WAEC Commerce 2012 past questions and answers

An issuing house helps companies sell new shares and bonds to the public; existing shares are traded on the stock exchange.

The balance of payments records all of a country's imports and exports, visible and invisible; the balance of trade covers goods only.

Department stores are large shops with many departments; the others are small-scale.

A bank draft is a cheque a bank draws on itself.

Distribution of goods is commerce.

Assets kept for long-term use are fixed assets.

Salaries paid to expatriates are payments for services, an invisible item.

Debenture holders are lenders and receive interest.

Customs and Excise collects import duties.

An auctioneer sells goods to the highest bidder.

Good transport carries goods to distant buyers, widening the market.

Buying and selling government securities in the open market is open market operation.

The West African Currency Board issued currency for British West African colonies before central banks were set up.

Current account holders draw money with cheques.

A mail order firm needs no shop; it keeps its goods in a large warehouse and sends them by post.

Imported goods on which duty has not yet been paid are kept in a bonded warehouse.

Public relations builds a good image of an organisation.

A public company may start business only after receiving a trading certificate.

The IMF is a world financial institution, not a grouping of countries for economic integration; the EU is an economic grouping.

Proximate cause is a principle of insurance; the others are types of policy or terms.

A standing order instructs the bank to make regular fixed payments.

Stock is a block of fully paid shares that can be traded in any amount.

The bank ordered to pay is the drawee.

A reduction off the quoted price to traders buying in quantity is trade discount; cash discount is for prompt payment.

Mark-up is the amount added to cost to get the selling price.

A quota limits the quantity of imports.

Ownership passes under hire purchase only when the last instalment is paid.

A consular invoice, certified by the importing country's consul, confirms the value of goods for customs duty.

Product, price, promotion and place make up the marketing mix.

A closed indent names the supplier; an open indent leaves the choice to the agent.

Infants (minors) generally lack legal capacity to contract.

The marketing concept puts consumer satisfaction first.

Ad valorem duty depends on value, which the consular invoice certifies.

Commerce covers buying, selling and distribution of goods and services.

The buyer first sends an enquiry, the seller replies with a quotation, the buyer orders, and the seller sends an invoice.

Indemnity means restoring the exact money loss, which applies to property insurance. A payment for an injury under personal accident or life cover is a fixed sum paid as compensation.

The faster stock is sold (rate of turnover), the more profit a business makes.

Moving people and goods is transport, a commercial activity, not industry.

'Errors and omissions excepted' lets the seller correct mistakes on the invoice later, protecting him.

Thrift and credit societies take savings and give loans; they do not guard members' property.

Throwing cargo overboard to save the ship is jettison.

A shipping advice note tells the buyer that the goods have been shipped, giving details of the goods and the ship; a certificate of origin shows only where goods were made.

Copyright protects an author's work.

(a) (i) Trade; (ii) Foreign trade; (iii) Retail trade; (iv) Wholesale trade (iii and iv in either order); (v)–(viii) any four aids to trade: banking, insurance, transport, advertising, warehousing, communication, tourism.
(b)(i) Primary production – extracting raw materials from land, sea or air, e.g. farming, fishing, mining.
(ii) Secondary production – turning raw materials into finished goods or structures (manufacturing and construction), e.g. textile making, building.
(iii) Tertiary production – providing commercial and personal services, e.g. banking, teaching, nursing.

Commerce divides into trade (home and foreign) and aids to trade.

(a)(i) Limited liability – members can lose only the amount they invested (unpaid on shares); their private property is safe.
(ii) Separate legal entity – the company exists in law apart from its owners; it can own property, sue and be sued in its own name.
(iii) Certificate of incorporation – document issued by the Registrar (CAC) showing the company is registered and legally exists.
(iv) Participating preference shares – preference shares that receive a fixed dividend first and also share in remaining profits after ordinary shareholders are paid.
(v) Ordinary shares (equities) – shares whose holders own the company, vote, and receive variable dividends after preference shareholders; they bear the greatest risk.
(b) Any five: provide essential services at low cost; create jobs; prevent private monopoly exploitation; undertake projects too big for private investors; promote even development; government revenue; protect strategic industries; improve standard of living.

Define each term in (a) clearly.

(a) The channel of distribution is the route by which goods pass from the producer to the final consumer.
(b) Any four, as arrow diagrams: Producer → Wholesaler → Retailer → Consumer; Producer → Retailer → Consumer; Producer → Consumer; Producer → Agent → Wholesaler → Retailer → Consumer; Producer → Wholesaler → Consumer.
(c) Any five, explained: same currency – no foreign exchange problems; same language and culture; fewer documents and simpler procedures; shorter distances, quicker delivery and lower transport costs; no customs duties/restrictions; less risk; easier to know customers and settle disputes under the same law.

Draw each channel with arrows from producer to consumer.

(a) Credit is the receipt of goods, services or money now, with a promise to pay at a future date (usually with interest).
(b) Six principles, explained: utmost good faith – disclose all material facts; insurable interest – must suffer loss if the event happens; indemnity – restored to position before the loss, no profit; contribution – insurers of the same risk share the loss; subrogation – insurer takes over the insured's rights after paying; proximate cause – the main cause of loss must be an insured risk.

Each principle needs a one-sentence explanation.

(a) Any five, explained: perishability – need fast transport; availability of refrigerated (cold) vehicles or containers; speed of the means; cost of transport compared with value of goods; distance; safety/reliability; quantity of goods; urgency of delivery; availability of storage at destination.
(b) Any five: very expensive; unsuitable for bulky, heavy goods; limited carrying capacity; affected by bad weather; needs airports, so no door-to-door service; risk of crashes with total loss; high cost of building airports; noise/pollution.

Frozen goods need speed and refrigeration.

(a) Market segmentation is dividing a market into groups of consumers with similar characteristics or needs, so each group can be targeted.
(b) Any six: age; sex; income; geographical location; occupation; education; religion/culture; lifestyle; family size; social class.
(c) Any five: creates awareness of products; increases sales; informs/educates consumers; introduces new products; helps meet competition; supports mass production and lower costs; creates jobs; builds brand loyalty.

(b) asks for the bases on which markets are divided.

(a) A contract is a legally binding agreement between two or more parties.
(b) Any five: offer; acceptance; consideration; capacity of the parties; intention to create legal relations; legality of object; genuine consent; certainty of terms; proper form where required.
(c) Any four, explained: performance; agreement; breach; frustration; operation of law (death, bankruptcy); lapse of time.

Name each way of discharge and explain it briefly.

(a) Indent – an order sent by an importer to a foreign supplier or indent agent; it may be open (agent chooses supplier) or closed (supplier named).
(b) Bill of lading – issued by the shipowner; a receipt for goods shipped, evidence of the contract of carriage and a document of title.
(c) Consular invoice – invoice certified by the importing country's consul in the exporting country, confirming the value of goods for customs duty.
(d) Certificate of origin – document stating the country where the goods were produced, used to fix duty/preferential tariffs.
(e) Bill of exchange – an unconditional written order by one person (drawer) to another (drawee) to pay a sum to a named person at a fixed or future date; used to settle foreign trade debts.

Say who issues each document and what it is for.

(a) Nationalisation is government taking over ownership and control of privately owned businesses; indigenisation is transferring ownership and control of businesses from foreigners to citizens (private or public).
(b) Any six: to give citizens control of the economy; to reduce foreign domination; to stop profits being sent abroad (capital flight); to create jobs and train local managers; to encourage local entrepreneurs; to promote economic independence; to raise citizens' income; to develop local technology.

The key difference: nationalisation – to government; indigenisation – to citizens.

(a) Issued capital = 30,000 × ₦20 = ₦600,000.
(b) Authorised capital = 80,000 × ₦20 = ₦1,600,000; unissued capital = 1,600,000 − 600,000 = ₦1,000,000 (50,000 shares × ₦20).
(c) Total assets = motor van 90,000 + buildings 65,000 + stock 60,000 + debtors 15,000 + cash 5,000 = ₦235,000.
(d) Current assets = 60,000 + 15,000 + 5,000 = ₦80,000; working capital = 80,000 − creditors 35,000 = ₦45,000.

Creditors are a liability, so leave them out of total assets.