MURANG’A EXTRA COUNTY SCHOOLS (MECS)

CLUSTER EXAMINATION
BUSINESS STUDIES PAPER 2- 565/2
FORM 4 END TERM 1 2023

1
TIME: 2 HOURS
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NAME…………………………………………………….ADM………………..CLASS……..

CANDIDATE’S SIGNATURE…………………………….DATE……………………………

INSTRUCTIONS TO CANDIDATES

(a) Write your name and admission number in the spaces provided above.
(b) Sign and write the date of the examination in the spaces provided above.
(c) Answer any five questions in the spaces provided
(d) This paper consists of 3 printed pages. Candidates should check carefully to ascertain that
all the pages are printed as indicated and that no questions are missing.
(e) Candidates should answer the questions in English.
FOR EXAMINERS USE ONLY

Question Maximum Candidate’s

Score score
20
20
20
20
20
Total score

Mecs Cluster Examinations Page 1 of 3

 1. (a) Explain five reasons why people prefer to start a partnership business.
(10 marks)

(b) Explain the importance of business studies to the society. (10 marks)

2. (a) Illustrate using a diagram the circular flow of income in a two-sector economy and
give three assumptions (10 marks)

(b) Explain five distinguishing features between a current account and a savings
account (10 marks)

3. (a) Explain five reasons why hypermarkets are becoming popular in Kenya today
(10 marks)

(b) On 1st May, 2020, Kihenjo Limited had cash in hand sh. 178,000 and a bank
overdraft of sh. 23,400. During the month, the following transactions took place.

2020
May 3: Cash sales sh. 16,500 paid direct to the bank
4: Bought goods for sh. 15,000 and paid by cheque
6: Cash sales sh.50, 000
9: Received a cheque sh. 76,500 from Mwikali
12: Bought goods sh.10, 000 on credit from Juma
13: Paid insurance premium sh.16, 000 in cash
14: Paid Otieno by cheque sh. 9, 700 in full settlement of his account having
deducted a 3% cash discount
16: The owner took sh. 1,000 cash from the business to pay hospital bill for
spouse
20: Withdrew sh. 30, 000 for office use.
23: Received a cheque of sh. 23, 750 from Kim in full settlement of his
account less 5% cash discount
25: Paid wages of shs. 20, 000 cash
26: The cheque received from Kim was dishonoured
30: Banked all the cash except sh. 3, 000

Required: A duly balanced three-column cash book (10 marks)

Mecs Cluster Examinations Page 2 of 3

 4. (a) Describe five channels that can be used when exporting Agricultural products.
(10 marks)

(b) Explain any five circumstances under which a business may prefer open office
layout (10 marks)

5. (a) Describe the procedure of making an insurance claim. (10 marks)

(b) Kenya has been experiencing a challenge of unemployment. Explain five

measures that the government has taken in her effort to curb the unemployment
problem.
(10 marks)

6. (a) Ouma is a businessman who is intending to increase his volumne of sales through
promoting his products. State and explain any four factors that he must put into
consideration before deciding on the method that he should use. (8 marks)

(b) The following trial balance relates to Uchumi Traders as at 31st December, 2022.
Uchumi Traders
Trial Balance
As at 31st December, 2022
Particulars Dr. (Shs) Cr. (Shs)
st
Stock on 1 Jan. 2022 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

Additional Information: Closing stock was valued at sh. 70, 000

Required:
(i) Trading profit and loss account for the period ended 31st December, 2022
(8 marks)
(ii) Balance sheet as at 31st December, 2022 (4 marks)

Mecs Cluster Examinations Page 3 of 3