BUSINESS STUDIES Paper 1 Questions and Answers - KCSE 2022 Past Papers

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BUSINESS STUDIES Paper 2 Questions and Answers - KCSE 2022 Past Papers

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QUESTIONS ;

Identify the component of Business Studies described in each of the statements below (4marks)

No.	Statement	Component
(a)	Systematic way of recording business transactions for decision making
(b)	The study of trade and aids to trade
(c)	The study of how human beings strive to satisfy their endless wants using the available scarce resources
(d)	The process of identifying a business opportunity and getting necessary resources to start and run a business

State four limitations of direct trade(4 mark)
Kaimosi Traders owned a house whose book value was Ksh 1,000,000. They insured the house for Ksh 800,000 against the risk of fire. Fire occurred and partly destroyed the house to a cost of Ksh 800,000.
Required:
1. Work out the amount of compensation that Kaimosi Traders would receive. (3 marks)
2. State the reason for paying the amount as determined in 3(a) above. (1 mark)
The diagram below represents the circular flow of income in a two sector economy.

Identify what is represented by the letters (a), (b), (c) and (d).(4 marks)

Name the books of original entry in which the following transactions are recorded: (4marks)

No.	Statement	Component
a	Bought goods on credit from Kamau wholesalers.
b	Kibisu a debtor, returned goods.
c	Cash sales.
d	Sold an old tractor on credit.

Outline three circumstances under which cash with order would be preferred. (3 marks)
State four non-tax sources of Government revenue. (4 marks)
Highlight four ways in which the economic environment may lead to business success. (4 marks)
Outline four circumstances under which a firm may be located near the market for its product.(4 marks)
Explain the meaning of each of the following trends in business ownership: (4marks,)
1. Holding company
2. Amalgamation
3. Absorption
4. Cartel

Identify the market structure described by each of the conditions given below. (4marks)

No.	Condition	Market Structure
a	The firm is the industry.
b	Buyers and sellers have complete knowledge about entire market but cannot influence the market.
c	Few large firms that dominate the market
d	Comprised of many sellers of differentiated products.

Outline four causes of cost-push inflation. (4 marks)
State four reasons for ethical practice in business. (4 marks)

State whether the transactions given in the table below will cause decrease, increase or no effect on the totals of the balance sheet. (4marks)

No.	Transaction	Effect
a	Bought office furniture in cash.
b	Deposited some money into the business bank account from personal savings.
c	Purchased goods on credit.
d	Withdrew money from the bank to pay the child's hospital bill.

Highlight four benefits of product promotion to the producer. (4 marks)

Name the type of unemployment described in each of the following statements: (4marks)

No.	Statement	Type of unemployment
a	Caused by change in production pattern during the year influenced by weather conditions.
b	Occurs repeatedly at similar times.
c	The number of people employed exceeds those that are required.
d	Firms are willing to employ all people at the prevailing wage rate but job seekers are not willing to take up the jobs.

Outline four differences between primary wants and secondary wants. (4 marks)
The following information relates to Maji Mazuri Traders for the month of December 2021

Details Ksh

Loan from Bank 24,000

Stock 40,000

Cash 60,000

Debtors 12.000

Salaries 8,000

Creditors 18.000

Furniture 16,000

Work out the net worth of Maji Mazuri Traders. (4 marks)
Outline four reasons that may make the Government protect consumers. (4 marks)

Identify the type of financial institution described in each of the statements below. (4 marks)

No.	Statement	Type
a	Operates fixed deposit, savings and current accounts.
b	Advances loans in proportion to one's savings.
c	Sells houses through mortgages
d	Offers finance to start or expand industrial enterprises.

Outline four benefits of electronic filing systems. (4 marks)
Highlight four benefits that Kenya may get from being a member of the East African Community. (4 marks)
The information below relates to Roga Roga Traders for the year 2021.
Sales Ksh 270,000
Margin 40%
Rate of stock turnover 6 times
Required:
1. Gross Profit (2 marks)
2. Cost of Goods Sold (1 mark)
3. Average stock (2 marks)
Highlight four reasons for locating bonded warehouses at border points. (4 marks)
Outline four services that retailers may offer to the consumers. (4 marks)

MARKING SCHEME

Areas in Business Studies described:
1. Accounting
2. Commerce
3. Economics
4. Entrepreneurship (4x1=4 marks)
Limitations of direct trade include:
1. Higher cost of distribution and operation will be borne by the producer in order to serve all consumers.
2. It may be harder to reach potential customers with the network where they are widely scattered.
3. It is suitable for a limited range of product/may not be applicable in the distribution of all products.
4. Risks involved are borne by the producer alone.
5. The producer bears the cost of packaging which could be otherwise done by the intermediaries.
6. Logistical challenges in managing distribution points serving consumers/buyers in various parts of the country.
7. Consumers may access fewer varieties of goods hence quality may be low.
8. Producer may have challenges of storage to hold enough stock to supply the market. (4x1=4 marks)
Calculation of compensation:
1. Compensation = Sum Insured × Loss
  Real value
  = 800,000 × 800,000
  1,000,000
  = 640,000
  Any 3x 1 = 3 marks
2. The house was underinsured.
  Under the principle of indemnity
  Any 1x 1=1 mark
Representation by letters (a), (b), (c) and (d):
1. Firms
2. Households
3. Payments for factor inputs/factors of production
4. Provision of factors of production/payment for goods and services (4x1=4 marks)
Types of original entries where the transactions are recorded: a
1. Purchases Journal
2. Sales Returns Journal/Returns inwards Journal
3. Cash Receipt Journal/Cash Book
4. General Journal/Journal proper (4x1=4 marks)
Circumstances under which C.W.O would be preferred include:
1. When the buyer is new to the seller
2. When the buyer's creditworthiness is questionable/in doubt
3. Where the seller is operating a mail order business
4. Where cash with order is the policy of the business
5. When the sellers requires cash urgently
6. When the seller requires ready/working capital
7. When the seller wants to avoid a lot of recording.
Non-tax sources of Government:
1. Government borrowings
2. Profits from Government Investments/Parastatal
3. Court fines/penaltie
4. Interest on loans advance by Government Agencies like KIE/ICDC
5. Rent and Rates on Government properties
6. Assets reverting back to the government upon death of owners without being claimed/Eschents
7. Grants/Aid/donations from donors and development partners
8. Licenses and fees
9. Proceeds from sale of government property
10. Fees e.g parking fees (4x1=4 marks)
Ways in which the Economic Environment may lead to business success include:
1. Low interest on loans hence affordable capita
2. Low/moderate inflation favouring costs of productio
3. Price stability leading to predictable income
4. Low taxes boosting profit ma gins
5. Increased Government subsidies lowering production cost
6. Increase in consumers level of disposable income increasing demand
7. Low exchange rates leads to business success.
8. Equitable distribution of income leads to business success. (4x1=4 marks)
Circumstances under which a firm may be located nea the market of its products:
1. When there is need to reduce the cost of transporting its fina product
2. When the finished/final products are heavy/bul
3. When dealing in perishable final product
4. When dealing in fragile final product
5. When the cost of transporting raw materials is cheaper than the cost of transporting finished final produc
6. When the market is located/concentrated in one area.
7. When the level of competition is high/stiff so as to deal direc ly with consumers
8. When the finished/final products are bulk (4x1=4 marks)
Meaning of the trends in business ownership are:
1. Holding companies - One that acquires 51% or more shares from another company
2. Amalgamation/Mergers - Where two/more business organizations combine/merge to form one bigger business
3. Absorption- A business taking over another business by buying all the assets and the purchased one ceases to exist all together.
4. Cartels-A group of related companies that agree to work together in order to control output, prices and market of their goods/services
Conditions describing types of market structures: (4x1=4 marks)
1. Monopoly
2. Perfect competition
3. Oligopoly
4. Monopolistic competition (4x1=4 marks)
Causes of Cost Push Inflation includes
1. Rise in salaries and wages
2. Increase in taxes
3. Reduction in subsidies
4. Unforeseen calamities such as drought/flood
5. Increase in prices of raw materials
6. Increased cost of utilities like electricity, water, insurance etc.
7. Unfavourable government legislation forcing use of expensive materials
8. Increase in profit margin (4x1=4 marks)
Reasons for ethical practices in Business include:
1. To avoid consumer exploitation by the business
2. To ensure the rights of employees are upheld
3. To protect the environment from degradation/pollution
4. To ensure fair competition
5. To give back to the society by providing service (CSR)
6. Abide by government requirements e.g Pay tax
7. Enhance the public image of the business
8. Ensure no discrimination in business
9. Eliminate use of unfair means of achieving business objective e.g hoarding (4x1=4 marks)
Effects of transactions on Balance Sheet totals
1. No effect
2. Increase
3. Increase
4. Decrease (4x1=4 marks)
Benefits of product-promotion to the producer include:
1. To counter competition
2. To increase sales volume of a given product/expand market
3. To create awareness about a product
4. To enhance customer loyalty
5. To influence/persuade the consumer to try out a new produc
6. To remind consumers about the existence of a product
7. To correct misinformation about a product.
8. To improve the business image (4x1=4 marks)
Types of unemployment:
1. Seasonal unemployment
2. Cyclical unemployment
3. Disguised/hidden unemployment
4. Voluntary/Real wage unemployment (4x1=4 marks)

Differences between primary human wants and secondary wants include:

	Primary wants	Secondary wants
(a)	They are felt needs	They are desired needs/ Not felt
(b)	Cannot be postponed	Can be postponed
(c)	One cannot do without/ essential for survival	Needed to improve quality of life/Can do without/Not essential for survival
(d)	Given priority in satisfaction	Are not prioritized in satisfaction
(e)	All are universal	Only some are universal/vary from one person to another
(f0	Does not determine once socio-economic status	May denote/determine one's socio-economic status

(4x1=4 marks)

Network=Asset Liabilities
Asset = 112,00016,000 128,000
Liabilities = 24,00018,000-42,000
Network = 128,000 42,000
= Sh. 86,0000 (4x1=4 marks)
Reasons that may make the Government to protect consumers include:
1. To ensure harmful goods are not sold to them
2. To ensure that goods offered for sale are of right weight and me sure
3. To protect them from overpricing/overcharging
4. To prevent hoarding
5. To ensure that businesses are housed in safe premises/ensure that safety standards are met
6. To protect them from misleading advertisement
7. To ensure that they do not buy substandard/inferior goods/false advertisement
8. To protect consumers against breach of contract
9. To ensure health standards are maintained
10. To ensure rights of tenants are upheld
11. To ensure professionals meet the set standards. (4x1=4 marks)
Types of financial institutio
1. Commercial banks
2. Savings and Credit Cooperative Society (SACCOS)
3. Housing Finance Companies
4. Development Banks (4x1=4 marks)
Benefits of electronic finding system include
1. Require little space
2. Easier and fast retrieval of information
3. Easily adaptable to future requirements of a firm/can be updat d with a lot of ease/flexibl
4. Relatively cheap
5. Enhances security of stored document through passwords
6. Documents stores can be accessed by people far away from site of location through internet
7. Provides for back-up system
8. Reduces paper work
9. Enhances tidiness/neatness in the offi
10. Can store large volume of information
11. Easily portable (4x1=4 marks)
1. Enables Kenya to dispose of surplus products.
2. Enables Kenyan citizens get wider variety of goods to choose from.
3. Enables Kenya to specialize in producing what it has comparative advantage in.
4. Promotes effective utilization of locally available resources to meet the high market demands.
5. It enables the country to expand the market for its good.
6. Enhance peace and understanding among trading East African Countries.
7. Facilitate transfer of technology among the East African Countries
8. Enables free movement of factors of production e.g labour
9. Enables creation of employment.
10. Enables developement of infrastructure.
11. Enables Kenya to have a common bargaining power
12. Enables Kenya to acquire goods at lower prices. (4x1=4 marks)
1. Gross profit
  Margin = GP × 100
  Sales
  40 = GP
  270,000
  40 =⁴⁰/₁₀₀× 270,000
  = 108,000 (4x½ = 2marks)
2. Cost of goods sold
  GP = Sales − COGs
  COGs = 270,000 − 108,000
  Cost of sales = 162,000 (2x½ = 1marks)
3. Average stock = 162,000
  6
  = 27,000 (4x½ = 2marks)
Reasons for locating bonded warehouses at border points.
1. To control entry and exit of illegal goods.
2. To inspect type/nature of the good imported/ exported
3. To control the quantity of goods entering the country
4. To control the entry of harmful goods/cross border smuggling of goods
5. Helps ini verification of documents of goods on transit
6. Ease of collection of duty.
7. To avoid dumping by controlling the quality of goods entering the country (4x1=4 marks)
Services that retailersoffer to consumers include;
1. Steady supply of goods leading to stable prices.
2. Advice to the consumers
3. Credit facilities to trusted consumers
4. Breaking bulk on behalf of the consumers
5. Preparing the goods for sale
6. Avails variety of good for consumers
7. Offer after sale service
8. Brings goods closer (4x1=4 marks)