Business Paper 2 Questions and Answers - Kakamega Evaluation Mock Exams 2022

QUESTIONS

1.      
   1. Explain five differences between a public corporation and a public limited company. (10 mks)
   2. Explain five factors that would lead to increase in the level of National income. (10 mks)
2.      
   1. Explain five factors that hinder entrepreneurial activities in a country.(10 mks)
   2. Makhisa traders started a business on 1st January 2022 with cash in hand sh. 50,000 and cash at bank sh. 19,000. His transactions during the month of January, 2022 were as follows:
      Jan   1 : Bought furniture worth sh. 10,000 by cash.
      Jan   2 : Deposited sh. 5,000 cash in the business bank account from the cash till.
      Jan   5 : Sold goods to Michael worth sh. 7,900 on credit.
      Jan 12 : Makhisa disposed off a van at sh. 70,000 receiving Payment of sh. 27,000 by cheque and a balance in cash.
      Jan 15 : Paid rent sh. 1,700 cash.
      Jan 16 : Paid salaries sh. 2,200 by cheque.
      Jan 20  : Received donations sh. 15,000 by cheque.
      Jan 22 : Withdrew cash sh. 10,000 for personal use.
      Jan 28 : Transferred all cash into the bank except sh. 1,000.
      Required:
      Prepare a two column cash book for Makhisa traders for the month of January, 2022. (10 mks)
3.        
   1. Explain five roles of middlemen in the chain of distribution.(10 mks)
   2. Explain five principles of insurance. (10 mks)
4.      
   1. Explain five benefits of mobile banking to customers. (10 mks)
   2. The following trial balance was extracted from the books of Atiti traders for the year ended 31st December 2021. 
      Atiti Traders
      Trial Balance
      As at 31/2/2021
      

      Details Capital Drawings Stock (1/1/2021) Purchases Sales Returns Carriage outwards Carriage inwards Discounts Motor vehicle Furniture Creditors Premises Debtors Bad debts

      Dr (Shs) 33,000 47,000 300,000 4,000 10,000 28,000 4,000 130,000 25,000 100,000 50,000 15,000   746,000

      Cr (Shs) 250,000 420,000  7,000 14,000 55,000 746,000

      Additional information.
      Stock at 31st December 2021 was valued sh. 55,000.
      Required
      Prepare
      1. Trading, profit and loss account for the year ended 31st December 2021.
      2. Balance sheet as at 31/12/2021.
5.      
   1. Explain five ways in which inflation can be controlled by the government. (10 mks)
   2. Explain five barriers to effective communication. (10 mks)
6.      
   1. Explain five disadvantages of using direct taxes to raise government revenue.(10 mks) 
   2. Explain five circumstances in which a firm may acquire monopoly  Power. (10 mks)

MARKING SCHEME

1.      
   1. 
      

      Public Corporation	Public Limited Company
      Formed under the act of parliament.  Partially owned by the government.  Initial capital provided by the state.  Management appointed by the government.  Set up to offer essential service, to the public.  Political interference due to nomination of directors by the government  Auditing done by government auditors.	Formed under the company’s act Owned by Private persons who own shares. Capital obtained from issue of shares and loans. Directors elected by the shareholders. Formed to make profit. No political interference. Auditing done by private auditors.

   2.    
      1. Entrepreneurship culture
         A country with many hardworking businessmen will invest more hence increasing the level of national income.
      2. Political stability
         A country that is politically stable will encourage more production activities hence increasing national income.
      3. Availability of capital
         Adequate capital leads to generation of move income.
      4. Availability of labour
         A country with a large about force which is skilled will utilise it to increase the level of national income.
      5. Availability of natural resources
         A country endowed with more natural resources like minerals will exploit then hence high national income.
      6. Improved technology.
         A country that uses modern technology in production will increase its output and level of national income.
2.      
   1.        
      • Unfavourable government policies tend to discourage smooth running of business.
      • Poor Infrastructure – Insecurity, poor transport and communication network discourage.
      • Lack of adequate knowledge and skills to start and run businesses.
      • Lack of market.
      • Stiff competition.
      • Political Instability.
   2. Makhisa Traders
      Two Column Cash book
      For the month of January 2022
      Dr    Cr
      

      Date	Details	l.f	Cash	Bank	Date	Details	l.f	Cash	Bank
      2022 Jan   1 Jan   2 Jan 12 Jan 20 Jan 28 28 28	Capital Cash Van Donations Cash Bal	C C b/d	50,000 33,000 83,000 1,000	19,000  5,000 27,000 15,000 55,300 121,300 119,100	2022 Jan   1 Jan   2 Jan 15 Jan 16 Jan 22 28 28	Furniture Bank Rent Salaries Drawings Bank Bal	C c/d	10,000 5,000 1,700 10,000 55,300 1,000 83,000	2,200 119,100 121,300

      Penalise for no title.
3.      
   1.      
      • Link producers to consumer.
      • Breaking the bulk.
      • Prepares goods for sale.
      • Accumulate the bulk.
      • Offer transport and storage facilities for producers.
      • Offer Advice to consumers and producers.
      • Provide finance to producers.
   2.    
      1. Principle of indemnity.
         States that one can only be compensated for the actual loss suffered.
      2. Principle of utmost good faith.
         The insured is expected to disclose all the relevant material facts relating to the property.
      3. Principle of insurable interest.
         A person can only insure the property that if a loss occurs that he suffers a direct loss. 
      4. Principle of subrogation.
         All remains after compensation become the property of the insurer. 
      5. Principle of contribution.
         All the insurers share in compensating the insured in case of a loss. 
      6. Principle of proximate cause.
         There must be closs relationship between the loss suffered and the risk insured against
4.      
   1.      
      • It enable a customer to access funds in his/her account any time.
      • Enables the customers to pay utility bills without travelling hence saving transport cost.
      • Facilitates transfer of money cheaply and faster.
      • Enables one to top up mobile airtime automatically.
      • One can request for mini-statements.
   2. Atiti Traders
      Trial Balance
      As at 31/2/2021
      

      Details Capital Drawings Stock (1/1/2021) Purchases Sales Returns Carriage outwards Carriage inwards Discounts Motor vehicle Furniture Creditors Premises Debtors Bad debts

      Dr (Shs) 33,000 47,000 300,000 4,000 10,000 28,000 4,000 130,000 25,000 100,000 50,000 15,000   746,000

      Cr (Shs) 250,000 420,000  7,000 14,000 55,00 746,000

      Atiti Tradere
      Trading, profit and loss account
      For the year ended 31/12/2021
      

      Opening stock                    47,000 Add: Purchase                  300,000 Add : Carriage inwards       28,000 Less:  Returns outwards      ( 7,000) Goods available for sale     368,000 Less: closing stock              55,000 Cost of goods sold             313,000 Gross profit   c/d              103,000   Expenses                       416,000 Carriage outwards              10,000 Discount allowed                  4,000 Bad debts                           15,000 Net profit c/d                      88,000                                         117,000

      Sales                             420,000 Less: returns inwards        4,000 Net sales                        416,000 416,000 Gross profit   b/d          103,000 Discount received           14,000                                     117,000 Net profit b/d                 88,000

      Atiti Traders
      Balance sheet
      As at 31/12/2021
      

      Fixed Assets Premises                         100,000 Furniture                          25,000 Motor vehicle                  130,000   Current Assets  Debtors                            50,000 Stock                               55,000                                       360,000

      Capital                           250,000 Add:Net profit                   88,000 Less Drawings                ( 33,000) Short term Liabilities Creditors                           55,000 360,000

5.      
   1.      
      • Reducing spending in order to reduce demand for goods.
      • Controlling foreign exchange.
      • Controlling the level of exports 
      • Sale of treasury bonds/government securities
      • Institute price control on specific industries.
      • Control consumptions of imports.
   2.      
      • Language barrier
      • Poor listening
      • Noise
      • Negative attitude
      • Prejudgment 
6.         
   1.    
      • Possible tax evasion
      • Discourages savings
      • Discourages work
      • Discourages Investment
      • Not imposed on all citizens.
      • May inconvenience the tax payer.
   2.    
      • When there is a government policy restricting formation of only a single firm.
      • When the size of the market is small.
      • Incase a firm controls an important input in production.
      • When a firm owns the production rights
      • Where a group of firms combine to act as one.
      • Where the initial capital is very high.
      • When there is additional costs by other firms.