Business Transactions

14 Grade 10 Business Studies questions on Business Transactions, with worked marking schemes. 14 questions are available on this topic in full.

1. Question 1

   1 mark

   Before ordering 50 desks, the chairperson of a school board of management writes to a furniture workshop asking for the prices and the terms of supply. The document the workshop sends back in reply is

   A. a purchase order

   B. an invoice

   C. a quotation

   D. a receipt

   (1 mark)

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2. Question 2

   1 mark

   A grocer in Meru received three crates of tomatoes that were spoilt and returned them to the supplier. Which document will the supplier send to reduce the amount the grocer owes?

   A. A debit note

   B. A delivery note

   C. A receipt

   D. A credit note

   (1 mark)

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3. Question 3

   2 marks

   Distinguish between a cash transaction and a credit transaction.

   (2 marks)

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4. Question 4

   1 mark

   A customer pays Ksh 5,000 in cash for cement at a hardware shop in Machakos. Which document does the hardware shop issue as proof that the money has been received?

   A. A delivery note

   B. A statement of account

   C. A receipt

   D. An invoice

   (1 mark)

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5. Question 5

   1 mark

   A wholesaler in Nakuru supplies 20 crates of soda to a retailer who agrees to pay the whole amount at the end of the month. This exchange is best described as a

   A. credit transaction

   B. hire purchase transaction

   C. barter transaction

   D. cash transaction

   (1 mark)

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6. Question 6

   4 marks

   Suggest four reasons why a wholesaler in Kisumu may be unwilling to sell goods on credit to a retailer who has just opened a shop.

   (4 marks)

   Marking scheme

   Award 1 mark for each well-stated reason, to a maximum of 4: - The new retailer's creditworthiness is not yet known, having no record of past payment - Risk of bad debts if the retailer fails to pay at all - Money is tied up in the debt, leaving the wholesaler short of cash to restock - Cost and time spent following up the debtor, including reminders and legal action - The new shop may close down or relocate before settling the debt - Rising prices mean the money received later is worth less than at the date of sale

7. Question 7

   3 marks

   State three limitations of using barter to carry out business transactions.

   (3 marks)

   Marking scheme

   Award 1 mark each, to a maximum of 3: - It needs a double coincidence of wants, that is, each party must want exactly what the other is offering - There is no common measure of value, so fixing a fair rate of exchange is difficult - Some goods cannot be divided, for example a goat cannot be split to pay for a small item - Perishable goods such as milk or vegetables cannot be stored, so value cannot be kept for later - Bulky goods such as bags of maize are costly and difficult to carry to the place of exchange - Payment cannot easily be postponed to a future date

8. Question 8

   5 marks

   Describe five documents used in a credit transaction, in the order in which they are used, from the time the buyer enquires about the goods to the time payment is made.

   (5 marks)

   Marking scheme

   Award 1 mark for each document correctly named with its use, in a logical order, to a maximum of 5: 1. Quotation - sent by the seller in reply to the buyer's enquiry, giving prices, terms of payment and delivery. (1) 2. Purchase order (or local purchase order) - sent by the buyer to place a firm order for the goods described. (1) 3. Delivery note - travels with the goods and is signed by the buyer to confirm the goods have been received. (1) 4. Invoice - sent by the seller to demand payment, showing the goods, prices and the total amount owed. (1) 5. Receipt - issued by the seller once the buyer pays, as evidence that the money has been received. (1) Accept a statement of account in place of one of the above where it is correctly described as a summary of transactions sent at the end of the month, provided the order remains sensible.

9. Question 9

   3 marks

   Explain three reasons why a trader should keep the documents used in the transactions of the business.

   (3 marks)

   Marking scheme

   Award 1 mark for each reason correctly explained, to a maximum of 3: - They are evidence that the transaction took place, and can be produced to settle a dispute with a customer or supplier - They are the source of the information entered in the books of account, so records can be written up accurately - They allow the goods received to be checked against the goods ordered and against the amount charged - They show how much is owed by each debtor and to each creditor, so payments can be followed up on time - They are needed by the auditor and by the tax authority as proof of the figures declared

10. Question 10

    1 mark

    Which one of the following is a business transaction?

    A. A shopkeeper in Nyeri selling two kilogrammes of sugar to a customer for Ksh 260

    B. A farmer deciding that he will plant beans in the next rainy season

    C. A trader counting the bags of maize remaining in the store

    D. A learner borrowing a ruler from a desk mate during a lesson

    (1 mark)

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11. Question 11

    2 marks

    Distinguish between a debit note and a credit note as used in business transactions.

    (2 marks)

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12. Question 12

    1 mark

    In a market in Turkana, a herder gives one goat to a trader and receives two bags of maize in return. No money changes hands. This exchange is an example of a

    A. barter transaction

    B. cash transaction

    C. hire purchase transaction

    D. credit transaction

    (1 mark)

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13. Question 13

    1 mark

    A stationery supplier discovers that the invoice already sent to a customer charged Ksh 400 for each ream of paper instead of the agreed Ksh 450. Which document will the supplier send to correct this undercharge?

    A. A debit note

    B. A quotation

    C. A credit note

    D. A receipt

    (1 mark)

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14. Question 14

    4 marks

    Outline four details that would appear on an invoice issued by a hardware shop in Eldoret to a customer who has bought goods on credit.

    (4 marks)

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