Business Studies Paper 2 Questions and Answers - Asumbi Girls High School KCSE Mock 2021

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Instructions to candidates

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


    1. Explain five means of payment that are provided by commercial banks. (10 mks)
    2. Explain five reasons why small scale firms continue to exist in an economy dominated by large scale firms. (10 mks)
    1. Describe the procedure used in making an insurance claim. (10 mks)
    2. Explain five disadvantages that a country may experience from imposing trade restrictions on trading partners. (10 mks)
    1. Discuss five factors to consider when choosing an office layout for a firm. (10 mks)
    2. Explain fve challenges experienced by a country when using expenditure approach to measure national income. (10 mks)
    1. Differentiate between monopoly and monopolistic competition product markets.(10 mks)
    2. Explain five ways through which consumers may protect themselves against exploitation by producers and business people. (10 mks)
    1. Explain any five circumstances under which a firm may prefer written communication over oral communication. (10 mks)
    2. From the trial balance given below, prepare a trading, profit and loss account for the year ended 31st august 2021and a balance sheet as at that date. (10 mks)
      Particulars Dr Cr
      Purchases/sales 349 000 582 000
      Debtors/Creditors 51 000 62 000
      Motor vehicle 600 000  
      Drawings 30 000   
      Returns 22 000 19 000
      Carriage in 10 000  
      Equity loan   170 000 
      Furniture and fittings 45 000  
      Discounts 25 000 36 000 
      Opening stock 40 000  
      Carriage outwards 7 000  
      Rent   24 000
      Advertising 13 000  
      Land and Buildings 500 000  
      KPY Bank loan   210 000
      Interest on loans 48 000  
      Cash at bank 150 000  
      Cash in hand 28 000  
      capital   815 000
      totals 1 918 000 1 918 000
    1. Explain four ways through which the price of a commodity may be determined (8 mks)
    2. The following information was extracted from the e books of Mbaikipingo:
      Feb 1 credit purchases: kamendish 12,000. Mugendish 30,000 and Opiyosh 25,000
      Feb 5 credit sales to Monica sh 20,000
      Feb 7 returned goods to Kamendish 320
      Feb 8 cash purchases paid for by chequesh 39,000
      Analyze the above transactions in the relevant day books (12 mks)

Marking Scheme

      1. Standing order: is an instruction to the bank by its customer to be paying a certain amount of money to a named person or institution after a given interval until a specified date or until otherwise instructed
      2. Credit transfer: a method of paying many people using one cheque
      3. Telegraphic transfer: a method of remitting money offered by commercial banks to anybody who wants to send money to another
      4. Electronic fund transfer: a method of transferring money from one account to another offered by commercial banks where computers are used
      5. Cheque: is a written order by the drawer to a bank to pay on demand a specified amount of money to the person named as the payee or to the bearer
      1. The extent of the market for goods and services determines the size of the firm
      2. The nature of the products sometimes makes it impossible to produce it in large quantities
      3. Simplicity of the organisation
      4.  Flexibility of small firms
      5. Quick decision making
      6. Belief that small firm is more manageable
      7. Rising costs of production such that diseconomies of scale set in very early, the firm has to remain small
      8. Few legal constraints
      1. Notify the insurer: immediately the risk insured against occurs, the insured should notify the insurer
      2. Filling a claim form: after notification, the insurer issues the insured with an official claim form to be filled
      3. Investigation of the claim: on receipt of the filled claim form the insurer launches an investigation concerning the cause of the occurrence of the risk
      4. Preparation of the assessment report: once its established that the claim is valid, insurance company uses experts called assessors to prepare a report concerning the extent of the suffered
      5. Payment of the claim: on receiving the assessors report, the insurance company decides to pay the insured
    2. Loss of government revenue that she would be collecting in form of customs duty for goods being imported or exported
      1. Possible retaliation by other countries
      2. Production of low-quality commodities
      3. High prices for locally produced commodities
      4. Less consumer choice
      5. Danger of the need for perpetual protection
      6. Possible emergence of monopolies
      1. The initial and maintenance cost of the layout
      2. Floor space available
      3. Number of employees
      4. Nature of work done
      5. Staff morale on the given layout
      1. No accurate records of expenditure are kept especially in the private sector
      2. Expenditures for the subsistence sector can only be mere approximations due to lack of records in this sector
      3. Differentiating between final expenditure and intermediate expenditure may be difficult
      4. It suffers from the problem of double counting
      5. Fluctuating exchange rates may pose challenges especially in valuation of exports and imports
    1.   A monopoly is the type of imperfect competition where a seller or producer captures the majority of the market share due to the lack of substitutes or competitors. A monopolistic competition is a type of imperfect competition where many sellers try to capture the market share by differentiating their products.       
      1. Dealing with complaints about defective items bought by members
      2. Making sure commodities are not hoarded and that a regular supply is maintained
      3. Ensuring that weights and measurements of commodities are correct
      4. Ensuring that health and safety regulations are adhered to
      5. Ensuring that essential services are available and that their prices are fair
      6. Educating their members on their rights
      1. It can be retained for future reference
      2. Some, like letters are relatively cheap
      3. It is suitable for confidential messages
      4. Allows for inclusion of fine details
      5. It is not prone to distortion of messages
      6. Can be used as evidence
      7. Can be addressed to many people
      1. Government intervention
      2. Haggling/bargaining
      3. Auction
      4. Tendering



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