Business Studies Paper 2 Questions and Answers - Nginda Girls Mock Examination 2023

INSTRUCTIONS

• Answer any five questions in the spaces provided
• Candidates should answer the questions in English.

QUESTIONS

1.  
   1. Explain five characteristics of an under-developed country. (10 marks)
   2. In the recent past, Kenya has been experiencing high rates of inflation. Explain any five non-monetary measures that a country may use to control this situation (10 marks)
2.  
   1. The per capita income in country A is considerably higher than that in country B. Explain five reasons why the citizens of country A may not necessarily enjoy higher standards of living than citizens of country B. (10 marks)
   2. Explain five circumstances under which personal selling would be the most appropriate method of product promotion. (10 marks)
3.  
   1. Explain any ways in which the external environment may contribute to the success of a business (10 marks)
   2. The following balances relate to Utawala Traders as at 31st December 2021
      

                                                         Shs

                  Salaries                                    70,000

                  Stock (1/1/2021)                     30,000

                  Premises                                  700,000

                  Creditors                                  35,000

                  Capital                                     700,000

                  Purchases                                150,000

                  Bank                                        120,000

                  Insurance                                  10,000

                  Electricity                                40,000

                  Debtors                                    60,000

                  Sales                                        350,000

                  Stock (31/12/2021)                 20,000

                  2-year bank loan                     200,000

                  Cash                                         90,000

                  Returns inwards                      15,000

      
      Required:
      1. Prepare a trading, profit and loss account for the year ending 31st December 2021 (5 marks)
      2. Prepare a balance sheet as at 31st December, 2021 (5 marks)
4.  
   1. Explain five ways in which a computer may be used in an office (10 marks)
   2. Most of the African countries are suffering from rapid unemployment rates. Explain five causes of this situation. (10 marks)
5.  
   1. Outline five differences between a public limited company and a public corporation. (10 marks)
   2. Currently, commercial banks are establishing Banking Agencies in different parts of the country. Explain five benefits that are enjoyed by their customers as a result of this development. (10 marks)
6.  
   1. On 1st October 2013, Nyati Traders Had shs.10 000 and shs.40 000 at the bank. During the month, the following transactions took place.
      2013
      Oct 2 Bought goods worth shs3,100 by cheque
             3 Paid motor expenses shs.6000 in cash
             6 Sold goods worth 8200 cash
            10 paid a creditor shs.9500 by cheque after deducting a 5% cash discount
            12 Received a commission of shs.580 directly into the bank account.
            15 The bank deducted shs. 850 from the business account for services rendered
            19 The owner took shs.1500 by cheque for personal use
            23 Paid Maboko traders shs.39,200 by cheque in full settlement of their account less                  2% cash discount
           24 Withdrew shs.15,000 from bank for business use
           26 Received shs.8,200 cash from a debtor in full settlement of a debt of shs.8,500
           30 Took all the cash to the bank leaving only shs.1800 in the cash till
      Required:
      Prepare a duly balanced three column cash book (10 marks)
   2. Explain any five ways of improving the efficiency of a warehouse. (10 marks)

MARKING SCHEME

1.  
   1. Characteristics of under-developed country
      • High Level of poverty- Most people in these countries depend mainly on subsistence and this leads to low levels of poverty.
      • High disparity in income distribution- The incomes in these countries are not evenly distributed with the few rich people earning so much while the poor majority earns very little
      • Low levels of savings and investments- They have very little or nothing to save and invest for their further development, making them to continue being poor
      • High population growth rates- This is due to them not being able to afford, ignorant about or simply refusing to use the modern birth control methods since they find consolation on their high number of children
      • Dominance of subsistence sector- This is due to their inability to raise capital for indirect production
      • Problem of unemployment- The high population growth rate leads to high supply of labour that the country’s economy cannot afford to absorb all, leading to unemployment
      • Under-utilization of natural resources- This may be due to lack of capital in the country or inappropriate technology they use
      • Dependence on the developed countries- This is due to their inability to sustain themselves financially, which make them keep calling upon the developed partners for their financial assistance
      • Poor infrastructure- Their roads and communication networks are not properly maintained due to the in availability of adequate resources to improve them.
   2. Non-monetary measures to control inflation
      • Reducing Government spending- Government spending has more money in circulation, which may bring about demand-pull inflation. Reducing such spending may therefore reduce demand-pull inflation
      • Increase in income taxes- Income tax will reduce consumer’s disposable incomes. This will reduce the levels of spending thus controlling inflation.
      • Reducing tax on production-The government may reduce taxes on production inputs such as raw materials. This will reduce the cost of production which enable producers to sell at lower prices, thus controlling inflation
      • Subsidizing production- The government may meet part of the production cost so that the produces incurs less in production. This will in return lead to lowering the cost of goods , thus controlling cost-push production
      • Producing commodities that are in short-run- The government may be involved in the production of goods that are in short-supply thus ensuring that there is no excessive demand which may lead to inflation
      • Controlling wages and salaries- This will lead to less money in circulation thus reducing inflation. It will also lower the cost of production and thus producers will sell at lower prices
      • Price control-the government may set the ceiling at which the producers can sell goods at. This will curb profit-push inflation
      • Restricting imports – Imported inflation can be reduced by reducing the quantities of imports.
      • Restricting terms of hire purchase and credit terms of sale
      • Controlling of exports- Exports may create shortages in the local market.
        Any 5 well explained point
2.  
   1. Reasons why the citizens of country A may not necessarily enjoy higher standards of living than citizens of country B.
      • Statistical problems- The collection of data of the national income may be inaccurate meaning that the national income figures may be inaccurate thus leading to wrong per capita income
      • Change in the value of money-If the currency has been devalued, for example, there can be change in the value of money without necessarily representing an improvement in the welfare of the people
      • Income distribution- The high per capita in country A may be as a result of excess wealth from a few minorities.
      • People’s hard work and sacrifice- The high per capita income in country A may have been obtained as a result of sacrifice from e citizens, e.g. less sleep and worries and this does not indicate high standards of living
      • Social costs- The increase in industries may bring about a lot of pollution, congestion and other environmental disruptions. This will increase the per capita income but lower the living standards of people
      • Change in population- If a static problem is assumed, a false higher per capita income will be assumed while the living standards of people do not improve
      • Quantity of goods and services produced- The high per capita income in country A may be as a result of increased prices, but not an increase in production. This will lead to inflation but not an improvement in the living standards of people
      • Nature of the products- The goods produced in country A may not be meant to satisfy immediate wants of the people. This will mean high per capita income but no improvement in the living standards of the people
   2. Circumstances under which personal selling is appropriate
      • When launching a new product- It is appropriate when launching a new product because it requires a lot of awareness creation, persuasion and convincing
      • When a product is tailored to meet customer’s specifications- This is because different customers have different tastes and preferences
      • When demonstration is required- Some products, esp. the technical ones, require their operations to be explained and this will be possible through personal selling
      • When the value of the product is high- In this case the seller may want to use personal selling to avoid the risk of losing them
      • Where the market is concentrated in one area- It will be economical to use personal selling when accessing this market
      • When the organization can afford to finance the sales force- The cost of maintain the salespersons may be high but a firm will use it only it can afford
3.  
   1. Ways in which external environment contributes to success of a business
      • A stable economic environment- This increases the consumer’s purchasing power hence more sales
      • Favourable government policies/Legal framework-This enables quick registration of business. Lower taxation and subsidies reduces the cost of production, which in term reduces the selling price. This increases the demand for goods
      • Enhanced security- This creates confidence in the entrepreneur to carry on with the activities without fear of losses
      • Adequate physical infrastructure of transport and communication- This will facilitate smooth movement and distribution of goods and services
      • Availability of modern technological advancement- Improved technology increases the productivity in terms of speed and quality
      • Healthy and fair competitive environment- Fair competition willenable a business cope and this will lead to the success of the business
      • Reliable suppliers- This will ensure that raw materials and stock are adequately available
      • Positive publicity- This will ctreate a good image for the business thus increasing the sales, leading to the success of a business
      • High population- This will provide a big market for the goods. It will also increase the labour supply
      • Favourable culture- A culture that favours the business will ensure that the business makes more sales thus leading to success of the business
      • Political stability- This provides a conducive working environment for business success
   2.  
      1. Utawala Traders
         Trading, Profit and Loss A/C √
         Dr. For the year ending 31st December, 2021 Cr
         

         sh.             sh. Opening stock                                     30,000 √ Add: Purchases                                  150,000√ Goods Ava. for sale                           180,000√ Less: Closing stock                          (20,000) √ C.O.G.S                                              160,000 Gross profit c/d                                  175,000√                                                              335,000   Salaries                                                 70,000√ Insurance                                             10,000√ Electricity                                             40,000√ Net profit c/d                                        55,000√                                                              175,000√

         sh.                   sh. Sales                                              350,000√ Less: Returns In.                           (15,000) √ Net sales                                        335,000√                                                              335,000 Gross profit b/d                            175,000√                                                                175,000 Net profit b/d                                  55,000

         
         (15×1/3=5 marks)
         NB: In case of foreign entry, deduct 1 √
      2. Utawala Traders
         Balance Sheet √
         As at 31st December, 2021
         

         Assets               sh.                 Sh                                              Sh.                   Sh  

         Premises                             700,000 √       Capital                                              700,000√

         Stock                                   20,000  √        Add: Net profit                                   55,000√

         Debtors                               60,000 √         Bank loan                                          200,000√

         Bank                                 120,000  √       Creditors                                             35,000√

         Cash                                    90,000√

                                                    990,000                                                                        990,000

          

         
         (10×1/2=5 marks)
4.  
   1. Ways in which a computer may be used
      • It is a tool of supervision- Computer can be used in monitoring employees activities online and this will help in controlling fraud
      • Security- Security of documents can be enhanced through use of passwords. CCTVs, which enhances security, are also computerized and this will minimize theft
      • Data Processing- Computer organizes and analyze data into meaningful output
      • Storage of information- A computer will help in filing documents electronically thus reducing paper work in an office
      • A tool of communication- A computer can be linked to the internet thus enhancing sharing of communication
      • Production of documents- Printing is made possible by use of computers
      • Assist in research- Computer can be linked to internet and thus will access various sites where information can be sourced
      • Capacity building- It acts as a tool for training during induction
      • Recreation/Entertainment- A computer has accessories for games, movies, music, e.t.c which can be used as a form of entertainment by employees, thus reducing boredom
   2. Causes of unemployment
      • Rapid population growth- This implies that population is growing at higher rate than the rate at which the economy is expanding. Thus, the workforce entering the labour force cannot be fully absorbed causing unemployment
      • Use of inappropriate technology- When capital-intensive methods of production are used in production, less labour is needed
      • Rural-urban migration- This has led to less development in rural areas which could have otherwise created employment. The excess labour in urban areas cannot be fully absorbed
      • Inappropriate education system- The education system in most developing countries is not matching the realities of the labour market in these countries
      • Seasonality in production- Seasonal variation creates unemployment in the economy such that during the peak season, employment is high, and during off peak season, employment is low.
      • Lack of product market- If the demand for some goods goes down, people are likely to be laid off, causing unemployment
      • Inadequate co-operant factor inputs- Co-operant factors are the factors that need to be combined with labour for productivity to take place. If these factors are inadequate, then less production will take place, thereby limiting the expansion of job opportunities
      • Job selection- Some people are very selective and thus remain unemployed until they get the suitable jobs
5.  
   1. Differences between a public limited company and a public corporation
      

      Public Limited Company	Public Corporation
      (a)   Fully owned by private people who own shares	Fully owned by the government
      (b)   Formed under companies Act	Formed by an Act of parliament
      (c)   Formed to make profit	Formed to offer essential goods
      (d)   Profit realized go to shareholders	The little profit realized go to government
      (e)   Financed by shareholders	Financed by the government
      (f)     Perform different functions	Perform a specific function

      
      Accept any other relevant point
      NB; Differences must match
      No splitting of marks
   2. Benefits enjoyed by customer due to establishment of Banking Agencies
      • Encouraging savings- The customers will be able to save due to the convenience of location
      • Saves time- The customer will be able to save time since the agencies are nearer. He/she will not be required to make long travels to the banks
      • Facilitates money transfer convenient- The agents will avail this service to the customer conveniently
      • Giving advice on investment- The customer will get financial advice from these agencies which will help them to venture in to profitable businesses
      • Easy access to money- One can easily withdraw money from his or her account without necessarily visiting the bank. The agents can also make arrangements for the customer to acquire loans easily
      • Provisions of bank balances/statements- This will enables customers to easily make decisions on financial obligations
      • Enables customers to conveniently open account which will lead to more savings for small scale entrepreneurs.
6.  
   1. Nyati Traders
      Three column cash book
      For the month ended 30th October, 2013
      

      Date	Details	LF	Disc. Allowed    Shs.	Cash Sh.	Bank Sh.	Date	Details	LF	Disc rec Shs	Cash Sh.	Bank Sh.
      2013						2013
      Oct 1	Bal	b/d		10,000	40,000	Oct 2	Purchases				3,100
      6	Sales			8,200		3	Motor expenses			6,000
      12	Commis				580	10	Creditor		500		9,500
      24	Bank	C		15,000		15	Bank charges				850
      26	Debtor		300	8,200		19	Drawings				1,500
      30	Cash	C			33,600	23	Maboko T.		800		39,200
      						24	Cash	C			15,000
      						30	Bank	C		33,600
      						30	Bal	cd		1,800	5030
      			300	41,400	74,180				1300	41,400	74,180
      	Bal	b/d		1800	5030

      
      (20×1/2 marks= 10marks), NO tick for totals
      NB:
      If no dates on either sides at all, deduct a maximum of 2 marks
      Details must be correct to award
      Balances must be specified i.e. bal c/d or bal. b/d
      Accept DA for discount allowed and DR for discount received
   2. Ways of improving the efficiency of a warehouse
      • Ensuring that there is proper handling equipment to handle goods easily
      • Ensuring that the staff is well trained- The employees working in the warehouse should be qualified so as to enhance good performance. They should also be motivated
      • Ensuring proper arrangement of good- This will enable easy movement of goods and staff
      • Ensuring adequate security- this will ensure the safety of goods and the staff
      • Ensure proper system of inventory control/recording- This will help in monitoring stock so as to avoid losses
      • Ensuring that legal requirement are adhered to for smooth running
      • Ensuring adequate transport and communication facilities
      • Ensure there are adequate proper storage facilities as well as equipment to cater for loading and off-loading
      • Provision of sufficient loading and offloading space to avoid delays
      • Ensure that public health requirement are met for smooth operations
      • Ensuring that the warehouse is situated at a convenient place
        Amy 5 well elaborated point( 5×2marks)