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

1.  
   1. Explain five factors that will influence the choice of office layout to be adopted by a firm.   (10 marks)
   2. Explain five advantages of a country belonging to a trading bloc.                  (10 marks)

2.  
   1. Explain five differences between a public corporation and a private limited company.  (10 marks)
   2. Highlight five circumstances under which an insurance contract may be terminated. (10 marks)

3.  
   1. Discuss five contributions of an efficient transport to the economic development of a Country.   (10 marks)
   2. Explain five benefits of retailers to wholesalers                                           (10 marks)

4.  
   1. Describe five factors that may influence the firm’s decision on what products to produce. (10 marks)
   2. Explain five challenges that may be experienced by a new entrepreneur who has just establish a business in Kenya   

5.  
   1. Explain five services offered by commercial banks to business people. (10 marks)
   2. The following transactions relates to David Traders for the month of December 2018.
      Dec 1^st            started a business with sh. 200,000 in the Bank account.
             2^nd             Bought furniture for sh, 50,000 and paid by cheque
             3^rd             Sold goods on credit to Caleb shs, 20,000; Salau 10,000
             4^th             Bought goods on credit from Rose sh 30,000; Kinga shs. 40,000
             5^th             Returned faulty goods to Rose sh 5,000
             6^th             Paid Rose on account by cheque less 10% cash discount.
             7^th             Received faulty goods from Caleb shs. 2000
             8^th             Received payment due from Caleb and Salau by cheque less 5% cash discount.
             9^th             Cash sales shs. 100,000
            10^th           Paid for wages shs. 20,000 by cash and electricity shs.10,000 by cheque.
            11^th           Deposited all the cash in hand into the bank account.
      Required: Prepare a three column cash book duly balanced.                              (10 marks)

6.  
   1. Discuss five factors to be considered when making a development plan in a less developed countries.(10 marks)
   2. The following information was extracted from the books of James wholesalers for the trading period ended June 2018.
                                                                                                      Sh
      Stock on 30.06.2017                                                               40,000
      Purchases                                                                               35,000
      Sales                                                                                      70,000
      Return inwards                                                                        1,500
      Return outwards                                                                      2,000
      Discount allowed                                                                      2,100
      Insurance                                                                                2,000
      Transport                                                                                 1,400
      Discount received                                                                     8,000
      Electricity                                                                                2,400
      Rent received                                                                          3,000
      Wages and salaries                                                                  5,000
      Advertising                                                                              2,000
      Stock 30. 06.2018                                                                   15,000
      Prepare a trading profit and loss account for the year ended 30^th June 2018. (10 marks)

MARKING SCHEME

1.  
   1. Factors influencing choice of office layout
      -     Number of office staff where there is large number of office staff the organization will prefer open layout which will accommodate many
      -     Quality of office equipment where the office has limited equipment it will prefer open layout for easy sharing
      -     Availability of funds. Where the office has problems of funds will prefer open layout which has less cost of partitioning
      -     Duties performed in an office. If the duties need confidentiality then closed office layout will be preferred for privacy
      -     Type of workers. If workers are those who require close supervision then adopt open layout for easy monitoring
   2. Advantages of belonging to a trading bloc.
      -     Widens market for goods by eliminating barriers which prevent movement of goods from one country to another
      -     Faster trading operations because of reduced procedures of importing and exporting goods
      -     Improvement in infrastructure, member countries will cooperate in improving the roads in the area hence reducing the cost of operations when conducting trade
      -     promotes regional specilisations.Every country will specialize in producing goods in which it has comparative advantage resulting to efficiency in member country
      -     establishing regional bank which will provide loans to firms in member states for expansion.
2.  
   1.  
      

      Public co-oporation	Private limited company
      - owned by the state / government	-Owned by share holders
      - formed under the act of parliament	- formed under companies act
      - financed by the government (initial capital)	- contribution from share holders financing
      - profits’ enjoyed by the government	- profits enjoyed by share holders
      - losses suffered by the government	- losses suffered by share holders
      - managed by directors appointed by the president	- managed by directors appointed by shareholders
      - main objective to offer essential services	- main objective to maximize profits

   2. Circumstance for termination of insurance policy
      -     When the policy expires since it becomes invalid after expiry
      -     Failure to pay premiums as agreed because it will be a breach of contract
      -     When the risk insured has occurred and the property has fully been compensated as it will be a new property
      -     When the insurance company discovered that the insurer does not have insurance interest
      -     When the insured voluntarily decides to terminate the contract or surrender value in the endowment and whole life policy
      -     When it is discovered that the insured did not give accurate information while taking the policy since he will have violated insurance policy

3.  
   1. Contribution of transport system in economic development in a country
      -     Creates employment, giving them a source of income
      -     Encourages large scale production by transporting surplus goods to areas of deficiency
      -     It promotes industrialization by ensuring constant supply or raw materials to the firm and finished product from the firm
      -     Promotes specialization by allowing people to concentrate in producing what they can produce cheaply and exchange through transport
      -     It minimizes wastage by ensuring that perishable goods are taken to the market when they are still in fresh state
      -     Source of government revenue through levies on fuel, driving license fees
      -     Enabling the government to get fund to finance development projects.
   2. Benefits of retailers to wholesaler
      -     Relieves wholesalers’ transportation costs by transporting goods from wholesale to their retail shops for customers to buy
      -     Relieves wholesalers from marketing risks of price fluctuation by buying the goods from wholesale and selling to customers.
      -     Relieves wholesalers from warehousing risks of theft, dead stock by storing goods they have bought from wholesalers
      -     Gives wholesalers important market feed back on product which they use to improve their business
      -     Relieves wholesalers from advertising expenses by advertising products bought from wholesalers

4.  
   1.  
      • Availability of resources :– resources availability in a firm will enable a firm to produce more Commodity for which it can access inputs easily and cheaply.
      • Consumer tastes: - The firm has to produce what the customers prefer.
      • Level of competition:- Firms will prefer to produce where there is less competition for inputs and market for products.
      • Availability of technology: - Firms will choose to produce products that they have the skills and know how to produce.
      • Gov’t policy:- firms will consider to produce products that are within the law to avoid production to illegal grounds.
      • Consumers cultural beliefs and practices which influence their pattern of demands and consumption behaviour.
      • Availability of raw materials and other inputs – i.e some raw materials are seasonal while others are not easily available.           
        Naming 1 mk. Otherwise 2 mks. (2 x 5 = 10mks)
   2.  
      • In adequate capital:- funds to sustain / run / expand due to lack of unilateral / insecure loans.
      • Inadequate skills / poor management to manage to operate the business properly.
      • Unfriendly / poor gov’t policies such as high taxation which is unfavorable for growth.
      • Poor infrastructure / poor roads may hinder in access the market / inputs.
      • Poor pricing which might make the product to be too expensive to attract buyers / to help to sustain the business.
      • Inappropriate technology which may rest in loss quantity / poor quality products.
      • Inadequate market due to become of buyers/ customers / due to cultural practices / beliefs customers.
      • Unfair competition where it may be two high for the new entrepreneur / the new entrepreneur.
      • Inadequate manpower to operate / run the business affectively.
        (5 x 2 = 10 mks)

5.  
   1. Services offered by commercial banks to business people.
      • Accepts deposits thereby mobilizing domestic savings and enabling efficency and convenience in transacts by accepting deposits in the main accounts i.e current accounts savings and fixed deposits account.
      • Lends money to individuals, private business, governments in forms of loans and overdrafts
      • Safe keeping of valuables such as title deeds, share certificates, Jewellery and wills for safety.
      • Provides money transfer facilities commercial banks provide convenient methods of transferring money through facilities such as standing orders, credit transfer, cheques e.t.c
      • Provision of foreign exchange services - Most commercial banks operate a foreign exchange department where customers foreign requirements are catered for
      • Giving advice on investment and management of funds to their clients on available investment opportunities and the best ways of managing their funds
      • Provide trustee services – Commercial banks may undertake to manage the property left behind by a deceased client on behalf of its inheritors
      • Acts a guarantor or referee who would want to get goods on credit or secure loans
         (5 x 2 = 10mks)
        Mention 1mk otherwise 2mks
   2.  
      

6.  
   1. - Period to be covered by the plan. Is it long term or short term plan
      - Goals to be achieved by the plan which included long term and short term goals
      - Resources available (both material and human resources) and how they are to be allocated
      - Whether the plan covers both public and private sectors or is it a partial plan covering one sector of the economy e.g. agriculture
      - Sources of revenue to implement the plans
      - The intended ways of spending government revenue in implementing the plans
      - Ways and means of implementing the plans
       (4 x 2 = 10mks)
      Mention 1mk otherwise 2mks
   2.