Business Studies paper 2 Questions and Answers - Samia Joint Mock Examination 2023

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  • Answer any five questions
    1. Explain any five accounting documents used in home trade. (10marks)
    2. Discuss five negative effects of inflation in the economy of Kenya. (10marks)
    1. Discuss five factors that will make two people wishing to take a life assurance policy to pay different premiums. (10marks)
    2. Explain five reasons why small firms continue to exist in an economy dominated by large scale firms. (10marks)
    1. Alukumu would wish to import a V8 car from Japan discuss five possible channels of distributing the car. (10marks)
    2. The following balances were extracted from Wakasungula’s traders. Cash at hand sh. 180,000and cash at Bank sh. 67,000 at 1st January.
      Jan. 2: Cash sales directly banked sh. 34,500
              3: Cash taking of sh. 20,000
              4: Purchased goods on credit from Sagini sh. 30,000 Pesh. Sh. 25,000 and Cosmo sh. 38,000
              5: Sagini and Pesh returned faulty goods worth sh. 10,000 each.
              6: Sharlet a debtor paid cash sh. 30,000 in full settlement of the debt after being allowed a 10% discount.
              8: Paid the following accounts by cheque after deducting 5% in each case: Sagini sh. 15,000, Pesh sh. 10,000 and Cosmo sh.                        30,000
              9: Received a cheque from debtor sh. 20,000
             10: Too cash to the bank sh. 32,000.
             12: Paid salaries sh. 10,000 in cash and sh. 37,000 by cheque.
              20: The cheque received on 9th was dishonored and there were bank charges of sh. 2,200.
              29: Withdrew sh. 20,000 from bank for her daughter’s medication.
              30: Deposited all the cash to the bank except sh. 2,000
      Prepare a duly balanced three column cash book.          (10marks)
    1. Explain any five roles of the Nairobi securities exchange market. (10marks)
    2. Explain five factors why the National income statistics
    1. Explain five ways in which the utility of maize can be increased. (10marks)
    2. The following trial balance relates to Nyamira traders Ltd. As at 31st March 2005.
                                                     Nyamira Traders
                                                       Trial balance
                                               As at 31st March 2005
       Detail   Dr.  Cr. 
       Capital                                       400,000
       Sales              560,00
       Purchase        100,00  
       Returns        500             1,000
       Carriages        15,000             6,000
       Opening stock        50,000  
       Discounts         2,000             4,000
       Rent               16,000
       Insurance        8,000   
       Machinery        560,000  
       Transport       1,000  
       Wages       10,000  
       Debtors       400.000  
       Creditors               60,000
       5 year loan               200,000
       1 year loan                75,000
       Furniture      60,000  
       Premises      40,000  
       Cash      500,000  
       Bank      100,000  
          1,353,000     1,353,000
      The closing stock was valued at sh. 60,000.
      1. Prepare a trading, profit and loss account.
      2. Prepare a balance sheet as at 31st March 2005.
    1. There has been an increase in demand for pork at Funyula market. Discuss any five factors that may have contributed for this situation. (10marks)
    2. Discuss how the introduction of money eliminates problems faced in Butter trade. (10marks)


      • Debit Note - a document prepared by the seller to the buyer correcting an undercharge.
      • Credit note - prepared by the seller to the buyer correcting an overcharge.
      • Invoice - document sent by the seller to the buyer demanding payment of goods delivered.
      • Receipt - document prepared by the buyer to the seller acknowledging payment has been made.
      • Pro-forma invoice - document send to the buyer by the seller requesting payment for the goods ordered for.
      1. Loss of faith in money system – Done to decline the value of our currency.
      2. Creditors tend to loose – They lend money that the value is high but at the time of payment the value is low.
      3. Reduction in the levels of savings and investment – People tend to spend most of their income leaving little to save and invest.
      4. Lowers the lend of investment - majority of our income will go for the basic needs
      5. Unfair distribution of incomes – the employed will still receive the same value of money while the person …..
      6. Future problem in economic planning – resources earlier allocated on project may be enough.
      7. Balance of payment problems – Very many countries may shy away trading with us.
      1. Health of the insured
        • Their health status may be different; i.e one may be sick so he/she pays more.
      2. Age of the insured
        • The order person is likely to pay more than the young
      3. Period to be covered by the policy.
        • One could have take a cover for a longer period so he pays more premiums.
      4. Residence of the insured.
        • The insured who stays in urban areas is likely to pay more premium than other.
      5. Occupation of the insured
        • An insured person with a well-paying job will pay higher premiums than the other.
    2. Reasons why small firms exist in an economy dominated by large firms
      1. Flexibility of small firms – Small firms can switch from one line of product to another easily.
      2. Size of the market – Small markets are suitable for small firms.
      3. Nature of the product – Some products like personal services are suitable for small firms.
      4. Simplicity in organization and operation – Small firms exist because they are easy to operate as compared with big firms.
      5. Quick decision making – Most people go for small firms because it is easier to make decision.
      6. Simplicity in management –Most business may opt for small firms due to the belief that they are easy to run as compared to big firms.
      • Foreign manufacturer – local consumer
      • Foreign manufacturer – Foreign agent – local retailer – local consumer
      • Foreign manufacturer – Foreign marketing board – local wholesaler – local consumer.
      • Foreign manufacturer – local wholesaler – local retailer – local consumer.
      • Foreign manufacturer – local wholesaler – local consumer
      1. Facilitate buying of shares – provides market for the investors willing to buyer shares in different quoted companies
      2. Facilities selling of share – The stock exchange provide market for those wishing to sell their securities
      3. Safeguards investors – The stock exchange market puts in place standards of performance to be attained before a company is quoted.
      4. Provide useful information to investors – Provides timely, accurate and reliable information to enable investors make decision.
      5. Enables company to avail capita – Through the sell of shares.
      6. Avails variably securities provides both shares and debentures.
      1. Difference in the cost of living despite having some per-capita income.
      2. Different levels of inflation – A country may report a higher income per-capita.
      3. Lack of proper population statistics
      4. Difference in income distribution – A country may have a wider gap between the poor and the rich while the other one has a fair gap.
      5. Different levels of accuracy in different countries – A country may have low per- capita income as a result of calculation errors.
      6. Difference in the value of the currency in different nations.
      • Through strong until the demand for maize rises.
      • Through transporting to the market places where maize is currently needed in large quantities.
      • Through changing the form of maize from maize to maize flour which can easily be utilized to make ugali.
      • By the changing ownership through trade. This ensures those who lack maize have the opportunity to possess.
                                                   Nyamira Trader Ltd
                                          Trading Profit and Loss a/c
                                        For the period ended 31st March 2005
      1. Favourable terms of sale – Traders at Funyula market are able to provide pork on credit terms.
      2. Increase in income of consumers – The increase in consumers level of income in Funyula market increased their purchasing power.
      3. Positive change in taste and preference in pork.
      4. Future expectation of an increase in price of pork. Very many consumers will now tend to buy more.
      5. Decrease in price of pork. A decrease in price within Funyula market will make pork relatively cheap hence increasing the purchasing power of people.
      6. Favourable income distribution amongst pork consumers in funyula market.
      1. Divisibility of money – Money can be divided into smaller units unlike in batter trade.
      2. Money is generally acceptable as a medium of exchange while in batter trade some commodities were not accepted.
      3. Money is durable – Materials used to make money are durable while in batter trade some goods were perishable.
      4. Money is portable – Money can be carried around easily.
      5. Money reduced the problem of double coincidence of wants as one can purchase any product that he/she is in need.
      6. Money has standard value – one can be able to measure whatever he has in money value.
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