Business Studies Paper 2 Questions and Answers - Maranda High School Mock Exams 2023

Instructions to Candidates 

1.  
   1. Explain five demerits of under population. (10 marks)
   2. Explain five importance of a business plan to an entrepreneur. (10 marks) 
2.  
   1. Explain five circumstances under which a trader would prefer letters than telephone when communicating with suppliers. (10 marks) 
   2. Explain five factors that may lead to an increase in a country’s productivity. (10 marks) 
3.  
   1. Explain five causes of unfavourable balance of payments. (10 marks) 
   2. Explain five characteristics of economic resources. (10 marks) 
4.  
   1. Explain five functions of an office in a company. (10 marks)
   2. Explain five principles of taxation. (10 marks)
5.  
   1. Explain five advantages of railway transport in Kenya. (10 marks) 
   2. On 1^st January 2021, Mbale traders had shs.22, 500 in cash and shs.250, 000 at bank.
      During the month, the following transactions took place:
      Jan 2: Made cash sales of shs. 465,200.
      Jan 5:  Received a cheque of shs. 451,250 from Kamau traders in full settlement for their debt after allowing a 5% cash discount.
      Jan 15: Paid Ndovu traders shs. 184,000 in cash after deducting a cash discount of shs.16,000.
      Jan 20: Deposited shs. 200,000 from cash till into the bank.
      Jan 25: Paid wages shs. 144,000 in cash.
      Jan 26: Bought goods worth 30,000 on credit from kisii traders.
      Jan 28: Settled Mbago traders account of sh. 300,000 by cheque, less 15% cash discount
      Jan 29: Withdrew shs. 250,000 from the bank for office use.
      Jan 30: Deposited all the cash into the bank, except shs. 59,700.
      
      Required: Prepare a duly balanced three column cash book. (10 marks).
6.  
   1. Explain five circumstances under which personal selling may be appropriate to a business. (10 marks)
   2. The following trial balance was prepared by Laketi traders as at 31 December 2022
      

      Particulars	Debit shs.	credit shs.
      Premises	850,000
      Debtors	650,500
      Creditors		820,000
      Motor vehicle	800,000
      Equipment	550,500
      Gross profit		1,960,200
      Furniture	350,000
      Stock	75,000
      Bank	200,000
      Cash in hand	150,000
      General expenses	117,800
      Discount received		66,100
      Commission allowed	12,400
      Insurance	7,500
      Lighting	4,600
      Salaries	78.000
      Capital		1,000,000
      	3,846,300	3,846,300

      Using the information given above:
      1. Prepare profit and loss account. (4 marks)
      2. Prepare balance sheet.(6 marks) 

MARKING SCHEME

1.  
   1. Explain five demerits of under population (10mks).
      • Decliine in economic growth
      • Aging population and strained healthcare systems
      • Limited workforce and skill shortages
      • Decreased cultural diversity
      • Increased brden on individuals
   2. Explain five importance of a business plan to an entrepreneur (10mks).
      • Facilitates acquisition of loans from financial institutions and other financiers.
      • Provides guidance for opening new or expanding existing business.
      • It acts as a management / monitoring tool for the business.
      • It’s a tool for evaluating business performance.
      • It lays the strategy to be used in marketing the products.
      • It enhances the credibility of the business.
      • It is a motivational tool.
      • To avoid mistakes.
      • Proper allocation of resources.
2.  
   1. Explain five circumstances under which a trader would prefer letters than telephone when communicating with suppliers (10mks).
      
      • Where there is need to keep/permanent record for future use
      • When the message is complicated in nature and recipient business needs time to study and understand the message }
      • When the content of the message needs to remain confidential
      • When the message is long and detailed
      • When similar message is meant for many people circulars can be used.
      • Where the telephone is not available letters can be used
      • When the message is not urgent since the letter takes longer time to reach recipient. 
   2. Explain five factors that may lead to an increase in a country’s productivity (10mks)
      • Labour supply- a country with a more skilled personnel is likely to have higher national income due division of labour and specialization
      • Availability of capital- a country that uses modern technology will have higher national income because production would be faster and efficient.
      • Existence of entrepreneurship-in a country where land capital and labour are organized in correct proportions output would be high hence increasing national income.
      • Availability of fertile land-a country with reliable rainfall, various minerals, and rivers will produce a wide variety of goods and services hence increasing national income.
      • Level of technology- a country that uses modern technology will produce high quality and quantity of goods leading to higher national income.
      • Political stability- a peacefully country attracts both local both foreign and local investors thereby increasing productivity.
      • Attitudes of citizens towards work-a country where the citizens value work will produce more goods and services leading to higher national income.
3.  
   1. Explain five causes of unfavourable balance of payments (10mks).
      
      • Fall in volume of exports that lead to reduced exports earnings
      • Deterioration in the country’s terms of trade relative to imports since import expenditure
      • Would be higher than exports earnings
      • Increase in volume of imports at a constant exports will lead to higher expenditure on imports
      • Restriction by trading partners that lead to one country importing more than she is exporting to a restricted partner
      • Less capital inflow compared to outflow- a country whose profit repatriation is higher than donations and grants received will experience deficit
      • Over-valuation of domestic currency which encourages importation but discourages exportation.
   2. Explain five characteristics of economic resources (10mks).
      • Scarcity. They are found in small quantities compared to the many uses into which they have to be put and hence not sufficient to satisfy all human wants.
      • Monetary Value. They have a price attached to them which have to be paid for their use. 
      • Uneven distribution. They are not distributed uniformly in society, hence some people, regions or countries have more of the resources than others.
      • Combinability. They can be used in different proportions to produce goods and services.
      • Usefulness. They are used to satisfy human wants (have utility).
      • Transferability. They may be transferred from one person to another in terms of ownership.
4.  
   1. Explain five functions of an office in a company (10mks).
      • An administration centre for the organization.
      • The communication centre for the organization.
      • A Centre for processing data.
      • Production and reproduction of documents.
      • management of records
      • Public relations centre for the organization
      • Safe guarding of the organization’s assets.
      • Personnel functions are coordinated from the office​
   2. Explain five principles of taxation (10mks).
      
      • Equitable- a good tax system should ensure fairness in payment of tax.
      • Certain – the tax that an individual or firm is supposed to pay should be clear in terms of the amount, time, and manner.
      • Convenient- the tax should be levied when the contributor has money to pay.
      • Economical- the cost of collecting and administering should be lower than the yield
      • Flexible – a good tax system should be readily adaptable to economic circumstances such as change in prices
      • Ability to pay- a tax system should be designed in a way that the amount charged is not too high to the extent that the contributor is not able to pay.
      • Diversified – a good tax system should be wide enough to meet the revue requirements of the country.
      • Simplicity – the system should be easier to comprehend/understand
5.  
   1. Explain five advantages of railway transport in kenya (10mks).
      • Safety
      • Speed
      • Capacity
      • Comfort
      • Environmental protection
      • Traffic Jam reduction
      • Economic Feasibility
   2. On 1 Jan 2021, Mbale traders had shs.22, 500 in cash and shs.250, 000 at bank. During the month, the following transactions took place.
      Jan 2: made cash sales of shs. 465,200.
      Jan 5: Received a cheque for shs. 451,250 from Kamau traders in full settlement for their debt after allowing a 5% cash discount.
      Jan 15: paid Ndovu traders shs. 184,000 in cash after deducting a cash discount of shs.16,000.
      Jan 20: Deposited shs. 200,000 from cash till into the bank.
      Jan 25: Paid wages shs. 144,000 in cash.
      Jan 26: Bought goods worth 30,000 on credit from kisii traders.
      Jan 28: Settled Mbago traders account of sh. 300,000 by cheque, less 15% cash discount
      Jan 29: Withdrew shs. 250,000 from the bank for office use.
      Jan 30: Deposited all the cash into the bank, except shs. 59,700.
      Required: Prepare a duly balanced three column cash book. (10mks).
                                                    Mbale traders
                                                 3 column cash book
                                                    As at 30 Jan 2021
      

      Date	Details	LF	Dis.all	Cash	Bank	Date	Details	LF	Dis.re	Cash	Bank
      Jan 1        2        5       20       29       30	Bal  Sales  Kamau  Cash  Bank  Cash		23750	22500  465200  250000	250000 451250 200000 150000	Jan        15        20        25        28        29        30        30	Ndovu  Bank  Wages  Mbago  Cash  Bank  Bal	c/d	16000  45000	184  200  144  150  5970	255  250  546

6.  
   1. Explain five circumstances under which personal selling may be appropriate to a business (10mks)
      • When a new product is being launched in the market.
      • Where the firm is financially able to finance sales persons.
      • When the product is tailored to meet customer’s specifications.
      • Where the product is of high value.
      • Where it is necessary to demonstrate the use of the product.
      • Where the market is limited to a small area.
   2. The following trial balance was prepared by Laketi traders as at 31 December 2009.
      

      Particulars	Debit shs.	Credit shs.
      Premises	850,000
      Debtors	650,000
      Creditors		820,000
      Motor Vehicle	800,000
      Equipment	550,000
      Gross profit		1,960,200
      Furniture	350,000
      Stock	75,000
      Bank	200,000
      Cash in hand	150,000
      General expenses	117,800
      Discount received		66,100
      Commission allowed	12,400
      Insurance	7,500
      Lighting	4,600
      Salaries	78,000
      Capital		1,000,000
      	3,846,300	3,846,300

      Using the information given above:
      1. prepare profit and loss account
                                                        Laketi traders
                                                 Profit and loss account
                                        For the period ended 31 Dec 2009
         

         Expenses                             shs.  General expenses            117.800  Commission allowed          12,400  Insurance                            7,500  Lighting                                4,600  Salaries                              78,000  net profit  c/d                  1,806,000                                         2,026,300

         Gross profit            1,960,200  Dis received                66,100                                  2,026,300

      2. Prepare balance sheet
                                                                        Laketi traders
                                                                        Balance sheet
                                                                     As at 31 Dec, 2009
         

         Assets                  Shs.                  Shs.  Premises              850,000      Motor vehicle        800,000  Equipment            550,500  Furniture               350,000             2,550,500  Current assets  Debtors                 650,000  Stock                       75,000  Bank                      200,000  Cash in hand         150,000            1,075,500                                                          3,626,000

         Capital                         1,000,000   Aadd net profit              1,806,000  Short term liabilities  Creditors                       820,000                                       3,26,000