WAEC SSCE - Commerce - 2010 (Essay)

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(a) What is a contract?

A contract is a legally binding agreement between two or more persons which creates rights and obligations that can be enforced in a court of law. It is an agreement supported by consideration and made with the intention of creating legal relations.

(b) Five elements of a contract

1. Offer - a definite proposal made by one party.
2. Acceptance - the unqualified agreement to the terms of the offer.
3. Consideration - something of value exchanged between the parties.
4. Intention to create legal relations - both parties must intend the agreement to be legally binding.
5. Capacity to contract - the parties must be legally competent (of full age, sound mind, and not disqualified by law). (Free consent and legality of purpose are also required.)

(c) Six conditions that could lead to the termination (discharge) of a contract

1. Performance: The contract ends when both parties fully carry out their obligations.
2. Agreement: The parties may mutually agree to bring the contract to an end.
3. Breach: When one party fails to perform his part, the injured party may treat the contract as ended and sue for damages.
4. Frustration (impossibility of performance): The contract ends when an unforeseen event makes performance impossible, for example destruction of the subject matter or a change in the law.
5. Lapse of time: A contract is discharged when the time fixed for its performance expires or the period allowed by the law of limitation passes.
6. Operation of law: The contract may end through death, bankruptcy, or where the subject matter becomes illegal.

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(a) Five features common to both public and private limited companies

1. Separate legal entity: Each is an artificial person in law, distinct from its owners, and can sue and be sued in its own name.
2. Limited liability: The liability of members is limited to the amount unpaid on the shares they hold.
3. Perpetual succession: The company continues to exist despite the death, insanity or withdrawal of any member.
4. Ownership by shareholders and management by directors: Both are owned by shareholders who contribute the capital but managed by a board of directors on their behalf.
5. Registration and legal documents: Both must be registered with the Corporate Affairs Commission and must file a Memorandum and Articles of Association before they can operate.

(b) Five provisions of a Memorandum of Association

1. Name clause: States the name of the company, ending with the word "Limited" or "Plc."
2. Registered office clause: States the location of the registered office or head office of the company.
3. Objects clause: States the aims, objectives and nature of business the company is set up to carry on.
4. Capital clause: States the amount of authorized (registered) capital and how it is divided into shares of fixed value.
5. Liability clause: States that the liability of the members is limited (to the value of their shares).

(A sixth provision, the Association or Declaration clause, states the willingness of the subscribers to form the company and take up shares.)

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(a) What is production?

Production is the creation of goods and services to satisfy human wants. It covers all the activities involved in making goods and services available to consumers, from the extraction of raw materials to the final delivery of finished goods and services.

(b) Factors of production

1. Land: This refers to all the free gifts of nature used in production, such as the soil, forests, rivers, minerals and other natural resources. Its reward is rent.
2. Labour: This is the human effort, both physical and mental, applied in the production of goods and services. Its reward is wages or salary.
3. Capital: This refers to all man-made assets used to produce further goods and services, such as machines, tools, buildings and money set aside for business. Its reward is interest.

(c) Three functions of an entrepreneur

1. He organizes and combines the other factors of production (land, labour and capital) to produce goods and services.
2. He bears the risks and uncertainties of the business, since profit is not guaranteed.
3. He takes the major decisions of the business, such as what to produce, how, where and for whom to produce.

Answer Details

Jamiu & Co. Ltd - year ended 31st March, 2006

(a) Cost of goods sold

= Opening stock + Purchases - Closing stock

= 3,000 + 7,000 - 2,000 = N8,000

(b) Net profit percentage

Gross profit = Sales - Cost of goods sold = 12,000 - 8,000 = N4,000

Total expenses = Wages + Transport + Electricity = 500 + 400 + 300 = N1,200

Net profit = Gross profit - Expenses = 4,000 - 1,200 = N2,800

\[ \text{Net profit \%} = \frac{\text{Net profit}}{\text{Sales}} \times 100 = \frac{2,800}{12,000} \times 100 = 23.33\% \]

(c) Rate of turnover

Average stock = (Opening stock + Closing stock) / 2 = (3,000 + 2,000) / 2 = N2,500

\[ \text{Rate of turnover} = \frac{\text{Cost of goods sold}}{\text{Average stock}} = \frac{8,000}{2,500} = 3.2 \text{ times} \]

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(a) Definition of communication

Communication is the process of passing information, ideas, messages or instructions from one person or place (the sender) to another (the receiver) through a chosen medium, in a way that is clearly understood, and receiving feedback. In commerce it is the transmission of business information between traders, customers and other parties.

(b) Six functions of the post office

1. Collection and delivery of mail: The post office collects, sorts and delivers letters, parcels and printed matter within and outside the country.
2. Provision of money transfer services: It transfers money through postal orders, money orders and telegraphic money orders.
3. Operation of savings facilities: It runs the post office savings bank, where people can save and withdraw money.
4. Provision of telecommunication services: It provides telephone, telegram, and telex services for fast communication.
5. Agency services for government: It sells revenue stamps, collects licence fees (such as radio and television licences), and pays pensions on behalf of government.
6. Provision of private mail bags and post office boxes: It rents out post office boxes and private mail bags to individuals and firms for the safe receipt of their mail; it also provides express and registered mail services for valuable items.

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(a) Five measures to solve balance of payments problems

1. Devaluation of the currency: Lowering the value of the home currency makes exports cheaper and imports dearer, thereby increasing exports and reducing imports.
2. Import restriction: Government can impose high tariffs, quotas, and outright bans on certain imports to cut down foreign spending.
3. Export promotion: Government can encourage exports through incentives, subsidies, and improved quality so as to earn more foreign exchange.
4. Deflationary (monetary and fiscal) policy: Reducing money supply and government spending, and raising interest rates and taxes, lowers domestic demand for imports.
5. Exchange control: Government can ration and control the use of foreign exchange so that it is spent only on essential imports; it may also borrow from the IMF and encourage foreign investment.

(b) Five disadvantages of international trade

1. Dumping of goods: Foreign producers may sell goods cheaply below cost, ruining home (infant) industries.
2. Over-dependence on foreign countries: A country may rely too heavily on others for essential goods, which is risky during war or crisis.
3. Unfavourable balance of payments: Excessive importation drains foreign reserves and creates balance of payments deficits.
4. Exhaustion of natural resources: Continuous export of raw materials can lead to the rapid depletion of a country's natural resources.
5. Importation of harmful and undesirable goods: Dangerous goods, and foreign tastes and cultures, may be imported to the detriment of home industries and society.

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(a) What is marketing?

Marketing is the process of identifying, anticipating and satisfying customers' needs and wants profitably. It covers all the business activities involved in moving goods and services from the producer to the final consumer, including product planning, pricing, promotion and distribution.

(b) Five importance of marketing in an economy

1. Bridges the gap between producers and consumers: Marketing moves goods and services from where they are produced to where they are needed, satisfying consumer wants.
2. Creates employment: Marketing activities such as selling, advertising, transporting and warehousing provide jobs for many people.
3. Encourages large-scale production: By guaranteeing a market for output, marketing enables producers to specialize and produce on a large scale, lowering costs.
4. Raises the standard of living: Marketing makes a wide variety of goods and services available to consumers, giving them wider choice and improving welfare.
5. Provides information and stimulates demand: Through advertising and promotion, marketing informs consumers about products and creates and increases demand, which boosts sales and national income.

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(a) Four steps a customer takes to open a current account

1. Obtain and complete the account opening form: The customer collects the current account application form from the bank and fills in his personal details.
2. Provide references and required documents: He supplies two respectable referees who already operate accounts, together with passport photographs and means of identification.
3. Make an initial deposit: He pays in the minimum opening balance required by the bank as an initial deposit.
4. Complete a specimen signature card and receive account tools: He records his specimen signature on the mandate card, and after verification the bank opens the account and issues him a cheque book and pay-in slips.

(b) Six functions of commercial banks

1. Acceptance of deposits: They receive and keep money for customers in current, savings and fixed deposit accounts.
2. Granting of loans and overdrafts: They lend money to customers and allow overdraft facilities to help finance business and personal needs.
3. Provision of means of payment: They provide cheques, standing orders, credit transfers and electronic payment services for settling debts.
4. Safe-keeping of valuables: They keep customers' valuables and important documents in safe custody through their strong rooms and safe deposit boxes.
5. Agency and foreign exchange services: They act as agents for customers by paying and collecting money, buying and selling shares, and providing foreign exchange for international trade.
6. Provision of financial advice and other services: They give advice on investment, provide references, issue travellers' cheques and act as executors and trustees.

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(a) Five member-countries of the Niger Basin Commission (Niger Basin Authority)

1. Nigeria
2. Niger
3. Benin
4. Cameroon
5. Mali

(Others include Chad, Guinea, Burkina Faso and Cote d'Ivoire.)

(b) Five objectives of the Niger Basin Commission

1. Joint development of the River Niger basin: To promote co-operation among member states in developing the resources of the Niger river basin.
2. Harnessing of water resources: To harness the waters of the river for irrigation, hydro-electric power generation and water supply.
3. Development of navigation and transport: To improve inland navigation and transport along the river to boost trade among member states.
4. Promotion of agriculture and fisheries: To develop agriculture, fishing, forestry and animal husbandry within the basin.
5. Control of the river and environmental protection: To co-ordinate flood and drought control, prevent pollution, and ensure equitable use of the common water resources for the mutual benefit of member states.

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(a) Definition of commerce

Commerce is the branch of production that deals with the buying and selling of goods and services, together with all the aids and services that make trade possible, such as transport, banking, insurance, warehousing, advertising and communication. In short, commerce is trade and the aids to trade.

(b) Six functions of commerce in an economy

1. Distribution of goods and services: Commerce moves goods from producers to consumers through wholesalers and retailers, ensuring that goods reach the people who need them.
2. Bridging the gap between producers and consumers: Through trade and its aids, commerce removes the place, time, knowledge and finance gaps that separate producers from consumers.
3. Creation of employment: Commercial activities such as transport, banking, insurance and retailing provide jobs for many people, thereby raising incomes.
4. Provision of finance: Through banks and other financial institutions, commerce provides the capital and credit needed to run and expand business.
5. Facilitating specialization and large-scale production: By guaranteeing a market and moving output to distant buyers, commerce enables producers to specialize and produce on a large scale.
6. Raising the standard of living and promoting international trade: Commerce makes a wide variety of home and foreign goods available to consumers, satisfying wants and encouraging trade between nations.