BUSINESS PAPER 2 - KCSE 2019 MARANDA MOCK EXAMINATION

1.  
   1. Explain five limitations of small scale retailers.
   2. African countries are considered to be underdeveloped. Explain five characteristics of such countries.
2.  
   1. Explain five factors that may lead to high consumptions of fruits.
   2. Explain five benefits of insurance industry to the economy.
3.  
   1. Explain five challenges that a trader who relies on rented warehouse may experience.
   2. The following information was extracted from the books of Economy traders in the month of March 2017.
      1/3       Cash in hand 40,000 and bank overdraft 12,000.
      3/3       Cash sales paid direct to the bank Shs.7,000.
      5/3       Credit sales to Mugo Shs.10,000.
      7/3       Received a cheque of Shs,9,000 from a debtor in full settlement of his account of Shs.10,000.
      8/3       Deposited Shs.3,000 from cash till into the business bank account.
      9/3       Paid for repairs in cash Shs.1,200.
      10/3     Mwala a debtor settled his account of Shs,25,000 by cheque less 3% cash discount.
      20/3     Withdrew Sh.1,300 from bank for personal use.
      29/3     Deposited all cash except Shs. 2,300.
      Required: Prepare a duly balanced three column cash book.(10mks)
4.  
   1. Explain five factors that will motivate an entrepreneur to implement a business idea.
   2. Explain five reasons why the government requires public finance.
5.  
   1. Outline five differences between a partnership and a cooperative society.
   2. Describe five methods that can be used to discourage trade between two countries.
6.  
   1. Explain five benefits of national income statistics to a country.
   2. The following trial balance was extracted from the books Kieni traders as at 31^st Dec 2017.
      Kieni Traders
      Trial balance
      As at 31^st Dec 2017
      

      Details	Dr	Cr
      Fixed Assets	292,600
      Current Assets	78,000
      Rent Income		23,0000
      Discount	3,000	2,000
      General Expenses	89,000
      Carriage inwards	28,000
      Purchases /Sales	280,000	474,000
      Returns	4.600	7,000
      Stock 1/1/2017	460,000
      Drawings	33,000
      Current Liabilities		53,000
      Capital		709,200
      	1,268,200	1,268,200

      
      Stock on 31^st Dec, 2017 was Shs,54,000.
      Required:
      1. Prepare trading, profit and loss account for the year ending 31^st Dec 2017.(8mks)
      2. Calculate working capital.(2mks)

MARKING SCHEME

1.  
   1. Limitations of small scale retailers.
      • Inadequate capital hindering expansion
      • Lack of managerial skills leading to poor performance.
      • Limited variety for consumers to choose from.
      • High prices of goods limiting the sales volume
      • Lack of latest technology which limits their fashions.
      • Lack of division of labour leading to poor quality.
   2. Characteristics of underdeveloped countries.
      • low per capita income due to minimal economic activities.
      • Rapid population growth rate leading to high dependency burden.
      • Poor infrastructure hampering trade.
      • Underutilised natural resources due to inadequate capital.
      • Unemployment creating social evils.
      • Low savings leading to low investment.
      • Large subsistence sectors leading to unfavourable balance of payment.
2.  
   1. Causes of increased consumption of fruits.
      • Favourable prices making them affordable.
      • Increased consumers income which increase the consumers.
      • Favourable tastes and preferences due to health benefits.
      • Favourable season such as dry season.
      • Increased population which raises the demand.
      • Expectation of high fruit prices in future increasing the consumers now.
      • Expectation of fruit shortages in future thus many buys now to avoid the shortage.
   2. Benefits of insurance to economy.
      • Creation of employment for those who work in the industry.
      • Mobilizing funds which can be used for investments.
      • Income to the dependants to cater for their needs.
      • Confidence to the investors to invest in risky but profitable sectors.
      • Giving peace of mind to the investors due to compensation.
      • Source of government revenue from taxes paid.
3.  
   1. Challenges of a rented warehouse
      • Lack of control which may inconvenience the trade.
      • Lack of storage space especially during peak season.
      • Lengthy release of good procedures leading to time wastage.
      • Uneconomical when done for a long time.
      • Unfavourable location which may not suit the trader.
      • Unfavourable infrastructure inhibiting movement of goods and services.
   2.  
      

      Date	Details	D/A	Cash	Bank	Date	Details	D/R	Cash	Bank
      1/3	Bal b/d		40,000		1/3	Bal b/d			12,000
      3/3	Sales			7,000	8/3	Bank		3,000
      7/3	Debtors	1000		9,000	9/3	Repairs		1,200
      8/3	Cash			3,000	12/3	Wages			5,000
      10/3	Mwala	750		24,250	15/3	Waki	120	2,880
      29/3	Cash			30,620	20/3	Drawings			1,300
      					29/3	Bank		30,620
      					29/3	Bal c/d		2,300	55,570
      		1750	40,000	73,870			120	40,000	78,870

4.  
   1. Factors that will convince an entrepreneur to implement a business idea.
      • Wide market to increase sales.
      • Enough profit to support the business.
      • Adequate skills to run the business.
      • Available goods/raw materials for steady operations.
      • Fair / Minimal competition to allow the business survival.
      • Ideal infrastructure to support the conduct of the business.
      • Adequate security to safeguard the business.
      • Modern technology to enhance diverse products.
   2. Reasons why government needs public finance.
      • To provide essential goods and services at minimal cost or at no cost at all.
      • Fair distribution of income to reduce regional imbalance in the country.
      • Maintain economic stability by checking inflation.
      • Promote economic development through initiating development projects.
      • To regulate certain sectors of the economy for economic reasons.
      • To control consumption of certain products for health reasons.
5.  
   1. Differences between a partnership and cooperative.
      

      Partnership	Cooperative
      i.2-20 partners	i.Minimum 10, no maximum
      ii.Managed by active partners.	ii.Managed by a management committee.
      iii.Formed through partnership deed or partnership Act.	iii.Formed through cooperative Act
      iv.Atleast one partner should have unlimited liability,	iv.All members have limited liability.
      v.No perpetual succession	v)Enjoys perpetual continuity
      vi.Maximise profit.	vi)Provide services to members

   2. Methods of trade restriction.
      • Imposing/increasing tariff to discourage imports.
      • Quotas-putting a limit of a product to be imported.
      • Total ban by abolishing the importation of a certain product.
      • Administrative bottle necks/complicated import procedure which makes importation tedious thus discouraging importers.
      • Setting high standards for imports to limit some imports.
      • Providing subsidies on local produce thus raising their demand due to low prices.
6.  
   1. Benefits of national income statistics
      • Measure the standard of living where high figures means higher standard of livings.
      • Compares the standard of living between different years where higher figures means improvement.
      • Compares standard of living in different countries where the one with high figures means better lives.
      • Assist in economic planning by comparing performance in different sectors.
      • Used to solicit funds by convincing the financiers on viability of the projects.
      • Indicate the rate of economy growth of a country by comparing national income figures in different periods.
   2.  
      1. KIENI TRADERS
         TRADING PROFIT AND LOSS ACCOUNT
         FOR THE PERIOD ENDED 31^ST DEC 2017
         

         Opening stock		460,000	Sales 474,000
         +Purchases	280,000		-Return in 4,600
         + carriage in	280,000		469,400
         -Return out	7,000	301,000
         G.A.F.S		76,000	Gross Loss 237,600
         -Closing Stock		54,000
         Cost of sales		707,000	707,000
         Gross loss b/d		237,600	Rent income 23,000
         Discount allowed		3,000	Discount received                   2,000
         General exp.......		85,000	Net loss 304,600
         		329,600	329,600

      2. Working Capital = Current Assets – Current Liabilities
         = 78,000 + 54,000 – 53,000
         =132,000 – 53,000
         =79,000