Business Studies Paper 2 Questions and Answers - Form 4 End Term 1 Exams 2022

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Questions

INSTRUCTIONS:

  • Answer any five questions

 

  1.          
    1. Explain five benefits of direct production. (10marks)
    2. Explain five differences between private limited company and partnership forms of Business units. (10marks)
  2.      
    1. Discuss five factors that Nakuru county government may consider before spending county Funds. (10marks)
    2. The following information relates to Maralal Traders for the month of May 2014.
      May 1: Balance brought forward:
                  Cash Shs. 180,000
                  Bank Shs. 450,000 (Cr)
              3: Received a cheque of 1,500,000 from Mpasha, a debtor
              7: Cash sales Shs. 280,000
              11: Jolloimat, a creditor of Shs.600, 000 was paid by cheque of sh 400,000 and the balance by cash.
              14: Received commission in cash sh. 150,000
              17: A debtor, Leteipa, paid his account of 185,000 by cheque less 2% cash discount.
              19: Paid the following expenses by cheque:
                    Rent Shs. 75,000
                    Electricity Shs. 32,000
                    Water Shs. 25,000
              21: Withdrew Shs. 100,000 from bank for personal use
              24: Paid cash Shs 133,280 to Kinai after deducting a cash discount of 2%
              25: Received a cheque of sh. 200,000 from Kiyapi, a debtor
              28: Paid Salaries Shs. 120,000 by cheque.
              31: Banked all cash except sh. 50,000.
      Required:
      Record the above transactions in a three column cash book. (10mark)
  3.      
    1. Describe five types of unemployment. (10marks)
    2. Explain five internal factors that may encourage the achievement of business goals. (10 marks)
  4.        
    1. The following information was extracted from the books of Umeme Traders as at 31st December 2009.
      Item Shs.
      Bank loan
      Bank loan interest
      Capital
      Closing stock
      Creditors
      Debtors
      Discount allowed
      Electricity
      Furniture
      Furniture repairs
      Gross profit
      Maintenance on premise
      Motor vehicle
      Motor vehicle maintenance
      Premise
      Rent received
      Sundry expenses
      567,000
      1,440
      1,680,000
      87,000
      272,400
      140,280
      170,400
      30,240
      489,804
      86,436
      624,720
      72,000
      1,080,000
      360,000
      648,000
      144,000
      122,520
      Prepare;
      1. Profit and loss account for the year ended 31st December 2009
      2. Balance sheet as at 31st December 2009. (10 marks)
    2. Explain any five challenges that an under populated country may experience. (10 marks)
  5.        
    1. Explain five reasons why the government imposes taxes in the economy. (10 marks)
    2. Explain five ways in which the central bank controls the money supply in the country. (10 marks)
  6.      
    1. Explain five measures that a wholesaler would take to ensure the smooth running of his warehouse. (10marks)
    2. Explain any five circumstances under which an increase in National income may not lead to improved standards of living. (10 marks)

Marking Scheme

  1.            
    1. Explain five benefits of direct production.(10mks)
      • Cost is affordable as the capital required for one to produce goods for one’s own consumption is less compared to indirect production.
      • No wastage as one produces what he/she can produce what he or she can consume alone hence no extras which can get spoilt.
      • Variety of goods and services as one can produce different types of goods at the same time.
      •  Involves use of locally available simple tools hence one may not necessarily need advanced technology which could be expensive to acquire.
      • Independence; as production is self-sufficient and producers produce enough for their own use. 
    2.  Explain five differences between private limited company and partnership forms ofBusiness units. (10 mks)     
      Private limited company Partnership 
      Have a minimum of 2 shareholders to 50 members. The business is owned by two or more persons with a maximum of twenty for ordinary partnership.
      The business can be managed by one director or two if big. The business is managed by active partners jointly.
      Do not allow the transfer of shares. They do not deal with shares but members contribution.
      All members have limited liabilities. One partner has unlimited liability except others who have limited liabilities.
  2.                
    1. Discuss five factors that Nakuru county government may consider before incurring any expenditure.(10mks)
      1. Economy;
        County expenditure must be incurred in the most economical way by avoiding any possible waste from occurring.
      2. Maximum social benefit;
        Any county expenditure must be incurred in such a way that majority of people are able to reap maximum benefit out of it.
      3. Flexibility;
        County expenditure should be adaptable to any future unforeseen occurrence and economics situations in the county.
      4. Sanctions;
        County expenditure must be approved by the county assembly to avoid embezzlement and misuse.
      5. Proper financial management;
        County funds should be well managed through maintenance of proper records and auditing as required.
    2. The following information relates to Maralal Traders for the month of May 2014.
      Required:
      Record the above transactions in a Three column cash book. (10mks)
      DR CR
      Date Details L.F Disc
      Rcvd
      Cash Bank Date Details L.F Disc
      allwd
      Cash Bank
      2014      2014
      May 1
      May 3
      May 7
      May 14
      May 17
      May 25
      May 31


      Balance
      Mpasha
      Sales
      Commission
      Leteipa
      Kiyiapi
      Cash


      b/f












      3700




       180,000

      280,000
      150,000




      .

      1,500,000


      181,300
      200,000
      226,720
      .

      May 1
      May 11
      May 19
      May 19
      May 19
      May 21
      May 24
      May 28
      May 31
      Balance
      Jolloimat
      Rent
      Electricity
      Water
      drawings
      Kinai
      Salaries
      Bank
       c/f














      2720

      .

      20,000




      133,280

      226,720
      450,000
      40,000
      75,000
      32,000
      25,000
      100,000

      120,000
      .
                  May 31  Balance  c/f   50,000 906,020
              610,000 2,108,020         610,000 2,108,020
      Jun 1 Balance b/f 50,000 906,020              
  3.                
    1. Describe five types of unemployment.10marks
      • Involuntary unemployment; it occurs when people are actively looking for jobs at the existing wage rate but cannot get them.
      • Disguised unemployment; occurs when the number of people employed exceeds those that are required and workers full capabilities are not fully utilized
      • Frictional unemployment; it occurs when people lose jobs and go looking for new ones
      • Residual unemployment; affects people who are physically or mentally challenged as employers may find it difficult to employ them
      • Structural unemployment; occurs when demand for labor declines do to either changes in the method of production or a decrease in supply of goods and services
    2. Internal factors that may encourage the achievement of business goals.
      • Proper human resource management.
      • Well laid down business structure allows proper flow of instructions and team work within the organization.
      • Adequate financial/proper finance management allows acquisition of assets/stock/expansion of business.
      • Adequate physical resources such as buildings, machines/furniture.
      • Developed business culture with proper values.
      • Well set-out objectives of the business to guide activities in the organization.
      • Committed/qualified/experienced owner who are able to make sound decisions, provide resources etc. (Any 5 x 2 = 10 marks)
  4.                         
    1. Umeme Traders profit and loss account.

      1. Umeme Traders
        Profit and loss account
        For the year ended 31st Dec, 2009
           Shs   Shs
        Expenses
        Bank loan interest
        Discount allowed
        Electricity
        Furniture repairs
        Maintenance on premise
        Motor vehicle maintenance
        Sundry expenses

        1,440
        170,400
        30,240
        86,436
        72,000
        360,000
        122,520
        Gross profit b/d
        Rent received
        Net loss a c/d 






        624,720
        144,000
        74,316






        Net loss b/d 74,316
          843,036   843,036
        (10 x ½ = 5 marks)
      2.    
           Umeme Traders
        Balance sheet
        As at 31st Dec, 2009 ✓
          Shs Shs   Shs Shs
        Assets
        Fixed assets
        Premises 
        Motor vehicles
        Furniture
        Current assets
        Stock
        Debtors


        648,000
        1,080,000
        489,804

        87,000
        140,280




        2,217,804


        227,280
        Capital & liability
        Capital 
        Less net loss


        Liabilities
        Bank loans
        Creditors

        1,680,000
        74,316



        567,000
        272,400 


        1,605,684




        839,400
            2,445,084     2,445,084
        (10 x ½ = 5 marks)
    2. Problems that a country which is under populated may experience.
      • Limited labour supply – A small population may not provide enough labour for production.
      • Limited market – A small population may not provide enough market for goods and services. Some business may end-up closing down.
      • Underutilization of resources – Resources in the country may be left idle because of lack of people to use them.
      • Uneconomical to provide public utilities – The available population may be scattered all over the country making it uneconomical for the government to provide public utilities.
      • Lack of specialization – People in an under populated country may not engage in specialization leading to production of poor quality goods.
      • Reduced phase of economic development for under populated countries, there is less resources. This reduces peoples creativity and innovation that may retard economic growth and development. (Any 5 x 2 = 10 marks)

  5.                 
    1. Explain five reasons why the government imposes taxes in the economy. (10 marks)
      • To raise revenue for the government.
      • Discourage consumption of certain products such product are highly taxed to make it unaffordable / expensive
      • Discourage importation of certain products / protect infant industries from competition
      • Reduce income inequality – those with high incomes are highly taxed
      • Control inflation direct taxes used to reduce inflation that is caused by too much money in supply.
      • Correct unfavourable balance of payments. More tax on imports reduces the level of imports into the country. protect home industries to protect strategic industries that offer employment
        No splitting of marks.
        5 well explained pts
    2. Explain five ways in which the central bank controls the money supply in the country. (10 mks)
      • Determining banking rates: The central bank can reduce the money supply by increasing the bank rate. Commercial banks will in turn increase their lending rates to customers which reduces the demand for loans. To increase money supply, the central Bank reduces bank rate
      • Open market operations (o.m.o): To increase money supply, the CB buys government countries from the public and sells the same to reduce money supply.
      • Cash/liquidity ration requirement: To increase many supply, cash/liquidity ratio is reduced and to reduce money supply, c/l ratio is increased.
      • (Increasing/ reserves) Compulsory deposit requirements: To increase many ss, compulsory deports are reduced and they are increased to reduce many supply.
      • Selective credit control: To reduce money ss. The CB can instruct commercial banks to give credit to some sectors and restrict for others. For an expansionary policy, such restrictions on lending can be removed.
      • Directives: The CB may instruct commercial banks on the lending rates to charge and the margin required depending on the prevailing economic conditions.
      • Requests: - The Central Bank can persuade or appeal to the commercial banks to increase or decrease credit facilities without giving specific instructions on what to do. (Moral suasion/persuasion)
      • Reduce / stop printing of currency Any 5 well explained pts.

  6.             
    1. Explain six measures that a wholesaler would take to ensure the smooth running of his warehouse. (12 mks)
      • It should be spacious enough to accommodate as many goods as possible.
      • It should appropriate equipment and facilities that will facilitate quick receipt and movement of the goods.
      • It should have adequate safety facilities to ensure adequate protection of goods against damage of goods.
      • It should be located near good transport network to facilitate faster movement of goods in or out of the warehouse.
      • It should have appropriate staff (skilled) to manage the receipt and recording activities of the warehouse.
      • It should have the necessary special facilities’ for the storage of goods
      • It should have proper recording of activities that take place to ensure adequate monitoring of stock movements.
      • It should conform to the existing government requirements for warehousing.
    2. Explain any five circumstances under which an increase in National income may not lead to improved standards of living. (10 marks)
      • Increase in income
      • Where the increase in national income is distributed to a small percentage of the population / unevenly distributed
      • Where the general price levels of products in the country has increased / inflation being experienced
      • Where the increase has been as a result of long periods of working / under poor conditions / strain on peoples health
      • Where the increase in national income has been spend on products that have no social welfare implications e.g. military products or projects undertaken may have been of long term nature.
      • Where the increase has been at the expense of people’s leisure
      • Where government may have imposed policies e.g. taxation that reduces peoples disposable income.

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