Business Studies Paper 2 Questions and Answers - ACK Diocese Mumias Joint Evaluation Mock 2022

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Instructions to candidates     
  • This paper consists of six questions
  • Answer any five questions
  • All questions carry equal marks
    1. Describe five features of economic resources                                        (10marks)
    2. Explain five internal economies of scale that a firm can enjoy as its scale of production increases.     (10marks)
    1. Explain five important of filing documents in an organization               (10marks) 
    2. Explain five factors that determine the size of a firm     (10marks)
    1. The following trial balance was prepared from the books of Muranga traders as at 31st Dec 2018
                                                                                    Muranga traders
                                                                                       Trial balance
                                                                                   As at 31st Dec 2018

          Dr (shs)  Cr (shs) 
      Carriage inwards
      Carriage outwards
      Stock (jan 2018)
      Delivery van
      General expenses






         1,190,000  1,190,000
      Stock on 31st Dec 2018 was at sh.130,000 required,
      Prepare a trading profit and loss account for the year ended 31st Dec 20189. (10marks)
    2. Explain any five limitations of advertising goods in newspapers              (10marks)
    1. Explain 5 ways of correcting balance of payment deficit.                      (10marks)
    2. Explain five factors that are likely to lead to high birth rate in Kenya.          (10 marks)           
    1. Explain five challenges that may be faced by a producer who sells goods directly to consumers.                      ( 10 marks)
    2. On March 1 2017, Lyon had cash in hand sh.87,000 and cash at bank sh.250,000.  During  the month, the following transactions took place:
      March 2: Cash sales sh.60,000
                 3: Paid salaries sh.101,500 by cheque
                 7: Received a cheque of sh.76,000 from Henry after allowing him a cash discount of 5%
               13: Bought office furniture by cheque sh.86,000
               17: Settled Marita’s account for sh.34,200 in cash, having deducted sh.800 cash discount.
               20: Received a cheque for sh.165,000 in respect of cash sales.
               22: Paid wages sh,25,000 in cash.
               24: Withdrew sh.32,000 from the bank for office use.
               25: Withdrew sh.4000 cash for personal use
               29: received sh.17,000 cash form Alvin in settlement of his account less  sh.1000 cash discount.
               31: Deposited all the money into the bank except sh.24,000.
      Prepare a three column cash book duly balanced.         (10 marks)
    1. Differentiate between life assurance and property insurance (10marks)
    2. Explain five circumstances under which personal selling may be most appropriate.          (10 marks)


    1. Features of economic resources
      • Scarcity in supply –they are found in small quantities compared to the many uses into which they have to be put.
      • Monetary value –they have price which have to be paid for their use.
      • Unevenly distributed-resources are not equally distributed some places have few resources while others have more.
      • Have utility –resources have the ability to satisfy human want.
      • Transferable –resources can be moved from one place to another.
      • Can be combined-two or more resources can be put together in different proportions to produce goods and services.
        5x2=10 mks
    2. Internal economies of scale that a firm can enjoy as its scale of production increases
      • managerial economies-specialization and division of labour enhance management.
      • Research economies- firm can afford to finance research and development
      • Financial economies-firm have access finance from banks as they have enough assets to act as collateral.
      • Technical economies-firm are able to use modern machinery which increase efficiency.
      • Marketing economies-firms are able to buy raw materials and stock in bulk getting discounts which in turns enables them to sell product as competitive prices.
      • Welfare economies-firms can provide recreation and other facilities e.g. housing, transport for their workers. 5x2=10mks
    1. Important of filing documents in an organization
      • It keeps an office tidy or clean as documents are well and neatly arranged
      • It is easy to make future reference by easily retrieving documents that are properly numbered, coded or labelled
      • Documents are safe from damaged by bad weather, pests as they are stored in safe facilities
      • Ensures security of documents from loss or theft as they are kept well from unwanted persons
      • It safeguards the secrets of a firm as documents are kept away form un authorized persons by using pins cctvs locks
      • Stores information for future reference in computers desks shelves
      • Saves space in an office as documents are compactly kept e.g in computers, flash disks etc.     (5x2=10mks)
    2. Factors that determine the size of a firm
      • Number of employees – a firm with large number of employees is said to be large, while the one with small number is said to be small
      • Sales volume – the amount of sales that a firm makes within a given period can be used to determine the size. i.e. large volume is said to be large firm and vice versa.
      • Market served – a firm that serves a large market is said to be large while the one that serves a small market is said to be small
      • Volume of output – a firm with high output is said to be large while the one with low output is said to be small
      • Floor area covered by premises- a firm with large floor area covered by premises is said to be large and vice versa.
      • Capital invested – the large the capita of the firm in terms of assets the large and vice versa
      • Production methods – a firm that is associated with specialization and division of labour is said to be large and vice versa. 5x2=10mks)
      • Not all potential customers are able to read newspapers
    2. Limitations of advertising goods in newspapers
      • Not all potential customers are able to read newpapers
      • The newpapers may be written in a language or medium that is not familiar to customers
      • It is expensive to buy newspapers and many people cannot afford
      • It is expensive to advertise using newpapers as one incurs extra cost
      • Newspapers are nto able to discriminate between the intended group and others
      • Newspapers may not reach all parts of the country
      • Newspapers have a short life and therefore easily discarded. 5x2=10mks)
    1. Ways of correcting balance of payment deficit
      • Increasing volume of export-this is done through the provision of exports incentives eg export compensation scheme.
      • Reducing volume of imports-is done through raising import duty and exchange controls.
      • Devaluation of currency-lowering value of country currency relative to other currencies to make import expensive and export cheaper.
      • Diversification of export-increasing range of commodities exported.
      • Borrowing from IMF and other lender to finance the deficit.
      • Encouraging the foreign direct investments in the country. 5x2=10 marks
    2. Factors are likely to lead to high birth rate in Kenya
      • Some culture practice taking children as security in old age therefore getting many children.
      • Early marriage prolong woman’s reproductive life.
      • People wanting to have many children in areas of high mortality so that if some dies other will be left.
      • Children seen as cheap labour.
      • Where people are opposed or ignorant of family planning methods e.g. catholic people. 5x2=10mks
    1. Challenges faced by a producer who sells goods directly to consumers.
      • Losses /bad debts as a result of some consumers failing to pay
      • Lack of storage facilities as consumers may not buy goods in large quantities.
      • Inability to cover/reach the whole market especially if consumers are widespread.
      • Financial problems as some consumers may not buy in cash
      • High cost of distribution especially if consumers are widespread.
      • Failure to concentrate on production activities as time has to be spent distributing goods.
      • Spoilage of goods in cases where goods are perishable and are not in good time.     5 x 2 = 10mks
    2.                                                                                     Lyon Traders
                                                                                    3 column cashbook
                                                                               For the month of March 2017

      Date  Details  Disc Allowed  Cash (Kshs)  Bank (Kshs)    Date  Details         Disc received  Cash (Kshs)  Bank (Kshs)
      March 1
      March 2
      March 7

      1st Aug.

      Bank ‘c’
      Cash ‘C’

      Bal b/d









      March 3
      March 3

      Office furni
      Cash ‘C’
      Bank ‘C’
      Balances c/d







    1. Difference between life assurance and property insurance 5x2=10mks)
       Life  Property 
      Risks are bound to happen
      May be used as security for loan
      Value of the policy appreciates and sum assured paid t maturity date
      The insured may insure same risk with different companies

      Not subject to the principal of indemnity, subrogation and contribution
      No limit on amount spelt out on a cover

      Risk may or may not occur
      Not used a security for loan
      Sum insured remains constant

      The insured is normally required to insure risk with one company
      Subjected to all insurance principles

      Cover value depends on the value of the property 

    2. Circumstances under which personal selling may be appropriate
      • When launching a new product because it requires a lot of awareness creation, persuasion and convincing.
      • When a product is tailored to meet customers specification because customers have got varying tastes and preferences.
      • When demonstrations are required – especially for technical products.
      • When the value of the product is high to avoid risks of losing such products if other methods were used.
      • When the organization can afford to finance the sales force as the cost of maintaining them may be very high
      • Where the market is concentrated in one area as the cost of accessing the market is reduced if personal selling is used.
        5x 2 = 10mks

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