Business Studies Paper 2 Questions and Answers - Bunamfan Cluster Pre Mock Exam 2022

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INSTRUCTIONS TO CANDIDATES

  • Answer ANY five questions from this paper.

Questions

  1.       
    1. Explain five ways in which the internal environment may contribute to the success of a business enterprise. (10 marks)
    2. Highlight five channels of distribution that a Kenyan manufacturer would use to ensure their goods reach consumers in another country. (10 marks)
  2.  
    1. Some developed countries have a huge population made of ageing persons. Explain five problems this situation could present to such countries. (10 marks)
    2. The following information was obtained from the Books of Muthaura traders,
      Sales           Kshs. 270,000
      Margin                        40%
      Turnover                6 times
      Expenses    Kshs, 40,000
      From the above information,
      Calculate:-
      1. Gross profit (3 marks)
      2. Cost of goods sold (2 marks)
      3. Average stock (3 marks)
      4. Net profit (2 marks)
  3.       
    1. Describe five accounting documents used in home trade. (10 marks)
    2. Explain five demerits a country may suffer when the Government becomes a major investor in business (10 marks)
  4.     
    1. Explain five challenges that may be experienced by a new entrepreneur intending to start a business in Kenya. (10 marks)
    2. Explain five reasons why per capita income is not an indicator of a better living standard in a country. (10 marks)
  5.   
    1. Outline five merits of Indirect taxes (10marks)
    2. Explain five problems that the insurance industry is facing in Kenya today. (10 marks)
  6.     
    1. There has been a decline in the demand for bananas in a certain market.
      Explain five factors that may have caused this trend (10 marks)
    2. On 1st January 2021, Tom Owino Traders had Kshs. 6520 cash and Kshs. 9847 at the Bank.
      During the month, the following transactions took place;
      January  
      2 Paid transport by cheque shs. 2,000
      3 Issued a Cheque to AFC settling an invoice for shs. 10,000 deducting 2% cash cash discount
      4 Sold goods for cash shs. 4,000 less 2% cash discount
      5 Banked shs. 1,000
      6 Received a Cheque from Kamau shs. 2,500 less 2% cash discount
      8 Paid Water bill in cash shs. 590
      9 Withdrew cash from Bank for Office use shs. 800
      10 Received a Cheque of shs. 5,000 from a debtor less 5% cash discount
      11 Received cash of shs. 900 from John and gave a cash discount of 2%.
      12 Banked all the cash except shs. 100
      Required: Prepare a duly balanced three column Cash Book (10 marks)

Marking Scheme

  1.        
    1. Explain five ways in which the internal environment may contribute to the success of a business enterprise. (10 marks)
      • A functional business structure. Formal arrangement of functions and the relationships of people that is directed towards achievement of organizational goals.
      • Employment of qualified, skilled and experienced personnel. When the correct labour force is acquired and correctly matched to their jobs, then performance is enhanced.
      • Proportionate allocation of financial resources. The business finances are allocated to activities based on percentage contribution to the organization’s success.
      • Access to relevant physical resources like buildings, machinery, furniture and other equipment to complement human effort.
      • Appropriate technology. Effective methods of production boosts the quantity and quality of output.
      • Positive business culture. Productivity is enhanced when culture matches the expectations, beliefs and values of the staff.
      • Realistic objectives. Setting objectives that are simple, measurable, achievable and specific.
    2. Highlight Five channels of distribution that a Kenyan manufacturer would use to ensure their goods reach consumers in another country. (10 marks)
      Kenyan Manufacturer Wholesaler
      (foreign)
      Retailer
      (foreign)
      Consumer
      (foreign)
         
      Kenyan Manufacturer Import
      Agent
      Retailer Consumer    
      Kenyan Manufacturer Manufacture’s
      Agent  in the
      foreign Country
      Consumer        
      Kenyan Manufacturer Manufacturer’s Representative Retailer Consumer    
      Kenyan Manufacturer Foreign
      Consumer
                 
      Kenyan Manufacturer Manufacturer’s Representative Wholesaler Retailer Consumer
      Kenyan Manufacturer Retailer
      (foreign)
      Consumer
      (foreign)
             
  2.           
    1. Some developed countries have huge population made of ageing persons. Explain five problems this situation could present to such countries. (10 marks)
      • Provides a less mobile labour force/old people display rigidity.
      • There will be lack of the input of more energetic youth & thus society will be less progressive.
      • There will be low labour supply.
      • They suffer loss of job opportunity because of decline in the demand for goods used by the youth.
      • Due to high levels of dependency, savings and investment are affected negatively.
      • They lack creativity and innovativeness.
    2. The following information was obtained from the books Muthaura.
      • Sales shs. 270000
        Margin 40%
        Turnover 6 times
        Expenses shs. 40000
        From the above information, calculate;
        1. Gross profit
          Margin =     GP             40    =         GP      
                          Sales          100          270,000
            5GP   =   540,000
             5                 5
          GP= 180,000 (3 marks)
        2. COS
          COS = Sales – GP
          COS = 270,000 – 180,000
          = 90,000 (2 marks)
        3. Average Stock
          ROSTO = COS/ Average Stock
            6  90,000 
          1             x
          6x = 90,000
          x = 15,000 (3 marks)
        4. Net Profit
          180,000 – 40,000 = 140,000 (2 marks)
  3.         
    1. Describe any five accounting documents used in home trade. (10 marks)
      1. Invoice – shows details of goods supplied on credit. Demands for payment.
      2. Debit note – Used to correct an undercharge
      3. Credit note – used to correct an overcharge.
      4. Receipt – it acknowledges payment.
      5. Statement of account- shows details of transactions for the month as well as the running balance.
      6. Consignment note- shows carriage charges.
    2. Five demerits a country suffers when a country becomes a major investor in business. (10 marks)
      1. Political interference in appointing Managerial positions
      2. It may scare away private investors
      3. Tax payers suffer in cases of losses in such businesses.
      4. Heavy investments in terms of training Personnel and the equipment.
      5. Poor controls may lead to corruption and embezzlement of funds.
  4.   
    1. Explain five challenges that may be experienced by a new entrepreneur intending to start a business in Kenya. (10 marks)
      1. Small capital – there are limited sources of raising capital.
      2. Lack of managerial skills – have limited skills in regard to business management, thus they may not be able to differentiate between capital and profits.
      3. Lack of continuity – the business is not a going concern in the sense that it ceases to exist as soon as the owner dies.
      4. Poor choice of business enterprises – the owner lacks the skills to choose a viable project/ investment.
      5. Lack of division of labour – the size and the mode of business ownership denies the benefit of division of labour and specialization.
    2. Explain five reasons why a high per capita income is not an indicator of better living standard in a country. (10 marks)
      1. Statistical problems – the collection of data of the national income may be inaccurate meaning that the national figures may be inaccurate hence wrong per capita income.
      2. Change in the value of money- if the currency has been devalued, for example, there can be change in the value of money without necessarily representing any changes in the welfare of people.
      3. Income distribution – although per capita income may be high, there is need to consider who has what share of the “national cake”. If the national cake is in the lands of a few, then we cannot say that people’s welfare has improved
      4. Nature of products – if the products are not meant to satisfy immediate wants of the people, then an increase in per capita income may not lead to a higher economic welfare.
      5. People’s hard work and sacrifice- increased national income may mean less sleep and worries. People don’t have time to enjoy what they produce and their welfare may be low despite the rise in national income.
      6. Social costs – e.g. some people may migrate from rural to urban areas straining family relationships, while an increase in industries may create pollution, congestion and other environmental disruptions. Such development may make the average citizen worse off than was before the increase in per capita income.
  5.  
    1. Five merits of direct taxes (10marks)
      1. Economical in collection
      2. Tax revenue is certain
      3. Fairness in contribution of tax
      4. Does not affect the prices of goods and services
      5. Brings re-distribution of wealth
      6. The society is conscious
      7. It is simple to understand
      8. The tax is desirable
      9. It is flexible
    2. Explain five problems that the insurance industry is facing in Kenya today. (10 marks)
      1. High levels of competition due to presence of many insurance companies in the country.
      2. Low income levels among the citizens, hence many people do not take insurance policies.
      3. Lack of information by potential clients on the insurance industry.
      4. High levels of motor vehicle accidents have made some insurance companies to close down as a result of large number of claims.
      5. Poor management due to lack of managerial skills have made a number of locally owned insurance companies to collapse.
      6. High awards given b the courts as compensation for loss of life in the motor industry has led to collapse of many insurance firms.
      7. Insurance companies are at times made to pay large amounts on bogus claims arising from motor accidents.
  6.   
    1. Five factors that may have caused a decline in the demand for Bananas (10 marks)
      1. Increase in the Price of Bananas
      2. Decrease in the level of consumers income
      3. Decrease in the price of substitute products
      4. A negative Change in the tastes and preference of consumers
      5. Poor terms of Sale
      6. Future expectation of a fall in price of bananas
      7. Low distribution of income among consumers.
    2.     
      Date Details F D. All Cash Bank   Date Details F D. Rcd Cash Bank
      1/1/2020 Bal b/d     6520 9847   2/1 Transport     2000  
      4/1 Sales   80 3920     3/1 AFC   200   9800
      5/1  Cash  C1     1000   5/1  Bank C1   1000  
      6/1 Kamau   50   2450   7/1 Salary     500  
      9/1 Bank C2   800     8/1 Water     590  
      10/1 Debtors   250   4750   9/1 Cash C2     800
      11/1 John   18 882     12/1 Bank C3   9932  
      12/1 Cash C3     9932              
                    13/1 Bal c/d     100 15379
            398 12 122 25 979         200 12 122 25 979

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