Compiled summary of the most frequently examined topics in KCSE Business Studies Paper 2.
Arranged in topic form with key points, subtopics, and examiner focus
areas for school revision use.
1. Distribution / Channels of Distribution
Definition: The process through which goods and services move from producers to final consumers.
Types: Direct, indirect, dual, multi-channel distribution.
Intermediaries: Wholesalers, retailers, agents, brokers, distributors.
Factors influencing choice: Nature of goods, cost, control, market size, competition, perishability, geographical area.
Roles of intermediaries: Breaking bulk, storage, promotion, risk-bearing, financing, transport facilitation.
Common KCSE focus: Factors to consider when selecting a channel; advantages of using intermediaries; diagrams of chain of distribution.
2. Insurance / Risk Management
Definition: A contract between insurer and insured for compensation against loss or risk.
Principles: Insurable interest, utmost good faith, indemnity, contribution, subrogation, proximate cause.
Types: Life assurance, property, motor, marine, fire, accident insurance.
Procedures: Proposal form, premium payment, policy issuance, claim process.
Importance: Promotes confidence, provides security, facilitates borrowing, promotes savings.
Common KCSE focus: Principles of insurance and their application, steps in obtaining insurance cover.
3. Trade and International Trade
Definition: The exchange of goods and services within or between countries.
Types: Home trade (wholesale & retail), foreign trade (import & export).
Advantages: Source of revenue, employment, specialization, access to goods not locally produced.
Trade restrictions: Tariffs, quotas, embargoes, exchange control, licensing.
Balance of trade & balance of payments explained.
Common KCSE focus: Reasons for trade restrictions; effects of international trade on developing countries.
4. Office Organization and Communication
Office layout: Open, closed, landscape, combination – determined by size, workflow, equipment, supervision needs.
Communication process: Sender, message, channel, receiver, feedback, barriers.
Forms: Oral, written, visual, electronic.
Modern methods: Email, social media, teleconferencing, memos, circulars.
Factors in choosing method: Urgency, confidentiality, cost, feedback need.
Common KCSE focus: Barriers to communication; factors influencing office layout.
5. Consumer Protection and Government Regulation
Reasons: Prevent exploitation, ensure safety, promote fair competition.
Methods: Legislation, price control, quality standards, consumer associations.
Government roles: Regulation, infrastructure, incentives, licensing, taxation.
Limitations: Corruption, lack of awareness, weak enforcement.
Common KCSE focus: Methods of consumer protection; government roles in business activities.
6. Sources of Finance / Capital
Types: Internal (retained earnings) and external (bank loans, shares, debentures, leasing, hire purchase).
Short-term vs long-term financing.
Factors to consider: Cost, risk, control, repayment period, flexibility.
Common KCSE focus: Advantages and disadvantages of various financing methods.
7. Stock / Inventory Management
Definition: The control and supervision of goods held for sale or production.
Methods: FIFO, LIFO, weighted average.
Importance: Ensures steady supply, avoids overstocking or stockouts, controls costs.
Stock records: Bin cards, stock ledgers.
Common KCSE focus: Stock valuation and advantages of effective stock control.
8. National Income and Macroeconomic Concepts
Definition: Total monetary value of goods and services produced in a country in a year.
Methods of measurement: Income, output, expenditure approaches.
Limitations: Inaccurate data, inflation, informal sector.
Uses: Economic planning, comparison, taxation policy.
Common KCSE focus: Methods of measuring national income; uses and limitations.
9. Entrepreneurship and Business Growth
Definition: Process of identifying, developing, and running a business opportunity.
Traits: Creativity, risk-taking, persistence, decision-making.
Business growth: Internal (expansion) and external (mergers, takeovers).
Challenges: Competition, finance, regulation, management skills.
Common KCSE focus: Characteristics of entrepreneurs; methods of business expansion.
10. Banking and Methods of Payment
Banking services: Savings, current, fixed deposit accounts, overdrafts, loans.
Methods of payment: Cash, cheque, credit card, EFT, mobile banking.
Advantages of banking: Safety, convenience, credit access.
Common KCSE focus: Differences between types of bank accounts; advantages of electronic banking.
11. Government Expenditure and Taxation
Types of taxes: Direct (income, corporate) and indirect (VAT, excise).
Principles: Equity, certainty, convenience, economy.
Reasons for taxation: Revenue generation, economic stability, redistribution.
Government expenditure: Recurrent and development expenditure.
Common KCSE focus: Reasons for government expenditure; characteristics of good taxation system.
12. Transport and Warehousing
Modes: Road, rail, air, water, pipeline.
Factors affecting choice: Nature of goods, cost, speed, reliability.
Warehousing functions: Storage, protection, financing, market stabilization.
Types: Private, public, bonded, wholesaler’s warehouse.
Common KCSE focus: Advantages of warehousing; factors determining choice of transport.
13. Forms and Trends in Business Ownership
Forms: Sole proprietorship, partnership, cooperative, company, franchise.
Emerging trends: Mergers, public-private partnerships, globalization.
Advantages & disadvantages of each form.
Common KCSE focus: Features of limited companies; reasons for business mergers.
14. Office Records and Financial Statements
Books of original entry: Purchases, sales, cash book, journal.
Ledger accounts and trial balance preparation.
Final accounts: Trading, profit and loss account, balance sheet.
Importance: Decision making, performance evaluation, control.
Common KCSE focus: Steps in preparing final accounts; classification of ledger accounts.
15. Challenges in the Business Environment
Economic challenges: Inflation, exchange rates, taxation.
Social challenges: Cultural practices, population changes.
Technological: Automation, e-commerce, digital transformation.
Political: Policy instability, corruption, bureaucracy.
Common KCSE focus: Effects of inflation on business; measures to cope with competition.
