Business Studies Paper 2 Questions and Answers - Butere Mock Exams 2021

QUESTIONS 

1.        
   1. Explain five services offered by wholesalers to retailers. (10mks)
   2. Explain five differences between a public limited company and a partnership. (10mks)
2.        
   1. Explain five ways through which the government of Kenya may reduce the level of unemployment. (10mks)
   2. On 1st August 2020, Shisia stores had cash in hand sh. 7800 and cash at bank sh. 370200. During the month, the following transactions took place;
      Aug 3: Cash sales sh. 50,000 paid direct into bank.
      Aug 5: Received a cheque of sh. 17500 from Rono in full settlement of his account of sh. 18000.
      Aug 8: Bought goods sh. 205,000 and paid by cheque.
      Aug 13: Paid rent sh. 4,000 in cash.
      Aug 16: Paid Shikuku by cheque sh. 66,500 in full settlement of his account less 5% cash discount.
      Aug 19: Withdrew sh.25,000 from bank for office use.
      Aug 23: Cheque received from Rono was dishonoured.
      Aug 26: Cash sales sh. 55000
      Aug 28: Ndimuli settled his account of sh. 80,000 by cheque after deducting 4% cash discount.
      Aug 29: Withdrew sh. 10,000 from bank private use.
      Aug 30: Deposited all cash into bank except sh. 5000.
      Required
      Prepare a three column cash book
3.      
   1. Explain five limitations of using output approach to measure national income. (10mks)
   2. Explain five reasons why Kenya may decide to restrict trade with other countries.
4.      
   1. The following trial balance was extracted from the books of Simba traders on 1st December 2016.
      SIMBA TRADERS
      TRIAL BALANCE
      AS AT 31ST DEC 2016
      

      Details	Dr(sh)	Cr(sh)
      Sales Purchases Returns Carriage inwards Carriage outwards Advertising Commission received Cash Discounts Salaries and wages General expenses Machinery Stock (1/1/2016) Debtors Capital Creditors Bank overdraft	290,000 15,000 6,000 4200 12000 50800 4900 22500 8,300 405,000 27,500 56,200 902,400	370,400 10,000 23,000 16,100 391,000 73,000 18,900 902,400

      Additional information
      Stock on 31st Dec 2016 was sh. 35,000.
      Required
      
      1. Prepare trading, profit and loss account for the period ended 31/12/2016(8mks)
      2. Balance sheet as at 31/12/2016. (4mks)
   2. The Rising star company is opting to replace the old machines with new ones. Explain four factors that will influence the choice of an office machine. (8mks)
5.      
   1.        
      1. Explain the procedures for making insurance claim. (6mks)
      2. Suchi acquired a house valued at kshs. 2,000,000 which he insured against fire for sh. 1,500,000. The building was gutted down by accidental fire causing a loss of 1,000,000. Calculate the amount of compensation. (4mks)
   2. Explain five functions of the central bank of Kenya. (10mks)
6.      
   1. Explain five reasons for consumer protection. (10mks)
   2. Explain five features of economic resources. (10mks)

MARKING SCHEME

1.        
   1. Explain five services offered by wholesalers to retailers. (10mks)
      • Breaking bulk so that retailers can buy convenient qualities.
      • Provision of credit facilities.
      • Transport goods to retailers premises.
      • Preparing goods for sale-branding, bleeding, parking.
      • Offering advice to retailers.
      • Ensure steady supply of goods by storing and releasing when need arises.
      • Provision of variety of goods.
      • Availing goods at convenient places to the retailers.
   2. Explain five differences between a public limited company and a partnership. (10mks)
      

      No.	Public company	Partnership
      1	Members have limited liability	Members have unlimited liability.
      2	The business has perpetual existence.	Business does not have perpetual existence.
      3	The business is a separate legal entity from its owners	The business is not legally separable from its owners.
      4	Minimum membership of 7 and not set maximum.	Minimum membership of 2 and maximum of 20
      5	There are a lot of legal procedures when being formed	Few formalities required while being formed
      6	Required by law to publish accounts annually	Not required to publish accounts.
      7	Can only deal with business activities provided for in the memorandum	There is no restriction on the kind of business it may engage in
      8	Management is done by elected board of directors.	Management is done by partners themselves

2.      
   1. Explain five ways through which the government of Kenya may reduce the level of unemployment. (10mks)
      • Adopting a relevant education system.
      • Adopting appropriate methods of production – labour intensive method.
      • Improvement of rural areas to reduce rural urban migration.
      • Increasing government expenditure through building roads, constructing dams, soil conservation.
      • Diversification of production – engaging in numerous sectors of production.
      • Controlling of the population – through ways such as family planning.
      • Improving infrastructure in order to stimulate economic activities.
      • Effective use of natural resources to increase production activities.
   2. On 1st August 2020, Shisia stores had cash in hand sh. 7800 and cash at bank sh. 370200. During the month, the following transactions took place;
      Aug 3: Cash sales sh. 50,000 paid direct into bank.
      Aug 5: Received a cheque of sh. 17500 from Rono in full settlement of his account of sh. 18000.
      Aug 8: Bought goods sh. 20500 and paid by cheque.
      Aug 13: Paid rent sh. 4,000 in cash.
      Aug 16: Paid Shikuku by cheque sh. 66,500 in full settlement of his account less 5% cash discount.
      Aug 19: Withdrew sh.25,000 from bank for office use.
      Aug 23: Cheque received from Rono was dishonoured.
      Aug 26: Cash sales sh. 55000
      Aug 28: Ndimuli settled his account of sh. 80,000 by cheque after deducting 4% cash discount.
      Aug 29: Withdrew sh. 10,000 from bank private use.
      Aug 30: Deposited all cash into bank except sh. 5000.
      Shisia stores
      Three column cash book
      

      Date 2020	Retail	F	Disc rec	Cash	Bank	Date 2020	Retails	F	Disc all	Cash	Bank
      Aug 1 3 5 19 26 28 30 30	Bal Sales Rono Bank Sales Ndimuli Cash Bal	b/d c c b/d	500 3200 3700	7800 25000 32800 5000	370200 50,000 17500 55000 76800 21300 590800 266800	Aug 8 13 16 19 23 25 29 30 30	Purchases Rent Shikuku Cash Stationery Rono Drawing Bank Bal	C C c/d	3500 3500	4000 2500 21300 5000 32,800	20500 66500 25000 17500 10000 266800 590,800

3.        
   1. Explain five limitations of using output approach to measure national income. (10mks)
      • Valuation of incomes arising from illegal activities such as money laundering, sale of narcotic drugs is a problem since they are not open to public scrutiny.
      • Valuation of subsistence output since such goods and services are not valued.
      • Fluctuating exchange rates making it difficult to value experts and imports.
      • Problem of rating government output as many of its services are not sold in the market.
      • Inaccurate data of output in the private sector.
      • Problem of deciding the type of goods or services to be included in the calculation.
   2. Explain five reasons why Kenya may decide to restrict trade with other countries.
      • To correct a balance of payment which is unfavourable – reducing imports.
      • To protect infant domestic industries from foreign competition.
      • To conserve foreign currency.
      • For the protection and conservation of cultural values – some imported products may have negative effect in the local culture.
      • To safeguard against dumping.
      • To stimulate consumption of locally produced goods so as to create employment.
      • To protect strategic and key industries e.g. agricultural industry.
      • To ensure that harmful products are not imported.
      • To avoid import inflation.
4.        
   1. The following trial balance was extracted from the books of Simba traders on 1st December 2016.
      SIMBA TRADERS
      TRIAL BALANCE
      AS AT 31ST DEC 2016
      

      Details	Dr(sh)	Cr(sh)
      Sales Purchases Returns Carriage inwards Carriage outwards Advertising Commission received Cash Discounts Salaries and wages General expenses Machinery Stock (1/1/2016) Debtors Capital Creditors Bank overdraft	290,000 15,000 6,000 4200 12000 50800 4900 22500 8300 405000 27500 56200 902,400	370,400 10,000 23,000 16100 391,000 73000 18,900 902,400

       Additional information
      Stock on 31st Dec 2016 was sh. 35,000.
      Required
      
      1. Prepare trading, profit and loss account for the period ended 31/12/2016 (8mks)
      2. Balance sheet as at 31/12/2016. (4mks)
         SIMBA TRADERS
         TRADING, PROFIT AND LOSS ACCOUNT
         FOR THE PERIOD ENDED 31/12/2016
         

         	Sh	sh		Sh	sh
         Opening stock Add purchases Add carriage inwards Less return inwards Goods available for sale Less closing stock Cost of goods sold Gross profit c/d Expenses Carriage outwards Advertising Discount allowed Salaries wages General expenses Net profit	290000 6000 10,000	27500 286,000 313,500 35,000 278500 76900 355,400 4200 12000 4900 22500 8300 64100 116,000	Sales Less return inwards Net sales Gross profit b/d  Add revenues Commission received Discount received	370,400 15,000 355,400 355,400 76,900 23000 16100 116,000

         SIMBA TRADERS
         BALANCE SHEET
         AS AT 31/12/2016
         

         ASSETS	sh	sh	CAPITAL + LIABILITY	sh	sh
         Fixed assets Machinery Current assets Stock Debtors Cash	35,000 56,200 50,800	405,000 142,000 547,000	capital add Net profit Current liability Creditors Bank overdraft	391,000 64,100	455,100 73,000 18,900 547,000

   2. The rising star company is opting to replace the old machines with new ones. Explain four factors that will influence the choice of an office machine. (8mks)
      • Affordability – machine chosen should be affordable (cheap to acquire)
      • Durability of the machine – machine should be able to last long.
      • Safety/security of the machine
      • Availability of spare parts – spare parts should be readily available.
      • Effect of the machine on staff morale – machines should boost the working morale of employees.
      • Availability of manpower.
      • Capability and efficiency of the machine.
      • Adaptability of the machine to the future needs of the firm
5.          
   1.      
      1. Explain the procedures for making insurance claim. (6mks)
         • Notifying the insurer/insurance company.
         • Filling a claim form.
         • Investigation of the claim.
         • Preparation of the assessment report.
         • Payment of claim.
      2. Suchi acquired a house valued at kshs. 2000,000 which he insured against fire for sh. 1500000. The building way gutted down by accidental fire causing a loss of 1,000,000. Calculate the amount of compensation. (4mks)
         Compensation = policyvalue × loss
                                     value of property
         1,500,000×1000,000
                 2,000,000
         Kshs.750,000
   2. Explain five functions of the central bank of Kenya. (10mks)
      • Issuing of currency.
      • Acting as a banker to the government.
      • Acting as a banker to commercial banks.
      • Regulating operations of the commercial banks.
      • Acting as a lender of last resort.
      • Controlling the level of money supply in the country.
      • Managing of public debts.
6.    
   1. Explain five reasons for consumer protection. (10mks)
      • To ensure that harmful goods are not sold to them.
      • To ensure that consumers are offered with goods of right quantities.
      • To ensure that consumers are not overcharged when they buy goods.
      • To ensure that goods sold are of good quality.
      • To protect them from false advertisement.
      • To ensure consumers health is not compromised.
      • To ensure steady supply of goods.
   2. Explain five factors of economic resources. (10mks)
      • Unevenly distributed.
      • Can change ownership.
      • Have utility.
      • Have alternative use.
      • Can be combined.
      • Can be complementary.