BUSINESS PAPER 2 - KAPSABET BOYS 2019 TRIAL MOCK EXAMINATION

1.  
   1. Outline any five differences between private limited liability company and public limited liability company. (10mks)
   2. Describe five accounting documents used in home trade. (10mks)
2.  
   1. The table below shows the demand and supply schedules for product A in a week.
      Price(sh)                   Quantity demanded          Quantity supplied
      (‘000’ tonnes)                     (‘000’ tonnes)
      35                                            5                                              80
      30                                            10                                            65
      25                                            20                                            55
      20                                            25                                            40                               
      15                                            30                                            35
      10                                            40                                            20
      5                                              55                                            5
      Use the information in the table above, draw the demand and supply curve showing the market equilibrium for the produce.                                                                       (10mk)
   2. Explain five benefits that a firm may enjoy by preparing a business plan. (10mks)
3.  
   1. Traders are required to observe ethical practices when carrying out product promotion. Explain five reasons for observing such ethical practices (10mks)
   2. Explain five benefits that may be realized by a country as a result of government policy to relocate Industries to rural areas. (10mks)
4.  
   1. Outline any five factors to consider while locating a ware house. (10mks)
   2. On 1^stSeptember 2015, Miriam had sh 55,000 in hand and sh. 250,000 in bank. During the month the following transactions took place.
      Sep 2:        Cash sales banked sh 35,260
      Sep 3:        Bought ribbons in cash sh 4,500
      Sep 8:        Paid Wangila, a creditor sh 94,000 by cheque in full settlement of his account after deduction 6% cash discount.
      Sep 12:     Received a cheque for sh 58,800 from Wetu after allowing her cash discount of sh 1,200
      Sep 15:     Paid salaries of sh 34,000 in cash
      Sep 25:     Withdrew sh 50,000 from bank for office use.
      Sep 28:     Anyango a debtor paid her account of sh 75,000 by cheque less 10% cash discount.
      Sept 30:    Deposited all the cash into the bank except sh 13,700
      Prepare a three column cash book and balance it off.                                                           (10mks)
5.  
   1. Explain any five uses of National Income Statistics (10mks)
   2. The following trial balance related to Tai Traders as at 31^st December 2014
      TAI TRADERS
      TRIAL BALANCE
      AS AT 31^ST DECEMBER 2014
      Details                                   Dr (Ksh)                    Cr(Ksh)
      Stock                                       10,000                                   
      Bank                                       3,500
      Purchases                              15,000
      Sales                                                                         28,000           
      Returns                                  800                             1,100
      Rent                                                                          580
      Insurance                               950
      Creditor                                                                    450
      Carriage in                             1,200
      Discounts                               300                             1,620
                                                    31,750                        31,750
      Additional information
      Closing stock was valued at Ksh 2,500
      Carriage out was Ksh 1,200
      Required: Prepare trading profit and loss account.                                                         (10mks

6.  
   1. Explain any five reasons why one would prefer to transport goods on road than rail.(10mks)
   2. On 1^st January 1993 Makena started a business with sh 120,000 cash and sh 300,000 in the bank.
      The following transactions were done in the month of January 1993.
      January 3:            Bought goods worth sh 60,000 by cheque
      January 10:          Sold goods worth sh 35,000 cash
      January 14:          Bought goods worth sh 90,000 cash from Odero
      January 18:          Paid wages sh 18,000 by cash
      January 20:          Withdrew sh 40,000 from bank for office use.
      Required;
      Record the above transactions in the relevant ledger account, balance them off and extract a trial balance.                                                                                                                (10mks)

MARKING SCHEME

1.  
   1. Differentiate between Private limited company and public limited liability company               (10mks)
      

      Private limited company	Public limited liability company
      a)     can be formed by minimum of 2 shareholders	a) Can be formed by a minimum of 7 shareholders
      b)     Formed by a maximum of 50 shareholders	b) Has no set maximum
      c)      Does not sell or advertise its shares to the public	c) Advertise and sells its shares to the public
      d)     Does not allow the transfer of shares without consent from other shareholders	d) Shares can be freely transferred from one person to the other in the stock exchange
      e)     Can start operating after receiving a certificate of incorporation	e) Cannot start operating until it is issued with the license of trading and approval of the prospectus.
      f)       Audited financial statements need not be published and filed with the registered of companies	f) Audited financial statements must be published and filed with register of companies

   2. Debit note – A document sent from the seller to the buyer to correct undercharge in the invoices.b) – Invoice – Document sent by the seller to the buyer demand payment for goods supplied.
      Credit note – Document sent by the seller to the buyer to correct overcharge
       Receipt – It is a document issued from the seller to the buyer when payment is made for goods
      Statement of account – Is a document sent from the seller to buyer showing details or balances of tra-sections for the month
      Payment voucher – A document used to validate payment for goods and services rendered
      Consignment note – To support hire of carrier services

2.  
   1.  
      
   2. Used in sourcing for finance /capital/loans/credit – It can be used to convince - financial Institutions and investors to fund the firm’scooperation. (10mks)
      • A tool of evaluation / help in avoiding mistakes – can be used to determine whether the firm is achieving its goals.
      • A tool of management/help in avoiding mistakes – can be used for structuring /implementation of firm’s activities.
      • Give a firm competitive edge – Enable the firm to get better understanding of the market.
      • Motivational tools/creates team work – In accomplishing the objectives of the firm.
      • Adaptability tool – Creates room to cope with changes
      • Any other relevant well explained 5 x 2=10mks

3.  
   1. To avoid misleading consumers – By not making false claim about their products.
      • To ensure that consumers are not offended – By not making use of appeal that goes against their cultural values.
      • To avoid exploiting certain vulnerable groups since they lack the knowledge.
      • To avoid negative influence on consumer (value and lifestyle) – That may lead to immorality /ill health.
      • To avoid portraying viral businesses negatively – In an attempt to capture market.
      • To create a positive image /reputation of the business hence maintaining customers loyalty / retain market share
      • To abide by the law of the country so as to avoid lawsuit/conflict.
      • To avoid environmental pollution – By using environmentally friendly promotional materials.
        Any other relevant well explained 5 x 2=10mks
   2. Benefits that may be realized by a country as a result of government policy of relocating industries to rural areas.
      • Reduced income disparities/inequalities/even distribution income- As more people have access to jobs/income generating activities.
      • Availability of auxiliary services / subsidiary/service industry – which lead to (faster) development of rural areas.
      • Creates jobs/increased job opportunities / more jobs available/reduce unemployment – In all regions of the country.
      • Increased utilization of resources /factors of production – Locally available factors of production (will be used) that would otherwise be idle.
      • Balanced economic development – As economic activities/firms are spread throughout the country.
      • Minimizes pollution in one area- Thus believing the extreme/severe impact.
      • Creation/expansion of market – For goods and services/raw materials produced in rural areas
        Any other relevant well explained 5 x 2=10mks

4.  
   1. Factors to consider when locating a warehouse
      • Availability of adequate security
      • Availability of auxiliary services eg banks
      • Enough land for future expansion
      • Nearness to the point of production, sale or supply.
      • Compliance with the government regulations
      • Good means of transport – easily accessible to bring goods in and out of the warehouse
      • Good communications network – To easily pass information between the warehouse and the customers/suppliers
      • Any other relevant well explained 5 x 2=10mks
   2. Miriam
      3 column cash book
      

      Date	Details	L.F	Discount allowed	Cash	Bank	Date	Details	L.F	Discount received	Cash	Bank
      2015 Sep 1 Sept 2 Sept 12 Sept 25 Sept 28 Sep 30 Sept 30	Balance Sales Wetu Bank Anyango Cash Balance	b/d C b/d	1200 7500	55000 50000	250000 35260 58800 67500 52800	2015 Sep 3 Sep 8 Sep 9 Sep 25 Sep 30 Sep 30	Ribbons Wangila Salaries Cash Bank Balance	C c/d	6000	4500 34000 52800 13700	94000 50000 320360
      			8700	105000	464360				6000	105000	464360
      				13700	320360

5.  
   1. Used to determine the performance of the economy – An increase of the N.1 may mean better performance of the economy and vice versa.a) Uses of National income
      • The country is able to determine the level of economic growth – By comparing the GDP over several years.
      • Helps investors to make informed decisions – On which sector to invest and when to invest.
      • Used by government as a tool of supporting their request for foreign aid.
      • Comparing economic performance of different countries.
      • Helps compete the standards of living between two countries.
      • Helps government to understand the income distribution in the country.
        Any other relevant well explained 5 x 2=10mks
   2. TAI TRADERS
      TRADING PROFIT AND LOSS ACCOUNT
      FOR THE YEAR ENDED 31^ST DECEMBER 2014
      

      Sh             sh
      Opening stock                                     10000 Add purchases         15,000 Add carriage inwards   1,200 Less returns outwards 1,100 Net purchases 15,100 CGAFS     25,100 Less closing stock 2,500 C.G.S     22600 Gross profit c/d 4600 27,200 EXPENSES Carriage outwards 1,200 Discount allowed 300 Insurance 950 Net profit c/d 4,350 6,800	Sales                     28,000 Less sales returns 800 Net sales 27,200 27,200 Gross profit b/d 4,600 Add; Rent received 580 Discount received 1,600 6,800

      Net profit derived from wrong gross profit award , but all other entries must be correct to attract awarding.NB: Wrong gross profit correctly brought down to the P & L account a word.

6.  
   1. Road transport is suitable over short distances since it is relatively fast compared to rail transport. (10mks)
      • There is flexibility in road transport since collection and delivery can be done at the convenience of the owner of the goods.
      • Road transport can provide door to door service. This reduces the amount of handling and increases the safety of the goods.
      • Road transport provides for specially designed vehicles to transport specialized goods e.g takers to transport oil etc
      • Road transport does not have a fixed schedule hence one can transport his goods at any time.
      • One can decide to own the vehicle so as to have more control since it is relatively cheap compared to a train.
      • If the quantity to be transported is small then road transport is mot appropriate.
      • The road network in this country is better than that of the rail network.
        Any other relevant well explained 5 x 2=10mks
   2. CASH IN HAND A/C
      
      Dr                                                           Cr
      

      1993 Jan 1 capital   120,000 Jan 10 sales 35,000 Jan 20 Bank 40,000 195,000 Jan 20 Balance b/d 87,000

      1993 Jan 14 purchases 90,000 Jan 18 wages 18,000 Jan 20 Balance c/d 87,000 195,000

      
      CASH AT BANK A/C 
      Dr                                                                                                                                Cr
      

      1993 Jan 1         capital                         20,000 200,000 Jan 20 Balance b/d                     100,000

      1993 Jan 5         purchases                         60,000 Jan 120cash 40,000 Jan 20       Balance c/d                         100,000 200,000

      
      CAPITAL A/C
      Dr                                                                                                                                Cr
      

      1993 Jan 20 Balance c/d320,000

      1993 Jan 1       cash                     120,000 Jan 1 Bank200,000 320,000 Jan 20 Balance b/d 320,000

      
      PURCHASES A/C
      Dr                                                                                                                                Cr
      

      1993 Jan 5       Bank                                   60,000 Jan 14     Cash                                     90,000 150,000 Jan 20 Balance b/d 150,000

      1993 Jan 20 Balance c/d 150,000 150,000

      
      
      SALES A/C 
      Dr                                                                                Cr
      

      1993 Jan 20     Balance c/d35,000

      1993 Jan 10     Cash                                         35,000 Jan 20       Balance b/d                          35,000

      
      WAGES A/C
      Dr                                                                         Cr
      

      1993 Jan 18 Cash                                 18,000 Jan 20     Balance b/d                       18,000

      1993 Jan 20Balance c/d             18,000

      
      MAKENA
      TRIAL BALANCE
      AS AT 20^TH JANUARY 1983
      

      Details	Dr	Cr
      Cash Bank Capital Purchases Sales Wages	87,000 100,000 150,000 18,000	320,000 35,000
      	355,000	355,000

      
      Total marks 30 x ¹/₃ = 10mksTotal ticks = 30