KCSE Business Studies Topical Questions and Answers

Lunga, a sole trader, does not keep a complete set of accounting records. Information extracted from the records are as follows

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Lunga, a sole trader, does not keep a complete set of accounting records. Information extracted from the records are as follows

Additional information:
(i) Interest charged on debtors overdue accounts amounted to Kshs 2,000
(ii) Bad debts written off amounted to Kshs 4,200
Prepare trading, profit and loss account for the year ended 31 December 2007 (10 mks)

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The following table represents the price and quantity of a commodity

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The following table represents the price and quantity of a commodity

(i) Plot the above information on a graph ( 5 mks)
(ii) Calculate the price elasticity of demand ( 5 mks)

(i) Plot the above information on a graph ( 5 mks) (ii) Calculate the price elasticity of demand ( 5 mks)

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Malamu Traders had the following balances s at 31 December 2008

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Malamu Traders had the following balances s at 31 December 2008

Prepare:
(a) Profit and loss account for the year ended 31 December 2008
(b) Balance sheets as at 31 December 2008 ( 12 mks)

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Explain four services that the central Bank of Kenya may offer as a Banker to commercial banks

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Explain four services that the central Bank of Kenya may offer as a Banker to commercial banks

Services that the central Bank of Kenya may offer as a Banker to commercial banks

Advising/information/education/publishing journals for commercial banks or financial matters.
Banker to commercial banks/accepts deposits by being in custody of the reserves received from commercial basis.
Supervising/ monitoring the operations of commercial banks /banking act
Providing a central cleaning horse where commercial banks settle debts due to each other /for cheques
Being a tender of the last resort to the commercial bans
Foreign exchange /buy /sell foreign currency to/ for a commercial banks
Icore of currency for commercial banks operations/replaces old currency/issue new notes/coins
Mediation/arbitration in case of disputes (between commercial banks)
Licensing- the operations of commercial banks
Repatriation of excess foreign currency/profit (broad) on behalf of commercial banks
Statutory management during financial crisis /receiverships

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Analyze the following document issued by Sheikh Traders

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Analyze the following document issued by Sheikh Traders

Analyze the following document issued by Sheikh Traders
Required:
(i) Name the document above
(ii) Calculate the amount paid for the goods, if the debtor paid on 28th October 2008
(iii) Determine the net profit of the business if transaction (ii) above was Kshs 120.400 and the debtor paid for the goods on 15th November 2008

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Using a diagram, explain the circular flow of income in a two sector economy

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Using a diagram, explain the circular flow of income in a two sector economy

a)using a diagram, explain the circular flow of income in a two sector economy.
House holds supply their resources (factors of provision) to various types of businesses and receive payment on the form of rent, wages and profit
On the other hand, businesses sell finished products to household and households pay for the goods and services received

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Explain five ways in which the government of Kenya may reduce the level of unemployment

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Explain five ways in which the government of Kenya may reduce the level of unemployment

Ways in which the government of Kenya may reduce the level of unemployment

Diversification of the economy by encouraging the establishing of different industries /sectors to create employments opportunities
Transforming agricultural sector/rural sector to curb rural urban migration/ accepts egs of transformation as a naming (to create more jobs and reduce unemployment )
Transforming education /training sector/to improve on skills/ (this makes the graduates)acquire relevant skills.
Establishing on employment policy by government to make it easy for people to get jobs/Accept egs of policy as mention
Lending /setting of a fund to assist unemployed to stat income generating activities/accept egs of funds as a mention
Exporting Labour by assisting unemployed people to acquire jobs abroad /countries with labour deficiency.
Encouraging the informal /Jua Kali sector in order to promote self employment
Delocalization/ decentralization policy for balanced regional development/reduced rural urban irrigation
Population policy to control growth/have a labour force that the economy can absorb
To improve infrastructure in order to suitable economic activities /Accept egs of infrastructure as a raring.
Increase government expenditure to expand the size of the economy/ to finance development projects.
Effective use of natural resources to increase production activities accepts egs of natural resources as a mentor.
Income /wage policy to harmonize/eliminate differences between regions/sectors
Attract (Local /foreign) investments through vision incentives/to grow the economy accept egs of incentives as explanation
Receiving collapsed industries/projects by injector, funds/selling than /increased production activities

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The diagram below shows an oligopolist kinked demand curve DD and current price and quantity at P and Q respectively.

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The diagram below shows an oligopolist kinked demand curve DD and current price and quantity at P and Q respectively.

(i) Name the curve represented by the gap WZ
(ii) State Why the curve WZ is vertical to price axis
(iii) Advice when the oligopolist can raise and lower the price of the commodity

Expected Responses

Refer to 9str paper MR curve /MC Curve/ disjoint in the MR where MC=MR curve i.e the equilibrium point.
Above price p /kink the demand curve is more /fairly elastic and less elastic/fairly inelastic below the price P0/Kuk/ if a firm raise price above P0 /Kerk other competing firm swill not follow suit bul if it lowers below P0 /Kirk all other low peting firms will follow suit.
When the eligopolist forms a collusion or a celtel with competing firms they can increase/lower /reduce the price.
When the oligopolies acquires a dominant position on the market/accept egs of dominant position
The price cannot be increased /decreased/rained because it is rigid at the kelik/OPO
The owner on roman II can be used as the answer far this section.

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The trial balance of Zakayo Traders as at June 2008 is given below

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The trial balance of Zakayo Traders as at June 2008 is given below

During the month, the following transactions took place
2008

June 5 Paid a creditor Kshs 228,000 by cheque in full settlement of a debt after deducting 5% cash discount.
15 Withdrew Kshs 100,000 from bank for office use
28 Received Kshs 160, 000 cash from a debtor after allowing cash discount of Kshs 40, 000

Record the above transactions in the relevant ledger accounts and balance then off.

Expected Response

During the month, the following transactions took place 2008 June 5 Paid a creditor Kshs 228,000 by cheque in full settlement of a debt after deducting 5% cash discount. 15 Withdrew Kshs 100,000 from bank for office use 28 Received Kshs 160, 000 cash from a debtor after allowing cash discount of Kshs 40, 000 Record the above transactions in the relevant ledger accounts and balance then off.

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Explain five demerits that may be associated with water transport ( 10 marks)

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Explain five demerits that may be associated with water transport

Demerits that may be associated with water transport

Relatively slow hence perishable /urgently needed goods may not be transported this way /take long when traveling
Limited availability only applicable where water is available
Waterways can be affected by adverse weather conditions such as droughts/freezing/storms/flooding.
Costs of maintaining/construction of ports/canals/waterways/harbor may be (relatively) high /expensive making it unaffordable for some countries
Waterways may not be navigable due to laugh terrain/ waterfalls/cataracts/rapids/shallowness/narrowness/inhabited by dangerous animals/rough waters.
High costs of units of carriage/vessels which may make them unaffordable to acquired/maintain
May be prone to piracy in the high seas /remote areas/may lead to Losses/may leads to losses/increased in insurable costs.

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Explain five measures that the government may take to improve the volume of exports ( 10 mks)

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Explain five measures that the government may take to improve the volume of exports

Measures that the government may take to improve the volume of exports

Creation of export processing zones- Where the producers/exporters enjoy a Variety of inceptives/accept e.g. of investors as explanation.
Manufacturing under bond to encourage local manufacturers to produce exclusive for export.
Export compensation schemes/ subsides schemes by refunding a specific % age of value of goods/services exported/meeting part of the cost of production for exports.
Providing information on international markets through publications/seminars/workshops/educational tours
Financing those producing for exports by availing credit/loan to exporters.
Participating in international trade fairs/exhibitions/shows to expose the exporters their goods/services
Use of commercial attaches/other government agencies to promote exports/advertise/look for markets for exports.
Customs drawbacks by refunding tax on imported ran materials used to produce exports.
Devaluation of currency to make exports cheaper/increased demand
Improved infrastructure to facilitate export production/export trade/accept eggs of infrastructure as a mentioned
Entering into trade agreement/blocks/integration/groupings/cooperation to give preferential treatment to a cooling exports
Improving on quality/standardization/packaging to make exports more attractive Export credit guarantee scheme to insure/ compensate exporters against risks when selling overseas.
Export credit guarantee scheme to insure/compensate exporters against risks when selling overseas.
Tax rebates/ lowering of duties on exports/reduction of taxes on inputs used to produce goods for export to make them cheaper/increase their demand/to reduce cost of production.
Improve /adopt modern technology in order to increase the volume of goods for exports.

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Explain five features of sole proprietorship form of business

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Explain five features of sole proprietorship form of business

Features of sole proprietorship form of business

Owned /formed by in person who provides the capital/starts the business.
Faster decision making/ (ultimate) decision made by the proprietor/ alone since he/she does not need to consult/has no one to consult.
Has limited life as its existence depends on the hope of the owner
Business owner has unlimited capital/management skills
Owner bears all the risks/losses of the business (alone) since he /she has no one to share with
Business owner has unlimited liability since personal property/assets may be attached
Managed by the owner with /without assistance of family members/ employees/which is tiring/forced to work for long hours.
Sole trader /enjoys all the profits alone since he/she has no one to share with
Easy /simple formation as if requires few /no legal formality/might only require a trading license
Flexibility/adaptability to change/accept e.g. of change as explanation
Secrecy/ confidentiality of information/ operation / no other people have access
Not a legal entity as the owner and the business are treated as one/the same.

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KAMAT owned a motor vehicle valued at Kshs 1,000,000. He comprehensively insured the car at Kshs 800,000. The motor vehicle was involved and declared a write off. Calculate the amount KAMAT should get from the insurer.

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KAMAT owned a motor vehicle valued at Kshs 1,000,000. He comprehensively insured the car at Kshs 800,000. The motor vehicle was involved and declared a write off. Calculate the amount KAMAT should get from the insurer.

KAMAT owned a motor vehicle valued at Kshs 1,000,000. He comprehensively insured the car at Kshs 800,000. The motor vehicle was involved and declared a write off. Calculate the amount KAMAT should get from the insurer.

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Outline four benefits that accrue to the government as a result of privatization of public enterprises

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Outline four benefits that accrue to the government as a result of privatization of public enterprises

Benefits of privatization of public corporations

Government obtains revenue from proceeds/ sale of shares
Offers opportunities for private citizens to participate in business
To enhance efficiency in the management
Reduce government expenditures
Obtain revenue from taxes
Attain foreign aid
Attract foreign investment

Outline four benefits that accrue to the government as a result of privatization of public enterprises

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Highlight four factors that must be considered before incurring public expenditure

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Highlight four factors that must be considered before incurring public expenditure

Factors before incurring public expenditure

Maximum social benefit/equity
Waste must be discouraged/economy
Flexibility/elasticity – possibility to vary expenditure according to the circumstances.
Sanctions-expenditure must be determined by a certain authority
Sound financial administration-accuracy and systematic/certain

Highlight four factors that must be considered before incurring public expenditure

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The following information relates to Maji Mazuri Traders as 31. 12. 2008

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The following information relates to Maji Mazuri Traders as 31. 12. 2008

Fixed assets 400,000
Stock 120,000
Current liabilities 60,000
Net profit for the current 100,000

Calculate:
(i) Rate of return on capital employed
(ii) Current ratio

The following information relates to Maji Mazuri Traders as 31. 12. 2008

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Highlight four circumstances under which business enterprises may choose to merge

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Highlight four circumstances under which business enterprises may choose to merge

Circumstances under which business enterprises may choose to merge:

Where persistent decline in profitability exits
Where there is intention to venture into new line
Where their is need to expand capital base
Where there is need to bring on board new skills/competences
Where their need to share research information
Control output
Control a wider market /increase sales
Lower the cost of production (e.g. raw materials labour etc)
Either to face emergencies /kibken
When there is too much competition
Diversification

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Kazim maintains a petty cashbook on a weekly interest of Kshs 13,000 on 1st April 2007 the cash balance was Kshs 2,570, During the week of April, the following transactions took place

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Kazim maintains a petty cashbook on a weekly interest of Kshs 13,000 on 1st April 2007 the cash balance was Kshs 2,570, During the week of April, the following transactions took place

2007

April 2 Received reimbursement from the main cashier
April 3 Paid Kshs 3,070 for cleaning materials
April 4 Paid Kshs 2,000 bus fare
April 6 Bought stationery worth Kshs 2,200
Prepare a petty cashbook to record the above transactions using cleaning stationery and bus fare columns

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The graph below the rate of population growth of a given country, Outline four factors that may have contribute to the trend between s and t

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The graph below the rate of population growth of a given country,Outline four factors that may have contribute to the trend between s and t

Outline four factors that may have contribute to the trend between s and t

Factors that may have contributed to the trend between S and T include:

Improved health facilities/health education
Lower mortality rate/death rates
Improved standard of living
Improved fertility rate /birth rates
Improvement in diet and nutrition
Immigration from other countries
Early marriages
Negative attitude towards family planning
In affective family planning method
Cultural/religious practice favour of many children
Absence of calamities epicenes, wars/politics
Absence of calamities epicenes, wars /politics
Ignorance/ lack of family planning methods
Establishment of policies that increase population.

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Outline four reasons why hypermarkets are becoming increasingly popular in Kenya

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Outline four reasons why hypermarkets are becoming increasingly popular in Kenya

Reasons for popularity of hypermarkets in Kenya include:

Easily accessible
One stop shop-A range of goods and services may be obtained
Parking space is available of auxiliary services
Operates for longer hours
Accept debits/Credit cards
Attractive & convenient to shop in
Saves on land rates/ space
They offer sales services
Security guaranteed
Located away from city hassles
Availability of auxiliary services.

Outline four reasons why hypermarkets are becoming increasingly popular in Kenya

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Outline four circumstances that would make an office manager to replace an existing machine with modern one

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Outline four circumstances that would make an office manager to replace an existing machine with modern one

Circumstances which would make an office manager to replace an existing machine with a modern one include:

Obsolescence- has outlived its usefulness
Where a faster machine is required
Where maintenance a costs are higher than cost of acquiring modern machine
Where there is need for increased production
Where training skills have changed
Where high quality works is required
Where he wants to save on labour
Where there is need to improve image of company
If the new one is capable of multiple use
If the new machine will save on space/storage
If the machine is capable of reducing fraud

Outline four circumstances that would make an office manager to replace an existing machine with modern one

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The bookkeeper of trade Traders extracted the following information from the accounting records.During the year ended 31.12.2007, suppliers were paid Kshs 1,500, 000 while cash purchases amounted to Kshs 800,000

14/12/2020

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The bookkeeper of trade Traders extracted the following information from the accounting records.During the year ended 31.12.2007, suppliers were paid Kshs 1,500, 000 while cash purchases amounted to Kshs 800,000

During the year ended 31.12.2007, suppliers were paid Kshs 1,500, 000 while cash purchases amounted to Kshs 800,000
Determine the purchases for the year (5 mks)

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Outline four reasons why an increase in per capital income may not necessarily lead to a rise in the standard of living of the citizens

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Outline four reasons why an increase in per capital income may not necessarily lead to a rise in the standard of living of the citizens

Reasons why an increase in per capita income may not lead to a rise in standard of living include:

Per capita income is an average and hence a mere statistics
Per capita figures may be high but income may be unevenly distributed.
Those not involved in the generation of the national income are also included in the calculation
Generation rise in the price of commodities/inflation may affect the purchasing power of the citizen.
High taxes may erode the real value of per capita income
May be obtained through a strain on people’s health
Expenditure pattern by the government/individual serving debts.

Outline four reasons why an increase in per capital income may not necessarily lead to a rise in the standard of living of the citizens

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Country X has been experiencing an upward trend in the price of petrol as a result of a rise in inflation. State four steps that can be taken to minimize expenditure on this product.

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Country X has been experiencing an upward trend in the price of petrol as a result of a rise in inflation. State four steps that can be taken to minimize expenditure on this product.

Steps that can be taken to minimize expenditure on petrol include:

Pooling people who are traveling to same direction
Use of alternative sources of energy/footing/bicycled
Encourage public service vehicles with higher carrying capacity/fuel saving engine
Encourage use of vehicle/machines with a lower engine capacity /fuel saving engine
Set maximum price legislation
Reduce tax on the product/subsidies
Improve road networks
Increase tax on complementary goods
Encourage machine maintenance
Swift off when not in use

Country X has been experiencing an upward trend in the price of petrol as a result of a rise in inflation. State four steps that can be taken to minimize expenditure on this product.

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Highlight four benefits that would accrue to a firm located near other existing firms

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Highlight four benefits that would accrue to a firm located near other existing firms

Benefits that accrue to a firm located near existing firms:

Enjoyment of existing infrastructure
Access to labour
Access to raw materials
Collaboration with existing firms’ e.g. research & development
Auxiliary services
Access to markets
Access to security
Social amenities

Highlight four benefits that would accrue to a firm located near other existing firms

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Lunga, a sole trader, does not keep a complete set of accounting records. Information extracted from the records are as follows

The following table represents the price and quantity of a commodity

Malamu Traders had the following balances s at 31 December 2008

Explain four services that the central Bank of Kenya may offer as a Banker to commercial banks

Analyze the following document issued by Sheikh Traders

Using a diagram, explain the circular flow of income in a two sector economy

Explain five ways in which the government of Kenya may reduce the level of unemployment

The diagram below shows an oligopolist kinked demand curve DD and current price and quantity at P and Q respectively.

The trial balance of Zakayo Traders as at June 2008 is given below

Explain five demerits that may be associated with water transport

Explain five measures that the government may take to improve the volume of exports

Explain five features of sole proprietorship form of business

KAMAT owned a motor vehicle valued at Kshs 1,000,000. He comprehensively insured the car at Kshs 800,000. The motor vehicle was involved and declared a write off. Calculate the amount KAMAT should get from the insurer.

Outline four benefits that accrue to the government as a result of privatization of public enterprises

Highlight four factors that must be considered before incurring public expenditure

The following information relates to Maji Mazuri Traders as 31. 12. 2008

Highlight four circumstances under which business enterprises may choose to merge

Kazim maintains a petty cashbook on a weekly interest of Kshs 13,000 on 1st April 2007 the cash balance was Kshs 2,570, During the week of April, the following transactions took place

The graph below the rate of population growth of a given country,Outline four factors that may have contribute to the trend between s and t

Outline four reasons why hypermarkets are becoming increasingly popular in Kenya

Outline four circumstances that would make an office manager to replace an existing machine with modern one

The bookkeeper of trade Traders extracted the following information from the accounting records.During the year ended 31.12.2007, suppliers were paid Kshs 1,500, 000 while cash purchases amounted to Kshs 800,000

Outline four reasons why an increase in per capital income may not necessarily lead to a rise in the standard of living of the citizens

Country X has been experiencing an upward trend in the price of petrol as a result of a rise in inflation. State four steps that can be taken to minimize expenditure on this product.

Highlight four benefits that would accrue to a firm located near other existing firms

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