Business Studies Paper 2 Questions and Answers - Lugari Constituency Joint Pre Mock Exams 2023

Instructions to candidates

The paper has six (6) questions of equal marks.You are expected to attempt only five (5)
Candidates should answer the questions in English

1. Explain five money transfer facilities offered by commercial bank to its customers. (10mks)
2. Explain five principles of public expenditure. (10mks)
1. Explain five advantages that may accrue to a country that engages in international trade. (10mks)
2. Explain five factors that are likely to lead to high birth rate in Kenya. (10mks)
1. By the aid of a diagram,explain excess demand and excess supply. (10mks)
2. Discuss any five circumstances under which an insured may not be compensated in the event of a loss. (10mks)
1. Highlight five factors that may contribute to demand pull inflation. (10mks)
2. On March 1st 2017,Martha had cash in hand sh 87,000 and cash at bank sh 250,000. During the month,the following transactions took place.
  March 2: Cash sales sh 60,0000
  3: Paid salaries sh 101,500 by cheques
  7: Received a cheque of sh 76,000 from Henry,after allowing him cash discount of 5%
  13: Bought office furniture by cheque shs 86,000
  17: Settled Maria’s account for shs34,200 in cash having deducted shs 800 cash discount
  20: Received a cheque for shs 165,000 in respect of cash sales
  22: Paid wages shs 25,000 in cash.
  24: Withdrew shs 32,000 from the bank for office use.
  25: Withdrew shs 4,000 cash for personal use.
  29: Received shs 17,000 cash from Alvin in settlement of his account less shs 1,000 cash discount
  31: Deposited all the cash into the bank except shs 24,000
  Prepare three column cash book duly balanced (10mks)
1. Explain five benefits of filing office documents to an organization (10mks)
2. A trader want to place an order to his supplier.Explain five factors that he should consider before choosing the appropriate mean of communication. (10mks)
1. Describe four sources of monopoly power in an economy (8 marks)
2. The following trial balance was extracted from the Ledgers of
  Ashley’s electronics business on 31st December 2020.
  
  Stock on 1st January 2020 was valued at shs. 77,000.
  Prepare:
  1. Profit and Loss account for the year ended 30th April 2020. (6 marks)
  2. A balance sheet as a 30th April 2020. (4 marks)
  3. Calculate, (2marks)
    1. Working capital
    2. Capital Employed

MARKING SCHEME

1. Five money transfers facilities offered by commercial bank
  1. Cheques - Customers write cheques asking the bank to pay another person.
  2. Bank overdraft- The bank accepts money from customers and guarantee the payment of money to be transferred to another person.
  3. Credit transfer-Customers with many payments to make gives he details of customers to be paid and the bank does the paying.
  4. Standing orders-A customer with regular periodic payment to make only require to fill a special form at the bank indicating amounts to be paid when to pay and whom to pay and the bank does the payment.
  5. Traveler cheques- Are cheques issued to customers travelling abroad and are of round sum of money.
  6. Use of credit and debit card facilities.
  7. Electronic money transfer where banks effects the payments by transferring money using electronic on behalf of their customers.
2. Five principles of government expenditure
  1. Economy of the expenditure- The use of public resources should be economical and avoid wastage of resources.
  2. Maximum social benefit- Public expenditures should provide maximum benefit to targeted people and justify the cost of expenditure.
  3. Authorization (sanction) - Public expenditure must be properly approved by the relevant authority.
  4. Flexibility –Public expenditure should allow the alteration depending on circumstances prevailing at a given time.
  5. Financial administration and accountability- Public must be kept properly and audited.
  6. Elasticity –The expenditure should be expanded or reduced with ease as may be dictated by circumstances.
1. Advantages of international trade to a country
  1. Improves standards of living of people due to increased supplies and variety.
  2. Leads to availability of large markets thus economies of large scale production.
  3. Promotes specialization which leads to improved quality and quantity if commodities traded in.
  4. Promotes social cultural interaction and exchange.
  5. Promotes competition from other countries which leads to improvement in quality and quantity.
  6. Provide foreign exchange earning especially when a country exports.
  7. Facilitates technological transfer to benefit countries with poor technology.
  8. Promotes peace among the trading partners and the world at large.
  9. Promotes economic development.
2. Factors that leads to high birth rates
  1. Lack of family planning education and contraceptives.
  2. African culture of viewing children as labor on farms.
  3. Women having a large number of children so that in case some die as a result of infant mortality rate they will end up remaining with a good number.
  4. View of children as security during the old age.
  5. Early marriages being encouraged in some communities such that women have a longer period of bearing children.
1. DD and SS are demand and supply curve.E is the equilibrium Pont. A price level P1 quantity demanded is Q1 and quantity supplied is Q2. This is as a result of increase in price from Pe to P1 which brings about excess supply. Similarly when the price is decreased from Pe to P2 quantity supplied reduce from Qe to Q1 and quantity demanded increase from Qe to Q2 bringing about excess demand.
2. Circumstances under which insured may not be compensated
  1. If the insured stop paying the premium as per the policy.
  2. If the cause of the loss is not the risk that was insured against.
  3. If the insured did not disclose the relevant information about the property being insured.
  4. If the insured did not suffer a loss directly incase the property is lost.
1. Factors contributing to demand pull inflation
  1. Increase in money supply through credit creation loans.
  2. Increase in disposable income as a result of reduced taxes or increased wages.
  3. Increased in community spending arising from increased speculation or advertising by sellers.
  4. Increased exports at the expense of domestic supply
  5. Increased in population.
  6. Shortages caused by bad weather conditions hoarding e.t.c.
  7. Decrease in imports caused by restrictions or trade agreement.
  8. Prolonged industrial unrest which reduces industrial output.
  9. Increased in government spending.
1. Benefits of filling office documents
  1. For easy retrieval of information.
  2. Continuity in record keeping.
  3. Records kept can be used for future use.
  4. Helps in preserving valuable records.
  5. Helps the organization to protect records against damage and theft.
  6. Helps the organization to save on space.
2. Factors to consider when choosing a means of communication
  1. Cost to be incurred during communication.
  2. Urgency of the message.
  3. Distance to be covered.
  4. Confidentiality of the message.
  5. Need for future reference.
  6. Desired impression to be conveyed.
  7. Expected feedback by the sender.
1. Sources of monopoly power
  1. Government controls- Where the government allows only one or group of firms to be only producers of a given commodity.
  2. High initial cost of production- Where the initial cost of production is too high government mey leave out other firms in production of other goods.
  3. Patent right- A company that comes up with the idea or a product may be protected from being copied by competitors hence remains as the only producers of the given commodity.
  4. Exclusive control of raw materials by one firm who become the sole producer.
  5. Low cost advantage which lock out competitors by selling its products at a very low price which undercuts the potential competitors.
  6. Technology – The use of unique technology by a firm keeps potential investors away.
  7. Merges – several firms can come together to solidify their market strength in eliminating the competition amongst themselves.
2. 3. 1. working capital = current assets – current liabilities
      = 136,000 –134,500
      = 1,500
    2. Capital employed = fixed assets + working capital
      = 340,000 + 1,500
      = 341,500