Business Studies Paper 2 Questions and Answers - 2021 KCSE Eldoret Diocese Mock Exams

Questions

INSTRUCTIONS TO CANDIDATES

This paper consists of 6 questions.
Answer ANY FIVE questions in the spaces provided
Candidates should answer the questions in English

1. Explain five measures that Kenya may take to control unemployment problem (10 marks)
2. Highlight five differences between direct tax and indirect tax . (10 marks)
1. Explain the meaning and significance in each of the following terms as used in foreign trade.(10 marks)
  1. Terms of trade.
  2. Balance of payment.
  3. Exchange rate.
  4. Balance trade.
  5. Common market.
2. Explain five functions of the national budget as a tool of planning. (10 marks)

Discuss five factors that have led to survival of small-scale retailers despite competition from Supermarkets. (10 marks)

The following balances were extracted from the books of Mutei traders on 31st December,2017.

	Shs
Gross profit General expenses Buildings Equipment Capital Furniture Insurance Stock Commission income Discount allowed Discount received Bank Overdraft Salaries and wages Creditors Carriage outwards Debtors Carriage inwards Cash	800,000 180,000 1,250,000 380,000 1,400,000 117,000 48,000 25,000 125,800 55,000 56,200 79,000 320,000 90,000 60,000 65,500 34,500 51,000

Prepare:

Profitandlossaccountfortheperiodended31stDecember2017.
Balance sheet as at 31stDecember,2017. (10marks)

1. Highlight five benefits accruing to a seller who uses the personal selling method to promote herproducts. (10marks)
2. The following transactions relate to Furaha traders for the month of July,2008
  July 1 : Balance brought down cash sh.16,250 and Bank Shs.19,847
  July2 : Sold goods worth Shs.1,348 to Patel and received a calculator in exchange
  July 5 : Paid transport by cheque Shs.2,000
  July 6 : Issued a cheque to Kerio Traders setting an invoice for Shs.10,000 deducting 2% cash discount
  July 10: Transfer Shs.15 000 from cash till to bank
  July 12: Sold goods for cash Shs.12,000 less 2% cash discount
  July 13: Sold goods to Onyango on credit worth Shs.15, 000
  July 14: The owner of the business withdrew Shs.3000 in cash to buy a present for his daughter
  July 16 : Received a cheque from Kuria Shs.2,500 less 5 % cash discount
  July 22 : Bought furniture from Babu Traders on credit worth Shs.16,500 and cash discount of 10% if payment is made within 2 weeks
  July 24: Withdrew cash from bank for office use Shs8,000
  July 26: The owner brought into the business Shs.9,000 cash
  July 27: Issued a cheque to Babu Traders for amount due
  July 28: Sold goods to Kuria worth Shs.5,000 for Shs.3,800 and received payment by cheque
  July 30: Banked all cash and remained with Shs.100 in the cash till
  
  Required; Prepare Furaha Traders three column cash book for the month of July 2008. (10 marks)
1. Explain five means of written communication. (10marks)
2. Explain five measures that are adopted by the government to protect consumers against exploitation. (10marks)
1. Explain five characteristics of perfect competition market structure.(10marks)
2. Commodity A and B are subtitute products. Using well label diagrams explain how increase in supply of commodity A would affect the equilibrium price and quantity demanded of commodity B. (10mks)

Marking Scheme

Explain five measures that Kenya may take to control unemployment problem
- Population control eg family planning
- Increased government expenditure thus having many projects set up
- Encouraging exploitation of natural resources to increase production activities
- Exporting labor to countries with labor deficiency
- Diversification of the economy to reduce seasonal unemployment
- Rural development
- Encourage foreign investment in the country
- Encourage use of labor-intensive method in production
- Improvement of the infrastructure to stimulate economic activities
- Improvement of education systems to make it more appropriate to the employment needs of the economy.

Highlight five differences between direct tax and indirect tax

Direct tax	Indirect tax
(i)Tax revenue is certain	(i)Uncertainty in tax collected
(ii) Does not affect prices of goods and services	(ii)Affects prices of goods and services
(iii) The society or taxpayers are conscious	(iii) the taxpayer may not be aware of tax being paid.
(iv) Economical in collection	(iv) Expensive in collection
(v) Cannot be avoided	(v) Can be avoided
(vi)Can discourage work	(vi)Encourages people to work hard to maintain their standards of living.

1. Explain the meaning and significance in each of the following terms as used in foreign trade.
  - Terms of trade: the rate at which exports on one country exchanges with imports. Tot = Price index of exports determines whether the trade between one country and another is favorable.
  - Balance of payment: the difference between both capital and current exports and imports of a country. If the value of exports is higher, the country experiences a surplus and vice versa. It determines whether a country is experiencing surplus in
  - Exchange rate: rate at which a country’s currency exchanges with another. This rate determines the value of exports and imports/ shows its indication of a country’s economic strength.
  - Balance trade: the difference between the value of a country’s visible tangible imports and its value of exports is higher than imports. Determines whether a country is experiencing surplus/ deficit trade
  - Common market: an agreement between countries that allow free movement of goods and factors of production. This allows mobilization of resources/ trade without restriction
2. Explain five functions of the national budget as a tool of planning.
  - Outlining government expenditure – It details the various expenditure programmed the government plans to undertake over a given period
  - Outlining government revenue – It gives details of the various sources of revenue for the government to finance its activities
  - Enabling government planning – The government uses the budget to plan for various activities and programmed that lead to economic growth and development
  - Introducing changes in taxation – The various taxes to be applied, the tax rate and the mode of application of the taxes are outlined in the budget
  - Regulating money supply – It outlines the monetary systems to be instituted by the government to regulate money supply in the economy
  - Stimulating economic activities – It is used to increase government expenditure in the economy which will spur economic activities in the country

Discuss the factors that have led to the survival of small-scale retailers despite competition from supermarkets (10 marks)
- Personalized services: small scale retailers provide personalized services and are therefore ab to attract and retain customers which are not offered by supermarkets.
- accessibility of small-scale retailers / convenience of locating small scale retailers are conveniently in urban centers.
- Credit facilities small scale retailers offer credit facilities to some of their customers which are not available to specific customer needs.
- Adaptation to specific customer needs small scale retailers easily adapt to the specific client.
- They can sell goods in small units than the supermarkets.
- Running costs of small-scale retailers are little and this makes it easier for them to survive unlike small markets which require huge capital to operate.
- Management: Small scale businesses the risks involved are low while in supermarkets are grew
- Starting/ initial capital starting small scale retailers a suitable for people form of low income.
- Flexibility- it is easier for small scale retailers to change from one form of business to another location than it is for supermarkets.

Mutei traders Profit and Loss For the year ended 31/12/2017√
General expenses 180,000 Insurance 48,000 Discount allowed 55,000 Salaries and wages 320,000 Carriage outwards 60,000 Net Profit 319,000	Gross profit b/d 800,000 Commission income 125,800 Discount received 56,200
982 000	982 000

Mutei traders Balance sheet As at 31/12/2017
Buildings Equipment Furniture Current assets Stock Debtors Cash .	1,250,000√ 380,000√ 117,000√ 1,747,000 25 000 65 000 51 000 141 000	Fixed Assets Capital Add Net Profit Current liabilities Creditors Bank Overdraft .	Shs 1 400 000 319 000 1 719 000 90 000 79 000 169 000
	1 888 000		1 888 000

Highlight five benefits accruing to a seller who uses the personal selling method to promote her products
- Personal selling gives the seller an opportunity to demonstrate the products that they are selling.
- She can get an immediate feedback and act on it.
- Salespersons can offer more elaborate explanations about the product.
- Seller will be able to get orders directly from customers.
- Personal selling compliments other promotional activities.
- Sellers can get an opportunity to convince the buyer hence make a sale.
- Seller has an opportunity to observe the reaction of customer to the product
- Improves the relationship between seller and buyer.
- Enables the seller to target the specific groups in question.

Faraha Traders
DATE	PARTICULARS	D.A	CASH	BANK	DATE	PARTICULARS	D.R	CASH	BANK
2008 July 1 . Jul 10 July 12 July 16 July 24 July 26 July 28 July 30 . .	. Balance c/d . Cash Sales Kuria Bank capital Sales Cash . Balance b/d	. . . . 240 125 . . 1 200 . 1565 .	. 16 520 . . . . 8 000 9 000 3 800 . 37 320 1000	. 19 847 . 15 000 11 760 2 375 . . . 18 320 67 302 32 652	2008 July 5 July 6 . July 10 July 14 . July 24 July 27 July 30 . .	. Transport Kerio traders . Bank Drawing . Cash Babu Traders Bank Balance c/d .	. . 200 . . . . . 1650 . . 1850	. . . . 15 000 3 000 . . . 18 320 1 000 37 320	. 2 000 9 800 . . . . 8 000 14 850 . 32 652 67 302

1. Explain five means of written communication. (10marks)
  - Letters – a form of written communication; business, official/formal, non-formal etc
  - Telegrams - is a means of communication provided by the post office, the sender obtains the telegram form from the post office and fills the message on it in capital letters and hand it over to the post office employees at the counter.
  - Telex - is a means of communication used to send short or detailed messages quickly by use of a teleprinter. The service is provided by the post office on application.
  - Facsimile (Fax) - involves transmission of information through a fax machine. Both the sender and the receiver must have a fax machine.
  - Memorandum (Memo) - is printed information for internal messages within an organization. It is normally used to pass information between departments or offices in an organization.
  - Notice - is used to inform a group or the public about past current or future events. It is usually brief and to the point. It can be placed on walls, in public places, on trees, newspapers or on notice boards.
  - Reports - are statements/within records of findings recommendations and conclusion of an investigation/research. A report is usually sent to someone who has asked for it for a specific purpose.
  - Circulars - are many copies of a single letter addressed to very many people when the message intended for each is the same.
  - Agenda - is an outline of the items to be discussed in a meeting. It is usually contained in a notice to a meeting sent in advance to all the participants of the meeting.
  - Minutes - are records of the proceedings of a meeting
2. Explain five measures that are adopted by the government to protect consumers against exploitation
  - Setting up standards- The government through the KEBS sets standards which must be maintained by producers and traders.
  - Weights and Measures Act - The government ensures that the equipment used for weighing and measuring are correct and accurate by regular checking and adjusting of the equipment.
  - Licenses- The government requires manufacturers and businesspeople to get licenses before commencing their business operations this ensures that there is control of the type of business carried out.
  - Food and Drugs Act- The government ensures that producers and traders do not include any substance that they sell to customers which may have harmful effects to the customers health.
  - Trade description Act-Ensures that a producers or traders does not cheat the consumers by providing false description of commodities.
  - Price control-The government may set a price beyond which a commodity should not be sold.
  - Rent and Tribunal Act-Ensures that tenants are not overcharged by landlords.
1. Explain five characteristics of perfect competition market structure
  - Large number of buyers / sellers such that action of single buyer / seller cannot affect the market
  - Homogeneity / uniformity of the product - products from different producers are identical in all aspects
  - Wide knowledge of the market - therefore no single seller /' buyer can affect the business at any price other than the equilibrium price
  - Freedom of entry / exit - there are no barriers to entry or exit to or from the market
  - Uniformity of buyers and sellers - therefore no benefit of selling or buying from a particular buyer or seller
  - No government interference - in form of taxes, subsidies, quotas, price control / price prevailing in the market is determined strictly by interplay of demand and supply
  - No excess demand / supply - buyers can buy all they want / sellers are able to sell all they supply to the market
  - No transport costs as buyers and sellers are in one area
2. Commodity A and B are complementary products. Using well label diagrams explain how increase in supply of commodity A would affect the equilibrium price and quantity demanded of commodity B. (10mks)