Business Studies Paper 2 Questions and Answers - KCSE 2020 past papers

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Instructions to candidates

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

1. Explain five measures that the government may take to solve youth unemployment in Kenya. (10 marks)
2. Explain five reasons for consumer protection. (10 marks)
1. Explain five principles of Government spending. (10 marks)
2. Explain five trends in office management. (10 marks)
1. Post the following transactions to the relevant ledger accounts and balance them off.
  1/3/2018 Started a business with Ksh 100,000 at the bank
  2/3/2018 Bought a motor vehicle worth Ksh 800,000 on credit from General Motors.
  4/3/2018 Withdrew Ksh 20,000 from bank for office use.
  6/3/2018 Bought stock worth Ksh 30,000 paying by cheque
  10/3/2018 Made cash sales of Ksh 15,000
  10/3/2018 Took cash Ksh 8,000 to pay hospital bills. (10 marks)
2. Explain five benefits of intermediaries to the consumer in the chain of distribution. (10 marks)
1. Explain five benefits of a savings account to a customer. (10 marks)
2. Explain five ways in which a warehouse may promote trade. (10 marks)

The following is an extract of a trial balance from the books of Adan Traders as at 31 December 2018

Adan Traders
Trial balance as at 31 December 2018

Details	Dr.	Cr.
Premises	1,120,000
Debtors and creditors	55,000	37,300
Cash in hand	65,000
Cash at Bank	80,000
Discounts	15,000	2,400
Salaries and wages	27,000
Commission	16,600	9,000
Power and lighting	11,700
Furniture	49,000
Capital		1,301,800

Additional information:
Stock of goods on 31 December 2018 Ksh 25,000
Gross profit Ksh 120,000
Required:

Prepare Adan Traders Profit and Loss Account for the period ended 31 December 2018 (5 marks)
Prepare a Balance Sheet as at 31 December 2018 (5 marks)

Explain five benefits of communication to a business. (10 marks)

1. Explain five reasons that may make it necessary for the government to promote entrepreneurship.(10 marks)
2. Explain five advantages of indirect production to the society (10 marks)

Marking scheme

1. Measures that the Government may take to solve youth unemployment in Kenya include:
  1. Adoption of relevant/changing/improving education system that equips the youth with relevant skills/training (e.g. Artisan, carpentry, masonry)/makes the youth employable
  2. Adoption of policies that encourage use of appropriate labour intensive methods of production to use/employ/ absorb/ more labour/increase job opportunities
  3. Diversification of economic activities that provide variety of production activities(e.g mixed agriculture, ICT.) / by encouraging/establishing different industries/ sectors
  4. Increasing Government spending in projects that employ the youth/kazi kwa vijana/accept of government projects as expansion/ which expands size of economy, relevant e.gs
  5. Partner with the private sector to steer community based projects/that involve the youth.
  6. Encourage maximum/better/full utilization of available (natural) resource to increase production
  7. Encouraging rural development/activities in order to attract firms/minimize rural-urban migration,
  8. Improve Infrastructure in order to stimulate economic activities.
  9. Control population Growth, so as to have a labor force that the economy can absorb/sustain
  10. Export labor by assisting the unemployed youth) to acquire jobs abroad/countries with labour deficiencies.
  11. Lending/setting up a firm to assist the unemployed to start income generating activities. Acc e.gs of a fund as a mention
  12. Protect local industries ( from foreign competition) so that they can expand/absorb more labor
  13. Encourage/promote the informal sector,juakali sector in order to promote self employment.
  14. Delocalization/decentralization of firms that reduces rural urban migration /increased Job opportunities in any - part & the country/any value addition can be awarded.
  15. Income wage policy to harmonize/eliminate differences between regions/sectors
  16. Attract local/foreign Investment to grow the economy/increase production activities
  17. Revive collapsed firms/industries/projects to increase production activities/ by injecting more funds to collapsed industries/firms
  18. Establish employment policy to make it easy for the youths to get jobs/ accept e.gs of employment policies as a mention.
  19. Setting up vocational/IVET Institutions to train youths on practical skills.
    (Any 5 x 2 =10 marks)
2. Reasons why consumers need protection include:
  1. Unfair pricing by traders who may overcharge them.
  2. To protect them from consuming low/poor/inferior quality goods i.e sale of counterfeits(instead of the original goods) that do not meet the set standards
  3. Misleading/false information advertising(about products) which may give wrong impression about the product/cheat on the performance of the product
  4. Unsafe structures/construction of substandard structures/buildings that endanger/ threaten life of consumers/that do not meet minimum safety standards.
  5. Artificial shortages/(hoarding) usually meant to increase prices/deny consumers access to goods/services
  6. Unhygienic/expired/harmful products e.g. selling skin lightening creams to ignorant client/that are unfit for consumptions/can cause damaged/problems to consumers. Accept mention of harmful products as expansion
  7. Breach of Contract Failure to honour contracts on the part of traders/unfair repossession of goods harassment by traders
  8. Underweight/undersized goods/services - where some traders sell goods below the weight/size paid for/give less service to consumers/cheat consumers on the weight/size of the goods
  9. Socially unacceptable goods services some traders sell offensive goods /services that harm the morality of society (accept examples of socially unacceptable goods/services as a mention)
  10. Illegal goods/ services some traders are unlicensed/unprofessional/unqualified to provide some goods/services.
  11. Unhygienic environment/premises some traders sell goods/services under dirty/unclean/unhealthy conditions that can affect the health of consumers contaminated goods/services
    (Any 5 x 2 =10 marks)
1. Principles of Government spending includes:
  1. Sanction.
    - The expenditure must be authorized/approved by parliament/relevant bodies.
  2. Economy.
    - Should be incurred in the most affordable way/to avoid any possible wastage/misuse
  3. Accountability/Good/proper financial management
    - Public funds should be well managed/proper records maintained(for auditing)
  4. Flexibility
    - The expenditure policy should accommodate the changing/prevailing economic situations (e.g. drought/floods/pandemics etc).
  5. Maximum/optimum Social benefit
    - Any expenditure must accord maximum benefit to the majority of the people.
  6. Productivity.
    - The expenditure should be incurred projects that can yield a (return on Investment).
  7. Equity.
    - Should be incurred in a way that ensures fair income distribution.
  8. Surplus
    - Savings should be spent on emergencies/fill revenue gaps between collections & projection/ expenditure should be less than the revenue collected
  9. Elasticity
    - Expenditure should be capable of being expanded/contracted in line with the size of the economy
      (Any 5 x 2 =10 marks)
2. Trends in office management include:
  1. Increased computerization/automation in managing business records/data/communication/ for efficiency. (accept relevant benefits of automation as expansion)
  2. Establishment of Public Relations Department/public relations/customer care services desk to address the need for customer satisfaction.
  3. Adoption of open/landscape office plans to facilitate supervision of staff/economize of floor space/enhance comfort in the office. ( accept e.gs of benefit of open plan offices expansion).
  4. Increased use of mobile phones (by employees) for office communication. (accept benefits of mobile phones for communication as explanation.
  5. Relocation of offices from urban to-suburban areas to take advantages of low rent/rates and large space away from congested town centres/outskirts of town.
  6. Merging duties/responsibilities employ multi skilled staff to reduce the number of employees doing routine work/ save on labor cost/carrying out different tasks.
  7. Use of biometric(reporting systems) to manage staff attendance control staff movement
  8. Provision (for) working from home/away from the physical office to save on cost/minimize congestion (accept any benefit of working from home as expansion)
  9. Innovating ways of motivating staff through tours/meals at work/transport/medical cover/to improve productivity/loyalty.
  10. Capacity building to develop staff skills/ competence.
  11. Hiv/aids/Covid 19 Awareness policy to sensitize employees/avoid discrimination/infection
  12. Stress management to promote good health/copying at work
  13. CCTV/closed circuit tv for surveillance/enhance security
  14. Inclusivity to promote equal opportunity in employment (accept examples of inclusivity as a qualification
  15. Environmental Conservation to mininise degradation/to ensure sustainability.
  16. Use a name tags/badges for (easy) identification of workers
  17. Cooporate social responsibilities to give back to the community.
  18. Team building to enhance bonging/interaction/teamwork/team spirit.
  19. Increased use of Internet/emails/social media/extranet /intranet/for conferencing/accessing information.
    (Any 5 x 2 =10 marks)
1. 40 x ¼ =10 marks
  NB
  1. where there's no title/wrong title do not award
  2. where the candidate comes with stock account do not award.
  3. ignore omission of dates
  4. where wrong dates are given - no marks for details and figures.
  5. Details on balancing should be balance carried down or balance CF.
  6. The balancing can be done at the last date of transaction or any date between the 20th & 30th.
2. Benefits of intermediaries in the chain of distribution include;
  1. Breaking of bulk/split goods into smaller quantities that can be conveniently purchased by consumers.
  2. Passing of(important) information/feedback (between consumers and producers) which improves the quality of goods produced/price/availability/usage (accept any relevant information about the good as expansion.
  3. Accumulation of bulk to ensure a steady supply of goods (throughout the years)/satisfy large consumers
  4. Avails a variety of goods (to the consumers)from different producer/ that consumers can choose from/to satisfy different tastes
  5. They offer advisory services to the consumers.) about the goods in the market/usage/price/availability (accept relevant advisory services as expansion)
  6. Prepare goods for sale (to the benefit of consumers.) through branding/packaging/sorting/grading/blending
  7. Avail goods closer to the consumers which relieves/saves the consumers the cost of traveling/ transport time
  8. Provide storage warehousing. enabling the consumers to get goods at the time they need them/in good condition (accept other benefits of warehousing to the consumers as expansion.
  9. Promote/Advertises goods that creates awareness of availability/existence of good/that makes the consumers make informed choice/decision when buying goods.
  10. Selling goods on credit. enabling consumers to afford more/expensive goods.
  11. Offers transport, which relieves the consumer of transporting goods/transport cost.
  12. Offers other sale services to enhance product usage/ increase customers satisfaction (accept consumer examples of other sale services
    (Any 5 x 2 =10 marks)
1. Benefits of savings accounts to a customer.
  1. Allows the customer to save by accumulating small amounts of money/for future use/since withdrawals are controlled/limited.
  2. Offers safe custody for the customer's money/against theft/Loss
  3. Minimal charges are levied on the account making it more attractive/affordable/compared to current account
  4. Customers earn interest on the account balance/as an income/which increases the bank balances.
  5. Requires little deposits to open. which makes inaccessible/as compared to other accounts.
  6. Customer may get bank loan on the basis of the savings accounts.
  7. Encourages the customer to invest from the savings.
  8. Deposits can be made into the account anytime to its convenience of the customers/compared to fixed account.
  9. Account holding are issued with identification cards which may also act as a debit card.
    (Any 5 x 2 =10 marks)
2. Ways in which a warehouse may promote trade include:
  1. Promote mass production/by allowing the producer to continue producing goods since there is space for storage of (finished) goods/raw materials
  2. Stabilizes prices by regulating the flow of goods/storing the surplus/releasing the goods when demanded.
  3. Ensures continuity of supply/steady supply of goods/seasonally produced goods by storing them/releasing to the market/when need arises.
  4. It facilitates the preparation/processing of goods of sale by branding/ sorting| packaging (accept relevant method of preparation for sale as expansion.
  5. Creates time utility by ensuring that consumers get goods when required.
  6. Ensure safety of goods from physical damage/the damaging effects of weather/pests
  7. May add value to some goods, e.g. wine/can improve in quality/taste better when they stay for long time/fetch better prices/better satisfaction of needs
  8. Enables traders to look for market/safe goods while they are still in the warehouse
  9. Ensure seasonally demanded good are stored until required
  10. Bonded warehouses help to store goods awaiting clearance by custom authority/allow the imported to claim the goods/look for money to pay for custom duty/clearance
  11. Security for goods/since they are protected from theft/pilferage.
    (Any 5 x 2 =10 marks)

Adan Traders Profit and Loss Account
ADAN TRADER'S
PROFIT AND LOSS ACCOUNT
FOR THE PERIOD ENDED 31^ST DEC. 2018

Discount allowed 15,000

Salaries and wages 27,000

Commission allowed 16,600

Power and lighting 11,700

Net profit 61,100
131,400

Sh.

Gross profit b/d 120,000

Discount received 2,400

Commission received 9,000

131,400
Net profit 61,100

10 x ½ = 5 marks

ADAN TRADER'S
BALANCE SHEET
Dr AS AT 31^ST DEC. 2018 Cr

Sh
Premises 1,120,000
Furniture 49,000
Stock 25,000
Debtors 55,000
cash in hand 65,000
Cash at Bank 80,000
1,394,000

Sh.
Capital 1,301,800
Net profit 61,100
Creditors 37,300

1,400,200

10 x ½ = 5 marks
NB

Penalise foreign item on the balance sheet up to zero
Wrong net profit, correctly posted to the balance sheet area however this should arise from an arithmetic error
Wrong titles do not award.

Benefits of communication to a business include.
1. Enhances coordination (between departments) ensuring they all work towards achieving objectives of the business.
2. Helps maintain a positive relationship with(other)stakeholders for smooth operation/reducing.
3. Facilitates the decision making process within the business for better management.
4. Increased employee motivation due to clarification of goals, objectives/expectations.
5. Improved Productivity/Better performance due to clear targets setting/feedback
6. Increased sales due to effective product promotion.
7. Improved harmony/ peace/understanding (in the business) due to minimal conflicts/since issues are clarified/challenges addressed.
8. Improved image/reputation (of the business) corrects negative attributes/perception which elevate the standing of the business in the market/In the eyes o the public.
9. Helps to clarify issues/points so as to avoid confusion/to be well understood.
10. Enables a business to get information/obtain/send information from internal/external sources (that can be useful to the business)
11. Enhances/promotes teamwork through consultational sharing & ideas/resources.
12. Facilitates/promotes research which helps to improve processes/activities in the business.
  (Any 5 x 2 =10 marks)

1. Reasons that make it necessary for the government to promote entrepreneurship include:
  1. Job/Employment creation for self through trading/production activities/for others/ may boost economic activities in the country. Trading activities may boost employment opportunities in the country.
  2. Opening up of remote parts of the country.
    Trading activities may attract support industries/auxiliary services/such as banks/infrastructure development in some areas (accept e.gs a support industry/auxiliary services & infrastructure as expansion.
  3. To raise living standards.
    Trade usually brings goods that some areas may not be in a position to produce hence higher living standards by availing a variety of goods to them.
  4. To reduce rural urban migration.
    When (more) people engage in business activities in the rural set-up/ it may serve to lower the rate of rural urban-migration (accept any advantages of reduction of rural-urban migration as expansion
  5. To promote innovation/creativity.
    Entrepreneurship encourages use/development of new technology/ideas/products which in turn results into high quality/quantity production.
  6. To make use of local resources.
    The Government may desire to put all the available resources into proper use, to increase production to avoid them being idle.
  7. To save on imports/foreign exchange by producing commodities locally(rather than buying from outside the country)
  8. To reduce foreign dominance for business in the country by encouraging Local people to invest in business
  9. To generate (more) revenue to the government where the business pay taxes to the government.
  10. To promote entrepreneural culture, where successful business often act as role models/mentors for future entrepreneurals.
  11. To encourage production of a variety of goods/services so as to satisfy different consumer tastes/ widen their choice.
  12. To encourage production of goods for export which generate foreign exchange
    (Any 5 x 2 =10 marks)
2. Advantages of indirect production to the society include:
  1. Access to enough quantity of goods due to surplus production.(can be used interchangably)
  2. Improved living standards due to income/profit generated
  3. They have access to many choices due to a variety of goods produced in the economy. (can be used interchangeably)
  4. Encourage competition ready to fair prices/quality goods/accept
  5. Availability of employment opportunities since many people are engaged in various stages of production. accept advantages of employment as expansion
  6. The society enjoys improved infrastructure/roads which may be put up to support business activities| facilitate movement production (accept advantages as of infrastructure as an expansion.
  7. Improves the societal cohesion/peace/harmony due to interaction since many people are brought together from different areas to trade.
  8. Maximum/optimum utilization of available resources since production is meant for sales/leading to increased production.
  9. High Quality goods produced due to use (better (advanced technology/specialization
  10. It encourages specialization/division of labor which leads to efficiency in product/ better quality good. (accept advantages of specialization/division of labor as expansion.
  11. The society enjoys improved social amenities/which may be put up to support business activities. (accept advantages of social amenities as expansion.
  12. The society enjoys improved auxiliary services which are put up to support business activities(accept advantages of auxiliary services).
  13. Encourages trade/ exchange many people to get what they cannot produce/leading to generation of income to owners/government through taxes.
  14. Can lead to steady supply of goods since there are many producers who may engage in similar production activities
  15. Promotes creativity/innovation which leads to new ideas/product/technology
  16. Encourages use of machines which makes production more.
    (Any 5 x 2 =10 marks)