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565/1 &565/2 business studies

MAKUENI COUNTY CLUSTER PREPARATORY EXAMINATION 2016 565/1

BUSINESS STUDIES PAPER 1

July / August 2016 TIME: 2 HOURS

1.State four external forces that may affect a business and its operations.(4 marks)

2.Apex limited has opened a factory in a rural shopping Centre called Baraka. Outline four ways in which the people living in

the surrounding areas may benefit from the factory.(4 marks)

3.Highlight four benefits Kenya is likely to get from exploitation of oil recently discovered in Turkana area.(4 marks)

4.Highlight four ways in which a firm can improve the productivity of its human resource.(4 marks)

5.Outline four factors to consider when deciding on a suitable location of an office.(4 marks)

6.In the spaces provided below, state the document to which each of the following statement relate.

StatementDocument

a) Inform the buyer when goods were dispatched and by what means

b) A request by seller for payment in advance

c) Used to correct an undercharge in an invoice

d) Shows details of the transactions between seller and buyer during a given period

(4 marks)

7.Amin plans to join Mwalimu National Sacco. Outline four benefits he is likely to enjoy.(4 marks)

8.Highlight four circumstances under which verbal communication may be ineffective.(4 marks)

9.Outline four reasons why a government may find it necessary to protect consumers(4 marks)

10.Highlight four factors that limit the use of containers in transport.(4 marks)

11.The table below contains descriptions relating to some type of warehouse. In the space provided, write the type of warehouse

to which each description refers.

DescriptionType

a) Used to store exports and imports

b) Any body can rent spaces in it for storing goods temporary

c) Operated for owners exclusive use

d) Owned and operated by farmers and manufacturers

12.State four benefits of after - sale services to the consumers.(4 marks)

13.The diagram below shows supply curves of two producers in different countries but of the same product.

XY

100

50100150200

Highlight four reasons why producer Y supplies more than producer X at the same price.(4 marks)

14. Upendo Traders insured their business premises against the risk of fire. Five months later, the premises were completely

destroyed by fire. Outline the procedure that they should follow before compensation is made.(4 marks)

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15. The following balances were extracted from Mwangaza traders books of accounts.

Shs.

Opening stock25,000

Closing stock35,000

Purchases190,000

Mark - up20%

Calculate:

i)Cost of sales(1mark)

ii) Gross profit(1 mark)

iii) Sales(1 mark)

iv) Rate of stock turnover(ROSTO)(1 mark)

Highlight four measures that the government may take to attract firms to an area.(4 marks)

16. Show the effect of each of the following transactions to capital, liabilities and assets indicating whether it is an increase (+) a

decrease (-) or a nil (0) .(4 marks)

TransactionsCapitalAssetLiability

a) Converted private land into business land

b) Paid creditors in cash

c) Sold a business van valued at shs. 600,000 from shs. 400,000 on credit

d) Sold goods on credit

17. Give four disadvantages of a long chain of distribution of goods to a buyer(4 marks)

18. For each of the following statements, give the type of unemployment described(4 marks)

Statements / DescriptionType of unemployment

a) Arise due to mismatch of skills and labour ,market demands.

b) A person has absolutely nothing to do

c) Arises when there is a change in methods of production

d) Arises when the number of people exceeds those that are required

19. The following balances were extracted from the books of Kipchoge as at 31st Dec, 2014

Shs.

Capital30, 000

Bank3, 400

Cash2, 700

Discount received200

Drawings300

Land6, 000

Furniture & Fittings19, 000

Sales4, 500

Prepare a correct trial balance as at 31 Dec 2014(5 marks)

20.Study the ledger accounts given below and write out the transactions that took place affecting the business of Huruma Ltd in

January 2008.

a)DrSales A/cCr

DateDetailsAmt.

2008

Jan 2Pendo50,000

b)DrCash A/CCr

DateDetailsAmt.

2008

Jan 15 Creditors30,000

c)DrPurchases A/CCr

DateDetailsAmt.

2008

Jan 10Bank20,000

d)DrEquipment A/CCr

DateDetailAmt

2008

Jan 20Cash10,000

e)DrDebtors A/CCr

DateDetailsAmt

2008

Jan 22Bank20,000

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21. List four items (transactions) which are recorded in a balance of payment account of a country.(4 marks)

22. The cost of consumer goods for a representatives of a household is given below:

YearPrice

20105000

20119000

Determine the increase in consumer price index using 2010 as the base year.(4 marks)

23. State the book of original entry used in recording each of the following transaction of Mrembo Traders.(4 marks)

TransactionsBook of Original entry

a) Mrembo returned goods worth shs. 4,000 to Boni traders

b) Malindi traders returned goods worth shs. 2000

c) Sold goods on credit to Mrima primary

d) Purchased goods on credit from Kilwa for shs. 10,000

24. As a student of B/studies, advice Mr. Maina on why he should open a current account to suit his business in a local bank.

(4 marks)

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MAKUENI COUNTY CLUSTER PREPARATORY EXAMINATION 2016

565/2


JULY / AUGUST 2016

TIME: 2 HOURS

1.a) Give Five reasons why majority of Kenyans fear to borrow money from commercial Banks.(10 marks)

b) Differentiate between a public corporation and a public limited company.(10 marks)

2.a) Explain five factors that may influence a country to adopt a protectionist policy in international trader.

(10 marks)

b) Explain five factors that may be used to measure the size of a business enterprise.(10 marks)

3.a) The following balances relate to Maendeleo Electrical Enterprise as at 31st December, 2014.

Sh.

Machinery1,240,000

Stock190,000

Debtors150,000

Motor vehicle1,100,000

Cash- in- hand150,000

Creditors270,000

Bank overdraft130,000

10 year bank loan1,200,000

Capital1,660,000

Drawings750,000

Net profit320,000

Required:

Prepare a balance sheet as at 31st December, 2014 clearly showing:

i)Net capital

ii) Total current liabilities

iii) Total current assets

iv) Total fixed assets

b) Five ways in which an entrepreneur contributes to the production of goods.(10 marks)

4.a) Explain five factors that may influence the choice of distribution channel for milk.(10 marks)

b) On first October 2010, Makueni Traders had sh. 110,000 in hand and sh. 500,000 at bank. During the month, the following transactions took place.

October, 2010:

2: Cash sales directly banked sh. 70,520 3: Bought stationery in cash sh. 9,000

4: Bought stock worth sh. 40,000 and the payment was done by the end of the next month in cash.

5: Paid Josh, a creditor sh. 188,000 by cheque in full settlement of his account after deductions 6% cash discount

10: Received a cheque for sh. 117,600 from Esther after allowing her a cash discount of sh. 2,400 12: Sold goods worth sh. 10,000 to Eric on credit

16: Paid salaries sh. 62,000 in cash

20: Withdrew sh. 100,000 from bank for office use

24: Arnold, a debtor paid his account of sh. 150,000 by cheque less 10% cash discount 28: The owner took some stock worth sh. 5,000 home for family use 30: Deposited all the cash into bank except sh. 27,400. Required:

Prepare a three column cash book and balance it off.(10 marks)

5.a) Explain five ways large scale organisations are able to reduce their cost of production.(10 marks)

b) Explain five main causes of inflation in a country.(10 marks)

6.a) Explain five reasons that contribute to low tax revenue by the government through Kenya RevenueAuthority.

(10 marks)

b) Mr Utano, a retired civil servant intends to invest his retirement benefits in a retail business. Explain five factors that Mr.

Utano should consider before investing his money in the business.(10 marks)

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MAKUENI COUNTY CLUSTER PREPARATORY EXAMINATION 2016

Kenya Certificate of Secondary Education (K.C.S.E.)

BUSINESS STUDIES

PAPER 1

Marking scheme

1.External factors that may affect business operations.

i)Legal requirements

ii)Economic factors eg. Consumer purchasing power , level of installing etc

iii)Political factors ie. Stability governance

iv)Technological advancement

v)Social / cultural factors

vi)Market competition

vii)Natural factors

2.Ways in which people of Baraka town will benefit from the factors of Apex Ltd.

i)The people will get goods / services at fair prices due to their proximity to the factory / readily available goods and

services.

ii)Surrounding community will get job opportunities

iii)The factory may provide market for raw materials produced by the surrounding community

iv)The company may improve infrastructure such as roads , electricity

v)The company may participate in community welfare activities such as education and health

3.Benefits Kenya is likely to get from exploitation of oil in Turkana area.

i)The country will earn and conserve foreign exchange

ii)Employment opportunities will be created

iii)The supply of oil in the country may be stable

iv)The people will enjoy low fuel prices

v)The government will earn revenue

vi)The infrastructure of surrounding areas is likely to improve

vii)The exploitation will accelerate economic activities in the surrounding areas / multiplier effect

viii) Petro- chemical industries will get ready raw materials / inputs

ix)Foreign investors will be attracted due to low cost of production

x)The country BOP will improve drastically

4.Ways of improving productivity of labour.

i)Provide workers with more education and training.

ii)Pay workers well

iii)Offering awards or gifts to workers

iv)Promotion of workers

v)Ensure good relationship between workers and management

vi)Provide workers with good working tools and equipment

vii)Provide recreation facilities, welfare kits and social amenities

viii) Good working conditions

ix)Division of labour and specialization

5.Factors to consider before you locate an office

i)Operational costs

ii)Security

iii)Availability of labour

iv)Space to facilitate expansion

v)Availability of support services

vi)Access to the office

6.Documents

i)Advice Note

ii)Proforma Invoice

iii)Debit note

iv)Statement of account

7.Benefits Amin is likely to enjoy as a member of Mwalimu National SACCO

i)He will get various types of loans eg. Emergency, school fees, development etc

ii)The loans attract low interest rates ie. 12% p.a

iii)Members develop saving habits by making regular payments (shares)

iv)Loans are guaranteed by members and not physical Assets

v)Requirement period can be varied

vi)Members enjoy dividends

vii)Members enjoy banking services - FOSA

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viii) Members fund are insured by CIS

ix)When member dies , outstanding loans are waived

x)Members are given investments advise

8.Ways in which verbal communication may be ineffective.

i)Where there is age difference

ii)Use of different languages

iii)Negative attitude / bias / prejudice

iv)Receiver has hearing problem

v)Use of unfamiliar terminologies

vi)Noise

vii)Poor timing

viii) Poor listening

ix)Pronounciation problems

x)Emotional response / fear / shyness

9.Reasons why government protects consumers.

i)Consumers are likely to be exploited by business people while pursuing profit motive.

ii)Safeguards against poor health standards

iii)Consumers do not always know their rights

iv)Business people left on their own may lower standards of quality of products

v)Consumers are weak because they act individually hence can‘t safeguard their rights due to lack of collective bargain

10.Limitations of containers.

i)Containers are expensive

ii)Special vehicles to transport containers are very expensive

iii)Special loading and offloading equipment required is expensive

iv)Container vessels required special special terminus

v)Special goods require special containers like milk

vi)Containers are of standardized sizes therefore require special vessels to transport some goods of irregular shapes

vii)Does not require small quantities because if they are less, they will be mixed up with other goods.

11.Type of warehouse

i)Bonded warehouse

ii)Public warehouse

iii)Private warehouse

iv)Producer warehouse

12.Benefits of After sales services to the consumers

i)Inspecting and checking the products at regular intervals to detect & repair

ii)They get warrantee on products

iii)They will get technical back up and advice on use of the products

iv)Receive transport services 4 goods bought

v)Installation and testing of the product

vi)Guaranteeing the availability of spare parts

13.Reasons why producer Y supplies more than producer X at the same price

i)Favourable climatic conditions in country Y than X

ii)Lower cost of production in country Y than X

iii)More access to sudsidies in country Y than X

iv)Improved infrastructure in country Y than X

v)Lower cost of production in country Y and X

vi)Available factors of production in country Y and X

vii)Impact of peace / stability in country X and Y

14.Insurance procedure.

i)Report the occurance of fire to the relevant authority and the insurer

ii)Insured fills in the relevant claims form giving all the relevant information

iii)Insurer investigates the cause of the fire

iv)Insurer evaluates the damages and estimates the loss

v)Compesation is made / amount of loss suffered paid.

15.Working:

i)Cost of Sales=Opening stock+ purchases - closing stock

=

=sh. 180,000

ii) Gross Profit=Cost Of Sales × Mark - up

=

=sh. 36,000

iii) Sales=Cost of sales + Gross Profit

=

=sh. 216,000

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iv) R.O.S.T.O=Cost Of Sales + Avg. Stock

Avg. Stock=

=

=sh. 30,000

R.O.S.T.O=½ x 8 = 4 marks

=6 times

16. Attraction of firms in an area. i) Development of infrastructure

ii) Provide business incentives like low taxes and subsidies iii) Ensure security

iv) Provide credit facilities to investors

v) Provide land at reasonable costs

vi) Provide good transport and communication networks vii) Good health care facilities

17.

CapitalAssetLiability

0

0

0

000

12×= 4 marks

18. Disadvantages of a long chain of distribution.

i)Increased price

ii)Chances of damage to goods due to handling

iii)Feedback to the manufacturer / producer is slow

iv)Perishable goods will go bad

v)Likelihood of delay of goods.

19. Type of unemployment.

a)Technological

b)Cyclical

c)Residual

d)Structural

20.Kipchoge‘s

Trial Balance

As at 31 Dec. 2014DRCR

ItemsShs.Shs.

Capital30,000

Bank3,400

Cash2,700

Discount received200

Drawings300

Land6,000

Furniture & Fittings19,000

Sales4,500

34,70034,700

21. Transactions affecting the business of Huruma Ltd. 2008

a) On 2nd Jan , the business sold goods on credit to Pendo amounting to shs. 50,000

b) On 15th Jan, the business paid cash to creditors shs. 30,000

c) On Jan 10, Huruma Ltd bought goods and paid by cheque shs. 20,000

d) On Jan 20, Huruma Ltd bought Equipment worth Shs. 10,000 cash

e) On Jan 22, the business paid debtors by cheque shs. 20,000

22. Balance of payment transactions

i)Visible / invisible exports

ii) Visible / invisible imports

iii) Inflow of cash from Kenyans abroad

iv) Outflow of cash from non - Kenyans

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v) Inflow / outflow of private investments capital

vi) Inflow of loans and grants from foreign gvt. / NGO‘S vii) Funds from IMF / world bank

23.× 100

×100 = 180%

24. Books of original entry

a) Purchases returns / returns outwards

b) Sales returns / returns inwards

c) Sales Journal / Debtors Journal

d) Purchases / Creditors Journal

25. Reasons as to why Mr Maina should open a business current A/C

i)No minimum balance is needed to maintain the A/c

ii)No restriction of withdrawals of funds

iii)Mr. Maina will be able to use cheque facilities for payments

iv)He will receive monthly statement of Account

v)He will be allowed overdraft facilities

vi)No maximum put on a single withdrawal

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MAKUENI COUNTY CLUSTER PREPARATORY EXAMINATION 2016 BUSINESS STUDIES

PAPER 2

Marking scheme

1.a) Reasons why majority of Kenyans fear to borrow loans from commercial banks.

i)Banks charge high interest rates for their loans

ii) The procedure involved before one gets a loan is lengthy

iii) Majority of Kenyans cannot offer security for the loans as required by banks iv) Many people fear the consequences of failing to pay the loan

v) Individuals may have cheaper sources of loans eg. SACCO‘s

vi) The rate of interest charged on bank loans are not fixed but can be varied according to prevailing economic situation in the country without consulting the borrower

b)

Public corporationPublic Limited Company

1.Formed under the act of parliament.1.Formed under the company‘s act

2.Fully owned by the government2.Owned by private persons who own shares

3.Initial capital is provided by the state or through state3.Capital obtained through issue of shares, selling of

guaranteesdebentures or other loans

4.Management appointed by the government (Board of4.Directors elected by the shareholders

directors)5.Formed to make profit

5.Set - up to offer essential services to the public

6.The profit made rest on the parliament6.The profits rest with the shareholders or creditors

7.Auditing done by private auditor‘s

7.Auditing done by government auditors8.Losses may lead to collapse of the business or

8.Losses are sub sized for borne by the governmentborne by owners

9.Political infinences especially due to nomination of9.No political infinence except the enacted laws

directors by the government10. Performs various functions.

10. Perfoms specific functions and related activities

2.a)Cause of protectionism policy

i)To correct the deficit balance of paymence / trade.

By reducing consumption of imports in the domestic market.

ii)Protection of strategic industries.

Some extremely important industries that a country cannot do without like agriculture and security, need protection from

foreign competition.

iii)Prevention of dumping

To protect consumers and producers against poor quality or low priced goods or harmful items from foreign markets

iv)Protection of local infant industries

Certain industries incur high cost in production in the initial stages and allowing imports from foreign producers can kill such industries

v) Protection of cultural and social values

Through interaction, people of particular country may borrow cultural values which can adversely affect the borrowers culture

vi) Expanding market for local products

Trade restrictions make it very hard for foreign suppliers to sell their products in the local market thereby increasing the share market for local producer large

vii) Creation and protection by employment

Discouraging imports leads to establishment of local industries to provide commodities that world have otherwise been imported, creating employment

viii) Promoting self reliance

Local producers to produce enough for the country to avoid shortages incase trade partner get into political conflict.

b) Factors that may be used to measure the size of a business enterprise.

i)Amount of capital invested

ii)Number of workers

iii)The level of output

iv)Size of market

v)Profit made

vi)Government policy

vii)State of technology

viii) Nature of the products(Correct explanation (2×5=10mks)

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3.a)

Maendeleo Electrical Enterprise

Balance Sheet

As at 31st December , 2014

Sh.Capital and Liabilities sh.sh.

Fixed AssetsCapital1,660,000

Machinery1, 240 000Add: Net profit320,000

Motor vehicle1, 100 0001,980,000

2, 340,000Less: Drawings750,000

NET CAPITAL1,230,000

Current Assets

Stock190,000Long - term Liabilities

Debtors150,00010 year bank loan1,200,000

Cash150,000

490,000Current / short - term liabilities

Creditors270,000

Bank overdraft130,000

400,000

2, 830,0002,830,000

b)Ways in which an enterprenuer contributes to the production of goods.

i)Identified viable business oppurtunities

ii)Provides guidelines on how production should be organized

iii)Co- ordinates other factors of production should be organized

iv)Provides capital necessary to cater for production

v)He assembles / marshals other factors of production

vi)He is the major decision maker

vii)He rewards all the factors of production

viii) He bears all risks / incurs all losses and enjoys all profits

4.a) Factors influencing choice of distribution channel.

i)Nature of milk - perishable product

Shorter / direct channel

ii)Cost of distribution- cost effective

iii)Customes preference of how the product might

iv)Level of competition

v)The quantity of milk being supplied

vi)Need for technical personnel

vii)Extent of the market

viii) Availability of middlemen / agents / inter - mediaries

ix)Government policy on distribution

x)Number of buyers.(2

b)

Makueni Traders Cashbook

For the month of October , 2010.

DateDetailsFolioDiscountDateDetailsFolioDiscountCashBank

AllowedCashBankreceived

Oct,2010Oct,2010

1Bal bd110,000500,0003Stationery9,000

2Sales70,0005Josh12,000188,000

10Esther2,400117,60016Salaries62,000

20Bank100,00020Cash100,000

24Anold15,000135,00030Bank111,600

30Bank11160030Bal C/d27,400646,720

17,400210,000934,72012,000210,000934,720

1Nov,

201027,400646,720

20 x ½ = 10

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5.a) Reasons for low prices in large scale organization.

i)They buy in bulk and so enjoy quantity discount

ii)They can afford advertising leading to more sales

iii)They have bigger bargaining power for low interest loans

iv)They are able to diversify products therefore spread risks

v)They employ skilled manpower

vi)They can sell in large quantity hence reducing average cost

vii)Acquire up - to - date technology

viii) Produce / mass production reducing selling expenses

ix)Ability to carry out research into better methods of production

b) Main causes of inflation in a country

i)Increased money supply due to provision of more credit facilities

ii)Increased government expenditure in excess of tax revenues

iii)Increased in wages without corresponding increase in output of goods / services due to trade union pressure

iv)Increased cost of inputs such as oil and intermediate goods

v)Increased taxation such as VAT

vi)Shortages of goods and services

vii)High cost of imports of both capital and finished goods.(2×5=10 mks)

6.a)Reasons for low tax revenue by the government through KRA.

i)Low national and per capita Income among the majority

ii)High rates of unemployment among Kenyans hence low PAYE

iii)Disparity in income distribution - majority are poor and not paying taxes

iv)Negative attitude among the majority on payment of taxes

v)High rates of tax evasion among Kenyans

vi)Corrupt KRA officials who do not remit tax revenues / collusion with tax payers.

vii)Very few categories of taxes by KRA (mainly on incomes)

viii) High cost of tax collection exceeding revenues.

b)Factors to consider before investing in a retail business.

i)Profitability : A good business opportunity should generate high profit

ii)Availability of market : Ready market and large market for sale of goods

iii)Level of production : competition should be minimal to ensure continuity of operations

iv)Few risks : To minimize losses

v)Government policy: All legal requirements should be easy to fulfill to enable him start the business

vi)Labour requirement: Relevant labour required must be available to enhance smooth operation

vii)Management : Should have the relevant managerial skills or it should be easy to hire or run the business

viii) Supply of inputs: there should be adequate supply of inputs for use in running operations of the business

ix)Capital: The amount of money required in relation to the money available for investment should be enough.

x)Growth prospects: Business having the possibility of growing / expanding.

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MOKASA JOINT EVALUATION 565/1


MARCH/APRIL, 2016 TIME: 2 HOURS

1.Outline four ways the economic environment influence business activities(4 marks)

2.List four personal attributes of an office staff(4 marks)

3.Highlight four limitations of the methods used by the consumer to protect themselves against exploitation(4 marks)

4.Outline four benefits of bonded warehouses to the government(4 marks)

5.Distinguish between(4 marks)

a) Derived demand and joint demand

b) Shift and movement along demand curve

6.Highlight four ways that may be used by a monopoly to differentiate a product market(4 marks)

7.Outline four ways in which the Central Bank may use to reduce the amount of money in circulation(4 marks)

8.For each of the following transactions, indicate the effect of each transaction on the balance sheet items as either increase,

decrease or no change.(4 marks)

TransactionEffect on AssetsEffects on liabilitiesEffect on Capital

Drawings of goods from the business

The proprietor brought a personal van for the business use

Borrowed KCB loan to pay a creditor Bought stock by cheque

9.The following transactions relate to the books of Amina traders as at 31st December 2015.

Gross profit ...20,000

Commission allowed ...200

Carriage on sales ...4,000

Discount received ...8,000

Salaries ...6,000

Rent ...2,000

Discount revived ...400

Commission received ...1,500

Interest on bank loan ...500

Prepare Amina‘s profit and loss account for the period ended 31st December, 2015.(5 marks)

10.Outline the relationship between scarcity, choice and opportunity cost with respect to satisfaction of human wants.

(4 marks)

11.List four documents prepared by the buyer in home trade(4 marks)

12.The National Transport Safety Authority (NTSA) is a department within the transport sector in Kenya. Highlight four

benefits Kenyans enjoy due to the establishment of NTSA(4 marks)

13.Outline four reasons why a firm would prefer to locate near the market of its products(4 marks)

14.List three withdrawals in the circular flow of income(3 marks)

15.Other than serving as a medium of exchange. Mention four other functions of money(4 marks)

16.The following transactions relate to the books of kilimo holdings. Record them in the relevant ledger accounts. (4 marks)

(i)1st January 2015, took a loan with ICDC of kshs. 50,000 receiving by cheque.

(ii)5th January 2015, kelunyo, a debtor paid his account of kshs. 40,000 in cash.

(iii) 10th January 2015, took money from bank, kshs. 50,000 for office use

(iv) 12th January 2015, bought furniture kshs. 35,500 in cash

17.Give the name of the insurance policy described in the following table(4 marks)

DescriptionName of policy

Covers ships while on a specified voyage and time

Covers a specified peril when the ship is either being loaded, offloaded or serviced Covers cargo against loss or damage while being transported by ship One policy used to cover a number of ships belonging to one organization

18. Currently the government is selling state owned businesses to private investors. Highlight four benefits of such decisions.

(3 marks)

19.State four essentials of effective communication(4 marks)

20.Outline four advantages of free gifts in product promotion(4 marks)

21.List four costs incurred in the distributions of goods(4 marks)

22.Highlight four merits of direct tax as a source of revenue to the government(4 marks

23.Identify the level of occupation described by each of the following information(4 marks)

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DescriptionOccupation

A boy chasing hare for meat

Britam insurance company selling their policies School carpenter making chairs for form ones Mr. Zuma counseling form four students

24. The following information relate to Kamau traders for the month of December 2015. Dec. 1- sold goods for kshs. 45,000 less 10% cash discount

Dec 5 - Bought goods worth kshs. 4,000 in cash and was allowed a discount of 5%

Dec 7 - a debtor paid kshs. 20,000 in full settlement of a debt of kshs 23,000 by cheque Dec 15 - Sold goods kshs. 70,000 on credit to jambo traders

Dec 26 - Paid rent kshs. 16,000 by cheque

Required:

Post the above transactions to relevant journals(4 marks)

25. Unemployment solving has been an agenda to most developing economies. Identify the type of unemployment being solved

below.(4 marks)

(i) Government initiating irrigation projects to ensure continuous production of food

(ii) Retraining teachers to embrace use of technology in teaching and learning

(iii) Government and private sectors inventing job advertisement sites for easy access by job seekers (iv) Parliament passing legislation that accommodate the disabled people to acquire jobs

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MOKASA JOINT EXAMINATION 565/2


TIME: 2 ½Hours

1.(a) Explain five circumstances that can cause a business to succeed in their activities.(10marks)

(b) Explain five problems facing the savings and credit cooperative societies in Kenya.(10marks)

2.(a) A prudent tax system must meet certain essential qualities. Explain five indicators of a good tax system.(10marks)

(b) Describe the procedure an insured must take when making an insurance claim.(10marks)

3.(a) Ondari intends to promote his products. Explain five factors that he must take into account when deciding on which

method to use.(10marks)

(b) Explain five weaknesses of using national income statistics as a measure of social welfare.(10marks)

4.(a) Explain five factors that justify the existence of small scale firms in an economy.(10marks)

(b) Bartenge Enterprises started business on 1st May 2014 with Shs. 250,000 consisting of: Cash at bank Shs.200, 000, Cash in Hand Shs. 30,000 and Furniture Shs. 20,000. The following transactions took place during the month of May.

3rd May 2014, Motor Van worth Shs. 85,000 and stock of Shs. 25,000 were bought on credit 6th May 2014, more stock worth shs.10,000 was bought by cash

9th May 2014, withdrew money from bank sh 50,000 for office use

15th May 2014, Sold stock at cost to a customer on credit for shs. 18,500

19th May 2014, received a cheque for the full settlement of a debt owed from the transaction of 15th may 2014 23rd May 2014, paid Shs. 65,000 by cheque for the motor van bought earlier on credit 31st May 2014, paid Shs. 20,000 cash for the stock bought on credit Required:

Prepare the balance sheet of Bartenge Holdings as at 31st May 2014.(10marks)

5.(a) Explain five problems that are faced by a country with a big population of ageing persons.(10marks)

(b) Explain five differences between banking and non-banking financial institutions.(10marks)

6.(a) Explain four reasons why upward communication should be encouraged in an organization.(8marks)

(b) The following trial balance was extracted from the books of Lule Traders on 30th April 2015

Lule Traders Trial Balance

As at 30th April 2015

Dr (Kshs.)Cr (Kshs.)

Sales186,000

Purchases115,560

Stock 1.5.201437,760

Carriage outwards3,260

Carriage inwards2,340

Returns4,4003,550

Salaries24,470

Electricity6,640

Rent5,760

Sundry expenses12,020

Equipment24,000

Furniture6,000

Debtors45,770

Creditors30,450

Bank38,760

Cash1,200

Drawings20,500

Capital128,440

348.440348,440

Stock as at 30.4. 2015 Shs. 49,980

Required:

a)Trading, profit and Loss account for the year ended 30th April 2015(8mks)

b)Balance sheet as at 30th April 2015(4mks)

Page | 14



BUSINESS STUDIES MARKING SCHEME.

1.Ways in which Economic environment influence business activities(4 marks)

Level of wages of the consumer

Taxes on income

Value of money/inflation/foreign exchange rate

Prices of other related goods

2.Personal attributes of office worker(4 marks)

Good Hygiene

Proper Posture

Acceptable/good moral behavior

Good health

Good Physical appearance

3 .Limitations of the consumer initiated methods to protect themselves against exploitation. (4 marks)

Lack of or limited government support

Deficiency of capital to finance their activities

Ignorance of consumers against their rights

Reluctance of many consumers to join the organization

Lack of consumers initiative to check on traders compliance on price and quality

4Benefits of bonded warehouse to the government (4 marks)

Source of revenue

Used to control the entry of harmful products into the country

Government is able to control the quality of goods entering the country

Government is able to verify documents of goods on transit

The government is able to inspect the nature or type of goods imported

Government is able to check on illegal goods entering the country

5 a) Joint demand-(Complimentary demand) applies to those commodities used together e.g. vehicle and petrol whereas

derived demand is where demand of one commodity is due to demand of another commodity e.g. demand for input is as

a result of demand of finished products(2 marks)

b) Shift in the demand curve is due to change in demand of a commodity caused by factors other than price of that

commodity whereas movement in the demand curve is a change in demand caused by changes in price of the commodity.

(2 marks)

6.Methods/Ways of market separation/product differentiation(4 marks)

Geographically = exported goods are sold at cheaper price in the country of manufacture than in foreign country. Time-peak and off peak

Type of demand e.g. demand for electricity of domestic use and commercial use Income e.g. in hospitals

7 Tools of monetary control(4 marks)

Increase in the bank rate

Buying of government securities in the open market Increase cash or liquidity ratio

Increase in compulsory deposit requirement Selective credit control

Reduce margin requirement

Request commercial banks to control credit. 8

decreaseNo effectdecrease

increaseNo effectincrease

No effectNo effectNo effect

No effectNo effectNo effect

(4 marks)

Page | 15


9

Amina Traders Profit and loss a/c

For the period ended 31st dec 2015

ExpensesRevenue

Commission allowed200Gross profit20,000

Carriage on sales4,000Discount received400

Discount allowed8,000Commission received1,500

Salaries6,000

Rent2,000

Interest on Bank loan500

Net profit c/d8,400

21,90021,900

Net profit b/d8,400

(5 marks)

10. Relationship between scarcity, choice and opportunity cost.(4 marks)

Human wants are unlimited and yet resources used to satisfy them are scarce.

Consumers make a list of wants in order of priority hence making a choice between the competing alternatives Having made a choice, the foregone alternative becomes the opportunity cost for the need that has been satisfied.

11. Documents prepared by the buyer(4 marks)

Letter of inquiry

Local purchase order Goods received note Goods returned note IOU

12. Benefits of NTSA to the Kenyan people.(4 marks)

Unroadworthy vehicles have been removed hence reducing road accidents Use of speed limiter has reduced road accidents

Carrying capacity has been limited hence reducing overloading and uncomfortability

PSV are operated by people with certificates of good conduct comfortable of customers/there is order Drivers and conductors have uniforms that help in identifying them

Yellow lines help identify PSV by their users

Use of alcoblows has helped reduce the effect of drunk driving hence reducing accidents.

Requirement that all PSVs be members of a SACCO for order, discipline and proper management of PSVs. Passengers can take their complains to the Sacco.

13. Reasons why a firm would locate near the market for products(4 marks)

Competing tool

If the market is concentrated in one place

If the product is heavy to avoid the cost of transportation The product is perishable

It may be due to Government policy

14. Withrawals in the circular flow of income(3 marks)

Taxation Saving Imports

15. Functions of money other being a medium of exchange. It‘s a store of value

A standard of deferred payment It‘s a measure of value

Unit of account

Facilitate the transfer of immovable property

16.DRBank accountCR

1/1.2015 ICDC 500,00010/1/2015 Cash 50,000

DRICDC A/CCR

1/1/2015 Bank500,000

DRKelunyo accountCR

5/1/2015 Cash40,000

Page | 16


DRCash A/CCR

12/1/2015 Furniture 35,500

5/1/2015 Kelunyo 40,000

10/1/2015 Bank 50,000

DRFurniture accountCR

12/1/2015 Cash 35,500

17.MARINE INSURANCE POLICIES

DescriptionPolicy

Covers ships on a particular voyage and timeMixed policy

Covers a specified peril when the ship is either loaded or offloaded or servicedPort policy

Covers cargo against loss or damage while being transported by shipMarine cargo policy

One policy used to cover a number of ships belonging to one ownerFleet policy

18. Currently the government is selling state owned businesses to private investors. Highlight four benefits of such decisions.

(4marks)

i) To improve efficiency in their management. ii) To generate revenue for the government

iii) Help to avoid unnecessary expenses/avoid wastage of resources iv) To meet donors conditions when soliciting for funds/foreign aid

v) Helps to improve the quality of goods being produce as it leads to competition among investors vi) Helps to attract investors who will start similar firms.

vii) Helps to reduce government expenditure curbing inflation.

19. State four essentials of effective communication.(4marks)

i)Medium used should be appropriate

ii) Language used must be simple to understand iii) Information overload should be avoided

iv) Both the sender and the receiver must have positive attitude while communicating.

v) It must be free from distortion

vi) Environment should be free from noise

vii) Message should get to the intended recipient in good time.

viii) The sender should have adequate knowledge of information being conveyed.

20. Outline four disadvantages of free gifts in product promotion.(4marks)

i)It may be costly.

ii) Some middlemen may keep away the gift

iii) There is no assurance that the prospective customer would buy the product after getting the gift.

iv) In an effort to get the gift, a customer may end up buying what he/she doesn‘t want/had not budgeted for.

21. List four costs incurred in distribution of goods.(4marks)

i)Transport cost

ii) Product promotion expenses

iii) Salaries and wages of workers

iv) Packaging, blending and branding cost.

v) Insurance costs

vi) Storage charges

22. Highlight four merits of direct tax as a source of revenue to the government.(4marks)

i)May be progressive hence equitable

ii) Simple to understand to both taxpayer and tax collector

iii) Convenient to both tax payer and tax collector as time for collection is known . iv) Can be used to counter inflation.

v) High revenue earning capacity as it expands naturally with economic growth.i.e elastic vi) May be used to redistribute wealth and resources equally.

vii) Certain to both tax payer and tax collector.

23. Identify the level of occupation described by each of the following information.(4marks)

Descriptionoccupation

i)A boy hunting a hare for meatprimary

ii)Britam insurance company selling their policiesTertiary(commercial services)

iii)School carpenter making chairs for form onessecondary

iv)MrZuma counseling form four studentsTertiary (direct personal services)

Page | 17


24.

Kamau traders

cash receipt journal

DateparticularsReceiptLedgerDiscount allowedCashBank

nofolioshsshs

2015

Dec 1sales4,50040,500

Dec 17debtor3,00020,000

Dec 15Sales70,000

7,50040,50090,000

Kamau traders

Cash payment journal

DateParticularsReceipt no.L.fDiscountCashBank

receivedshsshs

2015

Dec.5Purchases2003,800

Dec.6Rent16,000

2003,80016,000

(2 marks)

25. Unemployment solving has been an agenda to most developing economies. Identify the type of unemployment being solved

below.(4 marks)

i) Kenya government initiating irrigation projects to ensure continuous food production…; seasonal unemployment

ii) Retraining teachers to embrace the use of technology in teaching and learning; structural unemployment

iii) Government and private sectors inventing job advertisement sites for easy access by job seeker; frictional /involuntary unemployment

iv) Parliament passing legislation that accommodate the disable people to acquire jobs; residual unemployment

Page | 18




MARKING SCHEME

1.(a) Circumstances that can cause a business to succeed in their activities

-Where there is proper location of the business convenient for its operations.i.e Availability of customers.

-Where there are favourable government policies it encourages growth and investment.

-Where there is political stability and security thus creates certainty and confidence to entrepreneurs.

-Where there is fair competition to enable business access markets for its goods and services

-Where there is use of modern technology in production of goods and services promoting quality production.

-Where there is adequate capital to run and expand the business.

-Where there is availability of skilled and adequate labor matched to their job specialization

-Where there is good customer relationship and care to attract and retain clients.

-Where there is availability of good infrastructure for business to access its market and inputs.

-Where there is proper marketing plans to increase sales.5 well explained points= 10mks

(b) Problems facing the savings and credit cooperative societies in Kenya

-Loan defaulting by members as some leave employment due to terminal illness, sacking and personal reasons.

-Lack of management skills among members leading to poor management of societies.

-Corruption and embezzlement of funds by official

-Poor investment decisions by some officials leading to losses.

-Stiff competition from commercial banks and micro financial institutions.

-Late remittance of members contributions by employers.

-High demand for loans against the receipts from monthly contributions.

-Retrenchment of workers by both government and private sector has led to financial problems to the society.

2. (a) Indicators of a good tax system

a) Equity;

Tax burden should be distributed among the tax payers according to their ability to pay

b) Economy;

Collection and administrative cost of the tax should not exceed tax revenue collected

c) Flexibility;

Tax system should be capable of being revised or changed in line with the changing economic conditions.

d) Diversity;

Different types of tax so that tax burden is on different groups of the society.

e) Elasticity;

Tax revenue should be capable of responding appropriately to changes in national income.

f) Simplicity;

The tax system should be understood by tax payers and the collectors. This motivates them to pay tax.

g) certain;

The one expected to pay should be clearly aware of how much he/she is paying. The tax collector/government should also be

aware of how much it is supposed to collect from tax.5 well explained points= 10mks

(b) Procedure an insured must take when making an insurance claim(10mks)

Notification of the insurer by the insured that the risk insured against has occurred.

Filling a claim form. The insured is issued with a claim form to fill in giving details of the risk based on the principle of utmost good faith.

Investigation of the claim. The insurer investigates the claim based on the information in the claim form. Preparation of the assessment report. The insurer assesses the assessors report on the extent of the loss. Payment of the claim .On the assessment of the claim, the insured prepares to compensate the insured.

(5 well explained steps= 10mks)

3. (a) Factors that he must take account when deciding on which method of product promotion to use.

Nature of the product

Nature of the market/Target group Method used by competitors Government policy

Cost of promotion method

Objectives of the promoting firm.5 well explained points= 10mks

(b) Weaknesses of using national income statistics as a measure of social welfare

-It may be based on inaccurate data

-Bulk of the wealth held by a few people/Unequal distribution of income

-Wealth is created in the expense of peoples health/time for rest and recreation or leisure/no time for family etc.

-Increased productivity but there is massive environmental pollution

-Inflation i.e, the price level could have risen by the same proportion as per capita income.

-Most of the income made due to improvement is all put into more investment and not on improving for instance own housing.

Page | 19


-Government may be using income earned on goods and services such as military facilities which does not directly improves

people‘s standards of living.5 well explained points= 10mks

4.(a) Explain five factors that justify the existence of small scale firms in an economy.

Small capital .some businesses remain small because of limitations of investment funds.

Where the market served is small .The market demand in a particular industry could be too small that it cannot accommodate

large scale firms.

If the government demands so. The law may restrict the growth of firms.

Products that are designed to meet customer specification. There are services that require personal attention entrepreneurs that

invest in such firms are compelled to operate them in small scale.

Desire to retain control by the owner. There are entrepreneurs that start firms and leave them to remain small for fear of loss

of control and independence in management if the firm becomes large scale.

Rising costs of production. Some firms that would want to remain small because of fear of increasing cost of production with

increase in its level of production.

Risk of large scale enterprises. There are huge risks that face large scale enterprises despite the many benefits that accrue to it.

To avoid such risks, firms may opt to remain small scale.

Expensive goods. Firms that are engaged in the production and sale of expensive and sell specialized goods are of small scale

because the products they are dealing with are too expensive to call for mass production.

Quick decision making. In cases where the proprietors want to avoid delay in decision making, they may opt to maintain a

small business as it may require less consultations.

Simplicity of small firms. To avoid bureaucracy and complexities associated with large scale firms, a proprietor may want

to remain small scale.5 well explained points= 10mks

(b)

Bartenge Traders

Balance Sheet

As at 31st May 2014

Fixed assetsKsh.Ksh.

Equipment24,000√Capital128,440√

Furniture6,000√Add net profit27,320√

30,000155,760

Current assetsKsh.Less drawings20,500√

Stock49,980√135,260

Debtors45,770√Short term liabilities

Bank38,760√Creditors30,450√

Cash1,200√135,710

165,710165,710

10 ticks @ 1mk= 10mks

5. (a) Problems with an ageing population

They provide a less mobile labour force- The older a person gets, the less willing they are to move from one place to another or even to change jobs.

Low labour supply- Old people are less productive and thus cannot provide the much needed labour force

High dependency levels- the old will be less productive and therefore will be highly dependent on the few working group who will then be strained while providing for their needs.

The country becomes less progressive because it lacks the input of more energetic youth.

May lead to unemployment- this may be due to the fall in demand for goods and services required by the youth.

5 well explained points= 10mks

(b) Explain five difference between banking and non-banking financial institutions(10mks)

BANKNON BANK FINANCIAL INSTITUTIONS

Operate current accountsDo not operate current accounts

Controlled by the CBKNot controlled by CBK

They issue chequebooksNot allowed to issue chequebooks

Formed to offer a wide range of financial servicesFormed to offer specific services in which they were formed for.

They usually offer short term loansDesigned to offer medium and long term loans

Must open accounts with the central bankMust open accounts with commercial banks

They provide forex servicesThey do not deal in forex

Members of clearing houseDoes not take part in clearing house

Involved in credit creationNot involved in credit creation

Page | 20


6.(a) Importance of encouraging upward communication in an organization

-Facilitates quick feedback

-Enables the management to receive and accommodate the views and sentiments of all staff in the organization when

making decisions

-Enables a sense of belonging among workers thus motivating all members of staff

-Encourages free dialogue between the junior and senior members of staff

4 well explained points= 8mks

(b)

Lule Traders

Trading, Profit and Loss account

DrFor the year ended 30th April 2015√Cr

Cost of sales:Ksh.Ksh.Ksh.

Opening stock37,760√Sales186,000√

Add Purchases115,560√Less Returns In.4,400√

Add carriage in.2,340√Net sales181,600

117,900

Less Returns out.3,550√114,350

C.O.G.A.S152,110√

Less Closing stock49,980√

102,130

Gross profit c/f79,470√

181,600181,600

Carriage outwards3,260√Gross profit b/f79,470

Salaries24,470√

Electricity6,640√

Rent5,760√

Sundry expenses12,020√

Net profit27,320√

79,47079,470

16 Ticks @ ½ Mark= 8 Marks

Lule Holdings

Balance Sheet

As at 30th April 2015√

Fixed Assets:Ksh.Ksh.

Motor Van85,000√Capital250,000√

Furniture20,000√Current Liabilities:

105,000Creditors25,000√

Current Assets:Ksh.

Stock16,500√

Bank103,500√

Cash50,000√170,000

275,000275,000

8 Ticks @ ½ Marks= 4 Marks

Page | 21


KASSU JOINT EXAMINATION - 2016 BUSINESS STUDIES

565/1

PAPER 1

1.Giving an example in each case, outline the difference between renewable and non-renewable resources(4 marks)

2.State four reasons why diagonal communication needs to be encouraged in an organization.(4 marks)

3.Mention four benefits enjoyed by a member of a producer cooperative society(4 marks)

4.State four measures that the government can use to encourage increase in the country‘s volume of exports.(4 marks)

5.Highlight four positive impacts of the physical environment on the operations of a business.(4 marks)

6.Highlight four problems associated with monopoly market structure.(4 marks)

7.Outline four role of the mass media in promoting consumer protection.(4 marks)

8.Outline four services offered in agency banking as a trend in the banking sector.(4 marks)

9.State the best type of machine one would use to perform the following tasks(4 marks)

FunctionsName of machine

i)Used to trim papers into desired sizes

ii)To post information to ledgers and to prepare payrolls

iii)To transmit printed messages such as letters, maps, diagrams and photographs

iv)To destroy sensitive but unwanted documents

10.The following balance sheet belongs to Nyakwar Atiyo during the period ended 30th June 2000.

Nyakwar Atiyo Traders

Balance sheet

As at 30.06.2000

AssetsKshsCapital + LiabilitiesKsh

Machinery45,000Capital65,000

Current assetsCreditors45,000

Stock7,750Short term liability

Debtors1,375Bank loan10,000

Bank25,375

79,50079,500

The following transactions took place on July 1 2000.

(i) Paid creditors Sh 2000 by cheque.

(ii) Nyakwar Atiyo took stock worth Shs 7500 from the business for his son‘s birthday.

(iii) Motor vehicle previously owned by Nyakwar Atiyo values at sh 200,000 was converted into business vehicles.

Required: Prepare the balance sheet of Nyakwar Atiyo traders as at 2nd July 2000.

11.Highlight four roles of advertising agencies in product promotion(4 marks)

12.Distinguish between the following categories of government expenditure.(4 marks)

a) Recurrent expenditure

b) Capital expenditure

13.Highlight four differences between hypermarkets and departmental stores.(4 marks)

14.The information below was extracted from the books of Lemayian Traders for the year ended 31. 12. 2015

Opening stock45,000

Closing stock15,000

Turnover340,000

Margin25%

Required:

(i) Gross profit(2mks)

(ii) Purchases(2mks)

15.Distinguish between the following terms as used in National Income(3mks)

a) Gross Domestic Product

b) Gross National Product

c) Per capita Income

16.Highlight four ways in which the government of Kenya promotes entrepreneurial development(4mks)

17.State four channels of distribution for importation of agricultural produce.(4mks)

18.Outline four trends in transport sector.(4mks)

19.Outline four benefits of indirect production.(4mks)

20.Enter the following transactions in the relevant ledger accounts(4mks)

2015 April 1 Janet Cosmetics started a business with Ksh. 150,000 cash

Page | 22


,,3 Bought stock of goods for Sh. 40,000 and paid in cash

,,6 Opened a bank account and deposited Sh. 60,000 from the cash till

,,9 Purchased an office machine for Sh. 25,000 and paid by cheque

21.Give four reasons why a producer may need to have their own warehouse(4mks)

22.State the name of the source document used to record the following transactions(4mks)

TransactionSource Document

a) Received goods returned by a buyer who bought them earlier on credit

b) Making of payment to a casual workers at the end of the week

c) Bought goods for sale from Gilanis Supermarkets on credit

d) A customer, Adhiambo, send a cheque for goods she bought earlier on credit

23.Define the following terms as used in business studies(4mks)

(i) Annuity (ii) Proposer

(iii) Speculative risk (iv) Grace period

24.In the table below fill in the missing figures S,T,U and V.(4 mks)

BusinessAssets(shs)Capital(shs)Liabilities(shs)

A20,000S5,000

B42,00032,000T

CU17,00053,000

D18,000V6,000

25.Compute the consumer price index (CPI) from the following data giving explanation of your outcome(4mks)

YearPrice

2010300

2011375

Page | 23


KASSU JOINT EXAMINATION - 2016 BUSINESS STUDIES

565/2

PAPER 2

1.(a) Explain five principles of insurance.

(b) Study the following table of the demand and supply of product x.

Period 2010Price / unitsQtn dd / units

JulyShs 300500

AugustShs 300400

SeptemberShs 300200

OctoberShs 30080

NovemberShs 30050

Explain five factors that may have led to the trend above.

2.(a) Giving the types of unemployment, state the causes of the remedies.(10 marks)

(b) You are a sales executive with a local bank. Describe five steps that you must follow when sent to the field to promote

the products of the bank.(10 marks)

3.(a) Discuss five reasons why a country‘s economy is showing slow increase in their National Income(10 marks)

4.Explain five problems that are likely to face the process of implementation of well-prepared economic development plans

(10 marks)

5. (a) On 1st June 2015, Ndovu Traders had cash in hand of sh.25,000 and sh.56,200 at bank.

During the month, the following transactions took place:

2015

June 2 Cash sales, sh.42,000.

June 5 Received a cheque of sh.70,500 from Kiptala Traders after deducting a6% cash discount. June 8 Paid salaries, sh24,000cash.

June 9 Yegon settled his account of sh.45,000 in cash and was allowed sh.l,800cash discount. June 12 Cash sales sh46,500.

June 18 Paid Tuitoek's debt of sh.l00,000 by cheque after deducting 5% cash discount.

June 24 Withdrew sh.26,000 from the bank for office use.

June 30 Banked all the cash except sh.25,000.

Prepare a 3-column cashbook and balance it off on 30th June, 2015.(10 marks)

(b)Explain five factors that may hinder effective communication in an organization.(10 marks)

5.(a)Explain five factors that influence the choice of a product to produce.(10 marks)

(b)Discuss five errors that may not be noticed in a trial balance.(10 marks)

6.(a)Discuss five canons of public expenditure.(10 marks)

(b)The following information was extracted from the books of Umeme Traders as at

31st December 2009.

Shs

Bank loan567,000

Bank loan interest1,440

Capital1,680,000

Closing stock87,000

Creditors272,400

Debtors140,280

Discount allowed170,400

Electricity30,240

Furniture489,804

Furniture repairs86,436

Gross profit624,720

Maintenance on premise72,000

Motor vehicle1,080,000

Motor vehicle maintenance360,000

Premise648,000

Rent received144,000

Sundry expenses122,520

Prepare:

(i) Profit and loss account for the year ended 31st December 2009.(10 marks)

(ii) Balance sheet as at 31st December 2009.(10 marks)

Page | 24


KASSU JOINT EXAMINATION - 2016 565/1

PAPER 1

MARKING SCHEME

1.With an example in each case, the difference between renewable and non-renewable resources

Renewable resources are those whose supply can be restored when they are exhausted such as wood, HEP, solar energy etc.

Non-renewable resources are those whose supply cannot be restored once they are exhausted such as mineral deposits, coal,

natural gas etc.

2.Reasons why diagonal communication needs to be encouraged in an organization.

Promotes teamwork in an organization

It helps eliminate goal blindness

Assist in development of human resource because they can freely exchange ideas

Assist in coordination and harmonization of different activities in an office

It creates a sense of belonging among staff thus a motivating factor.

3.Benefits enjoyed by a member of a producer cooperative society

Better/higher prices for their produce

Educated on better methods of production through seminars, field trips, etc

Provided better storage facilities

Enjoys reliable transport means

Provided with loans to expand their operations

Can obtain farm inputs on credit

Provided with grading, packing, and processing services

4.Measures that the government can use to encourage increase in the country’s volume of exports

Offering export compensation schemes to exporters

Research to diversify foreign markets and products

Offering customs drawbacks

Lobbying for the removal of trade restrictions

5.Positive impacts of physical environment on the operations of a business

Favourable climatic conditions favour agricultural businesses

Absence of floods means goods can efficiently reach the market

Good roads and other physical infrastructure enhances trade

Land with good terrain favours production activities. For instance it is cheaper to construct business structures

6.Problems associated with monopoly market structure

Leads to charging of high prices

Causes the production of sub-standard products since there is no competition

It may cause unequal distribution of income

Too much monopoly power may be used to influence government to adopt unfavourable policies

Some may operate at excess capacity causing unemployment and wastage of resources

7.Outline four role of the mass media in promoting consumer protection

They air or print information on traders who exploit consumers.

They advise consumer on their rights

They refuse to publish any false/misleading advertisement

They inform the government and other departments on traders who exploit consumers

They taste products in their laboratories or using their own experts then inform consumers

They investigate problems facing consumers and try to solve them

8.Services offered in agency banking as a trend in the banking sector.

Customer deposits

Withdrawal from own account

Transfer of funds

Paying bills

Balance enquiries

Opening new accounts

Filling of loan application forms.

Page | 25


9.Type of machine one would use to perform the following tasks

Functions

i)Used to trim papers into desired sizes

ii)To post information to ledgers and to prepare payrolls

iii)To transmit printed messages such as letters, maps, diagrams and photographs

iv)To destroy sensitive but unwanted documents

Name of machine

Guillotine

Accounting Machine Facsimile (Fax machine) Paper Shredders

10. New Balance Sheet for NyakwarAtiyo traders

Workings:

Stock= Shs.7,750 - 750

Drawings= Shs. 750

Creditors= Sh. 45,000 - 2,000

Bank= sh 25,375 - 2000

Capital= Sh. 65,000 + 200,000

Added investment= Sh. 200,000

Motor Vehicle= Sh. 200,000

Fixed assetsKshs.Ksh.

Machinery45,000√

Motor vehicles200,000√

= 7,000

= 43,000

= 23,375

= Sh. 265,000

NyakwarAtiyo

Balance Sheet

Asa t 30.6.2000

Capital65,000√

Add additional capital200,000√

245,000Less Drawings(750)√

Current assetsKshs.Short term liabilities264,250

Stock7,000√Creditors2,500√

Debtors1,375√Short term bank loan10,000√ 12,500

Bank23,375√31,750

276,750276,750

10 ticks × ½ = 5marks

11.Roles of advertising agencies in product promotion

Help businesses in designing their trademarks, logos, and advertising materials

Book space and airtime for their customers in various media houses

Offer advisory services to their clients on selling techniques

Advertise on behalf of their clients

On behalf of their clients, they choose the appropriate media to use

12.Distinguish between the following categories of government expenditures.

i)Recurrent expenditure -refers to regular expenses incurred by the government in the provision of goods and services

e.g. salaries, fueling gov‘t vehicles, servicing public debt etc.

ii) Capital expenditure—refers to government spending that goes into financing specific projects such as construction of

roads, railway lines, airports etc.

13.Differences between hypermarkets and departmental stores.

Hypermarkets are located in the outskirts of town while departmental stores are found in town.

Hypermarkets offer a variety of goods while departmental stores deal in a particular line of goods

Hypermarkets comprises different businesses with different management while departmental stores comprises many single

shops under one management

Hypermarkets have ample parking space whereas departmental stores do not have.

With hypermarkets prices are not controlled hence can exploit whereas departmental stores sell at relatively low prices.

14.The information below was extracted from the books of Lemayian Traders for the year ended

31.12. 2015

Opening stock45,000

Closing stock15,000

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Turnover340,000

Margin25%

Required:

(i) Gross profit

Margin=Gross profit × 100

Saless

25=Gp

100340,000

Gp=25× 340,000

100

Gross profit = Shs. 85,000

(ii) Purchases

GP= Sales - CoGs

CoGs= Sales - GP

= 340,000-85,000

= 255,000

CoGs= Opening stock + Purchases - Closing stock

Purchases= CoGs- Opening stock + Closing stock

255,000 - 45,000 + 15,000

= Ksh. 225,000

15.Distinguish between the following terms as used in National Income

a)Gross Domestic Product

-Is the value of all goods and services produced within a country during a particular year irrespective of who does it.

b)Gross National Product

-It is the value of all goods and services produced by the nationals of a country during the year irrespective of whether they are

produced locally or abroad.

c)Per capita Income

-Is the average income per person in a given year. It is obtained through dividing the amount national income by the total

population

16.Ways in which the government of Kenya promotes entrepreneurial development

Building or improving all infrastructure such as roads, sewerage systems etc

Improving the level of security

Lowering taxation/giving tax exemptions or holidays

Providing subsidies

Controlling the cost of electricity and petroleum products/make it affordable to encourage production

17.Channels of distribution for importation of agricultural produce.

Foreign farmer→local consumer

Foreign farmer→local retailer→ local consumer

Foreign farmer→ local wholesaler →local retailer → local consumer

Foreign farmer→Local wholesaler→ local consumer

Foreign farmer → local agent→W/saler →Retailer→local consumer

Foreign farmer→Local Representative→W/saler→ Retailer→Local consumer

18.Trends in transport sector.

Pipeline and containerization

Electric trains replacing diesel engines

Underground tunnels are constructed to ease congestions on surface

Development of planes with large carrying capacities

Introduction of speed governors to control speed.

Psv‘s fitted with music systems

19.Benefits of indirect production.

High quality goods produced

Surpluses produced.no deficits in market

It is capital intensive reducing cost of labor

There is specialization in the production process which leads to efficiency and highquality

Modern technology is used promoting quality production.

It is less tiresome

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Promotes standards of living as variety of goods are available

20. Enter the following transactions in the relevant ledger accounts

Capital a/cCrDrCash a/cCr

201520152015

April 1 Cash 150,000April 1 Capital 150,000April 3 Purchases 40,000

,,6 Bank60,000

DrPurchase A/cCrDrBank A/cCr

201520152015

April 3 Cash40,000April 6 Cash60,000April 9 O. machine 25,000

DrOffice Machine A/cCr

2015

April 9 Bank25,000

21.Reasons why a producer may need to have their own warehouse

To enjoy complete control of operations in the warehouse

To design it to match their specific needs

In order to install special handling, storage and protection facilities which may not be available with a public warehouse

To avoid being tied down by rigid procedure of receiving and issuing of goods as is the case with public warehouses

In the long run, the cost of building own warehouse will be cheaper than the hiring of space in a public warehouse

The owner exercises full control and makes major decisions without having to consult any one

22.Name of the source document used to record the following transactions

TransactionSource Document

a)Received goods returned by a buyer who bought them earlier on creditCopy of the Credit note/Retained credit note

b) Making of payment to casual workers at the end of the weekCash payment voucher

c)Bought goods for sale from Gilanis Supermarkets on creditPurchase/Received/Original Invoice

d) A customer, Adhiambo, send a cheque for goods she bought earlier on credit Copy/Retained Cash Receipt

23. Define the following terms as used in business studies

(i) Annuity

Is an agreed amount of money that an insurer agrees to pay to the insured annually until the latter‘s death (ii) Proposer

This is a person wishing to take out an insurance cover (Prospective insured) (iii) Speculative risk

This is a risk that when it occurs may result in loss or a profit (iv) Grace period

This is the time allowed between the date of signing of the contract and the date of the payment of the first premium.

24.In the table below fill in the missing figures S, T, U and V.

S= Shs. 15,000T= Shs. 10,000

U= Shs. 70,000V= Shs. 12,000

25.Compute the consumer price index (CPI) from the following data giving explanation of your outcome

YearPrice

2010300

2011375

CPI= Price in the Year 2011×100%

Price in the Year 2010

= 375 × 100 =125%

300

This implies that price of goods has risen by 25% since 2010.

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KASSU JOINT EXAMINATION - 2016 565/2

PAPER 2

MARKING SCHEME

1.

(a) Explain five principles of insurance.

(i) Principles of indemnity

This principle state that insured can only be compensated for the actual loss suffered. The aim of the insurance company is to compensate the loss suffers for what they have actually lost financially being returned to the same financial position but no to benefit them.

(ii) Principle of utmost good faith or ―ubernima fides‖

At the time of signing the insurance contract the proposer is expected to give all the relevant material faults relating to the [property he wants to insure.

(iii) Principle of insurance interest

It states that, the insured should only insure property or life whose loss will affect him financially hence one cannot insure a friend‘s property.

(iv) Principle of proximate cause

For the insured to be compensated, there must be very close relationship between the loss suffered and the rick insured.

(v) Principle of subrogation

After the insured has been compensate, the remnant of the insured item becomes the property of the insurer. This ensures that the insured person does not make against (profit) out of insurance.

(vi) Principle of contribution

This principle state that where a person has insured the same property with more than one insurance company. Upon the occurrence of the event of loss, all the insurance company will share the loss proportionately.

(b) Study the following table of the demand and supply of product x.

Period 2010Price / unitsQtn dd / units

JulyShs 300500

AugustShs 300400

SeptemberShs 300200

OctoberShs 30080

NovemberShs 30050

Explain five factors that may have led to the trend above.

(i) Government policy

The government may have come up with policies that have discouraged the consumption of project x by levying heavy

taxation on the product, lack of subsidies and laws and regulation that have discouraged consumption which have led to this trend.

(ii) Uneven distribution of income

Demand for goods and service is usually higher when incomes are distributed among many people as opposed to where

incomes are in the hands of few people. A change in this trend explains that there is uneven distribution of incomes which has led to a decrease in the quantity demanded.

(iii) Decrease in population

There is a decrease in population which has led to a decrease in demand for goods x while the composition of the population in terms of its sex. Age, economic stats and education structure will also affect the demand for the product. (iv) Terms of sale

The demand for goods and services can increase if and when favourable terms of sale are offered to consumers. The terms of sale my include offering goods on credit, giving discounts etc. So for this case may be these was a decrease in the availability of credit or introduction of tougher credit terms which has led to a reduction in demands for the goods and services.

(v) Negative change in tastes fashion and preferences of consumers

Individual‘s tastes have a great influence on the demand for a commodity. If the consumer develops a negative taste for a

particular product, then this will clearly be reflected with a decrease in the quantity demanded. So in this case, the consumers might have a negative taste and a preference of product x.

2.

(a) Giving the types of unemployment, state the causes of the remedies.

(i) Structural unemployment

This type of unemployment occurs when the supply of a particular category of workers exceeds the demand for the services

e.g. supply for white collar jobs exceeds the job availability. So the possible cause for this unemployment occurs when the persons have different skills from those being demanded by the employers so the solution is to train the employees and also

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the government is to introduce the appropriate forms of education in schools and institutions to equip the school-leavers with relevant skills and attitudes for the existing job opportunities.

(ii) Frictional unemployment

This is a short-term unemployment that occurs as people adjust to market changes for instance, by quitting an existing job to seek a new one. This may be caused by people becoming too selective when choosing the jobs they want which may not be available in the market. The possible solutions for this would be to export labourers where there are too many skilled people and the government to provide travel permits for people to take up jobs outside the country.

(iii) Voluntary / real wage unemployment

It occurs where people choose not to work because they consider the remuneration to be low. The possible cause for this is where there is low demand for goods and services due to low incomes which result to a decline in economic activities and consequently a decline in employment. The solution for this is to encourage firms to use appropriate methods of production

such as labour intensive techniques to enable more people to be absorbed in the available jobs. (iv) Cyclical unemployment

This is unemployment which arises due to situations in the economic activities over a period of time in a pattern known as trade cycle. The possible cause is where low demand for goods and services due to low incomes which result to a decline in economic activities. The solution is where the government needs to initiate major projects that increase the government expenditure.

(v) Residual unemployment

This unemployment arises due to handicaps such as mental disorders and blindness which hinder people from engaging in production activities. The possible solution for this is to encourage government to introduce foreign investors in many ways to cater for this people.

(b) Steps that one must follow when sent to the field to promote the products of the bank through personal selling.

(i) Identifying the prospective customers

(ii) Preparing the presentation

(iii) Establishing customer contacts (iv) Arousing interest in the products

(v) Dealing with objections (vi) Closing the sale

(vii) After-sale services

3.

(a)Reasons why a country’s economy is showing slow increase in their National Income

Poor supply and low productivity of the labour force

Inadequate capital necessary for the exploitation of natural resources

Poor natural resource endowment

The technology used may be poor and inappropriate

Effects of political instability

Citizens‘s laziness and negative attitude towards work

Presence of a large subsistence sector

Low levels of foreign investment

(b)Problems that are likely to face the process of implementation of well-prepared economic development plans.

Reliance on donor funding

Limited supply of domestic resources such as skilled personnel, finance and capital

Earlier failure to involve the local people in plan formulation

Natural calamities

Trying to implement unrealistic, over-ambitious plans

Lack of corporation among executing officers

Inflation

Lack of political will

4.

(a) On 1st June 2015, Ndovu Traders had cash in hand of sh.25,000 and sh.56,200 at bank. During the month, the following transactions took place:

2015

June 2 Cash sales, sh.42,000.

June 5 Received a cheque of sh.70,500 from Kiptala Traders after deducting a6% cash discount. June 8 Paid salaries, sh24,000cash.

June 9 Yegon settled his account of sh.45,000 in cash and was allowed sh.l,800cas discount. June 12 Cash sales sh46,500.

June 18 Paid Tuitoek's debt of sh.l00,000 by cheque after deducting 5% cash discount.

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June 24 Withdrew sh.26,000 from the bank for office use. June 30 Banked all the cash except sh.25,000.

Prepare a 3-column cashbook and balance it off on 30th June, 2015.(10mks)

Ndovu Traders

Three-column cash book√

30 ticks × ½ = 10mks√

(b) Explain five factors that may hinder effective communication in an organization.(10 marks)

(i) Noise barriers: It refers to a loud, surprising, irritating or unwanted sound that disrupts the effective communication process. It may be from telephone interruptions that cause disturbance in the process of communication.

(ii) Choice of inappropriate channel: In accordance with the importance and the intensity of the message, a proper channel must be selected. If a poor channel is selected, it is likely that the message gets distorted or does not have the desirable effect. (iii) Information overload: Care must be taken when providing the amount of information to others lest they may lose it due to the information being overloaded. It is worth mentioning that while managing the people, a manager must make out how capable is a particular employee in processing the message and how much information can be provided to him or her. (iv) Poor Timing: Although urgent needs of a business do not specify any timing, there may be some rare cases. However, the timing of providing a particular message to others should be appropriate. If the information is communicated at the eleventh hour, it may result in resentment and causing the employees to lose the interest in performing particular activity.

(v) Physical distractions: physical distractions may cause disturbances to the effective communication process. Such as, telephone interruptions or visitors walk in on the manager and subordinates in the middle of a discussion. (vi) Improper and inadequate information: one of the facts that spells the difference between effective and ineffective communication is the quality of a message. A good message contains meaningful and appropriate information while it incorporates language rules with proper choice of words. A poor message whether spoken or written does not produce intended effect, while it creates ambiguity and leads to misinterpretations.

(vii) Poor body language attracts negative responses from others, whereas displaying poor body language not only makes bad impression on others, but also takes somebody‘s attention away from the effective communication process. (viii)Listening skills; good listening skills lead to full apprehension of a message, while poor listening distorts the message.

5.

(a) Explain five factors that influence the choice of a product to produce.(10 marks)

(i) Market/Supply-gap: The size of the unsatisfied market demand which constitute a source of business opportunity will dictate, to a great extent the need to select a particular product. The product with the highest chances of success as reflected in its demand will be selected. In essence, there must be existing obvious demand for the selected product. (ii) Finance/Fund: The size of the funds that can be mobilized is another important factor. Adequate fund is needed to develop, produce, promote, sell and distribute the product selected.

(iii) Availability of and Access to Raw Materials: Different products require different raw materials. The source quality and

quantity of the raw materials needed are factors to be seriously considered, Are the raw materials available in sufficient

quantities? Where are the sources of raw materials located? Are they accessible? Could they be sources locally or imported? Satisfactory answers should be provided to these and many other relevant questions.

(iv) Technical Implications: The production process for the product needs to be considered. There is need to know the technical implications of the selected product on the existing production line, available technology and even the labour force. The choice of a particular product may require either acquisition of the machineries or refurbishing of the old ones. The product itself must be technically satisfactory and acceptable to the user.

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(v) Profitability/Marketability: Most often, the product that has the highest profit potential is often selected. However, a product may be selected on the basis of its ability to utilize idle capacity or complement the sale of the existing products. The product must be marketable.

(vi) Availability of Qualified Personnel: Qualified personnel to handle the production and marketing of the product must he

available. The cost of producingthe product must be kept to the minimum by reducing wastages. This is achievable through competent hands.

(vii) Government Policies: This is quite often an uncontrollable factor. The focuses of government policies can significantly influence the selection of product. For instance, a package of incentives from government for a product will boost its production.

(viii)Government objectives: The contributions of the product to the realization of the company‘s short and long range objectives must be considered before selection. For instance, the company goal maybe the achievement of sale growth, sales stability or enhancement of the company‘s social value.

(b) Discuss five errors that may not be noticed in a trial balance.(10 marks)

(i) Error of omission

This is an error where a transaction is completely omitted from the books. No entries were made at all for the transaction. It is as if the transaction has not existed.

(ii) Error of commission

In this case, double entry was observed but the transaction was posted to a wrong account of the same class. For example goods sold to John was correctly credited to Revenue (Sales) account but debited to Jane‘s account. (iii) Error of principle

Double entry observed but an entry made in the wrong class of account. For example, payment by cheque for vehicle repairs

correctly credited to bank account but debited to vehicle account instead. In this case, not only the account is wrong

(vehicle instead of vehicle repairs) but also the class of account is different. Vehicle account is a rea