ZERAKI ACHIEVERS’ EXAMINATIONS
TERM ONE 2024
FORM FOUR BUSINESS STUDIES PAPER 2
MARKING SCHEME
1. (a) Circumstances under which a manufacturer may prefer to sell directly to the
consumer.
When goods are perishable
When the firm is financially strong to open up retail outlets
When there is compensation and need for lower prices.
Where a firm wish to have direct contact with customers (feedback)
When the market is concentrated in one place
Where there is insufficient infrastructure
When he or she wants to demonstrate on the use of the product.
When goods are requested on order or made for a specific customer
When goods are expensive to be sold through channels
When the volume of output is small.
When goods require specialized after sale service such as installation.
b) Five factors that will lead to an increase in a country’s national income
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
2. (a) Five challenges that a young population poses to a country
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
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b) Circumstances under which face to face communication may be ineffective are:
Where there is age difference.
Where the language has semantic problems/different languages
Where there exists a difference in frame of reference
Where the credibility of the communicating parties is in question/negative attitude/bias/prejudice.
Where the receiver has a problem in hearing/hearing impairment
Where there unfamiliar/difficult terminologies.
Where there is noise/noisy area.
Where there is poor listening by the recipient.
Where there is pronunciation problems.
Where there is poor timing
Where there is inability to understand gestures.
Where there is information overload
Where there is prejudgment
Where there is emotional responses like fear, joy, anger
3 a) Considerations that a seller should take into account before giving credit to a
customer.
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.
b)
(ii)
Gross Profit
a) Mark Up= ×100 %
Cost of Goods Sold
173,890
¿ ×100
595,405
¿ 29.2 %
COGS 437,405
b) ROSTO= = =3.74׿
Average Stock 116,800
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(i)
Gen Z Traders
Trading, Profit and Loss Account
For the period ended 31st December 2023
shs shs shs Shs
Opening stock 75,600.00 Sales 613,840.00
Add purchases 458,580.00 Less returns inwards 2,545.00
Add carriage inwards 54,680.00 Net sales 611,295.00
513,260.00
Less return outwards (6,545.00) 519,805.00
Cost of goods
595,405.00
available
Less closing stock (158,000.00)
Cost of goods sold 437,405.00
Gross profit c/d 173,890.00
611,295.00 611,295.00
Gross profit b/d 173,890.00
Expenses Income
Discount allowed 8,755.00 Discount received 9,560.00
Commission allowed 4,500.00 Rent received 24,500.00
Carriage outwards 6,570.00
Insurance Paid 35,400.00
Net profit c/d 152,725.00
207,950.00 207,950.00
4. a) Five ways in which inflation may be found to be useful in an economy.
i) Benefit to debtor – As they pay debts in future at low prices.
ii) Benefits to sellers - Who buy goods when prices are low and sell them when prices are high.
iii) Motivation to work - Makes people to work harder in an attempt to maintain current standards of living.
iv) Increased production - As people work harder to cope with inflation more goods and services are
produced.
v) Better use of the available resources - Consumers use the available resources economically thereby
avoiding wastage.
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(b)
Wajumbe Traders
Three Column Cash Book
Discount Discount
DATE Details Cash (sh) Bank (shs) DATE Details Cash (sh) Bank (shs)
Allowed Received
2022 2022
Jan-01 Bal b/d 75,000.00 Jan-01 Bal b/d 95,000.00
Jan-02 Sales 185,500.00 Jan-12 Salaries 65,000.00
Omba
Jan-04 850.00 16,150.00 Jan-16 Mungwana 1,900.00 93,100.00
Omba
Jan-23 Cash 140,000.00 Jan-23 Bank 140,000.00
Jan-26 Sales 156,460.00 Jan-27 Omba Omba 16,150.00
Jan-31 Cash 40,300.00 Jan-31 Bank 40,300.00
Jan-31 Bal c/d 15,200.00 148,660.00
850.00 260,500.00 352,910.00 1,900.00 260,500.00 352,910.00
Feb-01 Bal b/d 15,200.00 148,660.00
5. a) Functions of the national budget as a tool of planning.
Outlining government expenditure – It details the various expenditure programmed the government
plans to undertake over a given period
Outlining government revenue – It gives details of the various sources of revenue for the government
to finance its activities
Enabling government planning – The government uses the budget to plan for various activities and
programmed that lead to economic growth and development
Introducing changes in taxation – The various taxes to be applied, the tax rate and the mode of
application of the taxes are outlined in the budget
Regulating money supply – It outlines the monetary systems to be instituted by the government to
regulate money supply in the economy
Stimulating economic activities – It is used to increase government expenditure in the economy which
will spur economic activities in the country
b) Differences between Public Limited Company and Partnership form of business
Public limited company Partnership
i) Membership is a minimum of seven Membership is a minimum of two partners and a
Shareholders and no maximum maximum of 20 partners (except for professional
services)
ii Shares can be transferred freely shares/capital contribution can only be transferred with
without consent of others shareholders consent of other partners
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iii Shareholders have limited liability No limited liability for partners (At least one partner
has unlimited liability in case of limited partnership)
iv Managed by board of director Managed by partners themselves (Active partners)
appointed by the shareholders
v Regulated by Articles/memorandum of Regulated by partnership deed/ Partnership
Association/Company Act agreement/articles of partnership/partnership Act
vi Pay corporation tax on dividends They pay tax on profits
vii Has legal entity/can sue or be sued Has no legal entity/individual Partners can be sued
under its name
viii Main source of capital is sale of shares The main source of capital is partners contributions
6 a) Purpose of public finance to the government of Kenya
i. Provision of essential goods and services. The government has a responsibility of providing
its citizens with essential goods and services such as security, health, schools, drought control,
law. Such facilities and services may not be adequately covered by the private sector because of
the high costs involved and risks.
ii. Encouraging consumption of certain commodities-The government may encourage
consumption of certain commodities e.g. maize by subsidizing on their productions or lowering
their taxes.
iii. Controlling consumption of certain commodities-The government may also
encourage consumption of some commodities e.g. cigarettes and alcohol by imposing heavy
taxes on them.
iv. Promotion of Balanced regional development-This may be done by initiating
economic projects in areas that are under developed/lagging behind.
v. Wealth Redistribution-This is done by heavily taxing the rich and using the money
raised to provide goods and services that benefit the poor
vi. To promote economic stability-Economic instability may be caused by factors such
as unemployment. Such problems can be solved through public expenditure in projects that
generate employment such as ‘kazi kwa vijana’
vii. Creation of a conducive Business Environment-Through public expenditure, the
government may develop infrastructure such as roads, electricity, security e.t.c thereby creating
a conducive environment for businesses to thrive in.
viii. To raise government revenue-Through public finance, the government raises
revenue which it uses in provision of essential goods and services to the public.
ix. Improving balance of payment-This may be done by improving heavy taxes such as
customs duty to discourage importation.
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b) Benefits of division of labour and specialization in an organization
i. Saves time/ less time is spent in completing a job since there is less movement from
job to another
ii. Increased production/increased output per worker since people adapt at their jobs as
they do it repeatedly
iii. Standardized goods/goods produced are of uniform quality which enhances customer
satisfaction
iv. Increased use of machine hence work can be automated leading to low cost of
production
v. Enhanced management hence facilitates control/ co-ordination/accountability
vi. High quality goods produced since people do jobs which they are best suited/talented
vii. Increased creativity/innovation leading to development of new products
viii. Improved efficiency due to better use of resources
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