IGEMBE CENTRAL

565/1
BUSINESS STUDIES
Paper 1
Time 2 hours
1. State four characteristics of indirect production. (4 marks)
2. Outline four causes of cost push inflation (4 marks)
3. State four characteristics of basic human wants. (4 marks)
4. Highlight four disadvantages of operating an open office layout (4 marks)
5. State four reasons why government licenses business people (4 marks)
6. State four advantages of public limited companies. (4 marks)
7. The diagram below shows a shift of the supply curve

price

S1
S2

S1
S2
quantity
Outline four factor that may have caused the above shift (4 marks)
8. Highlight four reasons why the government of Kenya is encouraging delocalization of firms.
9. Give three injections into the circular flow of income in a two sector economy. (3 marks)
10. List four types of unemployment (4 marks)
11. Use the following information to prepare a trial balance for Wendo traders as at 31st May 2022.
Items Sh
Capital 1,480,000
Premises 300,900
Furniture 123,000
Creditors 42,900
Bank 29,400
Debtors 80,700
Stock 45,000
Sales 216,000
Overdraft 77,000
Purchases 155,000
3 year bank loan 122,000
Return inwards 24,500
Commission received 32,600
Discount allowed 12,900
Motor vehicle 1,199,100
(5 marks)

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12. Outline the meaning of the following documents as used in international trade. (4 marks)
a) Certificate of origin
b) Consular invoice
c) letter of hypothecation
d) Indent
13. Highlight four ways in which the government is involved in business activities. (4 marks)
14. State four benefit of using direct taxes to raise government revenue. (4 marks)
15. Name four characteristics of land as a factor of production (4 marks)
16 Identify the book of original entry that each of the following transactions can be recorded in
a) Sold Furniture on credit
b) Returned goods to a supplier
c) Bought goods on credit
d) A customer returned goods.
(4 marks)
17. Highlight four roles of advertising agencies (4 marks)
18. Outline four benefits of a bonded warehouse to the government (4 marks)
19. Outline four factors in the internal environment that may improve business performance
20. State four advantages of personal selling. (4 marks)
21. Identify four gaps in the market that may present business opportunities for an entrepreneur.
22. State four reasons why SACCOs are increasingly becoming popular in Kenya. (4 marks)
23. Highlight four factors that influence the amount of money held for transaction motive.
24. State the four of economic integration (4 marks)
25. Outline four characteristics of under-development (4 marks)

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 IGEMBE CENTRAL
565/2
BUSINESS STUDIES
Paper 2
Time 2½ hours
Answer any FIVE questions.
1. a) Explain five measures that may be taken to increase the volume of exports. (10 marks)
b) Explain five services that may be offered by wholesalers to the retailers. (10 marks)
2. a) Explain five factors that may lead to an increase in the level of national income of a country.
(10 marks)
b) The following transactions relate to Dagoreti Enterprises for the month of March 2016
March 1 : Started business with Ksh 15,300 in cash and a bank overdraft of Ksh 8,200
March 3 : Made cash purchase 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 for 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 5450 in cash
March 9 : Deposited Ksh 6,000 from the office into the business bank account.
March 10 : Paid insurance Ksh 3,700 by cheque
March 11 : Paid Ksh 3,900 for repairs in cash
March 12 : Received Ksh 8,570 in cash from Mwende
March 13 : Received a cheque of Ksh 11,200 from Makokha
March 14 : Paid water bill Ksh 2,590 by cheque
March 15 : Paid rent Ksh 6,500 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)
3. a) Explain five principles that govern a good tax system (10 marks)
b) Explain five types of marine policies that a trader can take. (10 marks)
4. a) Explain the meaning of the following trends in forms of business units. (10 marks)
i) franchising
ii) privatization
iii) amalgamation
iv) globalization
v) holding companies.
b) Turkiye textiles is a clothing company based in Turkey. Explain five channels of distribution
that Turkiye textiles may use to distribute its goods in Kenya. (10 marks)
5. a) Explain any five factors that a Kenyan trader may consider when choosing a means of
transporting goods to the market. (10 marks)
b) Explain any five functions of money. (10 marks)

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6. a) The following is an extract of a trial balance from the books of Adan Traders as at 31st
December 2018
Adan Traders
Trial balance
As at 31st Dec. 2018

Detail Dr. Cr.

Premises 1,120,000
Debtors & Creditors 55,000 31,100
Cash in hand 65,000
Cash at bank 80,000
Discounts 15,000 2,400
Salaries and wages 27,000
Commission 16,600 9,000
Power and lighting 11,700
Furniture 49,000
Capital 1,301,800
Additional information
Stock of goods on 31st December Ksh 25,000
Gross profit Ksh 120,000
Required:
i) Prepare Adan Trader Profit and Loss Account for the period ended 31st December 2018
ii) Prepare a Balance sheet as at 31st December 2018 (5 marks)
b) Explain five reasons why a business person should prepare a business plan. (10 marks)

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 IGEMBE CENTRAL
565/1
BUSINESS STUDIES
Paper 1
Time 2 hours
1. Characteristics of indirect production
i) Goods and services produced are mainly for sale.
ii) Production is on large scale/high quantity goods are produced.
iii) Modern technology and inputs are used/mechanization.
iv) There is specialization
v) High quality goods produced.
vi) There is more interdependence among producers.

2. Causes of cost-push inflation

i) Rise in salaries and wages
ii) Increase in indirect taxes
iii) Increase in profit margin
iv) Increase in cost of other inputs other than labour
v) Reduction in subsidies.

3. Characteristics of basic human wants

i) One cannot do without them
ii) They are felt needs
iii) They cannot be postponed
iv) They are satisfied before secondary wants

4. Disadvantages of an open office layout.

i) Lack of privacy
ii) Disruption from work due to staff movement
iii) May not guarantee security for office equipment.
iv) Infectious diseases may spread due to overcrowding
v) Does not confer status to senior staff
vi) Too congested to allow easy movement of staff and equipment
vii) Junior staff may resent the close supervision by seniors

5. Reasons why government licenses business people.

i) To regulate the number of business to avoid unhealthy competition
ii) To control the type of goods entering and leaving the country
iii) To ensure there is no illegal business being carried out.
iv) To ensure that traders only get involved in the trade activity they have been licensed for.
v) To ensure that those who engage in professional activities meet the requirements for their profession
vi) To raise government revenue.

6. Advantages of public limited companies.

i) Wide sources of capital
ii) Shareholders have limited liabilities.
iii) They have separate legal entity from the shareholders.
iv) Have continuity
v) Shares are freely transferable
vi) Enjoy economies of scale.
vii) Can afford to employ professional management staff.

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7. Causes of shift of supply curve to the right
i) Reduced cost of production
ii) Favourable climatic conditions
iii) Increase in the price of jointly produced goods
iv) Government incentive to producers
v) Entry of new firms into the market
vi) Improvement in production methods / technology.
vii) Reduced incidences of industrial strikes.
viii) Availability of enough factors of production
ix) Future expectations of all in prices of commodity
x) Enough time to adjust.
xi) Advantages of delocalization of firms
xii) Reduced income disparities.

8. Advantages of delocalization of firms

i) Availability of auxiliary services in rural areas.
ii) Increased utilization of local resources
iii) Reduced congestion in towns /rural urban migration
iv) Improved standards of living
v) Balanced economic development
vi) Leads to technology/skills transfer
vii) Infrastructural development of all areas
viii) Development /improved social amenities e.g. schools
ix) Creation / expansion of market
x) Minimize effects of calamities / catastrophes/ terrorist activities
xi) Minimize pollution in one area
xii) Reduced income disparities.

9. Injections into the circular flow of income

i) Government expenditure.
ii) Investment
iii) Exports
10. Types of unemployment
i) Cyclical unemployment
ii) Structural unemployment
iii) Seasonal unemployment
iv) Frictional unemployment
v) Disguised /hidden unemployment
vi) Involuntary unemployment
vii) Residual unemployment
viii) Real wage/voluntary unemployment
ix) Keynesian unemployment

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Wendo Traders, Tiral Balance As at 31st May, 2022
Detail Dr. Cr.
Capital 1,480,000
Premises 300,900
Furniture 123,000
Motor vehicles 1,199,100
Creditors 42,900
Bank 29,400
Debtors 80,700
Stock 45,000
Sales 216,000
Overdraft 77,000
Purchases 155,000
3 years bank loan 122,000
Return Inwards 24,500
Commission Received 32,600
Discount allowed 12,900
1,970,500 1,970,500
(15x1/3 =5 mks)
12.
a) Certificate of origin—A document prepared by the exporter giving details on goods and the country
of origin
b) Consular invoice—document that shows prices charged from goods are fair as certified by importing
country’s officials
c) Letter of hypothecation—a letter written by the exporter to his bank authorizing to sell goods being
exported
d) Indent—document prepared by the importer requesting exporter to supply him/her with the list of
goods indicated.
13. Ways in which the government is involved in business
i) As a consumer
ii) As a producer of goods and services / as a provider of essential services.
iii) As advisor of business people
iv) As a regular of business /e.g. by licensing, taxation, legislation
v) As a distributor/seller
vi) As a trainer of business people / training.
vii) As a promotor of business activities/trade promotion
viii) As a provider of enabling environment
ix) As a facilitator of business activities e.g. financing/ subsidizing.
14. Advantages of direct taxes
i) Economical / cheap to collect
ii) It is certain
iii) Convenient
iv) Can be used to control inflation
v) It ensures equity/fairness
vi) They are simple understand and determine
vii) Easy to administer / collect
viii) Flexibility
ix) It is elastic
15. Characteristics of land
i) It is a basic factor of production
ii) Its supply is fixed
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iii) lacks geographical mobility
iv) quality is not homogenous
v) productivity can be increased
vi) it is a natural resource
vii) subject to the law of diminishing returns
16.
i) General journal
ii) Purchases returns journal
iii) Purchases journal
iv) Return inwards journal
17. Roles of advertising agencies
i) They help organisation in designing their trade arks, logos, and advertising materials.
ii) They look space and airtime for their clients in various media.
iii) They choose on behalf of their clients, the appropriate media to use.
iv) They offer advisory on behalf of their clients.
v) They offer advisory services to their clients on selling techniques.
18. Benefits of a bonded warehouse to the government
i) It is a source of government revenue
ii) Government is able to control entry of harmful goods to the country.
iii) Government is able to verify documents of goods on transit
iv) Enables the government to control quantity of goods entering into the country
v) Government is able to inspect type of goods imported
vi) Government is able to check on illegal goods entering into the country
19. Internal factors that may improve business performance
i) Good business structure
ii) Qualified/skill personnel
iii) Availability of capital
iv) Access to relevant physical resources.
v) Positive business culture
vi) Good objectives/setting good objectives
vii) Proper management style
viii) Motivated / supportive owners
ix) innovativeness
20. Advantages of Personal selling
i) The seller gets opportunity to explain or demonstrate to the customers detailing of the product
ii) The seller is able to have personal contact with the prospective buyer which may improve their
relation
iii) Improves customer’s relation which may help to retina the customers.
iv) The buyer can negotiate terms of purchase e.g. discounts
v) The seller is able to provide answers to the questions to clear doubts raised by customers.
vi) It takes care of both the literate and illiterate prospective customers
21. Gaps in the markets
i) Lack of some products in the market
ii) Insufficient quantities
iii) Poor quality goods.
iv) Poor services
v) Change of government policy
vi) Incase of seasonal events
vii) Occurrence of a distance/catastrophe
22. Reasons for popularity of SACCOS
i) It is easier to save
ii) It is easier to get loans

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iii) Interest charged on loans is low
iv) Members savings are safe
v) SACCOs are flexible—give different categories of loans.
vi) Members earn dividend
vii) May offer banking facilities
viii) The educate their members
23. Factors that influences the amount of money held for transaction motive.
i) Size of the individual income
ii) Prices of commodities
iii) Individuals spending habits
iv) Availability of credit
v) Number of dependants
vi) Intervals between receipts of pay/income
24. Forms of economic integration
i) Customs unions
ii) Preferential trade are
iii) Free trade area
iv) Common market
v) Economic union
vi) Potential unions
25. Characteristics of under-development
i) High population growth/overpopulation /high birth rate.
ii) High level of poverty/low per capita income
iii) Low level of technology
iv) Low level of savings
v) Under-utilization of natural resources.
vi) Poor/under developed infrastructure
vii) High rates of unemployment

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 IGEMBE CENTRAL
565/2
BUSINESS STUDIES
Paper 2
Time 2 hours
1.a) Measures that can be taken to increase the volume of exports include
i) Through export compensation scheme where exporters are allowed to claim a certain percentage of
the value of their exports.
ii) Diversifying foreign markets to expand the market for exports. This increases the selling
opportunities for local products in other countries.
iii) Lobbying for removal of trade restrictions imposed by trading partners on the country’s exports. This
makes it easy to sell local goods in foreign markets.
iv) Devaluation of the country’s currency which makes its exports cheaper hence more attractive to
foreign buyers
v) Encourage foreign investments in the country e.g. EPZ’s This ensures production of quality goods
that meet specification of foreign countries.
vi) Reduction of bureaucracy in acquisition of export licenses. This makes it easy and attractive to
engage in foreign trade.
vii) Subsidizing export oriented businesses. This increases the profit margin for exporters making the
trade more attractive.
viii) Use of commercial attachees to promote the country’s products abroad. Aggressive promotion of the
country’s exports leads to increased sales in those countries.
ix) Customs draw back where part of import duty paid on imported raw material is refunded if used to
produce goods for export.
x) Lower tax/duty on exports to enable them be sold at lower prices that attract foreign buyers.
(any 5 x 2 = 10 marks)
b) Services that may be offered by wholesalers to the retailers.
i) Availing a variety of goods from different producers relieving the retailers of burden of visiting the
producer’s premises.
ii) They break bulk into quantities desired by retailers. The retailers are able to purchase only the
quantities they can afford.
iii) They offer storage services. This relieves the retailer from the risks of damage and cost of storage of
goods.
iv) They provide credit facilities to deserving retailers which act as a source of capital to them
v) They advertise goods to the benefit of retailers who obtain a ready market
vi) They offer transport to the retailers relieving them of transportation costs and the hustle of looking
for means of transport.
vii) They inform retailers on available offers for certain commodities. This may help retailers improve on
their profit margins
viii) Prepare goods for final sale to the benefit of the retailer by sorting/ blending , packing, weighing.
(any 5 x 2 = 10 marks)
2.a) Factors that may lead to an increase in the National income of a country.
i) High supply of human resources brought by high population: more workers earn more wages and
salaries which increases the national income
ii) High quality labour force who are paid higher salaries which increase the National income.
iii) Better or improved technology which increases production of goods which increases the GDP /
better qualities and quantities of goods that earn high income.
iv) High natural resource endowment / gifts of nature; increases production of goods, can generate more
income.
v) More foreign investments into the country; more investments increase output which increases
national income
vi) Political stability in the country. This attracts more investments and savings and therefore more

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 output. This increases incomes.
vii) High level of entrepreneurial culture: This encourages hardwork, more output and thus more
incomes are earned.
viii) More export trade; This increases foreign exchange earnings that are a major component in National
income. (any 5 x 2 = 10 marks)
Dagoretti Enterprises
Two Column Cashbook
for the month of March 2016
Date Details Folio Cash (shs) Bank (shs) Date Details Folio Cash (shs) Bank (shs)
1/3/16 Bal b/d 15,300 1/3/16 Bal b/d 8,200
4/3/16 Harrison 4,600 13,400 3/3/16 Purchases 10,200
6/3/16 Chebet 9,310 5/3/16 Wages 5,000
7/3/16 Otieno 7,720 8/3/16 Hassan 5,450
9/3/16 Cash C1 6,000 9/3/16 Bank C1 6,000
12/3/16 Mwende 8,570 10/3/16 Insurance 3,700

13/3/20 Makokha 11,200 11/3/20 Repairs 3,900

29/3/21 Cash 10,640 14/3/21 Water bill 2,590
15/3/22 Rent 6,500
29/3/23 Bank 10,640
31/3/24 Bal c/d 24,560
36,190 50,550 36,190 50,550
Bal - 24,560

(20 x 1/2 = 10 marks)

3.a) Principles that govern a good tax system
i) Principle of equity: Every subject of the state should pay tax in proportion to their income. A tax
system should therefore have horizontal and vertical equity.
ii) Principle of certainty: The tax that an individual should pay be clear in terms of the amount, time and
manner in which it should be paid. The government should also be fairly certain of the amount of tax
expected so that planning can be easier.
iii) Principle of convenience : Tax levied ought to be convenient to both the contributor and collector. It
should be levied at a time when the payer has money and made of payment should be convenient to
both the payer and the payee.
iv) Principle of economy. The cost of collecting and administering the tax should be lower than the tax
so collected.
v) Principle of flexibility. It should be readily adaptable to changing economic times. i.e when the
economic conditions of he people improve it should give raised revenue e.g. VAT
vi) Principle of diversity. There should be different types of taxes. So that tax burden is on different
groups in the society. This also ensures that he government has money at all times.
vii) Simplicity. A good tax system should be simple enough to be understood by each tax payer. This
will motivate them to pay tax.
viii) Principle of elasticity: The tax system should be able to generate more revenue for the government
by targeting items of mass consumption. (any 5x2 = 10 mks)
b) Types of Marine policies that a trader can take.
i) Marine hull: Covers damage or loss of a ship resulting from risks at sea such as storm, fire, collision
a capsizing.
ii) Marine cargo, covers against loss or damage of cargo while being transported at sea and usually
taken by the owner of the goods.
iii) Port policy: Covers a ship for a specific risk when being serviced, loaded or off-loaded.
iv) Voyage policy: covers a ship or cargo against marine risks in a particular journey. The policy is also
in force if the route is changed in an effort to save the ship cargo or human life.

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v) Time policy : Covers a ship against marine risks that may occur within a specific period of time.
vi) Floating policy: Covers a number of ships being operated on regular basis for a given value of
shipments.
vii) Fleet policy: covers a fleet of ship under one policy mostly those belonging to the same shipping
company.
viii) Freight policy : Covers a ship owner against the risk of the hirer of the ship failing to pay for freight
charges.
ix) Third party liability. Covers any loss caused by the ship to other people and property such as crew
and passenger, another ship or damage to dock structures
x) Composite policy: Given where a particular ship is covered by several insurance companies for the
same risk. Applies where the sum insured is too large to be covered by one insurer
4. a) Meaning of the following trends in forms of Business units.
i) Franchising— a situation where a business grants another the Rights to manufacture and distribute
its branded products . (2 marks)
ii) Privatisation: Changing of state owned cooperatives to Public Limited Companies.
(2 marks)
iii) Amalgamation—Combination of two or more business units into one major organization.
(2 marks)
iv) Globalization—functioning of companies in multiple locations globally and remaining less inclined
to operating withing a single home country.
v) Holding companies—These are companies that own other companies and oversees their operations
but exists solely to operate those subsidiaries. They hold controlling interests in the securities of
other companies. (2 marks)
b) Channels of distribution that Turkiye Textiles may use to distribute its goods in Kenya.
i) Foreign producer® agent® local wholesaler® retailer® consumer.
ii) Foreign producer® local wholesaler® retailer® consumer
iii) Foreign producer® local consumer
iv) Foreign producer® local wholesaler® consumer
v) Foreign producer® local retailer® consumer
vi) Foreign producer® local agent—wholesaler® retailer® consumer
NB: Accept Turkiye textiles for foreign producer
(any 5 x 2 = 10 marks)
5.a) Factors that a Kenyan Trader may consider when choosing a means of transporting goods to the
market.
i) Availability of the means: Some means serves wider areas than others. One can only choose a means
of transport from those that are available and connects to the desired destinations.
ii) Cost of transport: It should be reasonable in relation to the value of goods else using expensive
means for goods of low value may end up in a loss.
iii) Nature of goods: Different goods require different means of transport depending on their native,
perishability requires fast means such as air, while heavy and bulky goods requires powerful means
of propulsion such as train.
iv) Quantity of goods to be transported: Different means handle different load capacities of goods. Large
volume of goods are better transported by trains and small quantities by road.
v) Reliability : Means should be able to transport the goods to the intended destination or person at the
right time and form
vi) Security : The means chosen should ensure that the goods being transported are safe from theft, loss
and damage.
vii) Speed / urgency: goods urgently needed such as relief food and medical services should use fast
means of transport like air or road.
(any 5 x 2 = 10 marks)
b) Functions of money
i) Medium of exchange: Money is generally accepted by everybody in exchange for goods and

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 services.
ii) Measure of value: Money provides common denominator in which the value of various goods and
services are expressed.
iii) Unit of account : The values of different commodities are calculate and records kept in terms of
money.
iv) Store of value—Money is the most convenient means of storing wealth. This is because money is
easily convertible into other forms of assets.
v) Standard deferred payments: A debt incurred today can be paid later using money. This is because
money is acceptable by everyone at all times.
vi) Transfer of immovable assets: Money acts as a means of transferring immovable property such as
land and buildings. Example: One can sell a building in the rural area to buy a similar one in the
urban areas. (any 5 x 2 = 10 marks)

6. Adan Traders Profit and loss account

ADAN TRADERS
PROFIT AND LOSS ACCOUNT
FOR THE PERIOD ENDED 31ST DEC. 2018
Shs Shs
Discount allowed 15,000 Gross profit b/d 120,000
Salaries and wages 27,000 Discount received 2,400
Commission allowed 16,600 Commission received 9,000
Power and lighting 11,700

Net profit c/d 61,100

131,400 131,400
Net profit b/d 61,100

b) Adan Traders Balance sheet

ADAN TRADERES
BALANCE SHEET
AS AT 31ST DEC. 2018
Shs Shs
Premises 1,120,000 Capital 1,301,800
Furniture 49,000 Net profit 61,100
Stock 25,000 Creditors 31,100
Debtors 55,000
Cash in hand 65,000
Cash at bank 80,000
1,394,000 1,394,000

b) Reasons why a business person should prepare a business plan

i) Helps to avoid mistakes—a business plan provides a way of thinking ahead. This helps to avoid
possible mistakes in running the business.
ii) Determine amount of finance required. Helps to determine the amount of finance and other resources
required. This would enable the business to start and run smoothly.

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iii) Directs and motivates employees. A business plan would motivate the employees by making them
aware of what they are expected to do and the direction the business is to take.
iv) Guides in resource allocation—A business plan helps to identify the available resources and allocate
them according to the needs of the business. This enables prudent management of resources.
v) Requirement by financiers– A business plan can be used when borrowing loans since it is accepted
by banks as a proof of creditworthiness.
vi) Helps in identifying strength and weaknesses—a business plan enables the business person to be
aware of strength and weaknesses of a business and therefore can tackle the weaknesses in the
business before they affect its operations.
vii) Adaptability: A business plan would help in creating room to accommodate changes that may occur
in the figure.
viii) Tool of control: A business plan would help in comparing between the actual and budgeted
performance and judge how good the plan is. (any 5 x 2 = 10 marks)

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 MURANGA SOUTH
BUSINESS STUDIES
PAPER ONE
1. State four characteristics of direct production. (4 marks)
2. Mention four basic features of a market. (4 marks)
3. Indicate by a tick () whether the following items relate to the account indicated in the table below.
Items Trading A/C Profit and loss A/C Balance sheet
Sales
Salaries
Cash at bank
Purchases
Rent received
Motor vehicle
Electricity
Bank loan
4. List four means of transport used in land mode of transport. (4 marks)
5. Outline four reasons why it is difficult to satisfy human wants. (4 marks)
6. The following data was extracted from the books of Kamau Traders on 31st December 2023. Use it
to prepare his trial balance as at that date
Debtors sh 1,000
Stock sh 4,000
Capital sh 6,000
Bank overdraft sh 2,000
Cash sh 3,000
7. Identify the source document from which the information posted in the following journals would be
extracted. (4 marks)
Journal Source document
Sales return journal
Purchases journal
Cash receipt journal
Sales journal
8. In the spaces provided write the type of warehouse to which each description relates. (4 marks)
Description Type of warehouse
a) Used to store exports and imports awaiting custom duty
b) Operated for owner exclusive use
c) Anybody can rent a space in it for storing goods
d) Used to store tax-free goods awaiting sale or collection by
owners
9. Outline four demographic factors that may affect business operations. (4 marks)
10. The figure below shows a decrease in demand for a commodity from D0D0 to D1D1

State four possible causes that have led to the above situation. (4 marks)

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11. Outline four circumstances under which a country may be classified as under-developed. (4 marks)
12. Kariuki decided to take insurance cover for his warehouse against fire from G&G Insurance Limited.
It was valued at 1,000,000 Ksh and he was to make monthly payment of 10,000 Ksh. Identify the
following terms as used in insurance. (4 marks)
a) Kariuki
b) Fire
c) Ksh 1,000,000
Ksh 10,000
13. Highlight four importance of entrepreneurship in an economy. (4 marks)
14. Fill in the spaces in the table below. (4 marks)
Fixed Assets Current Assets Long term Short term Capital
F.A C.A Liabilities Liabilities
(L.T.L) (L.T.L)
a) 130,000 70,000 40,000 25,000
b) 610,000 130,000 115,000 425,000
c) 160,000 215,000 65,000 100,000
d) 1,105,900 550,000 175,400 830,500
15. Highlight four causes of demand-pull inflation. (4 marks)
16. Outline four circumstances under which face to face communication may be ineffective. (4 marks)
17. Outline four services that retailers may offer to the consumers. (4 marks)
18. State some of the expenses incurred by the middlemen/ intermediaries in the course of distribution of
products. (4 marks)
19. State four features of sole proprietorship form of a business. (4 marks)
20. The participants in a two-sector economy are households and firms. Identify the relevant participant
in each of the statements given below: (4 marks)
Statement Participant
a) Payment for goods and services _________________
b) Sales of factors of production _________________
c) Payment for factors of production _________________
d) Sales of goods and services _________________
21. Outline four methods that the government of Kenya uses to regulate business activities. (4 marks)
22. The diagram below shows the rate of population growth of a given country. Outline four factors that
may have contributed to the trend between 'S' and 'T'. (4 marks)
t

Population
growth
rate (%)

Time (years)
23. Highlight four uses of a two-column cash book. (4 marks)
24. Most businesses in Kenya are carrying out aggressive product promotion. Highlight four
importance of product promotion. (4 marks)
25. Outline four factors that may influence a firm's decision on type of goods to produce. (4 marks)

Page | 16
 MURANGA SOUTH
BUSINESS STUDIES
PAPER TWO (565/2)
1. a) Explain five circumstances under which a cheque may be dishonoured. (10 marks)
b) In the recent past Kenya government has been advocating for free trade to boost its economic
development. Explain five disadvantages of free trade. (10 marks)
2. a) Explain five differences between a public corporation and a public limited company.
b) Explain five ways in which the Central Bank of Kenya regulates the operations of commercial
banks in Kenya. (10 marks)
3. a) The following is Wokabi Traders trial balance as at 31st December 2023
Wokabi Traders
Trial balance
As at 31st December 2023
Details Dr(sh) Cr(sh)
Stock 10,000
Bank 3,500
Purchases 15,000
Sales 28,000
Returns 800 1,100
Rent 580
Insurance 950
Creditors 450
Carriage in 1,200
Discounts 300 1,620
31,750 31,750
Additional information: Closing stock sh 2,500
Required: Prepare a trading, profit and loss account for the period ending 31st December 2023.
b) John started a retail shop in Mutongwe Shopping Centre, after a year the business was not
performing well. Explain to him five factors that can lead to business success. (10 marks)
4. a) Explain five factors that hinder economic development in Kenya. (10 marks)
b) Explain five methods of determining the price of a commodity. (10 marks)
5. a) Explain any five ways in which production activities negatively affect the community. (10 marks)
b) Murang’a county government is intending to spend its revenue on development projects. Explain
five principles or guidelines that must be followed. (10 marks)
6. As at 1st July 2008, the cash book of Emoi Enterprise showed the following balances:
Cash sh 20,000 and bank overdraft sh 8,600
During the month the following transactions took place:
3/07/08: Nafula settled her account of sh 16,000 by cheque of sh 15,000
6/07/08: Paid rent by cash, sh 8,000
10/07/08: Deposited sh 6,000 into the business bank account from the cash till
15/07/08: Settled Wakuli’s account of sh 20,000 by cheque and he was allowed a discount of 1%
18/07/08: Deposited sh 28,000 in the bank from private sources
21/07/08: Cash sales sh 12,000
24/07/08: Otieno a debtor settled his account by cheque of sh 8,000 having been allowed a discount
of 20%
26/07/08: Purchased furniture of sh 5,200 paying by cheque
28/07/08: Received sh 3,600 cash from Nduta
30/07/08: Banked all the cash except sh 1,600

Required: Prepare three column cash-book duly balanced for the month of July 2008. (10 marks)
b) Explain five essentials of a good warehouse. (10 marks)

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 MURANGA SOUTH
BUSINESS STUDIES
PAPER ONE (565/ 1)
MARKING SCHEME
1. State four characteristics of direct production. (4 marks)
a) Goods produced are of low quantity/ No surplus
b) Goods produced are of low quality
c) Goods produced are of own use/ Subsistence production
d) There is less specialization
e) Simple methods of production are used/ Simple tools
f) Limited variety of goods and services
g) Less interdependence among producers
2. Mention four basic features of a market. (4 marks)
a) Availability of buyers/ consumers
b) Availability of goods/ services (products)
c) A platform for conducting transactions (area/ situation/ interaction)
d) Freedom to buy/ sell
e) Availability of medium of exchange
f) Availability of sellers/ producers

3. Indicate by a tick () whether the following items relate to the account indicated in the table
below. (4 marks)
Items Trading A/C Profit and loss A/C Balance sheet
Sales 
Salaries 
Cash at bank 
Purchases 
Rent received 
Motor vehicle 
Electricity 
Bank loan 
(8 X 0.5 = 4 marks)
4. List four means of transport used in land mode of transport. (4 marks)
a) Carts
b) Vehicles
c) Human beings
d) Animals
e) Trains
f) Pipeline
5. Outline four reasons why it is difficult to satisfy human wants. (4 marks)
a) Human wants are very many/ Unlimited/ Endless
b) Resources are scarce
c) Difficult to make choices since they are competitive
d) They are complimentary
e) They are recurrent
f) They are habit forming
g) They change with age, gender and time
h) Consumers have different tastes and preferences

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6. The following data was extracted from the books of Kamau Traders on 31st December 2023.
Use it to prepare his trial balance as at that date

Kamau Traders
Trial Balance
As at 31st December 2023
Details Debit (sh) Credit (sh)
Debtors 1000 
Stock 4000 
Capital 6,000 
Bank overdraft 2,000 
Cash 3000 
8,000  8,000 

(8 X 0.5 = 4 marks)
7. Identify the source document from which the information posted in the following journals
would be extracted. (4 marks)
Journal Source document
Sales return journal Outgoing credit note
Purchases journal Purchases invoice/ Incoming invoice
Cash receipt journal Cash receipt/ Copy of receipt
Sales journal Sales invoice/ Outgoing invoice
8. In the spaces provided write the type of warehouse to which each description relates. (4 marks)
Description Type of warehouse
Used to store exports and imports awaiting Bonded warehouse
custom duty
Operated for owner exclusive use Private warehouse
Anybody can rent a space in it for storing goods Public warehouse
Used to store tax-free goods awaiting sale or Free warehouse
collection by owners
9. Outline four demographic factors that may affect business operations. (4 marks)
a) Fertility rate
b) Immigration rate
c) Death/ mortality/ Attrition rate
d) Growth rate
e) Age groups
f) Distribution patterns
g) Population size
10. The figure below shows a decrease in demand for a commodity from D0D0 to D1D1
State four possible causes that have led to the above situation. (4 marks)
a) Decrease in levels of consumer's income
b) Decrease in population
c) Unfavorable government policy
d) Unfavorable terms of sale
e) Decrease in prices of substitute goods
f) Increase in prices of complimentary goods
g) Future expectations of decrease in price
h) Future expectations of increase in quantities supplied

Page | 19
11. Outline four circumstances under which a country may be classified as under-developed.
a) When the rate of unemployment is high
b) When there is high population growth rate
c) When the standards of living of citizens is low
d) In case of low per capital income
e) When a country has a high dependency ratio
f) When poverty levels are high
g) Where resources are under-utilized
h) When there is insufficient technology
12. Kariuki decided to take insurance cover for his warehouse against fire from G&G Insurance
Limited. It was valued at 1,000,000 Ksh and he was to make monthly payment of 10,000 Ksh.
Identify the following terms as used in insurance. (4 marks)
d) Kariuki - Insured
e) Fire - Risk
f) Ksh 1,000,000 - Actual value
g) Ksh 10,000 - Premium
13. Highlight four importance of entrepreneurship in an economy. (4 marks)
a) Creation of employment
b) Promotes innovation and creativity among people
c) Enhances optimum utilization of available resources
d) Generation of personal and national incomes
e) Formation of capital
f) Development of technology
g) Save on imports
h) Creation of variety of goods and services
14. Fill in the spaces in the table below. (4 marks)
Fixed Assets Current Assets Long term Short term Capital
F.A C.A Liabilities Liabilities
(L.T.L) (L.T.L)
a) 130,000 70,000 40,000 25,000 135,000
b) 60,000 610,000 130,000 115,000 425,000
c) 160,000 215,000 210,000 65,000 100,000
d) 1,105,900 450,000 550,000 175,400 830,500
15. Highlight four causes of demand-pull inflation. (4 marks)
a) Increase in government expenditure
b) Increase in consumer's expenditure
c) Increase in consumer's income
d) General shortage of goods and services
e) Increase in credit creation by commercial banks
f) Increase in population
16. Outline four circumstances under which face to face communication may be ineffective.
a) Where there is age difference
b) In case of language barrier
c) If there is negative attitude between communicating parties
d) When there is presence of noise
e) In case of poor listening between communicating parties
f) If communicating parties are far apart from each other
17. Outline four services that retailers may offer to the consumers. (4 marks)
a) Offer advice to the consumers
b) Offer credit facilities to the trusted customers
c) Breaking bulk for the consumers
Page | 20
d) Preparing goods for sale
e) They avail a variety of goods to consumers
f) They offer after-sale services to their customers
g) They bring goods closer to consumers
18. State some of the expenses incurred by the middlemen/ intermediaries in the course of
distribution of products. (4 marks)
a) Actual cost of buying the products
b) Transport costs
c) Storage costs
d) Insurance costs
e) Salaries and wages
f) Packing and blending costs
19. State four features of sole proprietorship form of a business. (4 marks)
a) Owned/ Formed by one person
b) Does not exist as a separate legal entity
c) Have no perpetual/ continuous life
d) It has unlimited liability
e) Flexible in its way of operation
f) Owner enjoys profit alone
g) Managed by the owner with the assistance of a family member
h) Owner bears all the risks
i) Faster decision making
20. The participants in a two-sector economy are households and firms. Identify the relevant
participant in each of the statements given below: (4 marks)
Statement Participant
a) Payment for goods and services Household
b) Sales of factors of production Household
c) Payment for factors of production Firm
d) Sales of goods and services Firm
21. Outline four methods that the government of Kenya uses to regulate business activities.
a) Licensing business activities
b) Setting standards
c) Legislation/ Formulation of policies/ Enacting laws
d) Setting quotas
e) Taxation
f) Price controls
g) Imposing total bans
h) Subsidizing businesses
22. The diagram below shows the rate of population growth of a given country. Outline four
factors that may have contributed to the trend between 'S' and 'T'. (4 marks)
a) Improved health fities
b) Low death rates
c) Improved standards of living
d) High birth/ Fertility rate
e) Early marriage
f) Ignorance/ Lack of family planning
g) Immigration from other countries
h) Cultural/ religious practices that favor many children

23. Highlight four uses of a two-column cash book. (4 marks)

a) To record cash receipts
b) To record cash payments

Page | 21
c) Acts a ledger
d) Determines cash balances
e) Determines bank balances
f) Used in preparing bank reconciliation statement
g) Used to see at a glance the transactions affecting cash and bank

24. Most businesses in Kenya are carrying out aggressive product promotion. Highlight four
importance of product promotion. (4 marks)
a) Stimulates demand for the product thus increasing sales
b) Can be used to open up or enter new markets
c) Educates customers on how to use the product
d) Inform users about changes in the prices of products
e) Creates and maintains good image/ name/ reputation for the business
f) Clearly brings out positive features of the product

25. Outline four factors that may influence a firm's decision on type of goods to produce.
a) Profitability
b) Government policy
c) Level of competition
d) Cost of production
e) Market/ Demand
f) Availability of resources

Page | 22
 MURANGA SOUTH
PAPER TWO
MARKING SCHEME
1. a) Explain five circumstances under which a cheque may be dishonoured. (10 marks)
• If the cheque is post dated presented to the bank before maturity date
• If the cheque is stale presented to the bank after six months since when it was drawn/ issued
• If the cheque is defaced/ torn/ dirty making its content illegible/ invisible
• If the drawer/ account holder has closed his account with the bank
• If the drawer is dead and the bank is notified/ is aware
• If the drawer becomes bankrupt/ insane, therefore losing the capacity to transact
• If there are insufficient funds in the drawer’s account
b) In the recent past Kenyan government has been advocating for free trade to boost its
economic development. Explain five disadvantages of free trade. (10 marks)
• Loss of government revenue since custom duties for exports and imports are exempted
• Closing down of local industries due to stiff competition with cheap imported products
• Unemployment due to closure of local industries
• Compromising a country’s political ideology due to conditions set by members in a trading
block
• Loss of opportunity to obtain cheaper commodities due to barriers for non-members who
may be producing cheaper and quality goods
• Limited consumer choice since varieties from non-members are not allowed
• Transfer of negative cultural practices due to interaction
• Dumping caused by importation of cheaper sub-standard goods
2. a) Explain five differences between a public corporation and a public limited
company. (10 marks)
Public Corporation Public Limited Company
i Formed under Act of Parliament Formed under Companies Act
ii Initially financed by the government Financed through selling of shares and debentures
iii Management board is appointed by the Management board appointed by the shareholders
government
iv Formed to provide essential goods/ services Formed with a profit-making motive
v Financial statements presented to the parliament Financial statements published in press for public
scrutiny
vi Generated profit goes back to the government Generated profit given to shareholders as
dividends
vii Government is the biggest shareholder Private persons are the biggest shareholders

b) Explain five ways in which the Central Bank of Kenya regulates the operations of
commercial banks in Kenya. (10 marks)
• Bank rates varying the banks lending rates, gives indication on the rate of interest to charge
to their customers
• Cash/ Liquidity ratio Increasing/ decreasing the cash/ liquidity ratio it may either decrease/
increase credit expansion
• Special/ compulsory deposits calling for compulsory deposits, reduces cash base thus
reducing ability to lend.
• Selective credit control through placing priority on sectors to lend to, lending reduces in
commercial banks
Page | 23
• Direct supervision to ensure that the laid down regulations are adhered to.
• Open market operations (OMOs), the Central Bank buys and sells treasury bills to increase
or decrease the lending ability of commercial banks
• Moral persuasion, central banks in some circumstances may persuade commercial banks to
regulate their lending habits
3. a)

b) John started a retail shop in Mutongwe Shopping Centre, after a year the business
was not performing well. Explain to him five factors that can lead to business success.
• Availability/ adequate capital at low rates of interest to support business operations
• Appropriate marketing strategies to stimulate demand and increase sales
• Fair competition in market to enable business generate profit
• Adequate skills and efficient management to facilitate proper running of the business
• Favourable government policies to encourage investing due to low cost and high profit
• Good customer relations to create customer loyalty and satisfaction that leads to more sales.
NB Award any other relevant point
4. a) Explain five factors that hinder economic development in Kenya. (10 marks)
• Low natural resource endowment – A country that has insignificant quantity and quality of
natural resources, e.g Lack of minerals may not have inputs leading to low productivity
• Inadequate capital – A country that lacks productive wealth and capital goods will struggle
to have meaningful productivity
• Poor technology – A country that uses backward methods of production will produce poor
quality and insufficient quantity

Page | 24
• Poor human resource endowment – A country that adopts poor education curriculum will
create manpower that lacks the requirements of the profession leading to production of
poor-quality goods.
• Political instability – Where the government is corrupt, unreliable, authoritarian, this may
scare away foreign investors leading to decreased productivity
b) Explain five methods of determining the price of a commodity. (10 marks)
• Bargaining/ Haggling – Price is determined through negotiation between the buyer and the
seller
• Auction – Price is determined through bidding buyers are given opportunity to suggest the
price. The highest bidder sets the price of the commodity
• Tendering – Buyers are invited to quote prices independently of each other. The buyer who
quotes the highest price with favorable terms sets the price of the commodity
• Price control by the government – The government sets the price beyond which a
commodity should not be sold
• Taxation/ subsidies – When government increases taxes, the price increases and vice versa.
When government increases subsidies the price decreases and vice versa
• Price mechanisms/ forces – Price is determined through interaction of demand and supply.
Equilibrium price is taken to be the price of the commodity
• Recommended retail price (RRP) – Where the manufacturer fixes the price of the
commodity
5. a) Explain any five ways in which production activities negatively affect the
community. (10 marks)
• Destruction of the environment activities such as lumbering leads to destruction of forests
leading to desertification hence climatic change
• Increased pollution of the environment through releasing harmful gases, untreated
affluence, noise and solid waste disposal causing diseases and death to both land and
aquatic life
• Increased social evils, when people move to areas where production activities take place in
search of jobs, those who do not secure employment will turn to drug trafficking,
prostitution to make ends meet
• Congestion of people around factories leads to strains on social amenities and housing thus
leads to development of slums and poor living standards
• Spread of diseases due to congestion, shortage of social amenities and prostitution leading
to increased deaths and low life expectancy
b) Murang’a county government is intending to spend its revenue on development
projects. Explain five principles or guidelines that must be followed. (10 marks)
• Sanction the expenditure must be approved by the relevant authority/ county assembly
• Economy spending must be incurred in the most affordable way to avoid wastage/ misuse
• Accountability/ good/ proper financial management spending should be well managed/
records provided for auditing
• Flexibility spending policy should accommodate the changing/ prevailing economic
situation
• Maximum/ optimum social benefit expenditure must benefit majority of the people
Page | 25
• Productivity expenditure should be on projects that generate/ yield returns
• Equity spending must ensure fairness in income distribution
• Surplus expenditure should be less than revenue collected
• Elasticity spending should be capable of being expanded/ contracted in line with the size of
the economy
6. a) 3- column cashbook
Date Details L.F Disc Cash Bank Dates Details L.F Disc Cash Bank
(2008) Allowed (2008) Received

July 1 Bal b/d 20,000 July 1 Bal b/d 8,600

 
July 3 Nafula 1,000 15,000 July 6 Rent 8,000
  
July 10 Cash 6,000 July 10 Bank 6,000
 
July 18 Capital 28,000 July 15 Wakuli 200 19,800
  
July 21 Sales 12,000 July 26 Furniture 5,200
 
July 24 Otieno 2,000 8,000 July 30 Bank 20,000
  
July 28 Nduta 3,600 July 30 Bal c/d 1,600 43,400
  
July 30 Cash 20,000

3,000 35,600 77,000 200 35,600 77,000
 

b) Explain five essentials of a good warehouse. (10 marks)

• Good infrastructure/ Good transport system to facilitate movement of goods/ access by
clients
• Suitable location to allow receipt/ issuance of goods
• Appropriate equipment to allow proper handling of goods
• Appropriate/ qualified staff/ personnel – Skilled/ trained for proper/ efficient management
• Adequate space/ room to allow easy movement of goods/ people/ staff in the warehouse
• Proper recording system to ensure proper monitoring of movement of goods in and out of
the warehouse
• Compliance with the law to avoid conflict with law enforcing agencies/ government
• Suitable building design to accommodate intended goods
• Security system to protect goods from loss through theft/ pilferage
Safety to protect goods from damage/ staff from injuries

Page | 26
 MERU CENTRAL SUBCOUNTY
565/1
BUSINESS STUDIES
PAPER 1
1. Classify the following resources as either natural, man-made or human. (4mks)
Resource Classification
a) Ship
b) Architect
c) Soda ash
d) Doctor
2. Outline four gaps that an entrepreneur may identify in the market. (4mks)
3. Highlight four elements that constitute demographic environment of a business. (4mks)
4. Below is a graph showing the per capita income in relation to size of population in a
country.

Output per worker

C B A

Population size
Name the parts represented by A,B,C (3mks)
5. State four uses of national income statistics to a country. (4mks)
6. The following information relates to Mwavumbo Traders for the month of Dec 2021
Details Kshs.
Stock 32,800
Cash 50,000
Outstanding salaries 34,600
1-year bank loan 24,200
Insurance expense 8,000
Motor van 200,000
Debtors 12,000
Calculate the net worth of Mwavumbo traders. (4mks)
7. State four benefits of studying Business Studies as a subject to an individual (4mks)
8. Highlight four advantages of using WhatsApp in communication. (4mks)
9. State four factors that determine the amount of money held for transitionary motive.

Page | 27
10. The graph below represents the demand and supply curves of milk

D0 S

Prices (Kshs)

S D0

Quantities
State four effects of a shift of demand curve to the left (4mks)
11. Outline four factors that may make it necessary for an insurance company to re-insure.
12. For each of the following transactions, indicate the account to be debited and the account to
be credited. (4mks)
Transactions Account to be Account to be
debited credited
a) Sold goods on credit to Aisha
b) Bought a motor van by cash
c) Paid Roy a creditor by cheque
d) Purchased goods on credit from Abu
for resale
13. State four circumstances under which a trader may decline to give credit facilities to
customers. (4mks)
14. List four factors that may hinder economic development in the country.
15. Name the books of original entry in which the following source documents are used.
Source documents Books of original entry
a) Incoming invoice ___________________
b) Incoming receipt ___________________
c) Outgoing credit note ___________________
d) Outgoing invoice ___________________
16. State four reasons why countries may trade with each other. (4mks)
17. Distinguish between the following types of goods produced in a country. (4mks)
a) Perishable goods and durable goods
b) Intermediate goods and finished goods.
18. On 1st January 2024, Kibet started a business with Kshs. 25,000 in cash and on 2nd January
he bought stock of goods worth Kshs. 10,000 in cash
Enter the above transactions in the relevant ledger accounts. (4mks)
19. Highlight four reasons for privatizing public corporations. (4mks)
20. Outline four differences between ocean liners and tramps as a means of water transport.
21. State four types of advertising. (4mks)
22. Outline four reasons that would make a firm to be located near a market. (4mks)
23. Highlight four demerits of an enclosed office plan. (4mks)
24. Outline four methods used by monopolistic firms to differentiate their products.

Page | 28
25. The following information wa extracted from the books of Mwangaza traders on 31st Dec
2023
Stock (1.1.2023) sh. 12,500
Returns inwards sh. 1500
Purchases sh. 70000
Returns outwards sh. 2400
Sales sh. 95000
Stock 31.12.2023 sh. 6500
Required: prepare Mwangaza traders trading account for the period ended 31st Dec 2023.
(5mks)

Page | 29
 MERU CENTRAL SUBCOUNTY
565/2
BUSINESS STUDIES
PAPER 2
1. a) Explain five factors that a firm need to consider when selecting an office layout to
adopt.
b) Outline five differences between sole proprietorship and partnership type of business.
2. a) Explain five ways of determining the size of a firm. (10mks)
b) Below are assets and liabilities of Chebet Traders as at 30th June 2020
Buildings 1,000,000
Motor vehicle 500,000
Bank 400,000
Furniture 200,000
Debtors 100,000
Capital 1,900,000
Loan 200,000
Creditors 100,000
The following transactions took place in the month of July 2020.
Settled her creditors in full by cheque.
Debtors paid 50,000 by cash
Injected 500,000 personal money to the business bank account.
Paid Kshs 100,000 being part of loan by cheque.
Bought additional furniture worth 100,000 and paid by cheque.
Brought personal motor vehicle valued at Kshs 300,000 for business use.
Sold part of his building worth 400,000 and was paid by cheque.
Required: prepare balance sheet as at the end of July 2020. (10mks)
3. a) Explain five demerits that a country may suffer when a government become a major
investor in business. (10mks)
b) Explain five negative effects of inflation in the Kenyan economy. (10mks)
4. a) Explain five factors that may promote entrepreneurial activities in the country. (10mks)
b) The following information was obtained from the books of Kimani traders for the year
ended 31 st December 2019
Purchases 400,000
Carriage inwards 50,000
Capital 1,000,000
Sales 800,000
Total expenses 195,000
Stock on 1st Jan 2019 40,000
Return outwards 30,000
Stock on 31st Dec 2019 100,000
Total creditors 35,000
Debtors 30,000
Return inwards 45,000
Required: compute the following
a) Net purchases (2mks)
b) Cost of sales (2mks)
c) Gross profit (2mks)

Page | 30
d) Margin percentage (2mks)
e) Rate of stock turnover (2mks)
5. a) Outline five channels that may be used in distributing flowers from Kenya to Germany
b) Explain five characteristics of a good tax system. (10mks)
6. a) Explain five measures that would be taken to ensure smooth functioning of a warehouse.
b) On 1st March 2022 Kamau traders had cash in hand Kshs 7,800 and a bank overdraft of
Kshs 24,300. During the month, the following transactions took place
March 3rd - Cash sales paid directly into bank Kshs. 16,500
4th - Bought goods for Kshs. 15,000 and paid by cheque
6th - Cash sales Kshs 50,000
9th - Received a cheque of Kshs. 18,000 from Amolo in full settlement of his debt
13th - Paid insurance premiums of Kshs. 16,000 in cash
15th - Paid Kamotho by cheque Kshs 9700 in full settlement of his account less 3% cash
discount
21st - Withdrew a cheque Kshs. 30,000 from bank for office use
24th - Received a cheque of Kshs 23,750 from Rotich in full settlement of his account less
5% cash discount
25th - Paid wages in cash Kshs. 20,000
30th - Banked all cash except Kshs 3,000
Required: Prepare a three column cash book and balance it off (10mks)

Page | 31
 MERU CENTRAL SUBCOUNTY
565/1
BUSINESS STUDIES
PAPER 1
MARKING SCHEME
1.
Resource Classification
a) Ship Man-made resource
b) Architect Human resource
c) Soda ash Natural resource
d) doctor Human resource
2.
− Low quality goods/services
− Insufficient quantities/ shortage of goods
− Limited variety of products in the markets
− Unaffordable prices / high prices of products
− Unavailability of products in the market
3.
− Population density/ geographical distribution
− Age distribution
− Gender/sex distribution
− Level of education
− Birth rates / population growth rate
− Death/ mortality rate
− Size of the population
4.
A-Overpopulation
B-Optimum population
C- Under population
5.
− Helps investors / entrepreneurs to make informed investment decisions
− Indicates the income / wealth distribution in a country
− Provides information on country’s economic performance over a period of time
− Assesses the levels of savings and investments in the country
− Indicates the contributions of each sector and which sector to emphasize
− Indicates and compares the average standards of living of people in their country
− Serves as support evidence to request / solicit for foreign aids and grants
− Assesses and compares the average standards of living people in different countries
6. Net worth = Assets – Liabilities
Assets = Kshs (200,000+32,800+50,000+12,000) = Kshs 294,800
Liabilities = Kshs (24,200+34,600) = Kshs 58,800
Net worth = (294,800 – 58,800) = Kshs 236,000
7.
− To acquire self-discipline/ positive attitude towards work
− To develop positive attitudes towards environment and health facilities
− To acquire knowledge that enables to evaluate the viability of business ideas and performance
− To appreciate the role of government in providing essential goods and services
− To appreciate the role of market forces in determining the prices of goods and services
Page | 32
 − To promote co-operation / interpersonal relations in society through trade
− To provide a strong foundation necessary for further education and training in business
− To acquire / equip entrepreneurial knowledge and skills to start and operate a business
8.
− Can be used for live videos/ voice calls
− One can send images / live videos
− Involves large audience e.g. groups/ communities etc.
− Easy control by administrator in case of inappropriate behaviors
− Its free/ not costly
− Can be used internationally
9.
− Access to credit
− family size
− Intervals between receipts of incomes
− Number of dependents
− Size of individual’s income
− Individual’s spending habits
10.
− The equilibrium price shifts downwards/ decreases
− The equilibrium quantity shifts in the left/decreases
− The quantity demanded will decrease
− The price will decrease/fall/drop
11.
− High value of property
− Need to spread risks
− If it’s a government policy
− Need to create client’s confidence
− High degree of a risk
12.
Transaction A/C debited A/C credited
a Sold goods on credit to Aisha Debtor/ Aisha√ Sales√
b Bought motor van by cash Motor van√ Cash√
c Paid Roy a creditor by cheque Creditor/ Roy√ Bank√
d Purchased goods on credit from Abu for resale purchases√ Abu / creditor√
13.
− If the customers are not credit worthy
− Where the stock level is low
− Where the customers have a doubtful character
− Where it is the policy of the business to sell goods in cash
− Where customers order goods beyond the ability of the sellers
− Where a customer wants to be given a very long repayment period
14.
− Social insecurity
− Political instability
− High population growth rate
− Over – reliance on foreign aid
− Devaluation of currency

Page | 33
 − Poor health of the working population
− Poor/ underdeveloped infrastructure
− Inadequate natural resources
− Inadequate skilled man power
15.
Source document Boks of original entry
a. Incoming invoice Purchases journal
b. Incoming receipt Cash payment journal
c. Outgoing credit note Sales returns / return inwards journal
d. Outgoing invoice sales journal
16.
− To enhance bilateral ties
− To have access to a wider variety of goods and services
− To enjoy peace and good relationship with trading partners
− To sell their surplus / excess goods
− To acquire what they are not able to produce
− To enjoy better and advanced technology from other countries
− To expand employment opportunities for its citizens
17.
i. Perishable and durable goods
Perishable goods – are goods that get spoilt quickly unless stored under special facilities
Durable goods- are goods that can serve/ are usable for a long period of time
ii. Intermediate and finished goods
Intermediate goods- are goods that require further processing to be ready for use
Finished goods – are goods that have already undergone processing and are ready to be used.
18.
Capital a/c cash a/c
2024 2024 2024
1/01 cash√ 25000√ 1/01 capital√ 25,000√ 2/01 stock√ 10,000√
Stock a/c
2024
2/01 cash√ 10,000√
19.
− To minimize political interference
− To reduce gov’t expenditure
− To enhance competition
− To improve efficiency in the operations
− To attract foreign investors
− To increase public participation in economic activities
− To enable the gov’t, concentrate on the state responsibilities
− To comply with the conditions set by development partners
20.
Liners Tramps
− Owned and operated by shipping − Owned and operated by individuals
conferences
− Freight charges are fixed − Freight charges fluctuates based on demand
− Cannot be chartered − Can be chartered

Page | 34
 − Calls at specific parts on published − Call at different ports at any time depending
dates on demand
− Follow fixed routes − Follow routes based on demand
21.
− Celebrity advertising
− Institutional advertising
− Product advertising
− Informative advertising/ primary demand advertising
− Competitive/persuasive advertising
22.
− If the finished products are heavy/ bulky than the inputs
− When the firm want to monopolize the market in terms of output / prices
− If there is stiff competition to make it easy to reach customers faster
− If the finished products are highly perishable
− If the final product is fragile
− If the final product is localized / small/ concentrated in the area
− Where the transportation cost of finished products is higher
− Where the firm realizes it will enjoy a substantial external economies of scale
23.
− No close supervision of workers/ difficult to supervise staff
− Costly/ expensive to construct and maintain
− Discourages team work
− Encourages absenteeism among workers
− Possibility of misuse of office facilities
− Discourages sharing of machines
24.
− Coloring
− Wrapping
− Advertising
− Branding
− Packaging
25.
Mwangaza traders
Trading account
For the period ended 31st Dec 2023
Kshs Kshs Kshs
Opening stock 12,500√ Sales 95,000√
Add: purchases 70,000√ Less: return inwards 1500√
Less: return outwards 2400√ 67,600√ Net sales 93,500√
Cost of goods available for sale 80,100
Less: closing stock 6,500√
Cost of goods sold 73,600√
GP c/d 19,900√
93,500 93, 500
GP b/d 19,900

Page | 35
 MERU CENTRAL SUBCOUNTY
565/2
BUSINESS STUDIES
PAPER 2
MARKING SCHEME
1. a)
Number of workers to be accommodated – if the number of employees to be accommodated is
large, an open office is chosen and if the number is small, enclosed office layout may be suitable.
Space of land available – If the space is small, open office layout may be appropriate and if the
space is large enclosed office may be chosen
Need for close supervision – if workers need close monitoring an open office may be chosen and
if the workers do not need close supervision, enclosed office plan may be suitable
Government policy –government may recommend the firm on the kind of office layout to adopt
thereby leaving the firm with no option.
Cost of construction – if a firm need to save on cost of establishment, open office may be
suitable because it’s cheaper / economical to construct.
Nature of work- if the work to be done requires privacy / is confidential enclosed office plan
may be suitable and if the work does not require privacy then open office layout may be
appropriate
Flow / speed of work- where work need to be done faster, open office layout may be chosen
Flexibility in appearance – where sitting plan needs to be changed easily then open office layout
may be chosen.
b)
Sole proprietorship Partnership
− Owned by sole proprietor/ sole trader − Owned by partners
− Shares profit alone − Profit shared by partners (according to
capital contribution)
− Makes decision alone − Decisions are made jointly by partners
− Managed by sole proprietor − Managed by partners themselves
− Main source of capital is owners − Main source of capital is contributed
contribution / personal savings jointly by partners
− Formed by sole proprietor − Formed by a minimum of 2 partners and
maximum of 20 partners.
− Faster decision making − Slow decision making (due to
consultations)
2. a)
i.Level of output/ volume of output – a firm’s size may be judged by the level of output. A large
firm will produce on large scale, while a small firm will produce on small scale
ii.Number of employees in the firm- a small firm is likely to employ only a few employees,
while a large firm will most often employ many workers.
iii.Size of the market controlled by the firm- large firms control large proportions of the total
market of a particular product. Small firms may only control a small size of the market.
iv.Capital invested - the larger the capital of the firm in terms of assets the larger the firm and the
smaller the capital of a firm the smaller the firm is considered to be.
v.Methods of production adopted- a large firm will most often adopt capital intensive methods
of technology where operations will be highly mechanized while small firms use more labour
than machinery.
vi.Sales volume- small firms have low levels of sales with a given period while large firms have
huge levels of sales.
Page | 36
 vii.Floor area covered by the premises- a firm with large floor area covered by premises may be
said to be large while one with a smaller floor area may be considered to be small.
2 b) Balance sheet of Chebet traders
Chebet traders
Balance sheet
As at 31st July 2020
Assets Kshs Capital + liabilities Kshs
Fixed assets Capital 1900000√
Buildings 600000√ Add: Investment 800000√
Motor vehicle 800000√ Final capital 2700000√
Furniture 300000 √
1700000
Current assets Long term liabilities
Debtors 50000√ Loan 100000√
Cash at bank 1000000√
Cash in hand 50000√
1100000

2800000 2800000
3. a)
i.The move may discourage private investors – Due to unfair competition, acquisition,
monopoly and unfair laws.
ii.Poor quality goods and services/ quality of goods and services may be compromised – due
to lack of competition/ emergence of state monopoly/ government employees may lack
enthusiasm since there is no profit motive.
iii.Limited choices to consumers/ consumer may be denied variety of products to choose
from
- where government is the only provider of goods and services leading to low standards of
living.
iv.Inefficiency – leading to low productivity, wastage of resources and continuous losses due
to unqualified staff/poor supervision.
v.Burden to tax payers/ the government may drain public resources/ increase government
expenditures- where the enterprise is not able to sustain itself hence burdening tax payers
due to continuous losses/ over ambitious large projects.
vi.Lack of accountability/ misappropriation/ corruption- managers of government who run
business tend to misappropriate/ embezzle public funds/misuse public funds.
vii.Unstable management/ government run businesses are prone to frequent change in their
management – occasioned by changing political leadership.
b)
i.Discourages savings and investments – as people tend to spend the money they have
rather than saving and investing.
ii.Low income earners are hardly hit – since they may not be able to afford the basics
iii.Increases interest rates – as a results of reduced savings in the country
iv.Declines citizens living standards – due to decrease in consumers purchasing power
v.Retards economic growth – as investors may not be willing to take risks
vi.May fuel/ worsen unemployment – due to reduced production activities / closure of firms
Worsens balance of payments – as exports become more expensive leading to fall in the
demand for exports as people prefer buying cheaper imports.
Page | 37
4. a)
i.Adequate finance – which supports the growth/ expansion/ operation of no business
ii.Availability of adequate security – that ensures that goods are not stolen
iii.Adequate market- demand where business can goods or services to satisfy their needs
iv.Good infrastructure /roads – that facilitates movement of goods to the market
v.Political stability - that assure safety of products hence facilitates safer movement of
goods to the market.
vi.Healthy/fair competition- the business can cope with/with stand in the market.
vii.Favourable government policies – government support that may encourage starting
/expansion of business venture
viii.Presence of role models/ successful business people – that inspire the youths to go into
business
ix.Good governance – that ensures accountability/ transparency in conduct of business
activity
x.Availability of appropriate technology – that can lead to production of desired quality/
quantity of goods
b)
a) Net purchases = Purchases + Carriage inwards – Return outwards
= 400,000√ + 50,000 – 30,000√
= Ksh 420,000√
b) Cost of sales = Opening stock + Net purchases – closing stock
= 40,000 + 420,000 – 100,000√
= Kshs 360,000√
c) Gross profit = (sales – return inwards) – cost of sales
(800,000- 45000) √ – 360,000√
= Kshs 395,000√
d) Margin % = gross profit x 100
net sales
= 395,000√ x 100 = 52.32%√
755,000
e) Rate of stock turn over = Cost of sales
Average stock
Average stock =40,000+100,000 = 140,000
2 2
= Kshs 70,000
Rosto = 360,000√
70,000
= 5.14 times√
5. a)
• local farmer (Kenya) → foreign consumer (German)
• local farmer → foreign wholesaler → foreign consumer
• local farmer→ foreign wholesaler → foreign retailer → foreign consumer
• local farmer → foreign retailer → foreign consumer
• farmer (Kenya) → foreign co-operative → foreign retailer → foreign consumer
• local farmer → foreign marketing board → foreign wholesaler → foreign consumer
b)
• Equity – the tax should be fair/ just/ people should be taxed according to their level of income

Page | 38
• Economical – it should be cheap/ easy to administer/ cost effective/ cost of collection should be
relatively lower than the tax revenue
• Convenient / method of payment should be convenient to the tax payer/collector- it should be
suited / favourable to the needs / activities/programs of the tax payer /collector
• Certainty – the taxpayer/ collector should know what /when/how to pay/collect
• Flexibility – where tax is used as an instrument of national policy it should be adaptable to all
economic circumstances subjected to revision
• Simplicity- it should be easily understood / administered
• Elasticity- proceeds from taxation should be capable of expanding / contracting with line
changes in the incomes population
• Diversity / wide based – there should be wide variety / range of taxes/ net many tax payers
• Difficult to evade- should not give loophole for people to escape/dodge payment
• Should regulate the economy- by encouraging production / proper allocation of resources
• Should have a maximum benefit to the tax payer – through provision of quality goods/ services
/encourage them to pay 5x2 = 10mks
6. a) Measures that would be taken to ensure smooth functioning of a warehouse
• Proper building design – should be designed in a way that it can accommodate intended goods
• Good recording system - should have good system for recording in order to monitor the
movement of goods in and out of a warehouse
• Compliance with the law- should be operated in accordance with the requirements of the law
• Good transport network - should be served with good roads for easy access of goods and staff
• Adequate space -should have ample space to store goods and easy movement of goods and staff
• Suitable location - should be located in places which allows easy access by clients
• Appropriate/ qualified staff - should have well trained and experienced personnel for efficient
operation of the warehouse
• Good communication network- for easy communication with suppliers and customers
• Appropriate handling equipment - should have equipment such as cranes to facilitate handling
of goods
b)
Kamau Traders
Three column cash book
For the month ended 30th March 2022
Dr cr
Date Details Discount Cash Bank Date Details Discount Cash Bank
allowed received
2022 2022
1/3 Bal b/d √ 7800√ 1/3 Bal b/d√ 24300√√
3/3 Sales√ 16500√ 4/3 Purchases√ 15000√
6/3 Sales√ 50000√ 13/3 Insurance√ 16000√
9/3 Amolo√ 18000√ 15/3 Kamotho√ 300√ 9700√
2/3 Bank ‘C’√ 30000√ 21/3 Cash ‘C’√ 30000√
24/3 Rotich√ 1250√ 23750√ 25/3 Wages√ 20000√
30/3 Cash’C’√ 48800√√ 30/3 Bank ‘C’√ 48800√√
30/3 Bal c/d√ 3000√ 28050√

30/3 1250 87800 107050 300 87800 107050

Bal b/d 3000 28050

Page | 39
 KIGUMO
BUSINESS STUDIES
PAPER 1
1. Identify the level of production for each of the following activities. (4mks)
Activity Level of production
(a) Fishing
(b) Constructing a road
(c) Insuring a car
(d) Dress making
2. Outline four reasons why road transport is still the most referred mode of transport from Nairobi
to Mombasa despite the introduction of Standard Gauge Railway. (4marks)
3. Determine the initial capital of ABC business whose details are as follows: (4marks)
Capital on 31 Dec 2001 was shs 120,000
Net loss during the year was shs 70,000
Drawings were shs 20,000 on a quarterly basis
Owner’s investment was shs 20,000
4. State any four functions of the central bank to the commercial banks. (4marks)
5. The following transactions took place in the business of Merete during the month of June 2019.
June03.2019- office furniture worth 80,000 was sold at 90,000 on credit to Kirere restaurant.
June 29.2019- Motor vehicle worth 1000,000 was bought from MAUA Motors paying 400,000
cash and the rest to be paid later.
Record the transactions in the relevant journal. (3marks)
6. Outline four reasons why an insurance company may re-insure. (4marks)
7. State four auxiliary services that may attract business enterprises in an area. (4marks)
8. The table below shows the general change of price for a certain commodity over a period of five
years.
Year Price (Ksh) CPI
(a) 2008 92.00 -
(b) 2009 100.80
(c) 2010 104.50
(d) 2011 105.30
(e) 2012 101.50
Required:
Using year 2008 as the base year, determine the consumer price index for year 2009, 2010, 2011
and 2012. (4marks)
9. State any four challenges of a population made up of a large proportion of young people.
(4marks)
10. Highlight four forms of written communication that the minister of education could use to pass
on information. (4marks)
11. Mr. Musembi had the following balances in his business on 1st Jan. 2021.
Motor van 65,000
Cash at bank 52,400
Machine 6,800
Creditors 15,900
Debtors 30,000
Loan 3,000
Stock 22,600
The following transactions took place in the month of Jan. 2008
Sold stock valued shs. 5000 for shs. 7,500 cash

Page | 40
 Exchange the motor van with a tractor valued at shs. 65,000
The debtor paid by cash shs. 10,000
Prepare: Mr. Musembi’s balance sheet as at 31st Jan. 2021. (5marks)
12. Identify any four characteristics of economic resources. (4marks)
13 State four features that make chain stores very unique. (4marks)
14. Sacco loans are more appealing to borrowers than those of commercial banks. Outline four reasons
why this is so. (4marks)
15. Wangami is a distributor of fresh milk at Mariira. Outline four challenges that he is likely to face
in his operations. (4marks)
16. Outline four reasons why billboards have become very common medium of advertising in major
urban centers. (4marks)
17. State five ways in which the government finances its expenditure. (4mks)
18. In the recent past there has been development of hypermarkets in Nairobi. Highlight four
disadvantages of such enterprises. (4marks)
19.. Indicate the source document for each of the following books of original entry. (4marks)
Books of Original Entry Source Document.
a) Sales return daybook ______________________________________
b) Cash book ______________________________________
c) Purchases journal ______________________________________
d) Purchase return journal ______________________________________
20. Outline four consequences of poor arrangement of goods in a warehouse. (4marks)
21. Highlight four causes of a shift of demand curve to the left. (4marks)
22. State four benefits of political stability to an economy. (4marks)
24. The information given below was extracted from the books of Amina traders on 31st December
2018
Purchases 260000
Opening stock 75000
Carriage on purchases 12500
Closing stock 27500
Mark-up 25%
Using the information above, prepare Amina traders trading account. (4marks)
25. Highlight four ways in which Kenya Association of Manufacturers (KAM) ensures that their
members do not exploit consumers. (4mks)

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 KIGUMO SUB-COUNTY
BUSINESS STUDIES
PAPER 2
1. (a) Explain five significance of business studies to a society. (10mks)
(b) Explain five measures being taken by commercial banks nowadays to attract and retain
customers. (10mks)
2. (a) With the aid of a table differentiate between a cooperative society and a partnership.
(10mks)
(b) Explain five factors that influence the level of national income in a country. (10mks)
3. (a) Explain any four principles of insurance. (8mks)
(b) As at 1 st June 2014, the cash book of Mandathi showed the following balances:
Cash 100,000
Bank 4,300 (CR)
During the month, the following transactions took place:
2004
June 3 Tumbo a debtor settled his account of sh.8000 by a cheque of sh.7,500
June 6 paid rent by cash sh. 4,000
June 10 deposited shs 3,000 into the business bank account from the cash till
June 15 settled jusper’s account of sh. 10,000 in cash and he was allowed a discount of 10%.
June 18 deposited shs. 14,000 in the bank from private resources.
June 21 cash sales sh. 6,000.
June 24 Adika, a debtor settled his account by a cheque of sh. 4,000 having been allowed a
discount of 20%.
June 26 purchased furniture sh. 2,600 paying by cheque.
June 28 received sh. 1,800 cash from Nduta.
June 30 banked the available cash except sh.800.
REQUIRED: Prepare a three-column cash book duly balanced. (12mks)
4. (a) Explain five negative effects of inflation. (10mks)
(b) Explain five positive effects of external environment on business operations. (10mks)
5. (a) The following information relates to Wambui Traders for the year ended 31.12.2006.
Turnover 270,000
Margin 40%
Rate of stock turnover 6 times
Expenses 40,000
Calculate:
i) Gross profit (3mks)
ii) Cost of sales (2mks)
iii) Net profit (1mk)
iv) Average stock (2mks)
v) Mark up (2mks)
(b) Explain any five features of a supermarket. (10mks)
6. (a) Explain five ways in which the use of containers enhances the security of goods. (10mks)
(b) Explain five characteristics that portray underdevelopment in most African countries.
(10mks)

Page | 42
 KIGUMO SUBCOUNTY
BUSINESS STUDIES
PAPER 1
MARKING SCHEME
1.
 Primary
 Secondary
 Tertiary.
 Secondary
2.
 Buses are readily available unlike SGR which has to be booked in advance.
 Road transport is relatively flexible in terms of terminals unlike SGR where terminals are far
away from the town.
 Easy/convenient to book a bus than a train of SGR.
 Bus terminals are located in the town centers unlike the SGR terminals – away from the
towns.
3. O. C=C.C+L+D-I
O.C= 120,000+70,000+(20,000*4)-20,000
=120,000+150,000-20,000 =250,000
4.
 Banker to commercial banks
 Provides foreign exchange to commercial banks
 Controls commercial banks
 Acts as central clearing house to facilitate clearing of cheques arising from inter-bank
transactions
 Advisor to commercial banks
5.
DETAILS F DR
June 03 Kirere restaurant A/c 90,000√
Office furniture A/c 80,000√
Gain on disposal 10,000√
(Being sale of office furniture at a
gain on credit)
June 29 Motor van A/c 1,000,000√
Cash A/c 400,000√
MAUA Motors A/c 600,000√
(Being purchase of Motor vehicle
partly in cash and partly on credit)
6.
 In case the value of the property is high
 In case of High risk of loss
 In case of high Number of risks insured
 In case of Need to spread the risk
 If it is the Government policy
7.
 Health services
 Banking services
 Insurance services
 Communication services

Page | 43
  Social services
8.
Year Price (Ksh) CPI
(a) 2008 92.00 -
(b) 2009 100.80 -109.56%
(c) 2010 104.50 -113.59%
(d) 2011 105.30 -114.46%
(e) 2012 101.50 -110.33%
9.
 High rate of unemployment/ demand for jobs
 Rate of crime/ social evils may rise as many are idle
 Constrain / pressure on goods and services
 High dependency ratio will rise
 Reduce investment / savings as a result of high rate of dependency.
 Low per capital income spread over a large non-producing population
 Problem of raising government finance
10.
 Circulars
 Letters
 Memos
 Reports
 SMSs
 Notices
 E-mails
 Minutes
11.
Mr. Musembi
Balance Sheet
As at 31st Jan 2021

F. A Shs Capital 157,900

Tractor 65,000 + Profit 2,500
Machine 6,800 160,400
C.A L.T.L
Bank 52,400 Loan 3 000
Debtors 20,000 C.L
STOCK 17,600 Creditors 15,900
179,300 179,300
12.
 Have money value
 They are scarce
 Unevenly distributed
 Can be combined in various proportions
 have utility
 Have alternative uses
 Can change ownership
 Can be complimentary
13.
 Purchases are centralized.
Page | 44
  Prices are standard for all the products in all the branches.
 Sales are decentralized.
 All branches deal in the same type of products.
 They are uniform in outward appearance and interior layout.
14.
 Saccos offer loans at low interest rates
 Saccos offer a variety of loans e.g. education, development
 Saccos require fewer loan application formalities
 Outstanding loans are lifted off by Saccos upon member’s death
 Once a member dies, there is double refund.
 Saccos do not require collateral/security against loans.
15.
 Perishability of milk
 Competition from other traders
 Need for a fleet of transport
 Spillage
 Low supply of milk during drought.
 Storage facilities are expensive to acquire.
16.
 They are positioned at strategic points where they can be read by many people.
 The advertising message is not heavily worded and this makes it possible for the message to
be understood and remembered easily.
 They can convey messages for a long time as they are relatively permanent.
 They are conspicuous and hence attractive to audience.
17.
 Fines imposed by courts on offenders.
 Rent and rates paid for the use of government property.
 License fee paid by those who want to operate business.
 Dividends/profits earned from government direct investments.
 Interests earned on loans advanced by the government to firms.
 Proceeds from the sale of government property eg privatization of parastatals.
 Taxes -Compulsory levies by government on individuals and business organizations.
 Government borrowing, Internally and Externally.
18.
 Might have Slow response to market changes
 Serves limited number of customers especially those with cars.
 Requires large amount of capital to set up.
 Threatens other retail businesses offering same products
 Requires large space not available in central business districts/located in the outskirts of town.
19.
 Credit note
 Receipts
 Outgoing invoice.
 Incoming credit note.
20.
 Time wastage when releasing goods
 Breakage of goods
 Accidents to personnel
 Chances of pilferage/theft of goods
 Difficult to monitor movement of goods
Page | 45
  Wastage of space
21.
 Decrease in the income of the consumer
 Reduction in the prices of substitute products
 Unfavorable government policy
 Decrease in the population
 Poor taste, fashion and preferences
 Future expectation of decrease in the price of the product
 Unfavourable natural factors
 Uneven distribution of income
 Bad terms of sales
 Increase in price of complementary products.
22.
 attracting foreign investment
 higher profits
 reduced brain-drain
 equitable/balanced development in the country
 increased local investment.
23.
Perfect competition Monopoly
1 Has large number of Sellers 1 Has one seller
2. Free exit and entry of firms into the market. 2. There is restriction difficult for firms to
enter into the market.
3. Prices determined by forces of demand and supply. 3. Prices set/fixed by the producer.
4. No preferential or discrimination treatment to 4. Price discrimination may be practised.
consumers by any firm or producer.
5. Each firm has too small or insignificant share of 5. A monopolist has full control and share of
the total market output. quantity of Product supplied in the market.
6. Produce/sell high quality products to attract 6. Product/sell low quality products due to
customers due to high competition. lack of competition.

24.
Mark up = gross profit
Cost of sales
COS = 75000+260000+12500-27500
= 320000
25 = x
100 320000
x = 800000
Net sales = 320000+80000
Amina traders
Trading account
For the period ended 31st dec 2018√
Opening stock 75000 Sales 400 000
Add purchases 260 000
Add carriage in 12 500
GAFS 347 500
Less closing stock 27 500
Cost of sales 320 000
Gross profit 80 000
400 000 400 000
Page | 46
25.
 They ensure that their members follow business ethics and do not take advantage of the
ignorance of the consumers to exploit them.
 They work together to deal with complaints from consumers and take strict measure against
members found to have violated consumer rights.
 They set higher standards of quality for products and services produced by their member.
 They investigate consumer complaints against their members and ensure the right action is
taken if the allegations are found to be true.
 They educate and inform consumers on the features, processing, effective usage and
identification of given products.

Page | 47
 KIGUMO SUB-COUNTY
BUSINESS STUDIES
PAPER 2
MARKING SCHEME
1. (a)
 The society starts appreciating the role of business in provision of goods and services
 Members of a given society are equipped with knowledge and skills necessary to run a
business comfortably
 Helps members of society to develop positive attitudes towards the environment.
 Assists members of a society to acquire self-discipline and positive attitudes towards
work.
 It enables the members of a society to understand the role of government in business
activities
 It equips the society members with abilities to promote co-operation in society through
trade.
(b)
 offering cheap loans/low interest loans/unsecured loans/overdrafts
 increasing banking hours
 computerization of services to serve faster e.g. ATM
 minimizing bureaucracy by introducing customer care services
 use of personal selling services to approach customers e.g. at places of work, streets
 reducing cost of banking e.g. low ledger fees, free cheque clearance, cheap cheques
 large withdrawals from savings account without notice
2. (a)
COOPERATIVE SOCIETY PARTNERSHIP
Formed by a minimum of 10 members Formed by a minimum of 2 partners
No maximum membership Has a maximum of 20/50 partners
Run by a committee elected by members Run by partners themselves
Formed through cooperative Act Formed through the partnership Act
Profit shared according to the shares held Profit shared equally or according to the
partnership deed.
Members have equal rights Partners have different rights depending on
their class/type
Members enjoy limited liabilities Partners have unlimited liabilities unless
there is a limited
Registered with the commissioner for Registered with the registrar of business
cooperatives names
(b)
 labour supply: if there is adequate labour more goods and services will be produced
leading to a higher national income
 capital: if capital is adequate, production is increased. This leads to a high output and
high national income.
 entrepreneurship: where there are many entrepreneurs, production is increased hence
high national income.
 land: if natural resources are adequate, more output is produced and the national income
increases.

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  Political stability: if there is peace, production runs smoothly. Output increases and thus
high national income
 level of technology: use of modern/appropriate technology increases production and
thus leads to a higher national income.
3. (a)
 Principle of subrogation: whatever remains of the property destroyed is the property of
insurance company
 Principle of indemnity: the aim of the insurance company is to take the insured back to
the original financial position he/she was before the risk occurred, one cannot make
profit out of an insurance contract
 Principle of contribution: where an insured has a policy for the same subject matter and
risk with more than one insurance company, when the risk occurs, the two or more
insurance companies will proportionately share the compensation
 Principle of proximate cause: one can only be compensated if the loss suffered was
caused by the risk insured against.
 Principle of insurable interest: one can only insure property that he/she has interest in,
one cannot insure other people’s property where he/she will not suffer
emotionally/financially
 Principle of utmost good faith: the insured person must disclose all material facts about
himself or the property insured, i.e must display honesty.
(b)
MANDATHI
THREE COLUMN CASH BOOK
FOR THE MONTH OF JUNE 2014
Date Details LF Disc All Cash Bank Date Details LF Disc Cash Bank
(shs.) (shs.) Rec. (shs.) (shs.)
2014 June Bal b/d 100,000√ 2014 June Bal b/d 4,300√
1 1
“3 Tumbo 500√ 7,500√ “6 Rent 4,000√
“ 10 Cash C 3,000√ “ 10 Bank C 3,000√
“ 18 Capital 14,000√ “ 15 Jusper 1,000√ 9,000√
“ 21 Sales 6,000√ “ 26 Furniture 2,600√
“ 24 Adika 1,000√ 4,000√ “ 30 Bank C 91,000√√
“ 28 Nduta 1,800√ “ 30 Bal c/d 800√ 112,600√
“ 30 Cash C 91,000√
1,500√ 107,800 119,500 1,000√ 107,800 119,500
1/07 Bal b/d 800√ 112,600√
4. (a)
 reduction in profits: price increase lowers demand for goods and services
 wastage of time window shopping for reasonable prices
 increases in wages and salaries due to pressure from trade unions
 decline in standard of living due to reduced savings
 loss to creditors since they lend when the value of money was high and are paid later when
the value has been eroded by inflation
 retardation in economic growth because investors are not willing to take risks
 adverse effects on the balance of payment/exports become expensive lowering their demand
while imports become cheap
 loss of confidence in the monetary system because of fluctuation of exchange rates.
(b)
 increase in population increases the number of customers/demands

Page | 49
  political stability gives business people conducive environment to trade, do more
production, customers are also available to buy due to peace
 low taxation/increased subsidies /favourable government policies enables entrepreneurs to
do business with ease, less costs/expenses
 favourable climate/weather increases the output especially for agricultural ventures
 Favourable/positive culture: where products sold by businesses are not against the culture,
no wastage
 availability of modern/appropriate technology that is also affordable: volume of production
increases and high-quality goods produced.
5. (a) (i) gross profit
40 Gp
=
100 270000
GROSS PROFIT = 108,000
ii) cost of sales
sales – cost of sales = G.p
(270,000 -c.0.s = 108,000) √
Cost of sales = 162,000√
iii) net profit
= gross profit – expenses
=108,000 – 40,000
= 68,000√
iv) average stock
R.O.S.T.O = C.O.S
AV. STOCK
6 = 162,000√
AV. STOCK
AVERAGE STOCK =27,000√
v) markup = 40 √
100
2 2 108000
= OR × 100 = 66.7%√
5−2 3 162000
(b)
 sells at relatively low prices since they buy directly from producers where they get good
quantity discount
 there is self-service, customers pick what they want for themselves
 all products have price tags, the price at which they are sold
 there are no credit facilities not unless one has a credit card
 goods are well displayed on shelves, easy for customers to pick what they want
 customers are provided with trolleys and baskets to put their shopping
 mostly found in urban areas
 they are large enterprises requiring huge capital to start
 Prices of commodities are fixed.
6. (a)
 they are too heavy to be carried away by thieves
 they are completely sealed while on transit hence goods can’t be stolen on the way
 they are not transparent hence do not reveal content.
 they can be packed at the premises of the exporter and not opened until they reach the
importer.
 they are not labeled to show content hence can’t attract theft
 the goods are compact inside the container hence do not break during movement.

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(b)
 high levels of poverty: majority are in abject poverty and cannot afford basic things
 disparity in income distribution: a wide gap exists between the lowly paid and the highly
paid
 low levels of savings and investment: little income earned is consumed mostly on basic
commodities leaving little or nothing to save and invest
 high population growth rate: ignorance of family planning and dangers of large families
leads to high population growth.
 dominance of subsistence sector: majority of goods produced are meant for consumption,
poor methods of farming, traditional technology is applied due to lack of capital
 problem of high level of unemployment: the rapid increase in population couple with
dominance of subsistence sector lowers employment opportunities
 underutilization of natural resources: this is because of lack of expertise and technology to
exploit available resources.

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 IGOJI SUB-COUNTY
BUSINESS STUDIES
PAPER 1
MARKING SCHEME
1. For each of the following cases, name the motive for holding money. (4marks)
CASE MOTIVE
a. To meet daily transport expense.
b. To meet any unforeseen circumstances.
c. to take advantage of anticipated future fall in price.
d. To pay for daily food requirements.
2. State four advantages of operating a public limited company. (4marks)
3. Identify four ways through which the utility of a commodity may be reduced. (4marks)
4. Highlight four barriers associated with the written communication. (4marks)
5. Inflation has been a major concern in Kenyan economy. Highlight how the persistent increase in
prices of commodities have affected the life of a consumer. (4marks)
6. Outline four qualities of a good sales person. (4marks)
7. List four benefits that a developing country derives from preparing a development plan for its
economy. (4marks)
8. Outline four circumstances under which a trader may decline to give credit facility to a customer.
9. State four ways in which nature of a product may influence the choice of transport means.
10. Give four circumstances under which a firm may be located near the source of raw materials.
11. Mutai, a young entrepreneur is considering starting a business in Chuka town. Outline four factors
that would show existence of a business opportunity within the town. (4marks)
12. Identify the market structure described by each of the conditions given below. (4marks)
Condition Market structure
a. The firm is the industry.
b. Buyers and sellers have complete knowledge about entire
market but cannot influence the market.
c. Few large firms that dominate the market.
d. Comprise of many sellers of differentiated products.
13. Identify the source document that can be used in recording each of the following transactions.
a. To correct undercharges in the invoice.
b. To pay casual workers in an organization.
c. To show that a cash transaction has taken place.
d. To show that credit transaction has taken place.
14. Outline four ways in which consumers are likely to suffer if there are no warehouses. (4marks)
15. The figure below shows a shift in the supply curve of a given commodity. (4marks)

Outline four factors that may have caused the shift in the supply curve from So to S1. (4marks)

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16. Give four differences between free and economic goods. (4marks).
17. Outline four reasons why the government may use regulatory measures to protect consumers
against exploitation. (4marks)
18. State four merits of replacing manual system with automated ones in carrying out office activities.
(4marks)
19. Classify the following risks as insurable or non-insurable by using a tick. (✓) (4marks)
Type of risk Insurable Non – insurable
a. Loss of premises burnt down by fire.
b. Loss of life due to motor accident.
c. Loss due to poor management style.
d. Damage of bus by the rioting students during strike.
20. Listed below is a set of transactions. In each case, state whether the transaction will increase,
decrease or have no effect. (4marks)
21. The following balances were extracted from the books of TIMS Traders on 31st March 2023.
Fixed assets 300,000
Current assets 123,700
Creditors 84,500
5-year loan 125,000
Calculate the net worth of the business as at 31st March 2023. (4marks)
22. Identify the type of ledger in which each of the following account would be found. (4marks)
23. State four channels that may be used in distributing imported goods. (4marks)
24. The participant in two sector economy are households and firms. Identify the relevant participant
in each of the statement given below. (4marks)
Statement Participant
a) Payment for goods and services
b) Sale of factors of production
c) Payments for factors of production
d) Sale of goods and services
25. A trader decided to take loan to expand a manufacturing business. Give four reasons why it is
beneficial to borrow from non-bank financial institutions. (4marks)

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 IGOJI SUB-COUNTY
BUSINESS STUDIES
PAPER 2
1. a) Explain five factors that hinder occupational mobility of labour as a factor of production.
b) Discuss five ways in that Meru County government can use to promote local traders.
2. a) Explain five reasons for the popularity of sea transport in the Kenya's export trade.
b) The following information was extracted from the books of Weru Traders as at 31st
December, 2020.
Details Kshs.
Gross profit 94,000
Commission received 32,000
Carriage outwards 8,000
General expenses 15,000
Discount received 29,000
Total fixed assets 1,110,000
Insurance 17,000
Capital 490,000
Drawings 37,000
Long term liabilities 610,000
Discount allowed 10,000
Commission allowed 4,000
Current liabilities 162,000
Current assets 192,000
Salaries 22,000
i) Prepare a profit and loss account. (6marks)
ii) Determine working capital. (1mark)
iii) Determine return on capital employed. (3marks)
3. a) The table below represents a farmer's supply of tomatoes to a local urban centre.
Year Quantity of tomatoes (tonnes)
2021 20,000
2022 15,000
2023 10,000
Assuming that the price remained constant, explain five possible reasons for the trend in the
supply of tomatoes. (10marks)
b) Despite their poor performance, the government is still interested in running some of the
public corporations in the country. Explain five reasons to justify their participation.
4. a) Explain five reasons why personal selling is increasingly being used as a method of sales
promotion. (10marks)
b) Discuss five reasons as to why developing countries are reluctant in implementing free
trade agreements. (10marks)
5. a) explain five reasons why an office filing system is important to an office. (10marks)
b) Explain five differences between direct and indirect tax. (10marks)
6. a) Discuss five benefits of intermediaries to consumers in the chain of distribution.
b) Post the following transactions to the relevant ledger account and balance them off.
2023 March 1: started a business with ksh.100, 000 at the bank.
2: bought a motor vehicle worth Kshs. 800,000 on credit General Motors.
4: withdrew ksh.20, 000 from bank for office use.
6: bought stock worth Kshs 30,000 paying by cheque.
10: made cash sale of Ksh.15, 000
11: took cash ksh.8, 000 to pay hospital bill.
Page | 54
 IGOJI SUB-COUNTY
BUSINESS STUDIES
PAPER 1
MARKING SCHEME
1. a) Transaction
b) Precautionary
c) Speculative
d) Transaction
2. Advantages of operating public limited company.
a) Shares are freely transferable.
b) Day to day management is entrusted to qualified managers.
c) The raising of capital is easier and less expensive and has many sources.
d) The death of any of its shareholders does not affect the running of the company.
e) There is limited liability.
3. Ways that may reduce utility of a product.
a) Failing to provide the commodity at the right time/ delaying delivery.
b) Selling commodity to the wrong person.
c) Transporting commodities to a wrong place.
d) Processing commodity into a poor form.
4. Barriers associated with written communication.
a) Use of unfamiliar language
b) Unfamiliar subject.
c) Blindness/ visual impairment.
d) Illegibility of the message.
e) Difficult level of message.
f) Illiteracy.
5. How persistent increase in prices of commodities affect the life of a consumer.
a) Loss of confidence in money as a medium of exchange.
b) Decline in savings.
c) Consumers are not able to afford basic necessities.
d) Low standards of living.
e) Credit consumers pay less.
f) Motivates people to work harder.
6. Qualities of a good sales person.
a) Has adequate product knowledge.
b) Is a good communicator.
c) Is sensitive to customer needs.
d) High sense of integrity.
e) Is presentable/well groomed.
f) Is persuasive/ convincing.
g) Has high level of commitment/ relates well with customers.
h) Good listener.
i) Good command of the language.
j) Polite/ courteous/ relates well with customers.
k) Persistent/ patient.
7. Benefits of a development plan to a country.
a) It provides a measure of performance of the economy.

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 b) It is used to solicit for funding.
c) It is used in allocation of resources in terms of priority areas/ redistribution of incomes.
d) It allows for the coordination of the effects and activities of all the plan implementers.
e) Provides the direction in which the economy is to move.
f) Provides incentives to various entrepreneurs to invest.
g) Helps in stabilization of the economy from cyclical fluctuations which bring unemployment.
h) The country can control budget deficits.
i) Redresses imbalances in the economy.
8. Circumstances under which a trader may decline to give credit facility to a customer.
a) Where the level of stock is low.
b) In case of unreliable customer/ uncredited worthy.
c) Where it is the policy of the business not to give credit.
d) Where the customer provides for longer credit period.
e) When the customer is new to the business.
9. Ways in which nature of product may influence choice of transport.
a) Perishability of goods: perishable goods require fast means of transport such as air.
b) Fragile goods: require smooth means of transport like water and air.
c) Highly valuable goods: require secure mean of transport to protect them from theft.
d) Inflammable goods: require means with special containers.
e) Heavy goods: require means that can accommodate the weight.
f) Bulky goods: require means that is spacious enough.
10. Circumstances under which a firm may be located near the source of raw materials.
a) Where it is cheaper to transport the finished goods than raw materials.
b) When dealing with highly perishable materials to avoid spoilage.
c) If government policy requires the firm to be located near the source of raw materials.
d) When the firm wants to ease handling of bulky raw materials.
e) Where the firm want to control an important raw material.
f) Where raw materials are fragile / brittle.
g) Where raw material is dangerous to carry over long distance.
h) Where the firm wants to ease handling of raw materials.
11. Factors that would show existence of business opportunity within the town.
a) Unavailability of the product in town.
b) Poor quality of the product in the market.
c) Insufficient quantities in the market.
d) Unaffordable price of goods he wants to offer in the town.
e) Poor services offered in the town.
12.a) Monopoly.
b) Perfect competition.
c) Oligopoly.
d) Monopolistic competition.
13.a) Debit note.
b) Petty payment voucher.
c) Cash receipt.
d) Invoice.
14.Ways in which consumers are likely to suffer if there were no warehouse.
a) They may lack produce when they require them.
b) They will have limited variety of goods to choose from.
c) There would be unstable prices of goods.
Page | 56
 d) They may not get goods continuously throughout the year.
e) Inadequate preparation of goods leading to poor quality.
f) They may not get goods in convenient quantities as bulk will not have been broken.
g) May lack seasonally produced goods.
h) Security of goods of consumers may not be guaranteed.
i) Consumers may get goods that are damaged due to bad weather.
15.Factors that may shift supply curve from So to S1.
a) A fall in the cost of production.
b) A fall in the prices of competitively produced goods.
c) Technological progress.
d) Conducive natural factors.
e) Favourable government policies.
f) Future expectations of a fall in the price of the commodity.
g) Entry of new firm into the industry.
h) Increased availability of factors of production.
i) Less workers strike.
j) Increase in the prices of jointly produced goods.
16.Differentiate between free and economic goods.
Free goods Economic goods
a) Are abundant in supply. a) Are scarce in supply.
b) Have no money value. b) Have monetary value.
c) They are gifts of nature. c) They require man’s effort.
d) They are for everybody. d) They are for specific individual/ organization.
17.Reasons why government may use regulatory measures to protect consumers against
exploitation.
a) Where standards for operating business is low.
b) To protect consumers from generalized exploitation on weights and measures.
c) Where there is need for government to enforce trading laws.
d) To protect consumers from hoarding of goods.
e) To protect consumers from unsafe buildings.
f) To protect consumers from substandard goods.
g) To protect consumers from unfair pricing.
h) To protect consumers from false advertising.
i) To protect consumers from breach of contract.
18.Merits of replacing manual system with automated ones in carrying out office activities.
a) Will save on labour.
b) There is greater accuracy in production.
c) Time saving since production will be faster.
d) There is uniformity of the output.
e) Help in controlling fraud.
f) Output produced is presentable.
19.a) Insurable.
b) Insurable.
c) Non-insurable.
d) Non-insurable.
20.a) increase
b) No effect.

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 c) Decrease.
d) Decrease.
21.Net worth = total assets – total liabilities
= (300,000 + 123,700) – (125,000 + 84,500)
= 423,700 – 209,500
= Kshs 214,200
22.a) Debtors ledger/ sales ledger.
b) Nominal ledger / general ledger.
c) Creditors ledger/ purchase ledger/ bought ledger.
d) Cash book.
23.
a) Foreign producer → agent →local wholesaler →retailer →consumer
b) Foreign producer →local wholesaler →retailer →consumer
c) Foreign producer →local consumer
d) Foreign producer → local retailer →consumer
e) Foreign producer → local wholesaler →consumer
f) Foreign producer →local agent →wholesaler →retailer →consumer
24.a) Households.
b) Households
c) Firms.
d) Firms.
25.Benefits of borrowing loans from non-bank financial institutions.
a) They give long term loans.
b) Provide finance for capital development.
c) Offer favourable lending terms.
d) Assist in management of profits.
e) Accept lower collateral values.
f) Give a longer grace period.

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 IGOJI SUB-COUNTY
BUSINESS STUDIES
PAPER 2
MARKING SCHEME
1. a) Factors that may hinder occupational mobility of labour as a factor of production.
o Age-age limit makes it difficult from changing from one job to another.
o Time required in retraining- where the length of time required for retraining is long people
may not be willing to change their jobs.
o Cost of retraining – if the cost is high, occupational mobility may be difficult.
o Government policy – government may not allow the change to take place hence having to
comply.
o Better terms of service – in the current job as opposed to the new job.
• Talent – where the new job requires special talent, it may be difficult for occupational
mobility to take place.
o Fear of the unknown – making a person to prefer the current job that he/she understands
better job security/ where the current job is more secure than the new job.
o Strict regulations – barring new entrants into the profession.
o Lower salary / pay – hence making it unattractive to change.
b) Ways in which government can use to promote local trade in the country.
o Through subsidizing local firms so as to lower production cost.
o By offering incentive to attract business people to invest e.g. tax holiday.
o By ensuring security to ensure peaceful working environment.
o Ensuring political stability – to encourage investment by the local and the foreigners.
o Simplifying the procedure of starting a business.
o By offering training on appropriate ways of carrying out business.
o By offering cheap loans to those who want to engage in business.
o Providing assistance in marketing of local products.
o Improving infrastructure to facilitate movement of goods to the market and raw materials to
the firms.
2. a) reasons for the popularity of sea transport in export trade.
o It is suitable for carrying heavy machinery.
o It has the capacity to carry large volume of goods.
o It is relatively cheaper than other means of transport.
o It connects easily to most countries for distribution.
o Container terminal makes it cheaper and easier for exporters and importers to dispatch and
receive goods.
b) i)
Weru Traders
Profit and loss account
For the period ended 31st Dec 2020
Dr Cr
Sh Sh
Carriage outwards 8000 Gross profit 94000
Commission allowed 4000 Commission received 32000
Discount allowed 12000 Discount received 29000
Insurance 17000
General expenses 15000
155000 155000
Page | 59
 ii) Working capital = general assets – current liabilities
= 192000 – 162000
= Kshs. 30,000
iii) Return on capital employed = Net profit ×100
Capital employed
Capital employed = total assets – current liabilities
= 1,302,000 – 162,000
= Kshs. 1,140,000
Or
= W.C + F.A
= 30,000 + 1,110,000
= Kshs. 1,140,000
Or
= CO + LTL
=530,000 + 610,000
= Kshs. 1,140,000
R.O.C.E = 77000 × 100
1,140,000
= 6.754٪
3. a) possible reasons for the trend in the supply of tomatoes.
o Unfavourable weather leading to a reduction in the production of tomatoes.
o Increase in the cost of production of tomatoes.
o Application of poor technology in tomatoes production.
o Increased competition from other substitutes of tomatoes.
o A shift in the farmer’s priority from tomatoes production to other products.
o Unfavourable government policies like increase in taxation and decrease in subsidies.
b) Reasons for continued running of public corporations.
o To prevent foreign dominance in the country – by investing in areas where the locals are
not
• able to invest.
o To create employment in the country – in a move targeted to improve the level of
employment
• in the country.
o To engage in businesses that are too sensitive – to be left in the hands of private investors
e.g. security.
o To provide essential goods and services: in order to protect consumers from exploitation by
private investors.
o To venture in businesses that private investors are unwilling to venture due to low profits or
high risks involved.
o To venture in businesses that private investors are unable to venture in – due to large initial
capital required.
o To attract foreign investment: - by initiating major business projects.
• viii) To stimulate economic development in the country: - by initiating development
projects like road construction.
4. a) reasons why personal selling is increasingly being used.
o Seller has a chance to explain details of the product.
o Creates a good relationship between customer and seller.

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o Seller can collect information regarding demand of the product.
o Seller can persuade customer to buy the product.
o Seller can make prompt decisions.
o Seller provides more knowledge about the products.
o Ability to tailor the product according to customers’ needs.
o Seller may get orders directly from the customers.
o There is immediate feedback/ observation of customers’ reactions.
b) Reasons why developing countries are reluctant in implementing free trade
agreements.
o To avoid unfair competition from developed countries with superior products as it may/
could
• lead to loss of market.
o Prevent dumping of inferior goods by developed countries which may have adverse effect
on the economy.
o To safeguard local employment which it may suffer due to free entry of imports.
o To avoid political blackmail/sacrifice of sovereignty of a country which may arise due to
dependence on other country’s goods/services.
o To reduce balance of payment deficits as a result of payment of imports more than receipts
from exports.
o To safeguard local industries that may not withstand competition from well-established
foreign industries.
o To safeguard against reduced government revenue otherwise earned through taxation of
imports and exports.
o To avoid erosion of cultural values arising from unrestricted interaction in free trade.
o To avoid over-exploitation of resources that may be depleted.
o To avoid imported inflation which may be caused by inflow of highly priced imports.
o To prevent entry of harmful goods/services which may have adverse effect on the health of
the people.
5. a) reasons why effective filing is important in an office.
o The office is kept tidy – as documents are neatly arranged.
o Retrieval of information is made easy – since documents are coded.
o Safety of information from damage: e.g. by bad weather or fire or pests.
o Saves on storage space – as documents are kept compactly e.g. in flash disks or CD’s.
o Saves time in making decisions – as information is readily available.
o Encourages transparency and accountability – as movement of document can be monitored.
o Provide security to information – against loss due to theft or misplacement.
o Safeguard confidential information – as documents are kept away from unauthorized access.
o Keep information/documents safe – for future reference.
b)
DIRECT TAX INDIRECT TAX
i) Imposed on personal and corporate i) Imposed on price of products.
income. ii) Does not discourage hard work.
ii) Discourages hard work. iii) Can be avoided by those who do not
iii) Cannot be avoided. purchase the commodity.
iv) It is economical to administer and collect. iv) It is expensive to administer and collect.
v) It is progressive in nature i.e. varied v) It is regressive in nature i.e. it is uniform
according to income earned. for both rich and poor.

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 vi) It is narrow based thus lack diversity. vi) It is broad based and include variety of
vii) Convenient to taxpayer as they are aware types.
of amount to pay. vii) Inconvenient to taxpayer as the price of
goods and services may change.
6. a) Benefits of intermediaries in the chain of distribution.
o Breaking of bulk into smaller quantities: that can be conveniently purchased by consumers.
o Avail goods closer to the consumers: which saves the consumer the cost of travelling.
o Selling goods on credit: enabling consumers to afford more expensive goods.
o Offers transport: which relieves the consumer the burden of transporting the goods.
o Advertises goods: that do create awareness on their availability.
o Provide storage/warehousing/enabling consumers to get goods at the time they need them.
o Prepare goods for sale: to the benefit of consumers through: branding, sorting, grading and
packaging.
o Accumulate bulk: to ensure a steady supply of goods that are required in bulk quantities by
the consumers.
b)
Dr. Capital a/c Cr.
Date Details Folio Amount Sh Date Details Folio Amount Sh
2023 Bal c/d 2023
March 10 100,000 March Bank 100,000
10 Bal b/d 100,000
Dr. Bank a/c Cr.
Date Details Folio Amount Sh Date Details Folio Amount Sh
2023 2023
March 1 Capital 100,000 March 4 Cash 20,000
6 Purchases 30,000
10 Bal c/d 50,000
11 Bal b/d 100,000 100,000
50,000
Dr. Motor vehicle a/c Cr.
Date Details Folio Amount Sh Date Details Folio Amount Sh
2023 General motors 800,000 2023 Bal c/d 800,000
March 2 March
11 Bal b/d 800,000
Dr. Cash a/c Cr.
Date Details Folio Amount Sh Date Details Folio Amount Sh
2023 2023
March 4 Bank 20,000 March 11 Drawings 8,000
10 Sales 15,000 11 Bal c/d 27,000
35,000 35,000
11 Bal b/d 27,000
Dr. General motors a/c Cr.
Date Details Folio Amount Sh Date Details Folio Amount Sh
2023 800,000 2023 Motor vehicle
March 10 Bal c/d March 2 Bal b/d 800,000
11 800,000

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Dr. Purchases a/c Cr.
Date Details Folio Amount Sh Date Details Folio Amount Sh
2023 2023
March 6 Bank 30,000 March 11 Bal c/d 30,000
11 Bal b/d 30,000
Dr. Sales a/c Cr.
Date Details Folio Amount Sh Date Details Folio Amount Sh
2023 2023
March 10 Bal c/d 15,000 March 10 Cash 15,000
11 Bal b/d 15,000
Dr. Drawings a/c Cr.
Date Details Folio Amount Sh Date Details Folio Amount Sh
2023 2023
March 10 Cash 8,000 March 10 Bal c/d 8,000
11 Bal b/d 8,000

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 KASSU JOINT
BUSINESS STUDIES
PAPER 1
1. Classify the following resources as renewable or non-renewable resources. (4marks)
a) Hydro-electric power
b) Building stones
c) Gasohol
d) Soda ash
2. Highlight four ways in which the economic environment may positively influence the
operations of a business (4marks)
3. The following items relates to Subukia Traders as at 30th March 2023.
Ksh.
Buildings 250,000
Creditors 30,000
Five-year loan 180,000
Stock 100,000
Cash in hand 60,000
Cash at bank 45,000
Debtors 15,000
Bank overdraft 24,000
Determine Subukia Traders capital as at 30th March, 2023. (4marks)
4. Outline four circumstances under which air transport may be used by a trader.
5. Identify the book of original entry related to the following source documents. (4marks)
Source Document Book of original entry
(a) Invoice issued
(b) Credit note received
(c) Receipt issued
(d) Invoice received

6. Outline four roles played by intermediaries in the chain of distribution. (4marks)

7. The Kenyan government has increased taxes on various products. Outline four reasons for this
trend. (4marks)
8. Outline four features of property insurance. (4marks)
9. State four functions of the entrepreneur in production of goods and services.
10. Give a brief description of the following trends in forms of business units. (4marks)
a) Franchising
b) Amalgamation
c) Check-off system
d) Privatization
11. Highlight four circumstances under which a Chief Executive Officer may decide to use to
letters in communicating to his staff. (4marks)
12. Outline four effects of an increase in demand for a commodity when supply remains constant.
(4marks)
13. Highlight four limitations of using per capita income to compare standards of living between
Kenya and China. (4marks)

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14. State the effect of the following transactions on the balance sheet totals. (4marks)
Business transaction Effect on balance sheet total
a) The sole proprietor brought additional capital to
the business.
b) Sold goods by cash.
c) Paid outstanding loan by cheque
d) Disposed an outdated computer at a loss
15. The following balances relates to the retail business of Naisula for the month of April 2021
Sales 120,000
Expenses 20% of sales
Cost of goods sold 80,000
Calculate:
i) Mark up. (1mark)
ii) Margin. (1mark)
iii) Total expenses. (1mark)
iv) Net profit. (1mark)
16. The inflation levels vary from one country to another. State any four levels that can be
experienced in different economies of the world. (4marks)
17. List four forms of open trade credit. (4marks)
18. State four reasons why many organizations prefer an open office plan for employees
19. Highlight four duties performed by commercial attaches in trade promotion
20. State four benefits of bonded warehouses to the government (4marks)
21. Outline four measures that the government of Kenya can implement so as to encourage the
establishment of firms in different counties across the country. (4marks)
22. Study the following diagram.

Output/
Capita

A B

Optimum Population
Mention four challenges facing a country whose population is in the part marked B
23. Give the name of the type of ledger where the accounts given below are kept (4marks)
Account Type of Ledger
Purchases
Gilanis (Supplier)
Salaries & Wages
Drawings
24. State four factors that influences the amount of money one can hold for transaction motive

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25. Describe the following documents as used in International trade (4marks)
a) Import license
b) Certificate of origin
c) Bill of lading
d) Letter of credit

Page | 66
 KASSU JET
BUSINESS STUDIES
PAPER 2
1. (a) Explain five importance of a business plan to an entrepreneur. (10marks)
(b) Explain five factors that may hinder development of a country. (10marks)
2. (a) Explain five functions of commercial banks in an economy. (10marks)
(b) Outline the differences between co-operatives and partnership. (10marks)
3. (a) Explain five reasons for government involvement in business. (10marks)
(b) On 1st September 2020, Kiptala Traders had cash in hand of Shs. 100,000
and a bank overdraft of Shs. 15,000. The following transactions took place
during the month.
Sept. 2: Bought goods in cash Shs. 15,000.
Sept. 5: Received the following cheques from debtors after allowing a 2%
discount in each case: Larry Kshs.9800 and Morin Shs. 14,700.
Sept. 7: Paid the following accounts by cash in each case deducting a 5% cash
discount: Silas Shs. 30,000 and Bray Kshs. 12,000.
Sept. 9: Sold goods on credit to Kimutai Sh. 12,000
Sept. 12: Kipsang settled his account of Kshs. 20,000 in cash after
deducting 2% cash discount.
Sept. 13: The cheque received from Larry was dishonoured
Sept. 14: Made net sales Shs. 25,000 where cash Sh. 15,000 was received
And the balance to be paid later
Sept. 15: Received a cheque from Abdul Shs. 29,100 after allowing him a 3% cash
discount.
Sept.16: Deposited all cash into the bank account except Shs. 16,700.
Required:
Prepare a three column cashbook and balance it off. (10marks)
4 (a) Explain five types large scale retailer. (10marks)
(b) Kenya’s trade with Singapore indicates a Balance of payment deficit against Kenya.
Explain five measures that Kenya can take to correct such balance of payment
disequilibrium (10marks)
5. (a) Rashid Holdings, a Steel selling business intends to promote her products around the
country. Explain four factors that it must consider when choosing an appropriate
method of product promotion. (8marks)
(b) The following trial balance relates to progressive traders as at 31st Dec 2022
PROGRESSIVE TRADERS
TRIAL BALANCE
AS AT 31ST DEC 2022
Particulars Dr Cr
Purchases/sales 349,000 582,000
Debtors/Creditors 51,000 62,000
Motor vehicle 600,000
Drawings 30,000
Returns 22,000 19,000
Carriage in 10,000
NCBA loan 170,000
Furniture and fittings 45,000
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 Discounts 25,000 36,000
Stock (1/1/2022) 40,000
Carriage outwards 7,000
Rent 24,000
Advertising 13,000
Land and Buildings 500,000
Access Bank loan 210,000
Interest on loans 48,000
Cash at bank 150,000
Cash in hand 28,000
Capital 815,000

Totals 1,918,000 1,918,000

Additional information.
Stock as at 31st December 2022 was valued at Kshs. 30,000
Required.
i) Prepare a trading, profit and loss account for the year ended 31st December 2022.
ii) Develop a balance sheet for Progressive traders as at 31st December 2022. (5marks)
6. (a) Explain five factors influencing the type of goods and services to be produced.
(b) Outline five features of monopolistic competition market structure. (10marks)

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 KASSU JOINT EXAMANITION
BUSINESS STUDIES
PAPER 1
MARKING SCHEME
1.
(i) Hydro-electric power - Renewable
(ii) Building stones - Non-renewable
(iii) Gasohol - Renewable
(iv) Soda ash - Renewable
2.
(a) Lower tax levels enable a business to earn more
(b) Low levels of inflation keep the cost of doing business lo as well
(c) Low lending rates enables a business to incur low cost of borrowing
(d) Favourable foreign exchange rates keeps the cost of importation low/favourable
(e) High employment rates enables expansion of market for products
(f) Increasing salaries and wages/income increases consumers purchasing power
3.
A=C+L
C=A–L
Total assets = sh (250,000 + 100,000 + 60,000 + 45,000 + 15,000) = Sh.470,000
Total liabilities = sh. (30,000 + 180,000 + 24,000)
= Sh.234,000
= 470,000 – 234,000 = Shs. 236,000
4.
(a) When goods are perishable
(b) When goods are of high value.
(c) When goods are urgently required
(d) When other means are not available
(e) When the distance to be covered is long.
(f) When the security of goods is of valuable consideration
(g) When the destination is remote.
(h) Where it is the policy of the business
(i) When safety of goods/services is required.
5.
Source Document Book of original entry
(a) Invoice issued Sales journal
(b) Credit note received Purchases returns journal
(c) Receipt issued Cash receipts journal
(d) Invoice received Purchases journal
6.
(a) Reduce transactions between producers and consumers
(b) Breaking bulk
(c) Accumulating bulk
(d) Risk taking
(e) Provide finance

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 (f) Passing of information
(g) Product promotion
(h) Transport and storage
(i) Providing a variety
(j) Availing goods to consumers
7.
(a) Raising revenue which is used by the government in providing goods and services.
(b) Discouraging importation of certain products
(c) Discouraging consumption of certain product.
(d) Reducing inequality in income distribution
(e) Controlling inflation
(f) Influencing location of businesses
(g) Correcting Unfavourable balance of payments
8.
(a) It is a contract of indemnity
(b) It is a short term contract
(c) Policy cannot be assigned
(d) It has no surrender value
(e) There must be insurable interest in the policy
(f) There is a minimum limit to the amount of compensation.
(g) The policy cannot be used as security to get loan credit.
(h) Uncertainty of the risk
9.
(a) He starts the business
(b) He makes all decisions
(c) He acquires and pays for all the factors of production
(d) Bears all the risks and enjoys all the profit.
(e) He controls the business
(f) Incurs the cost of production i.e. he pays for expenses such as water , electricity,
stationery and postage
(g) He owns the whole project.
10.
i. Franchising. This is where one business grants another the rights to manufacture,
distribute or provide its branded products using the name of the business that granted the
right.
ii. Amalgamation. This where two or more businesses combine to form a new business.
iii. Check-off systems. This where money is deducted by the employer and directly
submitted to the SACCO on behalf of the employee who is a member of the SACCO.
iv. Privatization. It is the changing of state owned corporations into public limited
companies
11.
(a) If there is need for a record for future reference
(b) In case the organization want to reduce on the cost
(c) Where confidential information is to be conveyed.
(d) In case there is need for inclusion of more details
(e) If the C.E.O wants to ensure that the information is not distorted
(f) Where evidence is required.
(g) Where the information is being addressed to many people.
Page | 70
12.
(a) The equilibrium point shifts to top right
(b) There will be an increase in equilibrium price
(c) Equilibrium quantity increases.
(d) There will be a shortage in the market.
13.
(a) There is difference in tastes and preferences among citizens from kenya and china.
(b) Income distribution might be different in the two countries.
(c) Difference in currencies limits the accuracy of information.
(d) Differences in natural resources endowment between Kenya and China.
(e) Difference in working condition in Kenya and China
(f) Difference in inflation rates.
(g) Difference in the country’s expenditure plans and economic priorities
14.
Business transaction Effect on balance sheet totals
a) The sole proprietor brought additional capital to the Increase
business.
b) Sold goods by cash. No effect
c) Paid outstanding loan by cheque Decrease
d) Disposed an outdated computer at a loss Decrease
15. (i) Mark up.
Gross profit = Sales – Cost of Sales ----- 120,000 – 80,000 = 40,000
Mark-up = G.p/CoS x 100 ----- 40,000/80,000 x 100 = 50 %
(ii) Margin.
Margin = G.p/S x 100 -------- 40,000/120,000 x 100 = 33.3%
(iii) Total expenses.
= 20/100 x Sales ----- 20/100 x 120,000 = 24,000
(iv) Net profit.
Net profit = Gross profit – total expenses
40,000 – 24,000 = 16,000
16.
(a) Creeping/mild/moderate
(b) Galloping/Rapid
(c) Hyper inflation
(d) Stagflation.
17.
(a) Simple credit
(b) Monthly credit
(c) Budget accounts
(d) Trade credit
(e) Credit card facilities
18.
(a) Easy supervision of workers.
(b) Construction cost is low because partitions are few.
(c) Easy location of workers.
(d) Staff movement is minimized thus saving time used in passing information.
(e) Promotes teamwork among employees.

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 (f) Maintenance cost is low.
(g) Floor space is saved.
(h) Discourage absenteeism by employees.
19.
(a) They look for new market for our exports.
(b) They study and analyze foreign markets where our exports are sold.
(c) They inform exporters the standard rules and regulations of exports required abroad.
(d) They organize trade fairs and exhibitions for our exports abroad.
(e) They organize educational tours for exporters and sale missions.
(f) They carry out market research on new markets and products for export.
20.
(a) The government gets revenue by levying duty on the goods
(b) The government is able to control the entry of harmful goods
(c) The government is able to verify the documents for goods in transit
(d) The government is able to check on the quantity, quality and the nature/type of goods
imported.
(e) The government is able to check on illegal goods entering the country.
21.
(a) By giving entrepreneurs free of cheap land to construct their factories.
(b) By giving tax incentives to those who locate their industries in the delocalized area.
(c) By giving cheap loans to entrepreneurs wishing to establish industries in areas with few
industries.
(d) By providing security in the new industrial areas.
(e) By providing subsidies to those industrialists who are willing to delocalize.
(f) By providing the appropriate infrastructure in the area.
(g) By providing social amenities e.g. schools and hospitals in areas where the delocalized
industries are to be established.
(h) By offering financial assistance to the delocalized industries.
22.
(a) Strain on the available social amenities
(b) Low standard of living
(c) Encourages rural to urban migration
(d) High dependency level
(e) Imbalance in demand and supply
(f) Food shortage
(g) Increased crime rate
(h) Environmental degradation
23.
Account Type of Ledger
Purchases General ledger
Gilanis (Supplier) Purchase ledger
Salaries & Wages Nominal ledger
Drawings Private ledger
24.
(a) Size/level of individual’s income: The higher the income of and individual, the more the
number of transactions thus high demand for transactions.

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 (b) Interval between pay days/ receipt of money: if the interval is long, then high amount
of money will be held for transaction reasons.
(c) Price of commodities: if the prices are high, the value of transactions will also increase
thus more money balances required.
(d) Individuals spending habits-people who spend a lot of money on luxuries will hold more
money than those who only spend money on basics.
(e) Availability of credit-people who have easy access to credit facilities hold little amount
of money for daily transactions than those who do not have easy access to credit.
25.
e) Import license – A document issued by the country to allow the importer to buy goods
from abroad.
f) Certificate of origin - Is a document that shows the country from which the goods
being imported have originated from. Useful if the imports may require some
preferential treatment.
g) Bill of lading - A document of title to goods being exported issued by the shipping
company to the importer who should use it to have goods released at the port of entry
h) Letter of credit - A document issued by the importers bank to the exporter’s bank to
assure the exporter of the payment for the goods ordered. The exporter can then be paid
by his bank on the basis of this letter.

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 KASSU JET
BUSINESS STUDIES
PAPER 2
MARKING SCHEME
1. (a)
- Source of finance – It can be used to convince financial institutions to finance the business
operations.
- A tool for management/control/coordination – It can be used for structuring/
implementation of the firms’ activities.
- Helps in allocation of resources – Ensures that resources are used in the best way
possible.
- A motivation tool in accomplishing the objectives of the firm.
- Evaluation tool – It can be used to determine whether the firm is achieving its objectives.
- Blueprint/guide – For implementing business thus assisting management in decision.
- Forecasting tool – By analyzing the strength opportunities threats and opportunities to
minimize the impacts of such disruptions.
- Proof of commitment – Who will put his/her efforts to the success of the business.
- Helps in adaptability – Creates a room to cope with changing economic circumstances.
(b)
 Low natural resource endowment
Lack of adequate natural resources such as land, favorable climate, raw materials etc. may be
a barrier to development.
 Poor technology
Poor technology leads to lower productivity resulting in under-development
 Inadequate capital
Capital refers to finances and tools used in production. When capital is inadequate, resources
will be under-exploited leading to lower productivity resulting in under-development
 Poor human resource endowment
Human resource refers to the country’s workforce. When this workforce is lacking
specialized skills, productivity will be extremely low which results in under-development.
 Unfavourable Political factors: Refers to factors which are brought about by a country’s
political institutions. Where the government is corrupt, corrupt or authoritarian, investors
may be scared.
2. (a)
- Accepting deposits from customers for safekeeping through savings, current and fixed
deposit accounts.
- Lending money to their customers – to meet their financial needs which is paid with
interest.
- Safekeeping of valuable items – e.g. title deeds which the customer may fear keeping
them in their premises due to insecurity reasons.
- Provision of foreign exchange – to their traders who would like to convert their local
currencies to foreign currencies.
- Offering advice on investment and financial matters.
- Offering trusted services – They undertake to manage the estate of their clients on their
behalf.
- Acting as a guarantor – to their customers who would like to get loans from other
financial

Page | 74
 institutions.
- Offering money transfer facilities – Through standing orders/credit transfer/EFT/ cheque.
- Acting as intermediaries between savers and borrowers.
(b)
CO-OPERATIVES PARTNERSHIP
 Members have limited liabilities  Some partners have unlimited liabilities
except for limited partners
 It is formed by a minimum of 10 members  Partnerships are formed by a minimum
of 2 partners.
 They are managed by a management  It is managed by active partners.
committee.
 The main objective is to improve the  The main objective is to make profit.
welfare of its members
 Membership is open and voluntary  There are restriction in joining a
Partnership
 Can be formed under co-operative act  Its formed based on the provision of the
partnership act
 It is governed by by-laws.  Governed by partnership deed.
 The main source of capital is members  The main source of capital is Partners
contribution contribution.
3. (a)
- To provide large capital investments that private sectors may not be able to raise.
- To protect consumers from exploitation – By traders through overcharging.
- To provide essential goods and services at fair prices.
- To generate government revenue – through licensing
- To create employment to improve people’s living standards.
- To safeguard security of the country by undertaking businesses that are risky and sensitive
to the state security.
- To reduce foreign dominance in the economy by encouraging local participation.
(b)
Kiptala Traders
Dr Three column cash book
Cr
Date Details L.F D.Al Cash Bank Date Details L.F D.R Cash Bank
2020 2020
Sep1 Balance b/f 100000 Sep1 Balance b/f 15000
,, 5 Larry 200 9800 ,, 2 Purchases 15000
5 Moryn 300 14700 7 Silas 1500 13500
12 Kipsang 400 19600 7 Brayo 600 11400
14 Sales 15000 13 Larry 9800
15 Abdul 900 29,100 16 Bank c 78000
16 Cash C 78000 16 Balance c/f 16700 106800
134,600 131600 134600 131600
Oct 17 Balance b/f 16700 106800

4 (a)
- Supermarket
This is a large-scale self-selection/self-service store that deals mainly with a wide variety
of household goods such as utensils, foodstuffs and clothes.
- Hypermarket

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 This is a large shopping complex/center comprising a variety of businesses owned and
managed by different people all housed in one building
- Departmental store
This is a group of single shops operating under one roof with a centralized management.
Each shop/department specializes in a particular line of products and is headed by its own
department manager.
- Chain store
This is a large scale business with separate branches selling similar products and are
managed and organized centrally. The branch managers are accountable to the head
office.
- Mail order store
This is a type of retail business where business is carried out through the post office,
online, telephone or email. Ordering of the goods is done through the post office, online,
telephone or email and delivering of goods is done by post or by the available courier
service providers.
(b)
- Devaluation of the country’s currency
This will make the country’s exports cheaper hence increased exports and at the same time
making imports expensive leading to low importation of goods.
- Encouraging foreign investment in the country
This may help in increasing the level of economic activities in the country hence production
of what would otherwise have been imported from other countries. Any surplus produce
can also be exported to other countries earning foreign exchange
- Restricting the capital outflow from the country
It is done by decreasing the percentage of the profits that the foreigner can repatriate back
to their country to reduce the outflow of capital
- Decreasing the volume of imports.
This will save the country from making more payments than it receives. It can be done
through imposing duty, quotas, use of administrative bottlenecks, foreign exchange control
etc.
- Increasing the volume of exports.
This enable the country to receive more than it gives to the trading partners. It can be done
through use of Export compensation scheme, diversifying foreign markets and products,
offering customs drawbacks and lobbying for the removal of trade restrictions.
5. (a)
- The cost of the promotion
The business will consider whether the company can afford it or not since some promotion
methods are very expensive making them not be easily affordable to the company.
- The nature of the product being promoted
Some products may require demonstration or not. Products which requires demonstration
are best promoted through personal selling
- The targeted group
One must consider if the method will reach the target group or not. The promotion method
must reach the targeted group, if it has to be effective
- The objective of the firm
A firm will choose a method which will help in achieving a particular objective. For
instance, if the business intends to correct its image tainted by the actions of competitors, it
can use Public relations to communicate the correct position about itself.
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- The method used by the competitors
It is advisable to a firm to choose a method that will enable them compete favourably
- Government policy
The firm must take into account the requirement of the law concerning product promotion.
This will enable them not use what the law does not allow or approve of
(b)
PROGRESSIVE TRADERS,
TRADING, PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31/12/2022
Cr
sh. Sh. Sh. Sh.
Opening stock 40,000
+Purchases 349,000 Sales 582,000√
+Carriage 10,000
inward
-Purchases (19,000)√ 340,000 Sales returns 22,000√
return
COGAS 380,000√ Turnover 560,000√
-Closing stock (30,000)√
COGS 350,000√
Gross profit 210,000
c/d
560,000 560,000

Gross profit 210,000

b/d 36,000
Discount
received
Carriage out 7,000 Rent received 24,000
Discount 25,000
allowed
Advertising 13,000
Interest on 48,000
loans
Net profit c/d 177,000

270,000 270,000√

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 (ii)
PROGRESSIVRE TRADERS
BALANCE SHEET
AS AT 31/12/2022
Assets Sh. Sh Capital + liabilities Sh Sh
Fixed assets Capital 815,000
Land 500,000 Add profit 177,000
Motor vehicle 600,000 Less Drawings (30,000) 962,000
Furniture 45,000 Long term liabilities
1,145,000 NCBA Bank loan 170,000
Current assets Access Bank loan 210,000 380000
Stock 30,000 Current liabilities
Debtors 51,000 Creditors 62,000
Bank 150,000
Cash in hand 28,000 259,000
1,404,000 1,404,000
6. (a)
• Profitability; -
Emirates enterprise manages should consider investing in viable sectors as businesses tend
to produce those goods and services that yield more profit
• level of competition; -
Firms tend to produce those products whose market competition is minimum i.e. those that
are scarce in the market
• Availability of resources; -
A firm will produce those products whose required resources it has. These resources may
include labor, raw materials, equipment etc.
• Government policy; -
A firm will produce those products which are favored by the government i.e. those which
are lowly taxed and legal
• Market demand; -
Firms will produce products whose demand is high in order to ensure high sales volume
• Cost of production; -
A firm will produce those products whose production cost is low
b)
- There are many sellers and buyers who operate independently.
- They are no barriers to entry into or exit from the market.
- Products sold are close substitutes but by are differentiated in terms of branding,
packaging, colour etc.
- No single firm has control over the factors of production – All firms acquire the factors
at the prevailing market rates.
- Wide knowledge of the market – Buyers and sellers are aware of the prices, quantities and
other market factors.
- Firm are independent – in terms of pricing and output decisions.

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 KIENI EAST
BUSINESS STUDIES
PAPER 1
1. Highlight four reasons for which business should observe ethical practice. (4marks)
2. Outline four positive implications of a youthful population to an economy. (4marks)
3. Highlight four circumstances in which a cheque may be used as a means of payment.
4. Outline four features of liners is sea transport. (4marks)
5. Mango Traders had the following ledger account balances as at 31st December 2014.
Ksh.
Sales 100,000
Purchases 170,000
Returns inwards 10,000
Returns outwards 20,000
Salaries 30,000
Capital 40,000
Bank loan 50,000
Prepare the business trial balance as at 31 December 2014. (5marks)
6. Of late the government has privatized many public corporations. Outline any four reasons
that may have led to this. (4marks)
7. Outline four functions of the International Bank for Reconstruction and Development.
8. The following balances were extracted from the books of Ayuma Enterprises on
31/12/2014.
Sh.
Gross profit 120,000
Rent income 100,000
Dividend received 200,000
Salaries 300,000
Carriage outwards 10,300
Discount allowed 21,000
Prepare Ayuma Enterprises profit and loss account for the year ended 31/12/2014.
9. The diagram below represents the demand of a commodity X in the market.

Highlight factors that may cause a change from D0 D0 to D1 D1 (4marks)

10. Highlight four reasons why a small scale business may succeed despite competition it faces
from large firms. (4marks)
11. State four advantages of using credit cards as a means of payment. (4marks)
12. Highlight four circumstances under which a seller would require a buyer to pay cash with
order. (C.W.O) (4marks)
13. Identify four ways through which businesses give after sales services to their customers.
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14. Outline four differences between a cheque and Bills of exchange. (4marks)
15. List four levels of inflation. (4marks)
16. Outline four benefits of export processing zones to a country. (4marks)
17. Highlight four monetary policy measures used by the central bank to decrease money
supply in the economy. (4marks)
18. Highlight four demerits of letters as a means of communication. (4marks)
19. Outline four features of a public limited company. (4marks)
20. On 1st January 2015 the cash book of Moja Traders showed cash and bank balances of Sh.
10,000 and sh. 20,000 (cr) respectively. Transactions that took place during the month
were: -
January 2Cash sales sh. 12,000.
January 10 Paid sh. 2,000 cash in respect of wages.
January 15 Received a cheque for sh. 35,000 from a debtor.
January 25 Withdrew sh. 5,000 from bank for office use.
January 29 Paid sh. 3,000 cash to a creditor.
Prepare a two column cash book for the month. (5marks)
21. An organization wants to increase the productivity of its workers. Highlight any four cause
of action it can take in order to achieve this. (4marks)
22. Outline any four sources of monopoly power for a firm. (4marks)
23. Differentiate between ordinary shares and preference shares of a company. (4marks)
24. Highlight any four characteristics of an under developed country. (4marks)
25. Outline the meaning of the following as used in International Trade. (2marks)
i) Franco
ii) FAS

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 KIENI EAST
BUSINESS STUDIES
PAPER 2
1. (a) Explain FIVE methods of payments offered by commercial banks in Kenya. (10marks)
(b) Highlight FIVE reasons as to why a high national income may not necessarily mean better
welfare for the citizens of a country. (10marks)
2. (a) Kapa Oil manufacturers have decided to eliminate wholesalers in their chain of distribution.
Outline FIVE possible effects that would result if wholesalers were eliminated. (10marks)
(b) Differentiate between a perfect competition from a monopolistic competition. (10marks)
3. (a) Explain FIVE causes of inflation in an economy. (10marks)
(b) Outline FIVE challenges that Kenya faces when trying to implement her development plans.
(10marks)
4. (a) Explain FIVE reasons why a public limited company may prefer to raise finance through
issue of ordinary shares instead of debentures. (10marks)
(b) The following balances were extracted from books of Masaku Traders for the year ended
31/12/2004
Rent 48,000
Lighting 7,200
Water 9,220
Salaries 75,000
Commission received 12,370
Discount allowed 4,600
Discount received 8,500
Gross profit 320,000
General expenses 98,000
Stock 25,250
Motor Vehicle 2,300,000
Furniture & equipment 650,000
Debtors 270,000
Creditors 396,400
Bank 200,000
Cash 50,000
Capital 3,000,000
Prepare
i) Profit and loss a/c for the year ended 31/12/2004
ii) Balance sheet as at 31/12/2004
5. a) Explain SIX measures that the Government of Kenya may take to control her persistent
Balance of payment deficit. (12marks)
b) Outline FOUR differences between endowment policy and whole life policy. (8marks)
6. a) Explain FIVE factors that limit the usage of Railway as a means of transport (10marks)
b) The accounts of Hakuna Matata Traders showed the following balances on 1 st January 2014.
Sh.
Cash 250,000
Debtors 60,000
Creditors 42,000
Stock 30,000
Bank loan 120,000
Motor vehicle 310,000
The following transactions took place during the month of January 2014.
Jan 2: Bought stock worth Sh. 50,000 on credit.
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Jan 3: Cash sales Sh. 80,000
Jan 5: Received Sh. 20,000 cash from debtors
Jan 10: Paid part of loan Sh. 70,000 cash
Jan 12: Paid creditors Sh. 52,000
Jan 16: Bought office furniture Sh. 45,000 cash
Jan 20: Paid salaries Sh. 40,000 cash
Jan 25: Deposited Sh. 100,000 into the bank
Required:
Record the above transactions in the relevant ledger accounts and balance the accounts on
31st January 2014. (10marks)

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 KIENI EAST
BUSINESS STUDIES
PAPER ONE
MARKING SCHEME
1.
- To ensure fair competition
- To protect consumers from exploitation
- To protect the environment
- To protect the rights of employees
- To promote social responsibility
- To maintain positive image
- To abide by the country laws.
- To maintain suppliers
- To promote positive cultural practices
2.
- Less expensive on social security and expansion
- Wider market for goods meant for the youth e.g. clothing
- Guarantees continues supply of labour
- Flexibility to technology changes which improves production.
- High mobility labour force
- Availability of diverse talents.
- Increases innovation invention due to their entrepreneurial cultural energetic and highly
productive team.
3.
- When the amount involved in the transaction is high when a seller insists on payment by
a cheque / business policy
- When evidence of payment is required
- When payment is to be directed into the payees account
- When the terms of sale are cash with order
- When there is need to ensure safety of money being transferred
- When the drawer does not want to get the bank.
- If it is government policy
4.
- Call at parts at regular intervals
- Follow a regular route / fixed net
- Form associations / conferences to protect themselves against unfair competition.
- Charge fixed freightage regardless of demand
- Call at specific parts
- Ferry passengers and cargo.

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5.
Mango traders
Trial balance
As at 31/12/2015
Particular /details Dr cr
Sales 100,00
Purchases 170,000
Return inwards 10,000
Return outwards 20,000
Salaries 30,000
Capital 40,000
Bank loans 50,000
Total 210,000 210,000
6.
- To promote ownership of the business by the public
- To reduce public expenditure on the same.
- Because of consistent loss making by corporations
- To earn revenue that it can use on other important projects.
- To encourage competition in provision of goods and services
7.
- Provision of finance to member countries to foster economic development
- Issuance of loans to developing countries at concessionary rates for project
development.
- Provision of personal to facilitate project appraisal
- Training local personnel in project appraisal and implementation
- Supervise mentor countries management of public finance.
- Promote long term growth in it e.g. removal of barrier
- Advances money to finance bop deficit
- Approving development pans fro members for funding
8.
Ayuma enterprises
Profit and loss account
For the year ended 31/12/2015
Particulars Dr Particulars Cr
Salaries 300,000 Gross profit 120,000
Carriage outwards 10,300 Rent income 100,000
Discount allowed 21,000 Dividend received 200,000
Net profit carried down 98,000
420,000 420,000

9.
- Consumers incomes may have increased
- Increase in population in the market
- Charge in tastes and preferences in favour of the production
- Decrease in price of a joint product.
- There may have been future expectation is increase in prices of the product.

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10.
- It requires relatively small capital to operate which is easily available
- It can take advantages of a small market
- It may be less complex to manage
- It is very flexible in case there is need to charge
- It may be providing personalized services and have strong relationship with customers
- It may be favoured by its location, close to customers it serves
11.
- It is portable hence easy to carry in making purchase
- It enables its holder to obtain credit
- It can be used to get cash from bank out lets
- It can be used to make large purchases
- It is more secure than cash
- It is fashionable, prestigious way of making payments
12.
- If the customer is new to a seller
- When the buyer’s credit worthiness is in doubt
- When the policy of the seller is not to advance credit if the business is being conducted
through the past
- When the seller wants money for restocking
13.
- Repairs / maintenance of bought and damaged items
- Advice on how to operate the product.
- Installation of equipment / machine.
- Overhauling / rehabilitation of old machine.
- Transportation of items sold
- Provision of spare parts at reduced costs.
14.
Cheque Bill of exchange.
- Drawer is an account holder - A drawer is a creditor
- Drawee is a bank - Drawee is a debtor
- Is evidence of payment - Is an acknowledgement of a debt?
- Is an instruction by as account - Is an order in writing by a creditor to a
holder to the bank to pay a specified debtor requiring the latter to on
amount to the named person, his demand or at stated future date a
order of bearer? specified sum of money to a named
person, his order of bearer
15.
- Hyperinflation / runaway inflation
- Galloping inflation / rapid.
- Stagflation
- Creeping inflation / mild moderate / gradual / persistent
16.
- It creates market for locally produced raw materials
- A country earns some revenue after tax free period.
- It leads to creation of employment opportunities incentives given by the government
encourage expert
Page | 85
 - It stimulates industrialization.
- It encourages foreign investors.
17.
- Increase in bank rates that would increase the cost of borrowing hence reduce money
supply
- Increase in compulsory deposit requirement will leave less that the banks can lend out.
- Making commercial papers attractive increasing their sales hence withdrawing money
from the economy
- Selective credit central where the CB selects the sectors to be given credit.
18.
- Has no immediate feedback?
- Net suitable for illiterate people.
- It lacks personal appeal
- It has room for persuasion and convincing
- It is time consuming to prepare and to reach the recipient
19.
- They must have a minimum of the 7 and no maximum
- Their shares and debentures are said to the public
- It can sell its shares at the stock exchange market
- Must be issued with the certificate of trading to commence business
- It has a legal entity
- It is managed by a board of directors.
20.
Moja traders
Two column cash book
Date Details F Cash Bank Date Details F Cash Bank
2015 2015
1/1 Bal c/d 10,000 1/1 Bal c/d 20,000
2/1 Sales 12,000 10/1 Wages 2,000
15/1 Debtors 35,000 25/1 Cash c 5,000
25/1 Bank C 5,000 29/1 Creditors 3,000
31/1 Bal c/d 22,000 10,000
27,000 35,000 27,000 35,000
1/2 Bal b/f 22,000 10,000

21.
- Improve pay package
- Recruit staff based on qualifications
- Improve on terms or conditions of service e.g. fringe benefits, like house, medical
allowances etc.
- Provides opportunities for further training in professional skills
- Avail all required facilities
- Promotions be based on merit
- Provide staff welfare e.g. housing, school, medication, security etc
- Use modern technology.
22.
- Large capital requirements that can only be affected by the firm
- Where the firm controls supply of an important raw material
- Where a firm has an exclusive technical knowhow in production of a certain commodity
Page | 86
 - Existence of a very small market situation that doesn’t allow for competition.
- a firm given exclusive monopoly right by the state
- where a firm merge into a single firm
23.
Ordinary shares Preference shares
- Do not have a fixed rate of divided - A have a fixed rate of dividends
- Divided paid last - Dividends paid first
- Have vetting rights - Shareholders no vetting
- Irredeemable - Are redeemable.
- Non- cumulative - Can be cumulative

24.
- Low per capita income
- Large income disparity
- High dependency ratio
- Poor standards of living
- Poor governance
- Low literacy levels
- Over reliance foreign existence
- Underutilization of resources
- High levels of unemployment
- Poor health care
- Low levels of investment
- Low life expectancy
- Over reliance in primary method of production
- Poor infrastructure
25.
- Free of expenses price quoted include all charges up to and including delivery of goods
to buyers’ premises
- Free alongside ship – price quoted include cost of goods, carriage charges to the docks
and dock handling charges.

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 KIENI EAST
BUSINESS STUDIES
PAPER 2
MARKING SCHEME
1. (a)
i) Use of cheques –Instruction to the bank to make payment to the named person.
ii) Standing orders – Instruction to make a periodic payment of a specific amount to a
named person until
instructed otherwise.
iii) Credit transfer – Payment of several people by use of one cheque.
iv) Travelers cheques –Used majorly by businessmen who travel a lot to make payments
outside.
v) Bankers cheque – It’s a cheque written by a bank to another bank to make payments to
a named person /institution thus the payment is guaranteed.
b) i) Uneven income distribution – Where too much of it is in the hands of few citizens and
too little for many citizens.
ii) Incorrect statistics (-incorrect statistics could have been used) thus getting a wrong and
exaggerated value of
national income.
iii) No leisure -High income might have been as a result of overworking labour force or
even working under difficult circumstances / thus compromising employee’s health
iv) The income might have been realized through activities that might have been
detrimental to the environment or health of the workers.
v) Illegal activities – The income might have been rising from illegal activities.
vi) High inflation rate – The high income might have been consumed by high levels of
inflation hence retarding the purchasing power of citizens.
2. (a)
i) Manufacturers would set up distribution centers /depots or warehouses which are
additional costs to manufacturers.
ii) The cost of distribution may be increased and the subsequent increase passed on to
consumers inform of higher prices.
iii) The retailers would have to go to manufacturers, which is an additional cost to
retailers.
iv) The producers would have to break the bulk because retailers may not be able to buy in
large quantities.
v) Manufacturers may be required to extend credit facilities to retailers, which require
additional financial capital.
vi) Due to additional functions to producers, it will reduce their specialization in
production.
vi) Prices may fluctuate due to unsteady flow of goods.

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 (b)
PERFECT COMPETITION MONOPOLISTIC COMPETITION
a) Sellers deal in homogeneous products - Sellers deal in differentiated products
b) Are not involved in promotion of - incur heavy expenses in promotion of
products? products
c) It’s a price taker - it’s a price setter /giver
d) Large number of sellers - Large number of sellers operating
e) Activities of one firm does not influence independently.
the activities of other firms - Activities of one firm are closely
monitored by the rest in the industry.
3. a)
i) Increase in government expenditure making more money available to people which
increase aggregate demand leading to an upward pressure on prices.
ii) Excessive credit creation by commercial banks increase money supply and hence
purchasing ability leading to inflation.
iii) Increase in money income which increase purchasing power causing an upward pressure on
prices of goods and services.
iv) Storage of goods and services leading to excessive demand hence pulling the prices of
commodities upwards.
v) Call for increase in wages and salaries, which will be reflected in the increased prices of
commodities.
vi) Increase in indirect taxes (e.g. VAT,) which makes firms to increase their prices.
vii) Increase in profit margins by management and shareholders leading to an increase in prices.
viii)Increase in cost of inputs (e.g. raw materials) causes the prices of finished goods to be high.
ix) Reduction in subsidies leading to an increase in cost of production which will be reflected
in an increase in the price of the commodities.
b)
i) Inadequate skilled personnel/ machines etc. to implement the plans.
ii) Continuous reliance on donor funding which at times fail to be remitted.
iii) Natural calamity i.e. (the country may suffer from calamities like drought, flood etc.) which
draw funds that were not planned for.
iv) Lack of co-operation and coordination between executing parties i.e. ministry of finance
andplanning.
v) Failure to involve local people hence making the plan to lack support from the local people
as they view it to be imposed on them by few people at the top.
vi) Lack of political will i.e. where political crisis is an obstacle to the achievement of the
vision.
4. (a)
i) Debentures are units of loans which must be paid by a public company unlike ordinary
shares
which is a unit of capital and companies are not obligated to pay.
ii) Debenture holders are paid in fixed rates of interest while ordinary shares interest is not
fixed.
iii) Failure to pay debentures rates leads to a company being declared bankrupt unlike payment
of share dividends.
iv) Debenture interest must be paid by a public company unlike ordinary shares.
v) In the event of a company winding up, it is obliged to pay debentures first while shares may

Page | 89
 come last.
vi) Raising money through shares requires no security while debentures may require a security.
vii) Securing finance through debentures is more expensive than through ordinary shares.
viii)Debentures reduce the borrowing power of a company while shares enhance.
ix) Share dividends can be converted to bonus shares while it is not possible with debentures
interest
b)
Masaku Traders
Profit and loss account for the year ending 31/12/2004

Expenses:
Rent 48,000  Gross Profit b/d 320,000
Lighting 7,200 Commission received 12,320
Water 9,220 Discount received 8,500
Salaries 75,000
Discount allowed 4,600
General expenses 98,000
Net profit 98,850 
340,870 340,870
(ii)
Masaku Traders
Balance sheet as at 31/12/2004
Fixed assets Kshs Kshs
Furniture 650,000 Capital 3,000,000
Motor vehicle 2,300,000 add: Net profit 98,850
3,098,850
Current assets Current liabilities
Stock 25,250 Creditors 396,400
Debtors 270,000
Bank 200,000
Cash 50,000
3,495,250 3,495,250
5. a)
i) Increase the volume of export i.e. by giving incentives to traders so that they can produce
more output.
ii) Reduce the level of imports i.e. by using restrictive measures such as import total ban etc.
ii) By diversifying the rate of export of the country so that when some fail others can still sell
in the world market.
iv) Through Devaluation of the country’s currency – this makes the export cheaper and hence
more competitive in the market.
v) By negotiating for foreign debt reduction- which will off load the debt burden.
vi) By adding value to the export e.g. processing of primary products so as to fetch better
prices when exported.

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 b)
Endowment policy Whole life policy
i) Benefits go to the insured unless death occurs i) Benefits goes to the beneficiaries.
ii) Focuses on financial security of insured and ii) Aims at financial stability of beneficiaries
beneficiaries.
iii) premiums paid only for the agreed period iii) Premium paid throughout one’s life time
iv) Compensation paid after the risk or expiry of iv) Compensation paid only after death of
period insured
v) Can be used as collateral for loan v) Cannot be used as collateral for loans
6. a)
i) High costs: Railway construction is an expensive venture, requiring huge investments.
These are not affordable.
ii) Existence of road network: There exists relatively wide network /competition from other
modes of transport.
iii) Poor management: the railway transport sub-sector has been poorly run, hence stagnation.
iv) Lack of modern technology: modern technology required for efficient railway system is
absent in Kenya/can only be imported.
v) Little government commitment: the government has committed its resources on other forms
of transport.
vi) Lack of flexibility: in ability to render door to door services.
vii) Speed: its relatively low speed renders it in appropriate for carrying certain goods.
viii)Lack of competition: Railway enjoys protected position making it impossible tom operate.
ix) Low industrial base: this has led to low demand for railway services.
b)
DR PURCHASES A/C CR
2010 sh 2010
Jan 2 creditors 50,000  Jan 31st Bal c/d 50,000
Jan 31 Bal b/d 50,000
DR BANK A/C CR
2010 SH 2010
Jan 25cash 100,000 Jan 31 bal c/d 100,000
Jan 31 b/d 100,000

DR CREDITORS A/C CR
2010 SH 2010 SH
Jan 12 cash 52,000  Jan 1 bal b/d 42,000
Jan 31 bal c/d 40,000  Jan 2 purchases 50,000
92,000 92,000
Jan 31 Bal b/d 40,000
DR STOCK A/C
CR
2010 sh
Jan 1 bal b/d 30,000  bal c/d 30,000
DR MOTOR VEHICLE A/C
CR
Bal b/d 310,000 bal c/d 310,000

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DR CASH A/C CR
2010 SH 2010
Jan Bal b/d 250,000 JAN 10 loan 70,000
Jan 3 sales 80,000 Jan 12 creditors 52,000
Jan 5 Debtors 20,000  Jan 16 furniture 45,000
Jan 20 salaries 40,000
Jan 25 bank 100,000
Jan 31 BAL C/D 43,000
350,000 350,000
Jan 31 bal b/d 43,000

DR DEBTORS A/C CR
2010 SH 2010
Jan 1 bal b/d 60,000  Jan 5 cash 20,000
Jan 31 bal c/d 40,000
60,000 60,000
Jan 31 bal b/d 40,000

DR BANK A/C CR
2010 SH 2010 SH
Jan 10 cash 70,000  Jan 1 bal b/d 20,000
Jan31 bal c/d 50,000 
120,000 120,000
Jan 31 bal b/d 50,000

DR FURNITURE A/C CR
2010 SH 2010
Jan cash 45,000  Jan bal c/d 45,000
JAN Bal b/d 45,000

DR SALARIES A/C CR
2010 SH 2010 SH
Jan 20 cash 40,000  bal c/d 40,000
Jan 31 bal b/d 40,000

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 KIRINYAGA EAST
BUSINESS STUDIES
PAPER 1
MARKING SCHEME
1. Outline four ways in which a well laid business structure is likely to lead to the success of
the business (4marks)
2. State the production factors that each of the following resources relate. (4marks)
a) Rainfall
b) A lawn mower
c) an investor
d) Cook.
3. State four disadvantages of using internet as a means of communication. (4marks)
4. Highlight four reasons why the government should create an enabling environment for
investors. (4marks)
5. For each of the following source documents indicate the book of original entry. (4marks)
Source Document book of original entry
a) Received receipt
b) Incoming invoice
c) Outgoing credit note
d) Incoming cash sale slips
6. Outline four features of non-banking financial institutions. (4marks)
7. For the year ended 31st December 2004 the following information was extracted from
Kiaga Business enterprise. Total assets sh.427,500, total liabilities sh.48,000
i) Additional capital introduced was sh.24,000
ii) Drawings made during the year was sh.2,000
iii) Net profit was sh.34,500
Required:
Determine the capital as at 1st January 2004. (4marks)
8. Highlight four demerits of giving a product to customers freely for trial. (4marks)
9. Outline four fiscal policies that the government can use to control inflation. (4marks)
10. Give four reasons behind the continued failure by the Kenyan revenue authority (KRA).
(4marks)
11. Recently organizations have been relocating offices to the sub-urban areas. Account for the
above scenario. (4marks)
12. Complete the table below by indicating the relevant account to be debited and credited.
(4marks)
Transaction Account debited Account credited
A debtor returned goods
Converted a personal car into business use
Drew cash from bank for office use
Paid cash to a creditor
13. Identify four challenges faced by a business without a business plan. (4marks)
14. The demand for personal cars/vehicles in Kenya has in the recent past shifted to right. State
four possible causes that have led to the above. (4marks)
15. Highlight four challenge likely to be faced when safeguarding properties of an
organization. (4marks)
16. Give four reasons for increasing popularity of insurance among Kenyan in the recent years.

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17. Outline four factors that limit the number of entrepreneurs in an area in Kenya (4marks)
18. State four characteristic of an open air market. (4marks)
19. The following information relates to County merchants for year ended 31st December
2013.
Discount allowed Kshs 8,000
Carriage outwards Kshs 4,700
Cost of sales Kshs 523, 200
Commission received Ksh. 4, 000
Sundry expenses Ksh. 18,200
Bad debts Kshs.4, 000
Margin 20%
Required: Prepare profit and loss account for county merchants. (4marks)
20. Outline four reasons for the continued use of human porterage despite the advancement in
transport technology. (4marks)
21. Highlight four circumstances under which a mangoes farmer may not require the services
of the middleman. (4marks)
22. Outline four advantages of using cash payment over an ordinary cheque. (4marks)
23. State four reasons why the government adopts protectionism policy in international trade.
24. Under what circumstances a partnership Business would be dissolved? (4marks)
25. Outline four challenges that have been posed by the recent floods in Kenya to the business
people. (4marks)

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 KIRINYAGA EASTERN CLUSTER
BUSINESS STUDIES
PAPER 2
1. (a) Explain five reasons that may make it necessary for the government to promote
entrepreneurship. (10mks)
(b) Explain five circumstances that would influence a producer to sell their products
directly to the consumer. (10mks)
2. (a) Explain five assumptions associated with the circular flow of income in a two sector
economy. (10mks)
(b) Highlight five advantages of an open office layout in an organization. (10mks)
3. (a) Explain five circumstances in which a firm may acquire monopoly power. (10mks)
(b) Explain five measures that a government may put in place to reduce high inflation.
(10mks)
4. (a) Explain five features that differentiate a public corporation from a public limited
company form of business units. (10mks)
(b) Explain five goals of development to a country. (10mks)
5. (a) Explain five advantages of government involvement in business activities.
(b) On 1 June 2019, L2020 Ltd had cash in hand sh. 87,000 and cash at bank sh.250,000.
During the month, the following transactions took place:
June 2: Cash sales sh. 60,000
3 : Paid salaries sh 101,500 by cheque
7: Received a cheque of sh. 76,000 from Mary, after allowing her a cash
discount of 5%
13: Bought office furniture by cheque sh. 86,000
17: Settle Omollo’s account for sh 34,200 in cash, having deducted sh 800 cash
discount
20: Received a cheque for sh 165,000 in respect of cash sales
22: Paid wages sh 25,000 in cash
24: Withdrew sh 4,000 cash for personal use
25: Withdrew sh 32,000 from the bank for office use
29: Received sh 17,000 cash from Alvin in settlement of his account less sh
1,000 cash discount.
30: Deposited all the money into the except sh 24,000.
Required: Prepare a three column cashbook duly balanced.
6. (a) Describe five principles of insurance. (10mks)
(b) The following opening balances were extracted from the books of Mageta Traders on
1st July 2016.
Details Shs.
Furniture 56,000
Capital 80,000
Creditors 20,000
Debtors 25,000
Bank 11,000
Cash 8,000
The following transactions took place in the course of the month.
(i) Paid a creditor sh 4,500 cash
(ii) Took sh 3,000 from the bank for family use

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(iii) Bought stock sh. 18,600 on credit
(iv) Acquired a 10-year bank loan sh. 165,000 which was credited to the business bank
account.
(v) Purchased land worth sh. 82,000 paying by cheque
(vi) Converted a family table worth sh. 5,500 for business use
(vii) Received sh. 7.300 in cash from a debtor.
Required: Prepare Mageta Traders Balance Sheet at the end of July 2016. (10mks)

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 KIRINYAGA EASTERN
BUSINESS STUDIES
PAPER 2
MARKING SCHEME
1 (a) Reasons that make it necessary for the government to promote entrepreneurship.
• Creation of employment; jobs are created which help in absorbing people who would
otherwise have been jobless.
• Formation of capital; Entrepreneurs are able to create capital in many ways e.g. the profits
earned can be used to expand the business or start up more businesses.
• Reducing rural urban migration; Entrepreneurs are able to set up business in the rural areas
and employ local people who would have gone to urban areas in search of jobs.
• Raising standards of living; Entrepreneurship helps in availing a variety of quality goods
and services to citizens.
• Savings on imports; Local entrepreneurs are able to produce goods and services that are
substitute to imports.
• Improving infrastructure; where many businesses have been set up, the government may
find it necessary to improve infrastructure like roads and security in order to cater for such
businesses.
• Reducing foreign dominance of the economy; Participation of local entrepreneurs in
various business activities helps in reducing investment by foreigners in the particular
areas.
• Making use of local resources; Entrepreneurship creates an environment that makes it
possible for exploitation of local resources.
(b) Circumstances that would influence a producer to sell their products directly to the
consumers.
• Nature of the products. If the goods are highly perishable to prevent them from going bad.
• When the market is concentrated in one area since the cost involved in accessing the market
would be low.
• When the firm is financially strong to open its own retailer outlets to maintain service
standard.
• When the competition is stiff.
• When the size of the market is small so that it maintains its customers/to avoid losing
customers, direct selling will be appropriate.
• In case its legal requirement, producer must comply.
• If the value of goods is too high, to avoid increase in price.
2 (a) Assumptions associated with the circular flow of income in a two sector economy.
• There are only two sector/players in the economy i.e. households and firms.
• Households spend all their income on goods and services without making any savings.
• Firms spend all their revenues on factors of production; there is no reserving any profit for
expansion.
• There is no government intervention through taxation and licensing,
• The economy is closed, no intervention trade, no imports and exports.
• All output produced by firms is purchased by household, there is no surplus.
• There is no injection of income (additional investment/savings/no financial sector/there is
fixed amount of income.)

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(b) Advantages of an open office layout in an organization.
• Easy supervision; it is easy to monitor employees’ performance since they are in the same
room.
• Economy of space; floor space is available since space has not been lost through partitions
and can accommodate more staff.
• Minimal cost; its cheap to construct, maintain and decorate.
• Sharing of resources, facilities and equipment. It makes it possible for joint use of office
facilities hence enable the firm to save on cost of acquisition.
• Fast and easy communication between workers and department is made easier and faster
since there are no physical barriers between them because they are found in the same room.
• Faster flow of work due to reduced movement and working close to one another.
• Enhance team work by sharing ideas and consulting each other which promotes friendship
and personal understanding.
• Discourages laziness and idleness since they can see and monitor each other.
3 (a) Circumstances in which firm may acquire monopoly power.
• If the firm has a selective production technique; this denies other firms the use of the
technique, production and sale of the product.
• If the firm has control over strategic inputs or raw materials; thus this makes the firm have
the sole access to inputs or raw materials used in production of the commodity.
• If the firm enjoys greater economies of scale, it enables the firm to produce at a lower cost
than others.
• If the firm is best served by one firm more economically, other firms entering the market
may make losses due to low sales hence the firm remain dominant.
• If the firm is set up as state monopoly of production of a particular product by the
government thus shifting out competition from competitors.
(b) Measures that a government may put in place to reduce high inflation.
• Increase interest rate to discourage borrowings.
• Withdraw excess cash in circulation by issuing government bonds and treasury bills.
• Institute policies that make prices of commodities steady (price control).
• Increase taxes on income to discourage extra income earned at expanse of leisure.
• Raising liquidity ratio or cash ratio of commercial banks.
• Use of selective credit control.
• Increasing commercial banks special deposits with the Central bank.
• Restricting wages increases.
• Raising margin requirements.
• Moral persuasion by government for people to buy only what is necessary.
4 (a)
Public Corporation Public Limited Company
i Initial capital is provided by the i Initial capital comes from the
government shareholders
ii Established by act of parliament ii Established through the company’s act
iii Managed by board of directors iii Managed by board of directors elected
appointed by the government by the shareholders
iv Its non-profit organization iv Its profit motivated
v Owned by government v Owned by the shareholders

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 vi Financial statement presented by vi Financial statements presented to
parliament parliament
vii Books of accounts audited by the vii Books of accounts audited by private
auditor general auditors

(b) Goals of development to a country

• Alleviation of poverty.
• Attainment of high and sustainable economic growth.
• Provision of adequate social amenities e.g. health.
• Diversification of the economy to reduce over-reliance on a few products.
• Alleviation of unemployment.
• Attainment of more equitable distribution of incomes.
• Provision of security.
• Enhancement of the economy to reduce over-reliance on a few products
• Alleviation of illiteracy.
• Improvement of infrastructure.
• Attainment of food security for population.
5 (a) Advantages of government involvement in business activities.
• Provision of essential services and goods for reasonable prices.
• Provision of large capital investment which private sectors may not be able to raise and
• without which development would be minimal.
• Protection of citizens from malpractices by business.
• Stimulate of economic development by developing social amenities.
• Creation of employment for its citizens to earn a living.
• Income generation through taxation.
• Stabilization of the economy through regulation or market intervention.
• Promote equity in distribution of resources.
• Control use of resources through conservation to ensure their sustainability.
• Maintenance of the law and order, which allows for smooth operations of country’s affairs.
• Promotion of best practices through encouraging adoption of ICT/Social programs.
• Reduce foreign dominance.
• Promotion of entrepreneurship cultures by encouraging business ownership.
• Promotes investment in the country by creating enabling environment.
(b) 3 - Cash Book
Date Details L Discount Cash Bank Date Details LF Disco Cash Bank
F unt
2019 Sh. Sh. Sh. 2019
Jun1 Balance b 87000 25000 Jun.3 Salaries 101500
2 Sales / 6000 13 Off.Equp 86000
5 Mary d 4000 76000 17 Omollo’s 800 34200
20 Sales 16500 22 Wages 25000
24 Bank 32000 24 Cash 32000
29 Alvin 1000 17000 25 Drawing Bank 4000
30 Cash C 108000 30 Bal c/d 108000
30 24000 180300

5000 196000 399800 800 196000 399800

30 Bal b/d 24000 180300

6 (a) Principles of Insurance.

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• Principle of indemnity. The insured can only be compensated for the actual loss covered.
• Insured is being returned to his financial position before the loss.
• Principle of utmost good faith. Insured is required to reveal material facts relating to
property being insured.
• Principle of insurance interest. The insurer should only insure property/life that is stands to
suffer a direct financial loss in case risk insured occurs.
• Principle of proximate cause. For insured to be compensated there must be a very close
relationship between the loss suffered and risk insured against.
• Principle of subrogation. After the insured has been compensated, the remnant of the
insured property becomes the property of the insurer.
• Principle of contribution. In case one has insured with more than one insurance companies
in case of loss, all the insurers would compensate/contribute proportionately to indemnify
the insured.
(b) Mageta Traders
Balance Sheet as at 31st July 2016
Fixed Assets Sh Sh Sh Sh
Land 82000 Capital 82500
Furniture 61500 143500
Current Assets Long term liabilities
Stock 18600 10-year loan 165000
Debtor 17700 Current liabilities
Bank 91000 Creditors 34100
Cash 10800 138100
281600 281600

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 NYERI CENTRAL
BUSINESS STUDIES
PAPER 1
1. Highlight four benefits of a business plan to an entrepreneur. (4marks)
2. State four ways in which a good filling system may facilitate the operations of an office.
(4marks)
3. Outline four circumstances under which a cooperative society may be dissolved.
4. State four features of insurable interest. (4marks)
5. 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. (4marks)
6. Outline four factors that may make a producer to bypass the wholesaler when distributing
goods. (4marks)
7. The following diagram represents the circular flow of income in two sector closed
economy.

HOUSEHOLDS
a
b

FIRMS

Identify two factors represented by each of the arrows labelled a and b (4marks)
8. Identify the ledgers in which the following accounts are kept. (4marks)
ACCOUNT LEDGER
i. Pendo (debtor)
ii. Machinery
iii. Rent
iv. Capital
9. Outline four functions of the World Bank. (4marks)
10. State four reasons for the increased use of cell phones in banking. (4marks)
11. An entrepreneur may spot a gap in the market which may be converted into a business idea.
Identify four such gaps. (4marks)
12. Outline four differences between direct production and indirect production. (4marks)

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13. On 1st January 2017 Mr. Kamau started a business with Ksh 10,000 in cash. The following
transactions took place during the first week of his business commencing; 2nd January;
Deposited Ksh 5,000 cash in bank
3rd January; purchased stationery worth Ksh 1,000 in cash
4th January; bought goods worth Ksh 2,000 by cheque.
Enter the above transactions in the relevant T accounts. (4marks)
14. Give four ways in which consumers benefit from advertising. (4marks)
15. Outline four functions of commercial banks. (4marks)
16. State four types of capital in a business. (4marks)
17. The following transactions took place in the month of June 2021
a) 10th June sold an old furniture worth Ksh 65,000 for Ksh 75,000 to Uchumi House.
b) 19th June disposed an old machine valued at Ksh 610,000 on credit to Karitu Enterprise
for Ksh 590,000.
Prepare a general journal to record the above transactions. (4marks)
18. List four sources of public finance. (4marks)
19. Highlight four problems faced in satisfaction of human wants. (4marks)
20. State four characteristics of chain store type of retail business. (4marks)
21. Give four implications of a declining population. (4marks)
22. Outline four requirements for one to start a limited liability company as one of the forms of
business units. (4marks)
23. State four trends in the transport system. (4marks)
24. Outline four reasons why a producer may need to have their own warehouse. (4marks)
25. Outline four roles of the mass media in promoting consumer protection. (4marks)

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 NYERI CENTRAL
BUSINESS STUDIES
PAPER 2
1 a) The use of motor cycle transport is becoming very popular in both rural and urban
areas of Kenya. Explain the limitations a business that relies on its use is likely to
encounter. (10mks)
b) Explain five principles of an efficient tax system. (10mks)
2. a) Explain five reasons why savings and credit co-operation societies are becoming
popular among Kenyan employees. (10mks)
b) Illustrate using a well labelled diagram the effects of an increase in consumer income
on equilibrium price and quantity. (10mks)
3. (a) Distinguish between perfect competition and monopoly in product markets.
(b) Prepare a duly balanced three column cash book from the following information
extracted from the books of Tirop Traders.
Jan 1st Balances b/d cash sh. 4000, bank shs 27,000
4th settle Oliech creditors account of sh. 8,000 by cheque having deducted 6% cash discount
8th Received shs. 6000 cash from Mutoma Traders
16th Deposited shs. 4,500 to the bank account
24th Withdrew shs. 9,200 from the bank from private use.
29th Received sh. 19950 from Kahawa by a cheque after allowing 5% cash discount.
31st Banked all the cash leaving shs. 1,500 in the office
4. (a) Explain five benefits enjoyed by a business that operates with a business plan.
(b) Prices of commodities have been increasing in the country in the recent past.
Explain five measures that the government may take to control this. (10mks)
5. (a) Explain any five factors in the external environment that may lead to business success.
(b) Fair price shop sells all its goods at a margin of 20% for the year ended 30th April,
2006 the trading activities were as follows.
Purchases shs. 80,000
Sales shs 950,000
Net profit 5% of sales
Closing stock shs. 200,000
Calculate;
i) The Gross profit
ii) The opening stock
iii) Markup percentage
iv) The net profit (10mks)
6. a) Outline five advantages of division of labour and specialization (10mks)
b) Explain any five functions of commercial banks in Kenya. (10mks)

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 NYERI CENTRAL
BUSINESS STUDIES
PAPER II
MARKING SCHEME
1. (a)
- Their carrying capacity is small – A business producing heavy and bulky goods may
experience challenges
- It is affected by weather changes- During heavy rains goods may spoil
- It’s not convenient over long distances- It is expensive where the load is to be
transported over long distances.
- It is prone to accidents – This would imply loses to the business.
- Repair and maintenance cost is high – Expenses of maintenance may result into reduced
profits.
(b)
- It should be equitable – higher income earners should pay higher taxes than those
earning less.
- It should be certain – The amount, time and manner of taxation should be clear to the
tax payer and the tax collector.
- Convenience – Its should be levied at the time the contributor has money.
- Economy- The cost of collecting and administering should be lower than the revenue to
be collected.
- Flexibility – The system should be to accommodate changes in accordance with change
in national income.
- Diversified – It should enable as many citizens as possible to contribute according to
their abilities.
2. (a)
- easy savings since the deductions made through a check of system which does not
require efforts by members.
- Obtaining credit requires few procedures before the loan is approved.
- The interest charge on loan is low as compared to other financial institutions.
- Loan require no collateral/security except for member’s shares/pay slips.
- Members savings are safe since they are insured with the co-operative insurance
company.
- Incase of death the member’s beneficiaries do not lose the savings in the co-operative.
(b)
- Equilibrium price increase from Pe to Pe1
- Equilibrium quantity increase from Qe to Qe1
- Equilibrium point shifts from Eo to E1
- Increase in demand causes excess demand.
3 (a)
Perfect competition Monopoly
(i) Allows free entry and exit of -Restricts entry of new firms
firms
(ii) Large number of sellers -Single seller
(iii) Reaps normal profits in the long -Reaps abnormal/supper normal profits in short and
run long run.
(iv) There is no transport cost -They incur all costs of production
(v) Firms are price takers -Firms is price giver
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 (b)
Three column Cash Book
Date Particulars Folio Disc Cash Bank Date Particulars Folio Disc Cash Bank
Allowed Rec
Jan Jan
1 Balance b/d 4000 27,000 4 Oliech 480 7,520
8 Mutoma 6000 16 Bank C 4500
16 Cash C 4,500 24 Drawings 9,200
29 Kahawa 1050 19,950 31 Bank C 4000
31 Cash C 4000 31 Bal c/b 1500 38,730

1050 10,000 55,450 480 10,000 55,450

Bal b/d 1500 38,730
4. (a)
- Assists in determination of capital/finances required – It aids in calculation of finances that
is required to fund the various activities of the business.
- It is a requirement by financiers – Financial institutions such as banks may require the
business plan before accepting to give loan to the business.
- It’s a motivation to employees- It communicates the objectives of the business to all the
employees enabling them to work towards achieving the set objectives.
- Helps in proper allocation of resources – It is a guide for proper distribution of available
resources to avoid underutilization or overutilization.
- Helps in identifying the strengths and weakness of the business – For any weakness
detected corrective measures are put in place early enough.
- For adaptability –A good business plan provides room to accommodate any unforeseen
changes that might occur in future.
(b)
- Reducing government expenditure – this reduces the supply of money in the economy
hence reducing inflation.
- Increasing income taxes – This reduces consumer’s disposable income hence reducing their
demand for goods.
- Wages and salary control-this reduces the supply of money/ability of consumers to buy
goods and services.
- Controlling exportation – this reduces commodity shortages hence preventing prices from
risking.
- Selling government securities in an open market operation.
- Increasing compulsory deposits made by commercial banks in the central bank.
- increasing the lending interest rates by commercial banks.
- Putting in place selective credit control measures.
5. (a)
- Availability of market-presence of many customers guarantee high sales volume hence
more profits.
- Favourable government policies – favourable laws and government policies on aspects like
taxation and licensing promotes business activities.
- political stability – This promotes peace hence attract investors and customers.
- Use of efficient modern technology in production –This lowers production cost leading to
business success.
- Positive cultural environment- where the business conforms with the culture of the
community it serves, its likely to succeed.
- Low/fair competition – where the business face least or no competition its likely to succeed.

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- Increase population in an area – increased populated widens the market for goods delt with
hence success.
(b) (i)
GP = sales − cost of sales
GP
margin =
sales
20 GP
=
100 950000
20
GP = × 950 000 = 190 000
100
(ii) opening stock
C. O. S = O. S + P − C. S
C. O. S = sales − GP
= 950 000 − 190 000 = 760 000
O. S = 760 000 − 80 000 + 200 000 = 880 000
(iii) Markup percentage
GP 190000
mark up = × 100 = × 100 = 25%
COS 760000
(iv)
Net profit = 5% of sales
5
NP = × 950 000 = 47 500
100
6. (a)
- Less time is spent/saves time-in completing a job as there is less movement by the workers
from one job to another.
- Lead to increased production/output as people adapt their jobs hence increased
productivity.
- Increased use of machine/automation leads to low cost of production.
- High quality goods and services are produced due to concentration on areas of
specialization on people becomes experts in areas assigned.
- Encourages invention and innovation as workers tries to come up with improved methods
of production.
- Improved efficiency due to better use of resources/reduced wastage.
(b)
- Accepting deposits –by accepting deposits it helps people to save their money.
- Lending money –Money saved is given out to individuals and organizations in form of
loans
- Safekeeping of valuable items – items of value can be kept in commercial banks for safety
at a fee.
- Facilitating transfer of money – They provide methods through which money can be
transferred from one person to another.
- Provision of foreign exchange – provision of different countries’ currencies enables
international trade to take place.
- Acting as guarantor or referee – to their customers who want to acquire credit from other
financial institutions.
- Linking savers and borrower – by accepting deposits and giving out credit commercial
banks provides a platform where savers and borrowers can interact.

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 KANDARA
BUSINESS STUDIES
PAPER 2
1 a) Explain five factors that one would consider when evaluating a business opportunity.
b) Explain five methods that Kenya can use to control an unfavorable balance of
payments. (10marks)
2 a) Explain five Negative effects of inflation in the economy (10marks)
b) Differentiate between private warehouse and public warehousing. (10marks)
3 a) Explain five factors which influence the decision on the type of goods and services
that a firm can produce (10marks)
b) Explain five factors considered when buying office equipment. (10marks)
4 a) The following balances were available from the books of Sangoma Traders during the
accounting period ended 31st December 2016
Shs.
Purchases for the year 400,000
Carriage inwards 50,000
Capital 1,000,000
Sales 800,000
Total expenses 195,000
Stock on 1st Jan 2016 40,000
Returns outwards 30,000
Stock on 31st Dec 2016 100,000
Total creditors 35,000
Debtors 30,000
Returns inwards 45,000
Calculate:
a) Cost of goods sold. (2marks)
b) Gross profit. (2marks)
c) Margin %. (2marks)
d) Rate of stock turn over. (2marks)
e) Rate of return on capital. (2marks)
b) Explain five barriers to effective communication. (10marks)
5 a) Explain five factors that should be considered by a firm when deciding on the method
to use for promoting his products. (10marks)
b) The following information relates to Bahari retailers for the month of January 2013.
Invoices received:
Jan 6: Mandela Ltd shs. 70,000
Jan 12: Odhiambo traders shs. 150,000
Jan 18: Jua kali Enterprises shs. 50,000
Invoices issued:
Jan 5: Jambini Traders shs. 10,000
Jan 10: Fedha Ltd. Shs. 100,000
Jan 15: Kaluworks Ltd shs. 120,000
Credit note issued:
Jan 5: Jambini traders shs. 12,000
Jan 13: Fadhili Ltd shs. 6,000

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 Credit note received
Jan 7: Mandela Ltd shs. 5,000
Jan 14: Othiambo traders shs. 1,000
Additional information.
Jan 8: Sold machinery on credit to Kwetu retailers shs. 50,000.
Jan 9: Bought electronic equipment on credit from Lowland Retailers shs. 8,000
Jan 10: Brought shs. 5,000 cash into business from own sources.
Required:
Record the above transactions in the appropriate books of original entry.
6 a) Explain five challenges that are likely to be encountered during the implementation
of development plans. (10marks)
b) Explain five characteristics of a monopolistic competition market structure.

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 KANDARA
BUSINESS STUDIES
PAPER 2
MARKING SCHEME
1. (a)
• The profit margin to be earned from the investment; should be reasonable to cater for
expenses/get surplus
• Existing attitude/practices/benefits of the target market; must e in line with people’s
attitude/beliefs/acceptable
• Availability of appropriate technology for efficiency/to be cost effective
• Size /availability of market should be big enough to support the business for maximum
profit/to sell their goods.
• Possibility of pretesting (trial use)-affordable to allow customers to try out without having
to purchase
• Availability of effective channels of distribution to ensure products reaches the customer
• Ability of the product to satisfy immediate need of buyer hence attractive to buyers
• Ease of usage easy for buyers to understand/use
• The level of competition to place the product in the market
• The payback period –reasonable/short to allow investor to recoup the Capital invested
• The risk involved-should be manageable/minimal to avoid unnecessary losses
b)
• By helping in the establishment of import substituting industries. These are industries
that produce goods that were previously imported from other countries.
• By putting restrictions on the volume of imports through imposition of high tariffs on
imports or setting import quotas. This limits the volume of imports thereby reducing the
negative balance of payments.
• By providing export compensation. This increases the volume of exports thereby
improving the balance of payments.
• By giving subsidies to local exporters. This enables the exporters to sell their goods at
competitive prices thereby increasing the volume of exports. An increase in the volume of
export reduces the negative balance of payments.
• By carrying out trade promotion activities abroad. This may increase the volume of
exports thereby improving the balance of payments.
• By devaluation of the currency. This way, exports become cheaper while the imports
become expensive. This leads to an increase in the demand for exports and a decrease in the
demand for imports. The reduction of imports and the increase of exports improve the
balance of payments.
• By encouraging foreign investments into the country. This provides the foreign currency
necessary for the payment of imports.
• Establishment of export processing zones. All goods produced in such zones are meant
for exports thereby increasing the volume of exports.
• By reducing export duties. This makes exports cheaper which in turn increases their
demand. This increases the volume of exports helping to improve the balance of payments.
• By controlling the issuance of foreign currency. This reduces the volume of imports.
2
• Problem in future planning: future prices of goods and services become unpredictable.

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• Balance of payments problem: other countries shy away from buying its goods to avoid
imported inflation.
• Hoarding of good and development of black market Business men hide goods so as to
sell when prices are higher.
• Loss of faith/ confidence in money system: as it loses value at a very high rate and no
longer accepted as medium of exchange.
• Creditors tend to lose: they lend when value of money is high and they are paid when the
value has decreased.
• Low level of investment: Interest rate increases and few people borrow money for
investment.
• Reduced savings: Increase in prices of goods and services leaves people with very little to
save.
• May lead to industrial unrest: Employees struggle to maintain their standards of living by
negotiating for high wages through their unions.
• Unfair distribution of income: Business men are able to increase prices of goods and
services but fixed income earners continue receiving income of a lower value.
• Suffering of fixed income earners: They continue receiving the same income even as
prices increase. This means they have low standards of living.
b)
PRIVATE WAREHOUSE PUBLIC WAREHOUSE
Does not need a license to operate Needs a license to operate
Owned by the producer, wholesale or May be owned by anybody who wishes to
retailer operate a warehouse business.
Used exclusively by the owner Anybody may rent space therein
Managed as a department of the main
Managed as an independent business
business
Managed as a department of the main
Insurance for stored goods is mandatory.
business
Usually located at the port or transport
Insurance for stored goods is optional
terminals.
Usually found near the owner’s business Usually very large in size
Usually small in size It stores general merchandise
3
a.
• Expected demand – where demand is low, a firm will only produce a few goods or not
produce at all.
• Availability of capitalize sources this would help decide on the level of production.
• Time period - the firm must consider whether short or long term production is required.
• Availability of labour supply of the relevant skills would be required.
• Cost of raw production - the firm must consider availability and cost of buying and
transporting materials
• Government policy - the firm must abide by the rules and regulations of the country.
• Availability of raw materials
• Level of competition.
• Profitability
• Effects of goods on the environment
Page | 110
• Seasonality in production
• Social cultural factors
• Price of the goods
• Level of technology
b.
• Cost – initial, maintenance and running costs of the equipment should be affordable.
• Adaptability – the equipment chosen should be able to cope with future changes
development.
• Durability – the equipment should be long lasting.
• Effect on staff morale - Gauge the attitude of the staff towards the equipment which
should be positive.
• Availability of man power – The personnel required to run or operate the equipment
should be available.
• Availability of room – The room to keep the equipment should be available.
• Security of the equipment – There should be available resources to guarantee the safety of
the equipment.
4. a)
a)
Opening stock + purchases + carriage inwards-returns outwards –
closing stock ¹
40,000 + 400,000 + 50,000 – 30,000 – 100,000
C.O.G.S = Shs.360,000 ¹
b)
Net sales – Cost of goods sold ½
Net sales = Sales – returns inwards ½
= 800,000 – 45,000 = Shs.755,000 ½
G. P = Shs. 755,000 – 360,000
= Shs.395,000 ½
c)
Gross profit
× 100 ¹
Net sales
395,000
= × 100
755,000
= 52.31% ¹
d)
Cost of sales
½
Average stock
Opening stock + clo sin g stock 40,000 + 100,000
Average stock = ½ =
2 2
360,000
= = 5 times
70,000
e)

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 Net profit
× 100 ½
Capital employed
Net profit = Gross profit – expenses ½ = 395,000 – 195,000 = Shs.200,000
200,000
= × 100 ½
1000,000
= 20% ½
(b)
• Language barriers thus not understanding the message.
• Noise interferes with the reception of the message.
• Poor listening by the recipient thus not achieving the desired objectives.
• Negative attitude creating bias/ which may lead to misunderstanding among the
communicating parties.
• Poor timing hence fails to achieve its intended purpose.
• Wrong medium interfering with the communication.
• Unfamiliar nonverbal signals/gestures –leading to misinterpretation of message.
• Emotional responses – leading to distortion of message.
• Unclear channel –hence misguiding the direction of the message.
• Age difference leading to misunderstanding/ misinterpretation of the message.
• Visual/ hearing impairment failing communication.
5. a) Factors to consider when choosing a method to promote products.
• Cost of the method- Affordable /cost effective.
• Target group/method that appeals to the target group.
• Urgency of the message/information to reach the consumers within the desired time.
• Nature of the product/method that will give the best achievement.
• Nature of the message/method of will present the various aspects of the product.
• Size of the market/ method that will serve the consumers effectively.
• Intended impression /method that will achieve the desired impression.
b.
Purchase Journal
Date Details Amount (Kshs.)
2013 Jan 6 Mandela Ltd. 70,000
12 Odhiambo Traders 150,000
18 Jua Kali Enterprises 50,000
Total posted to purchases
Account (Dr) in GL 270,000
Sales Journal
Date Details Amount (Kshs.)
2013 Jan 5 Jambini traders 10,000
10 Fedha Ltd. 100,000
15 Kalu works Enterprises 120,000
Total posted to sales
Account (Cr) in GL 230,000
Sales return Journal
Date Details Amount (Kshs.)

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 2013 Jan 5 Jambini traders 12,000
13 Fadhili Ltd. 6,000
Total posted to sales
return a/c (Dr) in GL 18,000
Purchases return Journal
Date Details Amount (Kshs.)
2013 Jan 7 Mandela Ltd. 5,000
14 Odhiambo traders 1,000
Total posted to purchases
return a/c (Cr) in GL 6,000

General Journal
Date Details Dr (Shs) Cr (Shs)
2013 Jan 8 Kwetu retailers machinery to record 50,000
sale of machinery on credit to Kwetu 50,000
retailers
Jan 9 Electronic equipment Lowland 8,000
retailers 8,000
To record purchase of electronic
equipment on credit from
Jane 16 Cash 15,000
Capital
To record additional capital brought 15,000
forward in cash into the business by
owner.
6. a)
• Over reliance on donor funding, which if they don’t receive, the plan may not be
implemented
• Lack of domestic resources such as skilled personnel, finance and capital may make the
implementation a problem
• Failure to involve the local people in planning. This will make them not to be willing to
implement it, for they will not be understanding it or rebelling for the fact that they were
not included
• Natural calamities such as diseases, floods, drought, etc may make the funds that had
been set aside for implementation be diverted to curb them
• Over-ambitious plans which are a times just made to impress the donors to release their
funds but may not be easy to implement
• Lack of co-operation among the executing parties which may make the work not to kick
off. For example, a conflict between the ministry of finance and that of planning of the
amount to be released
• Inflation which may make the estimated value of implementation not to be adequate,
bringing a problem of finances
• Lack of political will and commitment in implementing the plan. This may frustrate the
implementation.
b)
• There are many buyers / sellers (of the commodity) who are independent / thus
level playing ground
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• The products are close substitutes / similar (products e.g. Colgate, close up,
Aqua fresh) which enables each firm to enjoy a certain degree of monopoly power
/ but differentiated by use of colour / wrapping / name / shape / advertising
• Free entry / exit – there are no barriers / restrictions / hindrances for new firms
that require to supply the same commodity / nor are there barriers for those
wishing to exit the market / firms decision to enter / leave are influenced by profit /
loss
• Wide knowledge of market as buyers / sellers are aware of the price / output / market
factors
• / conditions.
• Firms set their own prices / output – prices are set depending on cost incurred /
demand in the market / since firms are independent / there are is little
interdependence,
• No firm controls any factor of production – firma acquire factors at (prevailing)
market prices / conditions
• (Individual) firms have highly elastic / gentle sloping demand curve – since
commodities are close substitutes
• It is possible for a single / some firms to dominate / influence market price
through extensive advertising / product promotion / differentiation
• All firms earn normal profits in the long-run since supernormal profits
attract new firms / losses make them leave / quit
• Entry / exit of a single firm does not significantly affect the market – none
of the firms can influence the market supply / price by joining / leaving /
increasing / decreasing output

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 KIRINYAGA WEST SCHOOL BASED EXAMINATIONS
BUSINESS STUDIES
PAPER 1
1. Highlight four channels of pharmaceutical manufacturer in France would use to distribute
his products in Kenya. (4marks)
2. Outline four demographic factors that a manufacturer may consider before setting up a
business. (4marks)
3. Indicate whether the following resources are renewable or non – renewable. (4marks)
Resources classification
Wildlife
Solar energy
Limestone
Natural rubber
4. Classify the following occupations as primary, secondary or tertiary. (4marks)
Occupation Level
Quarrying
Car making
Hair dressing
Textile making
5. Juma started a shop dealing in ladies clothing but failed after one year. Outline four factors
that may have caused the failure. (4marks)
6. Outline four advantages of open office layout. (2marks)
7. Name the business document to which each of the following descriptions relate.
Description Document
Used to alert buyers that goods ordered are on the way
A reply to an inquiry containing description illustrations, prices and terms
of sale of goods
Shows transactions that have taken place between the business and the
credit customer
8. State four circumstances that may lead to the dissolution of a company. (4marks)
9. Highlight four problems that hinders the expansion of railway transport in Kenya.
10. State four disadvantages of written communication to a business.
11. Outline the possible problems that may arise due to poor arrangements of goods in a
warehouse (4marks)
12. State four advantages of advertising to the customer. (4marks)
13. The diagram below shows the current demand for kerosene.

a) What is the effect of increased subsidy on rural electrification programme on demand of

kerosene? (1mark)

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b) Draw a new demand curve to show the effect of increased subsidized rural electrification
programme. (3marks)
14. Highlight four reasons why a person may choose to locate a business next to a similar
business. (4marks)
15. Highlight four characteristics of a monopolistic competitive market. (4marks)
16. Outline four factors that would contribute to increase in the level of national income.
17. Outline four steps that Kenya can take to solve her employment problems. (4marks)
18. Indicate the type of journal in which each of the following transactions would be recorded

Transactions Type of journal

Goods previously sold on credit were returned
Goods bought on credit
Goods sold for cash
Motor vehicle sold on credit
19. The following information relate to Kivai Traders
Ksh
Purchases 2 700 000
Return outwards 600 000
Closing stock 500 000
Open stock 1 200 000
Margin 2/9
Calculate:
a) Cost of sales (2marks)
b) Gross profit (2marks)
20. State four factors that will determine the amount of money held by an individual for
speculative motives. (4marks)
21. Highlight four factors that must be considered before incurring a public expenditure.
(4marks)
22. State four causes of cost push inflation. (4marks)
23. Outline four negative effects of liberalization to a country. (4marks)
24. The following information relates to Juma Enterprises for the year ended 31 st December
2023.
Shs.
Capital as 31/12/23 500 000
Profit 100 000
Drawings 60 000
Additional investment 40 000
Calculate the capital of Juma Enterprises as at 1st January 2023. (4marks)
25. For each of the following transactions, state the account to be credited and the account to be
debited (4marks)
Transaction a/c debit a/c credit
The owner brought in cash from private sources
Bought goods and paid by cheque
Withdrew cash for personal reasons
Deposited some money from the cash till to the bank account

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 KIRINYAGA WEST SCHOOL BASED EXAMINATIONS
BUSINESS STUDIES
PAPER 2
1. (a) Explain five characteristics of human wants (10marks)
(b) Explain five clauses that must be specified in the memorandum of association of a
public Limited company (10marks)
2. (a) Explain five importance of filing documents to an organization (10marks)
(b) The following balances were extracted from books of Rhoda Traders on 1st January
2015
Shs
Motorvan 200 000
Furniture 200 000
Stock 80 000
Debtor 60 000
Cash 240 000
Capital 600 000
Creditors 180 000
The following transactions took place during the year that ended 31st December 2018
i) Sold furniture worth sh. 60 000 for sh. 100 000 and received the whole amount in cash
ii) Purchased goods worth shs. 80 000 for which cash sh. 50 000 was paid the balance was still
outstanding at the end of the year
iii) Cash sh. 20 000 was taken from the business by the proprietor to pay her son’s school fees
iv) Opened a business bank account and deposited sh. 200 000 from cash box.
Required:
Draw Rhoda’s trade balance sheet as at 31st December 2018 (10marks)
3. (a) Explain five uses of national income statistics to a country (10marks)
(b) Explain five disadvantages of international trade (10marks)
4. (a) Explain five benefits of communication to a business (10marks)
(b) Explain five methods that the government may use to increase supply of goods to the
market (10marks)
5. (a) Explain five disadvantages of using direct taxes to raise government revenue.
(b) Explain principles of insurance. (10marks)
6. (a) Explain five reasons why business should observe electrical practices (10marks)

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(b) The following trial balance was extracted from the books of Faida traders as at 31/12/2020
Dr Cr
Purchases 420 000
Sales 855 000
Sales returns 12 000
Purchase return 20 000
Creditors 100 000
Debtors 6 300
Bank overdraft 65 000
Motor vehicle 480 000
Cash in hand 65 000
Furniture 190 000
Carriage inwards 14 000
Stock on 1/12/2020 280 000
Capital 626 250
Drawings 88 000
Telephone 6 400
Insurance 8 200
Postage 3 850
Rent 19 600
Discount 7 300 4 000
Advertising 12 900
1 670 250 1 670 250
Additional information: stocks as at 31/12/2020 was valued at Ksh. 60 000
Required:
i) Prepare Faida Traders Trading, profit and loss account for one month of December 2020
(6marks)
st
ii) A balance sheet as at 31 December 2020 (4marks)

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 KIRINYAGA WEST SCHOOL BASED EXAMINATIONS
BUSINESS PAPER 1
MARKING SCHEME
1.
- Foreign manufacturer → wholesaler → retailer → local consumer
- Foreign manufacturer → wholesaler → local consumer
- Foreign manufacturer → retailer → local consumer
- Foreign manufacturer → local agent → retailer → local consumer
- Foreign manufacturer → local consumer
2.
- Size of the population
- Sex/gender
- Age of the population
- Level of literacy
3.
- Renewable
- Renewable
- Non – renewable
- Renewable
4.
- Primary
- Secondary
- Tertiary
- Secondary
5.
- Poor location of the business
- Stiff competition from other retailers
- Inadequate finances
- Political instability
- Improper management practices
- Poor customer relations
- Poor marketing strategies
6.
- Easy supervision of workers
- Easy location of workers
- Floor space is saved
- Cheap to decorate
- Promotes teamwork
- Construction cost is low
7.
- Advice note
- Catalogue
- Debit note
- Statement of account
8.
- In case of court order
- When a company is insolvent or bankrupt

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 - When membership falls below the minimum number required
- When company amalgamates
- When decision is made by shareholders to dissolve
- In case the company acts contrary to the provisions of the object clause
9.
- Construction of railway is expensive
- Poor management of railway companies
- Not widely used in Kenya
- Stiff competition from other modes of transport
- Low government commitment on railway expansion programs
10.
- It lacks personal appeal
- It takes time to prepare and reach the recipient
- It is suitable for people who can read and write
- Does not offer room for persuasion and convincing
- Immediate feedback may not be possible
- May be ignored
11.
- Breakages of goods due to mishandling
- Difficulties in stock taking
- Loss of goods
- Loss of quality of goods
- Underutilization of space
- Difficulties in retrieving goods
12.
- Through advertising the customer may be educated on how to use a product
- It informs the customer about the offers available in the market
- Advertising guides customers on where to get the product
- A customer may benefit from improved quality of product brought by competitive
advertising
13. (a) Demand of kerosene will decline
(b)
14.
- Availability of skilled labour
- To take advantage of existing infrastructure
- To take advantage of raw materials
- To take advantage of auxiliary services
- To share knowledge and skills with other business people
- To take advantage of improved security
15.
- There are large numbers of buyers and sellers who act independently
- There are no barriers to entry or exit from the market
- Firms set their own prices
- Buyers and sellers have perfect knowledge of the market
- The sellers offer similar products that are differentiated
16.
- Availability of natural resources
- Advanced technology
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 - Availability of skilled labor force
- Positive attitude of citizens towards work
- Well-developed infrastructure
- Political stability
- Availability of capital
17.
- Encourage employment creation in the private sector
- By adopting relevant education system
- By encouraging direct foreign investment
- By controlling population
- Increasing government expenditure
- Rural development
18.
- Sales returns journal/return inwards journal
- Purchases journal
- Cash receipt journal
- General journal
19. (a) cost of sales = opening stock + net purchases – closing stock
1 200 000 = (2 700 000 + 600 000) – 500 000 = sh. 2 800 000
(b) markup = gross profit / cost of sales
GP = 2/7 ×2 800 000 = sh. 800 000
20.
- Level of income of an individual
- Rate of inflation
- Prevailing economic status of the economy
- Income of the interest of the investment
- Rate of interest
21.
- Maximum social benefits
- Flexibility/elasticity/vary expenditure according to circumstances
- Sanctions /expenditure must be determined by a certain authority
- Waste must be discouraged/economy
- Financial administration – accuracy and systematic
22.
- Rise in wages and salaries
- Increase in taxes
- Reduction in subsidies
- Increase in cost of inputs other than labour
23.
- Loophole for illegal goods to get into the market
- Not easy to control local prices hence killing infant industries
- Strategic industries may collapse
- There will be dumping of commodities
- Possibility of many people evading taxes
24. Capital 31/12/2023
500 000
+ drawing 60 000
- Additional investment 40 000
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 - Profit 100 000
Capital 1/1/2023 = 420 000
25.
Debited Credited
Cash Capital
Purchases Bank
Drawing Cash
bank cash

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 KIRINYAGA WEST SCHOOL BASED EXAMINATIONS
BUSINESS STUDIES
PAPER 2
MARKING SCHEME
1. (a)
• Insatiable/unlimited – cannot be fully satisfied because they are endless
• Recurrent/repetitive – once satisfied they are felt again
• Complimentary – satisfaction of one want give rise to another want
• Competitive – since resources are limited, they compete with one another in order to be
satisfied first
• Some are universal – some are common to all human beings
• Some are habitual/habit forming – once an individual has developed a taste for a
commodity, he tends to use it over and over again
• Requires resources – for them to be satisfied
• Vary in intensity and urgency – some wants are more felt than others
(b)
• Name clause – states the name of the company which must end with the word ‘limited’
• Objects clause – states the objectives of the company and specifies what the company has
power to do/function/aims/mandate/goals
• Situation clause – states the physical location of the company/registered office/country of
registration/headquarters
• Liability clause – states the extent to which members are liable to the debts of the company
/shareholders/members have limited liability
• Capital clause – discloses the amount of capital which the company can raise and the division
of the capital into units of equal values called shares
• Declaration clause – contains a declaration by the original members who registered the
company about their desire to form the company/their objectives/their personal details
2. (a)
• Tidiness is maintained – as documents are well arranged
• Easier retrieval of documents – since documents are coded/serialized
• Safety of information – from damage by bad weather, fire etc.
• Saves on storage space – since documents are kept compactly
• Encourages quick decision making – as information is readily available
• Facilitates safe keeping of documents – for future reference
• Safeguards secrets and confidential information – as documents are kept away from
unauthorized personnel
• Encourages transparency and accountability – since movement of documents is monitored
(b)
Motor van 200 000
Furniture 200 000 – 60 000 = 140 000
Stock 80 000 + 80 000 = 160 000
Debtors 60 000
Cash 240 000 + 100 000 = 340 000
340 000 – 50 000 = 290 000
290 000 – 20 000 = 270 000
270 000 – 200 000 = 70 000
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 Capital 600 000 + 40 000 – 20 000 =620 000
Creditors 180 000 + 30 000 = 210 000
Bank 200 000
RHODA TRADERS
BALANCE SHEET
AS AT 31ST DEC 2018
Asset Sh Sh Capital + liabilities Sh
Fixed assets Capital
Motor van 200 000 Add profit 600 000
Furniture 140 000 340 000 Less drawing 40 000
Current assets Net capital 20 000
Stock 160 000 Current liabilities 620 000
Debtors 60 000 Creditors
Bank 200 000
Cash 70 000 490 000 210 000
830 000 830 000
3. (a)
• Indicator of standard of living – an increase in national income indicates improved welfare
• To aid government in planning – they provide information which is used in making
economic policies, preparing annual budget and preparing development plans
• Investment decisions – data obtained can be used by entrepreneurs to make decisions on the
sector, when and amount of capital to invest
• Compares standards of living in a country between different periods – the period the
national income is high is said to have high standard of living and vice versa
• Compare standards of living between countries – countries with high national income are
said to have high standards of living
• Assessing performance of the economy over time – the period with high national income is
said to be better off
• To address income disparities – national income statistics provide information on
distribution of income which helps the government to address income disparities
(b)
• Importing of harmful products – e.g. drugs that affect the health of people
• May lead to collapsing of local /infant industries – since people will tend to buy imported
goods leading to loss of employment
• May lead to Unfavourable balance of payment – if the imports are higher than the exports
• A country may suffer from imported inflation – if a country imports from a country already
suffering inflation hence high cost of imports
• A country that relies on imported products may suffer problems of supply – during times of
emergency
• May lead to acquisition of bad culture from other countries – as a result of their interaction
4. (a)
• Giving and obtaining information – for proper flow of information within the firm and also
between the firm and outsiders
• Clarifying issues – and points which would otherwise be confusing
• Enhancing public relations – creating a positive corporate image with the outsiders
• Starting and influencing action – through communication, management is able to get ideas,
make plans and ensure they are implemented in the desired way
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• Improving customer service – helps in handling customer inquiries efficiently and offering
desired feedback
• Giving instruction – through communication management is able to get work done by issuing
procedures and orders
• Confirming arrangement – e.g. meetings and conferences
• Coordinating departments of a firm – through communication, departments are able to work in
harmony to achieve firm’s objectives
(b)
• Reduction of taxes on production – this causes reduction in the cost of production motivating
producers to increase production
• Increase subsidies in production government meets part of production cost making production
affordable
• Eliminating quotas in production – thereby increasing quantity imported into the country
• High price limit – which encourage many producers
• Improving access to credit – to boost investments to in production
• Improving infrastructure – to facilitate movement of goods and services
• Ensuring political stability – which encourage production
• Simplifying procedure of starting and engaging in business production – to boost investments
5. (a)
• Very unpopular with the citizens – the burden of paying taxes is born directly by the individual
tax is imposed on
• May be evaded – by cheating on income earned
• The tax payer is not consulted – in determining the tax rates
• Not equitable –citizens with low income don’t pay the taxes
• Reduce ability to save – by reducing the disposable income
• May encourage capital freight – foreign investor may transfer their capital to other countries
with low taxes
• Reduces purchasing power – leading to low standards of living
• Discourages hard work – as it directly reduces tax payer’s income
• It is complex – due to many accounting and formalities to follow
• May cause labour unrest – as labourers demand higher pay to absorb high taxes or to maintain
standards of living
(b)
• Principle of utmost good faith – requires the insured to disclose all material information to the
insurer about the property being insured
• Principle of indemnity – states that no one can be compensated beyond the value of the loss. It
aims at restoring the insured back to the initial financial position
• Principle of insurable interest – one should insure property that he/she stands to suffer a direct
financial loss in case the risk insured against occurs
• Principle of proximate cause – for an insurer to compensate the loss suffered, it must be
resulting from the risk insured against
• Principle of subrogation – after the insured has been compensated, the remains arising from the
damaged property belong to the insurance company
• Principle of contribution – states that should the property be insured with more than one
companies, the loss arising from the damage will be shared by the insurers proportionally
6. (a)
• To ensure there is fair competition – by avoiding unhealthy practices like portraying
competitors in bad light in advertising
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• To protect consumer – against exploitation/ malpractices/high prices/low quality goods
• To protect the environment – from pollution/degradation
• To promote social responsibility – by giving back to the society through bursaries/sponsorship
• To abide by the country’s law – hence reduce law suits/conflicts with law enforcing agencies
• To promote positive cultural practices – by producing goods and services that are in line with
community’s morals/culture
• To maintain suppliers – to ensure steady supply /continuous production
• To maintain positive image – to increase sales/retain customers/promote customer loyalty
FAIDA TRADERS
TRADING, PROFIT AND LOSS ACCOUNT
FOR THE MONTH ENDED 31ST DEC 2020
Sh Sh Sh
Opening stock 280 000 Sales 855 000
Add purchases 420 000 Less return inwards 12 000
Add carriage inwards 14 000 Net sales 843 000
Less return outwards 20 000 414 000
Goods available for sale 694 000
Less closing stock 60 000
Cost of goods sold 634 000
Gross profit b/d 209 000
843 000 843 000
Telephone 6 400 Gross profit b/d 209 000
Insurance 8 200 Discount received 4 000
Postage 3 850
Rent 19 600
Discount allowed 7 300
Advertising 12 900
Net profit aid 154 750
213 000 213 000
Net profit b/d 154 750
FAIDA TRADERS
BALANCE SHEET
AS AT 31ST DEC 2020
Assets Shs Shs Capital + liabilities Shs Shs
Fixed assets Capital 626 250
Motor vehicles 480 000 Add net profit 154 750
Furniture 190 000 670 000 Less drawings 88 000 693 000
Current assets
Stock 60 000 Current liabilities
Debtors 63 000 Creditors 100 000
Cash in hand 65 000 188 000 Bank overdraft 65 000 165 000
858 000 858 000

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 SABATIA SUB COUNTY
BUSINESS STUDIES
PAPER 1
1. State four benefits that could be enjoyed by a person who decides to take out an endowment
policy. (4marks)
2. Mention four features of a capital as a factor of production. (4marks)
3. Highlight four reasons why office documents should be filed. (4marks)
4. The oil pipeline has recently been extended from Nairobi to western Kenya. State four
benefits that may be encountered to the country from the extension. (4marks)
5. Outline four features of monopoly market structure. (4marks)
6. For each of the following transactions state the account to be debited and credited.
Transaction A/C debited A/C credited
a) Paid a creditor from private source
b) Proprietor brought in cash from private source
c) Bought goods and paid by cheque
d) Proprietor withdrew cash for personal use.
7. Highlight four problems that Kenyan government may experience in implementing a
development plan. (4marks)
8. Give four reasons which make buyers to shy off from buying goods through hire purchase.
(4marks)
9. State four benefits that may accrue to a business person who uses e – mail to communicate.
10. A trader has decided to take a loan to expand a manufacturing business. Give four reasons
why it is beneficial to borrow from non – bank financial institutions. (4marks)
11. Identify four disadvantages of advertising through television in Kenya. (4marks)
12. Give the difference between the following classes of goods.
a) Shopping and convenience goods. (2marks)
b) Material goods and non – materials goods. (2marks)
13. Highlight four factors that may negatively influence the level of national income of a
country. (4marks)
14. State four reasons why the government imposes tax. (4marks)
15. Show using curves, how increased subsides may affect supply of cabbage in the market
price remaining constant. (4marks)
16. Give four reasons why protectionism policy in foreign trade may fail. (4marks)
17. Highlight four benefits an individual gets from buying ordinary shares in a company such
as Safaricom. (4marks)
18. State four measures that the government of Kenya may take to solve youth unemployment
in Kenya. (4marks)
19. Kenya has been experiencing an upward trend in price of petrol as a result of a rise in
inflation. State four steps that can be taken to minimize expenditure on petrol. (4marks)
20. The following information relates to Mudete traders for the year ended 31st December 2023.
Sh.
Opening stock. 24,000
Carriage on sales. 12,000
Purchases. 370,000
Sales. 442,500
Closing stock. 40,000
Other expenses 100% on gross profit.

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 Required: prepare trading, profit and loss account for the year ended 31st December 2023.
21. Outline three disadvantages of free warehouses: (3marks)
22. State four Acts which the government uses to protect the consumers from exploitation.
23. The following information relates to mwanzo mpya traders for the month of June 2024.
June 1: bought goods on credit from Omondi costing Ksh. 10,500, Otieno Ksh 2000 and
Omollo Ksh. 5000.
June 2: Sold goods on credit to Wekesa Ksh 3000,Ogolla Ksh. 4000 and Alex ksh 7200.
Required:
Record the above transaction in respective journals. (4marks)
24. The following information relates to Onyango’s Business as at 1/6/2024. Prepare a trial
balance as at the date (4marks)
Stock 76,500
Creditors 450,400
Debtors 350,000
Bank 260,400
Fixed assets 970,200
Capital 1,300,000
Cash 120,000
Rent due 26,700
25. State four disadvantages of intermediaries in chain of distribution. (4marks)

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 SABATIA SUB COUNTY
BUSINESS STUDIES
PAPER 2
1. a) Explain five ways in which the external environment may contribute to the success
of a business. (10marks)
b) Outline five difference between a partnership and cooperative society. (10marks)
2. a) Explain five benefits of entrepreneurship to the economy. (10marks)
b) Explain five benefits that may accrue to a country as a result of government policy to
establish more Export Processing Zones (EPZs) in the country. (10marks)
3. a) Explain five trends in business ownership. (10marks)
b) On 1st March 2020, Yawa had cash in hand shs. 7,800 and a bank overdraft of shs
23,400.
During the month, the following transaction took place.
March 3: Cash sales sh. 6500 paid directly into the bank.
March 4: Bought goods for sh. 15,000 by cheque.
March 6: cash sales sh. 50,000
March 9: Received a cheque for sh. 18,000 from Amolo in full settlement of his
account of sh. 20,000.
March 13: Paid insurance premiums sh. 16,000 in cash.
March 14: Paid Kimotho by cheque sh. 9,700 in full settlement of his debt of sh.
10,000.
March 17: Cash sales sh. 150,000 paid directly into the bank.
March 21: Withdrew shs. 30,000 from bank for office use.
March 23: Received a cheque of sh. 23,750 from Rotich after having deducted 5%
cash discount.
March 25: Paid wages shs. 20,000 in cash.
March 26: The cheque received by Amolo was dishonoured.
March 30: Banked all cash except sh. 3,000.
Required: Prepare a three-column cashbook. (10marks)
4. a) Explain five ways in which the government may increase the demand of a commodity.
b) Explain five non-monetary policy measures that can be taken to control inflation in the
country. (10marks)
5. a) Explain five causes of unemployment. (10marks)
b) Explain five features of chain stores. (10marks)
6. a) Explain five reasons why a trader in Mombasa would prefer to transport goods using
Standard Gauge Railway (SGR) instead of road. (10marks)

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b) The following trial balance was extracted from the books of Rafiki Traders for the year
ended 31/12/2019
Rafiki Traders
Trial Balance
As at 31st Dec. 2019
Dr(shs) Cr(shs)
Capital 270 000
Drawings 30 000
Opening stock 50 000
Purchases 255 000
Sales 400 000
Returns 4 000 7 000
Carriage inwards 28 000
Carriage outwards 8 000
Discount 12 000 5 000
Insurance 25 000
Commission 3 000
Rent 18 000
Furniture 50 000
Land 155 000
Premises 110 000
Debtors 40 000
Creditors 70 000
770 000 770 000

Closing stock was valued at sh. 58,000

Required,
i) Prepare a Trading and Profit and Loss account for the year ended 31st Dec.2019
ii) Calculate the following ratios.
a. Mark up (2mk)
b. Rate of stock turnover (2mk)

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 SABATIA SUB COUNTY
BUSINESS STUDIES
PAPER 1
MARKING SCHEME
1.
a) If the assured dies the beneficiaries will be paid.
b) Assured benefits unless death proceeds the expiring of the agreed period.
c) Premiums are paid only during an agreed period.
d) It ensures financial stability of assured and dependents.
2.
a) It is manmade hence it supplies is under man’s control.
b) It is a basic factor of production.
c) It is subject to depreciation via wear and tear.
d) Can be improved through technology.
3.
a) So that they can be protected from damage.
b) So that information can be retrieved easily when needed.
c) so that office can be tidy.
d) So that reference can be done in future.
4.
a) Large volume of oil will be transported
b) Road damage will be minimized due to fewer tankers.
c) Delays/ shortage of fuel to western Kenya will be reduced as pipeline gives continues
supply.
d) Environmental pollution from heavy tankers will be minimized.
e) Pilferage of fuel will be reduced as it is difficult to steal oil from the pipeline.
f) Traveling from Nairobi to western Kenya takes shorter time due to reduced congestion
of the road.
g) Reduced cost of transportation of oil.
5.
a) One/single seller/producer/supplier.
b) Seller is the price maker.
c) Restriction/barriers to entry into market.
d) No close substitutes for the product.
e) Buyers have limited knowledge of market condition
6.
Transaction A/C debited A/C credited
a) Paid a creditor from private source Creditors Capital
b) Proprietor brought in cash from private source Cash Capital
c) Bought goods and paid by cheque Purchases Bank
d) Proprietor withdrew cash for personal use. Drawings Cash
7.
a) Over ambitious plans.
b) Lack of political good will.
c) Lack of adequate and skilled personnel.
d) Inflation.
e) Lack of co – operation among the executing parties.

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 f) Reliance on donor funding.
g) Failure to involve local people in planning.
h) Natural calamities. E.g. drought, floods.
i) Insufficient/ lack of funds.
8.
a) The buyer does not acquire ownership of goods until the last installment is paid.
b) The interest charged is higher compared to what is sold on cash.
c) It encourages impulse buying.
d) The seller can sell the goods if the payment of the installment is not completed.
e) There is limitation of goods offered for hire purchase, hence no variety to the buyer.
9.
a) It is relatively cheap.
b) It is relatively fast.
c) Enhances confidentiality.
d) Sender may get instant feedback.
e) Easy to access other information e.g. advertising.
f) Relatively easy to retrieve information.
g) It is universal.
h) Can advertise to others. (Wider market.)
i) Can send detailed information.
j) Can be used for future reference/ evidence.
10.
a) They give long term loans.
b) They provide finance for capital development/specific projects.
c) They charge low interest rates.
d) They assist in management of the projects.
e) They accept lower collateral values.
f) They give a longer grace period.
11.
a) It is an expensive medium of advertising.
b) The coverage may be limited due to high cost of television sets.
c) Television reaches even those audiences that were not targeted.
d) When there is power blackout the advert cannot reach the target audience.
e) The adverts are not long lasting.
12.
a) Shopping and convenience goods.
Shopping goods are goods that are not easily accessible and are of higher value e.g.
furniture, clothes, TV, computers etc. while convenience goods are those that are widely
available in retail shops and are bought frequently by customers to satisfy common
wants/ are easily accessible to consumers e.g. sugar, salt etc.
b) Material goods and non – materials goods. (2 marks)
Material goods are commodities that are tangible like food, books while non material
goods are services e.g. teaching
13.
a) Low labour supply.
b) Inadequate capital.
c) Low levels of entrepreneurship in a country.
d) Poor natural resources endowment in a country.
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 e) Poor technology.
f) Political instability of a country.
g) Les/ low foreign investment.
h) Negative attitudes of citizen towards work.
i) Large subsistence sector.
14.
a) To raise revenue.
b) To redistribute incomes
c) To discourage consumption of harmful goods.
d) To correct a deficit in the balance of payment.
e) To protect infant industries.
f) To discourage importation of certain products.
15.
16.
a) Possible retaliation.
b) Poor quality of products within the country.
c) High prices of goods in the country.
d) Less variety of goods in the country.
e) Dangers of protected firms not growing.
17.
a) He/ she is entitled to vote.
b) He/she becomes one of the owners of the company.
c) He/she is entitled to dividends.
d) He/she has a claim on assets when the company winds up.
e) He/she can be appointed to the board of directors.
18.
a) Encouraging employment creation in private sector.
b) Adopting policies that encourage the use of labour – intensive methods of production.
c) Adopting relevant education system e.g. TVET and CBC.
d) Diversification of economic activities.
e) Increasing government expenditure e.g. construction of roads.
f) Rural development to reduce rural – urban migration.
g) Encouraging direct foreign investment.
h) Population control.
i) Encouraging the use of local resources.
19.
a) Pooling people who are travelling to same direction.
b) Use of alternative sources of energy/ footing, bicycle.
c) Encourage public service vehicles with higher carrying capacity.
d) Encourage use of vehicles/ machines with a lower engine capacity/ fuel saving engine.
e) Set maximum price legislation.
f) Reduce tax on petrol/subsides.
g) Improve road networks.
h) Encourage machine maintenance.
i) Increase taxes on complimentary goods.

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20.
MUDETE TRADERS√
TRADING, PROFIT AND LOSS ACCOUNT
FOR YEAR ENDING 31ST DEC 2023
Dr Cr
Opening stock 24,000√ Sales 442,500√
Add: purchases 370,000√
Goods available for sale 394,000
Less: closing stock 40,000√
Cost of sales 354,000
Gross profit c/d 88,500√
442,500 _______
Expenses 442,500
Carriage sales 12 000√
Other expense 8,850√
Gross profit b/d 88,500√
Net profit c/d 67,650√ _____
88,500 88,500
Net profit b/d 67,650

21.
a) The government does not earn income since no tax is paid.
b) Inspection of goods is relaxed and this can lead to storage of illegal goods.
c) Corrupt traders can store goods in free warehouses to avoid paying taxes.
22.
a) Weight and measures Act.
b) Trading licenses Act.
c) Food and drug Act.
d) Public health Act.
e) Rent restriction Act and landlord and tenants Act.
23.
Sales Journal
Date Details Folio Amount
2014 Wekesa 3000√
June 2 Ogolla 4000√
Alex 7200√
Total to be posted to 14,200√
sales A/C (Cr)
Purchase Journal
Date Details Folio Amount
2014 Omondi 10 500√
June 1 Otieno 2 000√
Omollo 5 000√
Total to be posted to 17 500√
sales A/C (Dr)

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24.
ONYANGO’S BUSINESS
TRIAL BALANCE
AS AT 1/06/2024
ONYANGO’S BUSINESS
TRIAL BALANCE
AS AT 1/06/2024
Details Dr Cr
Stock 76,500√
Creditors 450,400√
Debtors 350,000√
Bank 260,400√
Fixed assets 970,200√
Capital 1,300,000√
Cash 120,000√
Rent due _______ 26,700__√
1,777,100 1,777,100

25.
a) Leads to high prices of goods.
b) Leads to delay of product.
c) Can lead to damage of goods.
d) Can lead to loss of goods on the way.

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 SABATIA SUB COUNTY
BUSINESS STUDIES
PAPER 2
MARKING SCHEME
1 a)
i) Fair/ healthy competition that business owners can cope up with/ withstand.
ii) Adequate market/ customers due to high purchasing power/ high incomes.
iii) Security to protect property/ goods against theft.
iv) Use of appropriate technology leading to production of high quality goods/ high
quantities of goods.
v) Favourable government policies which reduce the cost of doing business/ encourage
production of certain commodities.
vi) Political stability which creates a conducive/ favourable environment for investment/ for
starting/ operating a business.
vii) Increase in population hence creating wider market for goods/ services.
viii) Good infrastructure hence faster mobility of goods/ services to the market/ raw
materials to industries.
ix) Favourable socio-cultural factors which will encourage consumption/ production of
certain commodities/ running/ starting of a business.
x) Favourable natural factors/ climate which leads to increased production of agricultural
products.
xi) Favourable economic factors which increases consumers’ purchasing power.
xii) Reliable suppliers hence continuous/ uninterrupted production of goods.
xiii) Favourable legal frameworks
b)
i) Increased exports which helps to correct Unfavourable balance of payments.
ii) Increased foreign investment
iii) Creates job opportunities enabling people to earn an income.
iv) Creates market for locally produced raw materials
v) Stimulates industrialization
vi) Earns the government revenue after the tax free period through taxation/ levies.
2. a)
i) Creates job opportunities – enabling people to earn income
ii) Leads to enhancement of infrastructure – by the government in entrepreneurial areas
iii) Reduces encroachment of the economy by foreigners – by investing in areas that would
otherwise be invested by foreigners
iv) earns the government revenue – through the taxes paid by the entrepreneurs
v) widens the market – giving consumers a wide range to choose from
b)
i) Increased exports which helps to correct Unfavourable balance of payments.
ii) Increased foreign investment
iii) Creates job opportunities enabling people to earn an income.
iv) Creates market for locally produced raw materials
v) Stimulates industrialization
vi) Earns the government revenue after the tax free period through taxation/ levies.
3. a)

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 i) Cartels – A group of related companies that agree to work together in order to control
output/ prices/ market
ii) Holding companies – one that acquires 51% or more shares from another company.
iii) Amalgamation/ Mergers – where two or more business organizations combine to form
one bigger business.
iv) Absorption – A business taking over another business by buying all the assets and the
purchased one ceases to exit all together.
v) Check off system – money is deducted at source by employer and submitted to the
SACCOs on behalf of the employee who is a member of the SACCO.
vi) Privatization changing of state owned corporations to public limited companies to
enhance efficiency/
vii) Globalization which enables business organizations to conduct business activities in any
part of the world through the use of technology.
viii) Franchising – Is where one business grants another the rights to manufacture/
distribute/ provide its branded products using the name of the business that has granted
the right.
ix) Performance contract in order to monitor the performance of employees.
x) Trusts is where a group of companies work together to reduce competition/ where a
company buys more than 50% of shares in a competing company so as to reduce
competition.
xi) Front office Savings Account (FOSA) which enables SACCO members to conveniently
deposit/ withdraw money.
xii) Burial benevolent Funds (BBF) SACCOs have started systems to assist their members
financially in burials/ during bereavements.

b)

Three column cash book

Date Details Discount Cash Bank Date Details Disc Cash Bank
allowed Received
2020 2020
March 1 Bal 7800 March 1 Bal b/d 23400
b/d 6500 4 Purchase 15000
3 Sales 50,000 Insurance 16000
Sales 2000 18000 13 Kimotho 300 9700
6 Amolo 150000 Cash 30000
Sales 30,000 14 Wages 20000
9 Bank 1250 23750 Amolo 18000
Rotich 48,800 21 Bank 48800
17 Cash . . Bal c/d . 3000 150950
3250 . 247,050 25 300 87800 247050
21 87800
26
23

30
4 a)
i) Reducing taxation hence making the commodity to be affordable.
ii) Increasing subsidies so as to reduce the cost of production thereby reducing the price of
the commodity hence encouraging consumption.
iii) Setting a low price for the commodity hence encouraging its consumption.

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 iv) Removing ban on the commodity hence encouraging increased usage/ consumption of
the commodity.
v) Removing quotas – which increases demand for the commodity.
b)
i) Restricting imports by imposing high import duty/ through import quotas in order to
discourage imports.
ii) Controlling of exports so as to prevent shortages in the local market.
iii) Price control where the government sets price limit beyond which various commodities
should not sell at.
iv) Setting wage limits to control salaries/ freezing salary increments so as to reduce the
cost of production.
v) Offer incentives to local producers/ increasing subsidies/ tax reliefs on production so as
to reduce the cost of production.
vi) Reducing government expenditure in order to reduce the amount of money in
circulation.
vii) Increasing income tax so as to reduce consumers’ disposable incomes/ purchasing
power.
viii) Producing goods that are short in supply hence increasing production of goods in the
economy.
b)
i) Rapid population growth – leading to excess supply of labour than the economy’s
absorption capacity/ available jobs.
ii) Use of inappropriate technology/ production methods –use of capital –intensive methods
of production that require only a few people to operate/ that do not create more job
opportunities.
iii) Rural-urban migration – creating excess labour force in urban areas that cannot be
absorbed/ accommodated by the labour market.
iv) Inadequate co-operant factors of production/land/capital –which hinders establishment/
expansion of industries hence additional jobs cannot be created.
v) Inappropriate education system –leading to a mis-match between school leaver’s skills
and the job requirements.
vi) Seasonality in production – during off-peak seasons there is reduced production activities
leading to a decline in demand for labour/ lay-offs of workers.
vii) Low market demand for goods/ services - which discourages investments/ expansion of
firms/ production activities (thereby reducing employment opportunities)
5. a)
i) sales are centralized
ii) purchases are decentralized
iii) deals in the same line of products
iv) under the same ownership
v) have uniform layout and design
vi) prices are uniform
b)
i) Relatively cheap/ economical since it is more affordable when used.
ii) Relatively secure hence goods are more protected against theft/ loss.
iii) Have special facilities for carrying special types of goods
iv) Enables the transporter to plan for the transport of goods since they follow a fixed time
table.
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6. a)
i) Accepting deposits where individuals/ firms can save/ keep money for future use.
ii) Lending money in form of loans/ overdrafts which act as a source of working capital to
businesses/ is used to finance business activities.
iii) Safekeeping of valuable items to protect them against theft.
iv) Offer money transfer services that are safe/ convenient/ such as cheques / credit
transfers/ standing orders/ Electronic Fund Transfer
v) Providing foreign exchange services through which traders who engage in international
trade may effect payments faster.
vi) Giving investment advice to clients on available/ viable investment opportunities.
vii) Act as a guarantor to their customers who wish to take/ secure loans from other financial
institutions
viii) Act as a referee
ix) Act as a trustee – commercial banks may undertake to manage the estate of their clients
upon request/ death.
b)
Rafiki traders,
Trading profit and loss account,
For the year ended 31st Dec, 2019
Shs. shs. Shs.
Opening stock 50,000 Sales 400,000
Add purchases 255,000 Less return inwards 4,000
Add carriage inwards 28,000 Net sales 396,000
Less returns outwards 7,000 276,000
Cost of goods available for sale 326,000
Less closing stock 58,000
Cost of goods sold 268,000
Gross profit c/d 128,000
396,000
Expenses
Discount allowed 12,000 396,000
Commission allowed 3,000 Gross profit b/d 128,000
Carriage outwards 8,000 Incomes
Insurance paid 25,000 Discount received 5,000
Net profit 103,000 Rent income 18,000
151,000 151,000
.3

Mark up = Gross profit X 100%

Cost of goods sold

128,000 x 100 = 47.76%

268,000
Rate of stock turn over = Cost of goods sold
Average stock

Average stock = 50,000 + 58,000 = 54,000

2
268,000 =5 times
54,000
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 ACK DIOCESE OF MUMIAS EVALUATION
BUSINESS STUDIES
PAPER 1
1. State the term used to describe each of the following disciplines (4mks)
(i) Study of the process of identify and acquiring necessary resources to start and operate a
business
(ii) Study of how human beings store to satisfy their endless wants using the scarce resources
(iii) Study of trade and aids to trade
(iv) Study of the systematic way of recording business activities and using the records of
decision making
2. Outline four aspects of economic environment that may influence business operations
3. Name four accounting documents used in home trade (4mks)
4. Outline four benefits of using social media such as WhatsApp groups for office
communication (4mks)
5. Hamina has an intention of starting a business of selling cabbage in the local market, the
demand and supply is represented in the diagram below

State four consequences of selling the cabbages at P2 (4mks)

6. Given the following items of Owino’s traders
Stock 31/12/2023 30,000
Stock 1/1/2023 28,500
Purchases 200,000
Return inwards 4,000
Carriage 8,000
Additional information;
i) Carriage outwards was twice as much as carriage inwards
ii) Return inwards was ½ of return outwards
iii) Margin was 1/5
Prepare Owino’s trading account (4mks)
7. State four demerits of trade liberalization to a country (4mks)
8. Highlight four factors that influence transaction motive of holding money (4mks)
9. State the relevant books of original entry into which information extracted from the source
documents given below would be recorded (4mks)
SOURCE DOCUMENT BOOKS OF ORIGINAL ENTRY
(a) Incoming invoice
(b) Outgoing invoice
(c) Outgoing cash sale slip

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10. Incoming debit note Identify the reward related to each of the following resources (4mks)
RESOURCE REWARD
(a) Supervision ……………………………………………………
(b) Tractor ……………………………………………………
(c) Trees ……………………………………………………
(d) Owner ……………………………………………………
11. Outline four difficulties that a country with a young population may experience (4mks)
12. The following figures relates to Mwembe maziwa traders for the year ended 31st December
,2023
ITEM AMOUNT (KSHS)
(a) Net loss 10,000
st
(b) Capital (31 December, 2023) 470,000
(c) Monthly additional investment 17,500
(d) Drawings 30,000
Determine capital as at 1st January, 2023 (4mks)
13. Highlight four characteristics of oligopoly market structural (4mks)
14. State circumstances under which asset stock may change (4mks)
15. The following information relates to commodity Z
YEAR PRICE (Kshs)
2021 450
2022 675
(a) Calculate the consumer price index (2mks)
(b) Comment on your answer (2mks)
16. Jane decided to take insurance cover for her car against theft from Britam Insurance
Limited. It was valued at Kshs 90,000 and she was required to make monthly payment of
Kshs 4,000. Identify the appropriate Insurance term for the following (4mks)
i) Kshs 90,000 …………………………………………………….
ii) Britam Insurance Limited …………………………………
iii) Jane …………………………………………………….
iv) Theft …………………………………………………….
17. Name the office machine which serves the following functions (4mks)
a) Trimming documents into required shapes and sizes …………………………….
b) Printing postage impression on envelopes …………………………………….
c) Transmitting printed messages
d) Folding documents placing them in envelopes and sealing the envelopes …………….
18. Highlight four reasons for which the business should observe ethical practices (4mks)
19. State four features of co-operative societies (4mks)
20. The following transactions took place during the month of Sept 2023, in the business of
May traders.
Sept 1; Started a business with shs 50,000 in the bank shs 10,000 worth of stock
Sept 2; Sold goods for shs 4,000 to Halid.
Sept 3; Bought goods worth shs 15,000 and paid by cheque.
Required; record the above transactions in the relevant ledger (4mks)
21. Identify four measures that the government is putting in place to influence the location of
business enterprises in the country (4mks)
22. Outline four roles of stock exchange market for securities in Kenya (4mks)
23. State four circumstances under which a trader would prefer to transport goods by air

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24. State the participants in a closed two sector economy represented by each of the statement
given
STATEMENT PARTICIPANTS
i) Payment for goods and services ………………………………………………
ii) Sale of factors of production ………………………………………………
iii) Payment for factors of production
iv) Sale of goods and service Highlight four characteristics of economic resources (4mks)

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 ACK DIOCESE OF MUMIAS EVALUATION
BUSINESS STUDIES
PAPER 2
1. (a) Explain FIVE Internal environment factors that contributes to the success of a business
(10mks)
(b) Explain FIVE features of public corporations (10mks)
2. (a) On 1st January 2022 Maraba traders had ksh. 220,000 in cash and a bank overdraft of
ksh.28,000
During the month the following transaction
Jan 2: Cash sales directly banked ksh. 350,000
Jan 4: Received a cheque of Kshs. 225,625 from Karen in full settlement of her debt
after allowing a 5% cash discount
Jan 7: Donated cash ksh 58,000 to the business from SACCO own savings
Jan 10: Paid sakwa Investments ksh. 92,000 in cash after deducting cash discount of
ksh. 8,000
Jan 13: Deposited ksh. 35,000 from cash till into the bank.
Jan 18: Paid rent ksh. 72,000 in cash
Jan 22: Sold goods worth Ksh 40,000 to Barasa on credit
Jan 24: Settled Lukoye trader’s account of ksh 60,000 by cheque less 15% cash
discount.
Jan 28: Withdrew ksh 52,000 from the bank for office operations
Jan 30: Took ksh. 25,000 from the business for personal commitments
Jan 31: Deposited all cash except ksh. 35,000
Required: Record the above transaction in a three column cash book and duly balance.
(b) Explain FIVE principles of a good taxation system. (10mks)
3. (a) Explain FIVE circumstances shopper may prefer buying goods from single shops
rather than supermarkets. (10mks)
(b) Explain FIVE benefits Kenya gets by being a member of the common market for
Eastern and Southern Africa states (COMESA). (10mks)
4. (a) A commodity X has a normal demand and supply, with the aid of a diagram describe
the effect of introduction of government subsidy on inputs on the equilibrium price and
Quantity (10mks)
(b) Discuss FIVE factors that may be considered when choosing a method of promoting a
product (10mks)
5. (a) Explain FIVE advantages of adopting modern technology in office operations.
(b) Explain FIVE strategies the government can adopt to address the problem of youth
unemployment (10mks)
6. (a) Explain FIVE benefits of warehousing to consumers. (10mks)
(b) The following balances were extracted from the books of Edina outlets ltd for the year
ended 31-12-2021.
Item Kshs
Transport 45,000
Advertising 11,000
Rates 10,000
Wages 70,000
Interest earned 18,940
Gross profit 305,000

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 Discount Received 19,200
Discount Allowed 15,100
Sundry Expenses 84,000
Stock 46,800
Land and premises 2,600,000
Furniture & fixtures 1,050,000
Debtors 200,000
Creditors 400,000
Bank 420,240
Cash 41,000
Drawings 150,000
Capital 4,000,000
Required:
(i) Prepare the profit and loss account for the year ended 31-12-2021 (5mks)
(ii) Balance sheet as at 31-12-2021. (5mks)

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 ACK DIOCESE OF MUMIAS EVALUATION
BUSINESS STUDIES
PAPER 1
MARKING SCHEME
1. State the term used to each of the following disciplines
(i) Entrepreneurship
(ii) Economic
(iii) Commerce
(iv) Accounting
2. Apart of economic environment that my influence business operations
(i) Credit lending period
(ii) Price of the commodity
(iii) Taxes
(iv) Inflation rate
(v) Price of the related commodity
3. Accounting documents used in home trade
(i) Statement of account
(ii) Debit note
(iii) Invoices
(iv) Credit note
(v) Receipts
(vi) Cheques
(vii) Cash sale slip
4. Benefits of using social media such as whatsapp groups for office communication
(i) Reduced communication cost/economical/not expensive.
(ii) Provides unlimited space for information storage /filing.
(iii) Fast means of communication/saves time.
(iv) Facilitates quick decision making/feedback.
(v) Easy to use/convenient while communicating
(vi) Communication can take place at any time.
(vii) Wide coverage/communication can be conveyed to many people at different places of
the same time
5. Consequences of selling the cabbages at price p2
(i) Demand for cabbages decreases.
(ii) Likely to have surplus cabbage/less will be bought
(iii) Consumer may go for substitute which is cheaper
(iv) There will be pressure on the price to go down.
6.
Owino Trader
Trading Account
For the period ended 31st December 2023
Opening stock 28,500 Sales 245,458.75
Add Purchases 200,000 Less Returns Inwards 4,000
Add Carriage Inwards 2,667 Net sales 241,453.75
Less Returns outwards 8,000
Cog As 223,167
Less Closing Stock 30,000

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 Cogs 193,167
Gross profit c/d 48,291.75
241,458.75 241,458.75
7. Demerits of trade liberalization to accounting
(i) May lead to dumping
(ii) May cause over exploitation of natural resources
(iii) May lead to unemployed
(iv) Erosion of cultural values
(v) Entry of contra band goods.
(vi) May lead to unfavourable balance of payment
(vii) May encourage brain drain
8. Four factors that influence transaction motives
(i) Interval between income receipts
(ii) Number of dependants
(iii) Individuals level of income
(iv) Individual spending habits.
(v) Availability of credit
(vi) Rate of inflation/prize of products
9. (a) Incoming invoice Purchases journal
(b) Outgoing invoice Returns inward / sales return journal
(c) Outgoing cash sale slip Cash receipts journal / cash book
(d) Incoming debit note Purchases journal
10. Identify the rewards related to each of the resources
Resource Rewards
Supervision Salaries, Wages.
Tractor Interest
Trees Rates, Rent
Owner profits
11. Difficulties that a country with a young population may experience include
(i) High dependence ratio
(ii) High rate of unemployment
(iii) Increased social crimes
(iv) Low labour supply
(v) Pressure on goods and services
(vi) Reduced saving and investments
(vii) Diversion of government expenditure
12. Determine capital as at 1st January, 2023
Initial capital = Final capital + Net loss + Drawing – Annual additional investments
Initial Capital = 470,000 + 10,000 + 30,000 – (17,500x12)
Initial Capital = 510,000 – 210,000
Initial Capital = 300,000/=
13. Features of Oligopoly include
(i) May lead to price rigidity/ Kinked demand curve
(ii) Firms are interdependent in decision making
(iii) Products are homogeneous/ similar for some firms but can differentiate
(iv) Market is made up of few large firms.
(v) Firms may engage in price wars

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 (vi) Firms engage in non-price competition/collusive oligopoly
(vii) Unpredictability of behavior/uncertainty of firms.
14. Circumstances under which an asset stock can change include
(i) When the stock is purchased / purchases
(ii) When goods are sold / sales
(iii) When goods bought are returned be supplier/return outwards/purchases returns.
(iv) When goods sold are returned by customer /sales return/return inwards
(v) When goods are taken for personal/ private use
15. Calculate consumer price index
P1
Consumer price index (CP1) = × 100%
P0
675
= × 100%
450
= 150%
The price of commodity z in 2022 is 150% its price in 2021.
The price of this commodity rose by 50% since 2020/inflation by 50%
16. Identify the appropriate insurance terms
(a) Kshs 900,000 Sum assured / value of the property/ policy
(b) Britam Insurance Limited Insurer/ insurance company
(c) June Insured
(d) Theft Risk, perils/hazards
17. The machines described are
(a) Paper Shredder
(b) Franking machine
(c) Facsimile
(d) Composite machine
18. Reasons for observing ethical practices include
(i) To ensure fair competition
(ii) To maintain positive image of the business
(iii) To protect consumer/customer
(iv) To abide by the country’s laws
(v) To avoid discrimination in business
(vi) To maintain suppliers
(vii) To protect the rights of employees
(viii) To promote positive cultural practices
(ix) To promote social responsibility
19. Features of co-operatives societies include
(i) Formed by minimum of ten members
(ii) Run by management committee
(iii) Governed using by-laws
(iv) Main source of capital is shares contributed by members
(v) Surplus /profits is distributed to members
(vi) It has limited liabilities
(vii) Has no maximum membership
(viii) It is separate legal entity from the member
(ix) It is formed by people with common interest
(x) No single member is allowed to own more than

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20.
Bank A/C
Dr Cr
2023 2023
Sep 1 Capital 50,000 Sep 3 Purchases 5,000

Capital A/C
Dr Cr
2023
Sep 1 Bank 50,000
Sep 1 Purchases 10,000

Purchases A/C
Dr Cr
2023
Sep 1 Capital 10,000
Sep 3 Bank 20,000

Halid A/C
Dr Cr
2023
Sep 2 Sales 4,000

Sales A/C
Dr Cr
2023
Sep 2 Halid 4,000
21. Means that the government is putting in place influence location business
(i) By improving infrastructure
(ii) By providing social amenities
(iii) By providing business subsidies
(iv) By offering direct financial assistance
(v) By reducing taxes
22. Roles of stock exchange market in Kenya
(i) Assisting companies to raise capital
(ii) Facilitating buying of shares
(iii) Facilitating selling of shares
(iv) Creation of employment
(v) Safe guarding on invertors in trust
(vi) Raising revenue for the government
(vii) Availing variety of services
(viii) Fixing of prices
23. Circumstances under which a trader would prefer to transport goods by air
(i) When the goods are perishable
(ii) When the business can afford to use it
(iii) When the goods are urgently required
(iv) When goods are to be delivered over long distance
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 (v) When securing highly valuable goods
(vi) When it is most easily accessible
(vii) When accessing remote areas (not accessed by other means)
(viii) Only means available
(ix) When it’s the policy of the business to transport goods by air
24. Participants in a closed two sector economy represented by each of the statement given
Statement Participants
v) Payment for goods and services Households
vi) Sale of function of production Households
vii) Payment for factors of production Firms
viii) Sale of goods and service Firms
25. Characteristics of economic resources include
(i) Scarce in supply
(ii) Can be combined in various proportions
(iii) They are unevenly distributed
(iv) The have utility usefulness
(v) They have more value
(vi) They are transferable from one person to another/change ownership
(vii) They are capable of alternative uses

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 ACK DIOCESE OF MUMIAS EVALUATION
BUSINESS STUDIES
PAPER 2
MARKING SCHEME
1. (a) Favourable Internal business environment
• Proper/functional/effective business structure which makes the operations/activities of the
business coordinate/run smoothly.
• Having qualified/skilled/motivated/experienced/dedicated adequate staff that improve
performance/promote efficiency
• Adequate/enough finance/capital/fund to expand/afford all the operations cost/start new
business
• Adequate/suitable facilities/structures/buildings/equipment tools which support
operations/promote efficiency
• Positive/supportive business culture: which matches/resonates/operates in line with
organization beliefs/ethos/values
• Clear/good objectives which are S/M/A/R/T
• Supportive owners: who are able to address/support the policies of the business/finance
business activities/work well with management
• Quality/efficient/effective/good skilled management who will make good decision/come
with better ideas/promote efficiency/good co-
ordination/organization/planning/staffing/directing
• Innovations/research/invention which result to new/better ideas/findings for efficiency
(b) Features of public corporations
• Owned by the government/state which raises capital/has a role in management/who
forms/creates them
• Initial capital is from the government/exchequer which is used to establish/start the
corporation/financial its operations
• Formed under an Act of parliament after approval by the parliament/National assembly/by
a parliamentary decision/ A law/bill passed by the national assembly
• Is a legal entity can sue/be sued/engage into contract/separate from the owners
• Formed to provide essential services which are basic necessities/public goods required by
all people/at subsidized rates/accept examples of essential goods as expansion
• Management appointed by government/relevant minister/CS/president who form a board of
directors/who will oversee the operations of the organization/which comprise the chairman
and Board of directors.
2. (a)

THREE - COLUMN CASH BOOK

Date Details F Discount Cash Bank Date Details F Discount Cash Bank
Allowed Received
Jan2022 Jan
22
1 Balance 220,000 1 Balance 28,000
2 b/d 350,000 10 b/d 8,000 92,000
4 Sales 11,875 225,625 13 Sakwa 35,000
7 Karen 58,000 18 Bank 72,000
13 Capital 24 Rent 24,000 136,000
28 Cash 35,000 28 52,000

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31 Bank 52,000 30 Lukoye 25,000
Cash 71,000 31 Traders 71,000
31 Cash 35,000 465,625
Drawings
Bank
Balance
c/d
11,875 330,000 681,625 32,000 330,000 681,625
Notes:
- Details must be correctly indicated/named
- Balances must be b/d/c/f and c/d/c/f towards
- If all dates are missing deny 1 mark
- Incase Discount allowed and discount received are not Indicated in the format do not
award any entry in the discount column
- Credit sales if entered, take away/penalize 1mark.
(b) Principles/canoes of taxation
• Equity: should be charged fairly/justly/according to ability of taxpayer to
afford/progressive/rich pay more%/poor less %
• Economical: should be cheap/cost effective in collecting expenses/relative lower collection
cost compared to collection/no wastage in collection
• Convenient: method/time of collection should be favourable to taxpayer/according to
taxpayer’s program/e.g. salaried workers taxed at end month/farmers taxed at harvest time.
• Simplicity: method of collection/calculating tax easy to understand/not complicated
• Difficult to evade: should not have ways/loophole of escape/dodging payment
• Certainty: Tax collector/payer must be sure of when/how much tax to collect/pay
• Flexible: should be adaptable/adjustable according to economic performance
• Elastic: amount charged can be increased or reduced according to tax payers’ ability
3. a) Preference of single shop to supermarket
• If the single shop is nearer to buyer than supermarket in order to save on transport
• If the shopper does not have enough money to buy in cash since single shops can give
credit unlike supermarket that sell on cash terms.
• Where the shopper requires personal attention given in unit shops unlike supermarket that is
self-selection
• If the shopper wants some special goods which are only stocked by unit shops and not
supermarkets (accept examples of special good
• If the shopper wants foods in specific quantities sold in single shops and not in
supermarkets. (Accept example of quantities of goods not stocked in supermarket e.g. glass
of sugar.
• Where single shops operate for longer hours/late into the night when supermarkets are
closed.
(b) Benefits of COMESA membership
• Wider/expanded market. Since many countries to buy goods/services
• Promote/encourage large scale production (by Kenyan firms) therefore enjoy economics of
scale
• Promote transfer of (better/modern) technology leading to efficiency/large scale
production/high quality goods
• Leads to production of high quality goods resulting from completion

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• Easy/faster movement of goods; due to minimum restrictions/barriers/accept example of a
barrier reduced as explanation
• Joint research/share ideas which leads to finding on new/better goods/services
• Promote peace/good relation (among member countries) due to interaction/depending on
each other
• Encourage specialization where a country concentrates on goods of comparative
advantages/leading to high quality goods accept any advantage of specialization for
expansion
• Reduced prices of goods (from member countries) due to reduced/removal of tariffs, import
taxes.
• Create (more) employment for locals engaged in trade/services supporting trade.
• Promote (interstate) investment due to free movement/mobility of factors of production
• Provide/avail a variety of goods from which people can choose/select what we likes
• Improved infrastructure leading to cheaper/faster/cheap/smooth/safe most of good
people/wider reach of many places (accept examples of good infrastructure as mention e.g.
good roads.)
4. (a) Subsidies reduce cost of production therefore positive shift of supply curve.
- Introductions of subsidy reduces cost of production causing a positive shift of the
supply curve from SOSO to S1S1
- The equilibrium price will reduce from PO to Po/ accept arrow down
- Equilibrium quantity will increase from QO to Q1/accept arrow → to the right
(b) Choice of method of product promotion
• Cost of the method should be affordable/ cheap/cost effect/economical
• Spread/geographical coverage of targeted market: if wide choose wide that cover wide area
e.g. radio/if concentrated use personal selling that can reach all.
• Frequency/receptiveness: choose a media that can repeat for those who missed
• Policy of the firm: choose what agrees with firm policy/comply with the firms
proposed/agreed way of advert
• Nature of goods: if technical use a media that can demonstrate
• Type of target customer: if poor use a media less costly to access e.g. radio/rich = TV
• Duration of information: use method that can relay over a long period of time to remind/
rich man
• Attractiveness/appeal of media: use mean that excite buyer/has jokes/drama to please
buyers
5. (a) Advantages of introduction of modern technology in an office.
• Faster/quicker office work: which saves time/ensures no delays/timely operations
• Promote efficiency: leading to high quality work/presentable work
• Enhances accuracy: minimizing mistakes /errors in office work
• Saves on labour costs: by replacing/reducing the number of office workers/reducing
operation costs/hence increase profits
• Improves the image of the organization: hence attracting more customers
• Enhances large scale production: leading to accomplishment of more work.
• Motivate workers: by making work easier/ not tiresome.
• Enhance security: through codes/passwords/preventing leakage of information
(b) Solution to youth unemployment

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• Introducing relevant/appropriate training: in skills required by employers/firms/so that they
match with requirements in labour market
• Promote usage of appropriate/labour intensive technology (in production): which will
require a lot of workers/as opposed to capital intensive that does not require many workers
• Adopting a better employment policy: where those workers who have attained retirement
age are not given further contract/no favoritism/one man one job.
• Diversification of industries: so that people have more chances of employment
• Developing rural areas: to promote investment/production activities in rural areas/which
will reduce urban unemployment
• Encouraging entrepreneurship: by creating a good business environment/training
entrepreneurs
• Exporting excess labour: to foreign countries which have labour shortage
• Providing investment capital/youth/women/hustler fund that can be given to people to start
own business
• Supporting the informed sector/Juakali: to use their skills for self-employment.
6. (a) Benefits of warehousing to consumers
• Stable price: since there will be stable supply/not shortages to cause price likes
• Stable supply: since warehouse keeps goods that are in surplus and release in shortage
period in Good condition/quality
• Good: since warehouses have storage facilities that preserve/prevent spoilage of goods
• Enable desired state of goods: since warehouse provide condition for goods to mature/ripen
for use by consumer (accept examples bananas/wine etc.) as expansion
• Access to wider variety: since they store wide variety of goods from which consumer
choose what they like/prefer/ their taste
• Get seasonally produced good: during the off-season period when required by consumer
• Get desired quantity of goods: since final touches/breaking bulk is done in warehouse
(b)
Ejinja Outlets Ltd.
Profit and loss account
Dr for the period ending 31-12-2021 Cr
Expenses Gross profit b/d 305,000
Transport 45,000 Interest earned 18,940
Advertising 11,000 Discount Received 19,200
Rates 10,000
Wages 70,000
Discount Allowed 15,000
Sundry Expenses 84,000
108,040
343,140 343,140

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 Ejinja Outlets Ltd
Balance sheet
As at 31-12-2021
Fixed Assets
Land and premises 2,600,000 Capital 4,000,000
Furniture and fixtures 1,050,000 Add Net profit 108,000
4,108,040
3,650,000 Less Drawing 105,000
Current Assets Net capital 3,958,040
Stock 46,800 Current liabilities
Debtors 200,000 Creditors 400,000
Bank 420,000
Cash 41,000
688,040 4,358,040
4,358,040

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 SUPERIOR JET JOINT
BUSINESS STUDIES
PAPER 1
1. Outline four factors that comprise negative internal environment of a business. (4mks)
2. Name the factor that each of the following resources relate to (4mks)
Resource Factor of production
(a) Manager
(b) Water
(c) Owner
(d) Vehicle
3. You have been charged with a duty of preparing an Article of Association for Timba X
Company. State four items that you will include in your Article of Association. (4mks)
4. Outline four trends in forms of business units. (4mks)
5. Highlight four roles of advertising agencies in product promotion. (4mks)
6. Highlight four features of perfect competitive market. (4mks)
7. As a banker to the government state four services that the central Bank renders to the
government. (4mks)
8. Nundu and Thuku bought a building for Kshs 12,000,000. The building was insured for
8,000,000 against the risk of fire. Later the building was partially destroyed by fire to a
tune of Kshs 6,000,000.
(a) State the amount of compensation likely to be paid by the insurance company. (3mks)
(b) Give a reason for your answer. (1mk)
9. The diagram below shows a demand curve D0D0 and DIDI. Highlight four factors to account
for shift. (4mks)
D1
Do

Price

D1
Do
Quantity

10. The following information relates to commodity ‘Y’.

Year Price (shs)
2010 450
2014 675
a) Calculate the consumer price index for commodity “Y” taking 2010 as the base year. (3mks)
b) Comment on your answer. (1mk)
11. State four circumstances under which a business organization may decide to dispose off a
machine. (4mks)

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12. Highlight four channels that can be used to import motor vehicles. (4mks)
13. Outline four reasons why choice is inevitable in the satisfaction of human wants. (4mks)
14. State four limitations of using mobile phone in communication. (4mks)
15. The following details relate to Kakamega Traders as at 31. 12. 23
Shs.
Sales 300,000
Stock (1/1/23) 45,000
Stock (31/12/23) 35,000
General expenses 25,000
Capital 400,000
Margin 25%
Calculate;
(a) Purchases (2mks)
(b) Net profit (1mk)
(c) Rate of turnover (1mk)
(d) Rate of return on capital (1mk)
16. State three reasons why people hold money. (3mks)
17. Name four features that distinguish economic growth from economic development.
18. Highlight four factors that may account for high population growth rate in Kenya.
19. Name Four documents that originates from the seller in home trade. (4mks)
20. Highlight four advantages of a bonded warehouse to the government. (4mks)
21. State four forms of economic integration that may exist between countries. (4mks)
22. The following information was extracted from the books of Umoja traders.
Jan 1 Balance brought down: Cash sh 4,500
Bank sh 4, 500
Jan 2 Bought stationery in cash sh 3,200
Jan 5 Sales paid in cash sh 2,200 and by cheque sh 10,000
Jan 8 Paid wages by cheque sh 12, 400
Jan 10 Transferred sh 1 500 from the cash till to the business bank account.
Prepare a two column cash book and balance it off. (5mks)
23. For each of the following accounts, indicate whether it is real, nominal or personal
Account title Account type
a) Wambua, a debtor
b) Commission received
c) Bank
24. Use the following information to determine net profit for the year ended 31 Jan 2023
Ksh
Closing Capital 800, 000
Opening Capital 450, 000
Additional investment 90, 000
Monthly drawings 5, 000
25. Using expenditure approach, national income is arrived at by the formula:
Y = C+ I + G + (X – M).
Name what the following letters stands for: (4mks)
C, I, G, Y,

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 THE SUPERIOR JET
BUSINESS STUDIES
PAPER 2
1. a) Explain five principle of insurance. (10mks)
b) Discuss five ways in which buyers in home trade will use through the government to
protect themselves from unscrupulous traders. (10mks)
2. a) Explain five barriers to effective communication. (10mks)
b) Give five differences between perfect competition market and monopoly market.
3. a) Explain five methods of determining price of a product. (10mks)
b) Outline five advantages of being in trading block. (10mks)
4. a) Name and explain five different types of small scale retailers with shops. (10mks)
b) Open ledger accounts to record the following business transaction. (10mks)
May 1: Sold goods on credit to Adogo sh. 150,000
May 2: Received a cheque for 200,000 from Onyango in settlement of his account
May 3: withdrawal of sh. 10,000 was done from the bank for personal use.
May 4: Bought a computer on cash basis ksh. 35,000 paying by cheque
May 5: Cash sales sh. 20,000
5. a) Explain five trends that have being experienced in our office today. (10mks)
b) Explain five monetary systems that the government will use to control inflation.
6. a) Explain five features of mail order shops. (10mks)
b) The following balances were extracted from Lamu traders in January 2021.
cash 40,000 (DR) bank 17,000(CR)
The following transaction occurred during the month
January 2: Kemene a debtor settled her account of 32,000 by a cheque of 30,000
January 4: Paid salaries amounting to sh. 16,000 by cash
January 10: Deposited 12,000 into the business bank account from the cash till.
January 14: Settled Wanyanu’s account of 40,000 and was allowed a discount of
1% through a cheque
January 16: Deposited 56,000 in the bank from private sources.
January 17: Sold goods for cash sh. 24,000
January 20: Mike, a debtor settles his account by cheque of sh. 16,000 having being
allowed a discount of 20%
January 24: Purchase furniture for sh. 10,400 paying by cheque
January 26: Receives sh. 7,200 cash from Mandela
January 30: Banked all the available cash leaving only sh. 3,200 in cash till
Required
Prepare a three column cash book for Lamu Traders for January 2021. (10mks)

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 THE SUPERIOR JET
BUSINESS STUDIES
PAPER 1
MARKING SCHEME
1.
i) Poor management styles
ii) Un ambitious ownership/Owner.
iii) Poor/unfavourable business culture.
iv) Poor equipment or facilities.
v) Non-committed human resources/labour/employees/workers.
vi) Inaccessibility to financial resources/capital.
vii) Poor business objectives/strategy.
viii) Poor business Structure.
ix) Lack of business innovations/poor technology
2.
a) labour
b) Land
c) Entrepreneurship
d) Capital
3.
i) Rights of the share holders
ii) Methods of calling and conducting meetings
iii) Rules governing election of officials
iv) Rules regarding preparation and auditing of accounts
v) Powers and duties of directors
vi) List of directors and their particulars
vii) Dividends/loan capital/reserves policies
4.
i) The introduction of alcohol blow
ii) Registration of all public service vehicles in Saccos
iii) Introduction of tamper proof speed governors
iv) Construction of super highways/ roads with dual carriage.
v) Some public service vehicles are fitted with Wi-Fi
vi) Payment of fare using cards/M-pesa
5.
i) Conveys messages to a large audience
ii) Saves on cost of advertising especially on transport/Economical
iii) It uses different colours
iv) It appeals to both the literate and illiterate
v) They may last for a long period of time
vi) They are easy to prepare
6.
i) Many sellers or suppliers
ii) Price taker – price fixed by forces of demand and supply
iii) Free entry or exit in the market
iv) Commodities are similar in all ways e.g. size, brand, quality
v) A single seller cannot influence the price in the market

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7.
a) It receives deposits on behalf of the government from foreign donors, income tax
department, custom department etc.
b) It pays cheques drawn on the central bank
c) Advances short-term and long-term loans
d) Arranges national and foreign loans for the government
e) Maintains and operates special accounts for the government
f) Pays or remits funds abroad on behalf of the government
g) Accepts deposit or custody funds received from abroad on behalf of the government
h) Purchases, sells, transfers and accepts for custody cheques, bills of exchange and other
securities on behalf of the government.
i) Advices the government on financial matters
8. a)
Compensation = x Loss

= x 6,000,000 = Shs.4, 000,000

b) The building had been under-insured
9.
a) Increase in consumer’s income
b) Favourable government policies
c) Future expectation of increase in the price of the commodity
d) Future expectation of shortage in the supply of a commodity
e) Decrease in price of the substitutes
f) Increase in population size
g) Positive change in consumer taste and preferences
10.
(i) Consumer price index (CP1) = P1x 100
P0
= 675 x 100 = 150%
450
(ii) The price of commodity ‘Y’ in 2014 is 150% it’s price in 2010. Which indicates that the
price of this commodity rose by 50% since 2010/inflation by 50%
11.
i) Where the machine has become obsolete
ii) Where the machine has become inadequate/cannot cope with the requirements of the
business
iii) Where hiring a machine is cheaper than maintaining one
iv) Where spare parts are no longer available
v) Where skills to operate the machine are not available
vi) When the business has changed line of business hence has become irrelevant
vii) When the business wants to buy a new one to replace the old one
12.
a) Foreign producer → local consumer
b) Foreign producer → local retailer → local consumer
c) Foreign producer → local wholesaler → local retailer → local consumer
d) Foreign producer → local wholesaler → local consumer
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 e) Foreign producer → local agent → local retailer → local consumer
f) Foreign producer → local agent → local consumer
) Foreign producer → local agent → local wholesaler → local retailer → local consumer
h) Foreign producer → foreign agent → local agent → local retailer → local consumer
i) Foreign producer→ foreign agent → local agent → local wholesaler → local consumer
13.
i) Because resources available for satisfying human wants are limited/scarce.
ii) Because human wants are unlimited/endless/too many
iii) Because human wants vary in urgency and intensity.
iv) Because there is variation in tastes and preferences of human wants.
v) Because human wants are too many to be satisfied at once.
vi) Resources have different prices
vii) Some wants are more urgent than others
14.
a) Poor network coverage
b) Not suitable for the deaf
c) May be health hazard to the user
d) May be distractive
e) Expensive to operate
f) Prone to frauds
15. a) GP = x 300,000= 75,000

= C.O.S = sales - GP
= 300,000 - 75,000= 225,000√
C.O.S = O.S + P - C.S
Purchases = 225,000 - 45,000 + 35,000= sh. 215,000√
b) NP = GP - Expenses = 75,000 - 25,000 = sh. 50,000√
c) R.O.T = = = 5.6 times √ = 6 times
d) R.O.C. = = x 100 = 12.5%√
16.
a) Speculation reasons
b) Transaction reasons
c) Precautionary reasons
17.
Economic growth Economic development
(a) Refers to increase in national income -It’s sustained rate of increase in
over a period of one year national income over a long period e.g.
(b) It’s a quantitative increase in the size of 10 years
a country’s national income -It is qualitative and quantitative
(c) There can be economic growth without increment in the well-being of a
economic development country’s economy
(d) Can be measured at the rate of GDP -There cannot be economic development
changes from year to year without economic growth
-Can be measured in terms of welfare of
life e.g improved standards of living.
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18.
i) Early marriages in some communities
ii) Religious opposition of the use of birth control method
iii) Improvement in level of nutrition
iv) Cultural beliefs on large number of families
v) Children viewed as a source of labour and security.
19.
a) Catalogue
b) Price list
c) Quotation
d) Invoice
e) Proforma invoice
f) Credit note
g) Debit note
20.
a. Enables government to collect revenue
b. Enables government check on quality of goods
c. Enables the government check on quantity
d. Enables the government to check on nature of goods
e. Ensure proper documentation of goods.
21.
i) Common market
ii) Free trade area
iii) Customs union
iv) Economic union
22.
CASH BOOK
Date Details Cash Bank Date Details Cash Bank
Jan 1 Bal b/d 4,500 4,500 Jan 2 Stationery 3,200
Jan 5 Sales 2,200 10,000 Jan 8 Wages 12,400
Jan 10 Sales 1,500 Jan 10 Bank 1,500
Jan 10 Bal c/d 2,000 3,600
6,700 16,000 6,700 16,000
Jan 11 Bal b/d 2,000 3,600
23.
Account title Account type
a) Wambua, a debtor personal
b) Commission received nominal
c) Bank real
24. Opening capital = Assets – Liabilities
Closing capital = OP + AI + P - D
800,000 – 450,000 – 90,000 + (500 x 12) = sh. 300,000
25.
C – Expenditure on consumer goods
I – expenditure on capital goods (investment)
G – Government expenditure
Y – National income

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 THE SUPERIOR JET
BUSINESS STUDIES
PAPER 2
MARKING SCHEME
1. a) Principal of insurance
i) Principle of utmost good faith (Uberrimae fidei) - It requires that the person taking
an insurance cover should disclose all the material facts relating to the person or
property being insured.
ii) Principle of insurable interest - It states that one should only insure property that
he/she stands to suffer a direct financial loss in case of risk insured against occurs.
iii) Indemnity - It states that the aim of insurance is to reinstate or put back the insured to
their financial position where they were before the loss and not to benefit the insured.
iv) Proximate cause - It state that the insured to be compensated there must be a very
close relationship between the loss suffered and the risk insured against.
v) Subrogation - It states that whatever remains after compensation become the property
of the insurer.
vi) Contribution -This applies where the insured takes policies with two or more
insurances in case of a loss the insurer would contribute proportionately in order to
compensate
b) Government initiated methods.
i) Settling up standards - The Kenya bureau of standards sets national quality stand to
ensure that commodities are of the required standards.
ii) Weight and measure act - The government ensures that equipment used for weighting
and measuring are correct and accurate
iii) Licenses - Business people and manufacturers are required to get a license before they
can operate. This ensures that there is control on the type of business.
iv) Foods and drug act - It requires producers and traders not to include harmfully
substance in their commodities or put something in the product that will have a
negative effect on consumers’ health.
v) Public health act - It ensures commodities offered for sale are hygienic and good
quality.
vi) Trade description act - Ensure that traders do not cheat the consumer by providing
false descriptions of commodities.
vii) Price control - Not to sale good above set price. (government set price)
viii) Rent and tribunal act- Ensure that tenants are not overcharged by landlords.
2. a)
i) Language barrier - The sender and receiver might not understand each other
language in communication.
ii) Poor listening - Effective communication will depend on the willingness of the
recipient to listen keenly which requires careful attention and concentration.
iii) Poor timing - The message should be sent at an appropriate time.
iv) Wrong medium - Wrong choice of a medium to communicate wills barrier
communication e.g. writing a normal letter to a blind person.
v) Noise - Presences of noise may make it impossible for any message to be received in
the right way.
vi) Unfamiliar nonverbal signals - Both the sender and receiver should understand the
non-verbal cue the same way and have the same meaning

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 vii) Emotional responses - The emotional state of an individual e.g. when they are too
excited or angry can cause destruction barrier to communication.
viii) Unclear system within the organization
ix) Failure to plan before communication
b) Differences between perfect competition and market and monopoly market
structure
Perfect competition Monopoly market
a) Large number of buyers and sellers a) One seller or producer and any
b) The buyers and sellers have the unorganized buyers
freedom to enter and leave the market at b) There is barriers/ no freedom of entry to
will other firm into the industry
c) Firms (suppliers) in such market c) The monopoly firm is a price maker or
structure are the price takers price giver
d) There are many firms in the industry d) The monopoly firm is the industry;
e) Identical homogenous products: because it supplies the entire market
commodities from different producers e) The commodity supplied does not have
are identical in all aspects close substitutes which would
f) All buyers are identical in the eyes of otherwise pose competition
the seller; hence there is not price f) Price discrimination is may be possible
discrimination. g) Prices of the product are fixed by the
g) The price prevailing in the market is supplier.
determined strictly by the interplay of
demand and supply (market
mechanism)
3. a) Methods of determining pieces of a product
i) Auctioning - The price of a commodity is set through bidding.
ii) Tendering - Buyers/sellers are invited to quote their prices independent of each other.
The one who quotes the most favorable prices and terms wins the tender and the piece
becomes the price of the commodity in question.
iii) Firms policy/retail price maintenance -The firm sells good according to the dictates
of the producer
iv) Bargaining/haggling - The price of a commodity is determined through negotiation
between the buyer and the seller.
v) Government policy/intervention - The government can influence the price of a
commodity through measures such as price control, taxation and provision of
subsidies.
vi) Price mechanism/market mechanism - The price of a commodity is determined by
the interplay of demand and supply curve
vii) Price discrimination - A firm may decide to sell a commodity at different prices to
customers in different regions
b) Advantages of being in a trading block
i) Wide market - When countries come together, the barriers between them are
eliminated and the have access to a wider market which encourages large scale
production.
ii) Employment creation - Wide market encourages establishment and expansion of
many businesses leading to creation of more jobs and improves standard of living.

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 iii)
Development of infrastructure - Countries are able to pool resources together and
develop infrastructure such as railway, road, ports which attract investments and
promotes trader among them.
iv) Strong bargaining position - Countries have a strong voice and they can bargain for
and get better terms of trade.
v) Promotes specialization - Member countries can concentrate on producing items
where they have comparative advantage over other.
vi) Increased investment - Free mobility of factors of production attracts more
investment leading to faster economic growth.
vii) Peace and stability -The interaction among members’ countries promotes mutual
understanding and cooperation among the, thereby creating peace and stability hence
faster development.
4. a) Small scale retailer with shops
i) Single unit shop - The most common type of retail shop who sell a variety of goods
and are known as general shop but they are those who can sell one type of goods e.g.
bookshop
ii) Tied shop - Shops that sell exclusive goods of one manufacture, have same design,
colour and outlook e.g. Bata shop.
iii) Kiosks - Small scale retailer that mostly sell groceries to customers. They have simple
structures.
iv) Canteens - They sell to specific target group and are mostly in institution and do not
sell to those outside the institution e.g. school canteen
v) Market stall - Sell their item in big market where they have structure where the sell
from.
vi) Mobile shops - They sell the goods in cars as they move around
b)
Sales Account
Dr
CR
Date Details Folio Amount Date Details Folio Amount
May 1 Adogo 150,000
May 5 Cash 20,000

Bank Account
Dr CR
Date Details Folio Amount
May 3 Drawings 10,000
May 4 Machinery 35,000

Drawing Account
Dr CR
Date Details Folio Amount Date Details Folio Amount
May 3 bank 10,000

Machinery Account
Dr CR
Date Details Folio Amount Date Details Folio Amount
Page | 164
May 4 Bank 35,000

Onyango Account
Dr CR
Date Details Folio Amount Date Details Folio Amount
May 2 Bank 200,000

Adogo Account
Dr CR
Date Details Folio Amount Date Details Folio Amount
May1 Sales 15,000

Cash Account
Dr CR
Date Details Folio Amount Date Details Folio Amount
May 5 Sales 20,000

5. a) Trends in Office
i) Automation - There is increased use of modern machines especially computers which
has resulted in increased speed, efficiency and accuracy.
ii) Preference of open and landscape office layout - Most organization requires property
supervision of their work hence they are adopting the open or land scape office layout
which promotes this.
iii) Pre- urban location - Most offices now prefer to be located in the sub-urban or
outskirts where they can get more space, cheaper land rent, and secure environment.
iv) Use of badges - Staff badges are used to identify officers’ and encourage them to
behave well in public.
v) Use of cell phones - Mobile phones have replaces land line phone in communication as
it is used to make calls anytime and anywhere cheaply.
vi) Merging duties
vii) Customer care desk
viii) Electronic filling
ix) Teleconferencing and video conferencing
x) Covid rules
b) Monetary systems that government will use to control inflation.
i) Bank rates - The government through the central bank may increase the lending
interest rates which will make the banks to increase their credit interest rate hence less
people will borrow money.
ii) Open market operations (OMO) - The government would sell government securities
to be public his withdraws money into the economy hence money supply will reduce.
iii) Cash/liquidity ration - The central bank may require commercial banks to increase
their cash or liquidity ratio which reduces the amount of money that commercial banks
have for lending.
iv) Directives - The central bank may give instruction to commercial banks and other
lending institution on the interest rate to change.

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 v) Selective credit control - The central bank may give special instructions to
commercial bank and other money lending institution as to the type of sector that they
should give credit to ad which ones should be restricted.
vi) Compulsory deposits - The central bank may require the commercial banks to
maintain certain amount deposit with it in special accounts where the money would be
frozen.
vii) Request/moral suasion
6. a) Feature of mail order shops
i) Goods are sold through the post office - The trader sends the goods to the buyer
through the post office and the pay for the goods at the post office as they pick them.
ii) No personal contact - The customer does not visit the store because all transaction are
done through the post office hence they lack personal contact with the buyer.
iii) Have no shops - This business done not have a shop but have offices and warehouses
where they operate and store their goods.
iv) Cash basis - The business operates on cash with order and cash on delivery services
hence they avoid bad debt associated with credit sales.
v) Do a lot of advertisement - For their goods to be sold they engage in a lot of product
promotion so that they can make their goods to be known widely. This is done through
direct mails, catalogues and mass media.
b)
LAMU TRADES
THREE COLUMN CASH BOOK
FOR THE MONTH OF JANUARY 2021
DR CR
Date Details L.F Discount Cash Bank Date Details L.F Discount Cash Bank
allowed received
2021 2021
Jan 1 Balance b/d 40,000√ Jan 1 Balance b/d 17,000√
Jan 2 Kamene SL1 2,000√ 30,000√ Jan 4 Salaries 16,000√
Jan 10 Cash CI√ 12,000√ Jan 10 Bank C1√ 12,000√
Jan16 Capital 56,000√ Jan14 Wanyanu PL1 400√ 34,600√
Jan17 Sales 24,000√ Jan24 Furniture NL 10,400√
Jan 20 Mike 326.5√ 16,000√ Jan 30 Bank C2√ 40,000√
Jan 26 Mandela 7,200√ Jan 30 Balance c/d 3,200√ 87,000√
Jan 30 Cash C2 4,000√
2,326.5√ 71,200√ 154,000√ 400√ 71,200 154,000
Jan 31 Bal b/d 32,000 87,000

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 MANGU
BUSINESS STUDIES
PAPER 1
Answer all the question in the spaces provided after each
1. Outline four circumstances under which a business person would allow a customer to
acquire goods on credit. (4mks)
2. State any four errors that will not affect the balancing of a trial balance (4mks)
3. Highlight four demerits of using machines in carrying out office activities. (4mks)
4. Name the factor that each of the following resources relate to (4mks)
(a) Manager
(b) Water
(c) Owner
(d) Vehicle
5. Outline four ways in which warehousing promotes trade in Kenya. (4mks)
6. The diagram below shows a shift in supply curve from S0S0 to SI S1

quantity
Identify four factors that have made the supply curve to shift from S0S0 to SI S1 (4mks)
8. State the type of advertising that each of the following statements relate to (4mks)
Statement Type of advertising
Persuade consumers to buy a product
Promotes a particular brand of a product
Create awareness about a product
Promotes the name of the manufacturer
9. For each of the following transactions, state the account to be debited and the account to be
credited. (4mks)
Transaction Account to debit Account to credit
1) Paid a creditor from private source
2) Brought in cash from private source
3) Withdrew cash for personal use
4) Bought goods and paid by cheque
10. State four reasons why consumers have to make a choice between competing needs.
11. State four limitations of containerization. (4mks)
12. Highlight four ways in which prices of goods and services may be determined in the market

Page | 167
 other than the forces of demand and supply. (4mks)
13. Outline four uses of balance sheet by a business. (4mks)
14. Outline four reasons why government may find it necessary to protect consumers.
15. State four features that distinguish a private company from a public company. (4mks)
Private company Public company
16. Highlight four benefits that nay accrue to a customer who buy goods from a manufacturer
(4mks)
17. State four circumstances under which a seller would issue a credit note to a buyer
(4mks)
18. Outline four roles of an entrepreneur in a business. (4mks)
19. Illustrate with simple diagram, four channels a local farmer would use to distribute his
produce. (4mks)
20. Outline four benefits that will accrue to a firm as a result of increased scale of operation
21. Give two examples of products that would face the following types of demand.
i) Derived demand
ii) Joint demand
iii) Composite demand
iv) Competitive demand
22. Outline four roles of filing in an office. (4mks)
23. Outline four effects of an ageing population on an economy. (4mks)
24. Indicate the balance sheet items and show how they would be affected by the following
transactions. (4mks)
a. Purchase of a motor bicycle by cheque
b. Sale of goods on credit to Baraka
c. A debtor pays his debt in cash
d. The owner converted his personal house into business use
24. The following trial balance was incorrectly prepared
KALWAL TRADERS
TRIAL BALANCE
AS at 31-Dec-2004
DR CR
Capital 31000
Cash in hand 11000
Creditors 14000
Insurance 12000
Debtors 13000
Drawings 15000
Bank over draft 6000
Bank loan 18000
Stock 18000
56000 56000
Required: Prepare the correct trial balance (4marks)
25. Outline four differences between a monopoly and a monopolistic competition as product
market (4marks)

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 MANGU
BUSINESS STUDIES
PAPER 2
1. (a) Explain five principles of insurance (10mks)
(b) Explain five ways through which containers may be in effective as a way of moving
goods (10mks)
2. (a) Explain five internal economies of scale that may be experienced by the firm
(b) Explain five factors to be considered when setting up an office layout for a business
organization (10mks)
3. (a) Explain five causes of unemployment (10mks)
(b) Explain five benefits of preparing a business plan to a firm (10mks)
4. (a) Explain five factors that influence choice of product promotion (10mks)
(b) Explain five roles played by commercial attaches in trade promotion (10mks)
5. (a) Describe five differences between a movement along a demand curve and a shift of a
Demand curve (10mks)
(b) The following information relates to Maralal Traders for the month of May 2014.
May 1: Balance brought forward:
Cash Shs. 180,000
Bank Shs. 450,000 (Cr)
3: Received a cheque of 1,500,000 from Mpasha, a debtor
7: Cash sales Shs. 280,000
11: Jolloimat, a creditor of Shs.600, 000 was paid by cheque of sh 400,000 and the
balance by cash.
14: Received commission in cash sh. 150,000
17: A debtor, Leteipa, paid his account of 185,000 by cheque less 2% cash discount.
19: Paid the following expenses by cheque:
Rent Shs. 75,000
Electricity Shs. 32,000
Water Shs. 25,000
21: Withdrew Shs. 100,000 from bank for personal use
24: Paid cash Shs 133,280 to Kinai after deducting a cash discount of 2%
25: Received a cheque of sh. 200,000 from Kiyapi, a debtor
28: Paid Salaries Shs. 120,000 by cheque.
31: Banked all cash except sh. 50,000.
Required:
Record the above transactions in a three column cash book. (10mks)
6. (a) Explain five reasons that may limit use of pipeline transport in a country (10mks)
(b) Kavetsa had the following balances on 1st January 2010
sh
Motor vehicle 210,000
Debtors 20,000
Cash 90,000
Stock 25,000
Creditors 40,000
Cash at Bank 50,000
During the month, the following transactions took place
2010 January 4: paid sh 12,000 to creditors by cheque

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‘’ 13: purchased stock worth sh 18,000 on credit
‘’ 26: deposited sh 6,000 into the business bank account from cash till
Record the above transactions in the relevant ledger accounts and balance them off
(10mks)

Page | 170
 MANGU
BUSINESS STUDIES
PAPER 1
MARKING SCHEME
1. - He /she wants to attract more customers
- He/she wants to retain existing customers
- He/she wants to clear old stock
- The customer has been frequently buying
- The customer is honest/credit worthy
- There is adequate stock
- The customer is able to repay
2. - Error of principle
- Errors of original entry
- Compensating errors
- Errors of omission
- Errors of commission
- Errors of complete reversal of entry
3. - Workers loose craftsmanship
- May lead to redundancy
- May cause unemployment
- Its expensive to train/have personnel
- Process may stop in case of breakdown of machines
- Mishandling of machines may result into loses/damages
4.
- Labour
- Land
- Entrepreneurship
- Capital `
5.
- Ensures steady supply of goods
- Ensures stability of prices due to steady supply
- Ensures continuity of production
- Encourages production in large quantities
- Protects goods from theft
6.
- Strikes
- Withdrawal of firms
- Presence of natural calamities
- High taxation
- Withdrawal of subsidies
- Increase in costs of production
7.
- Persuasive/competitive
- Product
- Informative
- Institutional
8.

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 A/C DR A/C CR
Creditor’s capital
Cash capital
Drawing cash
Purchases bank
9.
- Resources are limited
- Needs/wants are unlimited
- Resources differ in taste/preference/fashion
- There are government policies on goods
10.
- Cost is high
- Suitable only for large volume of goods
- Not suitable for bulky goods with awkward shapes
- May cause unemployment i.e. is capital intensive
- Slow especially in sea transport
- Require special handling facilities
11.
- Government intervention e.g. price control
- Haggling/bargaining
- Tendering
- Auditing
12.
- Shows assets of business
- Shows what a business owes to others i.e. liabilities
- Shows source of finance for a business
- Shows net worth of the business
- Can be sued to borrow money
- Used in decision making
- Used by investors to know what to invest
13.
- Ensure quality goods to customers
- Ensure right quantity/size are offered
- Prevent false adverts directed at customers
- Ensure standards are maintained
- Prevent sale of harmful goods
- Prevent/protect against breach of contracts
- Ensure fair prices
- Curb-hoarding
14.
Private company Public company
2 – 50 persons No set maximum
Does not advertise shares Advertise sale of shares
Can start business on receiving certificate of Must wait for certificate of trading
incorporation
Managed by 1-2 directors Managed by board of directors
Shares are not transferable Shares are transferable

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15.
- Get after sale services
- Obtain goods at low prices
- Get technical advice on use of goods
- May enjoy genuine/quality products
16.
- When there is an overcharge
- When goods are returned
- When empty containers are returned
- When goods are not yet delivered yet invoiced/charged
- Where one is charged high price
- Where errors in calculation occur resulting in higher figures than the correct one
17.
- Start business
- Manages business
- Contributes capital
- Enjoy profits
- Bears risks/suffers losses
- Pays for expenses
18.
- Local producer-wholesaler-retailer-consumer
- Producer-marketing board-retailer-consumer
- Producer-consumer
- Producer-retailer-consumer
19.
- Attract skilled man power
- Easy access to loans
- Increased employee welfare
- Spread of risks/diversification
- Low transport cost
- Enjoy trade discounts
20.
- Hen-egg/cow-milk
- Torch battery/pen and ink
- Wood/timber/sisal
- Sukuma wiki & cabbages
21.
- Protect document from loss/damage
- Assist in office tidiness/efficiency
- Aid memory-i.e. reference
- Ensure systematic storage hence easy retrieval
- Minimize space
- Prevent document from unauthorized persons
22.
- Less labour mobility
- Low labour supply
- High dependency ratio
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 - Less progress in society
- Fall in demand for goods favoured by youths
- Conservatism/status quo persist
23.
- Asset increase cash at bank decrease
- Asset stock decrease and asset debtor increase
- Asset debtor decrease and asset cash increase
- Asset(building)increase and capital also increase
24.
KALWAL TRADERS
TRIAL BALANCE
AS AT 32-12-2004
DR CR
capital 31000
cash in hand 11000
creditors 14000
insurance 12000
debtors 13000
drawings 15000
bank overdraft 6000
bank loan 18000
stock 18000
96000 96000
25.
monopoly Monopolistic competition
One seller Many sellers
Seller sets price Prices set by demand and supply
There is barrier of entry No barrier to entry
No perfect knowledge of market There is perfect knowledge
No close substitutes There are close substitutes

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 MANGU
BUSINESS STUDIES
PAPER 2
MARKING SCHEME
1. (a)
i) Utmost good faith (Uberrimae fidei) – this principle requires that contracting parties be
honest. It requires the insured to disclose all material information to the insurer on the
property to be insured
ii) Principle of indemnity – it is the restoration of the insured who suffers loss to his former
financial position he or she was before the loss occurred
iii) Proximate cause – the cause of the loss for which a claim for compensation is made
should have direct or fairly close connection with the actual or real risk insured against
iv) Insurable interest – insurable interest exists where due to the risk occurring, a person is
bound to suffer financial loss. The insured must be directly benefitting from the
destroyed property and therefore its absence will make the person to suffer a loss
v) Contribution – incase one insures with two or more insurance companies to cover the
same risk, the different insurance companies will share proportionally when it comes to
compensating the insured for the loss arising from the occurrence of the risk
vi) Subrogation – after the insured has been indemnified, the remains or benefits arising
from the damaged property belongs to the insurance company. The insured should not
gain from any loss but should only be relieved of the actual loss suffered.
(b)
i) They are very expensive to buy and maintain
ii) They are not used to carry goods of irregular shapes
iii) It creates unemployment
iv) They require loading and offloading equipment
v) Containers cause damage to roads increasing maintenance costs
2. (a)
i) Managerial economies of scale – a firm’s productivity can be increased by employing
qualified staff who offer better organization structures
ii) Marketing economies – a firm that sells in large quantities incurs fewer costs in
advertising and distribution
iii) Financial economies – a firm with strong financial base can expand their business
iv) Risk bearing economies – large firms risks in market failure through diversification of
products or markets
v) Technical economies – these are benefits to a firm due to specialization of labour and
machinery
vi) Research economies – research in new methods of production, new market and new
products is necessary for firms that are large because it is affordable
vii) Welfare economies – workers’ incentives do motivate their workforce e.g. welfare like
recreation, health, housing and education
(b)
i) Work flow – this refers to the continuous flow of work in a particular section for
example accounts office
ii) Minimum movement – movement of staff need to be saved. This reduces noise and
distractions

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 iii) Supervision – the arrangement of office should provide opportunity for ample
supervision
iv) Working space – the layout should allow each worker to have enough working space
v) Proximity to equipment – equipment harness to the work is needed in order to avoid
unnecessary movement
vi) Communication – office arrangement should promote effective communication in the
business organization
vii) Office appearance – there should be attractive and good appearance of the layout chosen
by the business organization
viii) Legal requirement – the rules and regulations set should be adhered to e.g. lighting,
ventilation
ix) Staff to be accommodated – office arrangement should take into account the job type
and grade of the office staff
x) Cost of setting – should be affordable to the organization
3. (a)
i) Rapid population growth rate – this increases the supply of labour at a faster rate than
the rate of growth of the employment opportunities
ii) Inappropriate education system – where the education system does not instill relevant
skills and attitudes towards existing work, employment opportunities will co-exist with
surplus labour which is mismatched
iii) Change in production methods – the use of capital intensive methods in countries or
areas where there is abundant supply of labour leads to persistent unemployment
iv) Rural- urban migration – unemployment in urban centers has increased due to the large
exodus of rural youth moving to towns leading to excess labour in towns
v) Low demand for goods and services – where incomes are generally low, there is low
purchasing power. This leads to a decline in economic activities and consequently a
decline in employment
vi) Minimum wage laws – the fixing of high minimum wages by the government results in
low demand for labour resulting to increased unemployment
vii) Inadequate co-operant factor inputs – labour requires other factors like machines,
equipment, raw materials and entrepreneurship. Lack of such co-operant factors
increases unemployment
(b)
i) Assist in sourcing for finances as it can be used to convince financial
institutions/investors to fund the operations of the firm
ii) It can be used to evaluate the goals/objectives of the firm to determine if it is headed in
the right direction
iii) It is used as a tool of management/directing/coordinating the different business activities
iv) Confers a business a competitive edge by assisting it to gain better understanding of the
market/competitors/shows whether the business if financially feasible or not
v) Enhance efficiency of the firm through allocation of available resources in their best
uses
vi) Motivates/inspires the management/employees to work as a team to accomplish the
objectives of the firm/business
4. (a)
i) Cost of advertising – the promoter should consider if the chosen method of promotion is
within his/her financial ability

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 ii) Nature of product – for products that require demonstration of how they are used, choice
of appropriate promotion method is necessary
iii) Urgency of the promotional message – the promotional method adapted has to deliver
message to the audience at proper good time depending on the urgency of the
information
iv) Government policy – a firm should use only those methods that are allowed by the law
of the land
v) Competitors method – a firm should use a promotional method that will make it
compete favorably with other firms
vi) Objectives of the promoting firm – firms should choose the promotion method that will
achieve its set goals e.g. correct firms dented image of a product, it can use public
relation methods
vii) Geographical coverage method – a firm should choose a promotion method that is more
accessible to its customers
viii) Target market – a firm should choose a promotion method that addresses specific age
or gender
(b)
i) Exploring new markets for more export opportunities
ii) Analyzing markets for exports from their home countries
iii) Keeping statistics of product packaging sizes and methods of manufacturing
iv) Publicize and advertise their home county exports
v) Inform traders back home on the standards required
vi) Selecting buyers, agents and distributors of the home country’s exports
vii) Assist sale missions from home and organize educational tours
5. (a)
Movement along demand curve Shift in demand curve
i. it involves only one demand curve i. It involves two demand curves
ii.It is brought about by change in price of ii.Brought about by other factors that
the product influence demand other than the price of
iii.It involves a change in the quantity the product
demanded iii.Involve a change in demand
iv.A different quantity is demanded iv.A different quantity is demanded at
v.Movement along the curve can be traced the same price as before
up and down along the same curve v.A shift causes the curve to move either
to the right or left
(b)
Three – column cash book
Date details L.F D.Rc cash bank Date Details L.F D.Al Cash Bank
2014 2014
May 1 Balance b/f 180000 May 1 Balance b/f 450000
May 3 Mpasha 1500000 May 11 Jolloimat 20000 40000
May 7 Sales 280000 May 19 Rent 75000
May 14 Commission 150000 May 19 Electricity 32000
May 17 Leteipa c 3700 181300 May 19 Water 25000
May 21 Drawings 100000
May 24 Kinai 2720 133280
May 25 Kiyiapi 200000 May 28 Salaries 120000
May 31 Cash 226720 May 31 Bank c 22670
May 31 Balance c/f 50000 906020
610000 2108020 610000 2108020
June 1 Balance b/f 50000 906020
6. (a)
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i) May not be able to offer door to door services especially in regard to transportation of
oil
ii) May interfere with other development projects along its route
iii) A leakage can cause considerable environmental hazard or losses
iv) Limited ability to generate employment
v) Requires constant monitoring which could be expensive
vi) Construction of pipeline is very expensive
vii) Not appropriate or economical for transporting small quantities of products
viii) It is difficult to monitor where it passes in remote areas
ix) Can easily be sabotaged where transportation of inflammable product is concerned
(b)
Dr creditors account Cr
2010 2010
Sh Sh
January 4 bank January 1 balance b/d
12000 40000
January 26 balance c/d January 13 purchases
46000 18000
58000 January 26 balance b/d
46000
Dr bank account Cr
2010 2010
Sh Sh
January 1 balance b/d January 4 creditors
50000 12000
January 26 cash January 26 balance c/d
6000 44000
56000 56000
January 26 balance b/d
44000
Dr purchases account Cr
2010 2010
Sh Sh
January 13 creditors January 26 balance b/d
18000 18000
January 26 balance b/d 18000
18000

Dr cash account Cr
2010 2010
Sh Sh
January 1 balance b/d January 26 bank
90000 6000
January 26 balance b/d January 26 balance c/d
84000 84000
90000

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 MOKASA
BUSINESS STUDIES
PAPER 1
1. State four characteristics of economic resources. (4mks)
2. Outline four elements of effective communication. (4mks)
3. Outline four characteristics of monopolistic market structure. (4mks)
4. Outline four ways in which internal business environment can positively affect business
operations. (4mks)
5. The table below shows changes in quantity demanded of a commodity.
Month April May June July August
Quantity demanded 10,000 12,000 15,000 18,000 20,000
Give four reasons for the above trend. (4mks)
6. State four circumstances under which personal selling is appropriate. (4mks)
7. Outline four challenges faced by a country with a youthful population. (4mks)
8. On 1st Jan 2023, Kamusi traders had cash in hand shs. 15,000 and a bank credit balance of
Ksh. 120,000. During the month, the following transactions took place.
2023:
Jan 3: Sold goods worth 12,000 and was paid 8,000 in cash and the balance
was to be received later.
Jan 10: Bought goods worth shs. 5,000 and paid in cash.
Jan 18: Received a cheque of Ksh. 18,000 from a debtor.
Jan 25: Purchased goods worth Ksh. 40,000 partly paying by cheque of shs. 35,000
and the rest in cash.
Required: prepare a two-column cash book. (4mks)
9. State four benefits of division of labour and specialization in an organization. (4mks)
10. The following information relates to Maji Matamu Stores as at 31st December 2023.
Details Ksh.
Capital (31/12/2023) 1,020,000
Net loss 120,000
Additional investments 320,000
Monthly drawings 6,000
Determine the capital as at 1st January, 2023 (4mks)
11. Outline four factors that encourage entrepreneurial practices in a country. (4mks)
12. Identify the source documents from which the following information can be obtained.
Information Source document
Sold goods amounting to ksh.2,000 on credit to Njeri
Goods returned by Mwangi Ksh.420
Bought goods worth Ksh.13,000 on credit from Juma
Purchased goods from Nyayo traders and paid
Ksh.30,000 in cash
13. Outline four circumstances under which cash payment is appropriate. (4mks)
14. Outline four benefits that accrue to a producer who uses train as a means of transport.

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15. The diagram below represents the circular flow of national income; identify the factors
represented by arrows labeled. (4mks)

(b)
(a)

HOUSEHOLD FIRMS
(c)

(d)
16. State four disadvantages of indirect taxes. (4mks)
17. Outline four functions of money. (4mks)
18. The following balances were extracted from the books of Taptok wholesalers for the year
ended 31st December 2022. (4mks)
Ksh.
Sales 7,000,000
Debtors 1,600,000
Creditors 2,100,000
Purchases 4,200,000
Cash at Bank 700,000
Opening stock 1,000,000
Closing stock 600,000
Cash in hand 130,000
Calculate:
a). Cost of goods sold (1mk)
b). Working capital (1mk)
c). Rate of stock Turnover (2mks)
19. Describe four channels that can be used to distribute locally produced perishable farm
product. (4mks)
20. State whether the following transactions will increase, decrease or has no effect on assets,
capital and liabilities.
Transaction Assets Capital Liabilities
a). Bought stock for Ksh.80,000 on cash
b). Bought furniture worth 90,000 on credit
c). Took some stock of goods worth ksh.10,000
from his business to his wife at home
(d) Paid a creditor sh 20000 by cheque
21. Highlight four benefits of warehousing to a consumer. (4mks)
22. State four reasons for the privatization of state corporations. (4mks)

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23. Use the description below to identify the office equipment being described. (4mks)

Description Office Machine

a). For cutting unwanted documents into tiny pieces to avoid such
documents getting into the wrong hands.
b). Electronic device used for processing data, storing information
and for communication purposes.
c). Used for trimming papers into required shapes and sizes.
d). Used to transmit printed messages such as letters, maps,
diagrams and photographs.
24. Ole Tipis owns an industrial plant valued at Ksh. 40,000,000. On September 2023, the
industrial plant was insured with two insurance companies: XYZ and ABC for Ksh.
30,000,000 and Ksh. 10,000,000 respectively. In January 2024 fire damaged 40% of the
building. Calculate the amount of compensation to be contributed by XYZ, and ABC to
cover the loss. (4mks)
25. Outline four advantages that accrue to a firm due to the growth of the entire industry.
(4mks)

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 MOKASA JOINT EXAMINATION
BUSINESS STUDIES
PAPER 2
1. (a) Explain five services rendered by retailers to producers. (10marks)
(b) Outline five challenges one would face when measuring National income using
expenditure approach. (10marks)
2. (a) Explain five guidelines that should be followed by the county government in its
expenditure. (10marks)
(b) Describe the differences between private company and partnership. (10marks)
3. (a) The following transaction took place in the business of Kessup traders in the first week
of May 2023.
May 1: Started business with sh 800,000 in bank and sh 200,000 in cash
May 2: Purchased goods values at sh 240,000 from Silker stores on credit
May 3: Paid rent sh 12,000 by cheque.
May 4: Purchased Business Premises for sh 560,000 from Kessup women group and
paid by cheque.
May 5: Sold goods in cash sh 85,000.
May 6: Paid Silker stores sh 100,000 by cheque.
Required:
Use the above information to:
(i) Prepare the relevant ledger accounts and balance them off as at 7th May 2023 (8marks)
(ii) Extract a trial balance. (4marks)
(b) Explain four benefits of a proper filing to an organization. (8marks)
4. (a) Explain five reasons for consumer protection. (10marks)
(b) By aid of a diagram, explain the effect of an increase in demand of a product while its
supply is constant on equilibrium price and quantity. (10marks)
5. (a) Explain five reasons for the popularity of current accounts among business people
(10marks)
(b) Explain five measures that may be used by the government to solve unemployment
problems in the country. (10marks)

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6. (a) The following trial balance was extracted from the books of Kocholwa Grocery as
at 31st December, 2023
Kocholwa Grocery
Trial balance
As at 31st December 2023
Details Dr (shs) Cr (shs)
Premises 1,500,000
Debtors and creditors 20,000 30,000
Cash at bank 90,000
Cash in hand 10,000
Purchases and sales 140,000 320,000
Stock of good on 1st Jan 2023 45,000
Discounts 6,000 2,000
Salaries and wages 50,000
Commissions 8,000
Power and lighting 12,000
Returns 15,000 19,000
Carriage outwards 2,300
Carriage inwards 5,400
Capital 1,543,700
Furniture 27,000
1,922,700 1,922,700
Additional information
Stock of goods on 31st December, 2023 was worth sh. 22, 000.
Required:
(i) Prepare Kocholwa Grocery trading, profit and loss account for the period ended 31st
December, 2023. (6marks)
(ii) Prepare Kocholwa Grocery Balance sheet as at 31st December, 2023. (4marks)
(b) Explain five principles of insurance. (10marks)

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 MOKASA
BUSINESS STUDIES
PAPER 1
MARKING SCHEME
1.
- Are scarce in supply
- Have monetary value
- Can be combined have utility
- Have alternative uses
- Are complimentary
- Have monetary value
- Unevenly distributed
- Can change ownership
2.
- The sender
- Message
- Channel/medium
- Encoding
- Decoding
- Receiver
- Feedback
- Clarity of the message
- Preciseness of the message
- Accuracy of the message
- Completeness of the message
- Attentiveness Positive of the receiver
- attitude of both the sender and the receiver
- Timeliness/ message should be presented at the right time
- Preparedness/sender should think through the message before sending it
3.
- Many buyers and sellers
- No barriers to entry or exit
- Commodities sold are close substitutes
- All firms earn normal profits
- Firms are independent/ there is little interdependence
- Action by a single firm does not significantly affect the market
- Buyers and sellers have a wide knowledge of the market
- Individual firms have slightly elastic/gently sloping demand curve
- Possible for single firm/ some firms to dominate /influence the price through extensive
- advertising/product promotion
4.
- Adequate capital -is available to start and expand the business
- Good management practices- leading to good staffing, planning and coordination that
will make a firm to achieve objectives
- Good business structures- hence all activities and operations of the business are well
arranged to meet the objectives

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 - Use modern innovation and invention- hence new ways of production are able to
improve the quality and quantity of goods and services
- Availability of the required physical facilities like land, buildings machinery etc. - these
will help the workers to be efficient and support production process.
- Good business culture -that encourages hard work amongst workers and owners to attain
the objectives.
- Use of skilled business workers- who are hardworking and efficient at work hence able
to do work efficiently and produce high quality and quantity goods and services
- Formulating good objectives —that all workers can easily achieve and be very efficient.
- Adoption of modern/appropriate technology
5.
- A decrease in price of the commodity
- An increase in the people’s incomes.
- An increase in the price of a substitute product.
- An increase in population.
- An improvement in terms of sale e.g. where better discount is given
- A decrease in the price of a complementary product.
- An improvement in tastes, preferences towards particular product.
6.
- When launching a new product
- When the product is tailored to meet customer’s specifications
- When demonstrations are required
- When the value of the product is high
- When the organization can afford to finance the sales force
- Where the market is concentrated in one area
7.
- Unemployment
- Increase in social crimes
- Moving from rural to urban areas
- Diverts government resources to cater for consumption of goods and services for the
youth
- Creates pressure on social amenities
- Possible political/social unrest
- Low savings
- Low investments
8.
Kamusi Traders
Two column cashbook
Date Details lf cash Bank Date Details lf cash Bank
2023 2023
Jan 1 Bal b/d 15000 Jan 1 Bal b/d 120000
Jan 3 Sales 8000 Jan 10 Purchases 5000
Jan 18 Debtor 18000 Jan 25 Purchases 5000 35000
Jan 31 Bal c/d 137,000 Jan 31 Bal c/d 13,000
23,000 155,000 23,000 155,000
9.
- High quality goods are produced
- Increased creativity and innovation
- Increased production
Page | 185
 - Standardised /uniform goods are produced
- Increased use of machines/mechanization making work easier
- Less time is spent in completing a job
- Improved management
- Enhances efficiency due to better use of resources
- Improves workers’ skills as a worker repeatedly does same task
10.
IC = CC + NL + D – I√
= 1,020,000 + 120,000 + 72,000√ – 320,000√
= 892,000√
11.
- Positive cultures, and beliefs that encourage people to engage in business very early
- Availability of training in business that will equip people with skills to start and manage
businesses
- Favorable government policies that support or enhance the starting and running of
trading activities.
- availability of adequate capital to start and expand the business
- Availability of adequate technology to produce the required quantity and quality
- Availability of good infrastructure to access market raw materials and other inputs and
move goods easily to the market
- Availability of adequate markets to sale the finished products and get revenue to sustain
operations
- Presence of successful role models in the country, who support inspire and encourage
new investors to venture into business
- Fair competition that firms can easily cope up with and survive at the market.
12.
Information Source document
Sold goods amounting to ksh.2,000 on credit to Njeri Invoice Issued/outgoing/
sales invoice
Goods returned by Mwangi Ksh.420 Credit note
issued/outgoing
Bought goods worth Ksh.13,000 on credit from Juma Invoice
received/incoming/
purchases invoice
Purchased goods from Nyayo traders and paid Receipt received
Ksh.30,000 in cash
13.
- Where the amounts involved is small
- Where cash is the only means available
- Where the payee does not accept other means of payment
- Where the payee requires cash urgently
- Where there is need to avoid expenses associated with other means of payment
14.
- Trains have capacity to carry bulky and heavy loads
- It is economical over long distances
- They run on fixed time tables
- The cargo is relatively secure
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 - Shunting trains make it possible to deliver goods to and from factories.
- Trains are customized to suite different types of goods

15.
- Factors of production (Land, Labour, Capital, Entrepreneurship)
- Payment for factors of production (Interest, profit, salaries/wages, rent/rates)
- Sale of goods and services
- Payment for goods and services (Consumption)
16.
- May fuel inflation
- Less equitable
- Can be avoided
- Might interfere with resource allocation.
- Uncertainty in revenue yield.
- Lack of contributors’ awareness.
- Expensive in collection.
17.
- Used as a medium of exchange
- Measure of value
- Standard for deferred payment
- Unit of account
- Store of value
- Transfer of immovable assets

18.
a) Cost of sales = (Op. stock + Purchases – cl. Stock) √
= 1,000,000 + 4,200,000 – 600,000)
= 4,600,000√
b) Working Capital = Current Assets – Current Liabilities√
(1,600,000+700,000+600,000+130,000) – (2,100,000)
= 930,000√
c) Rosto = COS/Av. Stock√
= 4,600,000/600,000+1,000,000/2√
= 4,600,000/800,000√
= 5.75 times√
19.
Farmer → consumer
Farmer → Retailer → consumer
Farmer → wholesaler → consumer
Farmer → wholesaler → retailer → consumer
20.
Transaction Assets Capital Liabilities
a). Bought stock for Ksh.80,000 on cash No effect No effect No effect
b). Bought furniture worth 90,000 on credit Increase No effect Increase
c). Took some stock of goods worth ksh.10,000 Decrease Decrease No effect
from his business to his wife at home
d). Paid a creditor Ksh 20,000 by cheque. Decrease No effect Decrease
21.

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 - Warehousing ensures consumers get goods at stable prices due to continuous supply of
goods that minimizes shortages
- Breaking of bulk in a warehouse will enable consumers to get goods in small quantities
which they can buy
- Warehousing ensures consumers get regular supply of goods hence there is no shortage.
- Warehousing ensures consumers get goods which have improved quality hence suitable
for their use e.g. Bananas
- Warehousing ensures consumers get a variety of good to choose from to satisfy their
needs.
- Warehousing ensures consumers get goods which are well prepared for sale ie well
packed, branded and graded for their final use.
- Seasonally produced goods are availed to consumers since they stored well and supplied
continuously to the market e.g. farm produce 39
22.
- To encourage production and sell of quality goods and services.
- To raise revenue to finance budget.
- To eliminate corruption and stealing of public resources.
- To attract investors who will buy or start similar firms.
- To fulfill the requirements of the donors before they are given loans.
- To make the firms to be efficient hence self-sustaining.
- To reduce government expenditure and taxation of public to finance the parastatals.
- To improve management of the firms by employing skilled workers.
23.
Description Office Machine
a). For cutting unwanted documents into tiny pieces to Paper shredder
avoid such documents getting into the wrong hands.
b). Electronic device used for processing data, storing Computer
information and for communication purposes.
c). Used for trimming papers into required shapes and Guillotine
sizes.
d). Used to transmit printed messages such as letters, maps, Fax machine
diagrams and photographs.
24. Value of Loss = 40/100,000 * 40,000,000 = 16,000,000
Compensation by:
XYZ = 30,000,000/40,000,000 * 16,000,000√ = 12,000,000√
ABC= 10,000,000/40,000,000 * 16,000,000√ = 4,000,000√
25.
- Easier access to labour; where many firms are located in one area a pool of labour of
various skills is usually available. Therefore, firms relocating to the area find it easy to
obtain.
- Improved/efficient infrastructure; usually where many firms are located, infrastructure
would be highly developed e.g. roads, power, water and communication facilities. Firms
relocating in that area thus enjoy the services of infrastructure already in place.
- Firms may be able to dispose of their waste product easily
- Ready market may be available from the surrounding firms
- Readily available services such as banking, insurance and medical care
- Adequate supply of power due to large volume of consumption etc.

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 MOKASA JOINT EXAMINATION
BUSINESS STUDIES
PAPER 2
MARKING SCHEME
1. (a)
i) Inaccurate data/information-leading to understating/overstating of expenditures
ii) Problem of double counting-difficulty in differentiating expenditures of intermediate
and finished goods
iii) Fluctuation in prices/inflation which may cause expenditures to appreciate or depreciate
iv) Problem of valuing subsistence sector-expenditures are only approximated
v) Exclusion of illegal goods/services- expenditures on illegal goods/services are not
considered yet resources were used
2. (a)

i) Sanctions – government expenditure should be approved by relevant authority/

parliament
ii) Economy – should be cost-effective in order to minimize wastage
iii) Flexibility – should be capable of being adjusted to accommodate prevailing economic
circumstances
iv) Maximum/optimal social benefit- it should benefit as many people as possible
v) Equity -should aim at distributing resources fairly
vi) Elasticity -should be expanded or contracted in line with the size of the economy
vii) Good/proper financial management- To ensure accountability/good
governance/transparency through proper record keeping
viii) Surplus -expenses should be less than revenue collected
ix) Productivity -more resources should be spent on development projects e.g roads
(b)
Partnership Private company
(i) Has a minimum if 2 and maximum of Minimum of two shareholders and
20 partners, 50 for professional maximum of 50 shareholders
partnerships
(ii) Formed under guidance of Partnership Formed under Company Act
Act
(iii) Managed by active partners Managed by 1or 2 directors or board
of directors
(iv) Some partners have limited liability and Shareholders have limited liabilities
others unlimited liability
(v) It cannot sue/ be sued in its name It can sue/be sued in its name

(vi) Death, insanity or bankruptcy of a Has perpetual existence

partner leads to dissolution of
partnership
(vii) Major source of capital is partners Major source of capital is sell of share
contribution

Page | 189
3. (a)(i) Bank a/c
Date Details Amount Date Details Amount
2023 Shs 2021 Shs
1/5/2023 capital 800,000√ May. 2 Rent 12,000√
May. 3 Premises 560,000√
May. 6 Silker stores 100,000√
May. 6 Balance c/d
328,000√
1,000,000 1,000,000
May 8 Balance b/d 328,000√
Dr Cash a/c Cr.
Date Details Amount Date Details Amount
2023 Shs 2023 Shs
May. 1 capital 200 000√ May. 7 Balance c/d 285,000√
May. 2 Sales 85,000√
285,000 285,000
May 8 Balance b/d 285,000√
Dr Capital a/c Cr.
Date Details Amount Date Details Amount
2023 Shs 2023 Shs
May 1 Balance c/d 1,000,000√ May. 7 Bank 800 000√
Cash 200,000√
1,000,000 1,000,000
May. 8 Balance b/d 1,000,000
Dr Silker stores a/c Cr.
Date Details Amount Date Details Amount
2023 Shs 2023 Shs
May. 7 Bank 100,000√ May. 2 Purchases 240,000√
June. 7 Balance c/d 140,000√
240,000 240,000
May 8 Balance b/d 140,000
Dr Purchases a/c Cr.
Date Details Amount Date Details Amount
2023 Shs 2023 Shs
May. 2 Silker stores 240,000√ May. 7 Balance c/d 240,000√
240,000 240,000
May. 8 Balance b/d 240,000
Dr Rent a/c Cr.
Date Details Amount Date Details Amount
2023 Shs 2023 Shs
May. 3 Bank 12,000√ May. 7 Balance c/d 12,000√
12,000 12,000
May 8 Balance b/d 12,000
Dr Sales a/c Cr.
Date Details Amount Date Details Amount
2023 Shs 2023 Shs
May. 7 Balance c/d 85,000√ May. 5 Cash 85,000√
85,000 85,000
May 8 Balance b/d 85,000
Dr Premises a/c Cr.
Date Details Amount Date Details Amount
2023 Shs 2023 Shs
May. 4 Bank 560,000√ May. 7 Balance c/d 560,000√

Page | 190
 560,000 560,000
May 8 Balance b/d 560,000

Kessup Traders
Trial Balance Sheet
As at 31st December, 2023
ITEMS DR (Shs) CR (Shs)
Premises 560,000√
Sales 85,000√
Bank 328,000√
Cash 285,000√
Creditor (Silker stores) 140,000√
Capital 1,200,000√
Purchases 240,000√
Rent 12,000√
1,425,000 1,425,000
(b)
i) Documents are kept safe from loss or damage
ii) Easy/fast retrieval /accessibility
iii) Saving on storage /economises on space
iv) Limits accessibility of documents by unauthorised personnel
v) Helps to keep documents neat
vi) Encourages transparency/ accountability as no documents are misplaced
vii) Tidiness in the office is maintained/ office kept tidy as documents are neatly arranged
4. (a)
i) unfair pricing-by traders who may overcharge them
ii) low quality goods-sell of counterfeit instead of original goods/products that do not meet
the set standards
iii) misleading/false information/advertising-which may give wrong impression about the
product/cheat in the performance of the product
iv) Unsafe structures /construction of substandard structures /buildings that endanger life of
the consumer
v) Artificial shortages/hoarding usually meant to increase prices
vi) Harmful products-selling products that are unfit for human consumption
vii) Breach of contract-harassment by traders
viii) Underweight/undersized goods/services-where some traders’ goods are underweight
/cheat consumers on the size
ix) Socially unacceptable goods/services- some traders sell goods that erodes the morality
of the society
x) Illegal goods/services- some traders are unlicensed/unqualified to provide some goods

Page | 191
 (b)
D2
D1
Price

P2 E2
P1
E1

D2
D1

Note:
Shift of demand curve to the right (D1D1 to D2D2) leads to excess demand i.e.
equilibrium quantity Q2 – Q1 and moves the equilibrium price from P1 to P2.
5. (a)
i) Overdraft facilities are available-payment can be made even when the a/c holder does
not have money
ii) Account holder is not required to maintain any minimum balance giving him/her access
to all his/her money
iii) Bank statements are usually sent to the a/c holder regularly which enables him/her to
monitor the account
iv) Deposits into the account can be made anytime during working hours
v) Use of cheques in payment will serve as evidence of payment in the future/makes
payment convenient/ the a/c holder does not have to travel to the bank
vi) The a/c holder can withdraw any amount without giving a notice provided that the
account balance allows giving him/her access to all his/her money
vii) Payment can be made even if there is insufficient funds in the account by use of post-
dated cheque
(b)

i) Adoption of relevant education system that equips the youth with skills that required in
the job market
ii) Adoption of policies that encourage use of labour intensive methods of production to
increase job opportunities.
iii) Diversification of economic activities that provides variety of production activities
iv) Increasing government spending in projects that employs the youth which expands the
economy
v) Partner with private sector to steer community based projects that involve the
youth/create employment opportunities in private sector
vi) Encourage maximum utilization of available resources to increase production.
vii) Encourage rural development in order to attract firms and minimize rural-urban
migration
viii) Improve infrastructure in order to stimulate economic activities.
Page | 192
 ix) Population control so as to have a labour force that the economy can absorb
x) Exporting labour assisting unemployed youth to get jobs abroad
xi) Protecting local industries from foreign competition so they can absorb more labour
xii) Encourage/promote the informal sector/jua kali sector in order to promote self-
employment
xiii) Attract foreign investment to increase production activities/grow the economy

6. (a) Kocholwa Grocery

Trial balance
st
As at 31 December 2023
Details Dr (shs) Cr (shs)
Premises 1,500,000
Debtors and creditors 20,000 30,000
Cash at bank 90,000
Cash in hand 10,000
Purchases and sales 140,000 320,000
st
Stock of good on 1 Jan 2023 45,000
Discounts 6,000 2,000
Salaries and wages 50,000
Commissions 8,000
Power and lighting 12,000
Returns 15,000 19,000
Carriage outwards 2,300
Carriage inwards 5,400
Capital 1,543,700
Furniture 27,000
1,922,700 1,922,700
(b)
Kocholwa Grocery
Trading Profit and loss account
For the year ended 31st December, 2023
Sh Sh
Opening stock 450000 Sales 320000
Purchases 140000 Less R. inwards 15000
Less R. outwards 19000 Net sales 305000
Add c. inwards 5400
COGAS 171400
Less c. stock 22000
COS 149400
Gross profit 155600
305000
Discount allowed 6000
Salaries and wages 50000
Power and lighting 12000 Gross profit b/d 155600
Carriage outwards 2300 Discount received 2000
Net profit 95300 Commission 8000
165600 165600
Page | 193
 Kocholwa Grocery
Balance Sheet
As at 31st December, 2023
F. Assets Shs Shs
Premises 1,500,000 Capital 1,543,700
Furniture 27,000 Add Net Profit 95,300
1,527,000 1,639,000
C. Assets
Stock 22,000
Debtors 20,000 C. Liabilities
Bank 90,000 Creditors 30,000
Cash 10,000
142,000
1,669,000 1,669,000
(b)

i) The doctrine of utmost good faith- it requires the insured to disclose all the material
facts relating to the person or property being insured
ii) The principle of insurable interest- it states that one should only insure a property that
he/she stands to suffer direct financial loss in case the insured against occurs
iii) The principle of indemnity- the insured is restored back to the financial position he/she
was just before the risk insured against occurs
iv) The principle of proximate cause- it states that for the insured to be compensated there
must be a close relationship between the loss suffered and the risk insured
v) The principle of subrogation- it states that whatever remains of the property after
compensation according to the terms of policy becomes the property of the insurer
vi) The principle of contribution- it operates in a situation where the insured has taken
policies with two or more companies covering the same risk. In the event of loss, the
insurers will contribute proportionately to compensate the insured

Page | 194
 BOKAKE
BUSINESS STUDIES
PAPER 1
1. Give four features of basic human wants. (4mks)
2. Outline four reasons why the government trains business people (4mks)
3. Highlight four factors to consider when selecting a channel of distribution. (4mks)
4. Outline four commercial services that are useful to a manufacturer (4mks)
5. Indicate whether the following items are falling in real, nominal or private accounts.
(3mks)
Sales
Carriage inwards
Fixture and fittings
Stock
Cash
Capital
6. Outline four characteristics of multiple shops (4mks)
7. Give four causes of unemployment in Kenya today (4mks)
8. State the journal that deals with each of the following types of transaction (4mks)
Types of transaction Journal
(a) Sale of fixed asset on credit
(b) Correction of errors
(c) Credit purchases
(d) Return of goods by customers
9. Write whether the following transactions will have an increase, decrease or no effect on the
balance sheet totals. (4mks)
Transaction Effect
Withdrew stock for personal use
Paid a creditor by cheque
A debtor paid by cash
Received a loan by cheque
10. The following figures relate to Jamii Traders. Shs.
Details
Capital 30.4.2022 940,000
Net loss 20,000
Additional investments 420,000
Drawings per month 6,000
Determine capital as at 1.5.2021. (4mks)
11. Highlight four roles played by personal secretary (4mks)
12. The table below shows the supply of milk over a period of three years.
Year 2019 2020 2021
Quantity supplied (Litres)’’000’’ 50 30 25
Outline four reasons for the above trend. (4mks)
13. Given the following information of Elisha Traders (4mks)
Land and Building. 490,000
Machinery 300,000
5-year loan 110,000
2-year loan 80,000
Page | 195
 Creditors 90,000
Debtors 100,500
Stock 75,600
Cash 40,000
Bank overdraft 69,900
Calculate,
Working capital (2mks)
Current ratio (1mk)
Capital owned (1mk)
Borrowed capital (1mk)
14. Outline four trends in forms of business units. (4mks)
15. State four reasons that can lead to the termination of an insurance policy. (4mks)
16. State four essential elements in communication (4mks)
17. Given below are transactions to Buda traders for each of the transactions, indicate in the
column below the account to be debited and the account to be credited (4mks)
Transaction DR CR
(i) Paid salaries in cash
(ii) Withdraw cash from bank for office use
(iii) Paid telephone bill by cheque
(iv) Purchased office equipment on credit from Eldoret Holdings
18. State four causes of business failure (4mks)
19. State four assumptions of circular flow of income in a two sector economy (4mks)
20. Highlight four roles of advertising agencies in product promotion. (4mks)
21. Outline four benefits of commercial production (4mks)
22. Give four reasons why firms choose to remain small in an economy dominated by large firms
(4mks)
23. Highlight four features of perfect competitive market. (4mks)
24. Name four documents that originate from the seller in the home trade. (4mks)
25. State four errors that do not affect the agreement of a trial balance (4mks)

Page | 196
 BOKAKE
BUSINESS STUDIES
PAPER 2
1. (a) James runs a manufacturing firm and has employed seventy workers. Explain five
reasons why it would be beneficial to assign each worker a specific job in production
(10marks)
(b) Discuss five factors that will lead to an increase in a country’s national income.
2. (a) Explain five factors that a business organization would consider when choosing office
equipment. (10marks)
(b) Discuss five reasons why a government would opt to sell its public corporation
(10marks)
3. (a) The following balances relate to kanji stores as at 31 st march 2023
Land and buildings 1000000
Motor vehicle 800000
Stock 100000
Trade debtors 70000
During the week ending 7th April 2023. The following transactions took place –
April 2nd –Bought stock on credit 80000
3rd – Sold stock on credit 42000
6th-Received sh 100000 cash from debtors
Required: open the relevant ledger entries, balance them and extract a trial balance as
at 7th April 2023 (12marks)
(b) Outline four importance’s of insurance in the Kenyan economy (8marks)
4. (a) The following transactions were extracted from the books of daraja traders;
2023 June 1-balance brought forward cash ksh 1900, bank ksh 6500
3-sold goods in cash ksh 1200
5- Paid transport by cheque ksh 2050
7 –bought goods worth ksh 2500 in cash less 5% cash discount
10-paid postage charges by cheque ksh 3000
12-daraja deposited ksh 600 from cash till to the business bank account
13-bought goods ksh 8400 by cheque
15- Sold some old furniture for sh 3900 and received the money in cash
17 –brought a table to be used in the business whose value was ksh 1800
18- Paid electricity bill by cheque ksh 2100
20- Sold some goods against a cheque for ksh 6600 whose value was ksh 6850
21- Took cash ksh 400 for family use
26- Sold goods on credit to kimani valued at ksh 4500
28- Received cash ksh 1500 from bidii stores
30- Deposited all cash with the bank except ksh 3525.
Required: prepare a three column cash book duly balanced (10marks)
(b) Outline any five factors to consider while locating a warehouse (10marks)
5. (a) Discuss five challenges that a young population poses to a country (10marks)
(b) Explain five circumstances under which oligopoly market structure may be created
6. (a) Explain five factors that should be considered by a firm when deciding on the method
to use for promoting his products (10marks)
(b) With the aid of a suitable diagram. Explain the effects of a decrease in supply on the
equilibrium price and quantity.

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 BOKAKE
BUSINESS STUDIES
PAPER 1
MARKING SCHEME
1.a) Necessary for survival
b) They are universal
c)They are felt needs
d)They cannot be postponed
e) They are satisfied before secondary wants
2.a) To expose them to modern developments in management
b) Educates on efficient methods of operating a business
c) Exposes them to problems facing them and their possible solutions
d) Impact proper business ethics
e) Educates them on how to use available resources to minimize costs and maximize profits
f) To expose them to government policies regarding business activities in the country
3.a) Marketing risks
b) Nature of the product
c) Nature of the market
d) Role of the intermediaries
e) Resources and size of the firm
f) Channel used by competitors
g) Government policy
4.a) Warehousing
b) Transport
c) Communication
d) Insurance
e) Banking
5.a) Nominal
b) Nominal
c) Real
d) Real
e) Real
f) Private
6.a) Many shops in different locality
b) Shops have similar outward appearance
c) Buying is centralized
d) Selling is decentralized-goods not selling in one shop can be moved to
another
7.(i)High population growth rate
(ii)Inappropriate education system
(iii)Seasonality in production/poor climatic conditions
(iv)Poor government policy or job creation
(v)Low demand for goods and services which leads to closure of industries
(vi)Choice of production method; choice of capital intensive methods
where labour is abundant
8.(i)General Journal/journal proper
(ii)General Journal

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 (iii)Purchases Journal
(iv)Sales Returns
9.a) Decrease
b) Decrease
c) No effect
d) Increase
10.DC+NP+AI-L-D-C.C√
OC√+420,000√-20,000√-(6,000X12) √√=940,000√
OC+400,000-72,000=940,000
OC=612,000
11.a) receiving information
b) Filing of information
c) Take minutes for the seniors
d) Maintain petty cash book
e) Receive calls for the boss
f) Make calls for the seniors
12.a) Decrease in price of milk
b) Increase in cost of production of milk
c) Decrease in technology in milk production
d) Unfavorable weather affecting dairy cattle e.g. Drought
e) Outbreak of cattle diseases
f) Increased strikes by dairy farmers
g) Farmer’s expectation of future increase in the price of milk
h) Increase in price of other competitive commodities/produce of
farmers
13.a) Working capital =CA-CL
216100-159900
=56200
b) Current ratio
CA; CL
216100;159900
=1.35;1
c)Capital employed
=FA+WC or CO+BC
=49000+300000+56200
=846200
d) Capital owned
=A-L
1011100-349900
=661200
e) Borrowed capital
=11000+80000
=190000
14.a) Globalization
b) Privatization
c) Unit trusts
d) Franchising
e) Cartels
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 f) Holding companies
15.a) Lapse of time
b) Surrendering of the policy
c) Insured fails to pay premiums
d) Occurrence of a risk and compensation
e) Death of the insured
f) Maturity of the policy failure to be truthful
g) For property insurance e.g. car disposal or sell of the property to
another party
16.a) Sender
b) Message
c) Channel
d) Receiver
e) Get back
17.(i)Salaries a/c Cash a/c
(ii)Cash a/c Bank a/c
(iii)Telephone Bank a/c
(iv)Office equipment a/c Eldoret Holding a/c
18.a) Inadequate finance
b) Inability to manage people
c) Improper location/lack of customers
d) Lack of adequate raw materials
e) Poor management of finances
f) High levels of competition
g) Lack of market research
h) Lack of government support
19.a) All incomes earned by firms are spent on factors services
b) All incomes earned by household are spent on goods and services
c) Economy is closed (no international trade)
d) Existence of only two sectors in the economy
e) No government intervention
20.a) Production promotion
b) Advertise on behalf of their clients
c) Design logos, trademarks etc.
d) Advise their clients on selling techniques
e) Choose appropriate media of advertising
21.a) Earns revenue to the government
b) Earns foreign exchange
c) High output
d) Encourage specialization
e) High quality products
22.(i) Size of the market
(ii)Nature of the market
(iii)Flexibity of small firms
(iv)Quick decision making
(v)Belief that a small firm is more manageable
(vi)Rising cost of production
23.a) Wide knowledge of market
Page | 200
 b) Homogenous goods
c) No transport cost
d) No government intervention/interference
24.a) Catalogue
b) Quotation
c) Acknowledgement note
d) Invoice
e) Credit note
f) Debit note
25.(i)Error of total omission
(ii)Error of original entry
(iii)Error of commission
(iv)Error of principle
(v)Compensating errors
(vi)Complete reversal of entry

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 BOKAKE
BUSINESS STUDIES
PAPER 2
MARKING SCHEME
1a)
Output per worker is greatly increased thus reducing cost per unit
Workers engage in the trade they are best suited/talented leading to increased productivity
Encourage invention-one becomes a better worker after doing certain tasks repeatedly over
sometime
Enhances the use of modern machines making production faster and more efficient
Enables a worker to acquire skills in a particular field thus improving efficiency/
productivity
Less mental/physical effort is spent when one gets used to a particular job/less fatigue
b)
Increase in labour supply who produce more
Increased amount of capital invested leading to increased productivity
Increased utilization of land leading to increased productivity
Political stability which attracts both local and foreign investors leading to increased
productivity
Positive attitude of citizens towards work where people work to increase productivity
Reduced size of subsistence sector
Increased level of entrepreneurship
2a)
Cost of buying, whether the business can afford it or not
Availability of spare parts for maintenance of the machine
Durability whether it can last long
Service personnel-availability of qualified personnel to repair
Adaptability-ability of the equipment to cope with future changes
Effects on staff morale-the attitude of staff towards the equipment
Possibility of hiring rather than buying
b)
Raise government revenue
Reduce competition faced by foreign investors in order to attract them
Redistribute income by giving members of public corporation dividends
To break monopoly position by exposing them to competition
Minimize political interference
Comply with conditions given by development partners
3.(a)
Land and building a/c
April 1 bal b/d 100000 April 7 bal b/d 100000
Motor vehicle a/c
April 1 bal b/d 800000 April 7 bal b/d 800000
Stock a/c
April 1 bal b/d 100000 April 7 bal b/d 100000
Debtors a/c
April 1 bal b/d 70000 April 6 cash 100000
April 3 sales 42000 April 7 bal b/d 12000
Page | 202
 Capital a/c
April 7 bal b/d 197000 April 1 bal b/d 197000
Purchases a/c
April 2 bal b/d 80000 April 1 bal b/d 80000
Creditors a/c
April 7 bal b/d 80000 April 1 purchases 80000
Sales a/c
April 7 bal b/d 42000 April 3 debtors 42000
Cash in hand a/c
April 6 bal debtors 10000 April 7 bal b/d 10000

KONJI STORES TRIAL BALANCE

AS AT 7TH APRIL
DETAILS DEBIT CREDIT
Lands and buildings 1000000
Motor vehicle 800000
Stock 100000
Debtors 120000
Capital 197000
Purchase 80000
Creditors 80000
Sales 42000
Cash 100000
2092000 2092000
(b)
The government collects revenue from the insurance industry which is used to provide public
services
Creation of employment such as bankers and agents
Creates confidence: by encouraging business men to take risks in investing
Encourages savings from the members of the public in the form of policies
Monies collected by insurance are invested in other businesses such as real estates
4.(a)
Daraja stores
3 column cash book
DR for the month of June 2023 CR
Date Details D.A Cash bank Date Details D.R Cash bank
June 1 Bal b/d 1900 6500 June 5 Transport 2050
3 Sales 1200 7 Purchases 125 2375
12 Cash 600 10 Postage 3000
15 Furniture 3900 12 Bank 600
17 Capital 1800 18 Electricity 2100
20 Sales 250 6600 21 Drawings 400
28 Furaha 1500 30 Bank 3400
30 cash 3400 30 Bal b/d 3525 9950
250 10300 17100 125 10300 17100
4.(b)
Availability of adequate security
Availability of auxiliary services
Enough land for future expansion
Nearness to the point of production
Page | 203
 Compliance with the government regulations
Accessibility to good roads and transport network
Availability of good communication network
5.(a)
High dependency ratio
Low labour supply as many people have not attained working age
Reduces saving and investment due to high rate of consumption
Diversion of government expenditure to cater for the young welfare
Increased social evils/crime
High rate of unemployment
5.(b)
Where a few may control strategic input
Where some few firms may form cartels/collude
Where an industry may have barriers to entry
Where a few firms hold patent rights
Where a few firms may enjoy a large economies of scale
Where few firms possess a selective productive technique
6.(a)
Cost of the method
Target group
Urgency of the message
Nature of the message
Size of the market
Intended impression
6.(b)

S1
S0
P1 E1
price
P0 E0
S1

S0
Q1 Q2 Quantity

Page | 204
 SUNSHINE
BUSINESS STUDIES
PAPER 1
1. State four importance of learning business studies. ` (4marks)
2. State whether each of the following transactions will increase, decrease or have no effect on
balance sheet total. (4marks)
Received 32,000 cash from a debtor. .
Withdrew 12,000 from bank for personal use. ...................................................
Paid a creditor 53,000 by cheque. ......................................................................
Sold an old motor van worth 600,000 cash. .......................................................
3. The recent data shows that many youths in the country are unemployed. State four
measures that the Kenyan government can take to solve this problem. (4marks)
4. Outline four sources of Public finance. (4marks)
5. Classify the following resources as either human, man-made or natural. (4marks)
Resource Classification
Gold
Lawyer
Vehicle
Teacher
6. Highlight four characteristics of money. (4marks)
7. Identify the essential element of transport associated with the following. (4marks)
Road ....................................................................................................................
Railway station ...................................................................................................
Petrol ...................................................................................................................
Aeroplane ............................................................................................................
8. The following transactions were extracted from the books of Kitale traders during the
month of January 2023.
2023:
Jan 4: Sold goods worth 300 on credit to Ombogo invoice No.1304.
Jan 4: Sold goods worth 7000 on credit to Jemimu traders invoice No 1305.
Jan 17: Credit sales worth 6000 to Otieno invoice No 1306.
Jan 21: Sold goods worth 5000 to Kioko on credit.
Required
Prepare a sales journal for the above transaction. (4marks)
9. State four types of business activities. (4marks)
10. Highlight four principles of Insurance. (4marks)
11. State four circumstances under which a warehouse is said to be operating efficiently.
(4marks)
12. Mention four sources of monopoly power that allow a firm to be the sole supplier of a
product in the market. (4marks)
13. Fill in the missing figures in the table below. (4marks)
Assets Capital Liabilities
1,300,000 840,000 a
b 600,000 182,000
184,000 c d
14. Highlight four negative effects of inflation. (4marks)

Page | 205
15. The illustration below represents the circular flow of income in two section economy.
Identify the parts labeled a, b, c and d. (4marks)

16. State four sources of capital for sole proprietorship form of business unit. (4marks)
17 .Highlight four measures that the central bank can use to reduce excess money in
circulation. (4marks)
18. The following account balances were extracted from the books of Goloh traders on 30th
June 2020.
Sales: 600,000
Closing stock: 220,000
Returns inwards: 60,000
Purchases: 340,000
Opening stock: 240,000
Calculate: (2marks)
Margin
Rate of Stock Turnover. (2marks)
19. The graph below represents an increase in the supply of maize in Nyandarua County. State
four cause for this shift.

20. Outline four barriers of effective telephone communication. (4marks)

21. Kenya imports cars from Japan. Describe any four channels of importing this car.

Page | 206
22. The following information was extracted from the books of Kiptum traders on 30th April
2020.
Details:
Land and building 150,000
Creditors 1,5000
Motor car 120,000
Cash 25,5000
Capital 311,000
Bank 4,000
Sales 5,000
Purchases 18,000
Required:
Prepare Kiptum traders Trial Balance. (5marks)
23. Define the following terms as used in the satisfaction of human wants. (3marks)
Scarcity
Choice
Opportunity
24. Highlight four characteristics of tied shops. (4marks)
25. State four advantages of delocalization of firms. (4marks)

Page | 207
 SUNSHINE
BUSINESS STUDIES
PAPER 2
1. a) Entrepreneurship play a key role in the development of a country’s economy.
Explain five importance of entrepreneurship. (10marks)
b) Describe how the price of product can be determined in a free market situation.
Use a diagram to illustrate. (10marks)
2. a) Explain five factors to consider when choosing the appropriate method of
product promotion. (10marks)
st
b) Uhuru started a business on 1 Jan 2023 with 150,000 in cash and 90,000 Bank
Overdraft.
The following transactions took place during the month
Jan 2: cash purchases 70,000
Jan 3: paid rent 10,000 in cash
Jan 5: Cash sales paid directly into the bank 64,000
Jan 9: Deposited 50,000 into the bank from cash till
Jan 10: Paid wages in cash 4,000
Jan 13: Bought furniture for 36,000 paying 27,000 by cheque and the balance was to be
paid later.
Jan 15: Received 16,000 cash from debtor Joy
Jan 20: Bought goods for 19,000 paid partly by cheque 10,000 and he rest in cash
Jan21: Received a loan of 210,000 from Maria in cash
Jan 25: Deposited all the cash into the bank except 42,000
Required:
Prepare Uhuru trader’s two column cash book duly balanced. (10marks)
3. a) Describe five differences between partnership and co-operative societies. (6marks)
b) Explain five functions of an office. (10marks)
4. a) Most developing countries are experiencing a balance of payment deficit.
Explain five measures that may be used to correct this situation. (10marks)
b) Explain five advantages of government involvement in business. (10marks)
5. a) Discuss five internal benefits that accrue to a firm as a result of large scale production.
b) Explain five principles that guide public expenditure. (10marks)
6. a) Explain five features that are common to under-developed countries. (10marks)
b) The following trial balance relates to Sivirike Traders as at 31st December 2014.
Details Dr Sh. Cr. shs
Stock 10,000
Bank 3,500
Purchases 15,000
Sales 28,000
Returns 800 1100
Rent 580
Insurance 950
Creditors 450
Carriage in 1,200
Discounts 300 1,620
31,750 31,750

Page | 208
Additional information
Closing stock was valued at sh.2500
Carriage out was shs.1200
Required
Prepare a trading, profit and loss account. (10marks)

Page | 209
 SUNSHINE
BUSINESS STUDIES
PAPER 1
MARKING SCHEME
1.
(i)Acquire knowledge and skills necessary to start and run a business comfortably
(ii) Appreciate the role of business in provision of goods and services
(iii)Appreciate the role of government in business
(iv)A career subject etc.
2.
(i)No effect
(ii)Decrease
(iii)Decrease
(iv) No effect
3.
(i)Policies that enlarge the use of labor intensive technique
(ii)Diversification of economic activities
(iii)Develop infrastructure in rural areas to spur development
(iv)Exporting of labor where possible
4.
(i)Fines on offenders
(ii)Rent and rates paid for use of government property
(iii)Dividends and profits from government investment
(iv)Proceeds from sale of government property
5.
Resource Classification
Natural
Human
Man-made
Human
6.
(i)Acceptability / Stability /marketability
(ii)Divisibility
(iii)Portability/congistability
(iv)Durability/scarcity
7.
(i)Way
(ii)Terminus
(iii)Method of propulsion
(iv)Unit of carriage
2023 details No.
Jan 4 Ombogo 1304 300
Jan 4 Jemimu 1305 7000
Jan 17 Otieno 1306 6000
Jan 21 Kioko 1307 5000
Totals to be pushed to the sales a/c

Page | 210
 18300
9.
(i)Processing
(ii)Manufacturing
(iii)Trade
(iv)Construction
10.
(i)Principle of utmost good faith
(ii)Principle of subrogation
(iii)Principal of indemnity
(iv)Principal of contribution
11.
(i)If the warehouse has qualified staff
(ii)If the warehouse has adequate storage space
(iii)Incase the warehouse has qualified staff
(iv)If the warehouse is compliant with government law
12.
(i)Ownership of production rights
(ii)Control of important input production
(iii)In case of amalgamation of firms
(iv)Huge financial requirement
(v)Internal economies of scale
13.
Assets Capital Liabilities
a.460,000
b.782,000
c.154,000 30,000
300,000 200,000 d.100,000
A=C+L
14.
(i)Reduction in profit
(ii)Conflict between employees and employers
(iii)Loss to creditors
(iv)Decline in standards of living
15.
a) Payment for factors of production
b) Factors of production
c)Goods and services
d)Payment for goods and services
16.
(i)Inheritance
(ii)Owner’s saving
(iii)Loans from Banks
(iv)Ploughing back of profit
17.
(i)Selling of government securities through
(ii)Increasing the cash liquidity ratio

Page | 211
(iii)Increasing the bank rates
(iv)Moral Persuasion
(v)Instituting selective credit control measures.
18. c.o.s = o.s + p.c.s
=240,000+340,000-220,000
=360,000
G.p =sales –c.o.s.
=540,000-360,000
280,000
a) G. px100 G.p =180,000x100
sales 540,000
=331/3%
b) c.o. s = 360,000 360,000 = 1.56
Average stock 230,000 =2 times
A. v= 220,000 +240,000 = 230,000
2
19.
(i)Availability of factors of production
(ii)Reduced cost of production
(iii)Favourable government policy
(iv)Entry of firms into the industry
(v) Expectation of decrease in price of the commodity
20
.(i)Language barrier
(ii)Poor listening
(iii)Pre-judgment
(iv)Pre-network
21.
(i) Foreign Manufacturer → local consumer
(ii)Foreign Manufacture → Agent → local consumer
(iii) Foreign Manufacture → Agent → local retailer → local consumer
(iv) Foreign Manufacture → local wholesaler → local consumer
22.
KIPTUM TRADERS
TRIAL BALANCE
AS AT 30TH APRIL 2020
Details DR CR
Land of building 150000
Creditors 1500
Motor car 120000
Cash 25500 311000
Capital
Bank 4000 5000
Sales
Purchases 18000
317500 317500

Page | 212
23.
(i) Limited in supply. This is where the economic resources used to satisfy human wants are
limited in supply.
(ii)Selecting an item/human want to satisfy using the scale of preference
(iii)The best next forgone commodity
24.
(i)Sell goods from the same manufacturers
(ii)The prices of goods are the same in all the shops
(iii)Production in centralized scales are decentralized
(iv)Quality of the product is standardized
25.
(i)Ensures there is balanced -Regional development
(ii)Creates employment in the rural areas
(iii)Reduces Rural-Urban migration
(iv)Reduces pollution in the urban areas
(v)Reduces terrorism attacks on urban areas

Page | 213
 SUNSHINE
BUSINESS STUDIES
PAPER 2
MARKING SCHEME
1. a) Importance of entrepreneurship
- Creation of employment
- Formation of capital
- Reducing rural urban migration
- Raising standards of living
- Saving on imports
- Improving infrastructure
- Reducing foreign demand of the economy
- Making use of local resources
- Promotion of technology
- Promotion of entrepreneurial culture
(any 5 and explanation 2 x 5 = 10 marks)

b) Price determination where forces of demand and supply operate freely in the market.
Note
Let the learner explain the situation where excess supply or excess demand eventually lead to
equilibrium price. (10marks)
2. a) Factors to consider when choosing appropriate method of product promotion.
- cost of promotion
- nature of market
- target group
- government policies
- nature of the product
- availability of the method
- methods used by the competing firm
- urgency of the advert
Any other relevant answer
The student should briefly explain in order to score 2 marks per point
b)
Uhuru Traders
Two Column Cashbook
For the month of Jan 2023
Date Details F Cash Bank Date Details F Cash Bank
2023 2023
Jan 1 Bal b/d 150,000 Jan 1 Bal b/d 90,000
Jan 5 Sales 64,000 Jan 2 Purchases 70,000
Jan 9 Cash C1 50,000 Jan 3 Rent 10,000
Jan 15 Joy 16,000 Jan 9 Bank C1 50,000
Jan 21 Maria 210,000 Jan 10 Wages 4,000
Jan 25 Cash C2 191,000 Jan 13 Furniture 27,000
Jan 20 Purchases 9,000 10,000
Jan 25 Bank C2 191,000
Jan 31 Bal b/d 42,000 178,000
376,000 305,000 376,000 305,000

31/1/23 Bal b/d 42,000 178,000

Amount banked = Dr –cr) – 42,000 ½ x 20 scores

= 376 – 143,000-42,000 = 10 marks

Page | 214
 = 191,000
Balancing bank: Dr = 305,000
: Cr = 127,000
178,000
3. a) Differentiate between partnerships and co-operatives.

PARTNERSHIPS CO-OPERATIVES
- Formed by a minimum of 2 partners - Formed by a minimum of 10 members
- maximum membership is 20 for ordinary - has no maximum membership
partnerships and 50 for professional
partnerships
- partnerships have unlimited liabilities except - co-operatives have limited liabilities
for limited partners
- regulated by the partnership deed or the - regulated by the by-laws
partnership act
- it’s profit motivated - it’s welfare motivated
- it serves members and outsiders - it serves members only
Any 5x 2 plus explanation = 10 marks
b) Functions of an office
- Receiving and recording information
- Dissemination of information
- Mailing
- Reproduction of documents
- Safeguarding and controlling of organizations property
- Communication
- Filing Any 5 plus explanation 5 x 2 = 10 marks
4. a) Measures to correct a deficit in the B.O.P
- Increasing the volume of exports
- Decreasing the volume of imports
- Lobbying for removal of trade barrier
- Controlling capital outflow
- Encouraging foreign investment in the country
- Devaluation of domestic currency
- Encouraging capital inflow
- Export promotion
1 x 2 = 2 marks x 5 = 10 marks
Elaborate explanation is must for double score otherwise 1 mark is awarded for mentioning the point
only.
b) Advantages of government involvement in Business
- Creation of employment opportunities
- Generation of government revenue.
- help to reduce foreign dominance in the economy
- provision of Goods and Services
- the government is able to carry out business that require large capital start up
- helps to promote investment by creating enabling environment
- protection of citizens from malpractices by business
any 5 x 2 = 10 marks
5. a) Internal economies of scale
- managerial economies
- marketing economies
- research economies
- staff welfare economies

Page | 215
- financial economies
Any 5 x 2 marks = 10 marks
Any other relevant point
b) Principles of public expenditure
- sanction
- maximum social benefit
- principle of economy
- proper financial management
- principle of flexibility
any 5 x 2 marks = 10 marks
6. a) Features of under developed countries
- increase in levels of poverty / lower per capita income
- high dependency level
- poor infrastructure
- low labour productivity
- outdated cultural practices
- disparity in income distribution
- low levels of savings and investments
- underutilization of natural resources
- high population growth ratio
- high levels of unemployment
(mention 1 explain 1
b)

Sivirike Traders
Trading, profit and loss a/c
for the year ending 31st December 2-14

Shs shs Shs

Opening stock 10,000 Sales 28,000
Add. purchase 15,000 Less ret in. 8,000
Carriage inward 1,200
16,200
Less ret out 1,100 15,100
Cog As 25,100
Less closing stock 25,000
22,600
Gross profit dd 4,600
27,200 27,200

Insurance 950 Gross profit bd 4,600

Discount allowed 300 Add. rent 580
Carriage outward 1,200 Discount 1,620
Net profit c/d 4,350
6,800 6,800
Net profit b/d 4,350

Page | 216
 LANJET
BUSINESS STUDIES
PAPER 1
1. Highlight four factors that may positively influence the operations of a business. (4marks)
2. In the spaces provided below, indicate the type of utility created by each of the following
activities. (4marks)
Activity Type of utility
a) Store keeping -
b) Selling goods to a customer -
c) Making a chair -
d) Transporting goods -
3. Outline four differences between a good and service. (4marks)
4. Outline four factors that may encourage entrepreneurship in Kenya. (4marks)
5. Highlight four benefits of using electronic filing system. (4marks)
6. Outline four considerations that a seller should take into account before giving credit to a
customer. (4marks)
7. Outline four circumstances under which a cooperative society may be dissolved. (4marks)
8. State four reasons why the government should create an enabling environment for
investors. (4marks)
9. Name the essential elements of transport. (4marks)
10. Give four reasons why one would prefer a letter to a telephone to send a message. (4marks)
11. Outline four characteristics of property insurance. (4marks)
12. Outline four benefits to a business that uses its own warehouse. (4marks)
13. Give four advantages of personal selling as a method of sales promotion. (4marks)
14. Give the meaning of the following terms as used in business. (4marks)
a) Law of demand –
b) Law of supply –
15. Highlight four benefits that would accrue to a firm located near other existing firms.
16. State features of a monopoly market. (4marks)
17. Outline four ways in which households contribute to national income of a country.
18. State four types of unemployment in an economy and give the cause of each. (4marks)
19. State the effects of each of the following transactions on the balance sheet totals by writing
increase or decrease or no effect in each case. (4marks)
Transaction Effect on Balance sheets totals
a) Brought machine on credit
b) Withdrew cash from the business for personal use
c) Purchased stock in cash
d) Paid outstanding loan by cheque
20. Identify the ledger in which the following accounts are maintained;
Account Ledger
a) Commission income a/c
b) Supplier a/c
c) Machine a/c
d) Cash a/c
21. Give two reasons why a three column cash book is used both as a journal and a ledger.
(4marks)

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22. Indicate the type of journal in which each of the following transactions would be recorded.
(4marks)
transactions Journal
a) Goods previously sold on credit were returned
b) goods bought on credit
c) Goods sold for cash
d) Motor vehicle sold on credit terms
23. Outline four benefits that accrue to a business that uses automated teller machine (ATM)
banking services. (4marks)
24. Outline four benefits of direct taxation to the government. (4marks)
25. State four forms of economic integration that may exist between countries. (4marks)

Page | 218
 LANJET
BUSINESS STUDIES
PAPER 2
1. a) Explain five indicators of a high population growth. (10marks)
b) Explain the factors that can hinder effective communication. (10marks)
2 a) Menengai Manufacturers who have been producing product X stopped its production
and instead embarked on the production of another product. Explain five factors that
may have led to this decision. (10marks)
b) Situma intends to invest money he has acquired from a bank in form of loan into a
retail business. Explain five factors that he should considered before implementing his
decisions. (10marks)
3. a) Describe five channels that can be used to distribute locally manufactured goods.
b) The following trial balance was extracted from the books of Rafiki Traders for the year
ended 31/12/2019.
Rafiki Traders
Trial Balance
As at 31st Dec 2019
Dr (sh) Cr (sh)
Capital 270,000
Drawings 30,000
Opening stock 50,000
Purchases 255,000
Sales 400,000
Returns 4,000 7,000
Carriage inwards 28,000
Carriage outwards 8,000
Discount 12,000 5,000
Insurance 25,000
Commission 3,000
Rent 18,000
Furniture 50,000
Land 155,000
Premises 110,000
Debtors 40, 0000
Creditors 70,000
770,000 770,000
Closing stock was valued at shs. 58,000.
Required;
i) Prepare a trading and profit and losses a/c for the year ended 31st Dec, 2019. (10marks)
ii) Calculate;
a) Mark up (1mark)
b) Rate of stock turn over. (1mark)
4. a) On 1st January 2018 Mambo Traders had sh 90,000 cash in hand and a bank credit
balance of 124,000. During the month, the following transactions took place.
2018
Jan 2 Cash sale sh 189,000
4 A debtor settled his account of sh 7,000 by cheque less 5% cash discount.

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 12 Paid salaries sh 50,000 in cash.
16 Settled a creditors account of sh 86,000 by cheque less 2% cash discount.
23 Deposited sh 120,000 into bank from office cash.
26 Cash sales banked directly shs 350,000.
27 A cheque received on 4th January from a debtor was dishonored.
31 Banked all cash except sh 40,000.
Prepare a three column cash book dully balanced. (10marks)
(b) With the aid of a diagram, explain how equilibrium price and quantity are established in
free market. (10marks)
5 a) Safaricom ltd intends to prepare its products by encouraging a price-winning
competition through the media. Prices can be won through buying of products. Explain
five benefits that that the company would get by using this method of sales promotion.
(10marks)
b) Discuss four functions of money. (10marks)
6. a) Explain five ways in which inflation may be found to be useful in an economy.
b). Explain five activities that may be carried out in the process of distribution of goods.

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 LANJET
BUSINESS STUDIES
PAPER 1
MARKING SCHEME
1. Fair competition
• A stable political environment.
• Favourable legal frame work/ legislation
• A stable economic
• Ample security
2. Activity Type of utility
a) Store keeping - Time utility
b) Selling goods to a customer - Possession utility
c) Making a chair - Form utility
d) Transporting goods - Place utility
3.
Good Service
a) Goods and services are tangible a) Services are intangible
b) Quality can be standardized b) Quality varies
c) Some of goods can be stored c) Services cannot be stored
d) Separable from the producer d) Inseparable from the service provider
e) Not always perishable e) Always perishable
f) Goods paid for ownership f) Services paid for experience received.
4. Availability of infrastructure in many areas
• Existence of consultancy institutions.
• Existence of role models in entrepreneurship.
• Availability of market for goods and services
• Access to business finance/ capital
• Government support in development of entrepreneurs.
5. Easy access of data
• Less paper work
• Updated with ease.
• Less storage facilities
• Highly portable
• Environmental friendly
• Presentable outlook
6. Honesty/ reliability of the customer.
• Ability to pay back/ credit worthiness.
• Credit period
• Amount of stock available
• Collateral evaluate the security given to cover the credit
• Preparing economic conditions whether it can allow giving credit.
7. Where the cooperative continuously makes losses
• Increase of a court order
• In case of a court order
• in case of change in the law rendering its activities illegal
• If majority of members agree to dissolve it.
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• If membership falls below the required minimum (less than 10)
8. To minimize loss of doing business
• To enhance economic development in the country
• To increase the level of national income
• To avail a variety of goods and services
• To open new areas/ ventures neglected
• To create employment opportunities
9. Model/way
• Method of propulsion
• Units of carriage
• Terminus
10. Appropriate for confidential information
• Can be filled for future reference
• Relatively cheap
• Appropriate for complex messages e.g. maps
• No distortion of message
• Can give detailed information
11. Premiums charged depends on degree of risk
• It’s a contract of indemnity
• It is a short term contract.
• The policy cannot be assigned to the next of kin.
• The policy cannot be used as collateral for a loan
• It has no surrender value
12. Goods are safe from theft
• Goods can be processed
• It can be tailored to meet one’s specifications
• Can be conveniently located
• The business maintains a continuous supply of goods.
• Saving increases for not renting storage space
• Space is always guaranteed.
13.
• Creates good relationship between customer and the seller/ personal touch
• The seller has a chance to explain finer details of the product/demonstrate its use
• The seller corrects information regarding the demand of the product
• Seller can persuade the customer to buy/ negotiate
• Ability to tailor the product according to customer needs
14. a) Law of demand – Holding all other factors constant, the higher the price of a commodity,
the lower the quality demand and vice-versa
b) Law of supply – Holding all other factors constant, the higher the price of a commodity the
higher the quality price of a commodity the higher the quality supplied and vice-versa
15. Access to a pool of trained manpower
• Enjoy use of existing infrastructure
• Collaboration with existing firms
• Auxiliary services are available
• Easy access to raw materials

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16. Only one supplier for the entire market
• Commodity supplied does not have choose substitute
• Barrier to entry for new firms
• Prices are fixed by the suppliers
• The firm practices price discrimination
• The firm is also the industry
17. Consumption of goods
• Payment of labour
• Provision of savings for investments
• Provision of entrepreneurship
• Payment of taxes.
18. Cyclical unemployment – This is due to relatively low demand for goods and services
• Structural unemployment – This is due to relatively low actor mobility
• Seasonal unemployment – This is due to relatively low demand for labour at certain time of
the year
• Frictional unemployment – This is due to time lags i.e. time taken in changing jobs.
19.
Transaction Effect on Balance sheets totals
a) Brought machine on credit Increase
b) Withdrew cash from the business for personal use Decrease
c) Purchased stock in cash No effect
d) Paid outstanding loan by cheque Decrease
20.
Account Ledger
a) Commission income a/c Nominal ledger
b) Supplier a/c Purchase ledger
c) Machine a/c General ledger
d) Cash a/c Cashbook
21. i) Cash and Bank a/c column in cash book act as a ledger and total balances are used to
prepare trial balance like other ledger accounts.
ii) Both discount allowed and discount received column act as a journal and their total
balances are transferred to the ledger.
22.
transactions Journal
a) Goods previously sold on credit were returned Sales return Journal
b) goods bought on credit Purchase Journal
c) Goods sold for cash Cash receipt Journal
d) Motor vehicle sold on credit terms General Journal
23. Saves time
• Withdrawing any time
• Deposit any time
• Cheaper to operate
• Highly profitable
• Aim can be used to buy goods and services
• Can pay utility bills
24. The tax collected at the source and hence predictable
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• It simple to administer
• Economical to collect
• The tax has a wide base and therefore more is collected
• Equitable payment according to income
• Does not affect the price of goods and services
• Elastic may be raised or reduced according to the needs of the country.
25. Common market
• Free trade area
• Customs union
• Economic union

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 LANJET
BUSINESS STUDIES
PAPER 2
MARKING SCHEME
1. a)
o Increase in market demand – The aggressive demand of goods and services is always high
when high population increases.
o Enough labour supply - Increased population provides skilled semi-skilled labour in the
market.
o Increase in innovation and invention – (Technological advancement) Producers will be
forced to apply better methods of producing due to high demand of goods and services.
o Proper utilization of resources - Economic resources will be fully utilized to cater for
increased population.
o Full utilization of social amenities – Schools, hospitals will witness some organization as
more people to seek services.
b)
o Language barrier/ use of uncommon language – both the sender and the buyer should use a
common language.
o Presence of noise – The environment should be quiet.
o Improper timing - Communication should be done when the communicating parties are
ready to listen.
o Prejudgment – It makes the receiver unable to pay attention.
o Prejudice - The sender and buyer should not be biased to each other.
2 a)
o Government policy - The government may have passed laws prohibiting the product X.
o High competition – There might have been stiff competition in the manufacture of product
X compared to product Y.
o Raw materials – Used in the manufacture of product X might have been depleted while
those used in manufacture of Y are readily available.
o Cost of production – For product X might have been too high for the company to afford.
o Technology – Continuous production of product X might have required level of technology
that Menengai Company did not have. They could produce product Y using existing
technology.
o Profitability – Product X might have become less profitable compared to product Y.
• Market - for product X might have been declining while that of product Y was picking up.
• Environment consideration - Unlike production of product X might have been polluting/
degrading the environment which are not in the like with Menengai Manufacturer’s wish.
b)
o Profitability/ market/ customers – Whether the business will be profitable enough to repay
the loan and still continue operating.
o Security - Whether the location is secure enough to enable smooth operations of the
business.
o Government policy – Whether the existing government policies favour the existence of
such a business.
o Knowledge and skills – Whether he/ she has the necessary skills required in running a retail
business.

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o Availability of startup resources – Whether the goods he will be dealing in will be readily
available.
o Amount of capital - whether the amount of loan acquired will be enough to sustain the
business.
• Competition – Whether the business will be able to favourably compete with other existing
business as stiff competition may lead to failure of the business.
• Level of development of infrastructure - Whether the infrastructure is well developed to
enable smooth business operations.
3. a)
o Local manufacturer→ consumers
• Local manufacturer →retailer→consumers
o Local manufacture→wholesalers →consumers
• Local manufacturer →wholesalers → retailers → consumers
• Local manufacturer → government agent → wholesalers → retailers → consumers
• Local manufacturer → government agent → wholesalers → consumers
b)
Rafiki Traders
Trading, profit and loss a/c
For the year ended 31st Dec, 2012
Shs shs
Opening stock 50,000 Sales 400,000
Add purchases 255,000 Less returns inwards 4,000
Add carriage inwards 28,000 Net sales 396,000
Less return outwards 7,000
276,000
Cost of goods available 326,000
For sale
Less closing stock 58,000
Cost of goods sold 268,000
Gross profit c/d 128,000
396,000 396,000
Gross profit b/d 128,000
Expenses
Discount allowed 12,000 Income
Commission allowed 3,000 Discount received 5,000
Carriage outwards 8,000 Rent received 18,000
Insurance paid 25,000
Net profit c/d 103,000
151,000
Net profit b/d 103,000

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4. a)
MAMBO TRADERS
THREE COLUMN CASH BOOK
FOR THE MONTH OF JANUARY 2018
DATE Details Discount Cash Bank DATE Details Discount Cash Bank
Allowed (sh) (sh) Allowed (sh) (sh)
2018 2018
Jan 1 Bal b/d 90,000 Jan 1 Bal b/d 124,000
Jan 2 Sales 189,000 Jan 12 Salaries 50,000
Jan 4 Debtors 35,000 665,000 Jan 16 Creditors 1,720 120,000
Jan 21 Mwenge 10,800 169,200 Jan 23 Bank 69,000
Jan 23 Cash 120,000 Jan 27 Debtors 40,000 665000
Jan 26 Sales 350,000 Jan 31 Bank
Jan 31 Cash 69,000 Jan 31 Bal c/d
45,800 279,000 1,373,200 1,720 279,000 1,373,200
FEB 1 Bal b/d 40,000 499,920

Mark-up = Gross profit x 100%

Cost of goods sold
= 1,280,000 x 100% = 47.76%
268,000

Rate of stock = cost of gods sold

Turnover average stock

268,000 = 5 times
54,444

b)

The equilibrium, price is OPe. Equilibrium quantity is OQe and market equilibrium is at
point E.
If price is set at OP1 above the equilibrium one, there is excess supply of (OQ1 – OQ2). To
sell more, the sellers are forced to reduce their price. This reduces the supply and increases
demand.
The trend continues until market equilibrium point E is reacted. If the price is set at OP2
below the equilibrium price there is excess demand of (OQ1, -OQ2) and this forces the
price to go up. This increases the supply and continues until the market equilibrium point e
is reduced.
ii) Warehouse/ storing – Keeping of goods until the time they would be required.
iii) Insurance – This is ensuring security of the goods as they are stored or being transported by
taking an insurance.
iv) Preparation of goods for sale – This involves activities such as blending, sorting and
branding of goods.
v) Communication – Passing of messages/ information from one person to another.
vi) Trading – Passing of ownership from one person to another through buying and selling.

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5 a)
More sales – Many people buy the product in order to increase their chances of winning.
• Prolonged duration of the competition - The date of draw can be postponed to allow for
more sales.
• Promoting company image - These competitions tend to help create a good company
image.
• Creation of product greenness - The competitions tend to help create a good company
image.
• Cost - It is relatively cheap to use this kind of promotion compared to other because of the
• low values of the prizes.
• Creation of customer brand loyalty – People may become raised to buying the product
during
• the period of the competition and are likely to continue buying the product after the
competition.
b)
o Serves/ used as a medium of exchange – Money can be exchanged for goods/ services
removing the problems of barter/can be used to buy goods and services as it is generally
accepted as medium of exchange.
o Measure of value - Value of goods/ services can be compared/ estimated determined/
calculated monetary value.
o Store of value - Value of goods/ services can be stored/ readed in terms of money.
o Standard of deferred payment - Money assist in conduct of business on credit/ where
• payments are made late time.
o Unit of account - Value of goods/ services are recorded in terms of money.
6. a)
o Benefit to debtor – As they pay debts in future at low prices.
o Benefits to sellers - Who buy goods when prices are low and sell them when prices are
high.
o Motivation to work - Makes people to work harder in an attempt to maintain current
• standards of living.
o Increased production - As people work harder to cope with inflation more goods and
services
• are produced.
o Better use of the available resources - Consumers use the available resources economically
• thereby avoiding wastage.
b)
i. Transport - Movement of goods from one place to another/ from producers to wholesalers to
retailers and finally to consumers.

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 MURANG’A SOUTH PRE
BUSINESS STUDIES
PAPER 1
1. State four benefits of a business to the society. (4marks)
2. Outline four reasons why motorcycles as a means of transport are popular. (4marks)
3. Outline four advantages of delocalization of firms in a country. (4marks)
4. Highlight four means of payment that may be provided by commercial banks to their
customers. (4marks)
5. The financial period of Mukora traders ends on 31st December every year. On 31st
December 2021, the business had the following assets and capital.
shs
Capital 24,000
Stock of goods 1,500
Debtors 2,000
Machinery 20,000
Cash 4,000
Required:
Prepare a balance sheet as at 31st December 2021 (4marks)
6. Outline four circumstances under which partnership may be dissolved. (4marks)
7. Outline four circumstances under which gaps in the market may be identified. (4marks)
8. State the source document for each of the following subsidiary books. (4marks)
Subsidiary book Source Document
a) Sales journal
b) Purchases journal
c) Returns inwards journal
d) Returns outward journal
9. In the table given below, give the appropriate type of advertising which suits the
description. (4marks)
Description Type of advertising
i) Promotes the name of the manufacturer
ii) Famous or popular persons are used in advertisements
iii) Used by organizations that deal with similar products
iv) Aims at popularizing a new product to potential
customers
10. Using the diagram below indicate what is represented by the following letters. (4marks)

11. The office should ensure that the organization’s properties are protected and controlled.
Mention four ways that can be used. (4marks)
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12. Outline four disadvantages of a long chain of distribution. (4marks)
13. Outline four ways through which the government promotes trade internally. (4marks)
14. State the term that best fits each of the following descriptions. (4marks)
a) Money brought into the business by owner
b) Goods bought for resale
c) Money withdrawn by the owner for private use
d) Money borrowed by business
15. State four types of information that may be extracted from a receipt. (4marks)
16. Record the following transaction in a two column cashbook.
i) May 7, 2023 sold goods for sh 30,000 cash.
ii) May 8, 2023 paid Kamau sh 84,000 by cheque.
17. Outline four marine insurance policies. (4marks)
18. Highlight four features of monopolistic competition. (4marks)
19. Outline four business resources that a business can use to enhance its operations. (4marks)
20. State four causes of high birth rate in developing countries. (4marks)
21. Communication between or among people of the same rank in an organization is very
important. Highlight four importance of such communication. (4marks)
22. Using expenditure approach, national income is arrived at by the formula Y = C+ I + G +
(X – M). Name what the following letters stands for: (4marks)
C,I,G,Y.
23. Highlight four activities that take place as goods and services are moved from producers to
the users. (4marks)
24. The following balances were extracted from the books of accounts of Juha enterprises
shs
Stock as at 1st January 2013 35,000
Purchases 705,000
Stock as at 31st December 40,000
Purchases returns 15,000
Juha enterprises sell all their goods at a mark-up of 20%
Use the above information to calculate
Cost of goods sold. (2marks)
Gross profit. (2marks)
25. For each of the following accounts, indicate whether it is real, nominal or personal
Account title Account type
a) Wasua, a debtor
b) Commission received
c) Bank
d) Purchases

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 MURANG’A SOUTH PRE
BUSINESS STUDIES
PAPER 2
1.
a) Explain any five business macro-environment factors. (10marks)
b) Explain five advantages of advertising to the consumer. (10marks)
2.
a) Explain five advantages of indirect production in the society. (10marks)
b) Highlight five circumstances under which an insurance contract may be terminated.
3.
a) The following balances were extracted from the books of accounts of Bandari Enterprises
as at 31st December 2022
sh
Stock (31st December 2022) 294,600
Carriage outwards 20,000
Carriage inwards 31,000
Returns inwards 20,500
Returns outwards 32,200
Purchases 1,187,000
Discounts received 19,000
Sales 1,851,000
Salaries and wages 362,800
Discount allowed 30,400
Stock (1st January 2022) 236,000
Required: Prepare the trading, profit and loss account for the year ended 31st December
2022. (10marks)
b) Explain five ways of solving unemployment problems in Kenya. (10marks)
4.
a) Explain five limitations of barter trade. (10marks)
b) Outline five differences between a partnership and a public limited company forms of
business units. (10marks)
5.
a) Explain five factors that influence the quantity of a commodity supplied. (10marks)
b) Explain five advantages of transacting business through e-commerce. (10marks)
6.
a) Explain five factors that may discourage entrepreneurship in Kenya. (10marks)
b) The following opening balances were extracted from the books of Masinga Traders on 1st
May 2023
Details sh
Furniture 56,000
Capital 80,000
Creditors 20,000
Debtors 25,000
Bank 11,000
Cash 8,000
The following transactions took place in the course of the month:
- Paid a creditor sh 4,500 in cash

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- Took sh 3,000 from the bank for family use
- Bought stock sh 18,600 on credit
- Acquired a 10-year bank loan sh 165,000 which was credited to the business bank account
- Purchased land worth sh 82,000 paying by cheque
- Converted a family table worth sh 55000 to business use
- Received sh 7,300 in cash from debtor.
Required: Prepare Masinga Traders Balance sheet at the end May 2023. (10marks)

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 MURANG’A SOUTH PRE
BUSINESS STUDIES
PAPER 1
MARKING SCHEME
1.
• Creation of employment
• Provision of goods and services
• Source of income
• Proper utilization of available resources
• Promote economic development
• Proper use of leisure time
• Promotion of good relationship
2.
• Cheap to acquire
• Low maintenance cost
• Flexible – does not have fixed timetable/ route
• Charge relatively lower fare
• Few legal formalities required to acquire a license
• Does not require special skills
• Relatively faster than human porterage and carriage
3.
• Balanced regional development
• Provision of equitable employment opportunities
• Reduction of social problems
• Reduced rural-urban migration
• Exploitation of idle resources/ market for locally available raw materials
• Reduction of insecurity
• Improved standards of living
• Reduced effects caused by occurrence of war, terrorism attacks or natural calamities
• Local communities get goods and services without travelling far.
4.
o Cheques
o Bank / bankers cheques
o Standing orders
o Traveler’s cheques
o Credit transfers
o Telegraphic transfers
o Use of credit card
o Electronic fund transfer
o M-banking
o Direct cash deposit
o Use of debit card
5.
L = A-C
(1500 + 2000 + 20000 +4000 -24000) = sh 3500

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 Mukora traders
Balance Sheet 
As at 31st December 2021
Fixed assets sh Capital sh 24,000 
Machinery 20,000 
Current assets Liabilities 3,500 
Stock of goods 1,500 
Debtors 2,000 
Cash 4,000 
27,500 27,500
6.
• If the partners mutually agree to dissolve the business.
• In case of death, insanity or bankruptcy of a partner.
• In case of completion of intended purpose or end of agreed time.
• In case of court order.
• In case of continued disagreements.
• If the business engages in unlawful practices
• In case of retirement or admission of a new partner
• Where a partner requests for dissolution in writing
7.
• When goods offered on the market are not adequate.
• When goods offered are of poor quality
• When goods are not available in the market
• When prices charged for goods are high
• When the services needed by consumers are lacking/ poor
8.
Subsidiary book Source Document
a) Sales journal Outgoing invoice/ invoice issued
b) Purchases journal Incoming invoice/ invoice received
c) Returns inwards journal Outgoing credit note/ credit note issued
d) Returns outward journal Incoming credit note/ credit note received
9.
Description Type of advertising
i) Promotes the name of the manufacturer Institutional
ii) Famous or popular persons are used in advertisements Celebrity
iii) Used by organizations that deal with similar products Competitive/ Persuasive
iv) Aims at popularizing a new product to potential Primary demand/
customers Informative
10.
b- equilibrium point
c-equilibrium quantity
d-equilibrium price
11.
• Taking insurance cover
• Enhancing security against theft e.g. fencing
• Physical stock taking of each property
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• Keeping records of movement and usage of each the property
• Proper repairs, service and maintenance
• Ensuring physical care by people using the property
12.
• Increased higher prices
• Likelihood of delay
• Chances of damage due to handling
• Feedback to producer is slow/ delayed
• Shortages of products/ hoarding
• Deterioration of perishable goods
• High cost of distribution
13.
• Providing incentives
• Creating an enabling environment
• Organizing shows, trade fairs and exhibitions
• Offering financial assistance to business people
• Offering training
• Advising business people on legal matters
14.
a) Money brought into the business by owner Capital
b) Goods bought for resale Stock
c) Money withdrawn by the owner for private use Drawings
d) Money borrowed by business Loan
15.
• Date of payment
• Name of the person making the payment
• Amount paid in words and figures
• Means of payment
• Name of the institution / person to whom payment is made
• Receipt number
• Signature of the person issuing the receipt
16.
TWO COLUMN CASHBOOK
Date Details Folio Cash Bank Date Details Folio Cash Bank
7/5/2022 Sales G.L 30,000 8/5/2023 Kamau P.L 84,000
   

17.
o Marine hull policy
o Marine cargo policy
o Freight policy
o Port policy
o Voyage policy
o Fleet policy
o Insurance companies policy
o Time policy
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o Mixed policy
18.
• Large number of sellers independently.
• Perfect knowledge in the market
• No barriers to entry or exit from the industry
• Sell differentiated products
• No firm has control over the factors of production
• Firms set their own prices.
19.
a) Skilled/ appropriate human resources
b) Adequate finances
c) Availability of physical resources
d) Appropriate technology/ up to date
20.
• Cultural practices
• Early marriages
• Ignorance of family planning
• Religious beliefs
• High mortality rate
• Children being seen as a source of cheap labour
• Many births as families strive to get a male/ female child.
21.
a) Coordination and harmonization of different activities.
b) Teamwork is created within the department.
c) To exchange ideas in order to develop human resources.
d) To reduce goal blindness among different departments.
e) To create a sense of belonging among different departmental heads.
22.
C – Expenditure on consumer goods
I – Expenditure on capital goods/ investment
G – Government expenditure
Y – National income
23.
• Transport
• Storage
• Insurance
• Communication
• Advertising
• Banking
• Buying and selling
24. C.O.G.S = O.S + P –PR –CS
35,000 + 705,000 -15,000 – 40,000  = sh 685,000 
20 = G.P 
100 685,000
G.P = 685, 000 / 5 = sh 137,000 

Page | 236
25.
Account title Account type
a) Wasua, a debtor Personal
b) Commission received Nominal
c) Bank Real
d) Purchases Nominal

Page | 237
 MURANG’A SOUTH PRE
BUSINESS STUDIES
PAPER 2
MARKING SCHEME
1.
o Economic factors – factors affecting consumer’s purchasing power e.g. consumer’s income.
o Demographic factors – Relates to population and its characteristics
o Legal - political factors – Refers to government policies, laws of a country and all measures
regulating business activities.
o Social - cultural factors – Are society values, taboos, traditions and religion
o Competitive environment – relates to a situation where businesses try to outdo each other.
o Physical factors – factors relating to climatic conditions, relief etc.
• Technological factors – levels of knowledge and use of tools and equipment used in
production process.
b)
o Consumers become aware/ informed of existence of a product/ where it can be found.
• Consumers enjoy high quality goods and services resulting from competitive advertising.
• Allows/ aids to choose products from a variety offered in the market.
• Protects consumer from exploitation since they are aware of prices.
• Communicate changes about a product e.g. name, price, new uses
• Educate consumers on use of products
• Entertainment by use of drama/ music/ precise accompanying advertisement.
2.
a)
o Access to enough quantity of goods due to surplus production (can be used
interchangeably).
• Improved living standards due to high quality goods produced generated income/ profit.
• Stable prices due to large scale production, specialization and competition.
• Availability of employment opportunities since many people are engaged in various stages
of production.
• Improved infrastructure e.g. roads may be put up to support business activities
• Social cohesion since many people are brought from different areas to trade.
• Maximum utilization of available of available resources since production is meant for sale/
leading to increased production.
• High quality goods due to advanced technological specialization
• Encourage specialization/ division of labour leading to efficiency in production.
• Improved amenities to support business activities.
b)
o When the policy expires since the policy becomes invalid after expiry.
o Failure by the insured to pay premiums as agreed hence leading to a breach of contract.
o When the risk insured and the property has been fully compensated.
o When the insurer discovers that the insured does not have insurable interests.
o Voluntarily termination of the contract by the insured.
o When it is discovered that the insured did not give accurate information while taking the
policy.

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 3.

a)
Bandari Enterprises 
Trading, profit and loss account
For the year ended 31st December 2022
Opening stock sh 236,000 Sales sh 1,851,000 
Add purchases 1,187,000  Less returns inwards 20,500
Carriage inwards 31,000  Net sales 1,830,500
Gross purchases 1,218,000
Less returns outwards 32,200 
Net purchases 1,185,800
COGAS 1,421,800 
Less closing stock 294,600 
Cost of goods sold 1,127,200 
Gross profit c/d 703,300 
1,830,500 1,830,500 
Gross profit b/d 703,300 
Discount allowed 30,400  Discount received 19,000 
Carriage outwards 20,000 
Salaries and wages 362,800 
Insurance 36,800 
Net profit c/d 272,300 
722,300 722,300 
Net profit b/d 272,300
b)

o Adopting policies that encourage the use of labour intensive methods of production instead
of capital intensive methods.
o Adopting relevant education system which equips learners with skills relevant to the labour
markets.
o Diversification of economic activities in order to solve the off peak/ seasonal
unemployment.
o Rural development in order to reduce rural-urban migration and create employment
opportunities.
o Increasing government expenditure in sectors e.g. road construction, kazi mitaani to involve
local people and create jobs.
o Maximum utilization of local resources to generate income and create jobs.
• Promoting informal/ Jua kali sector to create self-employment.
• Exporting labour to countries which have deficiency.
4.
a)
o Lack of standard measure of value. It is difficult to determine, for example, how many bags
of maize are equivalent to one cow. One party will be cheated.
o Requires double coincidence of wants. A seller of a certain commodity must get a willing
buyer and the seller must accept the commodity that the buyer has in exchange for barter-
trade to take place.
o Indivisibility of most commodities without destroying their value.
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o Perishability of commodities. Perishable goods cannot be stored for long for future
exchange purposes e.g. vegetables and fruits.
o Lack of standard means for deferred payments. There was no means for which to settle
debts incurred now in future.
o Transportation hardship. Moving heavy and bulky goods around looking for persons to
exchange with other goods is cumbersome.
• There is no unit of account in barter trade. No recording therefore nowhere to refer in future
• Limits specialization since one tries to produce variety of goods though in small quantities

b)
Partnership Public Limited Company
i) Owned by a minimum of 2 Owned by a minimum of 7
shareholders
ii) Have limited sources of capital Have wide sources of capital
iii) Procedure involving formation is short Procedure involving formation is long
iv) Management is done by partners Management is done by a Board of
directors
v) Death, insanity or bankruptcy of a partner Death, insanity or bankruptcy of a
leads to dissolution shareholder does not affect a company
vi) Has a maximum membership of 20 No set limit for maximum membership
vii) Some partners have unlimited liabilities Shareholders have limited liabilities
5.
o State of technology – when technology improves, the rate of production is increa2sed.
When technology is outdated the quantity of goods and services produced is low.
o Price of the commodity – At higher price, the supplier will bring more to the market
o Availability of factors of production – e.g. labour, capital, land and entrepreneur – when
they are readily available production and supply of goods will be higher than when they are
lacking.
o Level of training to labour - Better skills/ training leads to high supply of goods and service.
o Seasons – Some goods are plenty in the market in some seasons while they are in short
supply in others regardless of the prices.
o Cost of production – Usually when the cost of production decreases, supply of affected
goods and services increases and vice-versa.
b) Explain five advantages of transacting business through e-commerce. (10 marks)
o It is a quick way of doing business through the internet thereby saving time/ facilitates
urgent transactions
o Enable large and small business transact business without discrimination through the
internet
o Access to large market since many regions are connected to internet
o Reduced paperwork as transactions are done online
o Access to other business information from the internet enhancing running of the business.
o Cheap/ cost effective thus saving cost of sending/ receiving/ storing business information/
acquiring products.
6.
a)

o Unfavourable government policy which discourages production of certain commodities/

increase cost of production.
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o Inadequate role models to motivate those who would be entrepreneurs.
o Inadequate/ lack of market due to low purchasing power/ high level of poverty due to low
income.
o Poor transport infrastructure making it expensive to access raw materials/ market.
o Insecurity that discourages entrepreneurs from investing/ getting raw materials.
o Inadequate natural resources leading to low production.
• Unavailability/ inappropriate technology that leads to poor quality/ competitive goods.
b)
MASINGA TRADERS
BALANCE SHEET 
AS AT 31ST MAY 2023
FIXED ASSETS Capital 82500 
Furniture 61500 
Land 82000 143500 L.T.L 143500
Loan 165,000 
CURRENT ASSETS
Debtors 17700  S.T.L
Bank 91000  Creditors 34,100 
Cash 10800 
Stock 18600  29400
281600 281600

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 KIPSIGIS
BUSINESS STUDIES
PAPER 1
1. Mention four ways in which the government participates in training businessmen in the
country. (4marks)
2. State four factors that limit the satisfaction of human wants. (4marks)
3. Give four reasons why government draw their development plan. (4marks)
4. Highlight four uses of national income statistics. (4marks)
5. Explain four internal economies of scale that a firm can enjoy as its production increases.
(4marks)
6. Land is one of the factors of production. Outline circumstances under which it may
discourage the location of firms. (4marks)
7. Give four reasons why a manufacturing firm may offer after sale service to its consumers
(4marks)
8. Tigen traders had the following balances as at 31stDecember 2012. shs
Opening stock 800,000
Closing stock 1,000,000
Sales 3,250,000
Turnover 3 times
Calculate;
a) Cost of goods sold (2marks)
b) Gross /profits (2marks)
10. The government of a developing country intends to formulate an elaborate policy to address
the widespread unemployment. Identify four areas of concern that the policy should look
into. (4marks)
11. Outline four monetary measures taken by the Central Bank to solve the problem of demand
pull inflation. (4marks)
12. Highlight four measures the state is putting in places to bring sanity in the matatu transport
sector in Kenya. (4marks)
13. Onyango intends to insure his motor vehicle with UAP insurance company. Outline the
procedure he would follow to take the policy. (4marks)
14. Indicate with a tick (√) in the relevant column whether each of the following business
transactions Will increase or decrease the capital account balance. (4marks)
Transaction Increase Decrease
A Cash donations of sh. 80,000 deposited into the business bank
account.
B Withdraw sh. 2000 from bank for personal use.
C Made profit of sh. 3000
D The business made a loss of sh. 4000 on sale of stock
15. List any four business considerations taken into account when carrying out business
opportunity evaluation. (4marks)
16. Outline four canons of taxation. (4marks)
17. Highlight circumstances under which the following chain of distribution are used:
a) Manufacturer → consumer
b) Manufacturer → Retailer → Consumer
c) Producer → marketing Board → Consumer
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d) Manufacturer → Agent → Consumer
18. State four reasons why an entrepreneur would prefer a landscape type of office. (4marks)
19. Highlight four factors that may have led to the shift in the demand curve from D0D0to
D1D1.

Price

D1

D0

D1

Quantity
20. State four reasons why John would prefer to obtain a loan from his Sacco but not from a
commercial bank. (4marks)
21. Kilunya traders had the following transactions during the month of March2010: March 3:
Sold goods to Waweru sh. 800, Ken Sh600 and Okwanya sh. 700
March 4: Bought goods from Uwezo sh. 15,000, Openo sh. 2000.
March 6: Sold goods to Mayi sh. 1200, Shirosh1500, Pakash 900
March 9: Sold goods to Luanda sh. 400
Required:
Enter the above transactions in the sales journal. (4marks)
22. Outline four circumstances under which a public ware house would be ineffective.
Required
Prepare Kisumu Traders Balance Sheet in the order of liquidity. (4marks)
24. Outline four factors that a citizen would consider while holding money for day to day
expenses (4marks)
25. Identify the accounts to be debited and accounts be credited from the following transactions.
Transactions A/C Debited A/C credited
A Bought stock on credit from Muthini
B Paid insurance premium by cheque
C Bought a van by cash
D Returned goods to supplier,

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 KIPSIGIS
BUSINESS STUDIES
PAPER 2
1. a) Explain five reasons why human beings make choices on the wants to be satisfied.
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.
2. a) Explain five problems that can be encountered in an office as a result of
computerization of operations (10marks)
b) Describe five services rendered by retailers to consumers (10marks)
3. a) With the aid of a well labelled diagram explain the effect on the equilibrium price and
equilibrium quantity when the supply of vehicles increases (10marks)
b) Outline five measures that the government of Kenya has put in place to protect
consumers from unscrupulous business practices (10marks)
4. a) Explain five problems experienced when computing national income using the
expenditure approach. (10marks)
b) Fahari traders had the following balances on 1st January2023.
Kshs
Equipment 5600
Bank 25,000
Debtors 28,000
Creditors 66,600
Later in the month, the following transactions took place.
January6th-Purchased goods worth sh 9500 and paid by cheque
January7th-Paid creditors, sh 10,600 cheque.
January23rd –Received a cheque of sh. 22,000 for goods sold
January28th-Withdrew sh5000 from the bank to pay salaries.
Required:
Open the relevant ledger accounts and extract a trial balance. (10marks)
5. a) Highlight five effects of production activities on the environment and community
health. (10marks)
b) Explain any five roles played by commercial banks to the business community.
6. a) Explain four methods that can be used by a country to solve the problems of deficit
balance of payment (8marks)
b) The following information was extracted from the books of Ramogi Traders as at 31st
December, 2022.
Kshs
Sales 800,000
Purchase 500,000
Returns inwards 90,000
Returns inwards 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

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 Stock (Jan 2022) 100,000
Interest expenses 10,000
General expenses 7,000
Stock (31st Dec2022) 120,000
Bank overdraft 4,000
Capital 170,000
Required:
i) Prepare a Trading, Profit and Loss account for the year ended 31st December, 2022.
(8marks)
ii) Prepare balance sheet as at 31st December, 2022.

Page | 245
 KIPSIGIS
BUSINESS STUDIES
PAPER 1
MARKING SCHEME
1.
• through organising trade fairs shows and seminars
• by sponsoring businessmen to colleges / universities / schools / tertiary levels to gain more
• business knowledge
• through direct training by Kenya institute of business training (KIBT)
• through the use of commercial attaches who train exporters on new ideologies / technology /
• market requirements
• through the use of science and technology congresses
• through business studies curriculum in secondary schools
2.
• due to low levels of consumers income
• due to high level of poverty / unemployment among most people
• due to poor health of individual consumers
• the high commodity prices in the country /inflation
• the scarcity of commodities in the country which limits consumers’ choice
• political instability / insecurity / civil strife / in the country which interfere with
production
• low levels of education in the country which limit creativity
• inadequate cooperate factors of production in the country
3.
• to identify complementary investment decisions
• to achieve fair and balanced distribution of resources in the country
• to achieve industrialization
• to source for loans and grants from oversee
• to promote / stimulate positive attitude
• to ensure proper use of resources
• to coordinate investments in the whole country
• to achieve economic stability
• to help mobilize different sectors of the economy for greater productivity
4.
• Indicator /measure of standard of living
• Comparison of standard of living between countries, countries with high national income
• are deemed to have high standard of living and vice versa
• assessing performance of the economy over time.
• compare standard of living in a country between different years/periods.
• Provide information on distribution /contribution of income –this helps the
• government to address income /production disparities.
• For investment decision- data obtained can be used by entrepreneurs to make decision
on
• the sector, when and amount of capital to invest.
5.

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• Welfare economies – firm can provide recreation and other welfare.
• Risk bearing economies - firms can afford to take higher risks on many products and
market.
• technical economies - firms are able to use modern machinery which increase efficiency,
• financial economies - firms have access to finance from banks
• managerial economies - specialization and division of labour enhances management
6.
• to show customers howto handle sophisticated products
• keep track of the performance of the product
• improving corporate image
• to attract customers
• to retain existing customers
7.
• where the cost of land is very high
• incase the land is too hilly to access
• if the available land is so limited that it does not leave space for future expansion
• if it is away from auxiliary services
• where the government restricts land use in certain parts of the country
8. a)
ROST = cost of goods sold average stock
Average stock = 800,000 + 1,000,000
2
= 900,000
Therefore
cost of goods sold = 3 x 900,000
= shs.2700,000
b) Gross profit = sales - cost of goods sold
= 3,250,000 - 2700,000 = Ksh. 550,000
9.
Promissionary note Bill of exchange
Drawn and signed by debtor Drawn and signed by creditor
Does not need to be accepted Must be accepted by debtor for
it to be valid
The drawer and drawee are The drawer is the creditor and
one the drawee is the debtor

10.
• education system reforms
• production methods to be adopted
• regional development plan
• development of informal sector
• exploitation of natural resources
• export promotion and import regulation
• diversification of economic activities
11.
• increasing bank rates
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• selling more government securities through OMO
• increasing the compulsory deposits
• lowering the cash ratio
• morally persuading banks not to give a lot of cash
12.
• Through banning of night travels
• Through reintroduction of alcohol blow
• Through insisting on license for all public service vehicles
• Ensuring all PSV have seat belts
• Ensuring all PSV are fitted with speed governors
• Ensuring all matatu have a yellow band along the length of the vehicle
• Through use of speed cameras
• Through introduction of highway courts to try traffic offenders
• Through stiffer penalties/fines for traffic offenders
• Through introduction of matatu saccos
• Through use of uniforms/ identification documents by PSV operators
• Through use of double highways in Kenya
13.
• The insured fills in proposal form
• The insurer determines the premiums to be paid
• The insured then pays the first premium
• The insurer then issues a cover note (binder) to the insured
• The insurer then issues the policy to the insured 30 days from payment of first premium
14.
Transaction Increase Decrease
a) Cash donations of sh.8000 deposited into business bank account 
b) Withdrew sh.2000 from bank for personal use 
c) Profit of sh.3000 earned by the business 
d) A business made a loss of sh.4000 on sale of stock 
15.
• size of market
• technology
• availability of raw material
• government policy
• amount of capital required
• level of competition the business is likely to face
• possibility of expansion
• difficulties in marketing
• security
• level of development of infrastructure
• impact of business operations on the environment
• level o f r i s k s i n v o l v e d i n t h a t k i n d o f business
• the profitability potential of the business
• culture and the traditions of the community where the business is located

Page | 248
16.
• the cannon of flexibility / elasticity
• the cannon of economy
• the cannon of equity
• the cannon of simplicity
• the cannon of certainty
17. (i)
• when goods are perishable
• when goods are urgently needed
• when goods are sensitive
• when goods are few / small in quantity
• when producer has his own retail outlet
• where the government decides so
• When the producer is new in the market
• Where the producer has less finances to market his goods
• When the manufacturer exports goods to foreign markets
18.
• easy supervision by the management
• low construction cost
• easy location of workers
• minimizes s t a f f m o v e m e n t h e n c e s a v i n g time
• low maintenance costs
• saving of floor space
• cheap to decorate
• decorations used boost the morale of the employees
19.
• decrease in consumer’s income
• increase in price of complements
• decrease in price of substitutes
• decrease in population
• increase in taxation i.e. PAYE
• - poor / bad weather conditions for agricultural products
• negative tastes and preference / fashion
• uneven distribution of income
• Unfavourable terms of sale i.e. low discount levels
• future expectations of price decrease
20.
• Saccos c h a r g e l o w interest rates while commercial banks charge high interest
rates
• Saccos offer sense of ownership to members which is not there in commercial banks
• no collateral is required by Saccos while commercial banks require collaterals
• Sacco loans are insured by CIS while commercial bank loans are not insured
• Saccos offer several types of loans while commercial banks offer one type of loan

Page | 249
21.

Date Particulars Invoice No. Ledger F Amount

3 Waweru 007 SL 800
3 Ken 008 SL 600
3 Kwenyo 009 SL 700
4 Uwezo 010 SL 1500
6 Mary 011 SL 1200
Daka SL
6 012 900
Luanda SL
9 Total posted to 013 400
sales a/c (Cr)
9
6100
22.
• where its location is not easily accessible
• if the storage equipment is inadequate
• where the room for expansion is limited
• where the handling facilities are inappropriate and inadequate
• incase the warehouse does not meet the set legal requirement
• where the warehouse does not have access to essential services
• if the workers are not qualified and adequate
• - incase the security and safety o f the warehouse is poor
23.
Kisumu Traders
Balance sheet
As at 31st Dec. 2013
Machinery 20,000 Capital 24,000
Debtors 2,000 Creditors 3,000
Stock 1,5000 Bank overdraft 500
Cash 4,000
27500 27500
24.
• size of the family
• level of income
• level of inflation
• interval between payments
• prices of commodities
25.
Transaction A/C debited A/C credited
a) Bought stock on credit from Muthoni purchases Muthoni
b) Paid insurance premium by cheque insurance bank
c) Bought a van by cash motor vehicle cash
d) Returned goods to supplier, Owino Owino Purchases returns

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 KIPSISGIS
BUSINESS PAPER 2
MARKING SCHEME
1.(a)
i) Commodities sell at different prices hence one has to choose what is affordable
• Wants are unlimited in number while available resources are scarce
• Some wants are more urgent and intense than others
• There are many varieties of products that satisfy the same wants
• Commodities differ in quality and other salient features
• Consumer financial positions vary with time hence a budget is needed
• Some wants are recurrent hence must be catered for quite often
• Human wants are competitive hence a choice is needed
• Universal
• Unlimited
b)
i) Enables him to look for market while goods are still being held in the bonded warehouse
• He can prepare the assorted goods for sale while still in bond
• Duty on imported goods would be passed on to the buyer if they are sold while still in
the bonded warehouse
• Goods are accorded security while in bond by the government
• It allows the importer to have some time to arrange to pay the duty if he does not have
enough money
• Some goods may improve in quality after sometime e.g. wine hence will be better / more
value
• Some goods may lose weight while in the warehouse and if they are subject to specific
duty the importer would end up paying less
2.(a)
o May lead to unemployment / loss of job / laying off of workers (when computers
replace worker)
o Requires (reliable source of) electricity which is expensive / not guaranteed
• They are expensive to buy, install and maintain
o Computers are prone to computer viruses which may lead to breakdown /malfunctioning
of the computers / software
o Confidential information may land into unauthorized hands (through hacking)
o Requires skilled / trained manpower which is costly / scarce / not guaranteed
• There is need for back up storage which is expensive
• It has adverse / side effects on health e.g. eye
• problem due to prolonged / perpetual exposure
• Boredom due to monotony o f use of computers
• Inhibits / limits creativity / innovation (since
• user can’t work without it
(b)
o Avail goods - within easy reach of consumers
o Offer wide variety of goods for consumers to choose from
o Breaks bulk of commodities into smaller sizes which are convenient / affordable to
consumers
Page | 251
o Offer advice to consumers on proper use /choice of commodities
• Offer after sales services (to customers) without charging them / at reduced rates
• Offer credit facilities to customers who can be trusted to pay / trustworthy / credit worthy
• Ensuring continuous supply of goods needed by consumer / ensure no shortages
• Stabilising prices of goods) by ensuring goods are always available / to enable customers to
budget for their expenses / by avoiding artificial shortages of goods
3.(a)

- when supply of vehicles increases, supply curve shifts to the right from S1S1 to S2S2
- a new equilibrium point E2 from E1 will be realized t h u s a new equilibrium price
Pe2 from Pe and a new equilibrium quantity
b)
i) Setting up standards
The Keya 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 be started without licence. This is to ensure there is control and legal
type of business carried out.
iv) Foods and Drugs Act
This ensures that producers and traders do not include any substance in the commodities
that they sell 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
4. (a)
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

Page | 252
v) Problem of fluctuating exchange rates (incase of valuation of imports / exports)
(b)
5. (a)
o Pollution / water pollution - this is caused by industrial waste that is discharged into
rivers thus affecting both human and aquatic life
o Degrading the environment i.e. excessive use of the environment such as over-exploitation
of minerals leads to their exhaustion. This affects the balance in the eco-system such as
spread of malaria when open holes are filled with stagnant water
o Depletion of energy sources for instance excessive use of energy available through
excessive agricultural activities causes clearing of forests which leads to soil erosion
• Rural-urban migration caused by the perception that jobs exists in production sites
have caused overcrowding which leads to poor housing / emergence of slums
o When goods that have been produced are
• being transported to the market, vehicles emit fumes which may lead to respiratory
infections
(b)
• They accept deposits / saving facilities to businessmen e.g. savings / current / fixed
deposit accounts
• They give loans / credit facilities to the business community in form of overdraft /
secured loans
• 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.
• They offer means of payment / money transfer 02`facilities / services to businesses
facilities like standing orders / credit transfers / travelers cheques / credit cards / debit
cards / cheques / letters of credit / electronic fund transfer etc.
• They provide foreign exchange services to businessmen through (either) buying or
selling foreign currencies (according to need)
• They give advice / advisory services to businessmen / firms about (viable)
investments / (sound) financial management
• 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
• They act as intermediaries between savers and borrowers by accepting deposits from
those who have excess money and lending to investors
6. (a)
o giving subsidies to local manufacturers in order to increase exports.
o use of customs draw backs to encourage exports of goods and services.
o Political instability / insecurity leading to hostile / Unfavourable environment for economic
growth
o High population growth rates that necessitate more production of consumer goods compared
to producer/capital goods which could have led to higher economic growth
o Poor/underdeveloped entrepreneurial skills

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(b)
Ramogi Traders
Trading, profit and loss A/C
For the year ending 31st Dec. 2022
Opening stock 100 000 Sales 800 000
Add purchases 500 000 Less return inwards 90 000
Gross profit b/d 216 000 Net sales 710 000
710 000 Gross profit b/d 216 000
Carriage outwards 3 000
Rent 60 000
Interest expenses 10 000
General expenses 7 000
Net profit 136 000
216 000 216 000

Ramogi Traders
Balance sheet
As at 31st Dec. 2022
Assets sh sh Capital + liabilities sh
Fixed assets sh
Delivery 160 000 Creditors 150000
Current assets Bank overdratft 40000
Stock 120000 154000
Bank 60000
Debtors 120000 300000
460000 460000

Page | 254
 NANYUKI
BUSINESS STUDIES
PAPER ONE
1. State four benefits of a business to the society. (4marks)
2. Outline four reasons why motorcycles as a means of transport are popular. (4marks)
3. Outline four advantages of delocalization of firms in a country. (4marks)
4. Highlight four means of payment that may be provided by commercial banks to their
customers. (4marks)
5. The financial period of Mukora traders ends on 31st December every year. On 31st
December 2021, the business had the following assets and capital.
shs
Capital 24,000
Stock of goods 1,500
Debtors 2,000
Machinery 20,000
Cash 4,000
Required:
Prepare a balance sheet as at 31st December 2021 (4marks)
6. Outline four circumstances under which partnership may be dissolved. (4marks)
7. Outline four circumstances under which gaps in the market may be identified. (4marks)
8. State the source document for each of the following subsidiary books. (4marks)
Subsidiary book Source Document
a) Sales journal
b) Purchases journal
c) Returns inwards journal
d) Returns outward journal
9. In the table given below, give the appropriate type of advertising which suits the
description. (4marks)
Description Type of advertising
i) Promotes the name of the manufacturer
ii) Famous or popular persons are used in advertisements
iii) Used by organizations that deal with similar products
iv) Aims at popularizing a new product to potential customers
10. Using the diagram below indicate what is represented by the following letters. (4marks)
a

d b

c
11. The office should ensure that the organization’s properties are protected and controlled.
Mention four ways that can be used. (4marks)
12. Outline four disadvantages of a long chain of distribution. (4marks)
Page | 255
13. Outline four ways through which the government promotes trade internally. (4marks)
14. State the term that best fits each of the following descriptions. (4marks)
a) Money brought into the business by owner
b) Goods bought for resale
c) Money withdrawn by the owner for private use
d) Money borrowed by business
15. State four types of information that may be extracted from a receipt. (4marks)
i) May 7, 2023 sold goods for sh 30,000 cash.
ii) May 8, 2023 paid Kamau sh 84,000 by cheque.
16. Outline four marine insurance policies. (4marks)
17. Highlight four features of monopolistic competition. (4marks)
18. Outline four business resources that a business can use to enhance its operations. (4marks)
19. State four causes of high birth rate in developing countries. (4marks)
20. Communication between or among people of the same rank in an organization is very
important. Highlight four importance of such communication. (4marks)
21. Using expenditure approach, national income is arrived at by the formula Y = C+ I + G +
(X – M). Name what the following letters stands for: C,I,G,Y. (4marks)
22. Highlight four activities that take place as goods and services are moved from producers to
the users. (4marks)
23. The following balances were extracted from the books of accounts of Juha enterprises
shs
Stock as at 1st January 2013 35,000
Purchases 705,000
Stock as at 31st December 40,000
Purchases returns 15,000
Juha enterprises sell all their goods at a mark-up of 20%
Use the above information to calculate
a) Cost of goods sold. (2marks)
b) Gross profit. (2marks)
24.
Account title Account type
a) Wasua, a debtor
b) Commission received
c) Bank
d) Purchases

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 NANYUKI
BUSINESS STUDIES
PAPER 1
MARKING SCHEME
1.
a) Creation of employment
b) Provision of goods and services
c) Source of income
d) Proper utilization of available resources
e) Promote economic development
f) Proper use of leisure time
g) Promotion of good relationship
2.
a) Cheap to acquire
b) Low maintenance cost
c) Flexible – does not have fixed timetable/ route
d) Charge relatively lower fare
e) Few legal formalities required to acquire a license
f) Does not require special skills
g) Relatively faster than human porterage and carriage
3.
a) Balanced regional development
b) Provision of equitable employment opportunities
c) Reduction of social problems
d) Reduced rural-urban migration
e) Exploitation of idle resources/ market for locally available raw materials
f) Reduction of insecurity
g) Improved standards of living
h) Reduced effects caused by occurrence of war, terrorism attacks or natural calamities
i) Local communities get goods and services without travelling far.
4.
a) Cheques
b) Bank / bankers cheques
c) Standing orders
d) Traveler’s cheques
e) Credit transfers
f) Telegraphic transfers
g) Use of credit card
h) Electronic fund transfer
i) M-banking
j) Direct cash deposit
k) Use of debit card
5.
L = A-C
(1500 + 2000 + 20000 +4000 -24000) = sh 3500

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 Mukora traders
Balance Sheet 
As at 31st December 2021
Fixed assets sh Capital sh 24,000 
Machinery 20,000 
Current assets Liabilities 3,500 
Stock of goods 1,500 
Debtors 2,000 
Cash 4,000 
27,500 27,500

6.
a) If the partners mutually agree to dissolve the business.
b) In case of death, insanity or bankruptcy of a partner.
c) In case of completion of intended purpose or end of agreed time.
d) In case of court order.
e) In case of continued disagreements.
f) If the business engages in unlawful practices
g) In case of retirement or admission of a new partner
h) Where a partner requests for dissolution in writing
7.
a) When goods offered on the market are not adequate.
b) When goods offered are of poor quality
c) When goods are not available in the market
d) When prices charged for goods are high
e) When the services needed by consumers are lacking/ poor
8.
Subsidiary book Source Document
a) Sales journal Outgoing invoice/ invoice issued
b) Purchases journal Incoming invoice/ invoice received
c) Returns inwards journal Outgoing credit note/ credit note issued
d) Returns outward journal Incoming credit note/ credit note received
9.
Description Type of advertising
i) Promotes the name of the manufacturer Institutional
ii) Famous or popular persons are used in Celebrity
advertisements
iii) Used by organizations that deal with similar Competitive/ Persuasive
products
iv) Aims at popularizing a new product to potential Primary demand/
customers Informative

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10.

b – Equilibrium point
cd –– Equilibrium
Equilibrium quantity
price
11.
a) Taking insurance cover
b) Enhancing security against theft e.g. fencing
c) Physical stock taking of each property
d) Keeping records of movement and usage of each the property
e) Proper repairs, service and maintenance
f) Ensuring physical care by people using the property
12.
a) Increased higher prices
b) Likelihood of delay
c) Chances of damage due to handling
d) Feedback to producer is slow/ delayed
e) Shortages of products/ hoarding
f) Deterioration of perishable goods
g) High cost of distribution
13.
a) Providing incentives
b) Creating an enabling environment
c) Organizing shows, trade fairs and exhibitions
d) Offering financial assistance to business people
e) Offering training
f) Advising business people on legal matters
14.
a) Money brought into the business by owner Capital
b) Goods bought for resale Stock
c) Money withdrawn by the owner for private use Drawings
d) Money borrowed by business Loan
15.
a) Date of payment
b) Name of the person making the payment
c) Amount paid in words and figures
d) Means of payment

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 e) Name of the institution / person to whom payment is made
f) Receipt number
g) Signature of the person issuing the receipt
16.
TWO COLUMN CASHBOOK
Date Details Foli Cash Ban Date Details Foli Cas Bank

7/5/202 Sales  G.L 30,000  8/5/202 Kamau  P.L 84,000 

17.
a) Marine hull policy
b) Marine cargo policy
c) Freight policy
d) Port policy
e) Voyage policy
f) Fleet policy
g) Insurance company’s policy
h) Time policy
i) Mixed policy
18.
a) Large number of sellers independently.
b) Perfect knowledge in the market
c) No barriers to entry or exit from the industry
d) Sell differentiated products
e) No firm has control over the factors of production
f) Firms set their own prices.
19.
a) Skilled/ appropriate human resources
b) Adequate finances
c) Availability of physical resources
d) Appropriate technology/ up to date
20.
a) Cultural practices
b) Early marriages
c) Ignorance of family planning
d) Religious beliefs
e) High mortality rate
f) Children being seen as a source of cheap labour
g) Many births as families strive to get a male/ female child.
21.
a) Coordination and harmonization of different activities.
b) Teamwork is created within the department.
c) To exchange ideas in order to develop human resources.
d) To reduce goal blindness among different departments.
e) To create a sense of belonging among different departmental heads.
22.
C – Expenditure on consumer goods

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 I – Expenditure on capital goods/ investment
G – Government expenditure
Y – National income
23.
a) Transport
b) Storage
c) Insurance
d) Communication
e) Advertising
f) Banking
g) Buying and selling
24.
a) C.O.G.S = O.S + P –PR –CS
35,000 + 705,000 -15,000 – 40,000 
= sh 685,000 
b)
20 = G.P 
100 685,000

G.P = 685, 000 / 5 = sh 137,000 

25.
Account title Account type
a) Wasua, a debtor Personal
b) Commission received Nominal
c) Bank Real
d) Purchases Nominal

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 VIHIGA COUNTY QUAKER SCHOOLS JOINT EXAMINATION
565/2
BUSINESS STUDIES
PAPER 2
TIME: 2 ½ HOURS
1 a. Country X is experiencing high levels of unemployment. Explain five measures that she
may take to solve the unemployment problems. (10 marks)
b. Explain five benefits that a private Company would get by converting to a public
company (10 marks)
2 a Explain five circumstances under which a business may decide to offer its customers after
sale services (10 marks)
b The following trial balance was extracted from the books of Miroyo Traders as at
31/12/2021.
M iroyo Traders
Trial Balance
As at 31st December 2021

A/C NAME DR (Shs) CR (Shs)

Purchases & Sales 275,000 390,000
Stock (1/1/2021) 30,000
Debtors 47,000
Commission 36,000
Returns 10,000 6,000
Carriage inwards 16,000
Carriage outwards 8,000
Bad debts 3,000
Wages 20,000
Rates 12,000
Buildings 450,000
Furniture 180,000
Bank overdraft 210,000
Insurance 19,000
Discounts 5,000 7,000
Drawings 25,000
Creditors 52,000
Cash at bank 250,000
Cash in hand 40,000
Capital 689,000
1,390,000 1,390,000
Additional information:
Stock was valued at Sh.50,000 as at 31ST/12/2021.
Required:
I. Prepare Miroyo Traders, Trading, profit and loss Account for the year ended 31/12/2021.
II. Balance sheet as at 31/12/2021.
3 a Using a diagram, show effect of increase in consumers’ level of income on the equilibrium
price and quantity. (10mks).
b Your school intends to place an order with Vic Enterprises for the supply of some urgently
required stationery. Explain five reasons why it would be advisable for the school to use
e-mail instead of telephone when placing the order. (10 marks)

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4 a) Gichuki Wholesalers intends to construct a warehouse. Explain five measures that Gichuki
wholesalers should take to ensure smooth functioning of the warehouse. (10 marks)
b) Explain five ways in which commercial banks facilitate payment on behalf of their customers.

5 a) On 1st April 2020, Kifaru traders had the following balances:

Bank 15,000 (CR)
Cash 25,000 (DR)
April: 3rd Paid wages in cash Ksh. 15,000
5th Bought goods worth Ksh. 750 in cash.
6th Received cheques from the following debtors after allowing a
2% discount in each Case, Roiki Sh. 980, Kombo Sh. 1960.
8th Chebe paid Kifaru by a cheque of Sh. 1,000.
11th Bought machinery by cheque for Sh. 5,000.
13th Cash sales paid directly to the bank Sh. 4000.
15th Withdrew Sh. 1,000 for private use.
20th Cash sales Sh. 20,000.
21st Banked cash amounting to Sh. 1,000.
24th A cheque received from Chebe 0n 8th April was dishonoured.
27th Received Sh. 3,000 by cheque from Kiko, a debtor.
30th Banked all the available cash except Sh. 1,000.
Prepare Kifaru Traders three column cash book for the month of April, 2020. (10mks)

b) Explain five Negative effects of general rise in prices goods and services (10mks)
6. a Explain five features of a monopoly. (10mks)
b Explain five circumstances that may lead to the existence of a market gap to be exploited
by the entrepreneur. (10mks)

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 VIHIGA COUNTY QUAKER SCHOOLS CLUSTER
BUSINESS STUDIES
565/2
MARKING SCHEME
1a. i) To check population growth/family planning.
ii) Use of appropriate techniques of production such as labor intensive methods of production.
Promote the informal sector such as jua kali.
Boost agricultural sector to reduce rural urban migration.
Exporting surplus labour to other countries.
Delocalization of firms.
Protect local industries from unfair foreign competition e.genforce anti-damping rules.
Diversification of economic activities in the country.
Subsidize local industries. This would make the firm more competitive locally and internationally.
Have appropriate education and training curriculum. Such curriculum should emphasize self-
employment as opposed to being employed by others.
To ensure there is security to attract foreign investors.
Develop basic infrastructure to spur investment.
Discourage people holding tracks of idle land to increase land use.
Increase government expenditure on development activity.
Any 5 x 1 = 5mks Naming
5 x 1 = 5mks Explanation Total 10mks
b Benefits a private Company would get by converting to a public company include;
• Easy transferability of shares; shareholders can freely transfer their shares when need arises/without
restrictions.
• Can advertise sale of shares to the Public (in the media) which can attract new/more investors.
• Company can be quoted/ listed (in stock exchange market) leading to proper management.
• Enhanced ability to borrow funds; by selling debentures / from the Public due to large asset base
• Better management; since it is run by competent board of directors/ professionals.
• Can enjoy economies of scale; due to increased sales
• Higher chances of continuity / survival; since shares can be transferred freely/ membership can be
changed without affecting the business
• Ability to raise a large amount of capital/ access more funds by selling shares to the members of
public through stock exchange market.
• Freedom from interference by owners; as owners have no direct managerial control over the
activities of the company.
• Increased professionalism /specialized management since it can afford/attract professional managers/
staff to run the company.
• Increased accountability/transparency; since the company’s annual audited accounts must be
published.
• Increased Public confidence/ good will/positive image in the company; due to increased exposure to
the public.
2a
• Where there is need to increase sales, by encouraging repeat purchase
• When there is need to create customer loyalty-retain customers
• When there is need to have competitive advantage-use it against your competitor, give the
business/product unique selling proposition
• When there is need to make customers trust the particular brand-give guarantee
• When there is need to build and retain a relationship with the customers eg loyalty program

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2b
Miroyo Traders
Trading profit and Loss Account
For the year ending 31st December 2021
Dr Cr
Opening Stock 30,000 Sales 390,000
Purchases 275,000 Less: Return inwards 10,000
Add: Carriage in 16,000 Net sales 380,000
291,000
Less :Return out 6,000 285,000
G.A.F.S 315,000
Less: Closing Stock 50,000
C.O.G.S 265,000 380,000
Gross profit C/D 115,000 Gross profit C/D 115,000
380,000 Commission received 36,000
Carriage outwards 8,000 Discount received 7,000
Bad debts 3,000
Wages 20,000
Rates 12,000
Insurance 19,000
Disc Allowed 5,000
Net profit C/D 91,000
158,000 158,000
Net profit B/D 91,000

MIROYOTRADERS
BALANCE SHEET
AS AT 31ST DECEMBER 2021√
FIXED ASSETS CAPITAL 689, 000√
Buildings 450,000√ Add: Net profit 91,000√
Furniture 180,000√ 630,000√ 780,000
Less: Drawings 25,000√
CURRENT ASSETS New capital 755,000√
Stock 50,000√
Debtors 47,000√ S.T.L
C.A.B 250,000√ Creditors 52,000√
C.I.H 40,000√ 387,000√ Bank order draft 210,000√
1,017,000 1,017,000

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 Using a diagram, show effect of increase in consumers’ level of income on the
equilibrium price and quantity.

i) The demand curve shifts to the right from DoDo to D1D1.

ii) Equilibrium point shifts eo to e1
iii) Equilibrium price increases from Pe0 to Pe1
iv) Equilibrium quantity increases from Eq0 to Eq1

3 b)
• Emails provide evidence for use in case of a dispute
• Email messages are more confidential hence able to maintain secrets/information can’t get to
unauthorized persons.
• Messages are received without distortion i.e. is reliable.
• It is affordable to send messages via email.
• Messages can be stored for future reference.
• Emails can be sent to several people at once.
• It can provide detailed and complex information such as tables, statistics and graphs.Any 5 x 1
= 5mks Naming
5 x 1 = 5mks Explanation Total 10mks
4a
• Ensure the warehouse is conveniently located/accessible to the workers and the users.
• Ensure the warehouse adequate handling equipment, machines and tools for
• ease of operation.
• Ensure the warehouse is spacious enough to allow easy storage, movement accommodation and
accessibility of goods by personnel.
• Ensure the warehouse is fitted with safety and security equipment protection
• of goods and personnel against risks e.g. fire.
• To ensure proper system of inventory control to monitor stock movement to avoid fraud
pilferage and theft.
• Provision of sufficient loading and off loading equipment to avoid congestion and delays.
• Ensure adequate preservation of the goods stored against damage.

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• Ensure there is efficient transport system to ease movement of goods in and
• out of the warehouse.
• Ensure that the laid down legal procedures are followed e.g. public health, Licensing etc.
• Ensure that the staff is well qualified, trained and motivated to enhance their performance.
• Ensure there are proper communication systems between the warehouse and
• the clients. Any 5 splitting
(b) Explain five ways in which commercial banks facilitate payment on behalf of their customers.
o Standing orders. A customer making regular payments could instruct the bank
to make the payments for an agree period of time until he makes changes to the instruction in
writing.
o Credit transfer. Customer with several payments to make at a certain time may write only one
cheque and then fill a credit transfer form which instructs the bank who is to be paid and how
much.
o Credit cards. The customer obtains goods without paying for them in cash
from a retail outlet that accepts the cards. The buyer signs a voucher which
is later presented to the bank by the seller for payment.
o Cheques. The bank issues the customers with a cheque book which they use
for payments.
o Mail transfer. This is where the bank would remit the payment through mail
on behalf of the customer.
o Banker’s cheque/bank draft. This is a cheque drawn by one bank to another
the people making the payment buys the cheque and makes the payment to
creditors who don’t accept personal cheques.
o Letter of credit. This is where banks guarantee payment to exporters on
behalf of their clients who have imported goods.
o Traveler’s cheques. This is used to assist travelers in/out of the country to settle their debts in
the country they are visiting.
o Telegraphic transfer. This is whereby bank remits money by use of cables/telephone on behalf
of their customers.
o Through M-pesa.Any 5 x 1 = 5mks Naming 5 x 1 = 5mks Explanation Total 10mksNB: The
naming must come out clearly

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 5a Kifaru Traders
Three Column Cash Book for the month of April 2020√
Dr Cr
Date Details F Discount Cash Bank Date Details F Discount Cash Bank
Allowed Received
Sh sh Sh sh sh Sh
2020 2020
April Bal. 2500√0 April Bal. b/d√ 15000√
1 b/d√ 1
April Wages√ 15000√
3
April Rioki√ 20√ 980√ April Purchases√ 750√
6 5
Kombo√ 40√ 1960√ April Machinery√ 5000√
11
April Chebe√ 1000√ April Drawings√ 1000√
8 15
April Sales√ 4000√ April Bank√ C1 1000√
13 21
April Sales√ 20000√ April Chebe √ 1000√
20 24
April Cash√ C1 1000√ April Bank√ C2 27250√
21 30
April Kiko√ 3000√
27
April Cash√ C2 27250√ April Bal. c/d√ 1000√ 17190√
30 30

60 46000 38190 46000 38190

May Bal. b/d 1000 17190
1st

b) Negative effects of general rise in prices(10mks)

• Lower standards of living – As people can only manage to buy fewer goods/services.
• Reduced savings – Much of income is used on goods/services, thus little investments/leading to
poverty.
• Reduced real value of money – People lose confidence in money/preference to hold wealth in
form of assets other than money form/Banks is negatively affected.
• Losses to creditors – Receive/get paid their debts when money value is eroded.
• Reduced profits – Low sales volumes/products become unaffordable.
• Conflicts between employers and employees – Due to demand for higher wages.
• Emergence of black markets – Sneaking in of illegal/harmful goods.
• Erosion of people’s purchasing power - People become poorer.
• Increase in interest rates/banks rates – Making borrowing/loans expensive.
• Political unrest – People complain of too high cost of living.
6a Explain five features of a monopoly. (10mks)
• Single producer/seller in the market hence no competition/ rivalry.
• No close substitute products hence consumers have no option but to use the product of the
monopolist to satisfy particular needs.
• Price discrimination may be possible charging different prices for the same commodity in
different markets.
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• Monopoly firm is the price maker/prices are fixed by the single supplier who has control over
the price to sell the product.
• Barriers/ restrictions to entry it is difficult for other firms to enter the market.
• Large number of buyers – so that none of them is able to influence the price in the market/ who
compete for the product supplied by the monopolist.
b Circumstances that may lead to the existence of a market gap to be exploited by the
entrepreneur include;

• If there is lack of some products/ goods /services; customers may require some products not
easily found in their area.
• If existing market prices are unnecessarily high offering relatively lower prices would create an
opportunity.
• If there is lack/ poor/inadequate after sales services; an opportunity will exist where (better)
services are offered after buying /selling goods/ services (accept) example of an after sale
services e.g transport as expansion.
• If there is poor/ low / substandard products; creating room for provision of better /high quality
goods/ services.
• If there is shortage/ excess demand/ inadequate supply of (goods/services)/ when goods
available in the market are insufficient; an opportunity to supply more exists.
• If there is need for variety/ limited variety to widen consumers choice/ to meet different
consumer needs.
• Where there is disaster /catastrophe/occurrence of natural disaster; which creates need.
• If there are seasonal events/occurrences/festivities; which creates requirements
• If there is innovation /invention /creativity/discovery of new products; which leads to efficiency
(presents an opportunity)
• If there are unmet social cultural needs; which existing products may not be addressing.

Page | 269
 ITHANGA/KAKUZI JOINT
BUSINESS STUDIES
565/1
PAPER 1
TIME: 2 HOURS
1. State four internal business weaknesses which can lead to business failure. (4mks)
2. Outline four ways in which the government may create an enabling environment for business.
(4mks)
3. Highlight four features of economic resources. (4mks)
4. Outline four factors that might have encouraged entrepreneurship in the recent times. (4mks)
5. Outline four disadvantages of an enclosed office. (4mks)
6. State four ways through which the central bank acts as a banker to the government . (4mks)
7. Highlight four circumstances in which a cheque may be used as a means of payment. (4mks)
8. Outline four factors a firm may consider when selecting the product promotion medium to use
for her product. (4mks)
9. The following transactions were extracted from the records of Fanaka provision shop
2006
02/04: Started business by depositing a cheque of sh 250,000 in a business bank account
09/04: Withdrew sh 50,000 from the business bank account out of which sh 30, 000 was used to
purchase equipment and the rest was retained for office use.
10/04: Purchased stock on credit for sh 40,000 from Central stores.
Required:
Enter the transactions above in the appropriate ledger accounts for the business. (4mks)
10. State the term that is best described by each of the following terms as used in insurance. (4mks)

Statement Insurance
(i) A temporary document issued to an insured on payment of the premium
while waiting for the policy document
(ii) Any calamity whose occurrence would cause loss to the insured
(iii) The value for which a property is insured
(iv) The process of naming the person to benefit from the insurance claim in
case of death of the assured

11. Give four factors that may increase the level of National Income of a country. (4mks)
12. State four principles which govern public expenditure in a country. (4mks)
13. In each of the transaction below, indicate in the appropriate columns the source document and
the books of original entry in which the transaction should be recorded. (4mks)
Transaction Source of document Books of original entry
(a) Purchase of goods on credit.
(b) Goods returned by a customer.
(c) Payment to a creditor
(d) Sale of goods on credit
14. The following information was extracted from the books of Orange Traders on 30th June
2013
Sh
Average stock 1,500
Closing stock 2,000
Purchases 16,800
Carriage inwards 100

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 Returns outwards 900
Mark up 20%
Required:
Calculate the sales for the year. (4mks)
15. Highlight four reasons why indirect production is superior to direct production. (4mks)
16. State four features of current accounts that make them preferable to business people.
17. State four methods that a government may use to influence location of businesses. (4mks)
18. State the account to be debited and the account to be credited in each of the following
transactions. (4mks)
Account debited Account credited
(a) Bought stock of goods on credit
(b) The owner withdrew stock from the business for
personal use
(c) Withdrew cash from bank for office use
(d) Paid salaries by cheque
19. State four reasons why a country may decide to trade with each other. (4mks)
20. Kamau, who runs a retail store, had the following assets and liabilities as at 31st March
2012.
Premises sh 100,000, Debtors sh 4000, Loan from AFC sh 50,000 and Capital sh 120,000
During the month of April 2012, the following transactions took place:
2012
April 1st -Sold goods at cost of sh 2000 in cash
2nd - Paid creditors sh 8000 in cash
10th - Received sh 2000 from his debtors in cash
th - Bought a motor van for sh 35,000 paying by cheque
15
25th - Purchased goods worth sh 15,000 and paid by cheque
Prepare a balance sheet as at 25th April 2012. (4mks)
21. Identify the type of error made in recording each of the following transaction. (4mks)

Transaction Type of error.

(a) The amount in an invoice for goods purchased was recorded in the books
as ksh 5000 instead of ksh 50,000
(b) Purchases of office equipment was debited in purchase account.
(c) Despite agreement of the trial balance sales and purchases had been
overstated by sh 3000 in each case.
(d) A debtor for sh 2,000 settled his account in cash less 10% discount. The
consequent double entry made in the books was in respect of cash
received only
22. In each of the following case name the type of inflation described. (4mks)
Description Type of inflation
(a) A rise in price due to increase in prices of factors of production
(b) A rise in prices due to increase in money supply.
(c) A rise in price due to buying expensive goods from foreign countries.
(d) A rise in prices due to un even growth in some sectors of the
economy.

23. Highlight four factors which may favour existence of a monopoly. (4mks)
24. Highlight four factors that are likely to contribute to unemployment in Kenya. (4mks)
25. Highlight four disadvantages of written communication. (4mks)
Page | 271
 ITHANGA/KAKUZI JOINT
BUSINESS STUDIES
565/1
PAPER 1
TIME: 2 HOURS
MARKING SCHEME
1. Internal business weaknesses which can lead to business failure.
 Poor business structure
 Unqualified/unskilled employees
 Inadequate financial resources/capital
 Unavailability of physical resources
 Outdated technology
 Poor research
 Negative business culture of the employees
 Poor management style
 Poor decisions of the owner(s)
2. Ways in which the government may create an enabling environment for business.
 Enacting legislation aimed at promoting and supporting business investments and activities
 Offering incentives to attract investments
 Providing credit and financial support to entrepreneurs
 Providing security
 Ensuring political stability
 Providing good infrastructure
3. Features of economic resources.
 They are scare in supply
 They have money value
 They are unevenly distributed
 They can change ownership
 They have alternative uses
 They are complimentary
 They have utility
4. Factors that might have encouraged entrepreneurship in the recent times.
 Use of relevant business curriculum in learning institutions/vocational training
 Government support in development of entrepreneurs
 Improvement of infrastructure
 Political stability
 Widening of the market
 Change of some social cultural practices in favour of some products.
 Existence of role models in entrepreneurship
 Access to business finance
 Availability of motivational speakers
(any other relevant)
5. Disadvantages of an enclosed office.
 Encourages absenteeism
 Supervision of workers become more difficult
 There is a likely misuse of office equipment
 Costly to construct and maintain
 A lot of space is wasted by partitioning consultation is not easy
 Involve a lot of movement

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6. Ways through which the central bank acts as a banker to the government
 Maintains current accounts for all government ministries and departments.
 Receiving money deposits from the government.
 Making payments on cheques drawn by the government.
 Advising the government on financial matters.
 Providing safe custody of funds received from abroad on behalf of the government.
7. Circumstances under which a cheque may be used as a means of payment.
 When the amount involved in the transaction is very large
 When the seller insist on payment by cheque
 When the evidence of the payments is required.
 When payment is to be directed into payee account
 When there is need ensure safety of the money being transferred
8. Factors a firm may consider when selecting the product promotion medium to use for her
product.
 Cost of the medium
 Target group
 Frequency of production
 Life of the promotional message
 Quality of the message
 Availability of the medium
 Nature of the product
9.

Dr Capital A/C Cr

Apr. 2 Bank A/c 250,000

Dr Bank A/C Cr

Apr. 2 Capital 250,000 Apr. 4 Equipment 30,000

Cash 20,000

Dr. Equipment A/C Cr

Apr. 4 Bank 30,000

Dr Cash A/C Cr

Apr. 4 Cash 20,000

Dr Purchases A/C Cr

Apr. 10 Central stores 40,000

Dr. Central stores A/C Cr

Apr. 10 Purchases 40,000

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 10.
a. Cover note (binder)
b. Risk
c. Sum insured
d. Nomination
11.Factors that may increase the level of National Income of a country.
 Use of advanced technology in production
 Availability of adequate human resources
 Availability of capital resources
 Positive attitude of citizens toward work
 Reduced level of subsistence sector
 Adequate natural resources
 Political stability
 Enhancing entrepreneurial culture of the society
12.Principles which govern public expenditure in a country.
 Should be sanctioned /approved by the parliament
 Maximum social benefit
 Should be flexible
 Principle of equity
 Should be productive
 Surplus : expenditure should be less than revenue collected.
 Elasticity ; should be capable of being expanded or contracted depending on the size of the
economy.
 Good financial management

13. Source document and the books of original entry in which the transaction should be
recorded.

Transac�on Source of document Books of original entry

(a) Purchase of goods on credit. Received/Incoming/purchases Purchases journal
invoices
(b) Goods returned by a customer. Issued/outgoing credit notes Sales returns/return inward
journal
(c) Payment to a creditor Received receipts/payment Cash book/Cash payment
voucher journal
(d) Sale of goods on credit Issued /sales/outgoing invoices Sales journal

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 14.
Average stock = opening stock + closing stock
2
1500 = opening stock + 2000 √
2
= (1500 x 2) – 2000
= 1000 √
Cost of sales = 1000 + 16800 + 100 – 900 – 2000
= 15000√
G.P = 20/100 x 15000 = 3000
Sales = 15000 + 3000 = 18000V
15. Reasons why indirect production is superior to direct production.
 Products are of better quality
 Leads to surplus production
 Makes it possible to use machines
 Product is for the market (sale)
 Leads to innovations and inventions
 It encourages specialization in production
 It improves the skills of the producer since tasks are done repeatedly
 The rate/speed of production is high
 Variety of goods can be produced
 It leads to high living standards
 It promotes peace and understanding among people through trade
 It promotes division of labour and specialisation
16. Features of current accounts that make them preferable to business people.
 They have unlimited access to funds
 Payments can be made by cheque
 Overdraft facilities can be arranged
 No minimum balance is required
 Bank statements are issued more regularly
17. Methods that a government may use to influence location of businesses.
 Offering free or cheap land
 Reduction of taxes
 Offering subsidies
 Offering financial assistance
 Improving infrastructure
 Providing credit facilities to investors

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18. Account to be debited and the account to be credited in each of the following transactions.

Account debited Account credited

a. Bought stock of goods on credit Purchases A/c Creditors A/c
b. The owner withdrew stock from the Drawings A/c Purchases A/c
business for personal use
c. Withdrew cash from bank for office use Cash A/c Bank A/c
d. Paid salaries by cheque Salaries A/c Bank A/c

19. Reasons why a country may decide to trade with each other.
 Need to dispose surpluses
 Desire by countries to acquire what they don’t produce
 Desire to enhance international relations
 Desire to acquire foreign currencies
 Need to exchange skills and knowledge of producing certain goods
 Desire to acquire high quality goods
 Need for employment creation
 To facilitate mobility of factors of production
 To obtain a wider market for domestically produced goods and services
20.

21. Error made in recording each of the following transaction.

Transac�on Type of error.

(a) The amount in an invoice for goods purchased was recorded in the Original entry
books as ksh 5000 instead of ksh 50,000
(b) Purchases of office equipment was debited in purchase account. Principle
(c) Despite agreement of the trial balance sales and purchases had been Commission
overstated by sh 3000 in each case.
(d) A debtor for sh 2,000 setled his account in cash less 10% discount. ommission
The consequent double entry made in the books was in respect of cash
received only
22. Type of inflation described.
Description Type of inflation
(a) Arise in price due to increase in prices of factors of Cost push
produc�on
(b) A rise in prices due to increase in money supply. Demand pull
(c) Arise in price due to buying expensive goods from foreign imported
countries .
(d) Arise in prices due to un even growth in some sectors of Structural
the economy.

23. Factors that may favour existence of a monopoly.

 Control of an important factor of production
 Ownership of production rights by one firm
 The size of the firm may be such that it is best served by one firm

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 When group of firms combines to act as one/amalgamation
 Where the initial cost is too high making it difficult for other firms to enter the industry
 Secretive production technique by one firm.
 Government restrictions of production to only one firm.
24. Factors which are likely to contribute to unemployment in Kenya.
 Rapid population growth
 Rural urban migration
 Inappropriate system of education
 Use of inappropriate technology
 Seasonality in production
 Inadequate resources required for production to be carried out.
 Training for collar jobs which may not be available.
 Selective when choosing the jobs they want which may not be available in the market.
 Mismanagement of resources/ corruption/ poor planning by the government.
 Introduction of new products that replace existing ones eg synthetic fibers to replace natural
fibers.
 over-reliance of few sectors of the economy as a source of employment
25. Disadvantages of written communication.
 It lacks personal appeal
 It takes time to prepare
 It is not suitable for the illiterate people
 Immediate feedback may not be possible
 It does not offer room for persuasion and convincing
 It is not a two way communication
 The message may take long to reach the receiver
 It does not allow the expressions of body language
 Some means of written communication are expensive

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 PRACTICE EXERCISE
NYERI CENTRAL PRE
BUSINESS STUDIES
PAPER 1
1. Outline four factors to take into consideration when planning an office layout (4mks)
2. Highlight four principles of insurance (4mks)
3. Indicate the type of advertisement described in the table below
Description Type of Advertisement
Used to promote a company home
Where a product is advertised using a popular person
Seeks to promote the sales of a new or existing products
Where the emphasis is to give full information about a product
4. State four factors that may limit the effectiveness of a warehouse (4mks)
5. The following represents equilibrium price and quantity for a market. Outline four effects of a
shift in demand curve to the left

6. Highlight four factors that may hinder the expansion of small business enterprises (4mks)
7. Outline four limitations of using National income statistics to measure standards of living in a
country (4mks)
8. State four ways through which face-to-face communication can be made more effective
9. Outline four distinctions between perfect competitions and monopoly (4mks)
10. Highlight four activities that may be carried out in the Nairobi securities Exchange market
11. Name factors of productions associated with each of the records listed below (4mks)
Rewards Factors of production
(i) Commission
(ii) Royalties
(iii) Interest
(v) Profit
12. State the type of unemployment relating to each of the following description (4mks)
Caused by alternating trading patterns occurring at similar times_________________
Arises where workers have more skills and higher qualifications than the job requirements
Arises out of a mismatch between the skills possessed by potential employees
Arises when people are unwilling to take up jobs due to low pay__________________
13. Highlight four roles played by entrepreneurship in on economy (4mks)
14. State four ways in which the government can influence an increase in demand for a product
15. State four advantages of air transport over road transport (4mks)
Capital Fixed Assets Current Assets Long term liabilities Short term Liabilities
40,000 9,000 15,000 6,000
82,000 100,000 94,000 72,000
103,000 100,000 150,000 70,000
150,000 63,000 27,000 23,000

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17. Identify the type of ledgers appropriate for the following accounts (4mks)
Account Type of ledger
Land account
Debtor Kamau account
Creditor Kandara wholesales account
Electricity expense account
18. The following information relates to Gakara Traders for the year 2015
Net Sales 320,000
Margin 25%
Expenses 35,000
Rate of stock Turnover 6 times
From the information above, calculate (3mks)
Gross profit
Cost of goods sold
Net profit
19. Outline four features of a good filling systems in a firm (4mks)
20. State four characteristics of a basic wants (4mks)
21. State four reasons why an entrepreneur needs to prepare a business plan (4mks)
22. Name five subjects of business studies (5mks)
23. Highlight four features of a public warehouse (4mks)
24. Identify four methods through which the government get involved in business (4mks)
25. State four factors that an entrepreneur would consider before investing in a business
opportunity. (4mks)

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 NYERI CENTRAL PRE
BUSINESS STUDIES
PAPER 2
1 (a) Highlight five benefits of an efficient transport system to the Kenyan economy.
(10mks)
(b) Explain five reasons for continued existence of small firms in an economy. (10mks)
2 (a) Explain any five characteristics of human wants. (10mks)
(b) Outline five differences between a public limited company and a private limited
company. (10mks)
3 (a) A multi-national company is planning to launch its products in Kenyan market.
Explain five factors that should be considered when choosing the appropriate media
through which to advertise its products. (10mks)
(b) (i) With an aid of a diagram describe the circular flow of income in a two sector
economy. (6mks)
(ii) Outline any four assumptions of a circular flow of income in a two-way sector
economy. (4mks)
4 (a) Explain five factors that may influence the supply of potatoes in an economy.
(b) The following trial balance was extracted from the books of Bli Keti Traders on 31 st
December 2008.
Bli Keti Traders
Trial balance as at 31st Dec 2008
Dr (shs) Cr (shs)
Purchases 70,000
Carriage Outwards 4,000
Stocks 1/1/2008 12,500
Sales 95,000
Fixed Assets 82,000
Creditors 8,500
Debtors 10,500
Bank overdraft 7,500
Returns outwards 2,400
Salaries 14,000
Cash in hand 2,500
General expenses 5,200
Returns inwards 1,500
Capital 88,800
202,200 202,200
Additional information
Closing stock was valued at shs 6,500/=
Prepare Trading profit and loss account for the period ended 31st December 2008. (10mks)
5. a) Discuss five factors that would influence a producer to sell his goods directly to the
consumers. (10mks)
b) On January 2019, Maxwell Traders had cash in hand shs. 87,000 and cash at bank
shs 250,000. During the month, the following transactions took place 2019
Jan 2 Cash sales shs 50,000
3 Paid salaries and wages shs 101,500 by cheque
6 Received a cheque for shs 76,800 from Wambua after allowing him a cash discount
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 of 4%
12 Bought office furniture by cheque shs 85,000.
16 Settled Katunge’s account of sh 40,000 in cash hiving deducted shs 800 cash discount.
18 Receiving a cheque for shs 150,000 in respect of cash sales.
21 Paid wages shs 24,000 in cash.
22 Withdrew shs 5,000 cash for private use.
28 Receiving shs 16,500 cash from Mochere in settlement of his account less shs 660
Cash discount.
30 Deposited all the money into the bank except shs 25,000.
Prepare a three column cash book duly balanced. (10mks)
6 (a) Outline five factors that may lead to growth of entrepreneurship in Kenya. (10mks)
(b) Describe five channels that may be followed when distributing imported rice.(10mks)

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 KAPSABET
BUSINESS STUDIES
PAPER 1
1. State four elements of the external environment that may negatively affect businessoperations.
2. Outline four factors that make office managers to communicate to their staff in writing.
3. Highlight four disadvantages of monopoly markets. (4mks)
4. Identify the books of original entry used in recording each of the following transactions of
Turkwel traders. (4mks)
Transactions Books of Original Entry
a) Sold goods on credit to Atieno
b) Bought goods on credit from ChantalTraders for sh 4000
c) Zuma returned goods worth sh 8000
d) Turkwel returned goods worth sh 11000 toSimba Traders
5. State four roles played by Nairobi stock exchange in Kenyan economy. (4mks)
6. Name four types of warehouses. (4mks)
7. State four reasons why consumers have to make a choice between competing needs.
8. Filling in the missing figures
Fixed Assets Current Assets Capital Liabilities
a) 275 500 315 000 115 500
b) 182 000 108 700 217 100
c) 76 400 123 100 91 900
d) 313 450 211 340 189 170
9. Highlight four functions of money. (4mks)
10. Identify the type of utility credited in the following circumstances. (4mks)
Activity Utility
a) Carpentry
b) Selling bread to students
c) Warehousing of goods imported
d) Carriage of cargo to the market
11. The following are policies issued under marine insurance, fleet policy composite policy,voyage
policy, time policy. Identify the policy that suits the description listed below.
Description Marine policy
a) Covers a ship within a specified period of time
b) Covers a ship on a particular journey
c) Different insurers covers a ship for the same
d) Covers many vessels against losses under onepolicy
12. This is Mutegi’s demand schedule for bread in a week.
Price per loaf (shs) No. of loaves demanded
30 1
20 2
15 4
12 6
10 8
5 12
1 20
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 Required: Draw the demand curve of Mutegi’s bread for a whole week. (4mks)
13. The following information was extracted from the books of Jupiter TradersRate of stock
turnover 3 times
Mark up 20%
Opening stock shs 160 000
Closing stock shs 200 000Required:
Gross profit (2mks)
Sales (2mks)
14. Outline four business ethics that a trader should observe when dealing with customers,
employees, and other businesses. (4mks)
15. Highlight four reasons why the government requires businesses to obtain licenses.
16. The following information was obtained from the books of Jakayo Traders as at 1 st July
2010.
Shs
Furniture 20 000
Stock 8 000
Creditor 7 000
Cash bank 12 000
Long term loan 10 000
Prepare Jakayo’s balance sheet as at 1st July 2010. (4mks)
17. State four circumstance under which cash with order is mostly practiced (4mks)
18. Highlight four reasons why a producer of goods may use intermediaries to distribute his
goods (4mks)
19. Outline four tools of monetary policy that government may use to reduce excess money in
circulation (4mks)
20. Highlight four benefits that would accrue to a firm located near existing firms. (4mks)
21. Highlight four circumstance under which personal selling may be used as a strategy in
product promotion. (4mks)
22. Give four measures that a government may take to reduce the mortality rate in a country.
23. Highlight four benefits of using electronic filing system in an office. (4mks)
24. Give four factors that limit use of containers as a method of transporting goods in a
developing country. (4mks)
25. Give four factors that influence the level of national income. (4mks)

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 KAPSABET
BUSINESS STUDIES
PAPER 2
1. (a) Explain five factors that encourage entrepreneurial development in Kenya. (10mks)
(b) Highlight five characteristics of an efficient tax system. (10mks)
2. (a) Dr Walden would like to pass a message to a firend. Explain five factors he is to consider
in choosing the most appropriate means of communication to use. (10mks)
(b) Describe any five source of document that a business may have access to. (10mks)
3. (a) Explain five benefits of direct production. (10mks)
(b) The following information relates to Maralal Traders for the month of May 2014.May
1: Balance brought forward
Cash shs 180,000 Bank shs 450,000 (Cr)
3: received a cheque of 1,500,000 from Mpasha, a debtor
7: Cash sales shs 280,000
11: Jolloimat, a creditor of shs 600,000 was paid by cheque of sh400,000 and the balance
by cash
14: Received commission in cash shs 150,000
17: A debtor, Leteipa, paid his account of 185,000 by cheque less 2%cash discount.
19: Paid the following expenses by cheque:Rent shs 75,000
Electricity shs 32,000
Water shs 25,000
21: Withdrew shs 100,000 from bank for personal use.
24: Paid cash shs 133,280 to Kinai after deducting a cash discount of2%
25: Received a cheque of sh 200,000 from Kiyapi, a debtor28: Paid salaries shs 120,000
by cheque
31: Banked all cash except shs 50,000
Required:
Record the above transactions in a three column cash book. (10mks)
4. (a) Explain five differences between private limited companies and partnerships forms of
business units. (10mks)
(b) Explain clearly with aid of a diagram the change of equilibrium as a result of increase in
supply of a commodity. (10mks)
5. (a) Explain five challenges that an underpopulated country may experience. (10mks)
(b) Explain five measures that a wholesaler would take to ensure smooth running of his
warehouse. (10mks)
6. (a) Highlight four circumstances under which a cheque may be dishonoured. (8mks)

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(b) The following trial balance related to Kimani;s business as at 31st December 2012

DR(SHS) CR(SHS)
Stock on 1st January 2003 60,000
Purchases and sales 400,000 580,000
Returns 20,000 50,000
Debtors and creditors 65,000 40,000
Premises 540,000
Machinery 200,000
Fixtures and fittings 100,000
Carriage outwards 8,000
Wages and salaries 30,000
Discounts 25,000 32,000
Commissions 16,000 14,000
Cash in hand 70,000
Capital 818,000
1,534,000 1,534,000
Required:

(a) Prepare a trading profit and loss account for the period ended 31st December 2012 anda balance
sheet as at that date if the closing stock was worth shs 70,000 (12mks)

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