BUSINESS STUDIES PAPER 2 - 2019 KCSE CEKENA MOCK EXAMINATION (QUESTIONS AND ANSWERS)

Instructions to candidates

• Write your name, class and admission number in the space provided above.
• This paper consists of six questions.
• Answer any five questions.
• Answers should be written in the space provided.
• All questions carry equal marks.
• Candidates should answer the questions in English.

1.  
   1. Explain five features that differentiate a public corporation from a private limited company form of business unit. (10 marks)
   2. Kapa Oil Manufacturers have decided to eliminate wholesalers in their chain of distribution. Outline five possible effects that would result if wholesalers were eliminated. (10 marks)

2.  
   1. Some developed countries have a huge population made up of ageing persons. Explain five Problems this situation could present to such countries.       (10 marks)
   2. Khwesa Traders had the following balances as at 31^st December 2014.
      Item                                        Shs.
      Building                                   540,000
      Bank loan                                 472,000
      Debtors                                    116,900
      Creditors                                  227,000
      Furniture                                  408,170
      Gross profit                              520,600
      Motor vehicle                            900,000
      Discount allowed                       142,000
      Lighting                                    25,200
      Interest on loan                          1,200
      Closing stock                            72,500
      Rent received                           120,000
      Repairs on buildings                  60,000
      Repairs on furniture                   72,030
      Repairs on motor vehicle           300,000
      General expenses                      102,100
      Capital                                     1,400,000
      Prepare:
      1. Profit and Loss Account for the year ended 31/12/2014.
      2. Balance sheet as at 31/12/2014. (10 marks)

3.  
   1. The saga of contaminated sugar and plastic rice has raised many questions in the economy. Describe five roles of the Kenya Bureau of standards (KEBS) in consumer protection in order to curb such commodities in the market. (10mks)
   2. Explain five measures that the government can take so as to improve the efficiency of the road transport system in the country. (10mks)
4.  
   1. VP Shah shop sells all its goods at a margin of 20%. For the year ended 30^th April 2006, the trading activities were as follows.
      Purchases        sh.        80,000
      Sales profit      sh.        950,000
      Net profit        5% of sales
      Closing stock  sh.        200,000
      Calculate
      1. The gross profit   (2 marks)
      2. The opening stock   (4 marks)
      3. Mark up percentage   (2 marks)
      4. The net profit.   (2 marks)
   2. Explain five reasons that justify why the Kenyan Government is emphasizing on promoting entrepreneurship in Kenya. (10 marks)

5.  
   1. In most secondary schools in Kenya, principals are accommodated in their own offices. Explain five disadvantages associated with this kind of arrangement. (10 marks)
   2. The following were the balances of Kiboko Traders as at 1^st January 2009. Cash Sh.40,000, bank overdraft Sh.17,000. During the month the following transactions took place. 
      January
      2^nd:       Mutiso a debtor settled his account of Sh.32, 000 by cheque of Sh.30,000                                     
      4^th:       Paid salaries amounting to Sh.16, 000 by cash.
      10^th:     Deposited Sh.12, 000 into the business bank account from the cash till.
      14^th:     Settled Wayua’s account of Sh.40, 000 and she was allowed a discount of 1% through a cheque.
      16^th:     Deposited Sh.56, 000 in the bank from private resources.
      17^th:     Sold goods for cash Sh.24, 000.
      20^th:     Mutua, a debtor, settled his account by a cheque of Sh.16, 000 having been allowed a discount of 2%.
      24^th:     Purchased furniture Sh.10, 400 paying by cheque.
      26^th:     Received Sh.7, 200 cash from Odhiambo.
      30^th:     Banked all the available cash except Sh.3200.
      Required:    Prepare three column cash for Kubuka Traders (10 marks)
6.  
   1. Kenya is in the process of developing a standard gauge railway line from Mombasa to Malaba. Explain five benefits that a trader in Malaba will enjoy from this modern railway line.  (10 marks)
   2. Outline five tools of monetary policy used by central bank  (10 marks)

MARKING SCHEME

1.  
   1. Explain five features that differentiate a public corporation from a private limited company form of business unit. (10 marks)
      

      Public Corporation	Private Limited Company
      1.Initial capital is usually provided by the government. 2.Established through legislation by an act of parliament. 3.Managed by a board of directors appointed by the government. 4.Profits are issued to dividends and the government to the members. 5.Non-profit motivated.	1.Initial capital comes from the shareholders. 2.Established by promoters according to the company’s act. 3.Managed by one or two directors elected by shareholders. 4.Profits are distributed and the shareholder on dividends. 5.Usually established to earn profits.

   2. Kapa Oil manufacturers have decided to eliminate wholesalers in their chain of distribution. Outline FIVE possible effects of eliminating wholesalers. (10 marks)
      • Manufacturers would set up distribution centers /depots or warehouses which are additional costs to manufacturers.
      • The cost of distribution may be increased and the subsequent increase passed on to consumers inform of higher prices.
      • The retailers would have to go to manufacturers, which is an additional cost to retailers.
      • The producers would have to break the bulk because retailers may not afford to buy in large quantities.
      • Manufacturers may be required to extend credit facilities to retailers, which require additional record keeping capital.
      • Due to additional functions to producers, it will reduce their efficiency in production.
      • Prices may fluctuate due to unsteady flow of goods.
        (any five well explained points @ 2=10mks)

2.  
   1. Some developed countries have a huge population made up of ageing persons. Explain Five problems this situation could present to such countries. (10 marks)
      • There will be less mobile force / rigidity to change and work in some areas.
      • Lack of input of more energetic youth- reduced productivity.     
      • Low active labour supply-leading to high cost of employment.
      •  Loss of job opportunities; low demand for goods/services leading to loss of jobs.
      • High level of dependency hence less saving and investments.     
      • Lack of creativity and innovations: low quality of goods.
      • high cost of providing social benefits to the aged-overburdening the tax payer.
   2. Khwesa Traders had the following balances as at 31^st December 2014.
      Item                                        Shs.
      Building                                   540,000
      Bank loan                                 472,000
      Debtors                                    116,900
      Creditors                                  227,000
      Furniture                                  408,170
      Gross profit                              520,600
      Motor vehicle                            900,000
      Discount allowed                       142,000
      Lighting                                    25,200
      Interest on loan                          1,200
      Closing stock                            72,500
      Rent received                           120,000
      Repairs on buildings                  60,000
      Repairs on furniture                   72,030
      Repairs on motor vehicle           300,000
      General expenses                      102,100
      Capital                                     1,400,000
      Prepare:
      1. Profit and Loss Account for the year ended 31/12/2014.
      2. Balance sheet as at 31/12/2014. (10 marks)
         
         
3.  
   1. The saga of contaminated sugar and plastic rice has raised many questions in the economy.Describe five roles of the Kenya Bureau of standards (KEBS) in consumer protection in order to curb such commodities in the market.            (10mks)
      • It set standards on the quality that must be met by both the locally produced goods as well as the imported goods.           
      • It ensures that harmful goods are neither produced nor imported into the country by inspecting all imported goods & local goods.
      • It provides quality assurance experts services to the producers to ensure that they produce high quality goods.
      • It requires that all foods are well labeled and packed so as to ensure that such food is protected and that the right information on the product is passed to the consumers.
      • It takes legal action against those who operate outside the set standards.
      • It ensures that all products are tested to ensure quality and that they bear a KEBS mark of quality on their package.
      • Ensure that the equipment used by producers to measure time, weight volume and length is correct for the consumer to get accurately measured goods.
      • Ensure that imported goods are inspected to ensure that they are of the right standards.  (5x2=10mks)
   2. Explain five measures that the government can take so as to improve the efficiency of the road transport system in the country.                                                                        
      • Improving the road network system by tarmacking more roads particularly in rural areas.
      • Ensuring that vehicles do not exceed their load capacities as this causes damage to roads.
      • Educating the providers and the consumers of roads transport services of their moral obligation to observe the traffic code.
      • Improving rail transport so as to ease congestion on roads.
      • Undertaking regular maintenance of roads to ensure that they are in good condition at all time.
      • Ensuring that there is strict adherence to traffic laws.
      • Ensuring that only trained and licenced people are allowed to drive vehicles on the roads.
      • Ensuring that corruption is eradicated on the roads, by imposing heavy panalties on those who practice it.
      • Establishment of by- pass road systems in the outstirts of urban centres does not have to pass through it.  (5x2=10mks)

4.  
   1. VP Shah shop sells all its goods at a margin of 20%. For the year ended 30^th April 2006, the trading activities were as follows.
      Purchases        sh.        80,000
      Sales profit      sh.        950,000
      Net profit        5% of sales
      Closing stock  sh.        200,000
      Calculate net profit.
      1. The gross profit
      2. The opening stock
      3. Mark up percentage
      4. The net profit.
         
         
   2. Explain five reasons that justify why the Kenyan Government is emphasizing on promoting entrepreneurship in Kenya.                                             (10 marks)
      • Employment creation :to earn a living
      • Improves infrastructure: for fast movement of goods/service/information to the market
      • Leads to innovation/creativity     higher quality of goods/low cost of production
      • Revenue generation : though payment of taxes
      • Leads to entreprenuerial culture: thus broaden more sectorsfor self employment
      • Provision of goods/services –diversification of production activities/provide variety of goods/services
      • Exploitation of resources: thus no idle / unutilized resources   (5 x 2 = 10 marks)
5.  
   1. In most secondary schools in Kenya, principals are accommodated in their own offices. Explain five disadvantages associated with this kind of arrangement. (10 marks)
      • It doesn’t allow for close supervision of workers.
      • It encourages unauthorized absenteeism by the staff.
      • Encourages misuse of office facilities such as telephone and internet.
      • It reduces interaction between management (the principal) and the rest of the staff members.
      • A lot of time is taken by officers moving from one office to another.
      • It is costly to construct and maintain.
   2. The following were the balances of Kiboko Traders as at 1^st January 2009. Cash Sh.40,000, bank overdraft Sh.17,000. During the month the following transactions took place.         
      January
      2^nd:       Mutiso a debtor settled his account of Sh.32, 000 by cheque of Sh.30,000                                     
      4^th:       Paid salaries amounting to Sh.16, 000 by cash.
      10^th:     Deposited Sh.12, 000 into the business bank account from the cash till.
      14^th:     Settled Wayua’s account of Sh.40, 000 and she was allowed a discount of 1% through a cheque.
      16^th:     Deposited Sh.56, 000 in the bank from private resources.
      17^th:     Sold goods for cash Sh.24, 000.
      20^th:     Mutua, a debtor, settled his account by a cheque of Sh.16, 000 having been allowed a discount of 2%.
      24^th:     Purchased furniture Sh.10, 400 paying by cheque.
      26^th:     Received Sh.7, 200 cash from Odhiambo.
      30^th:     Banked all the available cash except Sh.3200.
      Required:    Prepare three column cash for Kubuka Traders (10 marks)
      
      NB: C₁ and C₂ if not indicated don’t award.                         (20 x ½ = 10mks)
6.  
   1. Kenya is in the process of developing a standard gauge railway line from Mombasa to Malaba. Explain five benefits that a trader in Malaba will enjoy from this modern railway line.  (10 marks)
      • wide market: provide access wide market to increase sales
      • Saves on cost of transport- higher profit margins
      • Faster transport- avoids delay of goods to market
      • Security of goods- safety of goods against theft/damage
      • Containerization- eases handling of goods/improved safety
   2. Outline five tools of monetary policy used by central bank   (10 marks)
      • bank rate:
      • Open market operation
      • Selective credit controls
      • Cash ratio/;Liquidity ratio
      • Margin requirements
      • Compulsory deposits
      • Moral persuasions
        Mention 1mk otherwise 2 marks x 5 = 10mks