Business Studies Paper 2 Pre Mock Questions and Answers - Mokasa I Joint Examination July 2021

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Instructions to candidates;

  1. Write your name and admission number in the spaces provided above.
  2. Sign and write the date of examination in the spaces provided above
  3. This paper consists of six questions.
  4. Answer any five questions in the spaces provided after question six.
  5. All questions carry equal marks

For Examiners use only.

Question

Maximum score

Candidate’s score

 

20

 
 

20

 
 

20

 
 

20

 
 

20

 

QUESTIONS

  1.                                  
    1. Explain five factors to consider when choosing an office equipment. (10 marks)
    2. Explain the causes and remedies of the following types of unemployment. (10 marks)
      1. Seasonal unemployment
      2. Structural unemployment
      3. Disguised unemployment
      4. Residual unemployment
      5. Involuntary unemployment
  2.                        
    1. Explain five importance of insurance to an economy. (10marks)
    2. On 1st march 2019, Ushindi traders had ksh 95,000 in hand and a bank overdraft of ksh 15,000. During the month, the following transactions took place.
      March 2: Bought stock in cash ksh 70,000.
      March 3: Cash sales banked, ksh 22,000
      March 9: Paid Kiprop a creditor ksh, 12,880 by cheque in full settlement of his account after deducting 8% cash discount.
      March 11: Paid salaries ksh 14,000 in cash.
      March 16: Received a cheque of ksh 40,200 from Sawanda after allowing him a cash discount of ksh 1,800.
      March 20: Hanifa, a debtor paid her account of ksh 55,000 by cheque less 10%cash discount.
      March 24: Withdraw 26,000 from bank for office use.
      March 27: Took ksh 7,000 cash to pay his brother’s medical bill.
      March 28: Deposited all the cash into bank except ksh 14,200
      Required: prepare a three-column cashbook and balance it off. (10 marks)
  3.                        
    1. Explain five sources of monopoly power. (10 marks)
    2. Explain the difference between partnerships and cooperative societies forms of business units. (10marks)
  4.                      
    1. Explain five reasons for continued existence of small firms in an economy.(10 marks)
    2. Outline five channels that can be appropriate for the distribution of imported machinery from Germany. (10marks)
  5.                                    
    1. Explain five reasons for government involvement in business. (10 marks)
    2. Explain five documents sent by the buyer to the seller in Home trade. (10marks)
  6.                                
    1. Businesses are currently employing new product promotional strategies as a way of boosting their sales volumes. Identify and explain four such strategies. (8marks)
    2. The following trial balance relates to the business of Kazi Nzuri Traders for the period ended 31st March 2016.

        KAZI NZURI TRADERS
      TRIAL BALANCE
      AS AT 31ST MARCH 2016
        Dr Cr
        Shs. Shs.
      General expenses 120,000  
      Rent expenses 46,000  
      Telephone expenses 20,000  
      Carriage inwards 28,000  
      Salaries 360,000  
      Sales   4,000,000
      Purchases 2,400,000  
      Discount received   36,000
      Sales returns 40,000  
      Motor vehicle 500,000  
      Debtors 300,000  
      Stock (1st April 2015) 200,000  
      Land and buildings 2,000,000  
      Cash at bank 120,000  
      Cash in hand 12,000  
      Capital   1,850,000
      Drawings 80,000  
      Creditors 240,000  
           
        6,226,000 6,226,000
      Additional information
      Stock as at 31st March 2016 was valued at ksh. 100,000
      Prepare:
      1. A Trading profit and loss (7marks)
      2. A Balance sheet (5marks)

MARKING SCHEME

  1.                                
    1. Explain five factors to consider when choosing an office equipment
      1. Cost; this refers the initial, maintenance and running cost of the equipment. Organization will choose an equipment they can afford based on amount of capital available.
      2. Adaptability; this is the ability of the equipment to cope with future changes and development. An organization will choose an equipment that will adjust to any future changes without becoming obsolete.
      3. Possibility of hiring rather than buying; one has to consider the cost and convenience of buying an equipment as opposed to hiring. If hiring is expensive than buying, then the organization will have to buy.
      4. Durability; this refers to the lifespan of equipment. The organization will acquire an equipment that will last long.
      5. Effect on staff morale; this refers to staff attitude towards the equipment. The organization will acquire an equipment that will motivate the staff to use. Staff members should be involved in deciding which equipment to acquire.
      6. Availability of complimentary resources; this refers accessories required in order to operate the equipment. i.e the availability of power, spare parts etc.
      7. Availability of manpower; this the personnel required to run and operate an equipment. A business should consider the availability and cost of skills required.
      8.  Availability of room; where the equipment will be kept safely.
      9. Security of the equipment; one has to consider whether the available resources are adequate to offer enough security for the equipment
    2. Explain the causes and remedies of the following types of unemployment.(10 marks)
      1. Seasonal unemployment; it is experienced whereby products loses demand and responsible labor force is laid off.
        Solution; introduction of variety of economic activities
      2. Structural unemployment; it occurs where jobs are available but one does not have the required skills to handle the jobs.
        Solution; provision of relevant education training opportunities to ensure necessary skills required by the labor market.
      3. Disguised unemployment; occurs where the number of people employed exceeds those that are required. The workers full capability is not completely utilized.
        Solution; initiating more projects that would create more jobs.
      4. Residual unemployment; occurs when the physically or mentally challenged members of population are not offered job opportunities by employers.
        Solution; ensuring the implementation of policy of affirmative action.
      5. Involuntary unemployment; it occurs where people are actively searching for job opportunities at any existing wage rate but couldn’t find.
        Solution; initiate economic activities that could spur economic growth to create more job opportunities.
  2.                                                
    1. Importance of insurance to an economy
      1. Creation of employment. Insurance provides employment to individuals as actuaries and sales persons.
      2. Creating confidence in investors. Compensation in the event of occurrence of loss encourages investors to invest in risky ventures.
      3. Revenue to the government. The government receives revenue from license fee and taxes from the insurance profits.
      4. Continuity of business. Business that could close down because of loss due to event of a risk will continue to operate because of compensation from the insurance companies.
      5. Spreads risks. Pooling of risks ensures that the few who suffer loss are indemnified.
      6. Encourages savings. Endowment assurance is a savings plan to the assured.
      7. Investments. The excess of the total premiums over claims can be invested by the insurance firms.
    2.                   Dr                                            Three column cash book                   Cr

      Date  details  l/f  D.A  Cash  bank  Date  Details  l/f D.R cash bank

      2019

      1/3

      Bal b/d     95000  

      2019

      1/3

      Bal b/d       15000
      3/3 sales       22000 2/3 purchases     70000  
      6/3 sawnda   1800   40200 9/3 kiprop   1120   12880
      20/3 Hanifa   5500   49500 11/3 salaries     14000  
      24/3 Bank c   26000   24/3 cash c     26000
        Cash       15800 27/3 Drawings     7000  
                  28/3 Bank     15800  
                  28/3 Bal c/d     14200 73620
            7300 121000 27500       1120 121000 127500
        Bal b/d     14200 73,620            
  3.                                      
    1. Explain five sources of monopoly power
      1. Ownership or control of strategic raw materials; the firm may therefore refuse to sell or allow access to raw materials by other firms to prevent competition thereby becoming a monopoly.
      2. Patent rights for a product or production process; the firm therefore denies potential competitors the technology or use of production process or technique. This patent right therefore gives the firm monopoly power.
      3. Large initial capital investment; the cost of establishing an efficient production plant in relation to the size of the market may be such that only one firm may be able to survive in the market as it may be the only firm capable of raising the funds.
      4. Size of the market; sometimes the size of the market may be such that it can only support one firm.
      5. Government protection; the government may set up a firm and gives it exclusive rights to produce and sell a particular good or service to the public at affordable prices. Such a firm is occasionally cushioned by the government from competition and occasionally get government subsidies.
      6. Mergers and acquisitions; a group of firms may decide to merge into one large firm by combining their operations. The new firm is able to enjoy numerous advantages arising from its large size.
    2. Difference between partnerships and cooperative societies

      Partnerships  Cooperative societies 
      Formed by a minimum of 2 partners Formed by a minimum of 10 members
      The maximum number of partners is 20 but can be 50 for professional partnerships The is no set maximum for the number of members to form the society
      Some partners have unlimited liabilities All members have limited liabilities
      The day-to-day management of the partnership is left to the active partners assisted by employed professionals The management of the society is an elected committee of 9 members who are assisted by employed professionals
      It can be dissolved due to retirement or exit of a general partner The retirement or exit of a member cannot lead to the dissolution of the society
      Formed through drafting of a partnership deed Formed through drafting of by-laws that are submitted to the commissioner of cooperatives for consideration
         
  4.                                      
    1. Reasons for continued existence of small firms in an economy.
      1. Need for personalized services such as hair cutting makes them to thrive.
      2. Flexibility. Small scale firms can be changed when need arises.
      3. Less capital requirement. They require relatively less capital to start and operate unlike large firms.
      4. Ease management. Small firms are easy to manage and control compared to large firms.
      5. To keep away from rigorous legal process associated with starting of large firms.
    2. Channels for distributing imported machinery from Germany (10marks)
      1. Foreign Manufactures → local Agent → local Wholesaler → local Retailer → Local consumer
      2. Foreign manufacture → local Wholesaler → local Retailer → Local consumer
      3. Foreign manufacturer → local Manufacturer’s representative → local wholesaler → local Retailer → Local consumer
      4. Foreign manufacturer → local Wholesaler → Local consumer
      5. Foreign manufacturer → local retailer →  Local consumer
      6. Foreign manufacturer → Local consumer
  5.                                    
    1. Explain five reasons for government involvement in business.
      1. To attract foreign investment by initiating major business projects
      2. To prevent foreign dominance of the economy by investing in areas where the locals are not able to.
      3. To provide goods and services which are too sensitive to be left in the hands of the private sector e g fire arms.
      4. To provide essential goods and services in areas where private individuals and organizations are unwilling to venture due low profits or/and high risks.
      5. To provide essential goods and services which private organizations are unable to provide due high initial capital required.
      6. To prevent exploitation of the public by private business persons especially in provision of goods and services like sugar, transport and communication
    2. Documents sent by the buyer to the seller in home trade.
      1. Letter of inquiry. A request by a prospective buyer for information about the goods dealt in by a seller.
      2. Order. List of goods a potential seller is required to supply the buyer with.
      3. Goods received note. Sent to inform the seller that goods sent have been received.
      4. Goods returned note. Sent to the seller to inform him/her that goods have been returned
      5. I owe you. Is a written acknowledgement of debt.
  6.                                    
    1. Trends in Product promotion
      1. Use of the social media/facebook/
      2. Event sponsoring
      3. Use of website/internet to advertise product worldwide, which has increased the coverage
      4. Encouraging gender sensitivity and awareness in product promotion to bring about gender balance
      5. Use of electronic billboards in advertisement to increase their visibility even at night
      6. Intensifying personal selling by the business to reach more customers
      7. Use of road shows- Development of promotion convoys to move from one place to the other with music and dancers to attract more prospective customers
      8. Catering for the rights of the youths when carrying out product promotion and even involving them in carrying out the promotion
      9. Catering for the interest of those with special needs when carrying out advertisement
      10. Advertisement through mobile phones by sending them s.m.s about the product
    2.                  
                                    
        KAZI NZURI TRADERS
      TRADING, PROFIT & LOSS ACCOUNT
      FOR THE PERIOD ENDED 31ST MARCH 2016  
      Cost of sales:                          Ksh.
      Opening stock                      200,000
      Add purchases     2,400,000
      Add carriage in.   28,000     2,428,000
      C.O.G.A.S                          2,628,000
      Less closing stock                 100,000
                                             1,528,000
      Gross profit c/f               1,332,000
                                           3,860,000
      General expenses               120,000
      Rent                                      46,000
      Telephone                              20,000
      Salaries                                360,000
      Net profit                             922,000
                                               1,468,000

                                                          Ksh.
      Sales                                       4,000,000
      Less returns inwards                      40,000
                                                    3,960,000                                         

      3,860,000
      Gross profit b/f                         1,432,000
      Discounts received                        36,000

                                          

                                                     1,468,000

       
        KAZI NZURI TRADERS
      BALANCE SHEET
      AS AT 31ST MARCH 2016

                                                    Ksh.
      Fixed Assets:
      Land & Buildings                2,000,000
      Motor vehicles                   400,000
                                          2,400,000
      Current Assets:           
      Stock               100,000
      Debtors            300,000
      Bank                120,000
      Cash              12,000                   532,000

                                2,932,000

                                                          Ksh.

      Capital                                      1,850,000
      Add Net profit                              922,000
      Less Drawings                              80,0000
                                                     2,692,000
      Short term Liabilities:
      Creditors                                    240,000 

                                                   

                                                     2,932,000


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