2010 KCSE B S P2-002 marking scheme

2010 KCSE B S P2-002 marking scheme




1. a)  Tools of monetary policy

-Bank rates

-Open market operations.(OMO)

-Liquidity ratio.

-Compulsory deposits

-Selective credit control

-Directives.                                                           (Any five well explained. 5 x 2 =10mks)

b) Effects of global recession.

-Reduced foreign exchange earnings

-Reduced exports.


-Reduced external funding

-Unfavorable balance of payments

-Unstable exchange rates.                                   (Any five well explained. 5 x 2 =10mks)

2. a)                                                         Gatundia Traders.

Profit and Loss a/c for the period ended 31st Dec 2009.


Opening stock                    12,500

Add purchases      70,000

Less return out      2,400     67,000

Cost of goods

available for sale                 80,100

less closing stock               6,500

cost of sales                         73,600

Gross profit c/d                   19,900



Bad debts                   4,000

Salaries                      14,000

Salaries outstanding  2,800



Sales                           95,000

Less return inwards      1,500

Net taxes                   93,500.


Gross profit b/d 19,900

Net loss             6,100


½ x12 = 6mks

Gatundia Traders balance sheet as at 31st Dec 2009
Fixed assets 82,000 Capital 88,800
Stock 6,500 Less net loss 6100
Debtors 10,500 82,700
Cash 2,500 Salaries outstanding 2,800
Creditors 8,800
Bank overdraft 1,500
101,500 101,500

( ½ x 8 =4mks)

2. b) Benefits of selling in cash.

-Reduces cases of bad debts

-Seller has cash to buy more stock

-Cash to finance daily expenses

-Saves time

-Profits not tied in debts

-Sellers easily prepare his financial statement.

(Any five well explained. 5 x 2 =10mks)

3. a) Why government imposes tax.

-Raise revenue

-Protect infant industries

-Prevent dumping

-Discourage consumption of harmful products

-Reduce inequality in income distribution

– Control inflation

-Correct balance of payments

(Any five well explained. 5 x 2 =10mks)


Total creditors a/c
Purchase returns 263,000 Bal b/d 165,000
Discount received 29,500
Cash received 44,600 Credit purchases 315,500
Bal c/d 143,400
380,500 380,500
Total debtors a/c
Bal b/d 263,000 Receipts 309,000
Discount allowed 34,000
Sales return 36,400
Credit sales 305,900
Bal c/d 189,500
568,900 568,900

1 x 10 =10mks

4. a) Benefits of joining EAC

-Widens the market for products

-Political stability

-Preferential treatment for its goods

-Free mobility of labor

-Allows for exploitation of resources in the region.

-Improved interactions between communities in different countries.

-To have a strong bargaining power in relation to other trading blocks                                                                                                                              Any five well explained: 5 x 2 = 10 mks

b) Answers UN available.

5.  a) BOP disequilibrium in less developed countries.

-Fall in volume of exports

-Over reliance on foreign borrowing

-Restrictions by trading partners

-Deterioration in terms of trade.

-Devaluation of currency

-Over valuation of local currency

-Natural calamities

-Economic order.                                                           Any five well explained: 5 x 2 = 10 mks

5. b) Factors limiting size of a firm:

-Transport costs.

-Change in consumer buying habits

-Lack of capital for expansion

-Unwillingness to take risks

-Inadequate structures.

-lack of appropriate technology.

-lack of raw materials                                           Any five well explained: 5 x 2 = 10 mks

6. b) Advantages of internal borrowing.

– External borrowing may have strings attached that may have adverse effects on domestic            institutions.

-If money is used for non productive activities e.g. paying salaries, it may lead to a dead weight           debt that has to be repaid for long periods.

-May lead to over reliance on external funding leading to a country becoming a net borrower.

-Some institutions may insist the funds be put to uses that may not be a priority for the country.

Any three well explained  3 x 2 =6mks.

c) Incidences of tax under perfectly inelastic demand.

Due to imposition of tax price will increase from P to P1 while supply curve will shit from SS to     S1S1.

Due to nature of elasticity, the producer is able to pass the entire tax burden to the             consumer reflected by price increase P to P1.

(Explanation 2mks)





8 responses to “2010 KCSE B S P2-002 marking scheme

  1. paulo mutui

    November 24, 2012 at 1:09 pm

    thanks a lot

  2. Willis

    March 4, 2013 at 5:34 am

    Actually tank u vry much 4 dat paper-it hax rily helpd me.:-)

  3. sk

    July 28, 2014 at 7:37 pm

    it’ll b vry helful in my kcse rev this year…thank you

  4. JOSE

    November 5, 2014 at 7:19 pm

    You have really assited the candidates in doing their revision. thank you so much

  5. vera

    August 6, 2016 at 4:14 pm

    post also papers from other years

  6. frerciz aciz

    October 12, 2016 at 11:50 am

    this questions have assisted me alot#thanks palace

  7. kipyegon evans

    November 14, 2016 at 8:45 am

    hapo sawa


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