Business Studies Paper 2 Questions and Answers - Murang'a County Mocks 2020/2021

INSTRUCTIONS TO CANDIDATES

• This paper consists of 6 questions. Answer any FIVE questions

Questions

1.  
   1. Explain 5 money transfer facilities offered by a commercial bank to its customers. (10mks)
   2. Differentiate between a public limited company and a public corporation (10mks)
2.  
   1. Explain 5 ways of correcting balance of payment deficit. (10marks)
   2. Explain five factors that are likely to lead to high birth rate in Kenya. (10 marks)
3.  
   1. By the aid of a diagram, explain excess demand and excess supply (10mks)
   2. Discuss any five circumstances under which an insured may not be compensated in the event of a loss. (10mks)
4.  
   1. Explain five services offered by wholesalers to retailers. (10 marks)
   2. On March 1 2017, Martha had cash in hand sh 87,000 and cash at bank sh 250,000. During the month, the following transaction took place.
      March 2: Cash sales sh 60,000
               3: Paid salaries sh 101,500 by cheque.
               7: Received a cheque sh 76,000 from Henry, after allowing him cash discount of 5 %.
             13: Bought office furniture by cheque shs 86,000.
             17: Settled Maria’s account for shs 34,200 in cash, having deducted shs 800 cash discount.
             20: Received a cheque for shs 165,000 in respect of cash sales.
             22: Paid wages shs 25,000 in cash.
             24: Withdrew shs 32,000 from the bank for office use.
             25: Withdrew shs 4,000 cash for personal use.
             29: Received shs 17,000 cash from Alvin in settlement of his account less shs 1,000 cash Discount.
             31: Deposited all the money into the bank except shs 24,000.
      Prepare three column cash book duly balanced. (10 marks)
5.  
   1. Explain five benefits of filing office documents to an organization. (10 marks)
   2. A trader want to place an order to his suppliers. Explain five factors that he should consider before choosing the appropriate means of communication. (10 marks)
6.  
   1. The following trial balance was prepared from the books of Muranga traders as at 31^st Dec 2018
                             Muranga traders
                                Trial balance
                            As at 31^st Dec 2018
      

      	Dr (shs)	Cr (shs)
      Sales		900,000
      Purchases	500,000
      Returns	60,000	20,000
      Carriage inwards	30,000
      Carriage outwards	3,000
      Stock (jan 2018)	100,000
      Rent	12,000	60,000
      Delivery van	300,000
      Bank	60,000
      Creditors		50,000
      Debtors	100,000
      Interest	18,000
      General expenses	7,000
      Capital		178,000
      	1,190,000	1,190,000

      Stock on 31^st Dec 2018 was at sh.130,000 required,
      Prepare a trading profit and loss account for the year ended 31^st Dec 20189. (10marks)Stock on 31^st Dec 2018 was at sh.130,000 required,
   2. Explain any five limitations of advertising goods in newspapers (10marks)

MARKING SCHEME

1. 1. Explain 5 money transfer facilities offered by a commercial bank to its customers.  (10mks)
      • Accepting deposits; they accept deposits from their customers for safe keeping.
      • Providing means of payment; the provide convenient means of payments to their customers through standing orders, cheques, credit transfers e.t.c
      • Providing loans; they facilitate various types of loans.
      • Advisory services; they advise their customers on financial matters such as taxation and investment opportunities.
      • Foreign exchange; they sell and buy foreign currency as a service to the public.
      • Agents of stock of exchange; they do so by being contracted to channel new shares to the public or buying shares on behalf of their customers.
      • Guarantor and referees; they can stand surety on behalf of clients seeking credit transactions from other business units.
      • Safekeeping for valuables; they keep safely variable for their clients at a fee.    (any 5x2 = 10)
   2. Differentiate between a public limited company and a public corporation (10mks)
      

      public limited company	public corporation
      Formed by shareholders under the company’s act	Formed by the government through the act of parliament.
      Financed by shareholders	initially financed by the government
      Directors are welted and nominated by shareholders	Directors are political appointees
      Losses may result to collapse	Losses may be borne by the government
      No political influence except enacted laws	political influences

2. 1. Ways of correcting balance of payment
      • Increasing volume of export-this is done through the provision of exports incentives eg export compensation scheme.
      • Reducing volume of imports-is done through raising import duty and exchange controls.
      • Devaluation of currency-lowering value of country currency relative to other currencies to make import expensive and export cheaper.
      • Diversification of export-increasing range of commodities exported.
      • Borrowing from IMF and other lender to finance the deficit.
      • Encouraging the foreign direct investments in the country.     5x2=10 marks
   2. Factors are likely to  lead to high birth rate in Kenya
      
      • Some culture practice taking children as security in old age therefore getting many children.
      • Early marriage prolong woman’s reproductive life.
      • People wanting to have many children in areas of high mortality so that if some dies other will be left.
      • Children seen as cheap labour.
      • Where people are opposed or ignorant of family planning methods e.g. catholic people.   5x2=10mks  

3. 1. By the aid of a diagram, explain excess demand and excess supply       (10mks)
      
   2. Discuss any five circumstances under which an insured may not be compensated in the event of a loss.   (10mks)
      • If the insured has no insurable interest in the insured property
      • If the property is insured in an act of nature
      • If loss occurred due to willful action i.e. insured cancel the loss.
      • If insured fails to report occurrence of the risk within the stipulated period of time.
      • Incase of insolvent or bankruptcy of insurer.
      • If insured went against the principle of utmost good faith.
4.  
   1. Explain five services offered by wholesalers to retailers.       (10 marks)
      
      • (Availing) a variety of goods from different producers / relieving the retailers of the burden of visiting the producer’s premises / meeting their different needs / choices.
      • They break bulk into quantities desired by retailers / the retailers are able to purchase only in the quantities they can afford.
      • They offer storage / warehousing services – this relieves the retailers from the risk of damage / cost of storage of goods / services.
      • They provide credit / trade credit / financing to deserving retailers / which act as a source of capital to them / to be paid at a later date / as agreed.
      • They advertise goods / product promotion to the benefit of retailers to obtain (a ready ) market / relieving them of the cost of advertising / accept any correct benefit of advertisement to the retailer as expansion.
      • They offer transport to the retailers relieving them of transportation costs / the hustle of looking for means of transport.
      • They inform / advice / educate retailers on available offers for certain commodities / this may help retailers improve on their profit margin / accept examples of advice as explanation.
      • Blending the goods – mixing of different grades of goods / to get a desired / better quality.
      • Packing / packaging the goods- putting the goods in suitable containers / sizes / fixing labels / wrapping.
      • Sorting of goods – arranging / grouping goods in categories / in classes.
      • Branding –giving a name / features to a product for easy identification.
      • Steady supply of goods to the retailers whenever he / she needs them.
      • Acts as a link between producers and the retailers / by buying goods from the producer and selling them to the retailers / bringing goods closer to the retailers.
      • Grading goods – arranging / grouping goods according to the quality.
        NB: If a candidate gives preparation of goods for sale as a point, give 2 marks if qualified by way of example; give 1 mark if not qualified.
        1. Preparation of goods for sale without expansion – 1 mark.
        2. Preparation of goods for sale with examples of preparation , a candidate earns 2 marks
        3. Where a candidate has earned 2 marks for preparation of goods for sale fully explained but goes ahead to come up with ways of preparing goods for sale fully explained, award 2 marks but retain 1 mark for the other response.
   2. On March 1 2017, Martha had cash in hand shs 87,000 and cash at bank shs 250,000. During the month, the following transaction took place.
        March 2: Cash sales shs 60,000
                 3: Paid salaries shs 101,500 by cheque.
                 7: Received a cheque shs 76,000 from Henry, after allowing him cash discount of 5 %.
                13: Bought office furniture by cheque shs 86,000
                17: Settled Maria’s account for shs 34,200 in cash, having deducted shs 800 cash discount
                20: Received a cheque for shs 165,000 in respect of cash sales
                22: Paid wages sh 25,000 in cash
                24: Withdrew shs 32,000 from the bank for office use
                25: Withdrew shs 4,000 cash for personal use
                29: Received shs 17,000 cash Alvin in settlement of his account less shs 1,000 cash discount
                31: Deposited all the money into the bank except shs 24,000
      Prepare three column cash book duly balanced.      (10 marks)
      

      Date	Details	D.A	Cash	Bank	Date	Details	D.R	Cash	Bank
      1/3/17	Bal b/d √		87,000 √	250,000 √	1/3/17	Salaries √			101,500 √
      2/3/17	Sales √		60,000 √		3/3/17	Furniture √			86,000 √
      7/3/17	Henry √	4,000 √		76,000 √	13/3/17	Maria √	800 √	34,200 √
      20/3/17	Sales √			165,000 √		Wages √		25,000 √
      24/3/17	Bank ‘c’ √		32,000 √			Cash ‘c’ √			32,000 √
      29/3/17	Alvin √	1,000 √	17,000 √			Drawings √		4,000 √
      31/3/17	Cash ‘c’ √			108,000 √		Bank ‘c’ √		108,800 √√
      						Bal c / d √		24,000 √√	380,000 √
      		5,000 √	196,000	599,800			800 √	196,000	599,800

      38 × ¹/₄ = 9 ¹/₂ marks 
      NB: A tick on each side for dates   2 × ¹/₄  = ¹/₂ mark
5.  
   1. Explain five benefits of filing office documents to an organization.               (10 marks)
      
      • Tidiness in the office is maintained / office is kept tidy.As documents are (neatly) arranged.
      • Quick access / retrieval to / of information is made easy. Since documents are serialized / coded.
      • Safety of information from damage.By bad weather / fire / pests / accept examples as an example.
      • Saving on (storage) space / minimum space. As documents are kept compactively / accept examples of compact storage media as an explanation e.g. CD’s, diskettes.
      • Promote decision making possible / saves time in making decisions. As information is readily / easily available.
      • Encourages transparency / accountability. As no document are easily misplaced / as movement of documents can be monitored.
      • Security of  information against loss. Due to theft / misplacement.
      • Safeguard secrets / confidential information. As documents are kept away from unauthorized access / under key and lock.
      • Storage / safe-keeping of information / documents. For future reference.
   2. A trader want to place an order to his suppliers. Explain five factors that he should consider before choosing the appropriate means of communication.   (10 marks)
      
      • Urgency of the message-use fast means when the message is urgent
      • Cost-choose one which is cost effective / affordable
      • Confidentiality –Choose a mean depending on the privacy the message content.
      • Distancee. the geographical gap between the supplier and him eg telephone for long distance
      • Evidence for future reference
      • Reliabilitye. assurance that the message will reach
      • Accuracy-exactness of the message
      • Capacity of the mean-detailed message requires a method that would accommodate the volume of data involved.
6.  
   1. 
      
   2. Limitations of advertising goods in newspapers    
      
      • Not all potential customers are able to read newpapers
      • The newpapers may be written in a language or medium that is not familiar to customers
      • It is expensive to buy newspapers and many people cannot afford
      • It is expensive to advertise using newpapers as one incurs extra cost
      • Newspapers are nto able to discriminate between the intended group and others
      • Newspapers may not reach all parts of the country
      • Newspapers have a short life and therefore easily discarded.                  5x2=10mks)

500,000