Business Studies Paper 2 Questions and Answers - Sukellemo Joint Mock 2020/2021

SUKELLEMO JOINT MOCK
Kenya Certificate of Secondary Education
BUSINESS STUDIES
PAPER 1
2 HOURS

Instructions to Candidates

• This paper consists of six questions
• Answer any five questions. All questions carry equal marks

1.    
   1. Outline five differences between a public limited company and a parastatal(10 marks)
   2. The following details were ectractred from the books of Juhudi Retailers
      Invoices Issued:
      

      2017		Sh
      July 1	Mwango	120,000
      July 4	Nyambura	60,000
      July 10	Mwango	150,000
      July 25	Nyambura	80,000
      Invoices Received:
      2017		Sh
      July 1	Ndaru	220,000
      July 3	Ndaru	90,000
      July 14	Omari	40,000
      July 28	Ndaru	110,000
      Credit Notes Sent
      2017		Sh
      July 8	Mwango	20,000
      July 26	Nyambura	16,000
      Credit Notes Received
      2017		Sh
      July 11	Ndaru	30,000
      July 27	Ndaru	10,000

      Prepare Journal entries and show the posting of the totals to the relevant ledger accounts(10 marks)
2.    
   1. By use of a diagram show the effect of a shift of the demand curve from the left to right on equilibrium price and quality. (10 marks)
   2. Discuss five benefits of filing office documents to an organization. (10 marks)
3.    
   1. Give five limitations of using per capita income to compare the standard of living in different countries. (10 marks)
   2. Explain five ways in which a country may suffer as a result of being a member of a trading bloc. (10 marks)
4.    
   1. Explain five benefits Kenya would derive from a well-drawn development plan. (10 marks)
   2. Highlight five reasons why the government may find it necessary to participate in business activities. (10 marks)
5.    
   1. On 1st January 2013, Chui has Sh. 35,000 in cash and a bank overdraft Sh. 12,00. During the month, the following transaction took place:
      
      Jan 2 Sold goods for Sh. 8,000 cash.
      Jan 5 Received a cheque for Sh. 40,000 from Mwirigi Enterprises
      Jan 8 Paid Sh. 6,000 cash to Bundi.
      Jan 10 Deposited Sh. 13,000 into the bank from cash till
      Jan 14 Withdrew Sh. 5,000 from bank for personal use.
      Jan 15 Paid wages Sh. 4,000 in cash.
      Jan 18 Received Sh. 25,000 cash from Kazure.
      Jan 24 Cash sales paid directly into the bank Sh. 45,000
      Jan 26 Paid wages Sh. 2,400 in cash
      Jan 27 Withdrew Sh. 21,000 from bank for business use
      Jan 28 Bought furniture Sh. 19,000 in cash.
      Jan 29 Paid insurance Sh. 17,000 by cheque.
      Jan 30 Deposited all the cash into the bank leaving a balance of only Sh.3,000
      
      Prepare a two-column cashbook and balance it off. (10 marks)
      
      
   2. Explain five circumstances under which a buyer would prefer buying goods under credit purchase rather than hire purchase terms. (10 marks)
6.       
   1. Give four ways in which an entrepreneur contributes to produce goods.(8 marks)
   2. The following trial balance was extracted from the books of Baite Traders as at 31^st August 2015
      

      	Dr	Cr
      	Sh	Sh
      Sales		350,000
      Purchases	160,000
      Cash at the bank	290,000
      Returns inwards	5,000
      Carriage inwards	20,000
      Carriage outwards	14,000
      Salaries and wages	10,000
      Debtors	56,000
      Creditors		90,000
      Stock	35,000
      Machinery	265,000
      Rent		25,000
      Discounts received		18,000
      Light and heating	12,000
      Buildings	240,000
      Advertising	13,000
      Drawings	30,000
      Capital		667,000
      	1,150,000	1,150,000

      Additonal information:
      1. Stock on 31st August 2015 was valued at Sh. 50,000
      2. Prepare trading, profit and loss account for the year ended 31st August 2015 and a balance sheet as at that date.(12 marks)

MARKING SCHEME

1.    
   1. Outline five differences between a public limited company and a parastatal(10 marks)
      

      Public Limited Company	Parastatal
      -Owned by private people who own shares -Directors are elected by shareholders -Main objective is to make profit -Profit realised belongs to shareholders -Initially financed through issues of shares.	-Fully owned by government -Directors are appointed by government - Main objective is to offer essential goods and services -Profit realised belongs to the state. -Initially financed by state or though state guarantee

   2. The following details were ectractred from the books of Juhudi Retailers
      Invoices Issued:
      

      2017		Sh
      July 1	Mwango	120,000
      July 4	Nyambura	60,000
      July 10	Mwango	150,000
      July 25	Nyambura	80,000
      Invoices Received:
      2017		Sh
      July 1	Ndaru	220,000
      July 3	Ndaru	90,000
      July 14	Omari	40,000
      July 28	Ndaru	110,000
      Credit Notes Sent
      2017		Sh
      July 8	Mwango	20,000
      July 26	Nyambura	16,000
      Credit Notes Received
      2017		Sh
      July 11	Ndaru	30,000
      July 27	Ndaru	10,000

      Prepare Journal entries and show the posting of the totals to the relevant ledger accounts(10 marks)
      

      Sales Journal
      Date	Details	Invoice No.	l.f	Amount
      20 -7 July 1 July 4 July 10 July 25 July 31	Mwango Nyambura Mwango Nyambura total posted to G.L(Cr)			SH 120,000 60,000 150,000 80,000 410,000

      
      

      Purchases Journal
      Date	Details	Invoice No.	l.f	Amount
      20 -7 July 1 July 3 July 14 July 28 July 31	Ndanu Ndanu Omari Ndanu Total posted to G.L			Sh 220,000 90,000 40,000 110,000 460,000

      
      

      Returns Inwards Journal
      Date	Details	Invoice No.	l.f	Amount
      20 -7 July 8 July 26 July 31	Mwango Nyambura Total posted to G.L(dr)			Sh 20,000 16,000 36,000

      
      

      Returns Outwards Journal
      Date	Details	Invoice No.	l.f	Amount
      20-7 July 11 July 27 July 31	Ndaru Ndaru Total posted to G.L(cr)			Sh 30,000 10,000 40,000

      
      

      Sales Account
      Dr				Cr
      .    .		.    .	.    .	20-7 July 31	Sundry Debtors	Sh 410,000

      
      

      Purchases Account
      Dr			Cr
      20 -7 July 31	Sundry creditors	Sh 460,000	.    .	.   .	.   .

      
      

      Returns Outwards Account
      Dr			Cr
      .    .	.   .	.   .	20-7 July 31		Sundry creditors	Sh 40,000

      
      

      Returns Inwards Account
      Dr			Cr
      20 -7 July 31	Sundry debtors	Sh 36,000	.    .		.   .	.   .

      
      
      
2.    
   1. By use of a diagram show the effect of a shift of the demand curve from the left to right on equilibrium price and quality. (10 marks)
      
   2. Discuss five benefits of filing office documents to an organization. (10 marks)
      • Filing of documents in an office makes it tidy, otherwise it would make an office disorganised if documents are thrown all over the place without any order.
      • It makes it possible for an organization to make references when necessary. In case the documents are not kept, it may be difficult for information to be accessed when needed at some future date.
      • Documents can easily get lost or stolen if not filed. Filing ensures that documents are kept in secure places which minimises loss, theft or misplacement.
      • It takes a shorter time to access documents than when they are not filed which would waste a lot time trying to look for them.
      • It saves spaces otherwise documents that are not filed and kept end up taking a lot of space.
        
        
3.    
   1. Give five limitations of using per capita income to compare the standard of living in different countries. (10 marks)
      • Inequality in income distribution. Per capita income in one country may be high but in the hands of very few people yet another country may have low per capita income, which is evenly distribution.
        
      • Inappropriate application of national income. Per capita income in one country may be high but used in a way that does not benefit citizens while in the other country, it may be used to finance projects that directly benefits the masses.
      • Effect in people’s health. High per capita income in one country could be achieved at the expense of the people’s health
      • Different interpretations of national income. One country may interpret her national income as gross domestic product at market price while another may interpret hers as net national product at factor cost.
      • Non-marketed output. A country heavily relying on subsistence sector may appear to have low per capita income because of un-marketed output compared with another where such as sector insignificant.
      • Price structure. Price structure may be different in difference countries e.g. food stuffs may be cheaper in one country compared to another.
        
        
   2. Explain five ways in which a country may suffer as a result of being a member of a trading bloc. (10 marks)
      • Loss of government revenue as no duty is imposed on goods to and from member countries.
      • Closing down of local industries due to unhealthy competition with goods from more established industries from member countries.
      • Unemployment for locals as they are not able to compete with more qualified people from member countries.
      • Limits consumer choice. Citizens may have a limited choice as they may get goods produced within the trading block due to barriers placed to non-member countries.
      • Compromising a country’s political ideology as the country adjusts itself to fit in the trading block.
        
        
4.    
   1. Explain five benefits Kenya would derive from a well-drawn development plan. (10 marks)
      • Allocation of available resources enables the government to allocate the available resources in the best way possible. This would ensure that there are neither idle resources nor some being used in the wrong manner.
      • Project evaluation. Plan acts as a standard in which projects can be evaluated. Where there are deviations, they may analysed and corrective measures taken before it is too late.
      • Equitable distribution of income. Development plans enables government to distribute equitably income thorugh fair allocation of resources regionally.
      • Negotiation with donors. The government may use a development plan to convince donors that funds being sought would be put into proper use.
      • Stimulating effort. A well-drawn and explained development plan may make the masses exert more effort in national development.
      • Avoiding duplication. Through proper planning, different industries are set in different parts of the country thereby ensuring balanced development in the country.
        
        
   2. Highlight five reasons why the government may find it necessary to participate in business activities. (10 marks)
      • To provide goods and services that are too sensitive to be left in the hands of the private sector.
      • To attract foreign investment by initiating major development projects
      • To prevent exploitation of consumers by private business people especially in provision of essential goods and services
      • To provide essential goods and services which private individuals are not able to due to large amount of capital required.
      • To stimulate economic development in the country
      • To ensure equitable distribution of essential goods and services
      • To provide unprofitable but essential goods and services
        
        
5.    
   1. On 1st January 2013, Chui has Sh. 35,000 in cash and a bank overdraft Sh. 12,00. During the month, the following transaction took place:

      Jan 2 Sold goods for Sh. 8,000 cash.
      Jan 5 Received a cheque for Sh. 40,000 from Mwirigi Enterprises
      Jan 8 Paid Sh. 6,000 cash to Bundi.
      Jan 10 Deposited Sh. 13,000 into the bank from cash till
      Jan 14 Withdrew Sh. 5,000 from bank for personal use.
      Jan 15 Paid wages Sh. 4,000 in cash.
      Jan 18 Received Sh. 25,000 cash from Kazure.
      Jan 24 Cash sales paid directly into the bank Sh. 45,000
      Jan 26 Paid wages Sh. 2,400 in cash
      Jan 27 Withdrew Sh. 21,000 from bank for business use
      Jan 28 Bought furniture Sh. 19,000 in cash.
      Jan 29 Paid insurance Sh. 17,000 by cheque.
      Jan 30 Deposited all the cash into the bank leaving a balance of only Sh.3,000

      Prepare a two-column cashbook and balance it off. (10 marks)

      Dr	Two-column Cash Book						Cr
      Date	Particulars	Cash	Bank	Date	Particulars	Cash	Bank
      20 -8		Sh	Sh	20-8		Sh	Sh
      Jan 1	Balance b/d	35,000		Jan 1	Balance b/d		12,000
      Jan 2	Sales	18,000		Jan 8	Bundi	6,000
      Jan 5	Mwirigi Entr		40,000	Jan 10	Bank	13,000
      				Jan 14	Drawings		5,000
      Jan 10	Cash		13,000	Jan 15	Wages	4,000
      				Jan 26	Wages	2,400
      Jan 18	Kazure	25,000		Jan 27	Cash		21,000
      				Jan 28	Furniture	19,000
      Jan 24	Sales		45,000	Jan 29	Insurance		17,000
      Jan 27	Bank	21,000		Jan 30	Bank	51,600
      				Jan 31	Bal c/d	3,000	94,600
      Jan 29	Cash		51,600
      		99,000	149,600			99,000	149,600

       

   2. Explain five circumstances under which a buyer would prefer buying goods under credit purchase rather than hire purchase terms. (10 marks)
      1. Where there is need to own the goods as under hire purchase ownership remain with the seller until the last instalment is paid.
      2. Where there is need to sell the goods as goods under hire purchase cannot be sold before all instalments are paid.
      3. Where there is need to benefit from lower price as hire purchase term is higher.
      4. Where there is need to avoid good being repossessed as it is the case in hire purchase terms.
      5. Where buyer is buying non durable goods which cannot be sold under higher purchase terms.
      6. Where buyer is intending to pay in one instalment and avoid periodic instalment which are required under hire purchase terms.
6.   
   1. Give four ways in which an entrepreneur contributes to produce goods.(8 marks)
      1. Provides the capital required in the production process
      2. He assembles other factors of production
      3. He makes decisions on how the business should run
      4. Pays fro other factors of production
      5. Bears risk
      6. Identifies the viable business opportunity
         
         
   2. The following trial balance was extracted from the books of Baite Traders as at 31^st August 2015
      

      	Dr	Cr
      	Sh	Sh
      Sales		350,000
      Purchases	160,000
      Cash at the bank	290,000
      Returns inwards	5,000
      Carriage inwards	20,000
      Carriage outwards	14,000
      Salaries and wages	10,000
      Debtors	56,000
      Creditors		90,000
      Stock	35,000
      Machinery	265,000
      Rent		25,000
      Discounts received		18,000
      Light and heating	12,000
      Buildings	240,000
      Advertising	13,000
      Drawings	30,000
      Capital		667,000
      	1,150,000	1,150,000

      Additonal information:
      1. Stock on 31st August 2015 was valued at Sh. 50,000
      2. Prepare trading, profit and loss account for the year ended 31st August 2015 and a balance sheet as at that date.(12 marks)
         

         Baite Traders Trading, Profit and Loss A/C For the period ended 31st August 20-5
         	Sh	Sh		SH	Sh
         Opening stock		35,000	Sales	350,000
         Add: Purchases	160,000		Less: Return inwards	50,000	345,000
         Carriage inwards	20,000	180,000
         COGAFs		215,000
         Less: Closing stock		50,000
         Cos		165,000
         G.P c/d		180,000
         		345,000			345,000
         Carriage outwards		14,000	G.P b/d		180,000
         Sal/wages		10,000	Rent		25,000
         Light & heat		12,000	Discount Received		18,000
         Advert		13,000
         NP c/d		174,000
         		223,000			223,000

         
         
         

         Biate Balance sheet As at 31st August 20-5
         Assets Machinery Buildings	Sh 265,000 240,000	Capital + Liabilities Capital Less: Drawings	Sh  667,000 30,000	Sh
         			637,000
         Stock Bank Debtors	50,000 290,000 56,000	Add Net Profit Creditors	174,000	811,000 90,000
         	901,000			901,000