BUSINESS STUDIES PAPER 2 - KCSE 2019 NYANDARUA PRE MOCK EXAMINATION

1.  
   1. Explain five characteristics of economic resources.                                                                      [10 mks]
   2. Explain five merits of using audio visual means of communication.                                         [10 mks]

2.  
   1. Explain five circumstances under which a partnership may be dissolved.                               [10 mks]
   2. The following balances were extracted from the books of Kasuku traders on 30^th June 2018.
      Furniture             18,000                 Debtors   40,000
      Motal van           40,000                 Creditors   50,000
      Capital               75,000                  Cash           4,000
      C.F.C Loan         50,000                 Bank           19,000
      Stock                   54,000.
      The following transactions took place in the month of July 2018.
      July 10 Kasuku traders received ksh. 15,000 from a debtor by cheque.
      July 15   Bought more furniture worth ksh. 2,500 and paid in cash.
      July 20 Took goods worth 14,000 for home use.
      Required.
      Prepare a balance sheet as at 30^th July 2018.                                                             [10 mks]

3.  
   1. Describe five principles that guide insurance businesses in Kenya.                                     [10 mks]
   2. The following information relates to Rose holdings for May 2015.
      May   1.Sold goods to Garry at ksh. 660.
      May 5.Bought goods from K.N.T.C for ksh. 7500.
      May 10 Bought three office machines at ksh 2,500 each on credit from Fine elecronics.
      May 15 Goods worth ksh.1,850 were sold to Jack on credit.
      May 18 She sold old furniture on credit to Twiga motols at KSH. 1,500 whose book value was ksh.1000.
      Required.
      Record the above transactions in appropriate journals.                                                     [10 mks]

4.  
   1. Explain five features of monopolistic competition.                                                                          [10 mks]
   2. Outline five differences between public and private warehouses.                                                 [10 mks]
5.  
   1. Explain five documents used in home trade that are prepared by the buyer.                            [10 mks]
   2. Explain five ways in which the central bank of Kenya controls the operations   of commercial     banks.                                                                                                                                                                [10mks]
6.  
   1. The following transactions were extracted from the books of Furaha retailers.
      April   1.Balance brought forward cash ksh 1,900 cash at bank ksh. 6500.
      April 3.Sold goods in cash ksh. 1,200.
      April 5. Paid transport by cheque ksh. 2,050.
      April 7.Bought goods worth ksh.2,500 in cash less 5% cash discount.
      Apri l 10.Paid postage charges by cheque ksh.3,000.
      April 12.Furaha deposited ksh.600 from cash till to the business bank account.
      April   13.Bought goods ksh .8400 by cheque.
      April 15. Sold some old furniture for ksh 3,900 and received the money by cash.
      April 17.Brought a table to be used in the business whose value was ksh.1,800.
      April 18.Paid electricity bill by cheque ksh.2,100.
      April 20.Sold goods goods against a cheque for ksh.6,600 whose value was ksh.6,850.
      April 21.Took cash ksh 400 for family use..
      April   26.Sold goods on credit to Kamani valued at ksh 4,500.
      April 28.Received cash ksh.1,500 from Bidii stores.
      April 30.Deposited all cash with the bank exceptksh.3,525.
      
      Required to prepare a three column cash book duly balanced.                                                     [10 mks]
      
      
   2. Draw a well labeled diagram to show the effect of increase in demand and increase in supply on equilibrium point, equilibrium price and equilibrium quantity.      [10mks]

MARKING SCHEME

1.  
   1. Characteristics of economic resources are;-
      • Are scarce/limited in supply-----one cannot have all economic resources they may want.
      • Have money value----you can attach monetary value on them.
      • Have utility----are useful and can satisfy a want.
      • Most are transferable---some can be moved from one place to another eg man made resources
      • Are unevenly distributed----some areas /country have more than others.
      • Have alternative uses---- usage can be changed to areas of better/more returns.
      • Can be combined to produce goods---different raw materials can be combined to come up with a new product.
   2. Merits of audio visual means of communication.
      • Permanent record can be made---information can be saved in form video tapes/compact discs
      • Fast means ---hence good for urgent messages eg message sent through Tv reaches viewers immediately.
      • Immediate feedback is possible---one can study reaction of receiver on spot.
      • Possible to reach many people at once---a group of people can receive the message at once.
      • Sustain/attract attention of receiver ---message can be made to entertain the audience.
      • Possible to combine different means to reinforce message--- use of still pictures,pictures on motion,different sounds to create unique attention.
      • Can have high retension rate---receive can register scene in they mind hence possible to recall.
2.  
   1. Termination of partnership.
      • Court order---if formed under fraud/breach of partnership agreement.
      • Continued/persistent loss making---making it unable to meet its obligation.
      • Change of law/government policy---making its operations unlawful/illegal.
      • Mutual agreement of members---where partners agree to terminate their business.
      • Internal disagreements among partners---hence not able to agree on how to run their business.
      • Bankruptcy o f genera l partner ---court declares his/her total assets cannot settle debts.
      • If it was temporary partnership---having achieved its objectives/experily of time it was undertaking.
      • Permanent inability of general partner---making one not be able his/her duties due to illness/sickness.
      • Request by some partners to dissolve—others abiding by their request/wish.
   2. Kasuku traders
      Balance sheet
      As at 31/7/2018√
      

      Capital    61,000√ C.F.C Loan 50,000√ Creditors  50,000√	Furniture     20,500√ M. Van         40,000√ Stock            40,000√ Debtors         25,000√ Bank               34,00√ Cash               1,500√
      161,000	161,000

      
      N/B   For heading to score must be at 31/7/2018 as instructed.
      10   x 1 =10mks
3.  
   1. Principles of insuarance
      • Principle of indemnity---in an event of loss from an insured risk,insurer restore the insured back to the financial position he/she was before the loss occurred.
      • Principle of contribution---occurrs when insured insures same property with more than one insurer,in an event of loss the insurers share the loss proportionally.
      • Principle of utmost good faith/uberrima fides---insured expected to disclose all material facts about the item being insured whether asked or not by the insurer.Failure to disclose or being untruthful may cause the insurer not compensate in an event of loss.
      • Principle of subrogation---when insuredis compensated remains of insured item to be surrended to the insurer.It ensures the insured does not benefit out of insurance.
      • Principle of proximate cause—ensures that there was a very close relationship between the risk insured and the actual cause of loss for insurer to compensate.Loss suffered must arise directly from the risk insured against.
      • Principle of insurable interest---insured can only insure property that he/she can financially suffer loss if destroyed.
   2. Journals.
      Sales journal√
       

      Date	Details	Invioce no.	L.P	Amount
      May   2	Garry√			660√
      May     15	Jack√			1,850√

                                                              
      Purchases journal√
       

      Date	Details	Invoice no.	L.P	Amount
      May 5	K.N.T.C√			7,500√

                                                          
      General journal
      

      Date	Details	L.P	DR	CR
      May 10	Office machines √		7,500√
      	Fine electronic√ [purchase of office machine on credit]√			7,500√
      May 18	Twiga motors√		1,500√
      	Furnature√			1,000√
      	Profit & loss√			500√
      	[sale of old furn. At a profit on credit]√

4.  
   1. Features of monopolistic.
      • Free entry/exit from the market—no barriers to stop one to enter / exit in the market, such decisions influenced by profits/losses.
      • Products are similar[close substitutes]—each firm differentiates their products by use of colour /names/shapes/packaging etc.
      • Wide knowledge of the market---both buyers and sellers are aware of prices and quantities and other market forces.
      • Firms are independent---when making decisions on prices and quantities to produce.
      • Market has many buyers /sellers---who act independently allowing level play ground in the market.
      • Exit/entry of a single firm does not affect the market----no firm can influence the     price or supply by joining or leaving.No single firm has control over factors of production—all firms acquire them at prevalling market rates.
      • All firms earn normal profits in the long run---high profits makes other firms to enter while losses causes others to leave.
   2. warehousing
      

      PUBLIC	PRIVATE
      Requires a licence to operate	Does not require a licence to operate
      Owned by a retailer/wholesaler/producer	Owned by anybody who wishes to operate business of renting space
      Usually small in size	Usually big in size
      Insurance for goods stored is optional	Insurance for stored goods is a must.
      Can specialize on certain goods	Usually designed for general goods
      Usually near owners business	Usually located near terminals

      
      No splitting of marks either 0 mk or 2 mks for each difference
5.  
   1. Documents used in home trade.
      • Letter of inquiry—buyer sends to supplier to inquire/ask information about certain goods.
      • Order—request made by the buyer for supply specified goods in it. Or LPO[Local purchase order] –an official designed form used by businesses when buying goods.
      • Goods received note--- buyer informs the seller he/she has received the goods.
      • Goods returned/damaged note---buyer sends it when goods received do no match order sent/goods are demaged.
      • IOU[I owe you]—note prepared by the buyer to inform the seller he/she still has not paid his/her debt.
6.  
   1. 3 column cash book.
      Dr       Three column cash book for the month of September                                CR
      

      Date	Particulars	D.A	Cash	Bank	Date	Particulars	D.R	Cash	Bank
      Sep. 1	Bal b/f√		1,900√	6,500√	Sep 5	Transport√			2,050√
      ‘’     3	Sales√		1,200√		‘’   7	Purchases√	125√	2,375√
      ‘’   12	Cash√			600√	‘’ 10	Postage√			3,000√
      ‘’   15	Furniture√		3,900√		‘’   12	Bank√		600√
      ‘’   17	Addational capital√		1,800√		‘’   18	Electricity√			2,100√
      ‘’   20	Sales√	300√		6,600√	‘’   21	Drawings√		400√
      ‘’   28	Furaha√		1,500√		‘’ 30	Bank√		3,400√
      ‘’ 30	Cash√			3,400√	‘’ 30	Bal c/d√		3,525√	9,950√
      		300	10,300	17,100√			125	10,300	17,100√

      
      40x1/4=10mks
   2. Demand and supply diagram.
      
      Price decreases from po to p1, √ quantity demanded and supplied increases from qo to q1√ √ & equilibrium point falls to a lower position. √
      4X1=4MKS