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

Instructions to candidates

• This paper consists of six questions.
• Answer any five questions.
• All questions carry equal marks.
• Non-programmable silent calculators may be used.
• Candidates should answer the questions in English.

QUESTIONS

1.  
   1. Office etiquette are acceptable code of behavior in an office. Explain five office etiquette that an Office staff should possess. (10 marks)
   2. Explain five factors that have limited the practice of barter trade in Kenya. (10 marks)
2.  
   1. The diagram below shows the population and output per capita of China.
      
      Explain five advantages China would get if her total population is found in the part marked Y. (10 marks)
   2. Explain five sources of government revenue. (10 marks)
3.  
   1. On 1^st September 2020, Ali Traders started a business with ksh 15,000 cash at hand and a bank overdraft of ksh 40,000.During the month the following transactions took place:
      Sept 4: Kabogo a debtor settled his account of ksh 10,000 by cheque of ksh 8,000.
              7: Deposited ksh 4,000 into the business bank account from the cash till.
              8: Paid rent by cash ksh 4,000.
             14: Cash sales ksh 14,000.
             17: Purchased furniture worth ksh 3,000 paying by cheque.
             18: Settled Kofi’s account with ksh 10,000 after being allowed a discount of 5%.
             20: Received ksh 6,000 cash from Njeri a debtor.
             22: Kambu a debtor settled his account of ksh 4,000 by cheque, having been allowed 20% discount.
             25: Deposited ksh 17,000 into bank from private sources.
             30: Banked the available cash except ksh 1,000.
      Required:
      Prepare a duly balanced three column cash book. (10 marks)
   2. Explain five challenges facing containerization as a means of transporting goods.(10 marks)
4.  
   1. Using a well-illustrated diagram explain the effects of increase in supply of a commodity while its demand remains constant. (10 marks)
   2. Explain five circumstances that companies may find it necessary to re-insure. (10 marks)
5.  
   1. The following balance sheet was prepared by the accounts clerk of Old Mogo Traders.
                                                                                  Old Mogo Traders
                                                                                      Balance Sheet
                                                                                   As at 31^st December 2019
      

      Fixed Assets:                   SH SH Land and buildings            300,000 Furniture and Fittings          51,500 Machinery                         140,000 Motor Vehicle                    190,000 681,500 Current Assets: Stock                                 124,500 Debtors                             103,650 Cash at bank                      54,850 Cash in hand                        3,650 286,650 968,150

      SH SH Capital                    422,930 Add Net Profit         220,500                                643,430 Less Drawings        175,000    468,430 Long-term liabilities: Bank Loan 400,000 Current Liabilities: Creditors     99,720 968,150

      Use the above Balance sheet to calculate the following:
      1. Working Capital. (2 marks)
      2. Return on Capital. (2 marks)
      3. Current Ratio. (2 marks)
      4. Capital Employed. (2 marks)
      5. Borrowed Capital. (2 marks)
   2. Explain five advantages of using a cheque as a means of payment. (10 marks)
6.  
   1. Explain five benefits that Kenya as a country may achieve by adopting 2030 millennium developments goals.
      (10 marks)
   2. Explain five reasons why a public limited company may be dissolved.        (10 marks)

MARKING SCHEME

1.  
   1. Qualities of an office worker (office etiquette) :
      • Respect, showing regards to other people according to their rank.
      • Courtesy, handling people politely, pleasantly and with consideration.
      • Honesty, ability to tell the truth and being sincere.
      • Diplomacy, ability to convince others tactfully.
      • Loyalty, commitment an employee has to the organization he/she works for.
      • Initiative, ability to create and implement ideas.
        (Award any other relevant point -    any 5×2 =10 marks)
   2. Factors that have limited the practice of barter trade in Kenya: 
      • It requires double coincidence of wants that is very difficult to get in real life.
      • Lacks standard measure of value that makes it difficult to ascertain the real exchange value of a commodity with another.
      • Some commodities cannot be divided into smaller units without loss of value.
      • Some commodities cannot be stored for future transactions because they are perishable/lacks store of value.
      • Some commodities are difficult to carry because they are bulky/heavy thus cannot be traded with somebody far away.
      • Lacks unit of account, because it’s difficult to keep records of different commodities because they values are not known.      (Any 5×2=10 marks)
2.  
   1. Advantages china would get at part marked Y (overpopulation):
      
      • Widening market, there are many consumers of goods and services and thus more production activities.
      • Better utilization of resources, due to high demand for goods/services therefore efficient use of resources to satisfy the high demand.
      • Creates a pool of labour force because there are more labourers that leads to low cost of labour/meets various labour demands.
      • Enhances creativity because resources are scarce and people are looking for means of survival.
      • Promotes labour mobility as jobless people go looking for job opportunities.
      • Stimulates investments as entrepreneurs take advantage of higher demand/widened market.
        (Any 5×2=10 marks)
   2. Sources of government revenue.
      • Tax, compulsory levies by the government.
      • Fees, amount received by government against direct services rendered e.g. training fees, license fees.
      • Government owned property incomes e.g. forests, national parks royalties and rents.
      • Fines and penalties imposed by court of law for crimes.
      • Escheats, unclaimed assets/money of deceased without a heir.
      • Borrowing loans either locally or internationally from IMF or World Bank.       (Any 5×2= 10 marks)
3.  
   1.                                                                 THREE COLUMN CASH BOOK
      

      DATE	DETAILS	FOLIO	DISC.ALL	CASH	BANK	DATE	DETAILS	FOLIO	DISC.REC	CASH	BANK
      2020 Sept 1         4          7       14       20       22       25       30	Capital✔ Kabogo✔ Cash✔ Sales✔ Njeri✔ Kambu✔ Capital✔ Cash✔	C1  C2	2000✔  800✔	15000✔ 14000✔   6000✔	8000✔  4000✔  3200✔   17000✔   16000✔	2020 Sept1          7          8        17        18        30        30	Capital✔ Bank✔ Rent✔ Furniture✔ Kofi✔ Bank✔ Balance ✔	C1 C2 c/d	526✔	4000✔  4000✔ 10000✔  16000✔  1000✔	40000✔ 3000✔  5200✔
      			2800✔	35000✔	48200✔				526✔	35000✔	48200✔

      (40×¼=10 marks) Penalize 1 mark in case date is wrong and award no mark incase format is not correct.
   2. Challenges facing containerization as a means of transporting goods:
      • May not be suitable for goods with irregular shapes since they are rectangular in shape.
      • Require special handling equipment’s which may be expensive to acquire.
      • Containers are expensive to acquire/hire thus many people cannot afford.
      • Use of containers for transporting goods could be misused by those who want to engage in illegal activities because they are sealed at source thus do not allow inspection.
      • Require highly skilled personnel to manage the system which may be lacking/expensive to train or hire.
      • It is usually not convenient for those traders who may not have enough goods to fill a container.
        (Any 5×2=10 marks)
4.  
   1.  
      
      1. With an increase in supply surplus quantity is created in the market.✔
      2. The surplus quantity pushes the price down from P0 to P1.✔ (10×1=10 marks)
   2. Circumstances that necessitate companies to re-insure:
      • When the value of property is great such as a ship, thus a single insurance company may find it difficult to bear the loss.
      • When the chances of the loss occurring through the insured risks are high then it becomes necessary to re-insure.
      • When the insurance company has insured many risks that will cause huge losses that will be costly to compensate hence the need to re-insure.
      • If it is a requirement by the government then the insurance company has no alternative but to comply.
      • When the insurance company has covered many risks then there’s need to re-insure in order to share the financial burden/need to spread risks.
        (Any 5×2=10 marks)  -  There’s no splitting of marks.
5.  
   1.  
      1. Working capital = current assets + current liabilities.
         CA = 124,500 + 103,650 + 54850 + 3650 = 286,650✔
         CL = 99,720✔
         WC = 286,650 – 99,720 = 186,930.✔✔(4 × ½ =2 marks)
      2. Return on Capital: ROC =    NP     ×100 
                                                  CAPITAL 
         220500  × 100= 52.14%✔✔   (2×1=2 marks)
         422930
      3. CURRENT RATIO=CA:CL
                 286,650 : 99,720 = 2.875 : 1 (3: 1)✔✔      (2 ×1=2 marks)
      4. Capital Employed = Fixed Assets + Working Capital 
                             681,500✔ + 186,930✔ = 868,430✔✔
                                                      (4 ×½ =2 marks)
      5. Borrowed Capital = Long term Liabilities.
                                     = 400,000✔✔    (2×1= 2 marks)
   2. Advantages of using a cheque as a means of payments:
      • Cheques are secure than notes and coins because when lost can be traced to the person who cashed them.
      • Cheques are negotiable, can be used to pay a third party.
      • Cheques are portable because are light since are paper like.
      • Cheques are convenient to pay large amount of money which would be bring inconvenience incase notes and coins are used.
      • Acts as a receipt for future reference in case of controversy or loss of other documents.
      • It saves the time and transport costs for the one paying the money because there is no need for travelling to make payments.
        (Any 5×2=10 marks)
6.  
   1. Benefits of adopting millennium developments goals:
      • Eliminating/reduction of poverty to ensure that every citizen lives above the poverty line.
      • Reduced economic dependence, through dissatisfaction there will be increased production and working towards self-sufficiency.
      • The country will maintain favourable balance of payments through an improved export sector in the economy.
      • There will be reduced disparities in income distribution because every citizen will be earning/producing
      • Reduced unemployment due to increased production that creates employments opportunities.
        (Any 5×2=10 marks)
   2. Reasons that can lead to dissolution of public limited company:
      • Insolvency of public limited company, that’s when it’s unable to pay its debts it may wind up.
      • Ultra vires, when the company acts contrary to the objective clause of its memorandum of association.
      • Amalgamation, when its joins another company to form a completely different company.
      • Through a court order in case of complains from creditors or is engaged in un lawful act.
      • Decision by shareholders, during annual general meeting they may voluntarily agree to wind up the company.
        (Award any other relevant point, any 5×2=10 marks)