Business Studies Paper 2 Questions and Answers - Form 4 Term 3 Opener Exams 2023

INSTRUCTIONS:

• ANSWER ANY FIVE QUESTIONS

1.  
   1. Explain five advantages of an open office lay out. (10mks)
   2. Explain five causes of unfavorable balance of payment for the most developing countries. (10mks)
2.  
   1. With the aid of a diagram, explain the effect of an increase in supply to the equilibrium price and quantity of commodity. (10mks)
   2. Explain five ways of improving the efficiency of a warehouse. (10mks)
3.  
   1. The following trial balance was extracted from the books of Okumu traders as at 31/12/2015.
                                                  DR. (shs.)                         CR. (shs.)
      Opening stock                     30,000
      Purchases/sales                  275,000                           390,000
      Debtors                                47,000
      Commission                                                                 36,000
      Returns                                10,000                               6,000
      Carriage inwards                 16,000
      Wages                                 20,000
      Rates                                   12,000
      Buildings                              45,000
      Furniture                              180,000
      Bank overdraft                                                              210,000
      Insurance                              22,000
      Discounts                              5,000                               7,000
      Drawings                               25,000
      Creditors                                                                       52,000
      Cash at bank                         250,000
      Cash in hand                         40,000
      Capital                                                                           689,000       
      Totals                                     1,390,000                       1,390,000     
      Additional information:
      1. Closing stock sh. 50,000
      2. Carriage outwards sh. 8,000
         Required:
         Prepare Okumu traders trading profit and loss account for the period ended 31/12/2015. (10mks)
   2. Explain five characteristics of economic resources. (10mks)
4.  
   1. Explain five benefits that consumers get from advertising. (10mks)
   2. Highlight five differences between perfect competition and monopolistic competition. (10mks)
5.  
   1. Explain five means of payment that a trader can use to settle business debts. (10mks)
   2. Explain five problems encountered in development planning. (10mks)
6.  
   1. Oyamo started a business by the name of Oyamo provision store on 1^st May 2014 with sh.50,000 cash. During the first week of May, the following transactions took place:
      1. Deposited sh.40,000 into a business bank account
      2. Oyamo converted a table valued sh.40,000 from private use into business use
      3. Borrowed sh.120,000 from community bank which was deposited into the business bank account
      4. Purchased goods worth sh.60,000 on credit from Wanyoo distributers
      5. Bought equipment sh.30,000 paid by cheque
         Prepare the balance sheet of the business as at 7th May 2014. (10mks)
   2. Explain five benefits that a savings and credit cooperative society (SACCO) provides to its members. (10mks)

MARKING SCHEME

1.  
   1. Explain five advantages of an open office lay out. (10mks)
      • Supervision is enhanced/ easy supervision since all employees are in one room thus easy to monitor
      • Save on space because of few partitions
      • Sharing of resources because workers are in the same room thus reducing cost of buying
      • Easy communication since there are no physical barriers between the workers
      • Easy reorganization because it is only one room when need arises
      • Enhances team work because workers are in one room they can work and learn together.
      • Less cost of construction since it is only one room with no subdivisions to be constructed.
   2. Explain five causes of unfavorable balance of payment for the most developing countries. (10mks)
      • Reliance on primary products/raw materials/agriculture produce for exports which fetches low prices in the international markets
      • Heavy/high importation of finished goods/manufactured goods whose value are very high/spend more on them
      • Low levels of technology in production which compromises the quality of their exports/low/poor quality goods thus lowering the value
      • Too much reliance on foreign borrowing yet such loans are repaid with high interests
      • Natural disasters/calamities which interfere with production
      • Preference/demand for foreign goods since they believe they are good quality hence spending more on the
      • Low/poor foreign investment/inability to attract foreign investment leading to low capital inflow/low foreign receipts
      • Political instability/insecurity which may interfere with/lower export earnings
      • Appreciation/reevaluation of local currency which leads to lower export earnings
      • Devaluation of foreign currency which encourages more expenditure on imports and less export earnings
      • Low volume of exports leading to lower export earnings
      • Protection policies by other countries that leads to fewer/lower exports
      • Poor government policies/corrupt practices leading to capital flights/outflows
      • Unfavorable terms of trade leading to export earnings
      • Decrease in price for exports hence lowering the country’s exports
      • Unfavorable bargaining power/world economic order/forums the developing countries have little room in such forums
2.  
   1. With the aid of a diagram, explain the effect of an increase in supply to the equilibrium price and quantity of commodity. (10mks)
      
   2. Explain five ways of improving the efficiency of a warehouse. (10mks)
      • Ensuring there is adequate handling equipment to handle goods safely
      • Ensuring that personnel are well trained in carrying out their tasks
      • Ensuring proper use of space to ease movement
      • Ensuring proper system of inventory control to avoid fraud and losses
      • Ensuring that legal requirements are adhered to for smooth running.
      • Ensuring that there are safety measures in place to minimize damages
      • Provision of sufficient loading and offloading area to avoid delays.
3.  
   1.                               OKUMU TRADERS
                     TRADING, PROFIT& LOSS ACCOUNT
      DR.     FOR THE PERIOD ENDED 31ST DEC 2015 √           CR.
      

      Opening stock sh.30,000 √	Sales                    sh. 390,000 √
      Purchases  sh.275,000 √	Less return inwards    10,000√
      Add carriage inwards 16,000√	Net sales                   380,000
      Less return inwards   6,000√
      Net purchases           285,000
      Goods available for sale 315,000√
      Less closing stock     50,000√
      Cost of goods sold    265,000√
      Gross profit c/d       115,000√
      380,000
      Carriage outwards   8,000√	Gross profit b/d 115,000√
      Wages                     20,000√	Commission received 36,000√
      Rates                      12,000√	Discount received 7,000√
      Insurance               22,000√
      Discount allowed      5,000√
      Net profit c/d           91,000√
      158,000	158,000

      20× ½= 10mks
   2. Explain five characteristics of economic resources. (10mks)
      • They are scarce/limited in supply in comparison to many uses of satisfying unlimited needs.
      • They have monetary value price at which can be sold or bought
      • They have alternative uses can be put into more than one use eg. Land can be use for farming or settlement
      • Can be combined in various proportions to produce goods and services
      • They are transferable/can change ownership through buying and selling
      • They are complimentary are raised together to satisfy human needs e.g. Car and petrol are used together.
      • They have utility, ability to satisfy human wants
4.  
   1. Explain five benefits that consumers get from advertising. (10mks)
      • Consumers become aware/informed of existence of a product/on the products price/where it can be found
      • Consumers enjoy high quality goods/services resulting from competitive advertising/competitive producers seek to maintain very high standards of quality
      • Makes it easy to consumers to choose products from a variety offered in the market based on their advertised quality and contents
      • Protects consumers from exploitation/malpractices since they are aware of prices and quality of items and can therefore enforce their rights.
      • Communicates changes about the product like new product lines/change of name and physical address. This enhances convenience for the consumers
      • Educates the consumer on the proper use of products where advertising messages involve demonstration of product usage.
      • Entertainment by use of drama/music/plays accompanying advertisement
      • Aiding budgeting/planning as they are made to know about price and existence of goods
      • May enjoy lower prices due to competition
      • Correct misconception hence assist in making decisions
        NB: reminding/increasing sales market and employment are not relevant for they benefit the seller.
   2. Highlight five differences between perfect competition and monopolistic competition. (10mks)
      

      Perfect competition	Monopolistic competition
      a) Goods are homogeneous	Goods are differentiated
      b) Perfect knowledge of market conditions	No perfect knowledge of market conditions
      c) Demand curve for individual firms is perfectly elastic	Demand curve for individual firm is highly elastic
      d) Firms are price takers	Firms can influence price to some extent
      e) All firms earn normal profits in the long run	Possible for firms to earn super normal profits in the long run

5.  
   1. Explain five means of payment that a trader can use to settle business debts. (10mks)
      • Cash- in form of currency coins and notes serving as legal tender in the country
      • Cheque- where an account holder order his/her bank requiring it to pay a named person or bearer a specified amount of money
      • Banker’s cheque- cheque drawn by a bank on itself on receiving payment from a customer
      • Credit transfer-making payments through a bank to several payees by use of one cheque e.g. Paying employees
      • Standing order-instruction by an account holder to his bank to be making payments of a specified amount to a named party at regular intervals
      • Electronic fund transfer-payment can be affected using computer network
      • Credit cards-the card holders can purchase goods or services from specifies business enterprises.
   2. Explain five problems encountered in development planning. (10mks)
      • Lack of accurate or detailed data for planning which may lead to inappropriate plan being developed
      • Existence of large subsistence and sector which makes the planning unrealistic
      • Lack of qualified personnel to assist in planning which makes a country to rely on experts who don’t fully understand the country.
      • Problem of the private sector which will always require incentives for them to follow the plan.
      • Transfer of inappropriate plan. Some planners may simply borrow a plan form other countries which may not work in their countries
6.  
   1.                                            OYAMO PROVISION STORE
                                                          BALANCE SHEET
                                                         AS AT 7^TH MAY 2014
      

      Fixed assets                 shs.	Capital                             sh. 90,000
      Furniture                      40,000
      Equipment                   30,000
      	Long term liabilities
      	Community bank loan          120,000
      Current assets	Short term liabilities
      Bank                             130,000	Creditors                               60,000
      Stock                             60,000
      Cash                            10,000
      270,000	270,000

   2. Explain five benefits that a savings and credit cooperative society (SACCO) provides to its members. (10 marks)
      • Encourage/ help members to save by making regular contributions
      • Provide loan facilities to members based on members contributions
      • members receive dividends based on their shares
      • Members are educated/advised on cooperative societies /their rights/ their obligations
      • Some SACCOs have front office banking facilities/front office services for their members
      • They charge low interest on loans
      • They give loans on easy terms and conditions
      • Members savings/distribution is doubles upon death of a member