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2022 NABTEB Commerce (Essay & OBJ) Answers [22nd June]
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NABTEB MAY/JUNE 2022 FREE COMMERCE QUESTION AND ANSWER ROOM [NBC/NTC]

Wednesday 22nd June, 2022
Commerce Paper I & II (Objective & Essay) 3 pm – 6:20pm (3hrs 20mins)

2022 NABTEB COMMERCE (THEORY) ANSWERS:

INSTRUCTIONS: YOU ARE TOLD TO ANSWER ONLY FIVE QUESTION

NUMBER 1✅
NUMBER 3✅
NUMBER 4✅
NUMBER 5✅
NUMBER 6✅
NUMBER 7✅
NUMBER 9✅

(Kindly Pick Any Five)

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(NUMBER 1)


(1a)
(i) Commerce can simply be defined as all those activities involved in the distribution and exchange of goods and services WHILE Industry consists of the activities geared towards the production of goods through extraction, manufacturing and construction

(ii) A huge capital investment is required to start an industry. On the other hand, commerce requires comparatively less capital investment.

(iii) The industry is an indicator of production part of business activities. Unlike commerce which deals with the making goods available to the customers,i.e. the distribution part.

(1b)
(i) Extractive occupation: The extractive industries are those who engage in obtaining raw materials and natural resources from the soil or sea. The extractive occupation is concerned with making available raw materials and natural products from the land and sea. Examples of Extractive occupation are Farming, Fishing , Mining , Hunting , Forestry or lumbering , Quarrying and Farming

(ii) Manufacturing Occupation: Manufacturing occupation is concerned with the activities of those who engage in processing and turning raw materials produced in the primary industry into finished products. The raw materials or natural resources are transformed into finished products after going through different processes to add value and utility. Example of Extractive occupation are Shoe making, Textile processing,Food processing and Rubber processing

(iii)Constructive Occupation: Constructive occupation is concerned with all the activities of those who engage in assembling of goods manufactured into useable form. They convert manufactured products into various uses. They engage in constructing roads, bridges, houses, etc. All the various components extracted and manufactured are converted into useable form. Example of constructive occupation are Road construction, Building construction, Airport construction and Bridge construction

(1c)
(i)Economic activity: Commerce is an economic activity. A trader buys and sells goods to earn profit and wealth. It is expressed in monetary terms.

(ii)Profit: The motive of commerce is to earn profit. Gifts of goods to friends and relatives is not commerce. Profit drives the engine of commerce.

(iii)Marketing: Commerce involves marketing. It involves the exchange, distribution and promotion of products. It is done on a regular basis. Marketing is done to create goods and satisfy customers.

(iv)Components of business: Commerce is a components of business. It deals with goods produced by industries. Industries produce and commerce disposes the goods.

(v)Utility: Commerce creates place and time utilities to satisfy consumers needs. It transports goods from place to create place utility. It stores products for future uses which create time utility.

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(NUMBER 3)


(3ai)
Consequential Loss:Consequential loss  covers losses to commercial firms after a fire incident, resulting in interruption of business activities and stoppage of production. It covers loss of profit arising from the stoppage of the production processes. A consequential loss is an indirect adverse impact caused by damage to business property or equipment.

(3aii)
cover note: Cover note is a document issued by an insurance company that shows evidence of insurance coverage until they issue an insurance policy. This is  a temporary insurance cover to enable the issued to enjoy the benefits of a policy while it is being processed .cover note features the name of the insured, the insurer, the coverage, and what is being covered by the insurance.

(3aiii)
Policy: insurance policy is a contract between the insurer and the policyholder, which determines the claims which the insurer is legally required to pay. Insurance policy  is a document that contains the agreement that an insurance company and a person have made. Insurance policies describe what sort of claims the insurer is agreeing to pay and the various responsibilities of both parties

(3b)
(PICK ANY SIX)
(i)It Facilitates International Trade: Insurance stimulates and facilitates international trade. This is because marine policy provides cover for cargoes and vessels. The export credit guarantee also guarantees credit sales.

(ii)It Offers Investment Opportunities: Insurance makes funds available for investment. A large proportion of this resources are invested in the capital market where businessmen can obtain loan. This helps in developing the country's economy.

(iii)Leads to Risk Reduction: Insurance helps to reduce or control loss or liabilities of a businessman. It spreads the financial losses of the insured.

(iv) Provision of security: Insurance provides security to commercial activities. Some small enterprises would have collapsed as a result of major losses, but insurance always takes care of such uncertainty.

(v)Provides a Means of Saving: Insurance provides a means of saving regularly which will help to provide for the future, e.g. endowment policy.

(vi)It Serves as Collateral Security: Life assurance policy can be used as a collateral security to obtain loan from the bank for business investment.

(vii)It Helps in Motivating Workers: Through group insurance policy, the workers are fully aware of a secured future, hence they will work harder which will bring about higher productivity.

(viii)Provision for Old Age and Disability: Life assurance can be used as a way of providing for old age and to make provision for permanent disability.

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(NUMBER 4)

(4i)
Delivery Note
(PICK ANY TWO)
(i)It is used to confirm the goods before it is filed for reference.
(ii)It is used as evidence of delivery.
(iii)It is used when goods are transported by the wholesaler's means of transport.

(4ii)
Debit Note
(PICK ANY TWO)
(i)Debit note is used to correct an undercharge.
(ii)It is used when the invoice is not well priced.
(iii)It is also used when some items despatched have not been documented in the original invoice.
(iv)It informs the buyer that his account has been debited.

(4iii)
Receipt
(PICK ANY TWO)
(i) It serves as evidence of payment.
(ii)It state the actual amount received and who received it.
(iii)It shows the date of payment.
(iv)Receipt is used for auditing purposes.

(4iv)
Consignment Note
(PICK ANY TWO)
(i)It is used when the wholesaler engages an independent transporter to the goods to the retailer. convey
(ii)It is used to show details of goods sent.
(iii)It is also used as evidence of delivery when duly signed by consignee.

(4v)
Invoice
(PICK ANY TWO)
(i)It is document showing details of goods sold.
(ii)It serves as a receipt.
(iii)It is used to write up the purchases/sales journals.

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(NUMBER 5)

(5a)
(PICK ANY FOUR)
(i)Accepting Deposit
(ii)Lending to customers
(iii)Agent of payment
(iv)Discounting bill of exchange
(v)Foreign exchange transaction

(5b)
(PICK ANY FOUR)
(i)Accepting Deposit:Commercial banks accept deposits from the public for safekeeping. This is the oldest function of banks which helps in taking care of people's money. Money can be kept in current, fixed and savings accounts.

(ii)Lending to Customers:This is perhaps the most profitable function of a commercial bank. Deposits from different customers are pooled together and given out as loans with interest to people and firms for profitable investment.

(iii)Agent of Payment:Commercial banks can act as agent of payment on behalf of their customers. They encourage and permit customers to have current account in which they can draw without notice by cheque. Money can also be transferred from one account to another, e.g. credit transfer.

(iv)Discounting Bill of Exchange: Creditors can be paid by the bank immediately by discounting bill of exchange for their customers. This enables the creditor to be paid instantly, and the debtor is allowed a period of credit.

(v)Foreign Exchange Transaction: Commercial banks make foreign currencies available to their customers. They participate in foreign exchange market and help in solving any problem relating to foreign exchange.

(5c)
(i)Current Account
(ii)Savings Account

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(NUMBER 6 )

(6a)
(i)Balance of trade refers to the total value of goods sold and bought by a country during a given period ,usually a year. WHILE Balance of payment can be defined as a statement or record showing the relationship between a country's  total payments to other countries and it's total receipts  from them in a year.
(ii)Balance of Trade provides the only half picture of the country’s economic position. WHILE  Balance of Payment gives a complete view of the country’s economic position.
(iii)Balance of Trade accounts for only physical items WHILE Balance of Payment keeps track of physical as well as non-physical items.

(6b)
(PICK ANY FOUR)
(i)Generation of revenue: Tariffs are also imposed to generate revenue for the country. Many countries derive their revenue from import and export duties.

(ii)To prevent dumping:Tariffs are imposed to prevent dumping of goods from foreign countries. This is to prevent foreign goods from being sold at prices lower than the home price.

(iii)To improve balance of payments deficit: By imposing tariffs on imported goods, the unfavourable balance of payments can be corrected because importation will be discouraged.

(iv) Retaliatory measures: This can be used in retaliation against countries which impose taxes on their imports.

(v) To prevent importation of dangerous goods: Dangerous or harmful goods from other countries are prevented from being imported, through restriction.

(vi) Employment generation: Countries impose tariffs to encourage the establishment of local industries or enhance the expansion and growth of existing ones so as to provide job opportunities .

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(NUMBER 7)

(7a)
(i)Limited partners
(ii)General partners
(iii)Active partner
(iv)Nominal or Quasi partner
(v)Sleeping or Dormant partner

(7b)
(i)Limited Partners: A limited partner is the one who has agreed to contribute a certain sum to a partnership business and is prevented by law from taking any active part in the management and administration of the business. He is liable for debts and obligations of the partnership only up to the amount of capital he has contributed. A limited partner has limited liability.


(ii)General Partners: A general partner has full power of participating in the conduct and management of the partnership business. He is entitled to take full share in the management of the firm. This kind of partner is liable to the full extent of his estate for the partnership debts, i.e., he has unlimited liability

(iii)Active Partner: An active partner takes active part in the management and administration of a partnership business He contributes to the financing and formation of the business, takes active role in the day-to-day running of the firm and is being paid a certain sum as salary

(iv)Nominal or Quasi Partner: A nominal partner contributes only his name to the formation of the business. He neither contributes capital nor take part in the management of the firm. A nominal partner must be a distinguished personality within the community as his name must surely increase the reputation and possibly the goodwill of the partnership business. He might be a politician or a successful business man.

(v)Sleeping or Dormant Partner: A dormant partner takes no part in the conduct and management of the partnership business. He will contribute capital and share from the profit but will not engage in the day-to-day running of the firm, i.e., no active participation in the firm. A sleeping partner receives no salary but is liable for the debts of the firm. The mere fact that a partner is a dormant partner does not exonerate him from liability in the event of wrong decision by the active partners.

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(NUMBER 9)

(9a)
(PICK ANY FIVE)
(i)The business is owned by shareholders 
(ii)The shareholders have limited liability
(iii)The business is a separate legal entity
(iv)shares are not easily transferable
(v)There is continuity of business operations
(vi) Capital required to run the business is provided by the shareholders

(9b)
(i)Difference in Language is a serious set back international trade: Most countries experience translation problems which result in loss of accurate meaning to words and terms.Also understanding communications among countries becomes more difficult. Engagement of interpreters involves extra cost.

(ii)Religious/cultural problems: Plays important role in slowing down the pace of international trade.In particular, the choice of symbols, signs and trademarks are limited since the country may not understand them. Cultural taboos inhibit trade.

(iii)Difference in business laws and regulations: Business is not regulated by the law of the importing country but by international law. There is need for the knowledge of other countries' laws, to assist countries/business men in trade transactions.

(iv)Government Policy: Foreign trade can be hindered by the political ideologies of different countries. A country can deliberately decide not to trade with another country because of its political differences, e.g. The USA and Libya owing to the 1988 Lockerbie aircraft bombing.

(v)Transportation and Communication: Businessmen from different nations especially African countries find it difficult to contact their partners in other poor communication and transport facilities. This hinders foreign trade greatly.

(vi)Trade restrictions: Trade restrictions by countries have been created by trading partners when they discover they have adverse balance of trade or payment. Such restrictions include embargoes, duties, quota and cartel.

2022 NABTEB COMMERCE OBJECTIVES (OBJ) ANSWERS

1-10: ABACABDDCB
11-20: ADBAACBABA
21-30: CACBCDAABB
31-40: DCADBCDDAD
41-50: DCDADABBAD

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