FIND QUESTIONS FOR EXPECTED BUSINESS PR 2 ANSWERS

1. (a) Production;  is increasing usefulness of services or goods /creation of utility

(b) Business: activities undertaken in a society for the purpose of making profit.

(c)  Distribution: moving of goods from the production sites to the users.

(d) Economics: study of how human beings struggle to satisfy their endless wants using scarce

                      resources.

• Limitations of using internet.

• Expensive to afford by small firms
• Only operates in connected areas
• Can only be used by literate groups
• Cannot be used in areas without power/electricity

• (a) Provision of factors of production.

(b) Payments of factors of production.

(c) Expenditure on goods and services.

(d) Sales of goods and services

•                   

                         =120%

=50%

=240%

• Advantages of franking machine.
  • Can be used to print messages
  • Can print accurate postage amounts
  • Lessens theft/misuse of loose stamps by employees
  • Minimizes loss of stamps
  • Produces neat work

•                                               General journal

Date	Details	Folio	Dr.	Cr.
2/4/2021	Debtors     Machinery (Being sales  of old machinery on credit)		203,000	203,000
4/4/2021	Furniture       Bank       Kapiyo Art Craft (being purchase of furniture and partly paying by cheque and on credit)		80,600	50,000 30,600
			283,600	283,600

• Problems which tend to limit growth of small scale retailers in rural areas.
• Lack of capital
• Competition techniques
• Lack of market
• Expensive
• Poor management
• Poor infrastructure
• Lack of commercial services
• In the spaces provided below indicate with a tick (ü) whether the following transactions

will increase, decrease or have no effect on capital                                        

Transaction	Increase	Decrease	No effect
a) Sold a business van for cash			ü
b) Converted a private computer to business use	ü
c) Took stock from business for personal use.		ü
d) The business made profit	ü

• Benefits of pooling risk to the insurance company.
• Pooling of risks enables an insurance company to create a common pool of funds from the regular premiums from different clients.
• It enables the insurance company to compensate those who suffer loss when the risks occur.
• The insurance company is able to spread risks over a large number of insured people.
• Surplus funds can be invested in, for example giving out loans or buying shares in real estates
• It enables the insurance company to meet its operating costs by using the pool funds.
• It enables the insurance company ti calculate premiums to be paid by each client.

1. Highlight four roles played by intermediaries to a producer in the chain of distribution.
   1. Reduces transactions between producers and consumers
   1. Breaking bulk
   1. Accumulating bulk
   1. Providing finances
   1. Passing relevant information
   1. Product promotion
   1. Transportation services
   1. Warehousing/storage services
2. Workings
3. Working capital = 145,220 – 95,200

                             =ksh. 50,020

• Capital employed = 50,020 + 480,000

                               = ksh. 530,020

1. Situations in which the opportunity cost concept may be used.
   1. Where resources are scarce
   1. Where wants are many
   1. Where wants are  compatible
   1. Where wants vary in urgency and intensity

1. Consequences that may arise   due to poor arrangement of goods in a warehouse.
   1. Possible loss of goods through breakage
   1. Underutilization of space
   1. Theft of goods(pilferage)
   1. Contamination of goods
   1. Time is lost looking for goods in a warehouse
2. Benefits of indirect production.
   1. Better quality goods
   1. Avails a variety of goods
   1. High production capacity/mass production
   1. Better utilization of resources
   1. Facilitates exchange/trade
   1. Goods become cheaper
   1. Leads to high standards of living
   1. Creates employment.
   1. Leads to specialization/better skills
3.  Elements that may comprise the internal environment of a business.
   1. Business culture
   1. Business structure
   1. Human resources
   1. Financial resources
   1. Technology
   1. owners
4. Negative implication of rapid population growth.

• Increased dependency ratio
  • Reduction in savings and investments
  • Leads to unemployment
  • Exerts pressure on social amenities
  • May lead to over exploitation of natural resources
  • Reduced per capita income
• Content of partnership act.
• All partners are entitled to equal contributions of capital
• No salary is to be allowed to any partner.
• No interest is charged on drawing
• All profits and losses are to be shared equally
• Every partner has a right to inspect books of accounts.
• Every partner has a right to participate in decision making.
• Interest is to be paid on any loan borrowed by partners.
• No partner is to carry out competing business
• During dissolution, external debts are paid first, then loans from the partners and the capital

1. Elements of transport.
2. Unit of carriage
3. Method of propulsion
4. Terminals
5. Ways
6. Indicate whether each of the following will cause movement along the curve or shift in the curve by writing either shift or movement.                                                             (4 marks)

Factor	Effect
Change in real income	shift
Change in price of the product.	Movement
An increase in sales tax on a product	shift
An increase in population	shift

• Circumstances under which the government may issue license.
  • When there is need to regulate the number of businesses
  • Where there is need of doing away with illegal business in the country.
  • When the government wants to ensure that traders engage only in those businesses for which they have been licensed.
  • When the government wants to earn to revenue from the issuing of licenses.
  • When there is need to protect consumers against the exploitation by traders
  • When there is need to control the types of goods that enter or leave the country.
• Reasons for dishonoring the cheque.
• Postdated cheque
• Amount in figures and words are different.
• It lucks drawers  signature
• Errors crossed not counter signed.
• The cheque is dirty/defaced.

• Methods used by monopolistic firm to differentiate its products.
  • Branding
  • Packaging in different sizes
  • Pricing
  • Blending into different colours
  • Persuasive advertising
  • Trade marks

• Components of a good business plan.
  • Name of the business
  • Product to be sold
  • Personnel to manage the business
  • Amount of finance required
  • Market to be served
  • Types of employees required
  • Summary of the plan
• Unethical practices that are associated with product promotion.
  • Give false information about a product
  • Not disclosing side effects of a product
  • Overpricing of goods
  • Cheating on ingredients of goods
  • Advertising with negative effects on the environment
  • Promoting genuine products but sell counterfeits

• Reasons why trial balance may fail to balance.
• Making single entry.
• Failure to bring down balances correctly when balancing the accounts.
• Incorrect arithmetic’s when balancing the account.
• Transposition of figures.
• Error made in transferring balances.
• Failure to include all the balances in ledger.