Business Studies P2 Questions and Answers - Wisdom Pre-Mock Form 4 Exams 2021/2022

INSTRUCTIONS

Write your NAME, SCHOOL and INDEX NUMBER in the spaces provided.
Answer ANY FIVE questions provided in the spaces provided.
This paper consists of 6 questions

QUESTIONS

1. Explain five factors that may lead to the success of a business enterprise. (10 marks)
2. Spain and France are developed countries in Europe. Discuss five problems of using national income statistics to compare the living standards of their citizens. (10 marks)
1. Explain five principles that would lead to effective operation of Jubilee insurance company. (10 marks)
2. Explain five attributes of a good money material. (10 marks)
1. Explain five differences of a public Limited company and a partnership. (10 marks)
2. Explain five characteristics of economic resources. (10 marks)
1. Describe five documents required to register a public limited company. (10 marks)
2. On 1st June 2018, the following balances were in the books of Semenya Traders.
  Cash sh 15,000 Bank CR 40,000
  The following transactions occurred during the month.
  Date 4 Omenga a debtor settled his account of sh 10,000 by a cheque of sh 8,000.
  7 Deposited sh 4,000 into the business Bank account from the cash till
  8 Paid rent by cash sh 4,000
  14 Cash sales sh 14,000
  17 Purchased furniture worth sh 3,000 paying by cheque
  18 Settled Maina’s account of sh 10,000 after being allowed a discount of 5% by cash
  20 Received sh 6,000 cash from Nyori a debtor.
  22 Kemboi a debtor settled his account of sh 4,000 by cheque having been allowed a discount of 2%.
  25 Deposited sh 17,000 into the bank from private sources.
  30 Banked all the cash.
  Required
  Prepare a three column cash book duly balanced.
1. Kenya Power is a monopoly in Power distribution in Kenya. Explain five sources from which it could have received its power. (10 marks)
2. Explain five features of a good filing system. (10 marks)
1. Advertising in the Newspapers is one way of promoting sales of goods. Highlight five limitations of advertising goods in Newspapers. (10 marks)
2. The following trial balance relates to Kangogo traders as at 30th June 2018
  Particular Dr Cr
  Stock 1st July 2017 450,000
  Purchases 800,000
  Sales 1,200,000
  Carriage Outwards 10,000
  Carriage Inwards 5,000
  Returns 30,000 20,000
  Sundry Expenses 100,000
  Transport 20,000
  Stock 30th June 2018 550,000
  Capital 745,000
  _________ ________
  1,965,000 1,965,000
  Required:
  Calculate;
  1. Rate of stock turnover (3 marks)
  2. Rate of return on capital (2 marks)
  3. Markup (2 marks)
  4. Turnover (1 mark)
  5. Margin (2 marks)

MARKING SCHEME

1. Explain five factors that may lead to the success of a business enterprise. (10 marks)
  - Ability to manage people that involves activities such as hiring of new employees to fill in vacant positions, assigning duties to staff according to their qualifications.
  - Proper location – The business should be located at a place convenient for its operations.
  - Availability of raw materials/stock of goods. This would enable the business to continue operating to meet customer needs.
  - Adequate finance – Business with adequate capital is likely to do well since it will be able to finance all its operations.
  - Good public relations – This is necessary for attraction and retention of customers. little or fair competition in order to operate well.
  - Commitment to the business – A business where the entrepreneur is committed in its management is bound to do well.
2. Spain and France are developed countries in Europe. Discuss five problems of using national income statistics to compare the living standards of their citizens. (10 marks)
  - Different currencies – The countries have got different currencies hence have different standards of measure.
  - One country could be having a large subsistence sector whose income may not have been included in measure of N. 1.
  - The two countries could be different in terms of resources endowment hence different abilities to generate income.
  - Production activities may affect the health of citizens in the two countries differently.
  - The two countries may have different levels of inflation which distort the true value of goods.
  - The levels of income distribution in one country may be skewed compared to the other which may have a fair income distribution.
  - The degree of accuracy of the national income statistics are different in countries due to inaccurate data.
1. Explain five principles that would lead to effective operation of Jubilee insurance company. (10 marks)
  - Indemnity – States that the aim of insurance is to restore the person back to the financial position he was in before the loss.
  - Contribution – States that where a person has insured the same subject matter with more than one insurance company, upon the occurrence of the event of loss, the insurance companies that have insured that subject matter will contribute towards the compensation of the insured person.
  - Principle of Utmost good faith – States that a person taking an insurance policy is expected to give all material and relevant information about the subject matter in which he has insurable interest.
  - Principle of subrogation – It states that the insured must surrender the remains of an insured subject matter upon event of a loss once he is fully compensated.
  - Principle of proximate cause – States that there must be a very close relationship between the risk insured and the actual cause of the loss for insurance company indemnify. (Any 5 well explained 5 x 2)
2. Explain five attributes of a good money material. (10 marks)
  - Acceptability
  - Divisibility
  - Portability
  - Durability
  - Stability in value
  - Homogeneity
  - Cognisibility
  - Scarcity
  - Malleability
  - Not easy to forge
    Any 5 2 x 5 = 10 marks

Explain five differences of a public Limited company and a partnership. (10 marks

Public Limited	Partnership
Have Limited liability	Have unlimited liability except (Limited partners
Infinite membership	Limited to 20 except professionals who are 50 in
Have perpetual existence	No perpetual existence
Shares are freely transferable	Shares are not transferable
Minimum membership is 7	Minimum membership is 2
Can sue or be sued into name	Only partners can be sued
Managed by board of directors	Managed by an elected committee
Shares quoted in a security exchange	Shares not quoted since are not transferable.

Any 5 5 x 2 = 10marks

Explain five characteristics of economic resources. (10 marks)
- Monetary value – One can attach monetary value as they command a price.
- Have utility – useful.
- Transferable – Can change possession
- Unevenly distributed – Some areas are well endowed with resources than others.
- Alternative uses – e.g a pieces of land can be used for farming or for sports.
- Scarce in supply – Limited in supply which means one cannot have all economic resources they require.
- Can be continued – Different raw materials can be put together to produce a new product

Describe five documents required to register a public limited company. (10 marks)
- Memorandum of association – Governs the relationship between the company and outsiders.
- Articles of Association – Governs internal operations of the company.
- List of directors – Shows details of their names, addresses, occupations, shares subscribed and statement of agreement to serve as directors.
- Declaration – signed by the secretary to show that registrations requirements have been met as laid down by law.
- Statement signed by the directors. It states that they have agreed to act as directors.

On 1st June 2018, the following balances were in the books of Semenya Traders.

Cash sh 15,000 Bank CR 40,000
The following transactions occurred during the month.
Date 4 Omenga a debtor settled his account of sh 10,000 by a cheque of sh 8,000.
7 Deposited sh 4,000 into the business Bank account from the cash till
8 Paid rent by cash sh 4,000
14 Cash sales sh 14,000
17 Purchased furniture worth sh 3,000 paying by cheque
18 Settled Maina’s account of sh 10,000 after being allowed a discount of 5% by cash
20 Received sh 6,000 cash from Nyori a debtor.
22 Kemboi a debtor settled his account of sh 4,000 by cheque having been allowed a discount of 2%.
25 Deposited sh 17,000 into the bank from private sources.
30 Banked all the cash.
Required
Prepare a three column cash book duly balanced.

Date	Details	Discount Allowed	Cash	Bank	Date	Details	Discount Received	Cash	Bank
1/6/18	Bal b/d		15,000		1/6/18	Bal b/d			40,000
4/6/18	Omenga	2,000		8,000	7/6/18	Bank		4,000
7/6/18	Cash			4,000	8/6/18	Rent		4,000
14/6/18	Sales		14,000		17/6/18	Furniture			3,000
20/6/18	Nyori		6,000		18/6/18	Maina	500	9500
22/6/18	Kemboi	80		3920	30/6/18	Bank		17,500
25/6/18	Capital			17,000	30/6/18	Bal cld		-	7420
		2080	35,000	50,420			500	35,000	50,420

40 x ¼ = 10 marks

1. Kenya Power is a monopoly in Power distribution in Kenya. Explain five sources from which it could have received its power. (10 marks)
  - Control of an important input in production e.g. affirm may have sole control of a certain raw material e.g. Magadi Soda company that owns trona in Lake Magadi.
  - Ownership of production rights e.g. patent rights, copyrights and royalties.
  - Size of the market. A market size may be such that it is best served by one person or firm.
  - Additional costs by other firms other firms which try to enter the market may incur additional costs which raise their prices thus become unattractive.
  - Cartel formation – some firms may work together for the sole purpose of controlling the market of a product e.g. OPEC.
  - Financial factors – The initial costs may be high making it difficult for a new firm to enter the market.
  - Government policy – Where the government has imposed projective measures in one firm against any competition.
2. Explain five features of a good filing system. (10 marks)
  - Economical – should not be expensive to start and to maintain.
  - Accessibility – information should be easily retrieved without disturbing others.
  - Electricity – should be flexible to cater for future changes or expansion.
  - Safety – Provide protection to documents against loss, destruction.
  - Simplicity – should be simple to understand and operate.
  - Compactness – not occupying too much space.
  - Suitability – Should be appropriate to the needs of the business concerned.
1. Advertising in the Newspapers is one way of promoting sales of goods. Highlight five limitations of advertising goods in Newspapers. (10 marks)
  - The newspapers may not be read/reach an all places.
  - Not all potential customers are literate.
  - The newspapers may be written in a language not familiar to many customers.
  - Newspapers are expensive to buy space for advertising thus it becomes expensive to advertise.
  - Not many people can afford to buy newspapers.
  - It’s difficult to reach the target groups using newspapers.
  - Newspapers have got short life span since they are easily discarded after use.
  - Frequent publishing of newspapers i.e. daily issue make them not exciting to readers.
  - With the advent of social media in mobile phones, newspapers have become unpopular.
2. The following trial balance relates to Kangogo traders as at 30th June 2018
  Particular Dr Cr
  Stock 1st July 2017 450,000
  Purchases 800,000
  Sales 1,200,000
  Carriage Outwards 10,000
  Carriage Inwards 5,000
  Returns 30,000 20,000
  Sundry Expenses 100,000
  Transport 20,000
  Stock 30th June 2018 550,000
  Capital 745,000
  _________ ________
  1,965,000 1,965,000
  Required:
  Calculate;
  1. Rate of stock turnover (3 marks)
    - Turnover = Sales – Sales Returns = 1,170,000
  2. Rate of return on capital (2 marks)
    - Cost of goods sold = 705,000 = 1.41
      Average stock 500,000
  3. Markup (2 marks)
    - GP X 100 GP = Sales – COGs
      COGS 1,170,000 – 705,000
      = 465,000 = 65.957%
      705,000
  4. Margin (1 mark)
    - GP x 100 = 45,000 = 39.74%
      Sales 1,170,000
  5. Net Profit = GP – Expenses (2 marks)
    - = 465,000 – (100,000 +20,000) = 345,000
  6. Rate of return on Capital = Net profit = 345,000 x 100
    - Capital invested 745,000
      = 46.3%