September 4, 2022

 Business Studies Paper 2 (565/2) 1. (a) Explaining the types of inflation (i) Demand-Pull inflation Refers to a progressive increase in the general level of prices brought about by an expansion in demand. There is too much money chasing very few goods. (ii) Cost-Push inflation A progressive increase in the general price level brought about by a general increase in the cost of production. (iii) Imported inflation Refers to an increase in domestic prices resulting from importation of primary goods and inputs at higher prices. (iv) Structural inflation Refers to a persistent rise in prices resulting from failure of the economy to meet the general increase in demand. (4 x 2 = 8 marks) (b) Factors that may hinder the development of a country include: (i) Low demand for goods and services which discourages production activities hence interfering with development. (ii) Inadequate capital which leads to low levels of development (iii) Negative sociocultural practices which may hinder production and consumption of certain goods and services. (iv) Inadequate foreign exchange which limits access to imports hence affecting production and consumption. (v) Limited entrepreneurial abilities resulting into inefficiency in production. (vi) Poor management of resources arising from inadequate skills, corruption and poor govemance which limit the extent of growth and development. (vii) Poor nutrition and disease prevalence which renders some of the people unproductive as well as channelling much of the income into provision of health care instead of investment. (viii) Use of inappropriate technology which compromises the quantity and quality of goods and services produced. (Any 6 x 2 = 12 marks) 2. (a) Circumstances under which containerization may be used to transport goods include: (i) Where bulky goods are imported. Bulky goods are usually transported by sea where containers are used. (ii) Where specialized equipment are available for handling containers. (iii) Where container terminals are available – containerization require container terminals which are specially built to handle them. (iv) Where specialized means of transport like railways are available. (v) Where security of goods need to be guaranteed. Goods of very high value and those that are risky require high level of security which is guaranteed by containers. (vi) Where skilled personnel are available. The handling of containers require specially trained workers to handle and manage them. (Any 5 x 2 = 10 marks) (b) (I) Procedure for making an insurance claim (i) Notifying the insurer of the loss suffered. (ii) Filling a claim form from the insurer. (iii) Carrying out investigation to determine or ascertain the cause of loss. (iv) Insurance company making a report. (v) Determination and payment of the claim. (5 X 1 = 5 marks) (II) Determination of compensation 3. (a) Factors to consider when choosing a method of promoting a product include: (i) Cost of the method. The organization should choose a promotion method that is affordable. (ii) Geographical area of coverage. The organization should choose a method that will reach the customers in their various locations. (iii) Target group. The organization must choose a method that appeals to the relevant target group. (iv) Speed of the medium or method in relation to urgency of the message. The organization should choose a method that will reach the customers within the desired time frame. (v) Nature of the product. Different methods may be chosen depending on the nature of the product e.g. technical products may require demonstrations best achieved through personal selling. (vi) Nature of the message. The organization should choose a method that will best present the various aspects of the message. (Any 5 x 2 = 10 marks) (b) Features of economic resources include: (i) 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. (ii) Monetary Value. They have a price attached to them which have to be paid for their use. (iii) Uneven distribution. They are not distributed uniformly in society, hence some people, regions or countries have more of the resources than others. (iv) Combinability. They can be used in different proportions to produce goods and services. (v) Usefulness. They are used to satisfy human wants (have utility). (vi) Transferability. They may be transferred from one person to another in terms of ownership. (Any 5 x 2 = 10 marks) 4 (a) Benefits that may accrue to an organization that adopts an open office plan include: (i)Easy supervision. It is easy to monitor employee’s perfonnance since they are in the same room. (ii) Economy of space. More floor space is available since space has not been lost through partitions. (iii) Minimal cost. It is cheap to construct and maintain. (iv) Sharing of resources. It makes possible for joint use of office facilities. (v) Easy communication. Communication between workers and departments is made easier and faster since there are no physical barriers between them. (v) Easy reorganization. It is easy to re-arrange the office when need arises. (vi) Enhanced teamwork. Employees work as a team and learn to be together. (Any 5 x 2 = 10 marks) (b) Circumstances under which a partnership may be dissolved include: (i)Expiry of time or accomplishment of purpose. Where the partnership was formed for a definite time or a particular purpose, the expiry of time and accomplishment of purpose terminates the partnership. (ii) Mutual agreement among partners – where the partners agree among themselves to terminate the partnership. (iii) Bankruptcy of a general partner – where a court declares the value of one of the general partner’s property insufficient to settle his or her debts. (iv) Change in law that makes the operations of the partnership illegal. (v) Permanent inability of a general partner to perform or fulfill his part of the partnership agreement either as a result of disease, insanity or death. (vi) Internal dissension among partners – where partners disagree irreconcilably, then the partnership may be terminated. (vii) Persistent losses in operation – where the business has continued to operate at a loss, then it is

1 Business Studies Paper 1 (565/1) 1 Types of wholesalers (a) Specialized wholesaler (b) Regional wholesaler (c) Rack jobbers (d) General line wholesaler (4 X 1 mark = 4 marks) 2 Factors to consider before buying office equipment include: (a) space available (b) use of which it be put (c) technological trends in the industry (d) funds available (e) skills available (Any 4 x l mark = 4 marks) 3 Malpractices by traders against which consumers may need protection by the government include: (a) selling of contraband goods (b) overcharging (c) selling under Weight goods (d) selling expired goods (e) giving misleading information about the product (f) hoarding (Any 4 x l mark : 4 marks) 4 Features of insurable interest include: (a) presence of property rights or interest (b) potential insurable risk must be present (c) the property must have monetary value (d) the insurable risk must be legal (e) there must be the possibility of suffering financial loss in case of a risk happening (Any 3 x 1 = 3 marks) 5 Ways of reducing the level of unemployment in Kenya include: (a) encouraging self-employment (b) establishment of more labour intensive industries (c) impart the right skills through education and training (d) expanding the market for agricultural goods (e) exporting surplus manpower (Any 4 X 1 mark = 4 marks) 6 Services offered by a commercial bank to its customers include: (a) acceptance of deposits (b) safeguarding valuable items (c) advancing loans (d) offering management and consultancy services (e) advisory services on financial matters (f) foreign exchange services (Any 4 x l mark = 4 marks) 7 Sources of public finance include: (a) taxes (b) licences (c) court fines (d) donor aid (e) fees (f) treasury bonds and bills 8 Reasons why countries may trade with each other include: (a) to sell their surplus (b) to enhance bilateral ties (c) to acquire what they are not able to produce (d) protect special interest (f) to improve the quality of life of their citizens/improve access to a variety of goods improve standard of living of the citizens (Any 4 x 1 mark = 4 marks) 9 Reasons Why economic development is desirable to a country include: (a) improve infrastructure (b) create employment (c) increase life expectancy (d) reduce rural-urban disparity (e) improve the social welfare of citizens (Any 4 x l mark = 4 marks) 10 Factors of production and rewards they earn: (Any 4 x 1 mark = 4 marks) 11 Circumstances under which a co~operative society may be dissolved include: (a) by Government order (b) Where the co-operative continuously make losses (c) Where stipulated majority of members agree to dissolve it (d) by a court order (e) Where the co-operative society has achieved objectives for which it was formed 12 Features of a bonded warehouse include: (a) mostly located at points of entry into a country like the ports (b) stores goods that are under bond (c) guarantees payment of customs duty to customs authority (d) very spacious to accommodate even bulky goods like motor vehicles (e) must issue release Warrants to owners of goods for customs clearance (f) works hand in hand with customs officials for inspection of goods (Any 4 X 1 mark = 4 marks 13 Factors that may be considered when measuring the size of a firm include: (a) the level or volume of output (b) the number of employees (c) the capital invested (d) the production methods (technology) used (e) the market served (f) the floor area covered by the firm’s (h) the sales volume 14 18 Benefits that a farmer may get by transporting her produce to the market by road include: (a) Relatively flexible (b) Relatively cheap (c) Relatively available (d) Relatively fast (e) Variety of means of road transport (Any 4 x 1 mark = 4 marks) 19 Causes of the declining supply of sukuma wiki include: (a) fall in the price of kales (sukuma wiki) may have discouraged producers (farmers) as they opt to produce other goods (b) there may have been an outbreak of diseases affecting the sukuma wiki (c) there may have been prolonged drought which affects the sukuma wiki (d) there may have been increased cost of farm inputs like fertilizer and seeds (e) the farmers could be using inappropriate technology to produce the sukuma wiki (f) this may just be the ploughing time and many farmers have not yet planted sukuma wiki (Any 4 x 1 = 4 marks) 20 Ways in which households may contribute to national income of a country include: (a) consumption of goods ~ (b) payment of taxes (c) provision of factors of production (d) provision of savings for investment 21 Circumstances in which a trader may use oral communication include (a) when there is need to negotiate a deal (b) when there is need to explain the use and features of a product (c) when there is need for immediate feedback (d) when there is need to give an immediate compliment (e) when selling over the counter 22 Reasons why a firm may remain small include: (a) Target market is small (b) Limited production capacity (c) Nature of the product (d) Owner’s decision to remain small (f) Inadequate appropriate technology 23 Two-column cash book for the month of January 24 Benefits that accme to a trader who advertises products in a newspaper include: (a) wide coverage – message can reach a lot of people (b) evidence of the message exists (c) graphical details can be included (d) a traderhas a chance to compete with other traders (e) a trader has a chance of increasing sales. 25 Calculation of the increase in consumer price index  

 Business Studies (565/2) 1.(a) Benefits that may accrue to a country with a large proportion of skilled labour force include: (i) Saving on foreign exchange that would have been used to pay expartriates/ imported labour. (ii) Production of high quality goods/services as the workers are experts in their respective areas. (iii) Increased output of goods/services as the workers are competent due to exploitation of resources. (iv) Reduction in cost of production since the labour tends to be efficient/less wasteful. (v) Increase in purchasing power/demand due to higher incomes/salaries eamed. (vi) Reduction in dependency ratio since the employment rate is higher. (vii) Enhances creativity/innovation/research leading to new/improved/variety of goods/services. (viii) Promotes specialization/division of labour leading to faster production. (ix) Easen/simpilify setting of wage/employment policy due to abundance/ availability of skilled labour/may reduce labour stife/unrest. (x) Increased govemment revenue due to’income taxes levied. (xi) Increased foreigh exchange due to export of skilled labour. (xii)Enhances entrepreneural culture since skilled labour is more willing to undertake risks. (iii) Adaptability/flexibility as they are ready to embrace changes. Any 5 @ 2 =10 marks (b) Characteristics of an efficient tax system are: (i) Equity – the tax should be fair and justlpeople should be taxed according to their income. (ii) Economical – it should be cheap and easy to administer/cost effective/cost of collecting should be lower than the revenue. (iii) Convenient – method of payment should be convenient to the tax payer/ favourable to tax payer. (iv) Certainty – tax payer/collector should know what, when and how to pay/collect. (v) Flexibility – where tax is used as an instrument of national policy. it should be adaptable to all circumstances. (vi) Simplicity – it should be easily understood. (vii) Elasticity – proceeds from taxation should be capable of expanding/contracting in line with changes in income/population. (viii)Diversity/wide base. There should be wide range/varietyof taxes/should net many tax payers. (ix) Difficult to evade. Should not create loopholes for people to avoid. (x) Should regulate the economy. Any 5 @ 2 =10 marks   2. (a) Benefits that Kenya may get as a member of COMESA include: (i) Free flow of goods and services. (ii) Expanded market for goods and services. (iii) Reduced costs of operating businesses as a result of increased scale of operation. (iv) Production of competitive/quality goods and services. (v) Possibility of political cooperation. (vi) Increased variety of goods to choose from. (vii) Improved infrastructure to facilitate conduct of business. (viii) Creation of employment opportunities due to increased trading. (ix) Attracts investment due to greater demand. (x) Lower prices of goods due to abolition of tarrifs. (xi) Encourages specialization where countries enjoy comparative advantage. Any 5 @ 2 =10 marks (b) Factors that may hinder economic development in Kenya include: (i) Inaccessibility to appropriate technology leading to low quality/quantity. (ii) Inadequate research data. (iii) Poor development planning. (iv) Inadequate skilled labour force. (v) Inadequate natural resource endowment. (vi)iBrain drain-skilled man power seeking greener pastures elsewhere. (vii) Low demand for goods/services. (viii) Negative socio-cultural practices.   (ix) Inadequate/lack of foreign exchange. (x) Poor govemance/corruption. Any 5 @ 2 = l0 marks 3. (a) Benefits that may be realized by a country as a result of government policy to relocate industries to rural areas include:   Increased availability of variety of goods and services as a result of new businesses in the area.  Availability of auxiliary services – citizens would enjoy more and better auxiliary services like transport.  Increased job opportunities – there will be more jobs available that would reduce.  Increased utilisation of locally available resources – locally available factors of production will be used and the citizens would eam rewards associated with them.  Improved standard of living as development of the rural areas increases the quality and variety of goods and services.  Reduced congestion in towns – this would benefit the few citizens remaining in the city.  Balanced economic development as economic activities are spread throughout the country.  Transfer of technology to rural areas which leads to production of better quality goods/services.  Creation of market for goods/services produced in rural areas.Any 5 @ 2 = l0 marks (b) 4(a) Advantages of advenising to the consumer include:  Consumers become aware of existence of a product and where it can be found. Consumers enjoy high quality goods resulting from competitive advertising. /Producers seek to maintain very high standards of quality. Makes it easy for consumers to choose products from a variety offered in the market based on their advertised quality and contents. Protects consumers from exploitation since they are aware of prices and quality of items and can therefore enforce their rights. Communicates changes about the producer like new product lines. change of name and physical address. This enhances convenience for the customers. Educates the consumers on the proper use of products where advertising messages involve demonstrations of product usage. Entertainment by use of drama/music/plays. – Aiding budget/planning as they are made to know about price and existence of goods. May enjoy lower prices due to competition. Correct misconceptions hence assist in making decisions.Any 5 @ 2 = 10 marks 4 (b) 5 . (a) Circumstances under which a trader may use air transport:  Perishable nature of goods since they go bad/get damaged. Goods are of high per-unit value since they are prone to theft. Urgency – where goods require to arrive at the destination promptly. Security – where security of goods is of valuable consideration. Where other means of transport are unavailable. Where distance to be covered is too large. Where it is the policy of the business which needs to be followed. Where destination is remote making it inaccessible by other means.Any 6 @ 2 =12 marks (b) Ways through which a public limited company may be dissolved include:   A resolution by the shareholders to dissolve the company. When there is a unanimous decision by the shareholders to wind up the company during the annual general meeting. Change in the country’s law that renders the activities of the company illegal/ unlawful. When the laws of

 Business Studies Paper 1 (565/ 1) 1. Ways in which Business Studies may benefit an individual include: (a) Equips the individual with skills and knowledge to manage a business. (b) Prepares one for future career in business. (c) Enables one to relate issues affecting business to its environment. (d) Enables one to relate issues affecting business activities taking place globally. (e) Enables one to identify business opportunities to venture into. (f) Prepares one for further studies. (g) Enables an individual to think creatively and make sound judgement. (h) Makes an individual to appreciate the role of govemment in business. (i) Makes individual disciplined and have positive attitude towards work. Any 4 x 1 = 4 marks 2.External factors that may influence the operations of a business negatively includes. (a) Unfair competition. (b) Inadequate technology. (c) Unstable political environment. (d) Unstable economic environment. (e) Unfavourable legal framework. (f) Unreliable supply system. (g) Strong consumer bargaining power. (h) Poor physical facilities and infrastructure. (i) Low population level. (j) Insecurity. (k) Unfavourable socio-cultural environment. (l) Natural calamities. Any 4 x 1 = 4 marks 3. Characteristics of a successful entrepreneur include:- (2.) Innovative and creative. (b) Hardworking. (c) Goal-oriented/desires to achieve. (d) Time conscious. (e) Self confident. (f) Risk taker. (g) Good decision maker. (h) A good net worker. (i) A good communicator. (j) Should be ethical. (k) Should be flexible. (I) Future oriented. Any 4 x 1 = 4 marks 4.Functions of the office include: (a)Collecting information. (b)Receiving information. (c)Storing information. (d)Distributing information. (e)Production and reproduction of documents. ()Centre for administration. (f)Mailing. (g)Communication centre. (h)safeguarding and controlling Any 4 x 1 = 4 marks 5. 6.Households. Households. Firms. Firms. 7. 8.Determining owner’s capital. C = A – L = 2240.000 – 750.000 = 1.490.000 9. (a) Cyclical unemployment. (b) Disguised/hidden unemployment. (c) Structural unemployment/technological. (d) Voluntary unemployment/real wage. 10. Circumstances under which the capital of a business may change are:- (a) When the business makes profit. (b) When the business makes losses. (c) When the owner draws cash/goods for personal use/drawings. (d) When the owner makes additional investment into the business/additional capital. 11.Meaning of the entries:   (a) Bank overdraft. (b) Contra entry. (c) Cash received from debtor. (d) Closing cash in hand. 12. (a) When correcting undercharge. (b)When demanding payment for goods supplied. (c)When correcting an overcharge for goods supplied/empty packaging returned/ goods retumed. (d) When replying to a specific letter of inquiry. 4 x 1 = 4 marks 13. Documents that may be required by the registrar of companies in order to register a public limited company include:- (a) Articles of Association. (b) Memorandum of Association. (c) Prospectus. (d)List of directors. (e)Declaration. (f)Statement signed by directors. Any 4 x 1 = 4 marks 14.Measures that a country can take to reduce the level of inflation include: (a) Increase income taxes to reduce the disposable income available to consumers. (b) Reduce govemment expenditure. (c)Introduce compulsory saving schemes like Pension Fund. (d)Reduce exports. (d) Enforce wage guidelines to control wage increase. (f)Control prices by legislation. (g)Increase interest rates on loans. (h)Increase imports in case of shortages. (i)Raising the margin requirements. (j) Regulate printing and minting of money. (k)Use of buffer stocks to stabilize prices. Any 4 X 1 = 4 marks 15.Factors that may make a producer to by pass the wholesaler when distributing goods include:- (a)Having own retail outlet. (b)Dealing in perishable goods like bread which require shorter channels. (c)Dealing in technical goods which require elaborate after sales services. (d)Consumers and retailers buying in large quantities. (e)Need to keep price of goods low. (f)Limited geographical spread of the market. (g)Government policy. (h)When the production is in small quantity. (i)Where the producer has enough storage facilities. (j)When goods are produced on order. Any 4 x 1 = 4 marks 16.Benefits that a country would get by developing her infrastructure include:- (a)Attraction of foreign investment. (b)Creation of employment opportunities. (c)Improved security. (d)Improved health. (e)Increased production levels. (f)Enhanced movements of goods and services. (g)Increased per capital income. (h)Increased exploitation of available resources. (i)Increased entrepreneural activities. (j)Easier/faster communication. (k)Reduced cost of production. (l)Enhanced industrialization. (m)Equitable development. Any 4 x 1 = 4 marks 17. Benefits of a bonded warehouse to the government include:- (a)A source of data for planning purposes. (b)Enable the govemment to control entry of harmful goods. (c) Enable the government to inspect goods while still under bond. (d)Enables the govemment to regulate the quantity of imports. (e)The government uses it to check illegal goods entering the country. (f)A source of revenue from customs duty. (g)Enable verification of documents on transit. (h)Enable checking of the quality of goods. Any 4 x 1 = 4 marks 18. Qualities of a successful sales person include:- (a)Has adequate product knowledge. (b)Is a good communicator. (c)Is sensitive to customer needs. (d)I-Ias a high sense of integrity/honesty. (e)Is presentable (neat and well groomed). (f)Is persuasive. (g)I-Ias a high level of commitment. (h)Good listener. (i)Have good command of language. (j)Polite and courteous. (k)Persistent and patient Any 4 x 1 = 4 marks 19. Factors that may cause the supply curve to shift to the right include:- (a) Reduced cost of production. (b) Bumper harvest. (c) Increase in the price of complementary goods. (d) Govemment incentives to producers e.g. subsidy. (e) Entry of new fim1s into the market. (D Reduced price of substitute goods. (g) Improved production methods. (h) Reduced incidences of industrial strikes. (i) Availability ofthe factors of production. (j) Future expectation of a fall in price. Any 4 x 1 = 4 marks 19.Positive effects that production activities may have on community health include:- (a) Provision of safe products. (b) Provision of clean water. (c) A source of income which can be used to access medical services. (d) Provision of labour/occupation which leads to reduced stress and a chance to keep fit while working. (e) Provision of health facilities as a social responsibility. (f) Provision of recreational facilities. (g) Provision of health education to fight against diseases. (h) Provision of sewerage disposal plants which boosts community sanitation. (i) Planting

 Business Studies (565/2) 1. (a) Benefits that a firm may enjoy by preparing a business plan include: (i) Sourcing for finance/capital/loans. It can be used to convince financial institutions and investors to fund the firm’s operations. (ii) A tool for evaluation. It can be used to determine whether the firm is achieving its goals and objectives/ help to make necessary adjustment/changes/ for supervision purposes. (iii) A tool for management. It can be used for structuring the implementation of the functions /tool for planning, organizing, directing, staffing, coordinating budgeting/communicating. (iv) Gives the firm a competitive edge. It enables the firm to get a better understanding of the market and competitors. (v) Enhances efficiency in the use of the resources of the firm. It ensures that the resources available are allocated and used in the best way possible Without wastage. (vi) Motivational tool. It inspires the management /employees /creates team work in accomplishing the objectives of the firm. (vii) Framework /blue print/ guide for implementing a new business, thus assisting management in decision/actions on the (possible) strengths, weaknesses, opportunities and threats on a day to day basis. (Any 5 x 2 = 10 marks) (b) Demerits that a country may suffer when the government becomes a major investor in business include: (i) Discourage private investment. The move may discourage private investment due to unfair competition and acquisition of monopoly powers/unfavourable laws. (ii) Poor quality goods and services. The quality of goods and services may be compromised due to lack of competition. Government employees also lack enthusiasm since there is no profit motive. (iii) Limited choices for consumers. Where the government is the only provider of good/service, consumers may be denied a variety to choose from. (iv) Inefficiency. Leading to low/poor productivity/continuous loss. (V) Burden to tax payers. The investments may drain public resources by increasing government expenditure in situations where the enterprise is not able to sustain itself (burdening tax payers). (vi) Lack of accountability/transparency/corruption. Managers of government-run businesses tend to misappropriate and embezzle public funds/ misuse public funds. (vii) Unstable management. Government-run businesses are prone to frequent changes in their management occasioned by changing political leadership. (viii) Political interference/patronage. Appointment of cronies/nepotism and unethical practices may lead to social discontent. (ix) Bureaucracy/red tape. Leading to rigidity/slow response to market changes. (Any 5 x 2 = 10 marks) 2. (a) (6 X 2 : 12 marks) (b)Reasons for which traders observe ethical practices in product promotion include: (i) To avoid misleading the consumers by not ma.king false claims about their products. (ii) against their cultural values. (iii) To ensure that consumers are not offended by not making use of appeals that go (iv) To avoid exploiting certain vulnerable groups like children since they lack the knowledge and experience to understand and evaluate the purpose of persuasive appeals. (v) To avoid negative influence on the consumers’ values and lifestyles that may lead to immorality and ill health like glorifying the image of alcohol and cigarettes. (vi) To avoid portraying rival businesses negatively in an attempt to capture the market or gain undue advantage. (vii) To create a positive image reputation of business hence maintaining customer loyalty. (vi) To abide by the laws of the country to avoid law suits/conflicts/frictions with law enforcement agencies/government. (Any 4 X 2 = 8 marks) 3. (a)Objectives that may be attained by establishing firms in different parts of the country include: (i) To reduce rural-urban migration. Setting up firms in several parts of the country may curb the influx of people from rural to urban areas. This helps to retain the productive population in the rural areas. (ii) To utilize local resources/factors of production/untapped resources. Establishing firms in various parts of the country will enhance the use of idle resources in those areas. (iii) To create employment opportunities. This is a sure Way of creating employment opportunities in several parts of the country which improves the standard of living. (iv) To provide balanced regional development. Creating firms in various parts of the country will ensure that all parts grow/ develop at the same rate/time. (v) To promote development of infrastructure. Setting up of firms will encourage the growth of infrastructure like roads, power, water, railway and communication in various parts of the country Which opens up the country and facilitates production/movement of goods/services/factors. (vi) To promote development of social amenities / schools/ health facilities. When firms are set up in various parts of the country, social amenities Will also be developed. This improves the social welfare of the people. (vii) To reduce social problems hence avoiding/minimizing pollution/crime/ prostitution/drug abuse/theft. (viii) To promote urban growth hence encouraging growth of market/economy/ commercial activities. (ix) To reduce congestion in certain areas in order to ease pressure on resources. (X) To reduce effects of concentrated pollution which may negatively affect the environment. (Xi) To minimize effects/impact of calamities/terrorism/catastrophe which may polarize the economy. (xii) To reduce income disparities/inequalities as people will be engaged in production activities. (any 5 X 2 = l0 marks) (b) Accounting documents that are used in home trade include: (i) Invoice. This is a document sent by the seller to a buyer demanding payment for goods supplied. It shows details of the goods, quantity, unit price, value, any discount given, net payment and terms of payment sold/bought on credit/a source document for sales/purchases day bool/A Ledger. (ii) Debit note. A document sent by the seller to the buyer to correct an undercharge. It is issued when the invoice shows a lesser amount than what is actually owed. It is an additional invoice/may be used when empty containers have not been returned and have to be charged for. (iii) Credit note. A document sent by the seller to the buyer to correct an overcharge. It is issued when goods are returned to the seller because they are defective, not the ones ordered or they were not required. When returning empty containers (which had been charged for). A source document for sales returns/purchases returns day books. (iv) Receipt. This is a document issued

 Business Studies Paper 1 (565/ 1) 1. Features of human wants as described are: (a) Insatiable. (b) Recurrent / Repetitive. (c) Complementary. (d) Competitive. 2. Occupations that relate to the production activities are: (a) Extraction: (i) mining. (ii) fishing. (iii) lumbering. (iv) farming. (b) Construction: (i) bridge making (ii) road construction. (iii) ship building. (iv) masonry. (c) Direct services: (i) hairdressing. (ii) teaching. (iii) health care. (iv) entertaining. 3. Tasks that may be carried out by a receptionist in an office include: (a) Receiving visitors to the organization. (b) Receiving and routing telephone calls. (c) Taking and passing messages. (d) Dealing With simple petty cash for purchase of newspapers, tea etc. (e) Supervising messengers. (f) Keeping simple records. (g) Distributing publications by the organization. (any 4 x 1 = 4 marks) 4. Circumstances in which a cheque may be used as a means of payment include: (a) When the amounts involved in the transaction are high. (b) When the seller insists on payment by cheque. (c) When evidence of payment is required. (d) When payment is to be directed into the payee’s account. (e) When the terms of sale is cash with order. (f) When there is need to ensure safety of the money being transferred. (any 4 x 1 = 4 marks) 5. Activities that may be carried out in a stock exchange market include: (a) Buying and selling of shares. (b) Mobilizing savings for investment. (c) Listing of companies. (e) Issuing of new securities / raising capital. (f) publication of statistical information. (g) Advising investors. 6. Features of liners in sea transport include: (a) Ferry passengers or cargo. (b) Follow a regular time table / schedule. (c) Call at ports at regular intervals. (d) Follow a regular route. (f) Charge fixed freight age and fare regardless of demand. (g) Form associations / conferences to protect themselves against unfair competition. (any4x1 =4marks) 7. Types of information that a manager may pass to the juniors include: (a) Instructions and directions. (b) Explain policies of the organization. (c) Give procedures to be followed in carrying out duties. (d) Information on performance of juniors (evaluation). (e) Invitation to meetings. (f) Allocation / delegation of duties. (g) Motivating / inspiring juniors. (h) Giving solutions to juniors’ issues. (any5x1 =5 marks) 8. Meaning of terms: (a) Insured: Is an individual or business unit that signs an insurance contract to be covered against a risk of loss and can therefore be compensated in the event of the loss occurring. (b) Insurance: ls an arrangement (contract) in which the insured pays premiums to the insurer so as to be compensated in case of loss occurring as a result of an insured risk. (2 x2 = 4 marks) 9. Indicating Whether factors cause movement along the demand curve or a shift of the demand curve: (a) Shift of the demand curve. (b) Movement along the demand curve. (c) Shift of the demand curve. (3 x 1 =3 marks) 10. Roles played by the broker in the chain of distribution include: (a) Linking the buyer and the seller. (b) Bargaining for the principal. (c) Passing information between the principal and the client. (d) Facilitating access to a variety of goods and services to the buyer. (e) Providing an avenue for the seller to access many buyers. (f) Giving advice to buyers and sellers on market trends. (any 4 x 1 = 4 marks) 11. Factors represented by the arrows labelled a and b are: (a) (i) Payment for goods and services. (ii) Factor services / inputs / factors of production. (2 x 1 =2 marks) (b) (i) Payment for factor inputs. (ii) Goods and services. (2 x I =2 marks) (Total = 4 marks) 12. Missing figures: (a) CA = 155,000 (b) c = 73,600 (c) FA = 138,600 (d) 1. = 335,620 13.MheshimiWa’s 14. The columns: V is Folio W is Discount allowed X is Cash Y is Bank (4 x 1 = 4 marks) 15. Functions of the International Bank of Reconstruction and Development include: (a) Provision of finance to member countries to foster economic development. (b) Issuance of loans to developing countries at concessionary rates for project development. (c) Provision of personnel/manpower to facilitate project appraisal. (d) Provision of experts to implement and manage identified projects. (e) Training of local personnel in project appraisal and implementation. (t) Supervise member countries’ management of public finance. (g) Approving development plans from member countries for funding. (h) Advising and recommending economic policies to be adopted by member countries. (i) Promotes long term growth in international trade. (any 4 x 1 = 4 marks) 16. Disadvantages of barter trade include: (a) Lack of double coincidence of wants. (b) Indivisibility of some goods. (c) Perishability of some goods. (d) Difficult to measure value. (e) Problems of portability of some goods. (t) Lack of a standard for making deferred payments. (g) Lack of unit of accounts. (any 4 x 1 = 4 marks) 17. Recording transactions into the general journal. 18. Levels of inflation are: (a) Hyper inflation/runaway. (b) Galloping inflation/rapid. (c) Stagflation. (d) Creeping inflation/mild/moderate. 19.Characteristics of underdevelopment that are common among countries in Africa, Latin America and Asia include: (a) Low per capita income. (b) High population growth rate. (c) Poor standards of living. (d) Low literacy levels. (e) High levels of unemployment. (f) Poor health care. (g) Low life expectancy. (h) Over reliance on primary level of production/high levels of subsistence production. (i) High dependency ratio. (i) Poor infrastructure. (k) Low technological levels. (1) Large income disparities. (m) Low levels of labour productivity. (any 4 x 1 = 4 marks) 20.Factors in the internal environment that may influence the operations of a matatu business include: (a) The management/structure. (b) Employees. (c) Capital / finances. (d) The owner. (e) Marketing strategy / handling of customers. (d) Research and development. (g) Condition of the vehicle. (h) Business culture. (any 4 x 1 = 4 marks) 21. Reasons for which businesses should observe ethical practices include: (a) To ensure fair competition. (b)

2016 Business Studies Paper 2 Questions and Answers No. la. Explain five factors that may promote entrepreneurship in Kenya. (10 marks) ❖ Government support/ favourable government policies/ funding regulation (of business activities) may encourage the emergence expansion of business venture. ❖ Training/ in education entrepreneurship/ trainees are equipped with skills/ knowledge to undertake entrepreneurial activities to start businesses. ❖ Entrepreneurial culture/ cultural practices that encourage entrepreneurship through early exposure to business activities opportunities/ positive attitude towards business. ❖ Presence of role model interaction with successful business people who may inspire/ create interest in entrepreneurship/ business ownership. ❖ Availability of capital/ loans/ credit facilities for start expanding a business (may facilitate entrepreneurship). ❖ Political stability/ non political interference that creates a confused environment for starting/ running expanding business. ❖ Availability of market/ market information. ❖ Availability of security- that ensure safety of businesses/ property/ business owners. ❖ Healthy/ fair competition that business owners can withstand/be safe with. ❖ Good government that ensures accountability in conducting business activities. ❖ Availability of technology that can lead to the production of desired quality/ quantity of goods/ services. ❖ Employment creation for self/ others. ❖ Independence/ needs to earn an income/ livelihood. No. lb.Explain five circumstances under which a partnership may be dissolved. (10 marks) ❖ Temporary partnership/ (/ expiry of time / accomplishment of purpose /where the partnership was formed for a definite time /for a particular purpose)hence the expiry of time / accomplishment of purpose terminates the partnership ❖ Mutual / voluntary agreement among partners / where the partners agree among themselves(to terminate the partnership), when they may have no alternative for whatever reason. ❖ Bankruptcy/ insanity of a partner where (a court declares) the value of one of the partner’s property insufficient to settle his or her debt. /due to loss of contractual capacity. ❖ Change in law/ government policy that makes the operation of the partnership illegal. ❖ Permanent inability of a partner to perform /fulfill part of the partnership agreement either as a result of diseases / ill health / incapacitation. ❖ Internal dissension /disagreement among partners /disagree irreconcilably then the partnership may be terminated. ❖ Persistent losses in operation / where the business has continued to operate at a loss then it is terminated hence making it difficult to meet its financial obligations. ❖ Court orders (where the partnership was formed under) due to fraud / mistake / misrepresentation / breach of law /partnership agreement court of law may order it dissolution. ❖ Request by one /some partners to dissolve the partnership hence having to abide by their wish /granting their wish. ❖ Withdrawal /admission of a partner which changes the status of the partnership. ❖ Death of a partner which alters the composition of a partnership / which may necessitate a new agreement /arrangement. No.2a-Explain five advantages of government involvement in business. (10 marks) ❖ Provision of essential services / goods for fair / reasonable prices / affordable. ❖ Provision of large capital investment / undertake ventures that require large sums – which private sectors may not be able to raise / without which development would be minimal. ❖ Protection of citizens / to protect citizens from exploitation / malpractices by business. ❖ Stimulation of economic development by developing social amenities / infrastructure / roads / injecting funds into the economy / through development projects. ❖ Creation of employment / to create jobs (for its citizens) to earn a living / improve starndards of liing. ❖ Income generation / to generate government revenue through taxation / activities. ❖ Stabilization of the economy – through regulation / market intervention. ❖ Promote equity / fairness in distribution of resources ❖ Control use of resources – through conservation / legislative measures / ensure their sustainability. ❖ Maintenance of law / order – which allows for smooth operations (of country’s affairs). ❖ Promotion of best practices through encouraging adoption of ICT / good governance / social programmes / inclusivity. ❖ Promoting a country’s identity / image – through cultural programmes / branding initiatives / participation in international competition / fairs. ❖ Reduce foreign dominance / promote a country’s sovereignty by regulating foreign participation / encouraging local participation in the economy. ❖ Promotion of entrepreneurship cultures by encouraging business ownership / training / funding businesses. ❖ Promotes investment in the country by creating enabling environment. No.2b.Traders are required to observe ethical practices when carrying out product promotion. Explain five reasons for observing such ethical practices.(10 mrk) ❖ To ensure fair competition. ❖ To protect consumers/ customers. ❖ To protect the environment. ❖ To protect the rights of employees. ❖ To promote social responsibility. ❖ To maintain a positive image. ❖ To abide by the country’s laws, ❖ To maintain suppliers. ❖ To promote positive cultural practices. No.3a.Explain five methods of determining the price of a product other than price control (10 marks) ❖ Bargaining / Haggling – terms of exchange is negotiated / argued / debated between buyers and sellers. ❖ Demand and supply / price mechanism interactions between forces of demand and supply. ❖ Auction – prices determined by the highest bidder. ❖ Tendering – Prices determined by the (lowest) bidder who meets the required specifications. ❖ Retail price maintenance / recommended retail price / products price fixing / price fixing where producers / manufacturers agree on the price of commodities. ❖ (Price) collusion – where different market players such as buyers / sellers conspire to fix the price. ❖ Taxation / subsidy – which will influence the selling / buying price. ❖ Private treaty – a sale of property at a price agreed on by the seller and buyer without an intervening agency. No.3b .Explain five benefits that may be realised by a country as a result of government policy to relocate industries to rural areas ( 10 marks)   ❖ Increased availability of variety of goods and services as a result of new businesses in the area, ❖ Availability of auxiliary services – citizens would enjoy more and better

2016 Business Studies paper 1 No.1..State four external factors that may negatively influence the operations of a business. (4 marks) ❖ Unfair competition. ❖ Inadequate technology. ❖ Unstable political environment. ❖ Unstable economic environment. ❖ Unfavorable legal frameworks. ❖ Unreliable supply systems. ❖ Strong consumer bargaining power. ❖ Poor physical facilities and infrastructure. ❖ Low population level. ❖ Insecurity. ❖ Unfavorable socio-cultural environment. ❖ Natural calamities. No.2.Highlight four benefits of a business plan to an entrepreneur. (4 marks) ❖ Facilitates acquisition of loans from financial institutions and other financiers ❖ Provides guidance for opening new or expanding existing business / adaptability ❖ It acts as a management tool for the business / monitoring tool / identifies strengths ❖ 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’s a motivational tool ❖ To avoid mistakes ❖ Proper allocation of resources ❖ To determine how much resources are required e.g. labour, capital etc / source of capital ❖ Will help to identify the nature and scope of the market. No.3.State four ways in which a good filing system may facilitate the operations of an office. (4 marks) ❖ Easy retrieval of information. ❖ Office is kept tidy. ❖ Information is preserved for future reference. ❖ Security of documents is ensured. ❖ Facilitates quicker decision making. ❖ Ensures confidentiality of information by restricting access by unauthorized people No.4..Highlight four activities that may be carried out in a stock exchange market. (4 marks) ❖ Buying and selling of shares. ❖ Mobilising savings for investment. ❖ Listing of companies. ❖ Issuing of new securities / raising capital. ❖ Publication of statistical information. ❖ Advising investors. No.5.Outline four circumstances under which a co-operative society may be dissolved. (4 marks) ❖ By government order /change in the law. ❖ Where the co-operative continuously make losses. ❖ Where a stipulated majority of members agree to dissolve it . ❖ By a court order. ❖ Where the co-operative society has achieved objectives for which it was formed. No.6.Outline four methods that the government of Kenya uses to regulate business activities. (4 marks) ❖ Licensing business activities ❖ Setting of standards ❖ Formulating of policies – enacting laws / legislation ❖ Setting quotas ❖ Enforcement of laws ❖ Imposing total ban ❖ Subsidizing businesses ❖ Taxation ❖ Price control No.7.State four ways in which a youthful population may be useful to an economy. (4 marks) ❖ Less expenditure on social security and pension. ❖ Wider market for goods meant for the youth like clothing. ❖ Guaranteed continuous supply of labour. ❖ Flexibility and adaptability to technological changes which improve production. ❖ Faster growth of some sectors like the music, fashion and fast food industries. ❖ Increased innovation due to their adventurous nature. No.8.Outline one circumstance under which each of the following telecommunication services may be used: (4 marks) (i) Paging (ii) Facsimile (fax (iii) Radio call. (iv) Telex. (i) Paging – When there is need to call a person to attend to an emergency in a specific location (ii) Facsimile (fax) – Where there is need to send a copy of a printed document urgently. (iii) Radio call When there is need to give co-ordinated information through a central point (iv) Telex – Sending and receiving written messages No.9..The following transactions relate to Jelimo Stores: (a) 10th October 2015 sold unused stationery for Sh 3,000 on credit to K. Likia. (b) 23rd October 2015, bought a motor vehicle on credit from Onjwaria Motors for Sh 700,000. Required: Record the above transactions in the general Journal given below:(4 marks) No.10.State four features of an insurable interest. (4 marks) ❖ Presence of property rights or interest ❖ Potential insurable risk must be present ❖ The property must have monetary value ❖ The insurable risk must be legal ❖ There must be the possibility of suffering financial loss in case of a risk happening No.11.State four features of a parastatal. (4 marks) ❖ Provide essential services. ❖ Not profit motivated. ❖ Is formed by an Act of Parliament. ❖ Is mainly funded by the government. ❖ Is managed by government appointees. ❖ Any surplus earned-is surrendered to the government. ❖ Has limited liabilities. ❖ Attachment to a government ministry. ❖ Can be dissolved only through an act of parliament No.12.The graph given below represents the demand and supply curves of milk: State four effects of a shift of the demand curve to the right. (4 marks) ❖ The price will increase ❖ The quantity demanded will increase / demand will increase ❖ The equilibrium quantity shifts to right / increases ❖ The equilibrium price shifts upwards / increases ❖ The equilibrium point shifts upwards / right No.13 .Outline four functions of the World Bank. (4 marks) ❖ Providing finances to reduce budgetary deficits ❖ Provide loans for development projects. ❖ Provide finance to correct and adverse balance of payments. ❖ Provide technical expertise to support development. No.14.0utline four ways of reducing the level of unemployment in Kenya.(4mks) ❖ Diversification of the economy by encouraging the establishing of different industries /sectors to create employments opportunities ❖ Transforming agricultural sector to curb rural urban migration to create more jobs and reduce unemployment) ❖ Transforming education sector making graduates acquire relevant skills. ❖ Establishing an employment policy by government to make it easy for people to get jobs/ Accept e.gs of policy as mention ❖ Lending /setting of a fund to assist unemployed to stat income generating activities/ accept e.gs of funds as a mention ❖ Exporting Labour by assisting unemployed people to acquire jobs abroad /countries with labour deficiency. ❖ Encouraging the informal Jua Kali sector to promote self employment ❖ Delocalization/ decentralization policy for balanced regional development/ reduced rural urban irrigation ❖ Population policy to control growth/ have a labour force that the economy can absorb ❖ To improve infrastructure in order to have suitable economic activities /accept e gs of infrastructure as a rating. ❖

2017 Business paper 2 1.(a).Explain five ways in which the internl environment may contribute to the success of a business enterprise. (10 marks) A functional business structure. Formal arrangement of functions and the relationships of people that is directed towards achievement of organizational goals. Employment of qualified, skilled and experienced personnel. Vlfllen the correct labour force is acquired and correctly matched to their jobs, then performance is enhanced. Proportionate allocation of financial resources. The business finances are allocated to activities based on percentage contribution to the organization’s success. Access to relevant physical resources like buildings, machinery, furniture and other equipment to complement human effort. Appropriate technology. Effective methods of production boosts the quantity and quality of output. Positive business culture. Productivity is enhanced when culture matches the expectations, beliefs and values of the staff. Realistic objectives. Setting objectives that are simple, measurable, achievable and specific(b).Describe five channels of distribution that a Kenyan manufacturer would use to ensure her goods reach consumers in another country. (10 marks) (i)Kenyan Manufacturer —> Wholesaler(Foreign) —> Retailer(Foreign) —> Consumer (Foreign) . (II). Kenyan Manufacturer —> Import Agent —> Retailer —-> Consumer —> Manufacturer’s —> Consumer Agent in the foreign country (III). Kenyan Manufacturer —> Manufacturer’s Agent in the foreign country —> Consumer —> (IV). Kenyan Manufacturer —> Manufacturer Representatives —> Consumer —> Retailer (V). Kenyan Manufacturer —> Foreign Consumer (VI). Kenyan -—> Manufacturer’s —>Wholesaler —> Retailer —> Consumer Manufacturer Representative VII. Kenyan Manufacturer —> Retailer (Foreign) -—> Consumer (Foreign) 2.(a).Explain five differences between chain stores and departmental stores. (l0 marks) Chain Stores (i). Have many branches in different towns. (ii). Purchases are centralized. (iii). Have standardized prices in all branches. (iv). Has uniform outward appearance and interior layout in all branches. (v). Management of the stores is centralized. (vi). Slow moving goods in one branch (vi). can be moved to another where demand for them is higher. (Vii). A customer can pay for goods in vii. one branch and collect than from another branch. Departmental Stores (i) Have different departments within the same building. (ii) Purchases are made per department. (iii) Every department sets its own prices. (iv) Each department is different from the other in terms of outward appearance and interior layout. (v) Each department has its own management. (vi) Slow moving goods in one department cannot be moved to another department. (vii) Goods paid for in a department can only be collected from that department. (b).The following Trial Balance was extracted from the books of Ojwang Limited on 31 December 2013. Additional Information: Closing stock was valued at Ksh 80,000. Required: Prepare a Trading, Profit and Loss account. (10 marks)   3.(a).Explain five benefits that a private limited company would get by converting to a public limited company. (l0 marks)   Ability to raise larger amounts of capital – Converting to a public limited company will enable the firm to access more funds by sell shares to members of the public through the stock exchange. Enjoy permanency of capital – Shareholders cannot easily withdraw be sold to other investors. lncreased transparency and accountability – The shareholders must scrutinize and approve the company‘s annual audited accounts which must also be published. Increased public confidence in the company – This is due to increased exposure to the public and control by the stock exchange Freedom from interference by owners as it operates as a separate legal entity in which owners have no direct managerial control. Increased professionalism and specialization in management. It is mandatory to have professional managers and staff to run the company on behalf of the shareholders. Perpetual succession – The firm is assured of continuity since share can be transferred and membership changed without affecting the business.(b). Explain five disadvantages of using direct taxes to raise government revenue. (10 marks)   The burden of paying this tax is borne directly by the individual taxpayer and is paid at once or even in advance. Gives the taxpayer motivation to evade tax payment- The tax paye may come up with ways of concealing their income in order to avoid paying the tax or reduce the amount to be paid. Non-consultation of taxpayers in the determination of the tax rate – The determination of the rate and amount of tax to be paid is at the discretion of the tax authorities. Not an adequate source of government revenue – Most people in developing countries are low income earners hence limiting the amount of tax revenue from this source. Reduced ability to save and invest – Direct taxes take away money from the citizens hence reducing their purchasing power causing low investments. Tax payers are not involved in the expenditure of the tax revenue. There is low civic involvement and call for government accountability since tax payers do not make decisions on government expenditure. May encourage capital flight – Foreign investors may conceal their profits in order to transfer such earnings to other countries.4.(a).The following transactions relate to Dagoreti Enterprises for the month of March 2016. March l:Started business with Ksh 15,300 in cash and a bank overdraft of Ksh 8,200 March 3:Made cash purchases of Ksh 10,200 in cash March 4:Harrison, a debtor settled his account of Ksh 18,000 by issuing a cheque of Ksh 13,400 and the rest by cash March 5:Paid wages by cheque, Ksh 5,000 March 6:Received a cheque of Ksh 9,310 from Chebet March 7:Received cash, Ksh 7,720 from Otieno March 8:Paid Hassan Ksh 5,450 in cash March 9:Deposited Ksh 6.000 from the ofiice into the business bank account March 10:Paid insurance Ksh 3,700 by cheque March l1:Paid Ksh3,90O for repairs in cash March l2:Received Ksh 8,570 in cash from Mwende March l3:Received a cheque of Ksh 1 1,200 from Makokha March l4:Paid water bill Ksh 2,590 by cheque March l5:Paid rent Ksh6,500 by cheque March 29:Took all the cash that was in the office and deposited it into the business bank account Required: Prepare a two column cash book for the month of March 2016. (10 marks)   (b).Explain five factors that one may consider when selecting a means for communicating. (10 marks)   Confidentiality of the message -The means should safeguard the content of the message from being accessed by unauthorized people.  Accuracy of the means – Should

Questions and Answers 2017 Business Studies paper 1 1. State four elements of the demographic environment that may influence the operations of a business. (4 marks) – The population size. – The geographical distribution of the population.- – The population density. – The distribution of the population by sex/Gender.- – The distribution of the population by age. – The population growth rate. .- The birth rate. – The death rate/mortality rate/attrition rate.- – Immigration rate. – Emigration rate – Health of the population. 2. Outline four circumstances under which goods may be transported by use of containers. (4 marks) (a). When goods are fragile and require protection from damage. (b). When goods are highly valued and need to be secured from theft while on transit. (c). When goods are regular in shape and can easily be packed into containers. (d). When there is need to minimize handling of goods both at the port and in transit. (e). When there is need to use the available space more efficiently. (f). When specialized machines for loading and off-loading are available. (g). When there is need to cut down on transport. (h). When there is need to cut down insurance costs. (i). Where goods are special and require special attention e.g. perishable and inflammable goods. 3. The following information was extracted from the books of Salome Traders: Capital Ksh 1,119,300; Long tenn liabilities Ksh 1,807,000; and current liabilities Ksh 978,700. Required (a) Determine Salome Traders Rate of Return on Capital Employed if the business made a net profit of Ksh 438,945. (4 marks) C E = C + LTL = 1,119,300 + 1,807,000 = Rate of Return on Capital Employed ROCE = NP/PE X 100 CE = 438,945/2,926,300 X 100 = 15% (b) State the importance of the rate of return on capital employed. (1 mark)   It enables the business to determine the rate at which net profit is generated in relation to thee total investment into the business with simila ones. Shows whether the financés of the business have been invested wisely or not..  To compare the performance of the business with similar ones .Determining Salome’s Rate of Return on Capital Employed. 4 Highlight four indicators of economic growth that may be observed as a country progresses.(4 marks)   Increasing national income. Increasing national output/GDP. Improved infrastructure. Improvement in the provision of health facilities. Increased education opportunities. Increasing life expectancies. Improved housing for the population. Provision of more social amenities for leisure e.g. stadia. Improved standards of living for the citizens. Increased per capital income. Increased employment opportunities. Reduced dependency ratio/self employment. . Reduced income disparities. Reduction of negative cultural practices. Good governance/democracy.5. Chem Chemi Ltd is a new cement manufacturer. Outline four factors that may encourage this company to be established in Athi River town where other cement manufacturers are located despite the obvious competition. (4 marks)   Availability of raw materials in Athi River. Skilled labour is readily available in Athi River (can be poached from other companies). Market is readily available in Nairobi and its environs. There is ready supply/source of power. Government policy encourages the establishment of such firms in Athi River which is also an E.P.Z. An established transport network An established communication network. sewerage systems and water supply. Availability of security. Availability of auxiliary services e.g. banks. Availability of well-developed social amenities like schools, stadia6. Outline three ways through which a partnership may be formed. (3 marks) (a). A simple written agreement between the parties. (b). An oral agreement between the partners. (c). Action by members implying agreement to conduct business together. (d). A signed legal agreement (partnership deed). (e). By provision of the partnership act where there is no known agreement. 7. State four features of land as a factor of production. (4 marks)   . It is a natural resource. It is fixed in supply. Its productivity can be varied by varying the inputs. It lacks geographical mobility. It is subject to the law of diminishing returns. Its quality is not homogeneous. It is a basic factor of production. It is occupationally mobile. It’s reward is rent/rates8. State the principles of insurance described in the statements given below: (4 marks) (a) Restoring the insured’s financial position afier suffering loss from an insured risk. – Indemnity (b) Existence of a very close relationship between the loss suffered and the insured risk. – Proximate cause (c) The insurer taking ownership of the remains of the destroyed property after the insured is duly compensated. – Subrogation (d) Proof that the insured will suffer direct financial loss if property is destroyed. – Insurable interest 9. Highlight four items that would be included in the measurement of national income using the income approach. (4 marks)   Salaries/wages or personal earnings by households. Interest received for use of capital. Profits made by public enterprises. Dividends received by shareholders. Rent received for the use of land. Undistributed profits before tax on firms. Stock appreciation. Transfer payments e. g. grants to students. Depreciation on capital. Net income from abroad.10. The table below shows general price changes over a period of five years:   Using year 2010 as the base year, determine the consumer price index for years 2011, 2012, 2013 and 2014. (4 mark The C.P.I. for the year: 2011 = (100.80/90xl00)= 112 2012 = (103.50/90xl00)= 115 2013 = (105.30/90xl00) =117 2014 = (108/90xl00) = 120 11. List four forms of retail businesses that a school leaver may engage in. (4 mark (a) Kiosks (b) Canteens (c) Tied shops (d) Single shops (e) Market stalls (f) Open air market trading. (g) Hawking (h) Peddling (l) Automatic vending machine. (j) Mobile shops (k) Roadside selling. 12. Outline four benefits of using the internet for office communication. (4 marks)   Reduced cost of communication. Provides unlimited space for filing. A fast means of communication. Provides a source of information for research. Facilitates quick decision making. Reduces paperwork and the need for paper files. Accords convenience While communicating. Communication can take place at all times.  Information can

2018 Business Studies paper 2 1. (a)Explain five circumstances that may lead to the existence of a business opportunity to be exploited by the entrepreneur. (10 marks)   Lack of some products/services.Custoiners may need some products/services which are not easily found in their area.  Higher prices of goods/services.Existing market prices may be unnecessarily high hence offering them at relatively lower prices would create an opportunity.  Excess demand.When the quantities of goods available in the market are not sufficient, an opportunity to supply more exist.  Low quality products.When customers expect better quality products then, this presente an opportunity to offer them.  Sub-standard services.An opportunity will exist where better services are offered in the distribution of goods.  Un-met sociocultural needs/conditions.Goods and ses ices should target the society’s existing attitudes, practices and beliefs which existing products may not be addressing.  Innovation.Discovery of new technology which may lead to reduced costs of production and general efficiency presents an opportunity.(b) Explain five factors that Chuma Steel Manufacturers may consider when choosing a channel for distributing their products. (10 marks)   The geographical spread of customers.If the customers are spread over a wide area, then a longer channel would be preferable.  Durability of the steel products.Since steel products are not easily spoilt, long channels can be used ln their distribution. Level of competition.Shorter channels should be used if competition is so stiff.  Resources and size of the firm.If the firm has limited resources and only serves a small market, then a shorter channel is ideal.  Government policy.Chuma steel manufacturers must adhere to government regulation on the distribution of steel products.  Marketing risks.Where marketing risks are higher, more middlemen should be involved to spread such risks.  Availability of intermediaries.Chuma Steel Manufacturers can only use channels where intermediaries are available. Pricing of the steel products.Shooter channels will be preferred where the prices are to be kept low by avoiding the intermediaries.2. (a)Explain five clauses that must be specified in the Memorandum of Association of a public limited company. (10 marks)   The Name Clause.This clause states the name of the company and ends with the word “limited”. This name must be unique to the company and not shared with any other.  The Objects Clause.This clause states the objectives of the company and specifies what the company has powers to do.  The Situation Clause.This clause states the physical location of the company’s registered office.  The Liability Clause.This clause states the extent to which members are fiable to the debts of the company.Shareholders and members have “limited liability”.   The Capital Clause.This clause states the amount of capital that the company is authorized to raise, the capital structure, the composition and the values of the shares.  Association and Subscriptions Clause.This clause contains a declaration by the original members who registered the company about their desîre to form a company, their objectives, the number of shares they will owri and their personal details.(b) The following information was extracted from the books of Kisababu Traders on 31 December 2014:   Details Sh Sales 84,0000 Purchases 58,000 Opening Stock 15,700 Required: i. Prepare Kisababu Traders Trading Account for the period ending 31 December 2014. (5 marks)   ii. Work out Kisababu Traders percentage mark up.(2 marks)Mark up = GP/COGS x 10015,000/60000 x 100 60, 000 = 25% iii. Calculate Kisababu Traders Rate of Stock Turnover.(3 marks) Rate of Stock Turnover = COGS./Average Stock 60,000/(O.P. Stock * C.L. Stock) 60, 000 15, 700x 3000 2 60000/14350 =4 times 3. (a)Explain five demerits of using carts as a means of transport in towns. (10 marks) (i) Carts are prone to delays occasioned by their slow speed. (ii) Movement of carts is affected by extreme weather conditions like rainfall. (iii) They are unsuitable for transporting goods over long distances as people and animals get tired when pulling them. (iv) Carts offer little protection to goods against damage by elements of weather such as rain. (v) Goods transported by carts are susceptible to theft making it an unsuitable means of transporting valuable goods. (vi) Carts cannot carry very heavy and bulky goods since their carrying capacity is limited. (vii) Carts inconvenience motor vehicles and other road users since they are slower. (viii) Carts may be a cause of accidents since those pulling them usually disregard traffic rules. (b) Explain five types of direct taxes that the government may use to collect revenue from individuals and companies. (10 marks)   Personal Income Tax (P.A.Y.E.).This is tax charged on an individual’s income which may be from salaries, wages and profits made from businesses. This tax is usually progressive in nature.  Corporation Tax.This tax is usually charged on the profits made by companies and other incorporated business. It is a fixed percentage of the profits.  Capital Transfer Taa.This tax is charged when there is change of ownership of capital investment from one person to another.  Stamp duty.This tax is charged on the transfer of land or securities from one person to another.  Capital gains tax.This tax is charged when an asset is sold at a price that is higher than its book value.  Estate (death) duty.This tax is levied when property is transferred to an inheritor/ heir after the death of the original owner.  Wealth tax.This tax is levied on personal wealth that goes beyond a certain limit. This wealth may include realizableassets like land, houses, accumulated profits and even savings.  Withholding tax.This tax is levied on savings like pension dividends and any moneys held by individuals.4. (a)The demand for soft drinks has been on the increase. Explain five factors that may have contributed to this. (10 marks)   Favourable pricing.The soft drinks are priced at a value that consumers can easily afford.  Increasing consurner incomes.People are able to buy more of the products due to increased earnings.  High prices of substitutes.Most of the products in the market that can serve as substitutes are hîghly priced hence not preferred by buyers.  Favourable tastes and preferences.More consumers now like soft drinks as compared to other drinks.  Favourable government policies which

Questions and Answers 2018 Business Studies paper 1 1. Outline four features of labour as a factor of production. (4 marks) (a) Labour is perishable/cannot be stored. (b) It is not separable from the labourer. (c) The quality of labour is variable. (d) It is mobile/can move from one place to another. (e) It earns salary/wages. (f) It is a basic factor of production. 2. Outline four ways in which peace within a country may encourage entrepreneurial development.(4 marks) (a) Entrepreneurs are assured of the safety of their investment hence encouraged to invest. (b) Funds are availed for investment instead of being spent on provision of security. (c) There is free movement of factors of production which motivates trade. (d) There is free interaction between people which encourage sharing of business ideas. (e) Reduced cost of insurance due to lower risks. (f) Increased markets since even foreigners feel free to trade with the locals. (g) Stable complementary institutions like banks and warehouses which encourage business. 3. State four duties of the office clerk. (4 marks) (a) handling mails. (b) Duplicating and operating various office machines. (c) Filing and indexing. (d) Record keeping and simple book keeping. (e) Helps in store-keeping. (D) Ordering, receiving, storing and issuing of stationery. 4. The document shown below is used in home trade. (a) Identify the document(1 marks) Credit note (b) Outline three circumstances under which the above document may be used. (3 marks) (b) Circumstances under which the document is used include: (i) When correcting arithmetic error resulting into overcharge. (ii) Where the buyer has been charged higher prices than the recommended price. (iii) When items included in the invoice were not delivered. (iv) When a deserved discount is not given. (v) When the buyer has returned some goods. (vi) When empty crates /packaging for which a deposit had been paid are returned. 5. State four measures that may be taken by the government to control inflation. (4 marks) (a) Setting minimum and maximum wage limits to control salaries (b) Restricting imports. (c) Controlling of exports. (d) Restricting terms of hire purchase and credit terms of sale. (e) Price control. (f) Offer of subsidies and other incentives to local producers. (g) Controlling the supply and circulation of money in the economy. 6. Outline four measures that may be taken by the government to curb unemployment. (4 marks) (a) Diversification of economic activities. (b) Control of population growth. (c) Adoption of policies that encourage labour intensive methods of production. (d) Partner with the private sector to create employment. (e) Adopting relevant education system. (f) Encouraging direct foreign investment. (g) Encouraging efficient exploitation and use of locally available resources. (h) Availing investment funds through favourable credit like the Youth Fund and Uwezo Fund. 7. Highlight four benefits of national income statistics to the government.(4 marks) (a) Provides information on the country’s economic performance over a period of time. (b) Provides information to be used for making economic policies/budgeting/planning. (c) Provides information on the contribution of each sector of the economy to the national income. (d) Provides a breakdown on consumer expenditure and government expenditure. (e) Provides information on the distribution of income. ( Provide information on the types of factor incomes in the economy. (g) Provide statistics for measuring the economic growth of the country. (h) Provides information that is used to measure the standard of living in the country. (i) Provide information used for comparing economic performance of the country across two or more years. 8. Fill in the spaces in the table below: (4 marks) A.24,266 B.219,800 C.11,990 D.42,295 9. State four categories in which the various types of business partners may be classified.(4 marks) (a) By capital contribution. (b) By extent of liability to be borne. (c) By activity (part played in the day-to-day running of the business). (d) By age. 10. Highlight four ways in which the government creates an enabling environment for the conduct of business in the country. (4 marks) (a) Provision of credit facilities at favourable rates. (b) Ensuring political stability and good will. (c) Training and educating the population to create a pool of skilled manpower. (d) Marketing of final products for producers. (e) Provision of essential social amenities like water and sewerage, health and education. (f) Favourable policies andeasy procedures like licensing, subsidies and favourable taxation. (g) Provision of infrastructure. 11. Outline four roles of transport in the facilitation of trade.(4 marks) (a) Facilitates the movement of factors of production and other inputs like raw materials. (b) Enables goods to be moved to the market from their point of production. (c) Adds value to goods and services by moving them to the point of consumption. (d) Opens up new markets. (e) Makes it possible for the exploitation of natural resources. (f) Allows for specialization since it allows people to access goods produced elsewhere. (g) Promotes mass production since goods can be moved to be stored and sold elsewhere. 12. State three circumstances under which firms would form a cartel.(3 marks) (a) When there is need to control output by each firm. (b) When there is need to be in control of market prices. (c) When there is need to eliminate stiff competition among the firms. (d) When there is need to restrict entry of new firms into the market. (e) When there is need to increase the firms’ bargaining power. () When there is need to guarantee the income and financial strength of the firms. 13. Outline four conditions under which a manufacturer would distribute his products through the wholesaler. (4 marks) (a) When it is the dictate of government policy. (b) When the manufacturer needs time to concentrate on production. (c) When he wants to avoid the high costs of distribution. (d) Where it is too expensive to distribute using the manufacture’s ohm outlet. (e) Where wholesalers prefer to market the product under their own brand names. (f) Where the manufacturer wants to avoid marketing risks like drop in prices. (g) When the wholesaler provides