Business Studies Paper 2 Questions and Answers - Maranda Post Mocks 2020/2021

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  1.  
    1. Explain five advantages of office machine. (10mks)
    2. Explain five circumstances under which a manufacturer may prefer to sell goods directly to the consumer. (10mks)
  2.  
    1. Explain five reasons why trader would prefer to transport good by train instead of road. (10mks)
    2. Explain five external business environment that may positively affect the operation of the business. (10mks)
  3.  
    1. Explain five functions of wholesalers to the producers. (10mks)
    2. Explain five features of monopolistic competition. (10mks)
  4.  
    1. Explain five disadvantages of free trade to a country. (10mks)
    2. Give five differences between whole life and endowment policy. (10mks)
  5.  
    1. Explain five advantages of advertising to the business. (10mks)
    2. The following trial balance was extracted from the books of Bondo traders as at 31" July 2020

      Particulars Dr Cr
      Land and building 900,000  
      Motor vehicles 500,000  
      Furniture 15,000  
      5 year loan (KCB)   200,000
      Debtors 25,000  
      Stock 40,000  
      4 year loan (Equity)   150,000
      Cash at Bank 16,000  
      Cash at hand 10,000  
      Salary owing   20,000
      Creditors   50,000
      Capital   1,086,000
        1,506,000 1,506,000

      Required
      1. Prepare Balance Sheet as at 31st July 2020 in the order of permanency, (7 mks)
      2. Using the balance sheet prepared:
        Determine
        working capital (1 mark)
        Capital employed (1 mark)
        Borrowed capital (1 mark)
  6.  
    1. Give four difference between private company and public company. (10mks)
    2. Onyango traders had the following transactions during the month of february 2018
      Feb; 4th paid salaries by cash shs. 2,100 voucher no. 2143.
      6th paid Magucha by cheque shs. 3,200 receipt no. 0129.
      8th paid electricity by cash shs. 1,500 receipt no. 3104.
      12th paid Kamau by cheque shs. 7,000. receipt no. 1139.
      15th cash purchase of shs. 3,500 by cash receipt no. 13.09.
      20th paid wages shs. 2,000 by cash voucher no. 2144.
      25th paid Musumba by cheque shs. 1,500 after deducting a cash discount of shs. 50 receipt no. 0130.

      Required: prepare relevant journal. (10mks)


Marking Scheme

  1.  
    1. Explain five advantages of office machine. (10mks)
      1. They are labour saving- when a machine is used only a few staff are required hence saves wages.
      2. Operating by machine are faster hence saves on time.
      3. Operating by machine are accurate-machine produces exactness of the work.
      4. The output of machine is presentable-the final product of a machine is of high quality
      5. Machine helps to control stealing in the organization-machine have gauges or meters that record transaction hence reducing fraud.
      6. Products produced by machine are uniform-commodities are similar.
      7. Saving on cost-machine unlike labour are more economical in terms of cost per unit.
    2. Explain five circumstances under which a manufacturer may prefer to sell goods directly to the consumer. (10mks)
      • When the market is concentrated at one area since the cost involved in accessing the market would be low.
      • When size of the market is small so that it maintain its customers/to avoid losing customers.
      • When the goods are perishable so as to minimize on spoilage that avoids load to loss
      • When the firm is financially strong to open its own retail outlets.
      • Where the firm wishes to have direct contact with customers to enforce customers loyalty on order to get direct feedback
      • Where demonstration is required in the market so that they explain the operation of the commodity to the customers/consumers
  2.  
    1. Explain five reasons why trader would prefer to transport good by train instead of road. (10mks)
      • When he wants to plan for transportation of goods because train follow fixed time schedule unlike road.
      • If the good are bulk since train has large carrying capacity than road.
      • If the goods are to be transported over a long distance because it is cheaper by train than road
      • It is safer to transport goods by train than road because accidents are rare on trains.
      • If trader has a variety of special goods that required special facilities which the train has unlike road.
    2. Explain five external business enyironment that may positively affect the operation of the business. (10mks)
      • Favorable economic environment increase in the consumers' income will increase sales volume of the firm.
      • General increase in population a growing population creates a wider market for goods/services/provide labout.
      • Favorable legal political political stability creates a conducive environment for expansion of the business.
      • Favourable technological changes - will lead to high quality and quantity of goods that attract more customers.
      • Favorable cultural environment it influences on the type of business to start
      • Adequate physical environment which provide raw materials to the firm/facilitate movement of goods/provide site for location of business
      • Favorable competitions- least competition enables the firm to incur less overhead cost.
  3.  
    1. Explain five functions of wholesalers to the producers. (10mks)
      • The wholesalers buy goods from the producers and sells them to retailers. This relieves producers the problem of distribution
      • The wholesalers relieve of producers the risk of fall in price due to excess supply by buying from producers regularly.
      • Saves the producers of the problem of storage by buying in large quantities.
      • Wholesalers prepare goods for sale which would have been done by producers.
      • Wholesalers engage in product promotion eg advertising hence relieving of producers.
      • Wholesalers buy goods from producers on cash. Hence provide finance to producers which enable them to continue operating.
      • Wholesalers carry market research about demand which they pass the information to producers.
    2. Explain five features of monopolistic competition. (10mks)
      • There are many buyers and sellers which ac independently.
      • No barrier to entry or exit into the market. Anyone is free to join the industry at will and leaves as he wishes.
      • Products sold are similar but different in terms of branding packaging
      • Buyers and sellers have wide knowledge about the market i.e.price, quality and quantity
      • No single firm has control over the factors of production that can enable it enjoy monopoly.
  4.  
    1. Explain five disadvantages of free trade to a country
      • Loss of government revenue in form of import and export duty on the goods being imported or exported
      • Closing down of local industry as a result of cheap imported goods from member communities
      • May cause unemployment where more qualified people move into the country from their countries
      • Limited consumer choice that lead to lower standard of living,
      • Compromising a country's political ideology of the country in the if persuing different political ideology in order to fit in the bloc
      • Loss of opportunity to obtain cheaper commodities from non member countries that forces consumer to buy goods produced in the bloc.
      • Importation of inferior goods
      • Unfavourable balance of payment where imports are higher than exports
    2. Give five differences between whole life and endowment policy.
      Whole life Endowment
      Covers the assured throughout his/her life Covers the assured for a specified period of time
      Compensation is paid only when the assured dies Compensation is paid on maturity date or death of assured whichever come first
      Covers the family le assure doesn't benefit Covers the assured and the family
      Premiums are paid throughout the life Premiums are paid for a specified period of time
      Is not a saving plan for the future Is a saving plan for the future.
  5.  
    1. Explain five advantages of advertising to the business. (10 marks)
      • Creates awareness of the firm's products to the potential customers especially if the firms is new/ the product is new on market.
      • Help increase sales volume of the firm that translate to higher profit
      • Popularise the firms products and this encourage frequent use of the product
      • Reminds the consumers about continued existence of the firm's products. This enable the firm to maintain its market share.
      • Inform the customer about changes in price/quality
      • Upholding the image/reputation of the organization.
    2.  
      Working capital = total current assets - total current liabilities
      =91,000 - 70,000
      =21,000
      Capital employed = total assets - current liabilities
      =1,506,000 - 70,000
      =1,436,000
      Borrowed capital = total long term liabilities
      =350,000
  6.  
    1. Give four difference between private company and public company. (10 marks)
      Private limited company Public limited company
      Formed by minimum of 2 shareholders Formed by Minimum by of 7 shareholders
      Maximum 50 shareholders No maximum number of shareholders
      Shares are not freely transferable Shares are freely transferable
      It commences immediately it receives certificate of incorporation Wait for certificate of trading
      Not a must for books of account to be audited Books of account are audited annually
      Cannot draw prospectus Must prepare a prospectus
    2.  
      Date Particular Receipt No. LF Discount Received Cash Bank
      2018            
      Feb 4th Salaries 2143 G.L   2,100  
      6th Magucha 0129 P.L     3,200
      8th Electricity 3104 G.L   1,500  
      12th Kamau 1139 P.L     7,000
      15th Purchases 1509 G.L   3,500  
      20th Wages 2144 G.L   2,000  
      25th Musumba 0130 G.L 50   1,500
        Total to be posted to 

      Dis. Received, Cash, Bank A/C on the Cr side
          50 11,500 11,200

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