Business Studies Paper 2 Questions and Answers - Lanjet Joint Mock Exams 2023

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  • This paper consists of six questions.
  • Answer any five questions in this paper
  • All questions carry equal marks.
    1. Explain Five factors that hinders entrepreneurial practices in Kenya today. (10mks)
    2. Outline Five differences between a public corporation and a private limited company.(10mks)
    1. The following Trial balance was extracted from the books of laikipia Traders on 30th may 2023.
      Additional information:
      Closing stock was valued at shs 7,000.
      Prepare :
      1. Trading, profit and loss Account for the year ending 30th may 2023. (8mks)
      2. balance sheet as at 30th may 2023.
    2. Highlight four documents that are sent to the seller by the buyer in home trade. (8mks)
    1. The diagram given below shows changes in the supply curve.
      Explain five factors that may have led to the change from S1S1 to S2S2. (10 mks)
    2. Explain five functions of commercial banks. (10mks)
    1. Explain five limitations of using billboards as medium of advertising. (10mks)
    2. Explain five significance of warehousing to the consumers. (10mks)
    1. The following balances were extracted from KIVU MERCHANTS books of accounts on January 2017;
      Motor vehicles 250, 000
      Furniture 8, 000
      Stock 37, 000
      Debtors 20, 000
      Cash at bank 15, 000
      Cash in hand 5,500
      ADC loan 100, 000
      Creditors 12, 000
      Capital 224, 000
      The following transactions took place during the month.
      January 1 deposited an additional shs.30, 000 from private sources into the business bank account.
      January 5 issued a cheque for shs. 8, 000 to ADC bank which was honoured by the bank.
      “ 10 sold goods whose cost was shs.3, 500 at shs.7, 000 and received the proceeds by the cheque.
      “ 15 bought a new motor vehicle worth shs.50, 000 having borrowed an additional loan from ADC bank.
      “ 17 took goods worth shs. 1,200 to be used by his family.
      “ 20 sold one of the old motorvehicles whose book value was shs.27, 000 at shs. 22,000 on credit.
      “ 25 received cash shs.15, 000 from a debtor.
      “ 29 paid a creditor by cheque shs.8, 500
      “ 30 bought more goods on credit worth shs. 3,200
      Required: Prepare KIVU MERCHANT’S balance sheet as at 30th April 2017. (10mks)
    2. Outline five reasons why mobile phones (cell phones) have become popular means of communication. (10mks)
    1. Explain five negative effects of inflation. (10mks)
    2. Explain five reasons why a country may experience balance of payments disequilibrium. (10mks)

                                                                                   MARKING SCHEME

    1. Explain Five factors that hinders entrepreneurial practices in Kenya today. (10mks)
      • Poor infrastructure e.g poor roads network-making it difficult to transport raw materials/finished products to the market. NB :Accept examples of infrastructure as a mention).
      • Unhealthy/stiff/cut throat competition-forces some business to close down/discouraging new investors from venturing into businesses.
      • poor/lack of entrepreneurial skills-due to low levels of education/inappropriate education system/ hinders /people shy away from starting businesses.
      • Inadequate markets-discourage existing businesses and ner ventures
      • Unfavorable political climate/political instability/insecurity-which do not provide a conducive environment for business activities.
      • Negative cultures/negative religious beliefs-not favorable for certain businesses eg. Pork selling not viable in a muslim community/cultures that favours direct production
      • Inadequate resources/capital-required in production such as raw materials power ,labour, capital making it difficult to start businesses.
      • Unfavourable government policies /high taxes/high licence fees/unfair legislations/unfair regulations-which discourages investments/scare away investors.
      • Natural calamities –such as floods which discourage investments in some areas.
        (Any 5×2=10Mks)
    2. Outline Five differences between public corporations and private limited companies. (10mks)
       Public corporations  Private limited company
       Managed by a board of directors appointed      by government  Managed by directors appointed             by shareholders
       Initial capital is provided by the government  Initial capital comes from   shareholders
       Formed through an Act of parliament  Formed through company’s Act
       Owned by government  Owned by shareholders
       Profits belong to the government  Profits belong to shareholders
       Main objective is to provide essential goods   and services  Main objective is to make profit
       Losses are occasionally subsidized by the   government/borne by   government  Losses are borne by shareholders/may   lead to collapse of business
       Audited by government auditors  Audited by private auditors
                                                                                                                                                       NB: No splitting of marks
                                                                                                                                                       (ANY 5×2=10MKS
      1.                       LAIKIPIA TRADERS trading profit and loss account.
                                                       Laikipia Traders
                                         Trading ,profit and loss Account
                                        For the year ending 30th May, 2023 √

                                                       Laikipia traders
                                                        Balance sheet
                                                    As at 30th may 2023
      2. Highlight four documents that are sent to the seller by the buyer in home trade. (8mks)
        • Letter of inquiry -A written request by a potential/prospective buyer for information about the goods/services dealt by a seller.
        • Order /LPO - Written form of letter requesting a potential seller to supply the buyer with the specified goods.
        • Goods Received Note-A document sent to the seller after the goods have been received, checked, and recorded in the Goods Received Book.
        • Damaged goods note - A document that accompanies the goods returned to the seller by the buyer.
        • IOU – sent to acknowledge a deb
    1. Factors that may have led to the change of supply curve from S1S1 to S2S2. (10 mks)
      • Increase in the cost of production making it for producers to produce/supply less goods/services in the market.
      • Increase in taxation making the cost of production high which may be unaffordable by many firms leading to less quantity produced.
      • Inadequate/less factors of production making producers produce less goods and services.
      • Industrial unrest which if continuous may lead to shortage in the supply of goods in the market.
      • Withdrawal of some firms from the industry leading to few firms producing less good for the market in the short run period.
      • Reduced subsidies on cost of production making many firms be unable to meet the cost of production or end up producing less quantity of goods and services.
      • Future expectation/speculation of increase in prices of goods and services thus firms opting to hoard/ supply less and supply more when the prices are high in the market.
    2. Functions of commercial banks. (10 mks)
      1. Accepting deposits
        • Commercial banks play an important role in the economy by mobilizing domestic savings and enabling efficiency and convenience in transactions by accepting deposits
      2. Lending money
        • They may lend money to individuals, private businesses, the government and other public authorities in form of loans and overdrafts
      3. Safekeeping of valuable items
        • They accept valuable items such as title deeds, share certificates, jewellery and wills for safe keeping for their customers.
      4. Provision of foreign Exchange
        • A person with foreign currency can convert it into local currency at the prevailing exchange rates
      5. Giving Advice on investments and Management of Funds
        • Commercial banks can give advice to their clients on available investment opportunities and the best ways of managing their funds.
      6. Acting as a Guarantor or Referee
        • Commercial banks may act as guarantors to customers who would want to either get goods on credit from new supplies or secure loans from a financial institution.
      7. Acting as intermediaries Between savers and borrowers
        • By accepting money from people who have excess to save and give loans to investors, commercial banks act as intermediaries between the two parties.
      8. Money transfer facilities
        • Commercial banks provide convenient methods of transferring money through facilities such as cheques
      9. Lending money
        • They may lend money to individuals, private businesses, the government and other public authorities in form of loans and overdrafts
    1. limitations of billboards as method of product promotion. (10 mks)
      • Can easily be damaged and vandalized.
      • Expensive to construct/hire thus may have an effect of increased prize of goods and services.
      • May not be effective where the customers need to examine the product/in need of more detailed information about the products.
      • May obscure/obstruct/distract motorists’ visibility hence contributing to road accidents.
      • Messages may fade with time since they are exposed to adverse elements of weather.
      • Interfere with the environment in terms of view.
      • May not target a specific market/target group or cater for specific segment of the market.
      • May distract passerby’s, especially motorists.
      • Are exposed to elements of weather hence the massage may fade with time
    2. Significance of warehousing to consumers. (10 mks)
      • It facilitates steady supply of goods by storing surplus goods and releasing them during times of shortages.
      • May help them in stabilizing prices as supply becomes continuous.
      • Some goods when stored improve in quality to the advantage of consumer.
      • It can create employment opportunities to consumers
      • Enables the consumers to check on quality of goods before they buy.
    1. balance sheet
      1st: capital → 224,000+30,000=254,000

      1st: bank → 15,000+30,000=45,000
      5th: ADC →  100,000-8,000=92,000
      5th: bank → 45,000-8,000=37,000
      10th : stock → 37,000-3,500=33,500
      10th : bank → 37,000+7,000=44,000
      {10th : profit 3,500}
      10th : capital → 254,000+3,500=257,500
      15th : m. vehicles → 250,000+50,000=300,000
      15th : ADC → 92,000+50,000=142,000√
      17th : stock → 35,500-1,200=32,300
      {17th : drawings → 1,200}
      17th : capital → 257,000-1,200=255,800
      20th : m. vehicles → 300,000-27,000=273,000√
      {20th : loss → 5,000}
      20th : capital → 255,800-5,000=250,800√
      20th : debtors → 20,000+22,000=42,000
      25th : cash → 5,500+15,000=20,500
      25th : debtors → 42,000-15,000=27,000√
      29th : creditors → 12,000-8,500=3,500
      29th : bank → 44,000-8,500=35,500√
      30th : stock → 32,300+3,200=35,500√
      30th : creditors → 3,500+3,200=6,700√
      Capital → 224,000+30,000+3,500-1,200-5,000=250,800
      Bank → 15,000+30,000-8,000+7,000-8,500=35,500
      ADC → 100,000-8,000+50,000=142,000
      Stock → 37,000-3,500-1,200+3,200=35,500
      m. vehicle → 250,000+50,000-27,000=273,000
      debtors → 20,000+22,000-15,000=27,000
      cash → 5,500+15,000=20,500
      creditors → 12,000-8,500+3,200=6,700
    2. Five Reasons why mobile phones are popular means of communication. (10 mks)
      • Portable/convenient to carry around and so one can make and receive calls at any time or anywhere as long as he/she have it.
      • Information can be stored in written form/audio/audio-visual/provide evidence.
      • One can easily access information from the internet/websites.
      • Mobile phones have other functions such as games , calculators, clocks ,calendars, foreign exchange convertors which makes access easy.
      • Diverse types of messages can be sent and received like pictures , graphs, texts, animations, illustrations .
      • They are trendy and fashionable thus alluring masses to own/possess them.
        NB:(i) award for any other relevant answer
              (ii) No splitting of marks. 2×5=10mks
    1. Five Negative Effects inflation. (10 mks)
      • Reduction in profit – Rise in prices of commodities reduces salerol, hence reduces profit
      • May lead to industrial unrest – As worker pressure for high wages to compensate declining money value/increase in cost of living.
      • Wastage of time – As business/firm and individual waste time shopping for reasonable prices.
      • Balance of payment deficit as most people will opt for cheaper imported than local expensive.
      • Discourage saving as people fear to loose the value of their money overtime.
      • Decline in the standard of living since the purchasing power of consumer decreases. This will reduce their standards of living.
      • Weakens the value of currency hence failing as store of wealth.
    2. Five reasons why a country may experience balance of payments disequilibrium. (10mks)
      • Fall in volume of exports-reducing earnings from exports , (leading to deficit.)
      • Deteriorating in countries terms of trade-making her payments higher than receipts
      • Increasing in volume of imports –where exports are not increasing at the same rate,it will import more than it exports.
      • Restriction by trading partners-thus reducing volume of exports.
      • Less capital inflow as compared to outflow-leading to a deficit in capital account.
      • Over valuation of domestic country- making exports expensive compared to imports/exports lose market.
      • Devaluation of currency by trading partners-making imports cheap thus encouraging importation.   ( Any 5×2= 10mks )
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