Business Studies Paper 2 Questions and Answers - Form 4 Term 2 Opener Exams 2023

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INSTRUCTIONS TO CANDIDATES

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


QUESTIONS

  1.                          
    1. Explain five features of a sole proprietorship form of a business. (10 mks)
    2. Distinguish between oligopoly market and perfect competition market situations. (10 mks)
  2.                  
    1. Explain five insurance policies that the owner of a NAIVAS supermarket may find useful for his business. (10 marks)
    2. The following trial balance was extracted from the books of Jumia Traders on 31st December 2010.
      JumiaTraders
      Trial Balance
      As at 31st/12/2010

      Details

      DR

      Cr

      Capital   400000
      Sales   600000
      Purchases 200000  
      Debtors 20000  
      Creditors   60000
      Returns 25000 15000
      Discounts 6000 8000
      Carriage inwards 6500  
      Carriage outwards 15000  
      Salaries 10000  
      Stock 1st January 18000  
      Motor vehicle 400000  
      Furniture 150000  
      Rent 49000  
      Commission 50000  
      Electricity 43500  
       

      993,000

      993,000

      Stock on 31st December 2010 was sh. 20,000
      Prepare a trading, profit and loss A/C for the Year ended 31st December, 2010. (10 marks)
  3.                          
    1. Discuss the economic importance of the recently discovered oil in Northern Kenya. (10marks)
    2. Explain any five negative effects of inflation in an economy. (10 marks)
  4.                  
    1. Explain four Monetary Tools used by the Central Bank of Kenya to reduce the supply of money in the country. (8 marks)
    2. On 1st January 2012, Mlachake traders had cash in hand Ksh. 10,000 and cash at bank shs 15000. The following transactions took place during the month:
      Jan 2: Bought goods in cash sh. 1500
      Jan 4: Paid salaries by cash sh 7500.
      Jan 5: Received cheques from the following debtors after allowing 2% discount in each case. Masy sh 980, kiplimosh .1960.
      Jan 8: Settled the following accounts by cheque in each case deducting 5 % discount; Jumash 3000, Kasanishs 1200.
      Jan 12: Bought machinery worth sh 7000, paid sh 5000 by cheque and the balance to be paid later
      Jan 20: Took sh 1000 for personal use from the business cash till.
      Jan 25: Cash sales sh 2000
      Jan 26: Received cash shs.3000 from Kioko, a Debtor.
      Jan 28: Brought in Sh 2000 cash from his personal savings.
      Jan 29: Banked all cash except sh. 1000
      Required: Prepare a duly balanced three column cashbook. (12 marks)
  5.                  
    1. Using a well labeled diagram explain the effects of a shift in the demand curve from left to right. (10mrks)
    2. Explain five reasons why the government levy taxes. (10mks)
  6.                    
    1. Discuss five factors the National government will consider before spending National Funds. (10marks)
    2. The following balances were obtained from the books of Shah Enterprise on 1st January, 2012.
                 Shs
      Stock 5,000
      Debtors 2,000
      Cash in hand 4,000
      Premises 80,000
      Capital 66,000
      Machinery 18,000
      Overdraft 6,000
      Creditors 12,000
      Five year loan 25,000
      The following transactions took place in the first week of January 2012.
      1. Jan 2nd: Received from debtors sh. 1000 by cheque.
      2. Jan 3rd: Sold goods worth Shs 2000 for Shs 4000 and deposited the money in the business bank account.
      3. Jan 4th: Paid Sh 1000 in cash part of the five year loan.
      4. Jan 5th: Deposited Sh 2500 in bank account from cash till.
        Required:
        Prepare Nzioka Traders balance sheet as at 5th January, 2012 after the transactions took place. (10 marks)


MARKING SCHEME

  1.                            
    1. Features of a sole proprietorship
      1. It is started and owned by one person.
      2. The owner is responsible for day – today business operations.
      3. It has simple legal procedure during information.
      4. The owner enjoys all the profit and bears all losses alone.
      5. It has an unlimited liability.
      6. They are mostly small in size but there could be some that are large.
      7. It enjoys greater amounts of flexibility as the owner can change the business from time to time.
      8. It does have a perpetual life as its legal existence depends on the life of the owner.
        (Any five well explained = 10 mks)
    2. Difference between oligopoly market and perfect competitions market situations;
       Oligopoly  Perfect competitions
       Sellers are few  sellers are many
       The sellers determine / set the price /  are price makers  the sellers does not set / determine price / have no control / over price /  are price takers
      Product sold  / prodeuced is different  /  made different by colour, name , quantity and shape etc.   Products are sold / produced is homogeneous (in colour , shape and quality ) etc
      Barriers / restriction to entry in the market or exit due to high capital requirements no barriers to entry  / exit . there is free entry  / exit.
      Price wars exist / used to determine price  No price wars / allfirms sell at same  uniform price
      Extensive advertising / promotion of the products  No need for promotion / advertising / there's perfect knowledge about the market
      Factors of production are immobile / not easily switched from production of one to another factors of production are mobile , can be easily switched from one production to another
  2.                  
    1. Explain five insurance policies that the owner of a supermarket may find useful for his business. (10 marks)
      • Workman’s compensation
        For employees who may suffer injuries while at work.
      • Personal accident cover
        Covers losses / disability to injury or loss of income due to accident (body injury / death / hospitalization) accept any one explanation
      • Cash / goods in transit
        Covers cash or goods cost while being moved from one place to another
      • Theft and burglary
        covers losses resulting from theft and burglary activities.
      • Bad debt policy
        Losses due to failure of debtors to pay
      • Public liability
        Claims by other people due to accident injuries or losses caused by the supermarket or its employees.
      • Fidelity guarantee
        Losses due to theft of business property by employees
      • Motor vehicle policies
        To cover driver, vehicle, property on vehicle and property outside vehicle
      • Consequential loss
        Compensation due to loss of profits that result from halt in business activities after fire
      • Sprinkler leakage
        Compensates for damages caused by fire fighting equipment
      • Material damage policy
    2.                          
      1. Kwale traders
        Trading, profit and loss account
        For the year ended 31/12/2010
        b uyguyada
  3.                  
    1. The economic importance of natural resources.
      • They provide raw materials for industries.
      • They bring foreign exchange to the country when exported.
      • They are a source of energy.
      • They provide settlement for both human beings and wildlife.
      • They are a source of food.
      • They create employment when they are being exploited. (5 x 2 = 10marks)
    2. Negative effects of inflation in an economy.
      • Erosion of people’s purchasing power leaving them poorer than they were before inflation.
      • Loss of confidence in the local currency by the citizens. This results to the people preferring to use other country’s currency.
      • Lowering of people’s standard of living since the cost of living becomes higher.
      • It discourages savings as well as investment by individuals and firms.
      • It may result to high interest rates which make the cost of acquiring credit/finance to be very high.
      • It may result to emergence of black markets in the country.
      • It can even result to political instability in the country. (5 x 2 = 10 marks)
  4.                    
    1. Ways in which central bank of Kenya may reduce the supply of money in the country.
      • Bank rate :It’s the rate at which the central bank lends to commercial banks. The rate is raised in order to discourage borrowing and therefore reducing money supply.
      • Open market operations: The central bank sells treasury bills and bonds in the market.
      • Special deposits /compulsory deposits /minimum reserve requirements. These are raised upwards.
      • Cash ratio/ liquidity ratio: The ratio is increased in order to reduce money supply.
      • moral persuasion: The central bank may appeal /request/persuade credit rationing.
      • Directives/ instructions to financial institution to landless (4 x 2 = 8 marks)
    2. Prepare a three column cash book duly balanced. (10 marks)

      Date

      Details

      Folio

      d.a.

      Cash

      Bank

      Date

      Details

      Folio

      d.r.

      Cash

      Bank

       

      2002 July  1

      Bal b/d

         

      87,000

      240,000

      July 3

      Salaries

           

      101,500

             1

      Sales

         

      50,000ü

       

           12

      Furniture

           

       85,000ü

            6

      Wairimu

       

      3167        

          ü

       

      76800ü

           16

      Kirwa

       

      800

      39200

       

           18

      Sales

           

      150,000

           21

      Wages

         

      24,000

       

           28

      Malonya

       

      600

      15900

       

          22

      Cash

           

      30,000ü

         

      Cash

           

      64700ü

          25

      Drawings

         

      5000ü

       
                 

         30

      Bank

         

      64700

       
                 

         31

      Bal c/d

         

      20,000

      315,000

           

      3767

      152,900

      531500

           

      800

      152900

      531,500

      July 31st

      Bal b/d

         

      20,000

      315,000

                 
  5.                 
    1. Using a well labeled diagram explain the effects of a shift in the demand curve from left to right
      5 siduya
      Effects:
      1. There will be an increase in price from √OPO to OP1
      2. There will be an increase the quantity demanded from √OQO to OQ1
    2. Reasons why the government levy taxes.
      • To promote economic growth through investments and public corporations.
      • To promote equity in income distribution.
      • To control the economy by influencing consumption, investment output and employment.
      • Influence balance of payment and regulate imports and exports.
      • Discourage consumption of harmful products or those with negative impact on the society.
      • Collect revenue to finance government activities
      • Maintain economic stability.
      • Protect local industries infant/strategic from unhealthy competition.
  6.                  
    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.

 

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