Business Studies Paper 2 Questions and Answers - Asumbi Girls Mock Examinations 2022

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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.  
    1. Explain five methods used by central bank to increase money supply in the economy.    (10mks)
    2. Discuss five ways in which the government can reduce unemployment levels in Kenya  (10mks)
  2.  
    1. Explain five factors that may limit the use of containers as a method of transporting goods in a developing country.             (10mks)
    2. The following Trial balance was extracted from the books of Kabaka traders as at 30/6/2018.
                                                                Kabaka Traders
                                                   Trials balance as at 30/6/2021

       Particles  Dr  Cr 
      Sales
      Purchases
      Return inwards
      Carriage inwards
      Return outwards
      Carriage outwards
      Stock 1st Jul 2017
      Rent 
      Delivery van
      Bank
      Creditors
      Debtors
      Discount allowed
      General expenses
      Capital

      ____________
      600,000
        80,000
        40,000
      ____________
          3,000
      100,000
        60,000
      180,000
         60,000
      ____________
      120,000
         80,000
         18,000
      ____________
      1,268,000  
      900,000
      ________
      ________
      ________
      20,000
      _________
      _________
      _________
      _________
      _________
      170,000
      _________
      _________
      _________
      178,000     
      1,268,000  
      Stock on 30th June 2018 was valued at 135,000/=
      Required:
      Prepare Kabaka Traders Trading profit and loss A/c.
  3.  
    1. Explain five advantages of government involvement in Business.             (10mks)
    2. Discuss five factors that may influence entrepreneurial practices positively in the country (10mks)
  4.  
    1. Apart from selling of shares, explain five other sources of finance for public limited company.             (10mks)
    2. Explain five features of oligopoly.            (10mks)
  5.  
    1. Muema is planning to construct a warehouse for renting. Explain five measures that he may take to ensure its smooth operation. (10mks)
    2. Outline five measures that the Kenya government may take to reduce unemployment. (10mks)
  6.  
    1. Explain five methods used to distribute imported manufactured goods.      (10mks)
    2. The following transactions relates to Konate Traders for the month of December 2010.
      Dec 1st Started a business with sh. 200,000 in the Bank account.
              2ndBought furniture for sh, 50,000 and paid by cheque
              3rdSold goods on credit to Tila shs, 20,000; Katu 10,000
              4th Bought goods on credit from Kahamash 30,000; Kanga shs. 40,000
              5thReturned faulty goods to Kahamash 5,000
              6thPaid Kahama on account by cheque less 10% cash discount.
              7thReceived faulty goods from Katushs. 2000
              8thReceived payment due from Tila and Katu by cheque less 5% cash discount.
              9thCash sales shs. 100,000
             10thPaid for wagesshs. 20,000 by cash and electricity shs.10,000 by cheque.
             11thDeposited  all the cash in hand into the bank account.
      Required:
      Prepare a three-column cash book duly balanced (10mks)


MARKING SCHEME

  1.  
    1. Methods used by central bank to increase money supply
      • Reducing bank rates
      • Reducing liquidity ratio
      • Buying government securities
      • Reductions on compulsory deposits
      • Opening credit to all sectors in the economy
      • Directives to increase credit lending
      • Moral persuasions to banks to increase credit lending
    2.  
      • Population control to have labour force that economy can absorb.
      • Reviving collapsed industries hence increased production activities.
      • Establishing of more labour intensive industries.
      • Expanding market for goods and services.
      • Diversification of economy hence create more employment opportunities.
      • Increasing government expenditure to expand size of the economy.
      • Exposing labour to assist unemployed acquire jobs abroad.
      • Encouraging informal/Juakali sector in order to promote self – employment.
      • Encouraging self employment/entrepreneurship through low taxes, subsidies.
  2.  
    1.  
      • Special equipments for handling are expensive to buy and maintain.
      • Use of modern technology which is not available in developing countries hence it slows down handling of containers.
      • Requires skilled personnel which may not be available in developing countries.
      • Initial capital to set up the system/ buy containers man not be available since the cost is high.
      • Low volume of goods/irregular shaped goods may not call for use of containers.
    2.                                                      KABAKA TRADERS
                                               TRADING PROFIT AND LOSS A/C
                                               FOR THE YEAR ENDED 30/6/2021

      Opening stock                              100,000
      Purchases                                      600,000
      Carriage inwards                            40,000
      Return outwards                            20,000
      C.O.G.A.F.S                                    720,000
      Closing Stock                                 135,000
      C.O.G.S                                           585,000
      Gross profit c/d                              235,000  
                                                              820,000
       
      Expenses
      Carriage outwards                            3,000
      Rent                                                  60,000
      Discount allowed                            18,000
      General expenses                              7,000
      Net profit c/d                                 147,000 
                                                            235,000 
      Sales                         900,000
      Return inwards          80,000   
      Net sales                   820,000   
       
       
       
       
       
                                        820,000
       
      Gross profit b/d      235,000
       
       
       
       
       
      Net profit B/d                     147,000
  3.  
    1.  
      • Protection of citizens from exploitation/malpractices
      • Provision of essential goods/services at fair prices
      • Help solve unemployment problems hence improve standards of living.
      • Provision of investments which are essential but require large capital.
      • Creates competition forcing private sector to provide quality capital
      • Help reduce foreign domination of the country’s economy.
      • Promote fairness in distribution/use of resources
      • Control use of resources through conservation thus ensuring sustainability.
      • Income generation through taxation, licensing to finance government expenditure.
    2. Factors that influence entrepreneurial practices
      • Positive/ good societal attitude
      • Government support
      • Good peer influence
      • Proper education and training
      • High number of successful entrepreneurs
      • High number of financial institutions
      • High level of personal motivations
  4.  
    1.  
      1. Loans – borrowing from banks and other financial institutions.
      2. Ploughing back profit/Retained profit – profit not shared but used to expand/ run the business.
      3. Trade credit/buying goods on credit so as to pay at a later date.
      4. Hire purchases – buying goods and paying them on installment basis.
      5. Debentures to the members of the public.
      6. Sale of idle assets – to run business activities/ meet its financial obligations.
      7. Bank overdraft –To finance short term obligations.
    2.  
      • Interdependent in decision making to avoid counter reactions from other firms.
      • Deal in similar commodities which have been differentiated through colour, packing , pricing.
      • Engage in non-price competition through aggressive advertising market segmentation, after sale services etc.
      • Few-large firms which control substantial share of the market.
      • Engage in price rivalry/competition which may lead to survival or collapse of firms.
      • Price rigidity due to fear of selling above or below kinked demand curve.
      • Price leadership where the dominant firm dictates market price which rules the market.
  5.  
    1.  
      • Suitable location to receive and issue goods
      • Proper buildings suitable to the type of goods to be stored
      • Equipment and facilities for handling goods such as forklifts
      • Safety equipment for protection of goods against water and sunshine and personal protection
      • Accessibility to its users near transport system
      • Enough space for easy movement and accommodation of goods
      • Well trained staff for proper management
      • Requirement of the law
    2.  
      • Increase government expenditure to stimulate aggregate demand, hence the level of production
      • Encourage local private investment to increase productivity
      • Diversify the Kenyan economy
      • Protect local industries from foreign competition in order to maintain employment level
      • Find market for locally produced goods through aggressive export promotion in order to expand production capacities of local industries
  6.  
    1. Five channels for distribution of imported manufactured goods .
      1. Foreign manufacturer  → local consumer
      2. Foreign manufacturer  →  Foreign agent/exporter → local consumer.
      3. Foreign manufacturer  → Foreign agent → local agent → local consumer.
      4. Foreign manufacturer  → local agents/importers → local consumer.
      5. Foreign manufacturer    → Foreign agent → local agent/import merchant → local wholesaler → local consumer.
      6. Foreign manufacturer  → Foreign agent → local agent→ local wholesaler → local retailer →local consumer.
      7. Foreign manufacturer  → local agent/import merchant → local wholesaler → local retailer → local consumer.
      8. Foreign manufacturer  → local retailer → local consumer.
      9. Foreign manufacturer  → local wholesaler→ local consumer.
      10. Foreign manufacturer  → local wholesaler → local retailer→ local consumer.
      11. Foreign manufacturer  → foreign agent → local wholesaler → local consumer.
      12. Foreign manufacturer  → Foreign agent → local wholesaler→ local retailer → local consumer.
      13. Foreign manufacturer  → own retail outlet → local consumer.
    2.                                                                 Konate Traders
                                                                Three column cash book
                                                                   As at 31st Dec 2010

       Date  Details  L.F  D.A  Cash  Bank   Date  Details  LF  DR  Cash  Bank
      1st /12
      3/12
      8/12
       
      9/12
      31/12


      Capital
       
      Tila
      Katu
      Sales
      Cash





       c



       1000
       400



       1400




       100000


       100000
       200000

       19000
        7600

        80000

       306600
         1st/12
         2/12
         6/12
        10/12
        11/12
        31/12
        31/12
       Furniture
       Purchases
       Kahama
       Wages
       Electricity
       Bank
       Balance





        c
       c/d


       2500




       2500



       20000

       80000

       100000
       50000
       40000
       22500
       
       10000

       184100
       306600
       
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