“O”LEVEL COMMERCE

REVISION GUIDE
SUGGESTED ANSWERS
Paper 2
November 2016
November 2015
November 2014
November 2013
November 2012
June 2012
November 2011
November 2010
November 2016
1.a) Disadvantages of specialisation

Leads to interdependency if one worker is absent resulting in delays. Repetition of same tasks
is boring or monotonous. Automation leads to unemployment and there are limited choice of
goods. Specialisation have also resulted in industrial fatigue and absenteeism of workers.
Craftmanship is also lost.

b.) Differences between primary production and secondary production

Primary production is the first stage of production whilst secondary production is the second
stage of production. Primary production involves the extraction of raw materials from the
surface whereas secondary production involves the processing of raw materials into semi­
finished or finished goods. Examples of primary production are mining and forestry whilst
that’s of secondary production include tanning or dam building.

c.) Problems of barter transactions

Storage facilities­goods are stored for long periods and it creates problems for perishables.
Long distances are involved in searching for the goods.
Some goods are heavy to carry looking for goods to exchange.
Lack of divisibility­some goods are difficult to divide because dividing goods may result in
wastage.
Difficulties in valuing goods­it is difficult to determine how much of a given commodity can
be exchanged for another, for example how many goats are equivalent to a cow.
It requires double coincidence of wants­an individual who has a commodity to exchange has
to find someone who wants what he/she has and also has a commodity he/she wants. Manu
has a goat and wants a bag of maize but Rufaro has a bag a maize but wants a sheep. It will
be difficult for the two to transact.
2a.) Functions of wholesaler to consumer
­ Provides a variety of goods
­ Gives advise
­ Breaks bulk
­ Sells goods
­ Stores goods
­ Delivers goods
­ Evens out flow of goods
b.) features of mobile shops
­ Sell a variety of goods
­ Use vehicles as moving shops
­ Move in search of customers
­ Are small scale retail shops
­ Usually sell goods on cash basis
­ Saves time going out for shopping
c.) Similarities of Hire purchase and Credit sale
­ Payments are by instalments
­ Customer uses the goods while paying for them
­ allows customer to buy expensive goods
­ Both are forms of credit
­ Interest is charged
­ It improves standard of living
­ There is immediate possession of goods
3a) Purposes of a partnership deed
It is used when forming a partnership when the partners do not wish to use the Partnership
Act (1890). It specifies the following:
­ Duties of partners
­ Profit sharing ratio
­ Salaries to be paid to partners
­ Amount of capital to be contributed by each partner
­ Responsibilities of partners
­ Procedure of settling disputes
­ Conditions of admission of new partner
­ Conditions of dissolution of partnership
b.) Factors determining the size of a business
No of employees­small companies have few workers whereas big companies have many
workers.
Size of market­the larger the market the larger the business.
Capital invested in the business­small businesses require less capital whilst big businesses
require large capital.
Nature of business activities­some businesses may not be operated on a large scale, for
example hair salons and barber shops.
Managerial skills of owner­the ability to operate business at a large or small scale depends on
the managerial skills of owner.
c.) Sources of revenue for local authorities
­ Licences fees from shop owners and vendors
­ Grants from government to subsidise certain services
­ Interest charged on overdue accounts
­ Profit from businesses operated by local authorities, for example, beer halls
­ Rents paid for use of local authority stadiums, halls and recreational facilities
­ Rates levied on value of property to finance refuse collection
4.a) Difficulties faced by traders when selling in foreign markets
­ Differences in languages, religions, laws and regulations, customs and
measurements and weights
­ More paperwork is involved
­ Long distances are involved
­ High insurance costs
­ Difficulties in obtaining payment
b.i) Functions of Certificate of insurance
It is an insurance policy that give details of policy provided for goods in transit. It shows risks
covered and is required when making an insurance claim. It cover all exports within a
specific period or may be a specific policy to cover a specific cargo. It is also required in
documentary credit.
ii) Functions of Consular invoice
It assists customs officials to calculate duty as there is no need for customs officials to further
inspect goods when calculating duty. It prevents cheating when assessing duty and speeds up
clearing and delivery of goods. It may be used by customs officials to prohibit importation of
banned goods. However it contains:
­ Prices of goods
­ Shows date of issue
­ Quantities
­ Description of goods
c.i) Visible trade balance = visible exports­visible imports
= $50 000­$10 000
= $40 000
ii.) Invisible trade balance = invisible exports­invisible imports
= $18 000­$14 000
= $4 000
iii.) Current account balance = visible trade balance + invisible trade balance
=$40 000 + $4 000
=$44 000
5.a) Importance of Building Society
­ Keeps money safe
­ Provides mortgage facilities
­ Issues cheques on request
­ Operates stop order facilities
­ Gives investment advice
­ Issue bank cards
­ Provides loans
b.) Benefits of a savings account
­ There is use of ATM card
­ Ideal for small savings
­ Low opening and minimum balance
­ Withdrawals are made without notice
­ Earns interest
c.) Differences between Direct Debit and Standing Order
A direct debit is used for paying varying amounts at irregular intervals whereas a standing
order is used for paying fixed amounts at fixed intervals. Direct debit is usually used for
payments of electricity bills whilst standing order is used for payments of premiums. Direct
debit is initiated by the creditor whilst standing order is initiated by the debtor. Direct debit is
used when one completes a direct debit authorisation form whereas on standing order a
bankers order form is completed.
6.a) Examples of Business Risks include
­ Theft
­ Bad debts
­ Injury to workers
­ Injury to customers
­ Plate glass
b.i) Employers liability
It is taken out by the employer to cover claims by employees who get injured at work due to
negligence of employer ,for example if a worker get injured on the head by not wearing a
crush helmet. It is compulsory under the workmans compensation.

ii.) Public liability

It is take out by the employer to cover the business against claims by customers who get
injured on the traders premises due to company negligence. For example if a customer is
injured by a falling shelf or a customer who fractures a leg due to a slippery floor in a shop.

c.) Reasons why ABC get compensation

ABC Ltd will receive $6 000 according to the principle of contribution and indemnity. Both
insurers will share the loss by paying $3 000 each. The principle of indemnity ensures that
the individual is restored to former financial position thus preventing ABC Ltd from making
profit out of a loss.

7.a) Advantages of telex to a trader

It is quick in sending and receiving messages and messages can be corrected before
transmission. It provides written records and also can operate unattended. Stored information
can be retrieved.
b.) Electronic Mail
It make use of a computer connected to a telephone circuit and modems. Messages can be
typed and send from one computer to another or to several computers at the same time. It is
also fast.
c.) Differences between Private Bags and Postal Boxes
Private bags make use of bags made of canvas whilst postal boxes make use of metal boxes
on outside walls of Post Office. Private bags allow sending and receiving of mail whereas
postal boxes is used to collect mail only. On private bags mail is collected when the post
office is open ( during working hours) whilst when using postal boxes mail can be collected
anytime. Lastly mail collected using private bags is signed for whereas mail collected using
postal boxes is not signed for.
8.a) Advantages of rail transport
It is cheap and fast over long distances and is ideal for heavy and bulky goods. Rail transport
carry goods of different sizes and shapes. It is not easily affected by bad weather conditions
Carry goods in containers. It has large carrying capacity and travel on scheduled timetable
There are fewer accidents and there is no congestions. Rail transport can be electrified for
speed delivery.
b.) Reasons why some retailers have own transport systems
So as to collect and deliver goods anytime and this will minimise delays in delivery of goods.
There is less damage and theft. Own transport is independent of public transport strikes and
vehicles can be hired out to earn extra income. It is a status symbol of having own transport
and workers can be ferried to and from work. Vehicles can carry return loads on there way
back. It creates personal contact with customers because drivers are able to deal with queries.
c.) How containerisation has improved transportation of goods by air
There is less handling of goods and theft is reduced. There is mechanised loading and
unloading leading to speedy delivery of goods. There is less packaging and reduced freight
charges. There are also specialised containers for special cargo carried by special planes.
Lastly there is increased volume of goods to be ferried.

9.a) Purpose of the Code of Advertising Practice

It states the basic standards for advertising that is the rules that govern all advertisers. It
guards against disparaging advertisements so as to ensure that there is fair competition when
advertising. It also ensures that all advertisements are legal, ethical, honest and truthful.
b.) Generic (Collective) Advertising
It is form of advertising that is undertaken by a number of producers in the same industry
collectively. It promotes a product in general and it does not use brand names, for example,
milk is good for you. There is no competition among producers when advertising. It is
financed by a trade association on behalf of members.
c.) Ways consumers can protect themselves against exploitation from traders
Exercising care in credit commitments. Need to do window shopping to compare prices and
quality. Consumers need to check for expiry dates and quantity. Inspecting goods for defects
before buying is also another responsibility that should be done by consumers. Consumers
need to check for spare parts before buying goods and also knowing their rights and
legislation. Making shopping lists before buying is another important way of avoiding
exploitation. Lastly consumers should read advertisements and labels carefully.
November 2015
1. Explain the factors of production (20)

Land

Land is the site on which production takes place and it includes all the natural
resources and agricultural land or seas. There is no cost of production. The reward for
land is rent.

Labour

It is the effort put in by people in the production of goods and services. However it
can be physical or mental. Labour is a mobile factor of production and its reward is
wages or salaries.

Capital

It is money or wealth put aside for production of further wealth and to start a business.
It can be assets brought in the business by the owner, for example equipment. It can
be fixed capital and working capital. Its reward is interest.

Enterprise

It is the ability to combine all other factors of production to produce goods and
services. However it takes risks to run and manage the business as this involves time,
money and effort. The reward is profit.

2.a) Factors considered before starting a small retail business

One must have adequate capital to finance the business. Should have managerial skills. The
retail outlet must be accessible by different modes of transport. There is also need to consider
competition from other businesses and avoid staring similar businesses. Other factors to take
note of are the legal requirements needed when starting the business, storage facilities for the
goods. Lastly one need to employ qualified people when running the business.

b.) How Mrs Banda benefits from the services of a wholesaler

to start with, the wholesaler breaks bulk and sell goods in smaller quantities. Wholesaler
deliver goods to the retailer and also offering credit facilities. Advises retailer on display
techniques and receives complaints or suggestions from retailer and passes them to the
producers. Informs retailer of new product development. The wholesaler bears risk by storing
goods to prevent theft, brands and packages the goods.

3.a) Characteristics of international trade

It is trade between countries and it involves importing, exporting, re­exportation of imported

goods. However it involves the following:
 ­long distances are involved
­many documents are used
­uses foreign currencies
­high transit risks and insurance costs
­different languages are used
­different cultures and religions are used
b.) Reasons for controlling bonded warehouses

To ensure that goods are not manufactured but can be branded, bottled, graded or packed.
Allowing goods to mature and enabling entrepot trade. To ensure that goods are only
removed from the bond through a customs warrant.

c.) Reasons for collecting of customs duty

To raise government revenue and discouraging consumption of harmful goods. To prevent

dumping of goods and safeguarding local employment. This will also protect infant industries
and correcting unfavourable balance of payment by encouraging consumption of local goods.

4.a) Advantages of partnerships

More capital is raised and there is sharing of ideas hence quality decisions are made. There is
sharing of duties and burden of loss is share among the partners. Few legal requirements are
needed to start the business.

b.) Importance of the stock exchange

It lists and delists some companies after examining and assessing their performance. It also
acts as a barometer of the wellbeing of the economy of a country and quotes and publishes
prices for shares. Members of the public are also educated through the outreach programmes.
It sets out a code of conduct for dealers so as to protect investors from unfair business
dealings. Provides investors with names of reputable companies and by controlling the
admission of new members.

5.a) How the Central Bank assist the government. (10)

Raises government revenue through selling treasury bills and supervising financial
institutions. Manages national reserves such as gold. Issues notes and coins while replacing
worn out notes and coins. It also formulates and implements the countrys monetary policy
and regulating allocation of foreign currency. It is banker to the government and lastly it
regulates money supply in the country.

b.) Information required by bank before granting a loan to a customer (10)

Customers personal details (name, address, date of birth). Customers financial position that is
bank statement and a payslip (proof of income). Purpose of the loan and amount required.
Customer also need to provide proof of residence and collateral security. Lastly information
of the customers guarantor and trade references.
6.a) Why traders need efficient postal and telecommunication services (10)

It provides speedy contact between buyer and seller as well as between employer and
employee in an organisation. Communication enable settling of queries and lodging of
complaints. It allows dialogue to take place. It also allows sending and receiving of orders,
documents, payments and information through cellphones or mail.

b.i) Importance of Dash on Delivery (5)

Used when sending goods through the post office so as to avoid bad debts. The post office
collects the amount due on behalf of the consignor when goods are received through the post
office. The seller will be unwilling to allow a period of credit to buyer. Consumer does not
send money in advance.

ii.) lmportance of Datel (5)

It is used to send and receive computerised information quickly from one computer to site to
many computers over any distance. Information is displayed on computer screens, stored ,
retrieved and printed. Information may be corrected before sending. Datel is mainly used
when trading on Foreign Exchange markets.

7a.) How a manufacturer of clothes is assisted by insurance (10)

It provides cover when loss occurs. Provide cover against risks such as theft from factory or
premises. Provides cover against dishonesty employees who handle money through fidelity
guarantee and it instils confidence in the manufacturer. Provides public liability to cover for
the public who might get injured in the company premises. Provides cover against raw
materials, clothes or finished goods and also goods in transit. Covers bad debts through
(ECGD) Export Credit Guarantee Department. Provides consequential loss to cover losses
resulting from another insured loss.

b.) lmportance of pooling of risks (10)

Many people facing the same type of risks contribute premiums into a common pool
regularly. In the event of the loss, money is taken from the pool to compensate the
unfortunate member. The fortunate members help the unfortunate. The remainder is invested
leaving profit for the insurer. The burden of loss is shared.

8a.) Reasons for sending goods by air transport (8)

It is fast over long distances and there are lower risks of theft and damage to goods. Carry
low bulk, high valuable goods and operate on fixed routes and timetables. There are few
accidents and can carry containers. Remote and inaccessible areas can be reached by air, for
example rescue operations during floods. It is suitable for carrying urgently required goods

8b.) Similarities of bill of lading and charter party (6)

Both documents are used in international trade and shows names of shipping company and
hirer. They are transport documents used in sea transport and are used as contract of carriage
which are prepared by the shipping company.
Differences of bill of lading and charter party (6)
A bill of lading is an agreement to carry goods whilst a charter party is an agreement to hire a
ship. A bill of lading is a document of title whereas a charter party is not a document of title.
A bill of lading is a quasi­negotiable instrument whilst a charter party is not a quasi
negotiable instrument.
9a.) Purposes of advertising (10)

To increase sales and profits. To educate consumers on health and safety. Informing the
general public about prices of goods, where to buy the goods and how to use the goods.
Advertising helps in improving the image of the company and persuading customers to buy.
It helps in fighting negative publicity and recruiting of skilled labour.

However, to a lesser extend the main purpose of businesses might not be to increase sales but
rather improving its market share and educating the general public about important issues.
Another important issue is of informing people about the dangers of different products.

b.) Explaining Consumer Rights (10)

The right to choose­consumers must have access to a variety of goods and services.

The right to be informed­ consumers must be provided with correct information about goods
and services.

The right to basic needs­consumers must have access to basic necessities such as food,
clothing and shelter.

The right to consumer education­consumers must be provided with knowledge of their rights.

The right to be heard­consumers must be allowed to complain and express their views.

The right to redress­consumers must have fair settlement of just claims or return unfit goods.
 NOVEMBER 2014
1. (a) Explain any two factors of production.

Land – This is the site on which production takes place. It includes all natural
resources. Examples include seas, forests. Reward is rent.

Labour­ This is the effort put in by people in the production of goods. Usually
labour can be in the form of body or mind. Reward is wages or salaries. [6]

(b) How is a manufacturer of tractors assisted by the services of warehouse? Explain

three points.
Safekeeping of spare parts (tyres, spanners) and other machinery. Protects tractors
from harsh weather conditions. Storing tractors whilst in transit. Allows the
manufacturer to manufacture more tractors due to space created by warehousing.
[6]
1. (c) Distinguish between direct and indirect production

DIRECT PRODUCTION INDIRECT PRODUCTION

This is when one produces goods and services This is when one produce goods and services in
for own consumption surplus for sale

Example ­ subsistence farming Example – commercial farming

Poor quality goods are produced Quality goods are produced

Lack of variety Variety of goods available

No surplus There is surplus

2. (a) What are features of discount houses?

Explain any three.

 Large scale retail outlets outlet found in the private sector.

 Sell goods on cash and carry basis.

 Located in busy shopping centres not in city centres.

 (b) Explain six functions of del­credere agents.

Guarantees payment to the principal. Get a higher commission. Possess the goods
they sell. Sell goods in their own customers. Deliver goods to their customers.
Have insurable interest in the goods they sell.
[6]

2. (c) Give four comparisons between a credit note and a debit note.

CREDIT NOTE DEBIT NOTE

Used when supplier owes buyer money Used when buyer owes supplier money

Shows credit note number Shows debit note number

Shows overcharged amount Shows undercharged amount

Usually printed in red or pink Usually printed in black

3. (a) State six reasons for creating public enterprises (parastatals).

 Improve efficiency by reducing monopoly.

 To raise government revenue.

 To pursue viable pricing.

 Reduce burden on the taxpayer.

 There is also need to free the firms from political control.

 Improve the quality of goods.

 To allow member of the public to invest in the parastatals so as to be

accountable. [6]

(b) In relation to stock exchange, explain the terms

bulls,
bears,
stags.

Bulls ­They anticipate that share prices will go up so they buy now in order to sell
them latter.

Bears ­They anticipate that share prices will fall so they sell the shares now in order
to buy them latter.
Stags ­Buys all new shares of a company which have not been bought by members of
the public. [6]

3.c Fixed Capital

Consists of fixed assets.

Premises $4 000

Machinery $2 000

Fixed Capital $6 000

Circulating capital

Consists of current assets

Debtors $1 450

Prepayments $1 000

Cash $2 550

Circulating capital $5 000

Working Capital

Current Assets less current liabilities

Current Assets $ $

Debtors 1450

Prepayments 1000

Cash 2550

5000

Less Current Liabilities

Bank overdraft 800

 200 1000

Working Capital 4000

Gross capital employed

Total Assets plus Current liabilities

Premises $ 4 000

Machinery $ 2 000

Debtors $ 1 450

Prepayments $ 1 000

Cash $ 2 550

Gross capital employed $11 000 [8]

4 (a) Who are export merchants?

 These are traders who buy goods from local manufacturers.

 Sell the goods abroad.

 They buy and sell goods in their own names.

 They transport the goods, store the goods and also advertise the goods.

 Sell the goods at a profit.

(b) Explain three methods used to rectify a balance of payment deficit.

 Making imports more expensive by devaluing the local currency.

 Discourage consumption of imported goods by charging high customs duty.

 Reduce imports by rationing foreign currency allocation. [6]

4 (c) Why does Zimbabwe revenue Authority (ZIMRA) keep statistical records
of imports and exports?
 To show the movement of imports and exports in Zimbabwe.
 To help the government in taking corrective measures when there is an
unfavorable balance of trade or unfavorable balance of payments.

 To enable the government to:

 Determine the needs of its citizens.

 Calculating the balance of trade and balance of payments.

 Evaluate the effectiveness of its tax collection system. [8]

5 (a) List six advantages of making payments by cheque.

 Convenient than carrying cash.

 One does not need to count cash.

 Cheque may be post­dated.

 Cheque can be drawn anytime.

 Cheque can be endorsed in favour of a third person.

 Cheque is safe if crossed. [6]

(b) In relation to commercial banks, describe the importance of a cable

transfer.
It is a safe and fast way of sending money. Payment is made in foreign
currency. Payments can be made using telephone or cable transfer. It is
method used in sending and receiving money. Money is insured during

transit. [7]

5 (c) On 2 February 2006, Mrs Jones who banks with FBC Bank, Mutare, bought
goods valued at $2 000 from ABC Wholesaler and settled the debt using a
specially crossed cheque.

Sketch the cheque showing all the details.

FBC Bank Mutare Branch

Date: 2 November 2006

Negotia
Not

ble

Pay ABC Wholesalers or Order

The sum of: Two Thousand dollars only

Jones

[7]
6. (a) What are insurable risk?
 These are risks that have past consistent records, for example fire.

 They can be assessed and then a fair premium will be fixed.

 Probabilities can be calculated.

 Claims can be covered leaving profit for the insurance company.

[5]

6 (b) Explain the importance of the following in insurance:

Underwrites,
Cover note.
(1) Underwrites
 Owners of the insurance company.

 Assess risks

 Charge and collect premiums.

 Can re­insure big risk

 From syndicates to cover big risks.

 Pay commission to brokers.

 Earn profit as remunerations.

 (2) Cover note

 It is a temporary insurance certificate.

 Issued after payment of the first premium.

 It contains terms and conditions of contract.

 Used to claim compensation in the event of a loss.

[10]

6 (c) A factory valued $8 000 was insured for $10 000 against the risk of fire.
State, with reasons. How much the owner will receive if the factory is
damaged by fire.
 The owner will receive $8 000 because one cannot claim more than the actual
loss.

 The Owner will only be restored to his/her former position.

 The owner (insured) should not gain from the insurance company (insurer)

 The insurer is the only one that should make profit.

 The owner over insured the factory by $2 000. [5]

7(a) State any six importance of internet to a business.

 Sends information
 It is cheap and fast when communicating.
 Receives information.
 Stores information.

 Information can be retrieved.

 It shows worldwide information for example sports, news.

 Internet can also be used for research purposes.

7 (b) Explain the advantage of using a telephone in communication.

 It is fast in sending and receiving messages.

 Calls can be made locally or internationally.

 Reply is immediate, if the telephone is attended.

 It offers a variety of services, for example reverse charge calls. [6]

7 (c) Differentiate free post and business reply service.

FREE POST BUSINESS REPLY SERVICE

Mail is written free post on top Mail is written business reply service

No licence number is given Licence number is given

Used by individuals Used by mail order firms

Sender pays a surcharge on usual postage on Sender pays a on usual postage on mail
mail that is returned returned

It is an expensive service It is a cheaper service

No deposit is paid Deposit fee is paid

[8]

8 (a) Describe any three importance of transport to a primary producer of ore.

Transporting raw materials to the production site so that workers can

work. Transporting workers to and from work. It enables the transportation of
equipment and machinery. Moving waste materials to dumping site/ground
[6]
8 (b) Giving reasons, state the most suitable mode of transport to carry oil from
Beira to Mutare.
The most suitable mode is pipeline because of the following reasons. It moves
large volumes of oil. It is ideal for transporting liquids like oil. Oil is protected
from contamination. There is less risk of theft of the liquid while in transit. There
is a continuous flow of oil. Transporting oil using pipeline is also fast and safe. [7]
8 (c) How do you account for the fact that most freight carried within Zimbabwe
is by road?
 Many/most places in Zimbabwe are accessible by road.
 Road transport is cheap over short distances.
 Most places in Zimbabwe require door to door delivery service which can only
offered by road transport.
 Road transport also can operate on flexible routes and time tables.
 Road transport offers a wide variety of vehicles which suits most loads. [7]
9 (a) State six benefitsof advertising to a business.
 Increasing sales and profits.
 To fight adverse publicity.
 To fight competition.
 To improve company’s image.
 To maintain sales.
  To remind customers of existing products.
 To maintain sales. [6]
9 (b) Explain any three methods of appeal used in advertising.
Ambition: This is when a successful person is used to advertise a product.
Personality appeal: This is when prominent people are used to recommend
certain products
Romance: this method of appeal tries to connect the use of a product to success
with opposite sex.
9 (c) Why might a company find it necessary to use the services of an advertising
agency?
A company will need the services of an advertising agency so as to:
 Carry out market research on consumer tastes and preferences.
 Create the advertisement.
 Produce the advertisement.
 Book space and time for the advertisement either on television or radio.
 Place the advertisement.
 Monitor the success of the advertisement.
[8]

NOVEMBER 2013

1.1 Advantages of Mass Production

­ Making goods in large quantities

­ Goods are always available

­ Leads to automation

­ Leads to specialization of workers

­ Leads to standardization

­ Improves standard of living

­ Low cost of production resulting in low prices

1.2 Any three factors of Production

Land

­ The site on which production takes place

­ It includes natural resources

 ­ These include seas, lakes

­ The reward is rent

Labour

­ The effort put in by people in production of goods

­ Can take many forms that is mental or physical

­ The reward is wage/salary

Enterprise

­ The ability to run a business

­ It requires one to invest money

­ Risk in investing money

­ The reward is profit

2.1 Pre­Packaging

­ The placing of goods into containers either by producers, wholesalers and

retailers

­ Goods become easier to display

­ Prevents goods from deteriorating

­ Goods are easy to carry and handle

­ Facilitates self service method

2.2 Do it yourself products (D.I.Y)

­ These are semi­assembled kits

­ Most sold in supermarkets

­ Little skill is needed

­ Consumer assembles parts to make the finished products

­ Customer feels satisfied by doing work for oneself

2.3 Why retailers buy directly from manufacturers?

­ Cheaper prices offered by manufacturers

­ Enough capital

­ Enough storage facilities

­ Enough transport of carrying stocks

3.1 Reasons why traders give cash discount

­ It increases the rate of stock turn

­ Help to reduce bad debts

­ Save clerical work due to early payments

­ It encourage s early payment s of amounts due

3.2 Reasons why traders use quotations

­ It enables buyer to compare prices from different suppliers

­ It shows terms of payment

­ It shows prices of goods, terms of delivery

­ It shows period over which quotation is valid

3.3 Reasons why a trader would use an invoice

­ It summarizes a single transaction

­ It is an evidence of contract of sale

­ Used when goods are sold on credit

­ It shows:

Unit prices, total prices, invoice number, date of purchase

3.4 Reasons for the use of a statement of account

­ Summary of transaction over period of time.

­ Issued when goods are bought on credit

­ It is a request for payment

­ Reminds customers that payment is due

­ It shows:

a) Date of issue

b) Amount paid

c) Instalments

d) Instalment due date

4.1 Functions of Customs and Excise authorities

­ Collect revenue for the government by charging customs and excise duties

­ Collect, keep and analyze records of imported and exported goods and
services

­ Control bonded warehouses to ensure that duty is collected.

­ Supervise public health by arranging quarantine for animals

­ Supervise entrepot trade

4.2 Bill of lading

­ Required when goods are transported by sea

­ It is an evidence of receipt for goods on board the ship

­ It is a document of title which gives the bearer ownership of goods

­ It shows:

a) Name of shipping company and details of ship

b) Detailed description of goods i.e. types and quantities

4.3 Distinguish between a broker and a factor

Broker Factors

­ Does not take possession of ­ Takes possession of the

the goods goods

­ Earns a brokerage ­ Earns a factorage

commission commission

­ Do not deliver goods ­ Deliver goods to customers

­ Sell goods in the principals ­ Sell goods in his own name

name

­ Brings buyer and seller into ­ Deals directly with the

contact customer

5.1 Purposes of a Memorandum of Association

­ It is an application to register a company

­ Used during the formation of a company

­ It deals with the external world

5.2 Contents of a Memorandum of Association

­ The name of the company

­ Address of the company and that of its registered office

­ Purpose of the company

­ The classes of shares to be issued

­ The amount of share capital to be issued to shareholders

5.3 Advantages of a sole trader

­ Easy to run and control

­ Has few legal formalities

­ Can be set up with a small amount of money

 ­ Operates for long hours

­ Owner is able to make quick decisions

­ Profits are not shared

Disadvantages of a sole trader

­ Lacks specialized skills

­ Prices of goods are usually high

­ Lacks adequate capital for the day to day running of a business

­ Suffers unlimited liability and may lose personal asserts in case of insolvency

6.1 Distinguish between a current account and a deposit account

Current Account Deposit Account

­ User uses cheque book ­ No cheque book issued

­ Withdrawal is prompt ­ Notice of withdrawal is

required

­ Ledger fees are charged ­ No ledger fees are charged

­ Interest is received on credit ­ Interest is high

balance

­ Offered by commercial ­ Offered by all institutions

banks only

­ Offers stop order ­ does not offer stop order

6.2 Characteristics of money

­ Acceptability – Money should be acceptable

­ Durability – Money should restore its value

­ Divisible – Can be separated into different denominations

­ Scarcity – Money should not be found anytime

­ Uniformity – Should be similar e.g. $5 notes

­ Portable – Should be carried around easily

 7.1 Importance of statistics in insurance contracts

Contracts are based on the probability of an event occurring. Statistics helps to:

­ calculate probabilities

­ provide information of past records

­ fix fair premiums based on past records

­determine whether or not to accept a risk

7.2 Embezzlement of funds – fidelity guarantee

­ Taken out by the employer

­ It covers against dishonesty of employees who hands money

­ Provides security to employer against embezzlement of funds

­ Insurer (insurance company) restores money stolen by the employee if

convicted in the courts of law

7.3 Injury to customers – Public liability

­ Taken by the employer

­ Cover claims made by the public who get injured within a firm’s premises ,for
example a customer injured by a falling shelf.

­ Business is imdemnified.

7.3.1.1.1 Value $50 000

Insured for $30 000

Value destroyed $25 000

$30 000 x $25 000 = $15 000

 $50 000 1 compensation

7.4 Reasons for the amount of compensation

­ The stock was under insured

­ To get $25 000 the person should have insured $50 000 not for $30 000.

­ The insured should not gain by underinsuring.

­ The insured was paying less premiums towards the risk

­ What a person contributed is what he/she will get.

8.1 Importance of internet

­ Sends information

­ Receives information

­ Stores information

­ It is cheap and fast way of communication

­ Information can be retrieved

8.2 Purpose of communication to a trader

­ Allows sending and receiving information

­ Enables contact with buyers, suppliers and employees

­ Allows lodging of complaints and settlement of queries either through letters

or telephone

­ Allows sending or receiving of documents by fax, letters etc.

8.3 Factors considered when choosing an efficient mode of transport

­ Nature of goods e.g. bread, meat

­ Distance involved in transporting the goods

­ The security of the mode of transport i.e. safety of good.

­ The urgency of delivery

­ Cost of transporting the goods

­ Accessibility of the area to which goods are to be ferried.

9.1 Importance of Informative advertising

­ Only gives the good points of a product

­ Provides precise details of goods, prices, where to buy the goods etc.

­ Give details of future events

­ Maybe used in introducing new products

9.2 Importance of Generic advertising

­ There is no competition among products

­ Used by producers in the same industry:

a) To advertise a product together

b) No use of brand names

c) Usually this is used by trade Associations

9.3 Functions of Consumer Council of Zimbabwe (C.C.Z)

­ Educate consumers on their rights

­ Encourages fair competition among manufacturers when advertising

­ Settles disputes between consumers and traders

­ Conduct spot checks to make sure that:

a) Prices recommended by government are followed

b) Standards are maintained

9.4 Importance of posters when advertising

­ Can be easily replaced

 ­ Are cheap to produce

­ Give vivid impression of an event

­ Suitable for local advertisement

­ Provide record of advertisements

­ Easy to design

­ Can use local language

­ Audience can be targeted

NOVEMBER 2012
1a) Advantages of division of labour to the worker
­ Leads to specialization
­ Higher output at low cost
­ Low prices and high standard of living
­ Produce better quality goods
­ Leads to constant supply of goods
­ Leads to automation
­ Leads to simplification and standardization
­ Improves skills
­ Employment appropriate talents
­ Saves on tools
 ­ Leads to production of surplus

b) Trade
- Buying and selling of goods and services in order to satisfy human needs and
wants
- Trade can be either home or foreign
- Home trade includes retail and wholesale trade
- Foreign trade includes import and export trade
- Home trade uses few documents which include receipts, letter of inquiry etc
- Trade involves a lot of documentation like Airway bill and Bill of Lading
- Under international trade there is bilateral and unilateral trade
- Bilateral trade involves two countries
- Multilateral trade involves many countries
- Trade involves aid to trade: transport, insurance, advertising, communication,
banking and warehousing

2a) Commodity Markets

These are specialised markets meant for buying raw materials. The prices of commodities
are determined by forces of supply and demand. Commodity markets deals with
commodities that are of standard quality or easily graded. Trading is carried out by agents,
Action Sales and Direct Sales. Transactions may be immediate or forward delivery at a
future date.

b) Advantages of hire purchase to the buyer

- Buyer can use the goods whilst paying for them
- Enjoys an improved standard of living
- Goods are under hire purchase during the hire purchase period.
- Payments are spread over a long period
- Can buy expensive goods e.g. car, sofas
- Profits generated by using the item can be used in paying for the item.

3a) Why do countries impose trade restrictions

- To promote local industries
- Some goods are bad for human consumption
- To create employment
- To prevent shortages
- To protect local industries
- To raise government revenue
- To protect strategic industries

b(i) Indent
Purposes
- An order to buy goods from abroad
 - Send by an importer to an agent overseas
- It can be open indent where the indent does not state the source from which
goods are to be obtained or closed indent where the indent specifies the types of
goods required or the manufacturers from whom the agents must buy the goods.
Contents
It gives details of:
­types of goods
­prices of goods
­terms of delivery
­cost of insurance
­terms of payment
­indent number
ii) Consular Invoice
Purposes
- Document used in international trade and it assist customs officials to
calcukate customs duty.
- Speeds clearance of goods and delivering of goods
- Prevents fraud in duty calculation
Contents
­Description of goods (type and quantities)
­Prices of goods
­Quantities of goods
­Date of issue
­Names and address of importer and exporter

4a) Workings
1 1
margin mark up
4 3

x
cost of sales = =5 times x =$150 000
$30 000

gross profit 1 x 1
= → =
cost of sales 3 150 000 3

gross profit =$50 000

Turn over = gross profit + cost of sales

i) Turnover = $200 000

 ii) Gross profit = $50 000

b) Factors considered in siting a warehouse

- Availability of road network
- Nearness to suppliers
- Enough space – land
- Costs involved
- Capital available
- Legal requirements needed
- Nearness to customers

c) Differentiate between cash discount and trade discount

Cash discount Trade discount

- Recorded in books of accounts - Not recorded in the books of

accounts

- Deducted at the point of - Varies with the quantity and is

payment deducted at point of sale

- Encourages early payments of - Encourages customers to buy

amount due from one particular source

- Rate is usually lower - Rate is usually high

- Discount give to customers - Given by one trader to another

who pay promptly

5a)
i) Night safe facility
- Safe guards money for traders who do their business during the night
- They lock their money in bags
- Bags are slotted into bank chutes
- Bank tellers deposit the money the next day
-

ii) Credit transfer

- Used to pay many accounts using one cheque
- A multiple transfer form is completed
- Ideal for several payment at one time
- The method is used to pay salaries.
- The payee must have a bank account

iii) Bank overdraft

 - An informal way of borrowing money
- Usually borrowed for short term periods when one needs short term capital
- Collateral security is not needed
- Interest rate is very high
- Interest is charged daily on the overdrawn amount
- There are less formalities
b)
General crossing Special crossing

- The cheque is transferable - It is not transferable

- Must be deposited in a bank - Must be deposited into a bank

account account at the started bank branch

- Has the words not negotiable - Has the name of the payees’
written between the lines bank and branch written in between
the lines

6a) Role of Insurance Assessors

- Work for insurance companies
- Assess details on the claim form
- Examine the damaged item
- Calculate the cost of the damage
- Calculate what has been damaged and recommend compensation to be paid
- Negotiate amount to be paid against a claim

b) Importance of truthful information concerning a risk to be covered

- Allows assessment of risks
- Fixing of a fair premium
- Failure to disclose the relevant details makes the contract void

c) Making an Insurance Claim

- Obtain a police report
- Insured contacts the insurance company
- Complete a claim form in
- Utmost good faith
- Insurer assess the claim form
- Insurer checks whether the loss is a resale of the risk covered
- If the insurer is satisfied the insured is indemnified

7a) Factors considered when choosing an efficient mode of communication

- Availability of the transmission
- Cost of the transmission
- Urgency of the message
 - Effectiveness of the mode
- Accuracy of transmission
- Nature of information
- Safety of transmission

b(i) Franking Machine

- Machine is rented from the Post Office
- Used when sending large volumes of letters regularly
- Save time for sticking stamps
- Save labour and is faster
- Has a meter for recording total postage

ii) Business reply service

- Service is used in market research
- Mail is written business reply service
- Sender first obtains a licence from the Post Office and is required to pay a
deposit
- Licencee only pays postage on mail returned
- Envelopes used show licence number and address

c) Importance of Telex
- Receives and send messages via a typewriter and telephone
- Provides written record
- Can operate unattended
- Message can be corrected before sending it
- Fast way of sending and receiving information
- Information can be received even if office is closed

8a) Disadvantages of Pipelines

- No return loads
- Expensive to set­up pipeline
- Limited to transportation of fluids
- Not suitable to irregular cargo
- Loss maybe high where there is a leakage
- Requires numerous pumping station if gradient is high
- Can be easily attacked by enemies in times of war

b) Importance of Freightliners
- Trains which travel over very long distances
- Travel at great speeds
- Carry goods in containers
- Carry mixed cargo
 - Operate on fixed routes and time tables
- They also link inland cities with seaports

c) Roles of forwarding agents

- Collects goods from consignors’ premises
- Earn a fee for the work they perform
- Warehouse the goods
- Arrange insurance for the goods
- Fill in the necessary documents used when transporting goods
- Ensure that goods are delivered to the importer by instructing their
representatives overseas for final delivery of goods

9a) 5 Consumer rights

The right to be heard ­Consumers must be allowed to express themselves and lodge
complaints.
The right to redress ­Consumers must be compensated for substandard goods .

The right to choose ­Consumers must have access to a wide range of goods and services.

The right to be informed­Consumers must be given facts and figures required to make
informed choices and decisions.

The right to safety ­Consumers must be protected against goods and service that are
dangerous to health.

The right to consumer education ­Consumers must be provided knowledge of their

rights
The right to basic human needs ­Consumers must have access to basic needs such as
food, water, clothing, shelter, education and health care.

b) How consumers are protected by government

- Price control Act safeguards against overpricing of goods
- Fair trading Act guards against false price cutting, hoarding and conditional
selling of goods
- Hire purchase Act guards against unfair and unlawful repossession of goods
bought on credit
- Food and drugs act guards against adulteration of goods and improper
labelling of goods
- Consumer Safety Act ensures that products are safe for human consumption
- Trade measurers Act guards against underweight, incorrect weights and
measures

JUNE 2012
1a) Secondary Production
 - The second stage of production
- It includes manufacturing and construction work
- This stage processes raw materials into finished and semi finished goods
- The processing of raw materials in factories, the building of roads, bridges and
houses is all part of secondary industry.
b) Importance of banking to a farmer
- Enables making of payments
- Provides telebanking facilities
- Provides financial advice to clients
- Provides finance through loans and overdrafts
- Enables receiving of payments through cheques, stop order etc
- Provides custody of valuables such as title deeds or certificates
- Obtains foreign currency

c) Tertiary Production
- This is the third and last stage of production
- It deals with the distribution of goods and the provision of services
- Direct services are offered to the public ,for example teaching, accounting
- Indirect services are also found on this stage and examples include Banking,
Transport
- This is an important stage because it ensures that goods reach the final user.
2a) What a Trader could do to avoid the risk of failure
- Offer personal service by being friendly
- Ensure adequate capital by getting loans from friends or relatives
- Must have business skills by taking short courses
- Consider competition by avoiding starting similar businesses
- Identity a viable market through market research
- Consider future development plans
b) Distinguish between hire purchase and credit sale
Hire purchase Credit sale

- Strictly considered by law - More flexible on legislation

- Written agreement on - Written agreement not

essential essential

- Seller can be financed by a - The seller finances himself

finance company

- The seller can reclaim the - Goods cannot be reclaimed

goods

- A minimum deposit of 20% - Rare deposits or little is paid

to be paid
 - No immediate goods - Immediate goods ownership
ownership

3a) Reasons for establishing marketing boards

- To store agricultural produce
- To prevent shortages
- To facilitate a ready market for such goods
- To reduce monopoly in selling of a good
- To even out the supply of goods
- To control the selling and buying prices

b) Advice note
- Sent by the supplier to the buyer
- It notifies the buyer that goods are on the way
- This help the customer to prepare storage facilities
- It shows ­ method of dispatch
­ date of dispatch
­ description of goods
­ names and addresses of buyer and seller

c) Features of a co­operative wholesale society

- Formed by producers
- Normally sell perishables
- Sell to co­operative members
- Sell in bulk at low prices
- Can produce own goods
- Provide variety of goods
- Each member contributes capital
- Surplus made is shared among members
- Buy from producers
4a)
i. Invisible Trade
- Trade in services only, for example tourism
- Invisible trade is calculated by the formula exported services minus imported
services
- It is favourable when exported services are more than expenditure on services
provided by foreigners.
Tourists to X $100
Transport services provided $40 $140

Tourists from X $200

Shipping services to X $20 $220
Unfavourable balance (­$80)
 ii. Balance of Trade
- Trade in goods only, for example tobacco
- It is the same as visible trade
- Balance of trade = exported goods minus imported goods
- It is favourable when exported goods are more than imported goods.

Goods sold to other countries $400

Good bought from other countries $500
Unfavourable balance (­$100)

iii. Balance of Payments

- It is the difference between Zimbabwe as total earnings and total expenditure
- Exported goods and services minus imported goods and services
- It is favourable if exports are more than imports
- It is unfavourable when imports are more than exports

($100 + $40 + $400) ­ ($200 + $20 + $50)

$540 ­ $720
Unfavourable balance = ­$180

b) Correcting unfavourable balance of payments

- Make imports more expensive by devaluing the dollar
- Discourage quantities of goods to be imported by charging high customs duty
- Reduce expenditure on foreign currency by reducing imports
- Increase exports by giving tax concessions to exporters

c) Bill of Exchange
- It is a document that facilitates payment in foreign trade (a promise to pay a
certain amount at a future date)
- Allows importer a period of credit before making payment
- Can be discounted before it matures to enable exporter to obtain early payment

5ai) Private
- Name of the company ends with “Ltd’ or “Pvt” limited
- Has a separate legal entity
 Exists as a legal person
 Independent of its owners
 Enables a company to be sued or to use in its own name
 Allows company to make contracts

ii) Limited
 - Shareholders enjoy limited liability
- Shareholders only lose amount of capital
- Invested in case of bankruptcy
- Personal property is safe­guarded

b) Disadvantages of Multinational Companies

- Interfere with a country’s political affair
- Pay high salaries hence attract skilled and experienced employees from local
companies
- Submit in foreign currency, profits made in one country (e.g. Zimbabwe) to
their parent country.
- It has got centralized control, which is foreign based does not consider needs
of Zimbabwean people.

c) Differences between shareholders and debenture holders

Shareholders Debenture holders

- Owners of the company - Creditors of the company

- Ordinary shareholders have - Debenture holders have no

voting rights voting rights

- Are paid dividends when there - Interest is paid whether or no

is profit profit is made

- Shareholders cannot force a - Debenture holders can force a

company into liquidation company into liquidation (if interest
is not paid)

- Are irredeemable - Are redeemable

- Shareholders are paid after - Debenture holders are paid

debenture holders first before shareholders

6a) Telebanking
- Customers make enquiries with regards to their accounts over the phone
- Instructions are given by customers who operate call accounts
- For security reasons a password is allocated and used whenever enquiries are
done to one’s account
- Customers can request for the following over the phone
­Cheque books
­Statements
­Deposit books
­ATM cards
b) Functions of money
- Medium of exchange – it can be exchanged for goods and services
- A measure of value – value of goods and services is expressed in monetary
terms
- A store of value – money can be saved in savings or deposit accounts
- A standard for deferred payments – goods and services are valued and paid for
later
- A unit of accounts – all transactions are expressed in monetary terms
c) Why a cheque may be dishonoured
- When the cheque is post­dated
- Account is closed
- There are unsigned alterations
- There are incomplete details e.g. no date
- The amount of words is different from the amount in figures
- The cheque is torn
- The signature on the cheque differs from the specimen in the bank
- The drawer is insane or dead

7a) Confravision
- A fast way of sending and receiving information
- Enables face to face dialogue
- Uses satellite disks and television screens to transmit images to distant places
- Used by company executives to hold meetings
- It is deep as it saves on transport, accommodation and conference expenses

b) Datel
- Used to communicate business information using a computer via a telephone
circuit
- Used in banking and forex markets
- Stores and displays data on a computer
- Information can be reprinted
- A fast way of transmitting information
- Transmits computerized accounts and information
c) Facsimile (Fax)
- Combination of a telephone and a photocopier
- Licenced by the Post Office
- Provides a written record
- Used for sending documents
- Can receive documents even when unattended
- Has a fax number
d) Private Bags
- Are used with people without street addresses to receive and send letters
 - Bags are made from canvas and are recited from the Post Office.
- Allows mail to be collected from the Post Office anytime and only during
working hours
- Each bag has its own number and is lockable
8a) Disadvantages of owning a Fleet of Vehicles
- High initial capital costs of vehicles
- Maintenance of vehicles is high
- Vehicles maybe misused
- Vehicles depreciate in value
- Vehicles maybe underutilized
- High costs of insuring the vehicles

b) Differences between liners and tramps

Liners Tramps

- Not meant for hiring - Meant for hiring

- Have permanent homes - No permanent homes

- Follow strict timetables - No fixed timetables

- Travel on fixed routes - No fixed routes

- Freight charges are fixed at - Freight charges are fixed by

conferences negotiations

c) Functions of seaport authorities

- Provide refueling facilities for vessels
- Loading and offloading facilities e.g. crates
- Provide warehouse
- Provide accommodation
- Fresh supplies of food and water
- Passenger facilities e.g. toilets
- Office space (for customs officials)
- Provides ship repair yards
- Provide communication facilities e.g. telephone
- Maintain the efficiency of a seaport
- Quarantine for animals i.e. maintain public health

9a) Code of Advertising Practice

- It enables basic standards of advertising
- It encourages fair competition
- Guards against disparaging advertisement
- It ensures that all advertisement \s are:
 ­Decent of ethical
­Honest and truthful
­Legal as required by law
b) Standard Association of Zimbabwe
- Tests goods for quality
- Issues standard specification to organizations
- Ensure that the quality of goods is maintained
- Adopts and modifies international
- Standards of products performance, safety and quality
- Authorizes companies to use the SAZ seal
- Encourages standardization or uniformity of products
- Prepares standards of products for Zimbabwean manufacturers

c) Disadvantages of Advertising to Consumer

- Advertisements interrupt television and radio programs
- Leads to impulse buying
- Leads to overspending
- Leads to higher prices if advertising campaign is unsuccessful
- Advertised goods may be harmful
- Some advertisements undermine social standards or maybe unethical, false
and misleading
 NOVEMBER 2011
1a) Distinguish between Industry and Commerce
Industry Commerce

- Includes occupations engaged - Distribution of goods and

in obtaining raw materials services

- Can be primary obtains raw - Trade can be home of foreign

materials from farming etc

- Can be secondary changing - Home trade includes retail and

raw materials into finished goods wholesale trade

- Construction assembles parts - E.g. advertising, banking,

e.g. roads, dam construction insurance, communication,
warehousing and transport.

b) How a manufacturer benefits from communication

- Enables speedy contact with buyers and suppliers
- Between employer and employee
- Allows the sending and receiving of orders
- Allows receiving and making payments
- Enables obtaining and giving information over any distance and of any time
of the day
- Allows lodging of complains and settlement of queries
- Allows dialogue to take through telex, telephone etc.

2ai) Do it yourself products (DIY)

- These are semi­assembles kits e.g. solar kits
- Most sold in supermarkets
 - Little skill is needed
- Consumer assembles parks to make the finished products
- Saves money by doing work for oneself
- Customer enjoys improved standards of living
- Customer feels satisfied by doing work for oneself

ii) Self Service

- A method of selling
- Mostly used in supermarkets, hypermarkets
- Customer can examine the goods
- Goods sold ­well displayed
­individually priced
­branded and pre­packed
- Customers shop at leisure and places goods in trolleys and baskets

b) What a retailer could do to avoid risk of failure

- Offer personal service by being friendly
- Must have business skills by taking short courses
- Choose a convenient site
- Consider competition by avoiding starting similar businesses
- Consider future development plans
- Identify a viable market through market research

3a) Indemnity
- A contract of insurance
- Restores the insured person to his former financial position
- Does not apply to life assurance
- Amount of compensation is paid to the insured
- The insured must not gain
- It comes with proximate cause that is the insurance company must ensure that
the exact cause of the risk is the one insured
- The insurance company may buy an item whose value is the same as that of
the damaged item

b) Insurable interest
- One can only insure one’s property
- The insured must be the one to suffer a financial loss if the risk occurs
- If one insures someone’s property one may be tempted to cause the risk to
occur deliberately so as to gain out of a loss
- It prevents the insured from making a profit out of a loss
- It helps the insurance company to determine whether or not the applicant is
entitled to day cover
c) Utmost Good Faith
- Insured should be honest, tell the truth
- Must show all relevance information on the proposal and claim form
- Failure to provide truthful information makes the policy void
- Truthful information helps in the fixing of a fair premium
- It allows assessment of risks

4a) Differences between a Private Limited Company and a Partnership

Private limited company Partnership

- Governed by companies act of - Governed by partnership act

1981 1890

- Complex legal formalities - Less legal formalities

- Owned by shareholders - Owned jointly by partners

- Perpetual succession - Lacks continuity

- Shareholders receive - Partners get profits

dividends

- Raise capital by selling shares - Partners contribute to raise

privately capital

- A separate legal entity - Not a separate legal entity

- Members are shareholders - Members are partners

- Managed and controlled by a - Managed by active partners

board of directors

bi) Prospectus
- Prepared by company promoters
- Issued by public limited company only
- It is an invitation to members of the public to buy shares
- It contains ­ the price of each share
Future plans of the company
Number of shares to be sold
 Details of promoters

ii) Certificate of Trading

- Prepared by the registrar of companies
- Issued to public knitted companies only
- Issued after certificate of incorporation
- Allows public limited company to start trading
- It contains ­ date of issue
Place of issue
Name of company
Address of company’s registered office
5a) Importance of bonded warehouse to a manufacturer
- Stores dutiable goods
- Goods only released when duty has been paid
- Stores goods until they mature e.g. tobacco
- Goods can be removed from bend in small quantities
- Controlled by customs and excise authorities
- Stores goods in re­export trade

b) Reasons why revenue authorities keep statistical records

- To provide information on the levels of imports and exports
- Compile balance of payment
- Outflow of foreign currency is controlled
- Enable the government to be aware of the trading position with individual
countries and the world at large.
- Government can determine the needs of its people
c) Use of documentary credits/letter of credit
- It is a letter of credit accompanied by shipping documents e.g. bill of loading
- Provides security of payment to the exporter
- Importers bank finances the importer
- Importer obtains short term credit
- May be revocable – authority to make payment may be cancelled by the
importer at any time
- May be irrevocable – bank’s authority cannot be cancelled without the consent
of the exporter
- May be confirmed – bank will agree to pay the exporter if there is any default
by the exporter.

6a) Functions of Money

- Unit of account – all transactions are expressed in monetary terms.
- Store of value – money can be saved for future use.
- A measure of value – goods are priced in money terms.
- A standard for future payments – goods and services bought on credit are
valued and the amount owed is paid latter
- A medium of exchange – money can be exchanged for goods and services e.g.
 workers accept money for services offered.

b) Advantages of using a current account

- Keeps money safe
- Allows withdrawals on demand without giving notice allow use of cheque
- Holders have access to overdraft facilities or loans
- Allows use of stop orders, direct debit, credit transfer
- A convenient means of handling receipt and payments
- Holders can deposit money overnight by using night safe facilities.

7ai) Functions of Advertising Agency

- Think up the advertisement
- Create the advertisement
- Produce the advertisement
- Book the advertisement
- Place the advertisement
- Conduct market research
- Give advice on the best advertising medium
- Monitor the success of the advertisement

i) Standards Association of Zimbabwe

- Prepares standards of business
- Tests products for quality
- Ensure quality of goods is maintained
- Issues copies of standard specifications
- Encourage standardization of products
- Give authority to firms to use their seal
- Adopts international standards of quality and safety.

b) How consumers are protected by the Hire Purchase

- Goods are under guarantee during the hire purchase period
- Goods are insured by the seller during the hire purchase period
- The rate of deposit is legislated
- The number and amount of instalments are shown to enable the customer to
decide if he/she is able to hire the goods.
- Cash price of goods is shown
- Total hire purchase of goods is shown

8a) Functions of seaport authority

- Provide office space for customs officials
- Provide warehouse
- Provide accommodation
- Provide ship repair yards
- Loading and offloading equipment
- Passenger facilities e.g. toilets
 - Quarantine for animals
- Fresh supplies of food and water
- Communication facilities e.g. telephones
- Maintain the efficiency of a seaport
- Good road and rail networks
- Information on arrivals and departures

bi) Franking Machine

- User rents the machine from Post Office
- Trader is given a license to use the machine
- Machine is simple, to operate
- Saves – time for sticking stamps
­Labour costs
­Time for cancelling stamps
- Has a device to print the firms logos

ii) Fax Machine

- It is a combination of a photocopier and telephone circuit
- Licenced by Post Office
- Can produce multiple copies
- Provides written record
- Send exact copies to any distance
- Subscribers has fax numbers
- Used when speed is required
- Copies can be received even when office is closed
- Ideal for sending or receiving detailed informed
 NOVEMBER 2010
1a) Advantages of Specialization
- Time is saved as there are no change over of jobs
- Training period is short
- Saves tools
- Workers become more skilled
- Brings about higher standards of living
- Goods produced are standardized
- Leads to lower cost of production

Disadvantages of Specialization
- Automation leads to unemployment
- There is skill deepening no skill widening
- Doing one job continuous becomes boring
- It creates independence
- Lack of job satisfaction
- Results in immobility of labour
- Re­training of specialist workers is expensive

b) Importance of
Banking
- Enables making of payments
- Keeps money safe through current, savings or deposit accounts
 - Provision of credit cards, ATMs
- Provides telebanking facilities
- Obtain foreign currency
- Provides night safes
- Provides financial advice to clients

Insurance
- Covers goods/machinery/premises
- Covers goods in transit
- Instils confidence in business
- Provides compensation when loss occurs
- Provides health insurance cover through medical aid schemes
- Provides cover against bad debts
- Cover employees at work and the public

2a) Differences between Multiple Shops and Department Stores

Multiple shops Department stores

- Located in busy shopping - Located in the city centre

centres

- Sells narrow range of products - Sells a wide range of goods

- Each branch has a manager - Each department has a

manager

- Goods are usually sold at low - Sells goods at huge prices

prices

- All branches have similar - A multi storey building with

fronts and similar layouts several shops under one roof

b) Services offered by the wholesaler to:

Retailer
- Transportation of goods
- Storage facilities
- Bears risks
- Passes retailers complains to the manufacture
- Offer credit facilities to retailers
- Advises retailer on display techniques and in store layout
- Conveniently situated near retailers
Manufacturer
 - Collecting orders from numerous retailers
- Stores finished goods
- Advertises goods on behalf of manufacturers
- Finances manufacturer by paying cash
- Blends, packages, grades and brand goods
- Bears risks
- Clears manufacturer’s production line thus allowing manufacturers to
concentrate on production.
3a) Importance of trade to a country
- Obtain what it does not passes due to difference in climatic conditions e.g. fuel
- Access a wider range of goods and services thereby uplifting the standards of
its people
- Obtain goods of high quality at low prices
- Make available throughout the year, goods out of season since difference
countries have different seasons.
- Supplement shortage, for example in agriculture if there is a shortage of maize
(mealie­meal)
- To get what we cannot manufacture because of different in or lack of
technology e.g. motor vehicles.
- To obtain foreign currency
- Increases sales by widening its market
- Fostering of peace and friendship
b) Distinguish between visible and invisible trade
Invisible trade Visible trade

- Trade in services only e.g. - Trade in goods only e.g.

tourism wheat

- Invisible balance = exported - Also known as balance of

services minus imported services trade = exported goods minus
imported goods

- Favourable when exported - Favourable when exported

services are higher than imported goods are more than imported
services goods.

c) Purpose of forming trading blocs

- To promote peace within the region
- To encourage trade between member countries
- To have more bargaining power when negotiating as a group
- Reduce economic dependence from outside region
- To mobilize resources more efficiently e.g. technology, hydro­electric power
4a) Why parastatals are converted into Public Limited Companies?
- Free firms from political interference
- Reduce burden on taxpayer
- Pursue viable pricing
- Improve efficiency thus reducing monopoly
- No more recurrent deficits from state industries
- Allow members of the public to invest in them resulting in direct
accountability to the public
- Results in economic use of resources
- To raise government revenue

b) Functions of
a. Stock brokers
- An agent between members of the public and the stock jobber
- Buys and sells existing shares on behalf of the public
- Gets the best prices for clients
- Advises clients on market conditions
- Arranges transfer of share certificates

b. Del credere agents

- Possesses the goods they sell
- Sell goods in their own manners
- Sell goods on behalf of their principals
- Deliver goods to the customers
- Guarantee payment to their principals
- Receive a higher commission

ci) Capital
Assets minus liabilities $
Fixed assets 250.00
Current assets 110.00
360.00

Less Current liabilities 50 000

Long Term loan 100.000 150.00
210.00

ii) Working capital $

Current assets 110.00
Less Current liabilities 50.000
60.000
5 Circumstances a Trader would need
a) Direct Debit
- Used for paying varying amounts
- Used where intervals between payments vary
- In minimizing bad debts
- Payment is prompt
- There is no need of sending reminders to customers
b) Tele banking
- Traders make enquiries of their accounts over the telephone
- Instructions are given by traders who operate call accounts
- Traders may request for the following over the phone: deposit books, cheque
books or statements
- Banks have call centres to help people who use telebanking

c) Cheque card
- Uses PIN for security
- Allows customer to obtain overdraft facility
- Guarantees payment of cheques drawn by customer
- Enables card holder to draw cash from the customers bank
d) Credit transfer
- It is initiated by creditors
- It is ideal for several payment at one time
- Used to pay many accounts using one cheque
- The method is used to pay wages and salaries
- Payment is made to any bank in the country
- Payee must have an account

6a) i) Indemnity
- It is a contract of insurance
- Is restores the insured to his/her former financial position before the loss
occurred
- Insured must not gain out of a loss
- Amount of compensation is paid to the insured after loss has occurred
- The insured may be given cash equivalent to value of the item damaged in an
item whose value is the same as that of the damaged item

ii) Insurable interest

- One can only insure his/her property e.g. car, house etc
- The insured must suffer a financial loss when the risk occurs
- If one insures someone’s property might be tempted so deliberately cause the
risk to occur so as to gain out of a loss
- It prevents the insured from making a profit out of a loss
 b) The work of the Exports Credits Guarantee Corporation (ECGD)

- Covers risks of non­payment by importers

- Monitors importers risk changes
- Investigates credit worthiness of importers collects overdue debts
- Gives expert advice to exporters
- Finances exporters in the interim
- Provides comprehensive and specific policies
- Compensates exporter if exporter defaults
- Policy acts as collateral security

7a) Why is the transportation of goods by air increasing?

- Air transport is fast over long distances
- Air transport is safe
- There is an increase in the number of aeroplane and international trade
- There is also development of modern aeroplanes with larger carrying
capacities
- Availability of more airports
- Introduction of containerization
- Competitive air freight charges

Differences between a Cargo Liner and a Tramp

Liner Tramp

- Meant for hiring - No meant for hiring

- Travel on fixed results - Have no fixed routes

- Have permanent ports - No permanent ports

- Travel on fixed timetables - No fixed timetables

- Freight charges are fixed at - Freight charges are fixed by

conferences negotiation

8. Importance of the following services to a trader

a.)Freepost
 - Mail is written freepost at the top
- User need to seek approval from the Post Office; if granted pays deposit
- Sender does not pay for postage
- The service is a variation of business reply service

b.)Recorded delivery
- Used to send important documents
- It has proof of postage and delivery
- Can be traced if lost but without compensation
- Articles are delivery personally
- Each article has a registered number
- Articles must be handed over the counter ]

a) Electronic mail (e­mail)

- Is used for sending and receiving messages
- Using a computer or a telephone circuit
- A cheap way of sending messages
- Each subscriber has an e­mail address
- Information received can be retrieved and printed
- It uses modems

b) Cellular telephone (Cellphone)

- Used when speed is required
- Shows the time when the call was made
- It is portable
- Can send messages by e­mail
- A secret PIN can be used for security
-

9a) Why do producers advertise on television

- Advertisement can be repeated
- Advertisement can be timed
- Provides sound and vision
- Cheap as one advert covers many shops
- Has impact on customer through colour
- Demonstrations are possible
- Caters for the illiterate

b) Why do companies advertise

- Increase sales and profits
- Promote company’s image
- Reminds customers of existing goods
- To persuade customers to buy
 - Informs buyers about types of goods available, price of goods and where to
buy the goods
- Fight adverse publicity
- Compete with other manufacturers

c) Consumers can protect themselves from exploitation by traders by:

- Do window shopping so as to compare prices
- Prepare shopping lists to avoid impulse buying
- Check for guarantees
- Understand contracts before signing
- Exercise care in credit commitment
- Inspect goods for quality
- Read/listen to advertisements carefully
- Know consumer rights