WAEC Commerce 2021 past questions and answers

When people specialised, each produced more of one item than they needed, so exchange (trade and its aids) became necessary. That is how commerce began.

Manufacturing turns raw materials into finished goods, e.g. cotton into cloth.

Primary products come straight from extraction (farming, mining, fishing). Cocoa beans are harvested; textile, palm oil and flour have been processed.

Commerce covers all activities (trade and aids to trade) involved in distributing and exchanging goods and services.

"Limited" signals limited liability: shareholders can lose only the amount they put into their shares.

Carpenters, masons and bricklayers are classed under construction, the branch of industry that builds houses, roads and other structures.

Only a public limited company can offer its shares to the general public and have them quoted on the stock exchange.

A chamber of commerce brings together traders, manufacturers, bankers and others in an area, so it represents many kinds of business.

When goods are sold on credit some buyers never pay, so bad debts rise.

A department store is one large building divided into sections, each run like a separate shop. A chain store is a set of similar branches spread across different towns.

A cartel is an agreement among producers of the same product to limit output and fix prices while each firm stays independent.

A trade association exists to protect and promote the interests and welfare of the firms in that trade.

Dumping is selling exports abroad more cheaply than at home, often below cost.

A closed (specific) indent names the supplier; an open indent leaves the choice of supplier to the agent.

A partnership can end by agreement, by serious disagreement or when the venture it was formed for is completed. The end of a business year is just an accounting date, not a reason to dissolve.

Balance of trade = visible exports − visible imports. A negative figure means imports were greater than exports.

The customs and excise authority (e.g. Nigeria Customs Service) assesses and collects import duties. Clearing and forwarding agents help importers clear goods but do not collect duty for the government.

A credit note corrects an overcharge on an invoice (or allows for goods returned), reducing what the buyer owes.

Average stock = (opening stock + closing stock) ÷ 2 = (4,000 + 12,000) ÷ 2 = ₦8,000.

Cost of goods sold = opening stock + purchases − closing stock = 4,000 + 17,000 − 12,000 = ₦9,000.

A quotation goes from seller to buyer; if the buyer accepts the terms, he replies with an order.

A bureau de change exists to exchange (buy and sell) foreign currencies.

"E & O E" (errors and omissions excepted) on an invoice lets the seller correct mistakes later.

Perishable goods such as fish or fruit spoil quickly, so they need a fast means of transport.

In re-insurance an insurer passes part of a big risk it has accepted to other insurance companies, so no single company bears all of it.

Competitive advertising tries to win customers away from rival or substitute products, here beef.

The marketing concept says a firm should find out what consumers want and plan everything around satisfying them.

An agent acts for a principal and makes contracts between the principal and third parties.

Privatization is the sale of government-owned enterprises (or their shares) to private individuals and firms.

Standards organisations (e.g. SON in Nigeria) set and enforce quality standards for goods.

Consumer sovereignty means the consumer is 'king': what consumers choose to buy decides what firms produce. Caveat emptor means 'let the buyer beware'.

Private owners aim at profit, so services the public needs but which do not pay may be neglected or priced highly.

Window display arranges goods behind the shop's glass front to attract people walking past.

Commercialization keeps the firm in government hands but makes it run on business lines and aim to make a profit.

Tourism is a service sold to foreigners who spend money in the country, so it earns invisible exports.

The EU is an economic union whose members trade freely with one another, removing tariffs and quotas between them.

A patent gives an inventor the sole right to make and sell his invention for a period. A trade mark only protects a brand name or logo.

Planning means setting goals and deciding how to achieve them.

ECOWAS aims to promote trade and economic cooperation, so goods and services move freely among West African states.

(a) Merger: two or more companies agree to combine into one, usually forming a new company, and the old ones cease to exist separately.
Acquisition (takeover): one company buys a controlling interest in another; the buyer continues and the bought company loses its independence or disappears into it.
(b) Any five, each explained:
- Brings goods from producers to consumers (distribution) wherever they live.
- Creates employment for traders, bankers, transporters, insurers etc.
- Raises the standard of living by making a wide variety of goods available.
- Provides government revenue through taxes, duties and fees.
- Encourages production and specialisation by widening the market.
- Promotes international trade and friendly relations between countries.
- Banks and other financial institutions provide funds for development.
- Insurance reduces business risks; warehousing ensures steady supply.
- Advertising and communication spread information about goods.

Part (a) needs a clear contrast: new combined firm vs one firm buying another.

(i) Interest is the reward for capital (paid to lenders, fixed, whether or not there is profit); profit is the reward of the entrepreneur, what is left after all costs.
(ii) A share is part ownership of a company and earns a dividend that varies with profit; a debenture is a loan to the company that earns fixed interest and is repaid before shareholders on winding up.
(iii) Ordinary shareholders are paid last and their dividend varies, but they have voting rights; preference shareholders receive a fixed-rate dividend before ordinary shareholders and usually have no vote.
(iv) Cumulative preference: unpaid dividends of bad years are carried forward and paid later; participating preference: besides the fixed dividend, holders share in extra profit when profits exceed a set level.
(v) Cum div: share bought with the right to the dividend about to be paid; ex div: share bought without that dividend, which goes to the seller.

Give both terms in each pair a short definition so the difference is clear.

(a) Any four: medium of exchange; measure (unit) of value; store of value; standard of deferred payment; unit of account.
(b)(i) Bull: a speculator who buys shares expecting prices to rise, so he can sell at a profit later.
(ii) Jobber: a dealer who buys and sells securities on his own account (with brokers, not the public) and earns the difference between buying and selling prices (jobber's turn).
(iii) Broker: an agent who buys and sells securities for members of the public and earns a commission (brokerage).
(iv) Stag: a speculator who applies for new shares when first issued, hoping to sell them at a profit as soon as dealing starts.

Bull expects rising prices; bear expects falling prices; stag deals in new issues.

(a) Any five: cash (notes and coins); cheques; bank drafts; postal and money orders; credit/debit cards; bank transfer (internet/mobile banking, USSD); POS; inland bills of exchange; promissory notes.
(b) Any five, explained:
- Keeping records of stock (vehicles in stock, sold, on order).
- Accounting: recording sales, purchases, debtors and preparing accounts with spreadsheets/software.
- Communicating with suppliers and customers by e-mail and social media.
- Advertising vehicles online/on a website and selling through e-commerce.
- Storing customer and supplier data for quick retrieval.
- Preparing invoices, receipts and letters by word processing.
- Searching the internet for vehicles, prices and buyers.
- Diagnosing faults on vehicles with computer-based tools.

Relate each use of the computer to the motor dealer's business.

(a) Entrepôt trade is importing goods into a country in order to re-export them to other countries, often after storing, sorting or repacking.
(b)(i) A bill of lading is the document of title used when goods are carried by sea: a receipt, contract of carriage and title between exporter and shipping company. A consignment note is used when goods are sent by an independent carrier by land (road/rail), giving details of the goods and instructions for delivery.
(ii) A bill of sight is completed by an importer who cannot give full details of the goods (e.g. the bill of lading has not arrived); it allows customs to inspect the goods so they can be valued and duty assessed.
(c) Any five: raises costs and so prices; may mislead with false or exaggerated claims; persuades people to buy what they do not need; may promote harmful goods (alcohol, tobacco); may use indecent language and images; big firms can use it to drive out small ones, creating monopoly; wastes resources in competitive advertising.

Bill of lading = sea; consignment note = land carrier.

(i) Delegation (of authority): a superior assigns part of her duties and the authority to carry them out to a subordinate, though she remains responsible for the outcome.
(ii) Any four duties of a human resources manager: recruiting, selecting and placing staff; training and developing staff; staff appraisal and promotion; handling welfare, wages and benefits; discipline and dismissal; relating with labour unions; keeping staff records; planning manpower needs.
(iii)(a) Planning: setting objectives and deciding in advance how to achieve them.
(b) Organizing: grouping tasks into departments/jobs, assigning them to people and providing resources.
(c) Directing: guiding, leading, motivating and supervising staff to carry out plans.
(d) Controlling: measuring performance against set standards and correcting deviations.

The principle is delegation; remember responsibility cannot be delegated.

(a) An economic grouping is an association of countries, usually in the same region, that agree to cooperate economically, e.g. by removing trade barriers, to promote trade and development among themselves.
(b)(i) Lake Chad Basin Commission (any three): regulate and control use of the waters of Lake Chad; develop the basin's resources for agriculture, fishing, livestock and irrigation; settle disputes among member states; protect the lake's environment and fight desertification and pollution; promote regional cooperation.
(ii) ECOWAS (any three): promote trade and economic cooperation among West African states; remove tariffs and other trade barriers; allow free movement of people, goods and services; harmonise economic and monetary policies; develop infrastructure (transport, communication); raise living standards.
(iii) Niger Basin Commission/Authority (any three): promote cooperation in developing the resources of the River Niger; coordinate dams, irrigation and hydro-electric projects; improve navigation on the river; control floods and erosion; collect and share data on the river; protect the environment of the basin.

Give three distinct objectives for each body.

(a)(i) Authorised (nominal/registered) capital: the maximum share capital a company is allowed to raise, as stated in its Memorandum of Association.
(ii) Liquid capital: cash and assets that can quickly be turned into cash (cash in hand, cash at bank, debtors) without loss.
(b)(i) Fixed assets = Equipment 150,000 + Motor van 300,000 + Fixtures and fittings 40,000 = D490,000
(ii) Current liabilities = Creditors 120,000 + Overdraft 45,000 = D165,000
(iii) Current assets = Cash at bank 25,000 + Debtors 150,000 + Closing stock 25,000 = D200,000
(iv) Working capital = Current assets − Current liabilities = 200,000 − 165,000 = D35,000
(v) Average stock = (30,000 + 25,000) ÷ 2 = D27,500

Use the closing stock (31/03/20) in current assets; use both stocks for average stock.