BUSINESS STUDIES PAPER 2 - 2019 KCSE TAP TRIAL MOCK EXAMS (QUESTIONS AND ANSWERS)

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Instructions to candidates:

  • This paper consists of SIX questions
  • Answer any five questions.
  • All questions carry equal marks.
  1.  
    1. Describe any five channels that can be used to distribute locally manufactured goods.    (10 marks)
    2. Explain five challenges that may be experienced by a new entrepreneur who is intending to start a business in Kenya. (10 marks)
  1.  
    1. The table below shows the age distribution of a country.

      Age in years

      % of population

      0 – 15

      45

      16 – 55

      31

      56 and above

      24


      Explain four negative economic implications of this age distribution to a country.  (8 marks)
    2. The following trial balance was extracted from the books of Nyaituya on 31st December 2005.       
      BS22          
      Additional information.                              Sh.
      1. Stock as at 31st December 2005                  52,000
      2. Rent accrued                                     6,000
      3. Insurance paid in advance                 4,000
      4. Commission due                               5,000
      5. Salaries owing                                   21,000
        REQUIRED:
        Prepare a trading, profit and loss account for the year ended 31st December 2005 and a balance sheet as at that date.  (12 marks)
  1.  
    1. Explain five circumstances that make it necessary for insurance companies to re-insure.  (10 marks)
    2. The following transactions relate to Pumua Wholesalers for the month of March 2011.
      March 1:     Bought goods on credit from Kawe distributors Shs.26,200, Kamakia Ss.15600, Mambo Shs.33,360.
      March 2:     Sold goods on credit to Fuma retailers Shs.37,200, Tito grocers Shs.25,500 and Wamba traders Shs.16,250.
      March 6:     Returned goods to Kamakia Shs.2,400 and Mambo Shs.4,160.
      March 9:     Sold goods on credit to Tamu Shs.5,500 and Patu Shs.18,200.
      March 11:   Bought goods on credit from Chuma Shs.33,840.
      March 15:   Goods returned by Tamu Shs.1,500 and Fuma retailers Shs.1,820 and Patu Sh.2,600.
      March 18:   Bought goods on credit from Jama Shs.21,210 and Sama Shs.53,850.
      March 26:   Credit sales to Kamanja Shs.16,600, Orengo Shs.19,260 and Wama traders Shs.15,200.
      REQUIRED:
      Enter the above transactions in the respective books of original entry.     (10 marks)
  1.  
    1. Explain five methods that can be used by a country to solve the problem of deficit balance of payment. (10 marks)
    2. Outline five differences between land and labour as a factor of production.       (10 marks)
  1.  
    1. Explain the distinctions between each of the following sets of goods and services. (10 marks)
      1. Free goods and economic goods.
      2. Producer goods and consumer goods.
      3. Perishable goods and durable goods.
      4. Public goods and private goods.
      5. Intermediate goods and finished goods.
    2. Explain five ways in which an efficient road transport system may promote trade within a country.    (10 marks)
  1.  
    1. Using a well labelled diagram explain the flow of income in a two sector economy.    (10 marks)
    2. Give five differences between a fixed deposit account and a savings account.   (10 marks)


MARKING SCHEME

    1. Channels that can be used to distribute locally manufactured goods.
      • Local producer => Agent => Wholesaler => Retailer => Local consumer.
      • Local producer => Wholesaler => Retailer => Local Consumer.
      • Local producer => Local consumer.
      • Local producer => Manufacturer’s Representative => Wholesaler => Retailer = Local Consumer.
      • Local producer => Wholesaler => Local consumer.
      • Local producer => Retailer => Local consumer. (5x2 = 10mks)
    2. Challenges that may be experienced by a new entrepreneur.
      • Inadequate capital / funds to sustain / expand.
      • Inadequate skills / poor management.
      • Unfriendly / poor government policies e.g. high taxes which are unfavourable to the growth / expansion of the business.
      • Poor infrastructure / poor roads which may hinder access to markets or inputs.
      • Inappropriate technology which may result in less quantity or poor quality products.
      • Unfair competition.
      • Inadequate manpower to run the business effectively.
      • Poor pricing which might make the product to be too expensive to attract buyers or too cheap to sustain the business.
      • Inadequate market. (5x2 = 10mks)
    1. Negative economic implications of given age distribution.
      • About 45% of the total population consists of those below 15 years. This implies more expenditure has to be directed towards provision of education, health etc/
      • There is high dependency ratio which adversely effects savings and investments of the working population.
      • There is need to plan for creation of employment opportunities to cater for the expected increase in labour force.
      • Industries are likely to produce mainly goods used by the young population at the expense of the needs of adult population.
      • The country may be forced to import such goods as food and medicine which leads to balance of payments problems.
      • There will be little or no exports as the majority of the population who are young consume everything. (4x2 = 8mks)
    2.  
      bs2b2b
      bs2b2bfgrtyh
    1. Circumstances that make it necessary for companies to re-insure.
      • Value of he property: when the value of property is great such as a ship, single insurance company may find it difficult to bear the loss.
      • High risk of loss: when chances of loss through the insured risks are high it becomes necessary to re-insure.
      • Number of risks covered: when the insurance company has insured many different risks it would be too costly to compensate many claims at once hence the need for re-insurance.
      • Need to spread the risks: When the insurance company has insured many different risks it would be too costly to compensate many claims at once hence the need for re-insurance.
      • Need to spread the risks: when the insurance company wishes to share liability in the event of a major loss occurring.
      • Government policy: the government may make it a legal requirement for an insurance company to re-insure.             (5x2 = 10mks)
    2. Original Books of Entry
      Purchases Journal
      purchase3b
      Purchases Returns Journal
      purchase return
      Sales Journal 
      sales3b
      Sales Returns Journal
      sales return
    1. Methods that can be used by a country to solve the problem of deficit balance of payment.
      • Control of imports: A country can correct a deficit balance of payment by controlling imports using total ban, tariffs, quotas etc.
      • Increase the volume of exports: a country can correct deficit by increasing / encouraging exports.
      • Devaluation of home currency: this will encourage exports and discourage imports.
      • Encourage foreign investment in a country so as to produce goods for export.
      • Through import substitution: a country can put up industries to produce goods for home consumption instead of importing.
      • Giving subsidies to local manufactures in order to increase exports
      • Using foreign reserves: a country can exchange reserves and gold to offset its deficit.
      • Borrowing from other countries: a country can borrow from another country so that such money can be used to offset a deficit balance of payment. (5x2 = 10mks)
    2. Differences between land and labour as factors of production.

      Land

      Labour

      ·Refers to all resources provided by nature used in production.

      ·Is geographically fixed in supply (supply cannot be increased).

      ·Productivity reduces with constant use hence reducing in quality.

      ·Provides raw materials for production.

      ·Quality may be improved through adding fertilizer and manure.

      ·Rewards for land are in form of rent, rates and lease.

      ·Refer to human efforts in production.

      ·Is both geographically and occupationally mobile.

      ·Increased through growth of population.

      ·Efficiency in production increases with constant application through experience.

      ·Provides services in production.

      ·Quality may be improved through training.

      ·Rewards for labour are in form of salaries, wages, commissions and royalties.

      (5 x 2 = 10mks)
    1. Distinction between sets of goods and services.
      • Free and economic goods
        Free goods are those that are available in abundance as gifts of nature and have no price attached while economic goods are those that are scarce in supply and have money value.
      • Producer goods and consumer goods.
        Producer goods are those produced to be used in producing others while consumer goods are goods that are readily usable by the final consumer.
      • Perishable and Durable goods.
        Perishable goods are goods that go bad very easily unless stored using special facilities while durable goods are those that will continue giving service for a long time without spillage.
      • Public goods and private goods
        Public goods are those that belong to no one in particular but are owed by the government on all of us collectively while private goods are owned by individuals or groups of individuals in their private capacities.
      • Intermediate goods and finished goods.
        Intermediate goods are those that need to go through further processing before use while finished goods are final products that come out of production in the required form ready for use.                   (5x2 = 10mks)
    2. Ways in which an efficient road transport system may promote trade within a country.
      • Goods will be transported easily to the market.
      • Buyers and sellers will be able to move from one market to another easily.
      • Goods will be transported from areas with excess supplies to areas with shortages / scarcity.
      • Many areas of trade would be opened.
      • Quick / fast deliveries would be ensured i.e. minimal delays.
      • The cost of transport would be lower hence better profits to processors.
      • It enables producers to specialize in what they can produce cheaply.
      • Prices would stabilize due to steady / continuous supply. (5x2 = 10mks)
    1. Flow of national income in a two-sector economy. 
      6a6agth
      A – Households provide firms with factors of production.
      B – Firms provide households with goods and services.
      C – Firms provide households with income for factors of production.
      D – Households provide firms with income after buying goods and services. (2x4 = 8mks)
      Households     (1mk)
      Firms               (1mk)
    2. Differences between a fixed deposit account and a savings account.

      Fixed Deposit account

      Savings account

      ·Money is not withdrawn before contract is over.

      ·Larger amounts are needed to open.

      ·Interest earned on it is higher.

      ·Can be used as security for a bank overdraft.

      ·For people with substantial amount of money.

      ·Account is in force for a specified period of time.

      ·Money can be withdrawn at an agreed interval.

      ·Smaller amounts required to open.

      ·Interest is usually lower.

      ·Cannot be used as security for a bank overdraft.

      ·For small saves.

      ·It is a running account as minimum balance is maintained.

      (5 x 2 = 10mks)
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