Business Studies Paper 2 Questions and Answers - KCSE 2022 Mock Exams Set 2

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  • This paper consists of six questions
  • Answer any FIVE questions


    1. Labour is an important factor of production. Explain five barriers that may hinder its mobility as a factor of production. (10 marks)
    2. Explain five circumstances under which a high population growth may be desirable to a country. (10 marks)
    1. Explain five factors that influence the amount of money held by an individual for transactionary motive. (10 marks)
    2. Manufacturers distribute their products to the final consumers through various channels. Explain five factors considered when choosing a particular channel of distribution. (10 marks)
    1. On 1st June 2008 Happy Traders had cash in hand shs.5000 and cash at Bank shs7500. The following transactions took place during the month.
      June 2: Bought goods in cash sh750
      June 4: Paid salaries by cash shs. 3750
      June 5 Received cheques from the following debtors after allowing 2% discount in each case, Kamau sh. 490, Jane sh. 980.
      June 8: Paid the following accounts by cheque in each case deducting a 5% discount Otieno sh.1,500, Wanjiku sh.600.
      June 12: Bought office machinery by cheque shs.2,500
      June 20: Withdrew cash sh.500 for private use.
      June 25: Cash sales sh.1000
      June 26: Banked cash amounting to sh.500
      June 29: Received shs.1,500 cash from Wanjohi a debtor.
      Required: Prepare a three column cash book duly balanced. (12 marks)
    2. Explain four reasons why the Government imposes tax on its Citizens. (8 mks)
    1. Outline five differences between a parastatal and a co-operative society (10mks)
    2. The table below shows the age distribution of a country.
      56 and above
      Explain five negative economic implications of this age distribution to a country (10mks)
    1. Describe the procedure that should be followed when taking an insurance policy (10mks)
    2. Zeraki Investment operates a wholesale business and the following information relates to
      various transactions during the month of May, 2019.
      May 3 sold goods on credit to Anyimba sh 60,000
      8 purchased goods on credit from Mjuaji stores sh 120,000
      12 returned goods bought on credit from Mjuaji stores sh 6,000
      16 purchased goods on credit from Mjuaji stores sh 160, 000
      22 sold goods on credit to Mafala retailers sh 150,000
      23 bought a new motor vehicle from Mashariki motors worth sh 3,200,000 on credit
      24 Anyimba returned goods worth sh 10,000 to the business
      29 sold equipment worth sh 840,000 on credit to Chap Chap limited.
      Record these transactions into Zeraki investment books of original entry. (10mks)
    1. Motorcycles have become a common feature in transport in Kenya. Outline five reasons that explain the rapid growth of motorcycle transport in Kenya (10 mks)
    2. Explain FIVE reasons for the existence of small firms despite competition from large scale firms (10mks)

Marking Scheme

    1. Barriers that may hinder mobility of labour.
      • Ignorance of available opportunities elsewhere
      • Insecurity and political uncertainty e.g. civil wars, tribal crashes
      • Unattractive terms in some jobs e.g. poor /lack of pension schemes, payments.
      • Language barriers does not understand foreign languages
      • Strict immigration rules e.g. lack of visas
      • Travelling/residence/school expenses/costs may be high.
      • Adverse climatic conditions causing discomfort & diseases/discourage
      • Length of service in a particular occupation may make one reluctant to change due to fear of taking risks.
      • Lengthy and expensive training required to change/acquire skills
      • Social ties that bind one to his/her community can discourage one to venture new environs.
      • 2 marks for any well-explained point.
        x 5 = 10 marks
    2. Circumstances under which a high population growth may be desirable.
      • Where there is need to increase market demands
      • Where there is need to increase labour supply/where a country is experiencing low levels of labour supply.
      • When the government requires to boost a large army for defensive/security purposes.
      • Where the country wants to attract more investments both foreign and local through increased consumption by the high population.
      • If the company wants to reap the benefits of specialization and division of labour.
      • When there is need to fully utilize the country resources.
      • No splitting 2 x 5 = 10 marks
    1. Factors that influence the amount of money held by an individual for transactionary motive
      • The level of households/individuals income - the higher the amount of income the higher the amount of money that an individual would hold for transactions purpose.
      • The price level/cost of living - The higher the cost of living the higher the amount of money an individual would hold.
      • The number of dependants an individual has/family size – individual with large families will keep large amount of money for transactions purpose.
      • The possibility of getting credit –The more difficult it is, the higher the amount an individual would hold for transactions purpose.
      • Lifestyle of an individual – psychosocial environment. An individual with an expensive lifestyle or high income neighbourhood will hold more money
      • for transactions purpose.
        Pattern of payment/interval between payments- weekly wage earner will need to hold less than a person who receives his salary monthly.
      • Mention 1mk otherwise 2 marks
    2. Factors to be considered in choosing a particular channel of distribution.
      • Numbers of potential customers - Where customers are few the manufacturer may use its own sales force and for large number of customers, the manufacturer would use intermediaries.
      • Geographical concentration of the market - Where the market is centralised in a few geographical areas, direct distributions okay. However a seller would use intermediaries in less concentrated markets.
      • Order size - It is economically feasible to sell directly to customers who can buy their goods in large quantities. The producers would use intermediaries to sell to customers who buy in small quantities.
      • Unit value of the product - Products of high unit value can be distributed directly to the customers due to higher risks they are likely to be exposed to if longer channels of distribution were used.
      • Perishability of the product - The products that are subject to physical/fashion perishability must be sold through short, fast channels hence such goods mostly go directly to customers.
      • Technical nature of the product - Goods of highly technical nature are normally sold directly to customers as the seller ought to provide considerable pre-sales and after sale services.
      • Financial resources - A producer who is financially strong can afford to distribute directly to consumers.
      • The intermediaries - Different intermediaries perform different functions, hence a firm should select the channel that would be convenient to it.
      • Competitors - A firm wishing to have its produce compete directly with that of a competitor would select a channel that the competitor uses and vice versa.
      • Environmental factors - Government laws and regulations may prohibit manufacturers or their own outlets from selling directly to consumers i.e. appointment of independent distributors may be called.
      • Availability of a channel - Certain middlemen may not be available making the manufacturer to take self-distribution.
       Date Details  Disc. Allowed  Cash  Bank  Date  Details  Disc Rcvd  Cash Bank
      2008    Sh  Sh  Sh  2008    Sh  Sh Sh
      June 1  Bal b/d    5 000  7 500  JUne 2  Purchases    750  
       5 Kamau  10      Salaries    3750  
       5 Jane  20    490  Otieno  75    1425
       25 Sales    1000 980    Wanjiku  30    570
       26 Cash        12  Machinery      2500
       29 Wanjohi  1500    500  20  Drawings    500  
                26 Bank   500  
                30 Bal c/d   500 4975
          1530 6000 9470     105 6000 9470
    2. Why government imposes tax.
      • Raise revenue
      • Protect infant industries
      • Prevent dumping
      • Discourage consumption of harmful products
      • Reduce inequality in income distribution
      • Control inflation
      • -Correct balance of payments Any five well explained 5 x 2 = 10mks.
    1. Differences between a parastatal and a co-operative society
       A Parastatal  A Co-operative
       (i) Formed under an act of parliament  (i) Formed under co-operative society act.
       (ii) Managed by a board of directors appointed by the state  (ii) Managed by a management committee elected by members.
       (iii) Formed to offer essential services to the public  (iii) Formed to offer services to the members
       (iv) Owned by the government  (iv) Owned by the members
       (v) Initial capital comes from government  (v) Initial capital comes from members
       (vi) Profits realized go the government  (vi) There is sharing of profits among members
       (vii) Regulated by acts of parliament articles of association and memorandum of association  (vii) Regulated by the by-laws of the society and co-operative society act.
      (viii) Books of accounts are audited by auditor of state corporations. (viii) Books of accounts audited by external auditors
      (ix) Published financial statements are presented to parliament (ix) Published financial statements are presented to members during annual AGM
      Any 5 well matched differences @ 2 = 10mks
    2. Negative implications of this age distribution to a country are:
      • About 45% of the total population consist of those below 15 years. This implies that more expenditure has to be directed towards provision of the basic needs of this age group e.g. education, health, housing at the expense of other age groups.
      • There is a high dependence ratio which might adversely affect savings and investments of the working population. This will lead to low savings and investments in the economy and the country may look for foreign aid in crease investments in the economy.
      • There is need to plan for creation of employment opportunities to cater for the expected increase in labour force
      • Industrial development is likely to be imbalanced towards production of goods used by the young population at the expense of the needs of adult population.
      • The country may be forced to import goods such as food, medicine and capital which will increase the import bill leading to balance of payment problems
      • The high percentage of young people will lead to most domestic products being used locally and hence little is exported. This will worsen balance of payment problem.
    1. Procedure followed when taking an insurance policy are:
      • The person intending to take the policy applies by filling a proposal form
      • The insurance company studies the details of the proposal to confirm whether the details given are correct/confirm the risk insured involved is insurable
      • The insurance company asks the propser to pay/proposer pays’
      • The insurance company issues a cover note to show that the risk insured while waiting insurance policy
      • Insurance policy is issued outlining details of the agreement between the parties and the conditions that a company has agreed
        5@ 2 = 10mks
      • Sales Journal          
        Date Details Amount

        Mafala retailers
        Total posted to sale a/c
      • Purchases Journal  
         Date  Details  Amount

         Mjuaji stores
        Mjuaji stores
        Total posted to purchases a/c
      •   Purchases returns Journal
         Date  Details  Amount

         Mjuaji stores
        Total posted to purchases returns a/c
      • Sales returns Journal
         Date  Details  Amount

        Total posted to sales returns a/c
      • General Journal
         Date  Details DR  Cr
            Sh  Sh
         25/5/2010  Motor vehicle a/c
                        Mashiriki motor a/c
        To record purchase of motor vehicle on credit.√
        3 200 000

        3 200 000

        29/5/2010 Chap chap limited a/c
                       Equipment a/c
        To record sale of √equipment on credit
        840 000

        840 000

    1. Reasons for rapid growth in motorcycle transport
      • Cheap to buy since less capital is required compared to vehicles/ prices are low
      • Flexible on roads since they can offer down to less services/ change routes according to demand
      • Convenient for carrying goods/ passengers for short distances
      • Costs of operations are very low since they consume little food/ costs of maintenance/ spare parts is low
      • Cheap to hire since they charge low price/ fares
      • Fill up faster/ carry only one or two passengers and therefore save time at terminals/ bus stops
      • Reach in the interior of rural areas where vehicles may not reach/ other means are not available
      • Their fares are flexible/can be negotiated with customers
      • Easier to hire since they are more readily available than vehicles
      • Faster compared to bicycles and therefore suitable for urgent services/perishable goods
      • Do not need special terminals therefore one can board and alight at convenience/anywhere
      • Can carry heavier loads than bicycle since they do not rely on human power/ rely on engine/fuel power
        1 mk – mention 2 mks – otherwise x 5 = 10 mks
      • Lack of enough money for expansion
      • Little/ small markets
      • Need for personalized services
      • Fear of incurring increased costs
      • To avoid risks that are associated with large – scale business
      • Nature of goods
      • For ease of management
      • Flexibility
      • Need to maintain close control (owner wants to control)
      • To avoid the many legal procedures.

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