KNEC KCSE Business Studies Paper 2 Question Paper / 2015 KCSE Gem Sub-County Joint Evaluation

a) Explain five ways in which the Nairobi Stock exchange supports business and economic growth in a country. (10 marks)
b) Horizon is an importer of assorted goods from different countries. Explain five advantages he may enjoy while his goods are
stored in a bonded warehouse. (10 marks)

a) Explain five problems that can be encountered in an office as a result of computerization of operations. (10 marks)
b) Describe five services rendered by retailers to consumers. (10 marks)

a) With the aid of a well labeled diagram, explain the effect on the equilibrium price and equilibrium quantity when the supply of vehicles increases. (10 marks)
b) Outline five measures that the government of Kenya has put in place to protect consumers from unscrupulous business practice. (10 marks)

a) Explain five problems experienced when computing national income using the expenditure approach. (10 marks)
b) Fahari traders had the following balances on 1st July 2014.
Kshs
Equipment 5,600
Bank 35,000
Debtors 28,000
Creditors 66,600
Later in the month, the following transactions took place.
July 6th-Purchased goods worth sh 9500 and paid by cheques.
July 7th –paid creditors, sh 10,600 by cheques.
July 23rd –Received a cheques of sh. 22,000 for goods sold
July 28th –Withdrew sh 5000 from the bank to pay salaries.
Required:
Open the relevant ledger accounts and extract a trial balance. (10 marks)

a) Explain five effects of production activities on the environment and community health. (10 marks)
b) Explain any five roles played by commercial banks to the business community. (10 marks)

a) The economy of country X has been growing at a very low rate. Explain four possible reasons that could have led to this trend. (8 marks)
b) The following information was extracted from the books of Ramogi Traders as at 31st December, 2012.
Kshs
Sales 800,000
Purchases 500,000
Returns inwards 90,000
Returns outwards 26,000
Creditors 150,000
Rent 60,000
Delivery van 160,000
Carriage outwards 3,000
Debtors 120,000
Carriage inwards 40,000
Bank 60,000
Stock (Jan 2012) 100,000
Interest expenses 10,000
General expenses 7,000
Stock (31st Dec 2012) 120,000
Bank overdraft 4,000
Capital 170,000
Required:
i) Prepare a Trading, Profit and loss account for the year ended 31st December, 2012. (8 marks)
ii) Prepare a balance sheet as at 31st December 2012. (4 marks)

a) Explain five ways in which the Nairobi Stock exchange supports business and economic growth in a country. (10 marks)
i. Provides market for existing shares/Boost investment in shares/securities – by facilitating transfer of shares from one shareholder to another.
ii. Help quoted companies raise additional capital through initial public offer (IPO)/selling/floating of new shares/introduction of new shares.
iii. Provides a measure of performance of quoted companies through (having) records of share price fluctuations.
iv. Provides a measure/indicator of economic performance by establishing the stock exchange index.
v. Provides information to potential investors by publishing data on performance of shares in stock exchange.
vi. Provides data to the government which is used in national/economic planning.
vii. Promotes good management of (quoted) companies by setting requirements companies must meet the criteria/threshold of being quoted.
viii. Lists/delists companies that meet/do not meet the criteria/threshold of being quoted.
ix. Mobilizes savings/Encourages saving habits by channeling funds to viable investments (thereby building confidence on performance of quoted companies)
x. Provides the government with the outlet for selling securities to obtain funds for its projects.
xi. Encourages share prices stability (through speculation) thereby promoting trading of shares/securities/avoiding wide variations in share prices.
Splitting 2 x 5 = 10 mks
Naming 1mk
Otherwise 2 mks
c) Horizon is an importer of assorted goods from different countries. Explain five advantages he may
enjoy while his goods are stored in a bonded warehouse. (10 marks)
i. Enables him to look for market while goods are still being held in the bonded warehouse.
ii. He can prepare the assorted goods for sale while still in bond.
iii. Duty on imported goods would be passed on to the buyer if they are sold while still in the bonded warehouse.
iv. Goods are accorded security by the government as long as they are in bond.
v. It allows the importer to have sometime to arrange to pay the duty if he does not have enough money.
vi. Some goods may improve in quality (after sometime) e.g. wine, fruits, hence will be better/have more value.
vii. Some goods (may) lose weight while in the warehouse thereby lowering the duties payable.
2 x 5 = 10 marks

a) Explain five problems that can be encountered in an office as a result of computerization of operations. (10 marks)
i. May lead to unemployment/loss of jobs/laying off of workers when computers replace worker.
ii. Require (reliable source of) electricity which is expensive/not guaranteed.
iii. They are costly to buy/install/maintain.
iv. (Computers are) prone to computer viruses which may lead to breakdown/malfunctioning of the computer (software)
v. Confidential information may land into unauthorized hands through hacking.
vi. Requires skilled/trained manpower which is costly/scarce/not guaranteed.
vii. There is need for back up storage which is expensive.
viii. It has adverse/side effects on health e.g. eye/problem due to prolonged/perpetual exposure. (accept examples of health problem as a naming)
ix. Boredom due to monotony of use of computers.
x. Inhibits/limits creativity/innovation since can’t work without. (2 x 5 = 10 mark
b) Services rendered by retailers to consumers. (10 marks)
i) Avail goods – within easy reach of consumers.
ii) Offer wide range/variety of goods for consumers to choose from.
iii) Bulk breaking/Breaks bulk of commodities into smaller sizes which are convenient/affordable to consumers.
iv) Advisory services/offer advice to (consumers) on proper use/choice of commodities.
v) Offer after sales services (to consumers) without charging them/at reduced rates.
vi) Offer credit facilities to (customers) who can be trusted to pay/trustworthy/credit worthy.
vii) Ensuring continuous supply of goods needed by consumer/to minimize shortages.

viii). Stabilizing prices (of goods) by ensuring goods are always available/to enable customers to budget for their expenses/hence avoiding artificial shortages of goods.
Splitting
Naming 1 mk otherwise 2 mks for a fully explained point.
Any 2 x 5 = 10 mks

a) With the aid of a well labeled diagram, explain the effect on the equilibrium price and equilibrium quantity when the supply of vehicles increases. (10 marks)


When supply of vehicles increases, supply curve shifts to the right from S1S1 to S2S2.
 A new equilibrium point E2 from E1 will be realised thus a new equilibrium price Pe2 from Pe and a new equilibrium quantity qe2 from qe.
c) Outline five measures that the government of Kenya has put in place to protect consumers from unscrupulous business practice. (10 marks)
(i) Setting up standards
The Kenya Bureau of Standards (KEBS) sets national quality standards and ensures that commodities are of the required standards.
(ii) Weights and Measures Act
The government ensures that equipment used for weighing and measuring are correct and accurate.
(iii) Licences
Businesses cannot to started without a licence. This is to ensure there is control and legal type of carried out.
(iv) Food and Drugs Act
This ensures that producers and traders do not include any substance in the commodities that they to the consumers which might be harmful.
(v) Price control
The government may set a price beyond which a commodity should not be sold especially for essential goods and services.
(vi) Rent and Tribunal Act
Ensures that tenants are not overcharged by landlords. (2 x 5 = 10 mks)

a) Explain five problems experienced when computing national income using the expenditure approach. (10 marks)
i. Problem of double counting.
ii. Problem of differentiating between final and intermediate expenditure.
iii. Lack of records for subsistence sector/implying expenditure here are more approximations.
iv. Lack of clear/accurate/reliable records of expenditure in the private sector.
v. Problem of fluctuating exchange rates (incase of valuation of imports/exports) (5 x 2 = 10 mks)​

M.A = 12 ticks x ½ = 6 marks

8 ticks x ½ = 4 mks

a) Explain five effects of production activities on the environment and community health. (10 marks)
i. Air/water pollution – (this is) caused by industrial waste that is discharged into rivers thus affecting both human and aquatic life.
ii. Degrading the environment (excessive use of) of the environment such as over-exploitation of minerals leads to their exhaustion. This affects the balance in eco-system such as spread of malaria when open holes are filled with stagnant water.
iii. Soil erosion caused by clearing of forests.
iv. Overcrowding/poor housing/emergence of slums resulting from urban – rural migration. (2 x 5 = 10 mks)

c) Explain any five roles played by commercial banks to the business community. (10 marks)
i. They accept deposits/saving facilities to businessmen e.g. savings/current/fixed deposit accounts.
ii. They give loans/credit facilities to the business community in form of overdraft/secured loans.
iii. Commercial banks offer safety locker facilities/safekeeping of valuables (at some fee) to businesses e.g. title
deeds/share certificates/log books/wills/jewels etc.
iv. The offer means of payment/money transfer facilities like standing orders/credit transfers/travelers cheques/credit
cards/debit cards/cheques/letters of credit/electronic fund transfer/mobile money transfer.
v. Provide foreign exchange services to businessmen through (either) buying or selling foreign currencies (according
to need)
vi. They give advice/advisory services to businessmen/firms about (viable) investments (sound) financial
management.
vii. They provide trusteeship/act as trustees by undertaking to manage property/estates left behind by deceased clients
(hence improving/expanding/continuing/supporting business operations.
viii. They act as referees/guarantors to clients who would wish to acquire/secure loans/buy goods on
credit from elsewhere/financial institutions hence supporting business operations.
ix) They acts as intermediaries between savers and borrowers by accepting deposits from those who
have excess money and lending to investors (hence supporting business activities)
x) The provide night safe keeping facilities for late bankers hence ensuring extended business
hours (for maximum /optimal profits)
xi) Commercial banks acts as issuing houses thereby facilitating selling of new shares by various
firms/companies.
xii) They undertake collection/receiving of money from debtors on behalf of their clients (thereby
promoting investments habits/business activities)

a) Reasons that can lead to low rate of growth of a country. (8 marks)
i. Inadequate capital/funds/finance limiting production/investments.
ii. Poor/underdeveloped/undeveloped/inadequate infrastructure leading to reduced economic activities/slow
production (of goods/services)
iii. Political instability/insecurity leading to hostile/unfavourable environment for economic growth.
iv. High population growth rate that necessitates more production of consumer goods compared to producer/capital goods/which could have led to higher economic growth.
v. Use of old/obsolete/outdated/backward/inappropriate technology) thereby hindering/inhibiting/limiting fast/high productivity (of economic resources)
vi. (Widespread/high levels of) ignorance/illiteracy leading to failure to keep up with modern economic trends worldwide.
vii. Poor/underdeveloped entrepreneurial skills limiting expansion/establishment of (more) production units.
c)

I.

ll.