BUSINESS STUDIES PAPER 2 - KCSE 2019 MOKASA PRE MOCK EXAMINATION

1.  
   1. Explain five ways in which division of labour is useful to a firm.             (10 marks)
   2. Explain five negative effects of a youthful population in a country          (10 marks)

2.  
   1. Explain four insurance policies you would advise a hospital chief executive officer to insure against.       (8 marks)
   2. The following balances were extracted from the books of Abade Traders for the year ended 31/12/2016.
      Item                                                         Kshs.
      Discount received                                   9,500
      General expenses                                  97,000
      Rent                                                         48,000
      Lighting                                                    6,300
      Motor vehicle                                   2,100,000
      Gross profit                                          326,000
      Salaries                                                   75,000
      Commission received                           12,470
      Cash                                                        50,000
      Debtors                                                 278,000
      Discount allowed                                    4,600
      Water                                                        9,200
      Stock                                                       95,000
      Furniture and Equipment                   600,000
      Bank                                                      200,000
      Capital                                               3,200,000
      Creditors                                                 14,330
      
      Required; Prepare
      1. Profit and loss account for the year ended 31/12/2016 (6 marks)
      2. Balance sheet as at 31/12/2016 (4 marks)
      3. Calculate
         1. Working capital (1 mark)
         2. Capital employed                                                                               (1 mark)

3.  
   1. Explain five reasons why consumers need protection against traders malpractices (10 marks)
   2. Explain five banking services offered by the Central Bank to the Government (10 marks)

4.  
   1. Give five differences between perfect competition and monopoly market structures. (10 marks)
   2. Explain five guidelines county governments need to follow before spending public funds.          (10 marks)

5.  
   1. Explain five circumstances under which a customer may prefer to buy goods on credit terms rather than on hire purchase  (10 marks)
   2. The following transactions took place in the business of Mokaya enterprise in the month of July 2017
      July 1:            Started business with sh. 150,000 in bank and ksh, 30,000 in cash
      July 3:            Purchased goods valued at sh. 34,000 from Kioko on credit
      July 8:            Paid rent sh. 13,000 by cheque
      July 10:          Purchased office equipment valued at Ksh. 45,000 from Daima stores and paid by cheque.
      July 12:          Sold goods in cash Ksh. 15,000
      July 15:          Paid Chemtai Ksh. 24,000 by cheque
      
      Required: Use the above information to;
      1. Prepare the relevant ledger accounts and balance them off as at 15^th July 2017(6 marks)
      2. Extract a trial balance          (4 marks)

6.  
   1. Explain five benefits that may be realized by a country as a result of government  policy to relocate industries to rural areas.        (10 marks)
   2. On 1^st of April 2018, Machofi Traders had the following balances:
      1. Bank 15,000(Cr)
      2. Cash 25,000(Dr)
         
         The following transactions took place during the month of April 2018.
         April:
         3^rd:      Paid wages in cash sh. 15,000
         5^th:      Bought goods worth sh. 750
         6^th:      Received cheques from the following debtors after allowing a 2% discount in each case. Rioki sh. 980, Kombo sh. 1,960
         8^th:      Chebe paid a cheque for sh. 1,000
         11^th:    Bought machinery by cheque for sh. 5,000
         13^th:    Cash sales paid directly to the Bank sh. 4,000
         15^th:    Withdrew cash sh. 1,000 for private use
         20^th:    Cash sales sh. 20,000
         21^st:    Banked cash amount sh. 1,000
         24^th:    A cheque recorded from Chebe on 8^th of April was dishonoured
         27^th:    Received sh. 3,000 from Kiko a debtor
         30^th:    Bank all the available cash except sh. 1,000
         
         Prepare Machofi Traders Three column cash book for the month of April, 2018 (10 marks)

MARKING SCHEME

1.  
   1.  
      • Increase in productivity since output per worker is greatly increased because more workers are engaged
      • Saves on time since workers perform part of the whole process
      • Encourages use of machines because division of labour involves production on a large scale and therefore permits economical use of machines
      • Leads to production of high quality goods and services since there is use of machines
      • Enables workers to acquire more skills in a particular field since they repeat the same activity now and then
      • Encourages invention and innovation. Repetition improves craftsmanship leading to creativity
   2.  
      • It leads to high rates of unemployment due to high demand for few jobs
      • It increases dependency ratio since many youths depend on few employed
      • Reduces savings and investments as most of the money is spent on basic needs of the youths
      • It leads to increase in social evil as the youths look for ways of survival by getting money through wrong means
      • It puts a lot of pressure on goods and services required by the youth as the demand outsrips supply
      • The government strains to raise finance to fund young people
2.  
   1.  
      • Fidelity guarantee policy- This policy will cover and compensate the hospital against losses which will occur due to dishonesty of his workers who might steal his/her property e.g cash
      • Theft/burglary policy- this policy covers and compensates the hospital against losses that would be caused by thieves or robbers who will take away his property by force
      • Fire policy- this policy will cover and compensate the hospital incase fire destroys or damages his property
      • Motor vehicle accident policy- it covers and compensates in case the hospital motor vehicles are damaged in an accident
      • Workmen’s compensation/ employees liability policy- this policy compensates medical staff/workers incase injured while on duty
      • Loss of goods/money on transit- this policy covers and compensates the hospital incase his goods are damaged while in transit or if transit or if the money is stolen while being taken from or to bank
      • Public liability policy- compensates members of the public who are injured accidentally or any injury to him/her while in the hospitals premises
      • Key man’s policy- compensates a hospital incase of loss of a key/main doctor/ workers
      • Medical policy- pays medical bills for workers incase they are hospitalized
      • Bad debts- compensates a trader incase debtors/patients/clients fail to pay their debts
   2. ACCOUNTING
3.  
   1.  
      • To protect them from over from overpricing of goods and services
      • To protect them from being sold underweight products
      • No protect them from being sold poor quality goods and services
      • To protect them from misleading/false advertisements that may cheat/exploit consumers
      • To protect them from being sold to harmful/unhygienic goods and services that are unfit for human consumption.
      • To protect them from being sold to harmful/ unhygienic goods and services that are unfit for human consumption.
      • To protect them from being sold to socially unacceptable goods and services i.e. pornographic materials which can influence morality in the society.
      • To protect them from hoarding of goods and services so as to create shortages and raise prices.
      • To protect them from being sold to illegal goods and services to protect them from unlicensed traders/ to protect them from unprofessional services.
      • To protect them from breach of contracts
      • To protect them from unsafe buildings/premises which don’t meet the required standards
      • To protect them from unhygienic environment premises which endanger their lives
   2.  
      • Receives deposits on behalf of the government from foreign donors, income tax department, customs department etc.
      • Borrowing money on behalf of the government and externally
      • Collecting revenue for the government from various deparments/institutions
      • Making payments on behalf of the government e.g. payments of civil servants through a cheque drawn on the C.B
      • Advicing government on financial matters
      • Sells government boards and treasury bills
      • Lending money to the government usually on short term arrangement
4.  
   1.  
      

      Perfect competition	Monopoly
      Many buyers and sellers Commodities are homogenious There is free entry and exit into the market by suppliers Price determined by the forces of demand and supply No price discrimination No government interfearance	Single seller many buyers Commodities have no close substitues There are barriers to entering the market The firm is the price giver in the market There exists price discrimination There may be government interfearance

   2.  
      • Sanctions- every public expenditure must be approved by the relevant authority like county assembly
      • Maximum social benefit- any public expenditure must be incurred in such a way the majority of the citizens are able to reap maximum benefit from it. e.g improved living standards and quality of life
      • Flexibility/ Elasticity- the policy on public expenditure should be flexible enough to meet prevailing economic situations i.e it should be possible to increase or decrease the expenditure on projects depending on the prevailing circumstances e.g during drought, it should be possible to spend on famine relief
      • Economy- public expenditure should be planned carefully and prudently to avoid any possible waste
      • Proper financial management(Accountability)- public funds should be well managed. This should be facilitated by maintenance of proper records which should be audited as required
      • Productivity- the biggest proportion of public expenditure should be spent on development and less on non development projects
      • Equity- Government expenditure should be distributed equitably to all sectors of the economy in order to reduce income and wealth inequalities.
5.  
   1.  
      • When there is no down payment needed like in Hire purchase
      • Where the buyer wants to own the goods immediately unlike where in Hire purchase ownership is delayed
      • Where the buyer wants to resell the goods immediately unlike in Hire purchase
      • Where the buyer wants to buy both durable and non-durable goods unlike in Hire purchase where durable goods are accessed
      • Where the buyer doesn’t want the goods to be re-possessed unlike in Hire purchase.
      • Where the buyer wants simple proceedings unlike in Hire purchase where the procedures are lengthy and time consuming.
   2. ACCOUNTING
6.  
   1.  
      • Increased availability of variety of goods and services as a result of new businesses in the area
      • Availability of auxiliary services – citizens would enjoy more and better auxiliary services like transport, banking,insurance, warehousing
      • Increased job opportunities- there will be more jobs available that would reduce unemployment
      • Increased utilization of locally available resources- locally available factors of production will be used and the citizens would earn rewards associated with them
      • Improved standards of living as development of rural areas increases the quality and variety of goods and services
      • Reduced congestion in towns- this would benefit the few citizens remaining in the city
      • Balanced regional development as economic activities are spread throughout the country
      • Transfer of technology to rural areas which lead to production of better quality goods/services
      • Creation of market for goods and services produced in rural areas
      • Development of towns in rural areas/ urbanization
   2. MACHOFI TRADERS
      THREE COLUMN CASH BOOK            
      

      DATE	DETAIL	L.F	DISC. ALL	CASH	BANK	DATE	DETAIL	L.F	DISC. REC	CASH	BANK
      2018 April 1	Bal b/d			25,000		2018 April 1	Bal b/d				15,000
      2018 April 6	Rioki		20		980	2018 April 3	wages			15,000
      2018 April 6	Kombo		40		1,960	2018 April 5	purchases			750
      2018 April 8	Chebe				1,000	2018 April 11	Machinery				5,000
      2018 April 13	Sales				4,000	2018 April 15	Drawings			1,000
      2018 April 20	Sales			20,000
      2018 April 21	Cash	C			1,000	2018 April 21	Bank	C		1,000
      2018 April 27	Kiko			3,000		2018 April 24	Chebe				1,000
      2018 April 30	Cash		60	48,000	20,250	2018 April 30	Bank			20,250
      					29,190	2018 April 31	Bal b/d			1,000	11,690
      Bal b/d				1,000	11,690					48,000	29,190