KCSE 2021/2022 PREDICTION

Kenya Certificate of Secondary Education

BUSINESS STUDIES
Paper 2
Marking scheme
1. (a) Disadvantages associated with principals being accommodated in schools.
(i) It doesn’t allow for close supervision of workers.
(ii) It encourages unauthorized absenteeism by the staff.
(iii) Encourages misuse of office facilities such as telephone and internet.
(iv) It reduces interaction between management (the principal) and the rest of the staff
members.
(v) A lot of time is taken by officers moving from one office to another.
(vi) It is costly to construct and maintain.
No splitting of marks (5 x2=) 10
marks
(b) The main source documents that a firm / business is likely to use include.
(i) Purchase invoice – received by the firm from suppliers when buying goods on credit.
(ii) Sales invoice- Sent by the firm when selling on credit.
(iii) Credit notes – sent by the firm to customers who have returned the goods.
(iv) Receipt – used to acknowledge money received or payment mode.
(v) Debit notes- received by the firm from suppliers when goods purchased are
returned to the original supplier.
(vi) Payment voucher – acts as evidence of payment to a named party.
(vii) Paying slip – evidence of money paid into bank accounts.
(viii) Cheque counterfoils- from the cheque book to show the cheques paid out.
(ix)Bank statement – a summary of the bank account from banks point of view.
(x) Remittance advice note- sent from a customer to their suppliers informing the supplier
that they have paid their advice.
Point 1mark
Explanation 1mark 5 x2=10 marks
2. (a) Methods of trade restrictions country X would use.
(i) Tarrifs
These are taxes levied on imported goods. Tarrifs make imports more expensive in the
domestic market which discourages people from buying them. It is meant to encourage
consumption of locally produced goods.
(ii) Customs goods.
This includes both export and import duties. It is imposed on goods crossing a country’s
borders. Import duty raises the price of imported goods thus discouraging their
consumption.
(iii) Quotas
This is restriction on the volume of commodities to be imported into a country over
certain
period. The government does this through licensing or through foreign exchange
allocation.
(iv) Total ban.
This is when the government stops any importation of certain commodities that may
 be deemed undesirable to the social well being.
(v) Embargoes.
This paper consists of 5 printed pages
Turn over
An embargo is an official order that forbids the buying or selling of a commodity.
(vi) Subsides on production.
These are grants that may be offered by the government to producers. It is aimed at
reducing production costs that an industry is facing. Subsidies enable producers to make
the
prices of their products more competitive compared to imports.
(vii) Foreign exchange control
This is where the foreign exchange dealing is state controlled. The government man put
restrictions on international trade by restricting the importer’s ability to obtain foreign
currency which is needed to pay for imports of certain goods.
(viii) Administrative control
The government may put certain minimum quality requirements for imports to be
allowed such requirements may put off any world be exporters to the country.
( ix) Regulatory trade restriction.
This involves making imports and customs producers very complicated and time
consuming to discourage importers.
Point 1 mark
Explanation1 mark
5x2=10 marks
(b) Principles of insurance.
(i) Almost good faith – All information provided by the insured to the insures must be
truthful
(ii) Subrogation- The remains or scrap of the property after the occurrence of the risk is
usually taken by the insurer after the insured is compensated.
(iii) Proximate cause- There should be a close connection between the cause of the loss
and
the risk insured.
(iv) Insurable interest – One insures only that which bring a loss to him/her.
(v) Indemnity. One is only compensated back to his/her old financial position before the
occurrence of the risk that led to a loss.
(vi) Contribution –allows to get compensation from two or more insurance companies
covering
the same risk. In such a case, each insurance company is required to pay a proportion of
the insured amount.
Point 1 mark
Explanation 1 mark
5x2=10 marks
3. (a) (i) mark up = gross profit
Cost of sales
Cost of sales = opening stock + purchases – closing stock
=160,000 + 90,000- 70,000
=180,000√√
 Gross profit = sales – cost of sales
=240,000 – 180,000 = 60,000√
Mark up = 640,000 x100 = 33 1/3%√
180,000
4 ticks x ½ = 2
marks
(ii) Margin =gross profit x100
Sales
60,000 x100 = 25%√
240,000 √
Alternative method
Mark up margin
1
/3 1 =1/4 = 25%
3+1
4 ticks x ½ = 2
marks
2.
(iii) Rate of stock turnover = cost of sales
Average stock
Average stock = opening stock + closing stock
2
160,000+ 70,000 = 230,000 = 115,000
2 √ 2
Rate of stock turnover =180,000 = 1.565 times √√
115,000√
4 ticks x ½ = 2
marks
(iv) Return on capital employed = net profit x 100
Capital employed
Net profit = gross profit – expense
= 60,000 – (25,000 +12,000)
= 60,000 – 37,000 = 23,000√
Capital employed = total assets – total liabilities.
Total assets
Premises 95,000
Closing stock 70,000
Cash at bank 20,000
Cash in hand 10,000
Debtors 25,000 220,000
Less total liabilities
7 year loan 30,000
Creditors 75,000 105,000 115,000√
Return on capital employed = 23,000 x100
115,000
= 20%√√
4 ticks x ½ = 2 marks
 (v) Current ratio= current assets
Current liabilities
Current assets
Stock 70,000
Debtors 25,000
Cash at bank 20,000
Cash in hand 10,000 125,000√
Current liabilities
Creditors 75,000
Current ratio = 125,000√ = 5:3 ≈ √√ 2:1
75,000
4 x ticks x ½ =
2 marks
(b) Reasons why the government trains people.
(i) Expose them to modern development in management.
(ii)Educate them on efficient methods of operating business such as advertising and book
keeping.
(iii) To identify current problems facing business and provide possible solutions.
(iv) To impart proper business ethics such as good customers relations and honesty.
(v) To educate them on how to utilize available resources to minimize costs while
maximizing profit.
(vi) To inform them on various available business opportunities within the environment.
(vii) To expose them to government policies regarding business activities in the country.
No splitting of marks 5 x2=10 marks
3.
4. (a) Makori traders
Balance sheet
As at 31st January 2012
Fixed assets sh sh sh sh
Motor vehicle 600,000 capital
400,000√√
Furniture 70,000√ 670,00 long term liabilities
Current assets bank loan (5 years)
460,000√
Stock 250,000√ short term liabilities
Cash 30,000√√ creditors 33,000√
Debtors 140,000 bank overdraft 20,000
350,000
Bank 120,000√ 540,000
1,210, 000√
1,210,000
Each mark (√) 1 mark 10 x1=10
marks
(b) Source of business ideas
(i) Newspapers. One can get a business ideas from information articles and advertisement
sections of the local newspapers.
 (ii) Shows and exhibitions. A business idea can be obtained from sales person and
commodities exhibited.
(iii) Magazines .these carry article from which one can obtain a business idea.
(iv) Hobbies. Activities carried out for leisure can be converted into income generating
activities.
(v) Vocational training and experience. A business may be developed from one’s area off
training.
(vi) Survey. Finding out what consumers require through formal and informal surveys
can
lead to development of a idea.
Point 1 mark
Explanation 1 mark 5 x2=10 marks
5. (a)Advantages of internet banking to customers.
(i) It provides access from anywhere.
(ii) It saves time visiting the bank and also transports cost.
(iii) It offers a variety of services such as paying bills, transaction information and
transfer
between accounts.
(iv) Can be used for access personal account details.
(v) It can print out a statement.
(vi) Enables a consumer to keep up to date with the bank account.
(vii) It saves people from carrying cash to pay bills.
No splitting of points 5 x2=10 marks
(b)Benefits the country derives from well drawn development plan.
(i) It enables appropriate resources allocation. This would ensure that there are neither
idle resources nor some being used in the wrong manner.
(ii) A development plan helps the government avoid duplication of project e.g. setting up
the same industries in different parts of the country.
(iii) It brings about balanced regional development so that all parts of the country can be
developed.
(iv) During implementation a development plan being done as expected.
(v) A well drawn and explained development plan enable the masses exert more effort in
national development.
(vi) It can be used to support foreign aid bargain. The country is better equipped when
soliciting
for foreign and as it is used to convince the donors to release funs for the project in the
plan.
Well explained points = 5 x 2=10 marks
6. (a)Limitations of using capital income to compare standards of living in different
countries.
(i) Inequality in income distribution per capital income in one country may be high but in
the

4.
hands of very few people yet another country may have a low per capita income , which
is evenly distributed.
 (ii) Inappropriate application of national income per capita income in one country may be
high
but used in a way that does not benefit citizens which in other country it may be used to
finance projects that directly benefit the masses.
(iii) Effect on people’s health. High per capita income in one country could be achieved
at
the expenses of the people’s health.
(iv) Different interpretations of national income one country may interpret her national
income
as gross domestic product at market price while another may interpret hers as net
national product
at factor cost.
(v) non-marketed output. A country heavily relying on subsistence sector may appear to
have
low per capita income because of un-marketed output compared with another where such
a
sector is insignificant.
(vi) Price structure. Price structure may be different in different countries e.g. food stuffs
may be cheaper in one country compared to another.
Well explained point 5 x2=10 marks
(b) Negative economic implication of an ageing population.
(i) Fall in demand for goods and services demanded by the youth.
(ii) Low labour supply leading to under-utilization of resources.
(iii) Increase in welfare costs e.g. the pension schemes and medical facilities are
overstretched.
(iv) High dependency ratio where old people are dependent to import labour that
affects the country’s foreign exchange reserves.
(v) Less progressive as there would be low saving and investment.
(vi) Innovation and invention in hindered because old people tend to be conservative.
No splitting of marks 5 x2=10 marks