Business Studies Paper 2 Questions and Answers - Sunrise Pre Mock Exams 2023

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INSTRUCTIONS TO THE CANDIDATES

Answer any five questions.
All questions carry equal marks.

1. Explain FIVE importance of a business plan to an entrepreneur. (10mks)
2. Explain FIVE sources of monopoly power. (10mks)
1. Explain FIVE measures to undertake in order to increase efficiency of warehouse. (10mks)
2. Explain five limitations of barter trade that led to the evolution of money. (10mks)
1. Explain FIVE reasons why Omwami would choose to start as sole proprietorship other than joining a Public Limited Company. (10mks)
2. Optimist Investment operates a wholesale business and the following information relates to various transactions during the month of Jan, 2023.
  Jan 3 sold goods on credit to Anyimba sh 60,000
  8 purchased goods on credit from Mjuaji stores sh 120,000
  12 returned goods bought on credit from Mjuaji stores sh 6,000
  16 purchased goods on credit from Mjuaji stores sh 160, 000
  22 sold goods on credit to Mafala retailers sh 150,000
  23 bought a new motor vehicle from Mashariki motors worth sh 3,200,000 on credit
  24 Anyimba returned goods worth sh 10,000 to the business
  29 sold equipment worth sh 840,000 on credit to Chap Chap limited.
  Record these transactions into Optimist investment books of original entry. (10mks)
1. Explain five advantages of using direct taxes to collect revenue in a country. (10mks)
2. Explain five importance of filing documents in an organization. (10mks)
1. Explain FIVE reasons for the existence of small firms despite competition from large scale firms
2. Describe the procedure of obtaining an insurance claim. (10mks)

Explain FIVE ways in which the government may positively influence that attract business activities to a given area. (10mks)

The following trial balance was extracted from books of A bass stockists as at 31^st December 2015. (10mks)

Details	Dr shs	Cr shs
Openinig stock	30,000
Purchases	275,000
Sales		390,000
Debtors	47,000
Commission received		36,000
Return inwards	10,000
Return outwards		6,000
Carriage inwards	16,000
Carriage outwards	8,000
Advertising	3,000
Salaries	19,000
Rates	12,000
Premises	450,000
Machinery	180,000
Loan		210,000
Insurance	20,000
Discounts	5,000
Drawings	25,000
Cash	40,000
Bank	250,000
Creditors		52,000
Capital		689,000
	1,390,000	1,390,000

Additional information;
Closing stock – shs. 50,000
Required: Prepare Abass stockist trading profit and loss account for the period ended 31/12/2015

MARKING SCHEME

1. Explain FIVE importance of a business plan to an entrepreneur (10mks )
  1. Enables the entrepreneur to avoid mistakes that would hinder the growth of the business.
  2. Enables proper allocation of resources for maximum production.
  3. It motivates employees to work towards the set objectives.
  4. Assists the entrepreneur to acquire financial assistance (capital/finance) from financial institutions if the business is viable/promising
  5. Enables the management to know the amount of capital needed to avoid crisis
  6. Enables the business to adopt changes in the economy without affecting the business negatively
  7. Enable the management to evaluate the strengths and weaknesses of the business in order to take appropriate measures
  8. It is used as a project tool to guide management decisions.
  9. It increases efficiency of the business since all activities/rols are clearly defined
2. Explain FIVE sources of monopoly power (10 mrks)
  1. Ownership of(strategic) factors of production/inputs hence control of supply of an important factor of production
  2. Ownership of production techniques that other firms do not have.
  3. large capital requirements which prevents other firms from entering the market
  4. Small size of the market hence can only be served/supplied profitably by one firm.
  5. Government restrictions which prevents other firms from joining the industry.
  6. Merging of firms/amalgamations into a single firm.
  7. A firm engaging in restrictive practices to stop other firms from entering the markets or force other firms to leave eg lowering of its prices.
1. Explain five measures to undertake in order to increase efficiency of warehouse. (10mks)
  1. Ensure proper /adequate /good handling equipment to handle goods well/ easily.
  2. Install safety equipment/facilities to safeguard goods against damage/ pests/ water leaks.
  3. Ensure proper inventory system control/ proper record keeping to monitor inflow/ outflow of goods.
  4. Ensure adequate space to allow easy movement by personnel/ to accommodate all the goods available for storage.
  5. Hiring qualified /skilled /trained personnel to assist in goods handling /care of the goods.
  6. Enhance security to avoid theft of the goods /ensure safety of workers/personnel.
  7. Ensure compliance with the law to avoid conflicts with the authorities/government/law enforcers who may stop/halt its activities /for smooth operation.
  8. Provide sufficient loading and offloading facilities to minimize congestion/delays/ breakages.
  9. Ensure adequate communication facilities for effective/ easy contact with clients/ suppliers.
  10. Ensure proper / appropriate buildings to suit /match the type of goods to be stored.
  11. Ensure linkage to good/ appropriate /efficient/ reliable transport network system to facilitate easy movement of goods in and out of the warehouse.
  12. Ensure adequate/ appropriate storage facilities so that goods do not get spoilt.
  13. Ensure it’s suitably/ conveniently located for easy access by clients.
  14. Ensure clear operational procedures and guidelines for smooth operation.
2. Explain five limitations of barter trade that led to the evolution of money. (10marks)
  1. Requires double coincidence of wants i.e.-s there must be somebody who has exactly what you want and he wants what you have/where is difficult to come by.
  2. Barter trade) lacks a standard measure of value. -It is difficult to determine how much of a commodity to be exchanged for another.
  3. Indivisibility of some commodities.- Some commodities could not be divided into smaller units without losing value e.g. a goat cannot be divided without killing it.
  4. Perishability of commodities. -Some commodities cannot be stored for a long period (to be used in future exchanges) without them going bad.
  5. Inconvenience in transporting some good/bulky/heavy.- Some commodities are difficult/expensive to carry (from one place to another looking for a trading partner)
  6. Lack of standard measure for deferred payment.-When payment was to be made in future, use of goods and services for the payment was difficult because by the time the person is paid, either the value of the commodity or his needs would have changed/due to change in value of goods.
  7. Lack of unit of account. -It is difficult to calculate/keep records of values of different commodities. (Any 5 x 2 = 10 marks)

Explain five reasons why Omwami would choose to start as sole proprietorship other than joining a Public Limited Company. (10mks)
1. In sole proprietorship Omwami would enjoy all the profits alone.
2. He can get assistance from family members in managing the business.
3. It is easy in dissolve compared to public company.
4. Omwami can produce/sell anything of his choice unlike PLG which is regulated / flexibility.
5. Faster decision making
6. He keeps the secrets of the business.
7. To retain independence

OPTIMIST INVESTMENT
Sales Journal

Date	Details	Amount
		Sh.
3/5/2010 22/5/2010	Anyimba Mafala retailers Total posted to sale a/c	60,000√ 150,000√ 210,000√

Purchases Journal

Date	Details	Amount
		Sh.
8/5/2010 16/5/2010	Mjuaji stores Mjuaji stores Total posted to purchases a/c	120,000√ 160,000√ 280,000√

Purchases returns Journal

Date	Details	Amount
		Sh.
12/5/2010	Mjuaji stores Total posted to purchases returns a/c	6,000 6,000√

Sales returns Journal

Date	Details	Amount
		Sh.
24/5/2010	Anyimba Total posted to sales returns a/c	10,000 10,000√

General Journal

Date	Details	DR	CR
		Sh.
25/5/2010 29/5/2010	Motor vehicle a/c Mashiriki motor a/c To record purchase of motor vehicle on credit.√ Chap chap limited a/c Equipment a/c To record sale of √equipment on credit	3,200,000√√ 840,000√	3,200,000√√ 840,000√√

20 @ ½ = 10mks

1. 1. They are progressive / equitable any five (10mks)
  2. The poor are exempted
  3. It is certain
  4. It is convenient i.e. tax collected at time of earning
  5. Guarantees fair redistribution of wealth
  6. Creates sense of citizenship
  7. Economical in terms of collection
  8. It is elastic / flexible
  9. It is desirable i.e. only affects disposable income and not prices
2. Importance of filling documents in an organization. (10mks)
  - Easy retrieval of documents
  - Keeps office very tidy
  - Safety of documents
  - Documents are kept neat
  - Documents are kept away from unauthorized persons
  - Space is well utilized.
  - Information for future reference is kept.
  - Filed documents are used as evidence in case of disputes.
1. - Lack of enough money for expansion
  - Little/ small markets
  - Need for personalized services
  - Fear of incurring increased costs
  - To avoid risks that are associated with large – scale business
  - Nature of goods
  - For ease of management
  - Flexibility
  - Need to maintain close control (owner wants to control)
  - To avoid the many legal procedures (10mks)
2. Describe the procedure of obtaining an insurance claim. (10mks)
  1. Filling a proposal firm
    - The person intending to take insurance policy fills in a proposal form. The applicant fills relevant / material facts on the subject matter of insurance.
  2. Determining the premium to be paid
    - The premium to be paid is determined depending on the value of the property and the type of risk to be covered.
  3. Payment of the first premium
    - After the insurance company has accepted to cover the risk and premiums are calculated and the insurer pays the first premium.
  4. Issuing of cover note (binder)
    - The insured is issued with temporal policy which is valid for 30 days within which the policy would be issued.
  5. Issuing of policy
    - This is the contractual document between the insurer and the insured and it contains the terms and conditions of the insurance cover. Once issued it replaces the cover note and the policy becomes operational.

Explain five measures put in place by the government to bring order in road transport sector in Kenya today. (10mks)
1. Speed governors – used to check on over speeding on our roads which causes accidents.
2. Use of alcoblows – to check/detect and prevent driving of vehicles by drunk drivers.
3. Certificate of good conduct – carried out to make sure that those involved in road transport are of good conduct especially drivers and touts.
4. Inspection of vehicle – done to make sure that only road worthy vehicles are allowed in Kenyan roads.
5. Carrying capacity – the government usually determine the carrying capacity of vehicle both passengers and cargo carrying vehicles to avoid road damage and accidents.
6. Vetting of drivers to ascertain that the genuity of their driving licences.
7. Designating routes for PSV.
8. Uniform for drivers and touts/conductors.
9. All PSV vehicles should have the yellow line.
10. All PSV vehicles to join matatu SACCO.
11. Use the cashless means of payment.

Abass stockists
Trading, profit and loss a/c
For period ended 31^st Dec 2015
Dr Cr

Opening stock 30,000
Add purchases 275,000
Add carriage in 16,000
Less returns ou 6,000 285,000
G.A.F.S 315,000
Less closing stock 50,000
C.O.Gs 265,000
Gross profit c/d 115,000
380,000
Carriage outwards 8,000
Advertising 3,000
Salaries 19,000
Rates 12,000
Insurance 20,000
Discount allowed 5,000
Net profit c/d 91,000
158,000

Sales 390,000
Less returns inwards 10,000

380,000
Gross profit b/d 115,000
Commission 36,000
Discount received 7,000

158,000

(20 x ½ = 10mks

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