Business Studies Paper 2 Questions and Answers - Nyeri Mocks 2021 Exams

INSTRUCTIONS:
ANSWER ANY FIVE QUESTIONS

QUESTIONS

1.                        
   1. Explain five features of human want (10mks)
   2. explain five principles that would lead to effective use of government resources (10mks)
2.                  
   1. Explain five reasons why an effective filing system is important in an office (10mks)
   2. Explain five advantages of locating firms in different part of the country. (10mks)
3.                  
   1. Explain five elements of effective communication (10mks)
   2. The trial balance of Zanayo Traders as at 1st June 2008 is given below
      

      	DR	CR
      Stock		76,500
      Creditors		450,400
      Debtors	350,000
      Bank		260,400
      Fixed Assets	970,200
      Cash	120,500
      Capital		1,300,000
      Lighting due		27,200
      	1,777,600	1,777,600

      During the month, the following transactions took place:
      2008:
      June 5 Paid a creditors sh 228,000 by cheque in full settlement of debt after deducting 5% Cash discount.
      June 15 Withdraw sh 100,000 from bank for office use.
      June 28 Received sh 160,000 cash from a debtor after allowing cash discount of sh 40,000.
      Record the above transactions in the relevant ledger accounts and balance them out(10mks)
4.                                
   1. Explain five methods of determining the price of a product other than demand and supply (10mks)
   2. Explain five factor that one may consider when selecting a means for communicating. (10mks)
5.                    
   1. Explain five circumstances under which a country may realise a surplus in balance of payment (10mks)
   2. Explain five features of monopolistic competition. (10mks)
6.                    
   1. Explain five trends in office management (10mks)
   2. The following Trial balance was prepared from the book of Mugambi Traders for the year ended 31st Dec 2005.
      Mugambi Traders
      Trial Balance
                                                  Dr                              Cr
      Land and building          500,000
      Capital                                                            940,000
      Plant and machinery     200,000
      Motor vehicle                300,000
      10year bank loan                                           200,000
      3 years ICDC loan                                         100,000
      Stock                           100,000
      Debtors                        60,000
      Creditors                                                        60,000
      Accrued expenses                                         20,000
      Cash at bank              100,000
      Cash at hand               20,000
      Drawings                     40,000
                                      1,320,000                     1,320,000
      Prepared
      1. A balance sheet for the year ended 31st December 2005.
      2. Determine:
         Working Capital
         Capital Employed
         Borrowed Capital

MARKING SCHEME

1.                                            
   1. Features of human wants
      1. They are numerous and unlimited: When on is satisfied another crops up to take its place and begin at birth and end at death.
      2. They continually change with time, age and gender; what is required when its cold may not be the same as what is required when it is not.
      3. They are habit forming; once an individual develops tastes for a commodity he/she tends to use it over and over again.
      4. Require resources: limitations in resources required means only a few human wants re fulfilled.
      5. They are universal; all human beings need goods and services for existence though quantities may vary.
      6. They are competitive; wants compete for attention each yearning to be satisfied.
   2. Principles that would lead to effective use of government resources
      1. Economy: requires proper planning to minimise wastage to ensure maximum benefit.
      2. Sanction, authority should be sought from relevant bodies before committing public finance.
      3. Maximum social benefit resources should be used only on projects that improve social welfare to benefit as many people as possible.
      4. Flexibility: Expenditure should be able to be adjusted to reflect the prevailing circumstances.
      5. Equity distribution of resources should be fair to all sectors and regions to minimise incidents on inequalities and imbalances.
2.                    
   1. Reasons why effective filing system is important in an office
      • Vital documents will be kept for future reference/evidence.
      • Easy retrieval/accessibility of documents.
      • Economic use of available space.
      • Documents are kept safe from damage.
      • Limits accessibility of documents to only authorised personnel.
      • Aids in keeping the office tidy
      • May help the organization to keep some documents for the length of time as specified by the law.
   2. Advantages of locating firms in different parts of the country
      • To bring about a balanced regional growth. When industries are delocalised, all regions of the country may develop at roughly the same pace.
      • To ensure that employment opportunities are evenly distributed all over the country.
      • To reduce rural – Urban migration: Once industries are delocalized, the attraction of people to the urban areas will be reduced since they will be able to get jobs in the rural areas.
      • To enhance the development of social amenities such as schools and hospitals in all areas of the country.
      • To improve the standards of living of people all over the country. This leads to better distribution of income, which ensures that people all over the country enjoy a better and uniform standard of living.
      • To promote the development of infrastructure all over the country.
3.                  
   1. Elements of effective communication
      • Sender:- This is a source of the message.
      • Messenger: This is the information to be communicated.
      • Channel: This is the medium to be used in conveying the information
      • Encoding: This is the process of generating the message.
      • Decoding : This is the process of interpreting the message recorded.
      • Receiver/recipient: The party/person to whom the message is sent.
        Feedback: Reaction/response to the message
   2.                                        
      

      DR                                       Cash A/c                                                               CR

      01/6/2018 Bal B/d                              120,500	30/6/2008 Bal c/d                        380,500
      Bank                                                    100,000
      Debt                                                    160,000
      380,500	380,500

      DR                                                      Bank A/C                                            CR

      01/6/2008 Bal B/d                              260,400	05/6/2008 Credit                      228,000
      Bal C/d                                                100,000	13/6/2008 Cash                        100,000
      328,000	328,000

      DR                                                      Debtors A/C                                        CR

      01/6/2008 bal b/d                           350,000	28/6/2008   Cash                       160,000
      	28/6/2008  disc  Allowed            40,000
      	30/6/2008  bal C/d                    150,000
      350,000	350,000

      DR                                                      Creditors A/C                                     CR

      05/6/2008          Bank                         228,000	05/6/2008 Credit                                450,000
      5/6/2008     Disc Rec                            12,000
      30/6/2008  Bal C/d                             210,000
      450,000	450,000

      DR                                                      Discount Allowed A/C                       CR

      28/6/2008    Cash                                  40,000

      30/6/2008 Bal C/d                                40,000

      DR                                                                  Discount Received A/C          CR

      30/6/2008 Bal b/d                             12,000

      05/6/2008   Creditors                            12,000

4.                    
   1. Methods of determining price other than demand and supply
      • Auctioning: Prices determined by the highest bidder .
      • Bargaining/Hagg: Terms of exchange is negotiated between buyers and sellers.
      • Tendering: Prices determined by the lowest bidder who meets the required specification
      • Price fixing or retail price maintenance as producers agree on the price of commodity.
      • Prices collusion where different market players such as sellers and buyers conspire to fix price.
      • Taxation or subsidies which will influence the selling and buying price.
      • Private treaty: sale of property at a price agreed on by the seller and buyer without an intervening agency.
   2. Factors that one may consider when selecting a means of communication
      • Confidentiality of the message: The means should safeguard the content of the message from being accessed by unauthorised people.
      • Accuracy of the means: Should be able to deliver the message in its original form and without distortions.
      • Urgency of the message: The means should be fast enough to ensure timely delivery of the message.
      • Need for feedback.
      • Affordability of the message: The sender must be able to meet the cost of the means chosen.
      • Nature of the message: An appropriate means should be chosen if the message is very complex, detailed or technical.
      • Need for future reference: The means must be able to provide evidence if future reference will be required.
      • Capacity of the means: Should allow the required volume of information to be passed at an agreed speed.
      • Reliability of the means: Should be able to deliver the information to the receiver as intended.
      • Availability of means: Should be readily available.
      • Intended/desired impression: The means should be able to create the desired effect.
5.                      
   1. Circumstances under which a country may realize a surplus in balance of payment
      • When a country exports highly valved finished goods and manufactured in the international markets.
      • Reduced volume of imports which lowers expenditure of imported goods and services.
      • When the country aggressively promotes it exports; this will create more market for exporting goods thus increasing the country’s earnings.
      • When the country devalues its currency; this makes imports more expensive forcing consumers to buy locally produced goods while exports become cheaper and are sold in large volumes.
      • When the country enjoys favourable economic order/bargaining power; the country may be able to influence the world markets price to favour its exports.
   2. Features of monopolistic competition
      • Many sellers and buyers, the market is comprised of many buyers and sellers who operate independently.
      • Free entry and exit into the market; there are no barrier to entry into or exit from the market.
      • Commodities sold are very close substitutes form sell similar products which are highly differentiated by names, shapes.
      • All firms earn normal profits in the long run, some firms may earn supernormal profits in the short run.
      • Firms are independent, there is little in terms of pricing and quantities to produce.
6.                  
   1. Trends in office management
      • Computerization- Means employment of computers in office operations.
      • Office arrangement – Business are adopting either open or landscaped office management.
      • Public relations department – business have developed such departments to ensure customer satisfaction e. G customer care.
      • Use of cell – phones/mobile phones; most offices have started using operation mobile phones for 24/7.
      • Office location: Most offices are being located in sub-urban areas.
   2. Mugambi Traders Balance sheet as at 31st Dec 2005
      Mugambi Traders
      Balance sheet
      As at 31st Dec 2005
      

      Sh                           sh Fixed Assets Land and building  500,000 Plant & Machinery 200,000 Motor Vehicle        300,000                   1,000,000 Current assets Stock                      100,000 Debtors                     60,000 Cash at bank           100,000 Cash in hand             20,000                      280,000                                                                 1,280,000

      Sh Capital                                    940,000 Less Drawings                          40,000                                                 900,000 10 year bank loan                    200,000 3 year I C D C loan                  100,000 Current liabilities Creditors                                    60,000 Accrued expenses                      20,000                                                1,280,000

      Working capital
      Current Assets – Current Liabilities
      (280,000 – 80,000
      =200,000
      
      Capital Employed
      Fixed Asset + Working Capital
      1,000,000 + 200,000
      = 1,200,000
      
      AH CE = Capital borrowed + Long term liabilities
      = 900,000 + 300,000
      = 1,200,000
      
      Borrowed capital
      = 10 years loan 200+ 3 year ICDC loan 100,000
      = 300,000
      
      Alternative
      Borrowed Capital = Long term liabilities
      = 200,000 + 100,000
      = 300,000