SCHOOL: ___________________________________________________________________

NAME: ______________________________________________________________________

CLASS:_____________________________________ ADM. NO._______________________

.

FORM TWO
YEAR

BUSINESS STUDIES

TIME: 2 HOURS

Instructions

1. State four elements of transport. (4 Marks)

a) ……………………………………………………………………………………………..

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 b) ……………………………………………………………………………………………..
c) ……………………………………………………………………………………………..
d) ……………………………………………………………………………………………..
2. Give four reasons why people prefer to start a partnership over a sole proprietorship. (4 Marks)
a) ……………………………………………………………………………………………..
b) ……………………………………………………………………………………………..
c) ……………………………………………………………………………………………..
d) ……………………………………………………………………………………………..
3. State four reasons that justify regular use of face to face communication. (4 Marks)
a) ……………………………………………………………………………………………..
b) ……………………………………………………………………………………………..
c) ……………………………………………………………………………………………..
d) ……………………………………………………………………………………………..
4. In the spaces provided below, indicate using a tick, whether each of the statements relate to
memorandum or articles of association. (5 Marks)
Statement Memorandum of Articles of
Association Association
i) Indicates the procedure to be followed when
calling annual general meeting
ii) Shows the purpose for which the business was
formed
iii) Shows the powers and duties of directors
iv) Indicates the liabilities of shareholders
v) Shows the authorized capital of a company

5. Outline four demerits that Kenya experiences from relying on oil as the main source of energy.
(4 Marks)
a) ……………………………………………………………………………………………..
b) ……………………………………………………………………………………………..
c) ……………………………………………………………………………………………..
d) ……………………………………………………………………………………………..

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6. Identify the three core functions of warehousing. (3 Marks)
a) ……………………………………………………………………………………………..
b) ……………………………………………………………………………………………..
c) ……………………………………………………………………………………………..
7. Name the principle described by each of the following statements: - (5 Marks)
Statement Principle
i) The insured must disclose all relevant
material / facts
ii) Remains of damaged property belongs to
the insurer after full compensation
iii) One can only be compensated if he/she
was owner of damaged property
iv) There is a close connection between
cause of loss and risk insured
v) Compensation restores one to his original
financial position before occurrence of
risk

8. Outline any four contents of a good product promotion message. (4 Marks)

a) ……………………………………………………………………………………………..
b) ……………………………………………………………………………………………..
c) ……………………………………………………………………………………………..
d) ……………………………………………………………………………………………..
9. State four reasons why the government involves itself in licensing business. (4 Marks)
a) ……………………………………………………………………………………………..
b) ……………………………………………………………………………………………..
c) ……………………………………………………………………………………………..
d) ……………………………………………………………………………………………..

10. Highlight four characteristics of human wants. (4 Marks)

a) ……………………………………………………………………………………………..

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 b) ……………………………………………………………………………………………..
c) ……………………………………………………………………………………………..
d) ……………………………………………………………………………………………..
11. State the use of each of the machine given in the table below. (4 Marks)
Machine Use
i) Paper shredder
ii) Guillotine
iii) Paper punch
iv) Stapler

12. Handcarts have become popular in urban centres as a means of transport. Give three reasons why
this is so. (3 Marks)
a) ……………………………………………………………………………………………..
b) ……………………………………………………………………………………………..
c) ……………………………………………………………………………………………..
d) ……………………………………………………………………………………………..

13. Outline four benefits of indirect production. (4 Marks)

a) ……………………………………………………………………………………………..
b) ……………………………………………………………………………………………..
c) ……………………………………………………………………………………………..
d) ……………………………………………………………………………………………..
14. Give four reasons why a customer may prefer to buy goods on credit rather than on hire purchase.
(4 Marks)
a) ……………………………………………………………………………………………..
b) ……………………………………………………………………………………………..
c) ……………………………………………………………………………………………..
d) ……………………………………………………………………………………………..

15. State four characteristics of an entrepreneur. (4 Marks)

a) ……………………………………………………………………………………………..

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 b) ……………………………………………………………………………………………..
c) ……………………………………………………………………………………………..
d) ……………………………………………………………………………………………..

16. State four features of a bonded warehouse. (4 Marks)

a) ……………………………………………………………………………………………..
b) ……………………………………………………………………………………………..
c) ……………………………………………………………………………………………..
d) ……………………………………………………………………………………………..

17. Indicate using a tick whether the factors given below are external or internal business
environment. (5 Marks)
Factor Internal External
i) Business policies
ii) Competition
iii) Customers
iv) Taxes
v) Cultural beliefs/ traditions

18. State four principles of cooperative societies. (4 Marks)

a) ……………………………………………………………………………………………..
b) ……………………………………………………………………………………………..
c) ……………………………………………………………………………………………..
d) ……………………………………………………………………………………………..

19. ABC traders bought goods on credit from Thika Wholesalers for Ksh.150,000. Terms of sale were
as follows: 15% Trade discount, 5% cash discount if paid within a week, 3% if paid within a
fortnight.

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 Invoice amount thereafter.
The above transactions took place in the month of June 2010. Calculate the amount paid if
payment was made on 8th June 2010. (3 Marks)

20. State four factors that determine the amount of premium on property insurance. (4 Marks)
a) ……………………………………………………………………………………………..
b) ……………………………………………………………………………………………..
c) ……………………………………………………………………………………………..
d) ……………………………………………………………………………………………..
21. State four steps that a consumer may take to protect himself against exploitation by traders.
(4 Marks)
a) ……………………………………………………………………………………………..
b) ……………………………………………………………………………………………..
c) ……………………………………………………………………………………………..
d) ……………………………………………………………………………………………..

22. Identify the means of communication described by the statement in the table below. (4 Marks)
Statement Means of communication

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 i) Used for passing information to a group
of persons and posted to noticeboard,
pasted on trees/walls
ii) A presentation of what have been found
out, concluded or recommended after a
study, investigation, etc.
iii) A list of items to be discussed in a
meeting
iv) Used to pass general messages that
pertains to a particular officer within an
organization

23. State four factors that may be considered when choosing a method of product promotion.
(4 Marks)
a) ……………………………………………………………………………………………..
b) ……………………………………………………………………………………………..
c) ……………………………………………………………………………………………..
d) ……………………………………………………………………………………………..
24. Outline four current trends in transport. (4 Marks)
a) ……………………………………………………………………………………………..
b) ……………………………………………………………………………………………..
c) ……………………………………………………………………………………………..
d) ……………………………………………………………………………………………..

25. In the table given below, identify the document described by each of the following statement.
(3 Marks)

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Statement Document
i) Issued in response to a specific letter
of inquiry
ii) Issued to the buyer requesting
payment before goods are delivered
iii) Issued after payment has been made
by a seller to buyer

FORM TWO

BUSINESS STUDIES

MARKING SCHEME

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26. Elements of transport.
e) The way
f) The unit of carriage
g) Method of propulsion
h) Terminals
1 x 4 = 4 Marks

27. Reasons why people prefer to start a partnership over a sole proprietorship.
e) To raise more capital
f) To share workload
g) To share losses and liabilities
h) To combine different talents
i) For consultation in decision making
j) To share ideas in the running of the business
1 x 4 = 4 Marks

28. Reasons that justify regular use of face to face communication.

e) Suitable for confidential messages
f) One can observe the facial expression of the audience
g) Provides immediate feedback
h) Has a personal appeal

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 i) Body language can be easily expressed
j) It is relatively cheap
k) Doubts can be cleared on the spot
l) Convincing is possible
1 x 4 = 4 Marks

29. Relating to memorandum or articles of association.

Statement Memorandum of Articles of
Association Association
vi) Indicates the procedure to be followed when 
calling annual general meeting
vii) Shows the purpose for which the business was 
formed
viii) Shows the powers and duties of directors 
ix) Indicates the liabilities of shareholders 
x) Shows the authorized capital of a company 

30. Demerits that Kenya experiences from relying on oil as the main source of energy.
e) Oil is expensive
f) Pollutes the environment
g) Non-renewable
h) Uses a lot of foreign exchange to import
i) Not readily available in Kenya
j) Failure to develop alternative sources of energy
k) Leads to overdependence on other countries for energy
1 x 4 = 4 Marks

31. Functions of warehousing.

d) Receiving goods into the warehouse
e) Storing the goods
f) Releasing the goods to users

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 1 x 3 = 3 Marks

32. Principle described by each of the following statements: -

Statement Principle
vi) The insured must disclose all relevant Utmost good faith / uberrima Fides
material / facts
vii) Remains of damaged property belongs to Subrogation
the insurer after full compensation
viii) One can only be compensated if Insurable interest
he/she was owner of damaged property
ix) There is a close connection between Proximate cause
cause of loss and risk insured
x) Compensation restores one to his original Indemnity
financial position before occurrence of
risk
1 x 5 = 5 Marks

33. Contents of a good product promotion message.

e) Name of the product
f) The price
g) Where it can be obtained / acquired
h) Use of the product
i) Packaging size available
j) Competitive advantage over other similar products
1 x 4 = 4 Marks

34. Reasons for licensing business.

e) To ensure that businesses only engage in activities for which they are licenced
f) To control illegal businesses
g) To control the types of goods entering / leaving the country

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 h) To ensure that those who engage in professional activities meet the requirement of that
profession
i) To regulate level of competition
j) To raise revenue
k) To ensure standards are maintained
l) To ensure safety e.g. PSVs, hotels, schools, etc.
1 x 3 = 4 Marks

35. Characteristics of human wants.

e) Unlimited
f) Habitual
g) Competitive
h) Recurrent
i) Universal
j) Vary with time, age, gender, etc.
k) Some wants to be fully satisfied if one has the required resources
l) Vary in urgency / intensity
1 x 4 = 4 Marks

36. Use of machine.

Machine Use
v) Paper shredder Destroying unwanted documents
vi) Guillotine machine Trimming documents into required size and shape
vii) Paper punch Making holes on papers
viii) Stapler Pinning papers together
1 x 4 = 4 Marks
37. Reasons why handcarts have become popular in urban centres
e) Appropriate for the type of goods common in urban centres
f) Readily available
g) Flexible and can be used in places without good roads
h) Appropriate since the distance involved is short

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 i) Cheaper to hire
j) Convenient because they can deliver goods to door steps of the customer
Any 3 1 x 3 = 3 Marks

38. Benefits of indirect production.

e) Provision of better quality goods
f) Provision of variety of goods
g) Enables production in large scale
h) Better utilization of resources
i) Encourages specialization
j) Goods become cheaper
k) Promotes interdependence among people, communities and countries
Any four 1 x 4 = 4 Marks

39. Reasons why a customer may prefer to buy goods on credit rather than on hire purchase.
e) No deposit / down payment required
f) Ownership of goods passes to the buyer immediately
g) Goods cannot be repossessed for non-payment
h) Buyer can re-sell the goods before paying
i) It’s cheaper than hire purchase
1 x 4 = 4 Marks

40. Characteristics of an entrepreneur.

e) Desire to achieve
f) Ability to solve problems
g) Readiness to take risk
h) Should adhere to accepted business ethics
i) Patience
j) Persistent
k) Goal oriented
l) Highly motivated

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 m) Self-drive / desire to achieve
1 x 4 = 4 Marks

41. Features of a bonded warehouse.

e) Goods are bonded till duty is paid
f) Goods are only released on production of a release warrant
g) Stores dutiable goods
h) Goods may be sold in bond
i) Goods can be re-exported while in bond
j) Located at entry points of a country
k) Under the control of customs authorities 1 x 4 = 4 Marks

42. Indicate using a tick whether the factors given below are external or internal business
environment.
Factor Internal External
vi) Business policies 
vii) Competition 
viii) Customers 
ix) Taxes 
x) Cultural beliefs/ traditions 
1 x 5 = 5 Marks

43. Principles of cooperative societies.

e) Service motto
f) Dividend payment
g) Open and voluntary membership
h) Limited interest on capital
i) Democratic administration
j) Education to members
k) Cooperation with other cooperatives
1 x 4 = 4 Marks

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44. List price = 150,000
Less 15% trade discount
= 15⁄100 × 150,000 = 22,500
= 150,000 − 22,500
= 127,500
Invoice amount = 127,500
Less 3% cash discount
= 3⁄100 × 127,500
= 3,825
Amount payable
= Invoice amount – Cash discount
= 127,500 − 3,825
= 123,675
Each tick = 1 mark
1 x 3 = 3 Marks

45. Factors that determine the amount of premium on property insurance.

e) Value of property
f) Exposure to the risk insured
g) Condition of the property
h) Frequency of previous losses
i) Extent of previous losses
j) Sum insured
1 x 4 = 4 Marks

46. State four steps that a consumer may take to protect himself from exploitation by traders.
e) Returning defective products bought
f) Lodging complaints with the traders
g) Reporting cases of exploitation to the relevant authority
h) Joining consumer associations

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 i) Shunning traders who exploit them/ boycotting
j) Improvising ways of detecting underweight goods
k) Being aware of their rights
1 x 4 = 4 Marks

47. Means of communication described by the statement

Statement Means of communication
v) Used for passing information to a group Notices
of persons and posted to noticeboard,
posted on trees/walls
vi) A presentation of what have been found Reports
out, concluded or recommended after a
study, investigation, etc.
vii) A list of items to be discussed in a Agenda
meeting
viii) Used to pass general messages that Memo
pertains to a particular officer within an
organization
1 x 4 = 4 Marks
48. Factors that may be considered when choosing a method of product promotion.
e) Targeted group of customers
f) Size of the market
g) Cost of the method
h) Nature of the product
i) Geographical spread of the market
j) Legal requirement / Government policies

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 k) Competition
1 x 4 = 4 Marks
49. Current trends in transport.
e) Banning of standing passengers in public vehicles in Kenya
f) Outlawing of matatu cartels
g) Emergence of small taxi cabs with small engine capacities e.g. tuk tuk
h) Introduction of speed limiters in all public and commercial vehicles
i) Use of containers in transport
j) Use of unleaded petrol and low sulphur diesel
1 x 4 = 4 Marks

50. Document described by each of the following statement.

Statement Document
iv) Issued in response to a specific letter Quotation
of inquiry
v) Issued to the buyer requesting Pro-forma invoice
payment before goods are delivered
vi) Issued after payment has been made Receipt
by a seller to buyer

1 x 3 = 3 Marks

END

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