Business Studies Paper 2 Questions and Answers - Joint Pre-Mock Exams 2021/2022

INSTRUCTIONS TO CANDIDATES.

• This paper consist of six questions with section a and b.
• Answer only five questions, both a and b in the writing material provided.

1.  
   1. There has been rapid rate of unemployment over the years in Kenya. Explain five measures the government may put in place to curb this trend. (10 marks)
   2. Explain five uses of national income statistics ( 10 marks)
2.  
   1. Explain five benefits a country may get by locating industries in different parts of the country (10 marks)
   2. Explain five differences between shares and debentures (10 marks)
3.  
   1. Explain five principles that guide operation of insurance companies in Kenya.   (10 marks)
   2. Explain five roles played by non-governmental organizations( NGOs) in protecting consumers (10 marks)
4.  
   1. Explain five factors a business should consider while deciding on the office machine to buy (10 marks)
   2. The following information was extracted from the books of Bondo retailers in December 2019.
      Dec 2: Bought a computer worth sh.10, 000 on credit from digital traders.
      Dec 5: Bought office furniture worth sh. 5,000 on credit from office suppliers limited.
      Dec 11: Settled a debt owed to Kamau, a creditor by giving up stock worth sh. 6,000
      Dec 15: Sold a printer worth sh.15,500 for sh 18,000 to Kiamaiko ltd on credit
      Dec 23: Settled a debt of sh 200,000 owed to a creditor Omoka by giving up a motor vehicle Worth the same amount
      Dec 25. Sold an old set of chairs for sh 53,000 to Milele traders
      Dec 27: Sold a motor vehicle worth sh 87,000 for sh 80,000 on credit to Gitau
      Dec 30: realized that goods worth sh 10000 sold on credit to Muasya had been recorded in The books of account as sh 1000
      Record the information in the relevant book of original entry (10 marks)
5.  
   1. Explain five benefits a trader may enjoy by operating a unit shop (10 marks).
   2. Explain five reasons why the demand curve for second hand clothes may shift to the left (10 marks)
6.  
   1. Explain five circumstances under which a business may decide to offer its customers after sale services
      (10 marks).
   2. On 1^st May 2020, ,Kihenjo ltd had cash in hand sh.178,000 and a bank overdraft of shs.23,400.
      During the month, the following transactions took place:
      May 3: Cash sales sh 16,500 paid direct into the bank.
      May 4: Bought goods for sh.15,000 and paid by cheque.
      May 6: Cash sales sh.50, 000.
      May 9: Received a cheque for Sh.76, 500 from Mwikali in full settlement of her debts.
      May 13: Paid insurance premium sh.16,000 in cash.
      May 14: Paid Otieno by cheque Sh.9,700 in full settlement of his account having deducted 3% cash discount.
      May 21: Withdrew Sh 30,000 from bank for office use.
      May 23: Received a cheque of sh 23,750 from Kimani in full settlement of his account less 5% cash discount.
      May 25: Paid wages of shs. 20,000 in cash.
      May 26: Cheque received from Mwikali was dishonored, the bank charged sh 350.
      May 30: Banked all cash except Sh 3,000.
      Prepare a three-column cash book duly balanced. (10 marks)

MARKING SCHEME

1.  
   1. There has been rapid rate of unemployment over the years in Kenya. Explain five measures the government may put in place to curb this trend. (10 marks)
      
      • Diversification of economic activities/establish different industries
        
      • Population control/encourage family planning-
        
      • Adopt relevant education system- to impart relevant skills
        
      • Encourage efficient exploitation and use of locally available resources
        
      • Partnering with private sector to create employment
        
      • Adopt policies that encourage use of labour intensive production methods
        
      • Availing investment funds eg through youth fund to start income generating activities.
        
      • Encourage rural development-to reduce rural-urban migration
        (5x2=10mks)
   2. Explain five uses of national income statistics ( 10 marks)
      
      • To measure a country’s economic performance over time/economic growth-a period of higher national income is
      • considered economically better.
        
      • To compare standards of living of different countries-countries with higher national income figures are
      • considered to have better standards of living.
        
      • Assisting the government in planning the economy-know where to allocate more resources.
        
      • As an indicator of a c ountry’s standards of living-increase in national income implies improvement in standards of living.
      • Making investment decisions-provides information about progressing and declining sectors of the economy for investment decisions.
        
      • Assessing distribution of wealth/assessing disparities in income distribution.
        (5x2=10mks)
2.  
   1. Explain five benefits a country may get by locating industries in different parts of the country (10 marks)
      • Enhance regional balance in development
      • Help reduce rural-urban migration
      • Reduces effects of attacks by enemies
      • Facilitate exploitation of resources in different parts of the country
      • Reduced concentration of pollution
      • Infrastructural development in many parts
      • Employment creation in different parts of the country
        (5x2=10mks)
   2. Explain five differences between shares and debentures (10 marks)
      

      Shares	Debentures
      They form unit of capital for a company	They represent liability ( loan) for a company
      Shareholders earn dividends	Debenture holders earn interest
      Shareholders have voting rights	Debenture holders have no voting rights
      They are paid last during liquidation of the company	They are paid first during liquidation of the company
      Represent capital owned	Represent borrowed capital
      Shareholders are owners to the company	Debenture holders are creditors to the company
      Are not convertible to debentures	Are convertible into shares

      (5x2=10mks)
3.  
   1. Explain five principles that guide operation of insurance companies in Kenya.    (10 marks)
      • Utmost good faith-The insured should disclose all material facts about the property or life being insured
      • Indemnity-The insured should be restored back to their initial financial position they were in immediately before occurrence of the insured risk
      • Proximate cause-There must be a very close relationship between the cause of the loss and the insured risk
      • Subrogation-After total loss and full compensation ,the remains of the insured property belongs to the insurance company
      • Contribution-Incase of double insurance, upon occurence of the insured risk, the insurance companies should contribute proportionately to compensate the insured
      • Insurable interest-One should only insure property that he/she stands to suffer direct financial loss upon occurrence of the insured risk.
        (5x2=10mks)
   2. Explain five roles played by non-governmental organizations ( NGOs) in protecting consumers (10 marks)
      • Accelerate consumer awareness/ educating consumers on their rights-Through seminars, brochures
      • Filing law suits on behalf of consumers
      • Organise protest against adulteration of products, hoarding, underweight products
      • Help the educational institutions in preparation of courses of study to ensure they have a concept of consumer protection
      • Collect data on different products and test products to determine authenticity and research on consumer problems
        (5x2=10mks)
4.  
   1. Explain five factors a business should consider while deciding on the office machine to buy (10 marks)
      • Availability of space for storage
      • Availability of spare parts
      • Cost of the equipment
      • Possibility of hiring rather than buying
      • Effects of the equipment on staff morale
      • Adaptability of the machine too future changes
      • Security of the machine
      • Durability of the machine
        (5x2=10mks)
   2. The following information was extracted from the books of Bondo retailers in December 2019.
      Dec 2: Bought a computer worth sh.10, 000 on credit from digital traders.
      Dec 5: Bought office furniture worth sh. 5,000 on credit from office suppliers limited.
      Dec 11: Settled a debt owed to Kamau, a creditor by giving up stock worth sh. 6,000
      Dec 15: Sold a printer worth sh.15,500 for sh 18,000 to Kiamaiko ltd on credit
      Dec 23: Settled a debt of sh 200,000 owed to a creditor Omoka by giving up a motor vehicle Worth the same amount
      Dec 25. Sold an old set of chairs for sh 53,000 to Milele traders
      Dec 27: Sold a motor vehicle worth sh 87,000 for sh 80,000 on credit to Gitau
      Dec 30: realized that goods worth sh 10000 sold on credit to Muasya had been recorded in The books of account as sh 1000
      Record the information in the relevant book of original entry (10 marks)
                                                                           Bondo traders
                                                                           General journal
      

      Date  2019 Dec 2 Dec 5 Dec 11 Dec 15 Dec 23 Dec 25 Dec 27 Dec 30

      Details  office equipment a/c digital traders a/c Being a record of purchase of a computer on credit from digital traders Furniture a/c office supplies a/c Being a record of purchase of office furniture on credit from Office supplies ltd Kamau a/c Stock a/c To record settlement of a debt owed to Kamau through stock Kiamaiko ltd a/c Office equipment a/c Gain on disposal a/c To record sale of a printer at a gain to Kiamaiko ltd at a gain Omoka a/c Motor vehicle a/c Being a record of settlement of a debt through a motor vehicle Milele a/c Furniture a/c Being a record of sale of chairs on credit Gitau a/c Loss on disposal a/c Motor vehicle a/c Being a record of sale of a motor vehicle on credit at a gain Muasya a/c Sales a/c Being a correction of wrong recording of sale of stock on credit

      L.F

      Dr(sh) ✓10000  ✓5000   ✓ 6000   ✓18000  ✓200000     ✓53000   ✓80000 ✓7000       ✓ 9000

      Cr(sh)     ✓10000     ✓5000    ✓6000 ✓15500 ✓2500   ✓200,000    ✓53000     ✓87000         ✓9000

      ( 20x0.5=10)
5.  
   1. Explain five benefits a trader may enjoy by operating a unit shop (10 marks).
      • May have loyal group oof customers
      • The trader get close contact with the customers
      • Minimal operating cost since the owner can get assistance from family members
      • May have more sales since the trader may provide credit facilities to trustworthy customers
      • Easy to start with only a trading license required
      • The owner can stock goods from different manufacturers
        (5x2=10mks)
   2. Explain five reasons why the demand curve for second hand clothes may shift to the left (10 marks)
      • Change in consumers tastes/preferences in favour of second hand clothes
      • Increase in consumers disposable income-improve their purchasing power
      • Favourable terms of sale for second hand clothes eg discounts, attractive packaging
      • Increase in population-Increasing the market for the second hand clothes
      • Decrease in indirect taxes on second hand clothes-make the clothes more affordable
        ( 5x2=10mks)
6.  
   1. Explain five circumstances under which a business may decide to offer its customers after sale services (10 marks).
      • Where there is need to increase sales, by encouraging repeat purchase
      • When there is need to create customer loyalty-retain customers
      • When there is need to have competitive advantage-use it against your competitor, give the business/product unique selling proposition
      • When there is need to make customers trust the particular brand-give guarantee
      • When there is need to build and retain a relationship with the customers eg loyalty program
        ( 5x2=10mks)
   2. On 1^st May 2020,,Kihenjo ltd had cash in hand sh.178,000 and a bank overdraft of shs.23,400.
      During the month, the following transactions took place:
      May 3: Cash sales sh 16,500 paid direct into the bank.
      May 4: Bought goods for sh.15,000 and paid by cheque.
      May 6: Cash sales sh.50, 000.
      May 9: Received a cheque for Sh.76, 500 from Mwikali in full settlement of her debts.
      May 13: Paid insurance premium sh.16,000 in cash.
      May 14: Paid Otieno Sh.9,700 by cheque in full settlement of his account having deducted 3% cash discount.
      May 21: Withdrew Sh 30,000 from bank for office use.
      May 23: Received a cheque of sh 23,750 from Kimani in full settlement of his account less 5% cash discount.
      May 25: Paid wages of shs. 20,000 in cash.
      May 26: Cheque received from Mwikali was dishonored, the bank charged sh 350.
      May 30:Banked all cash except Sh 3,000.
      Prepare a three-column cash book duly balanced. (10 marks)
        DR                                                                                                                                                                        CR

      DATE	DETAILS	LF	DISC ALL SH	CASH  SH	BANK SH		DATE	DETAILS	LF	DISC REC SH	CASH SH	BANK   SH
      2020   May     1	Balance	b/d		178,000			2020   May     1	Balance	b/d			23,400
      3	Sales				16500		4	Purchasesd				15,000
      6	Sales			50,000			13	Insuarnce			16,000
      9	Mwikali				76,500		14	Otieno		291		9409
      21	Bank	C		30,000			21	Cash	C			30000
      23	Kimani		1250		29750		25	Wages			20,000
      30	Cash	C			219000		26	Mwikali				76500
      							26	Bank charges				350
      							30	Bank	C		219,000
      							31	balance	c/d		3,000	181091
      31	balance	b/d		258000  3000	335750  181091						25800	335750