Business Studies Paper 2 Questions and Answers - Form 4 Mid Term 2 Exams 2021

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  • This paper consists of six questions.
  • Answer any five questions.


    1. Describe any five characteristics of human wants. (10mks)
    2. Explain five ways in which commercial banks help in facilitating business activities in a community.(10mks)
    1. Quails traders intends to construct a warehouse .Explain five measures that Quails Traders should take to ensure smooth functioning of the warehouse. (10mks)
    2. Sambaza, an island country in Indian Ocean, has been experiencing low national income
      Discuss five reasons that may have contributed to this problem .(10mks)
    1. Explain five factors that have contributed to the popularity of containers in transport. (10mk)
    2. Kamwe Company limited prefers to sell its products direct to consumers. Highlight five circumstances under which this manufacturer may sell direct to consumer. (10mks)
    1. Ndathi has realized that his brother’s one year old business is growing fast. Explain five reasons that could be contributing to this scenario. (10mks)
    2. Miciri a young entrepreneur has first won a lottery worth ksh.500; 000.He is torn between putting up a soap producing firm and a milk bar. Explain to Miciri five factors that he needs to consider before making a decision or what to produce. (10mks)
    1. Wamutira a newly employed teacher has joined Tajirika savings and credit co-operative society (SACCOs) ltd. Explain the five benefits that she may get from being a member of that SACCO.(10mks)
    2. Yegon had the following transaction in the month of June 2003.(10mks)
      June 2 Started business with sh .100, 000 cash and furniture (from home) sh.3000.
              3 Opened a bank account with sh. 7000.
              6 Bought goods from kamanda on credit sh.500.
              7 Sold stock sh.800 and was paid by cheque.
              8 Yegon took away sh.100 cash from the business for his daughters fare back to school.
      1. Record the following transactions in the relevant ledger accounts and balance them off. (10mk)
    1. Explain five ways in which the government can provide an enabling environment can provide an enabling environment for business enterprise. (10mks)
    2. The following is the trial balance Mwingi West shop as at 31st March 2013.(10mks)
      Stock 1 April 2012 181,600  
      Sales and Purchases 691,850 923,400 
      Carriage inwards 4,200   
      Carriage outwards 15,700  
      Return outwards   6,400
      Wages and salaries 102,400  
      Rates and Rent 30,150  
      Communication expense 6,240  
      Commission Payable 2,160  
      Insurance 4,050  
      Sundry expenses 3,180  
      Buildings 200,000  
      Debtors and creditors 143,200 32,640
      Outstanding Expenses   48,960
      Fixtures 28,500  
      Cash at bank 29,700  
      Cash at hand 1,150  
      2 years loan   80,000
      Loan from k Ball   20,000
      Drawings 79,200  
      Capital   408,880
        1,520,280 1,520,280

      1. A trading profit and loss a/c for the year ended 31st March 2013.
      2. Balance sheet as at 31st March 2013.


      • They are unlimited in number/ They are endless such that satisfaction of one leads to another
      • Are competitive/ cannot all be satisfied as the same time since the resources are few/ They compete for priority from available limited resources
      • Some are recurrent such that the satisfied want may require to be saisfied again and again. 
      • Some are universal/ They relate to everyone in the world/ common to everybody
      • Some are complimentary satisfaction of one want may create a need to satisfy another want
      • They vary in intensity & urgency. Some wants are felt than others and cannot be postponed while others are less intense and can be saisfied later
      • Some wants are habitual and they develop in a person from habits that they get used to.
      • Some are insatiable/ cannot have full satisfaction of any given want.
      • Wants vary from time to time, from one age group to another.
      • Accept deposits of money for safe keeping.
      • Sources of finance to business people in form of loans which they use to start/run their businesses.
      • Issue letters of credit for clients who trade internationally to enable them access goods on credit.
      • Offer different means of payment to enable them carry out transactions smoothly e.g credit transfers.
      • Advice on financial investment where they give confidential financial reports on their customers.
      • Act as referees where they give confidential financial reports on their customers.
      • Act as agents to companies intending to sell shares to the public.
      • Act as management trustees to properties of a deceased person.
      • Offer foreign exchange -services such as bureau de change to facilitate international trade.
      • Convinient location/accessible to the users.
      • Proper adequate handling equipment & machines for ease of operation.
      • Spacious enough to allow easy storage, movement accommodation and accessibility of goods by personnel.
      • Adequate/special storage facilities for handling/holding different types of goods/preservation against damage.
      • Fitted with safety and security equipment to ensure precaution/safety of goods/employees.
      • Qualified/competent personnel to facilitate smooth flow of operations.
      • Follow the laid down legal procedures to avoid conflict or registration/operate within the law.
      • Proper buildings/structures for the type of goods intended to be stored. ____
      • Good communication system to facilitate exchange of information between the warehouse and its clients.
      • Efficient transport network to enable the goods to be moved in and out of the warehouse with ease.
      • Low number of income generating population since most people are dependants.
      • Inadequately trained labour/poor quality of labour supply /labour force.
      • Low natural resource endowment/low quality &quantity of the natural resource whch are used as raw materials for production.
      • Too many foreign firms in the country who repatriate most of income generated.
      • Low level of technological advancements/low innovations and inventions leading to poor quality output and low profits.
      • Poor terms of trade/low value of exports compared to imports.
      • lack of aggressiveness to invest/entrepreneur.
      • Lack of peace/security/political stability creates a harsh environment to low national income.
      • Existence of a large subsistence sector leads to underestimation of the country’s output.
      • Speedy/ fast since there is increase use of machines for handling goods.
      • reduced risk of theft of goods on transit as containers are sealed at the exporters premises.
      • Allows efficient utilization of space since containers are standardized and hence fit in well.
      • less/minimal damage to goods since containers are strong.
      • Specifically designed containers can be used for special goods.
      • Reduced insurance premiums due to reduced theft/tampering and Pilferage.
      • Flexibility of the mode since it can offer door to door services.
      • Can carry large quantities of goods at ago.
      • Less frequent handling using modern technology helps to reduce labour costs.
      • If goods are highly perishable to avoid wastage.
      • Where there is need to demonstrate the use of commodities which are technical in nature.
      • If the has his own retail outlet.
      • Incase his sales are by tender
      • Where the government policy requires that such goods be supplied direct to consumers.
      • Where competition is stiff /to counter stiff competition.
      • Where the market served is small and localized
      • Incase of service industry .where the service can only be offered by the producer
      • Availability of enough finance to run its day activities sustain the business to profitability
      • Use of appropriate marketing strategies that have led to high sales volumes
      • Ability to cope with and overcome competition e.g. proper pricing.
      • Reliance on modern technology reduces cost of production and hence fair prices for goods/services.
      • Good infrastructure such as road electricity which increased efficiency in production.
      • Proper business location making it accessible to most of the potential customers.
      • Favorable government policies e.g. fair taxation which reduces the cost of production.
      • Security /political stability give certainty of the days to come and peace of mind.
      • Selling appropriate products in the market which appeals most of the people in that area.
      • Employing appropriate/trained employees who do the work well since they are skilled in specific areas.
      • Consumers needs tastes and preferences. The customers must be willing to spend money on the Product of choice.
      • Availability of resources required for production e.g. raw materials.
      • Demand /size of the market. Invest in the product that has the highest demand for more/high level of profits.
      • level of competation.Provide goods/services that meet least competatition.
      • Profitability. Good /services that will yield maximum profits should be chosen.
      • Government policy. Goods /services that are favored /goods/services that are not illegal.
      • Cost of production must be the lowest.
      • Availability technology should help to reduce the cost of production and maximize profits.
      • Modern technology/improvement in technology may reduce the costs of production
      • she would be encouraged to save/develop a saving habit since payment is on check –off system.
      • She would get a variety of loans based on her needs e.g. education ban, Emergency loan, development loan
      • Receive divideds at the end of every year from the profits of the society’s investments.
      • She would be educated on co-operatives affairs and also investment opportunities available.
      • Her loans and contributions would be insured which minimizes the risks of losses.
      • She would earn interest fro m her savings if they gets to certain amount.
      • she would get banking services if the SACCO operates front office banking facilities e.g. bankers’ cheque;salary advance etc.
      • Easy loan term conditions to members i.e. no need for a security /collateral to acquire a loan.
      • incase she dies the loans are waived off and savings doubled
      Dr                   Capital A/C                 Cr
      June 8 Bal c/d 13000 June 2 Furniture 3000
                    Cash 10,000

      Dr                   Cash A/C                 Cr
      June 2 Capital 10,000
                   Bal b/d 2,900

      June 3     Bank    7,000
             8  Drawings    100
                     Bal c/d 2,900

       Dr               Furniture A/C             Cr
      June 2  Capital 3000
      Bal c/d            3000 
      Bal c/d       3000

       Dr               Bank A/C             Cr
      June 3 Cash 7000
      June 7 sales   800
      Bal c/d 7,800

       Dr               Purchases A/C             Cr
      June 6 Kamanda 500
      Bal b/d 500
      Bal c/d 500


       Dr               Kamanda's A/C             Cr
      Bal c/d       500
      June 6     Purchases       500

       Dr               Sales A/C             Cr
      Bal c/d        800

      June 7      Bank      800
      Bal b/d      800

       Dr               Drawings A/C             Cr
      June 8     Cash         100
      Bal b/d      100
      June 8      Bal c/d        100


      • Giving economic incentives such as lowering taxes so as to encourage establishment/growth of businesses (Accept examples of incentives as a qualification).
      • Improvement of infrastructure such as roads and communication to facilitate movement of goods/labour in and out of the market/firms.
      • Enforce laws/favourable legistlation to guard against loss that may arise from thuggery and lawlessness.
      • Provision of credit at favorable terms to enable access to capital cheaply and easily.
      • Promote use of appropriate technology to enhance productivity and effective utilization of resources.
      • Ensure security/political stability for a peaceful atmosphere which attracts more business investors.
      • Deliberate trade promotional campaigns to facilitate marketing of final products.
      • Creating a pool of qualified personnel/through various training institutions such as the public universities.
      • passing favourable policies that support and encourage potential investors.
       Mwingi West Shop
      Trading, Profit AND Loss Account
      For the year ended 31st marh 2013. 
      Opening stock    181600 Sales 923400
      Add: purchases
      Add: carriage inwards


      Less Return Outwards 6,400
      Net purchase
      Gross profit c/d
          923400   923400
      Carriage outward  15700   Gross profit b/d  52,150
      Wages and salaries 102400   Net Loss  111730
      Rent and rates 30150      
      Communication expenses 6240      
      Commission payable 2160      
      Insurance 4050      
      Sundry expenses 3180      

       Mwingi west shop
      Balance sheet
      As at 31st march 2013
      Assets   Capital & liabilities  
      Fixed Assets

      Capital 408,880 

      Less: Net loss
      Less drawings
      Current assets     220950 
      Cash at Bank
      Cash in hand

      Long term liabilities
      Loan from k.Ball
      2 years loan

          Current liabilities
      Outstanding expenses 

        402550  402550
      30 x 1/3=10mks

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