KCSE PREDICTION BY Dr.

Rakdafha@0742783642
Business Studies Paper 2 Questions and Answers -
2022 K.C.S.E
Prediction Set 1

1.a.Importance of trade within a country.

 Enables consumers to ge a wide varity range of goods and services to satisfy different
tastes/preferences
 Creates a link between producers and consumers
 Promotes peace and harmony among trading partner thro' interaction among traders
 Provide employment thus raising citizens standards of living
 Encourages specialisation since producers sell what they produce and buy what they do not
produce
 Facilitates tranfer of technology/skills which enhance wuality goods/services
 Encourage full utilization of available resources by provifing market/demand for raw materials
 Promotes entrepreneural culture where succesful entrepreneurs acts as role model Widens
market for goods/services where surplus is sold

b.Differences between a cooperative sociuety and a public company

Cooperative society Public company

Members welfare motivated Profit motivated

Serves members only Serves the general public

Minimum of 10 adults Minimum of 7 shareholders

One man one vote One share carries one vote

Co-operates with other cooperatives Compete with other companies

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Governed by cooperative act Governed by company act

Has one class of shares Has several types of shares

Share not freely transferable Share are freely transferable

2.a.On 1st December 2015, Mumbi traders had shs. 125,000 in hand and a a bank overdraft of
shs 97,000

During the month, the following transactions took place

Dec 2: Cash sale banked shs. 335,260

3: Bought goods in cash shs. 10,500

9: Paid Njeru a creditor shs. 190,000 by cheque in full settlement of his account after deducting
5% cash discount

13: Received a cheque for sh. 158,400 from Maro after allowing her a cash discount of shs.
1,600

16: Paid salaries shs. 36,000 in cash

24: Withdrew shs. 100,000 from bank for office use

29: Nyangau, a debtor paid her account of 175,000 by cheque less 10% cash discount

31: Deposited all the cash into bank except shs. 33,490

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

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b. Purpose of public finance
 To influence distribution of income in order to reduce regional imbalance in the country
 To stimulate economic development in the economy by intiating a major
invetment/construcution of major development projects
 To regulate economic activities in the country by checking consumption of some
goods/control monoply
 To raise public revenue levied through taxes to finace government expenditure
 Enhance good governmance/accountability/transparency
 To maintain economic stability in the country by checking inflation
levels/unemployment/b.o.p deficits
 To control/regulate/encourage particular sectors of the strategic/social/economic e.g
agriculture/health/education etc
 Market intervention so as to guide regulate and sometimes control the activities of the private
sector
 Establish finanacial policies on subsidies ensure government security/law/order

3.a.Reasons for which business should observe ethics practices

 To ensure fair competition - by ensuring fair play as business compte with each other/by not
discrediting competitor product/damaging competition promotional materials
 To protect consumer from exploitation/overcharging/false advertising/poor quality of goods
and services
 To protect the environment degradtation/pollutants
 To protect the rights if employees by paying them fairly/intervene/not violating their rights
 To promote social responsibility by enhancing a good relationship with the community/giving
back to the socity
 To abide by the country's laws to avoid law suits/conflicts/friction with law enforcing agencies
 To mainatain suppliers - by paying them in time
 To promote positive culturall practices by not using offensive appeals that go against their
cultural values
 To avoid discrimination in business by giving equal opportunities to all

b.Factors that contribute to income disparity in Kenya

 Corruption/outright stealing of country's resources

 Disparity in access to education
 Differences in individual/personal talent endowments
 Some people being politically advantaged over others
 Nepotism in securing good job opportunities
 Some people being involved in violent robbery
 Inheritance, some people had a lot to inheirt from their parents while others did not have
anything
 The poor are always victims of the various cycle of poverty
 Disparity in natural resources endowmnet

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4.a.Circumstances under which a manufacturer would prefer to sell his products direct to
the consumer

 If goods are highly perishable

 To enable him to provide after slaes services to buyers
 To maximise profit
 To ensure consumers get goods at the right price
 If he has his own retail outlet
 Incase of very sensitive items such as arms
 Incase of sale by tender
 Incase of small items e.g. small scale dairy farmer selling milk to neighbour

b.Need for development planning

 Ensure proper allocation of resources to avoid wastage/avoid duplication

 Act as a basis for attracting foreign aid and investment as it convinces them to finance/funding
from donors
 To coordinating/controllling/communicating-used for structruing/implementatiin of the
function
 To help in evaluating the performance to help make necessary adjustments/to determine
whether the country is achievingg its goals/objectives
 It is a motivational tool, it inspires citizens to work hard/creates positive attitude towards work
 Framework/roadmap which give direction in decision making/assist in management
 Adoptability tool - give room for any changes/uncertainty

5.a.Explain five advantages of free trade

 Enjoys quality of goods and services- due to increased competition

 Countries tend to specialise in what they can produce best
 Consumers are able to access a wide variety of goods/services to choose from
 Leads to creation of a wider market where countries can sell their surplus
 Free movement of factors of production from one country to another
 Creates investment opportunities in different countries
 Free flow of technology/skills/idea among different countries
 Enjoy cheaper goods/services due to competition
 Promotes peace/understanding among countries through interaction of their citizens

b.Need for consumer protection

 To protect tyhem against sale of poor quality goods and services

 To protect them against sale of goods and services under unhygienic conditons and
environment
 To protect them against sale of harmful goods and services
 To protect them against breach of contract
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 To protect them against over pricing of goods and services
 To protect them against hoarding of goods and services which may create artificial shortage
 Protect them against cheating through misleading or false advertisements
 Protect them against sale of underweight goods and inadequate services
 Protect them against sale of socially unacceptable goods and services
 Protect them against danger that arise due to contamination of the environment
 Protect them against sale of illegal goods and services
 Protect them from dangers that may arise from the use of unsafe buildings

6.a. The following information ws extracted from the books of Sahara traders fro the year ended
30th April, 2013

Shs.

Sales 480000

Opening stock 1/5/2012 80,000

Opening stock 30/4/2012 120,000

Gross profit margin 25%

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b.Cause of population decline
 Government policy encouraging small families
 High costs of living
 High infant mortality
 Strict immigration rules
 Hunger/deteriorated diet
 Change of attitude favouring small families
 Calamities e.g wars/epidemics
 Poor health facilities
 Decrease in fertility rate/birth rate
 Adaptation of family planning programs
 Increase in employment for women leading to delayed marriage
 political instability

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questions