Business Studies Paper 2 Questions and Answers - Maranda Pre-Mock Examinations 2022

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    1. Explain five characteristics of human wants (10mks).
    2. Explain five sources of monopoly (10mks).
    1. Explain five services offered by wholesalers to consumers (10mks).
    2. The table below shows the supply of tomatoes in Njoro market for a period of six months.
      Price(shs) 120 120 120 120 120 120
      Quantity kg 900 1080 1270 1330 1407 1500
      Explain five Factors that may have led to the above trend (10mks)
    1. Explain five reasons why a trader in Mombasa would prefer to transport Goods to Nairobi by standard gauge railway instead of road (10mks)
    2. Explain five negative effects of inflation (10mks)
    1. Explain five reasons for a business preparing a business plan (10mks).
    2. Explain five importance of insurance in an economy (10mks)
    1. Explain five essentials of an effective warehouse (10mks)
    2. Journalise the following transactions which took place in the business of Wafula traders during the month of march 2019.
      Mar 5: purchased office furniture on credit for shs. 25,000 From Miugiza furniture Limited.
      Mar 10: A machine worth shs.60,000 was sold to Kisumu traders on credit
      Mar 15: an equipment worth shs. 80,000 was sold on credit to Bondo traders for sh. 90,000.
      Mar 20: Bought a new motor vehicle forsh. 800,000 from Explo motors limited. paying shs. 300,000 in cash and the balance was to be settled at later date.
    1. Explain five causes of unemployment in kenya (10mks).
      The following trial balance was extracted from the books of kamau traders as at June 2018.
      Kisumu traders
      Trial balance
      As at 30 June 2018.

        Dr.(shs.) Cr(shs.)
      premises  1,500,000  
      Debtors and creditors 20,000 30,000
      Cash at bank 90,000  
      Cash in hand 10,000  
      Purchases and sales  140,000  320,000
      Stock of goods on 1/7/2017 45,000  
      Discounts 11,000 2,000
      Salaries and wages  50,000  
      commissions 1,000 8,000
      Power and lighting 12,000  
      Returns 15,000 18,700
      Carriage inwards 5,400  
      Carriage outwards 2,300  
      Interest on loans 1,000  
      Furniture 27,000  
      Rent 1,000  
      Advertising 1000  
      Capital   1,553,000
      Total 1,931,700 1,931,700
      Additional information
      Closing stock on 30 June, 2018 was 22,000.
    2. Prepare Trading profit and loss account for the period ended on 30 June 2018.


      • They are insatiable - endless or unlimited
      • they vary in intensity and urgency - vary from one person to another or from one situation to another
      • they are competitive - they yearn for attention
      • they are recurrent / repetitive - they demand to be satisfied again and again
      • some are universal - they are common to all human beings
      • they are habtual
      • they are compimentary
      • where patent rights, copyrights, royalties belong to one person or firm, then that creates monopoly
      • control of an important input in production such as iron ore, then such a firm will enjoy monopoly
      • existence of internal economies of scale, whereby a firm reduces its production costs to a level that other firms cannot
      • additional cost by other firms such as transport costs, that may increase the price of commodities to a level that it becomes less attractive
      • financial factors - where initial capital is very high, it becomes difficult for other firms to enter
      • where a group of firms combine to act as one for the purpose of controlling output
      • restrictive practices such as limit pricing in order to drive away other firms
      • wholesalers ensures a steady supply of goods which inturn ensures consumers do not experience shortage
      • wholesalers ensure a steady supply of goods to the market which lead to stable prices hence consumers can plan expenditure
      • wholesalers make it possible for the customers to enjoy a variety of goods
      • creates the bulk thus enabling the consumer through the retailer to get goods in suitable quantities
      • give information to the consumer through the retailer about goods eg. changes in products
      • decrease in cost of procustion that led to firm acquiring large quantities of raw materials for production
      • availability of factors of production that lead to continuous production/ large scale production
      • use of modern technology that leas to faster and efficient production
      • reduced taxes on factors of production that made production cheaper
      • provision of subsidies that lead to reduced cost of production
      • favourable weather conditions that led to continued increase in yields
      • entry of new firms into the industry that lead to overal increase in production
      • future expectation of decrease in price of commodity
      • trader can plan transportation of goods because it follows strict time schedules
      • is faster hence the trader will save on time
      • has large carrying capacity which can accommodate large/bulk of goods at once
      • is relatively secure as cases of theft and accidents are rare
      • economised for transporting heavy and bulky goods over long distance
      • reduction in profits due to reduces sales volume
      • wastage of time - consumers and firms waste a lot of time shopping around for reasonable prices
      • conflicts between employees and employers because employees demand high salaries while employers are reluctant leading to strikes
      • decline in standards of living due to reduced purchasing power of money/cannot afford a variety
      • loss to creditors - creditor receives the money in future when it had lost value
      • retardation of economic growth since the investors are not expanding production activities/take risks
      • adverse effects on the balance of payment becasue exports become expensive decreasing demand relative to imports      
      • avoiding mistake - by identifying the mistakes and correcting it in the plan
      • identifying strength and weakness whereby remedial action action is taken for the weakness
      • reuirement by firm workers for purpose of convencing the lenders
      • determining of the amount of finance required to fund the various business activities
      • allocation of resources - to ensure resources are neither under utilised of used for the wrong purposes 
      • Adaptability - provide room to accommodate any future changes
      • As a motivating factor - it stimulates efforts of works in achieving the set objectives
      • employment creation - for insurance companies have employed drivers, managers, clerks
      • is source revenue to the government - employees of insurance companies pay taxes to government from salary
      • ensures continuity of business by compensating the insured after suffering a loss
      • spread of risks through creation of common pool from which the few who suffer loss are compensated
      • encourages savings for example whole life policies
      • promote investments - insurance company invests surplus funds in real estate
      • compliance with law to avoid lawsuit
      • proper recording system - to monitor movement of goods
      • well trained staff - for proper management and efficient
      • adequate space - to allow easy movement/accommodation of goods
      • good communication - for easy contact
      • proper building design - accommodates the intended goods
      • good transport system - facilitates faster movement goods
      • appropriate equipment - eg fork lifts for easy operation
    2. General journal
      Date  Participants LF Dr(shs) Cr(shs)
      2019 Mar 5

      office furniture 
      miugiza furniture ltd
      (being a purchase of office furniture on credit)
      1 25000


      Kisumu traders 
      Machine A/c 
      (being a sale of machine on credit)

      Bondo traders 
      Equipment A/c 
      Gin on disposal
      (being a sale of equipment on credit at gain) 

      10000rapid population growth where labour force entering market is higher than the job opportunities created
      20 new motor vehicle 
      explo motors ltd 
      being a purchase of new motor vehicle partly cash partly credit


      • rapid population growth where labour force entering market is higher than the job opportunities created
      • inadequate co-operent factor inputs that limit the scale of firms operation and expansion jobs
      • use of inappropriate technology. use of capital intensive limit/reduce job opportunities
      • inappropriate education system that equip learners with skills/knowledge that is outdated
      • seasonality in production that leads to unemployment during off peak season
      • rural-urban migration that lead to urban unemployment
    2. Kaman traders 
      Trading, profit and loss
      For the period ended 30th June 2018

                                          sh                  sh
      opening stock                                45000
      pruchases               140000
      + carriage inward     5400
      - retuen                   18700          123700
      G.A.F.S                                       171700
      less closing stock                         22000
      cost of sales                               149700
      gross profit                                 155300
      expenses                   shs
      disc. allowed           11000
      salaries/wages        50000
      comm allowed          1000
      power&lighting        12000 

      carriage outwards   2300
      interest on loans      1000
      rent                          1000
      advertising              1000
      net profit c/d          86000  

      sales            320000
      less retuens  15000

      gross profit b/d          155300
      add disc received        2000
      commission received   8000

      net profit b/d             86000
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