Business Studies Paper 2 Questions and Answers - Mangu High School Mock Exams 2022

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    1. Outline five measures that an office can take to safeguard the organization's property. (10 marks)
    2. Describe five ways through which commercial banks differ from non-bank financial institutions. (10 marks)
    1. Highlight five advantages of government involvement in business (10 marks)
    2. The following transactions relates to the Ebenezer furniture Ltd. for the month of August 2015
      August 2: Invoice received for Matu traders values at shs 60,000
                  3: Credit note received from Matu traders valued shs 15,000
                  5: Receipt issued to Jomo Academy worth shs 25,000
                  8: Invoice issued to Malaika Restaurant shs 80,000
                 10: Credit sales of furniture worth shs 16,000 to Miugiza Hotels Ltd.
                 13: Paid Matu shs 8,000 by cheque less 10% cash discount.
                 16: Purchased furniture on credit valued a tshs 7,000 from Mwendwa furniture stores.
                 29: Sold an old business van valued at shs 400,000 to Maitima Holdings on credit.
      Record the above transactions in the relevant subsidiary books. (10 marks)
    1. Explain five reasons why choice is important in the satisfaction of human wants. (10 marks)
    2. Explain five factors that may lead to the shift of demand curve from right to left (10 marks)
    1. Explain four circumstances that would lead to a firm being located near the market for its products. (8 marks)
    2. The following trial balance was extracted from the books of Wikaro Enterprises as at 31st December 2015.
       Details  Dr.(shs)  Cr.(shs)
       Purchase and sales  1,200,000  1,740,000
       Stock 31/12/2014  180,000  
       Debtors and creditors  195,000  120,000
       Discounts  75,000  96,000
      Returns  60,000  150,000
      Machinery  600,000  
      Commissions  48,000  42,000
      Buildings 1,620,000  
      Carriage outwards 24,000  
      Cash in hand 210,000  
      Insurance 90,000  
      Capital   2,454,000
      Furniture 300,000  
        4,602,000 4,602,000
      Stock on 31.12.2015 was valued at shs 210,000
      Required: Prepare 
      1. Trading, profit and loss account for the year ended 31st December 2015. (71/2marks) 
      2. A balance sheet as at 31st December 2015. (41/2 marks)
    1. The Kenyan government has constructed a new standard Gauge Railway (SGR) line. Explain five benefits that will accrue to Kenyan economy from this railway line. (10 marks)
    2. Kamau imported a probox car from Dubai. Illustrate five channels that he could have used to import the car. (10 marks)
    1. Explain five sources of government revenue for development expenditure. (10 marks)
    2. On June 2015, Mungai Traders had cash in hand shs 87,000 and cash at bank shs 250,000.
      During the month the following transactions took place
      June 2nd : Sold goods for shs 60,000 cash.
               3rd: Paid stationery shs 101,500 by cheque.
               7th: Purchased a computer by cheque shs 86,000
               13th: Received cheque of shs 76,000 from Otieno, after allowing him a cash discount of 5%
               17th: Settled Kigwadi's account with shs 34,200 in cash, having deducted shs 800 cash discount.
               19th: Deposited shs 1,000 into the business bank account from personal savings.
               22nd: Received a cheque for shs 165,000 in respect of cash sales.
               24th: Withdrew shs 4000 cash for personal use.
               26th: Withdrew shs 32,000 from bank for office use.
               29th: Received shs 17000 cash from Kipruto in settlement of his account less shs 1000 cash discount.
               31st: Deposited all the money from the cash till into the bank except shs 24,000.
      Required: Prepare a duly balanced three column cash book. (10mks)


    1. Outline five measures that an office can take to safe guard the organizations property. (10mks)
      • Enhance security against theft by employing guards 
      • Ensure physical care by the people handling them 
      • Keeping records of movement usage and return of property
      • There should be periodic physical stock taking
      • The organisation can take an insurance cover against the property
      • There should be proper repairs, servicing and maintenance 
      • Property using electricity requires switching of when not in use. 
      • The personnel handling these property should undergo training on proper usage
      • Property that is obsolete should be replaced regularly to maintain the number required.
        Any 5.x 2 = 10mks
    2. Differences between coinmercial banks and non-bank financial institutions. (5 mks)
       Commercial Banks  Non-Bank Financial Institutions
       provide clearing house facilities / do clear cheques  Do not provide clearing house facilities/do not clear cheques
       provide overdraft facilities through current account  Do not provide overdraft facilities / Do not offer current account
       provide short-term to medium term loans  Provide medium term to long-term loans
       provide loans for general use  Provide loans for specific purpose
       Do exchange foreign currencies  Do not exchange foreign currencies
       Closely supervised / controlled by central bank  Not closely supervised / controlled by central bank
       Provide safekeeping of valuable  Do not provide safe keeping of valuables
    1. Highlight five advantages of government Involvement in business activities. (10mks) 
      • Government provides essential services which may be deemed unprofitable by enterprises.
      • Government is able to carry out business that require large amount of capital which may not be raised by private individuals.
      • Business managed and run by the government create employment hence help in solving reducing unemployment problems 
      • Profit realised by the government parastatals distributed through provision of services leading to cquality/protection of consumer against exploitation 
      • Government run business create competition making private business to improve quality and charge fair prices.
      • Government help reduce foreign domination in the economy. 
      • Government promotes economic development
      • Government help in controlling environmental degradation.
      • Government involvement in business help in promoting entrepreneurial cultural.
      • Government involvement in business help in the adaption of the appropriate technology.
        Any well explained points 5x 2 = 10mks
      Purchase Journal
      Date Details LF Invoice no. Amount    
       Aug 2 Matu traders  PL    60,000    
       Aug 16 Mwendwa  PL    7,000    
      Purchase Returns Journal
       Date  Details  LF  Credit note no.  Amount    
       Aug 03  Matu traders  PL    15000    
      Sales Journal
      Date Details LF Invoice No. Amount    
      Aug 08 Malaika SL   80000    
      Aug 10 Miugiza SL   16000    
      Cash Receipt Journal
      Date Details LF Receipt No. Cash Bank  
      Aug 5 Jomo Academy SL   25000    
      Cash payment/Disbursement Journal
      Date Details LF Doc no Disc Cash Bank
      Aug 13 Matu PL   2000   8000
      General Journal / Journal proper
      Date Details LF DR CR
      Aug 29 Maitima Holdings SL 400000 60000
      10 ticsks x 1 @ = 10 mks
      being a record of cusiness Vanto
    1. Explain five reasons why choice is important in the satisfaction of human wants (10mks)
      • Wants are unlimited in number while available resources are scarce
      • Some wants are more urgent and intense than others
      • Some commodities sell at different prices hence one has to choose what is affordable There are many varieties of products that satisfy the same wants thus the need for choice
      • Commodities differ in quality and others have salient features, thus the need for choice
      • Consumers financial position vary with time hence a budget is needed
      • Some wants are recurrent hence they must be catered for quite often
      • Human wants are competitive, hence a choice is needed.
        any 5@2mks=10mks
    2. Factors leading to the shift of demand curve from right to left (10mks)
      • A decline in consumers tastes and preferences for the product
      • Seasonal changes not favouring demand for the product eg in a dry season demand for gumboot decreases
      • Decrease in population leading to fewer buyers
      • Increase in taxation on the prices hence less demand
      • A decrease in the consumers level of income
      • Decline in the prices of substitutes
      • Increase in the prices of the product any five explained points
    1. Circumstances leading to the location of a firm near the market for its products. (10maks)
      • In case the final product is more bulky than inputs or raw materials 
      • Where the cost of transporting raw materials or inputs is lower than that of transporting the final products to the market.
      • Where the market is localised ie concentrated in a particular area it might be economical to have the firm located there to be in close contact with the customers 
      • Where the government policy requires a firm to be located where the market is situated, the firm will have no choice but to comply. 
      • Where the substantial external economies can be enjoyed where the market for the product exists, a firm might be established
      • If the final product is perishable requiring fast delivery to the buyers. 
      • If the final product is fragile such that long channels of distribution may damage the product
        Any five explained point 5x 2 = 1 10 mks
      1. Wikaro 1 Enterprises
        Trading, Profit & Loss account
        For the year Ended 31st December 2015
         Opening stock    180000 sales   1740000
         add purchases  1200000   Less return inwards  (60,000)
         less return outwards   (150000)   Net sales  1,680,000
         net purchases    1050000    
         Cost of G.A.S    1230000    
         Less closing stock    (210000)    
         Cost of sales    1020000    
         Gross Profit    660000    
            1,680,000   1,680,000
        Discount allowed   75000 Gross profit b/d 660,000
        Commission allowed   48000 Add discount received 96,000
        Carriage outwards   24000 Add commission received 42,000
        Insurance   90000    
        Net profit c/d   561000    
            798000   798000
              Net profit b/d 561,000
      2. Wikaro 1 Enterprises
        Balance Sheet
        As at 31st December 2015
         Assets    Capital and liabilities  
         Debtors  195000  capital  2454000
         Stock  210000  add net profit  561000
         Machinery  600000  creditors  120000
         Buildings  1620000    
         Cash in hand  210000    
         Furniture  300000    
           3135000    3135000
    1. Benefits of SGR to the Kenyan Economy.
      • Speedy delivery of goods - ensures that goods are distributed faster to reach on the time without delay.
      • Large bulky goods - the means will carry more goods at once which reduce cost of transport.
      • Lowers the cost of transport - enables the producers to pay less and thus reduce their expenses for carriage. It's cheap method
      • Reduces damage of roads- most trucks will be replaced by trains and thus reduce cost of repair on our roads.
      • Reduce road congestion- this helps to reduce traffic jams and accidents on roads. 
      • Not affected by adverse weather- thus offers continuous services all seasons, both rainy and sunny. 
      • Comfortable commuter services - passengers can be moved conveniently 
      • Reduced pollution - more environmental friendly.
        NB: Candidates must bring out the benefits. Imk stating, 1mk explanation
    2. Channels of distributing imported probox from Dubai
      1. Foreign manufactures → local consumer
      2. Foreign manufacture → local retailer → local consumer
      3. Foreign manufacturer → local wholesalers →local retailer → local consumer
      4. Foreign manufacturer→ local wholesalers →local consumers
      5. Foreign manufacture →local agent → local wholesalers→ local retailer → local consumer
      6. Foreign manufacture→ foreign agent → local agent → local retailers→ local consumers 
      7. Foreign manufacturer →local agent → local wholesalers → local retailer → local consumer
      8. Foreign manufacturer →foreign agent → local agent
      9. Foreign manufacture→ local agent→ local retailer →local consumer
      10. Foreign manufacture →local agent → local wholesaler →local consumer
    1. Source of government revenue for development expenditure
      • Government borrowing both internal and external
      • Taxation (Taxes)
      • Fines and penalties charged to offenders in courts 
      • Proceeds/income from scale of government properties
      • Licenses fees paid by those operating business 
      • Interests earned on loans advanced by government to firms
      • Dividends and profits earned from government direct investments
      • Rents and rates paid for use of government property
      • Escheats
       Date  Details  F  DA  Cash  Bank  Date  Details F DR Cash Bank
       2015            2015          
       June 1  balance   b/d    87000  250000  June 3  Stationery        101500
       2  Otieno    4000    76000  7  Computer        86000
       19  Add investment        10000  17  Kigwadi    800  34200  
       22  Sales        165000  24  Drawings      4000  
       26  Bank  C1    32000    26  Cash  C1      32000
       29  Kipruto    1000  17000    31  Bank  C2    133800  
      31 Cash C2     133800  31  Balances  c/d    24000  406300
            5000 196000 625800        800  196000  625800

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