difference between his buying and selling prices.
(e) Brokerage – the commission a stockbroker charges clients for buying or selling securities for them.

Define each term in a sentence.

(a)(i) Goodwill – the value of a firm's good name, reputation and customer connections, above the value of its physical assets.
(ii) Patents – exclusive rights given to an inventor to make and sell his invention for a period.
(iii) Trade mark – a registered name, symbol or design that identifies a firm's products.
(iv) Copyright – legal right of an author, artist or musician to stop others copying his work.
(b) Any four: members pass a special resolution to wind up (voluntary); inability to pay debts (insolvency); court order (compulsory liquidation); object of the company achieved or becomes illegal; fraud or illegal activities; number of members falls below the legal minimum; expiry of a fixed period; failure to start business within a year.

Dissolution can be voluntary or by court order.

(a) Nationalisation – government takes over ownership and control of private businesses; indigenisation – ownership and control of businesses pass from foreigners to citizens.
(b) Advantages of nationalisation (any five): government controls strategic industries; essential services at low prices; prevents private monopoly exploitation; profits go to the state; creates jobs; ensures even development; protects national security.
Disadvantages of indigenisation (any three): shortage of local capital and skills; may scare away foreign investors; fronting – foreigners use local names; few rich citizens gain control; possible fall in efficiency and technology.

Nationalisation transfers to government; indigenisation transfers to citizens.

(a) Cost of goods sold = 60,000 + 180,000 − 70,000 = Le 170,000; gross profit = 220,000 − 170,000 = Le 50,000.
(b) Average stock = (60,000 + 70,000) ÷ 2 = Le 65,000.
(c) Expenses = salaries and wages 8,000 + transport 6,000 + rent 5,000 = Le 19,000; net profit = 50,000 − 19,000 = Le 31,000. (Debtors are an asset, not an expense.)

Leave debtors out; they are not an expense.