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Last updated: 11 November 2026
Updated 12 November 2026. These KCSE Business Studies Paper 2 questions and answers are original practice questions in the 565/2 format: one full accounts question worked line by line, plus essay questions on insurance, inflation, transport and demand, each with the points an examiner looks for. Business Studies Paper 2 for 2026 is on Thursday 19 November, 8.00 to 10.30 am, according to the KNEC 2026 KCSE Examination Timetable. They are written and checked by our team; they are not KNEC papers or a KNEC marking scheme.
How Business Studies Paper 2 (565/2) Is Organised
Paper 2 is 2 hours 30 minutes long and marked out of 100. It has six questions and you answer any five, so each question is worth 20 marks. Most questions are split into an (a) and a (b) part of about 10 marks each, and at least one part normally asks you to prepare or correct accounts. Paper 1 (565/1, on Tuesday 17 November) is the short-answer paper; Paper 2 tests the same Form 1 to Form 4 syllabus in essay and accounts form. The KNEC timetable gives large-print candidates the same 2 hours 30 minutes and braille candidates 3 hours (8.00 to 11.00 am).
Use your first five minutes to choose your five questions. Pick the accounts question if you have practised the layout, because a correct, well-labelled account can earn close to full marks, while essays lose marks for thin explanations.
| Area | What is commonly asked |
|---|---|
| Accounts | Books of original entry, ledgers, cash books, trial balance, trading, profit and loss account, balance sheet, ratios |
| Commerce | Insurance, banking, transport, warehousing, communication, product promotion, home and international trade |
| Business units and the environment | Sole traders, partnerships, companies, co-operatives, public corporations, government and business |
| Economics | Demand and supply, national income, population, inflation, development planning, balance of payments |
Accounts Question With Worked Answer
Original figures for Amani Traders for the year ended 31 December 2025 (KSh): sales 800,000; returns inwards 20,000; opening stock 60,000; purchases 500,000; returns outwards 10,000; carriage inwards 15,000; closing stock 75,000; rent 48,000; salaries 96,000; carriage outwards 6,000; general expenses 20,000.
1. (a) Prepare a trading, profit and loss account for the year ended 31 December 2025. (10 marks) (b) Calculate the mark-up, the margin and the rate of stock turnover. (6 marks)
| Trading account | KSh |
|---|---|
| Sales 800,000 less returns inwards 20,000 = net sales | 780,000 |
| Opening stock | 60,000 |
| Add purchases 500,000 less returns outwards 10,000 = net purchases | 490,000 |
| Add carriage inwards | 15,000 |
| Goods available for sale (60,000 + 490,000 + 15,000) | 565,000 |
| Less closing stock | (75,000) |
| Cost of sales | 490,000 |
| Gross profit (780,000 − 490,000) | 290,000 |
| Less expenses: rent 48,000 + salaries 96,000 + carriage outwards 6,000 + general expenses 20,000 | (170,000) |
| Net profit | 120,000 |
Worked answer (b): Mark-up = gross profit ÷ cost of sales × 100 = 290,000 ÷ 490,000 × 100 = 59.2%. Margin = gross profit ÷ net sales × 100 = 290,000 ÷ 780,000 × 100 = 37.2%. Average stock = (60,000 + 75,000) ÷ 2 = 67,500, so rate of stock turnover = cost of sales ÷ average stock = 490,000 ÷ 67,500 = about 7.3 times.
Where the marks go: carriage inwards belongs in the trading account because it adds to the cost of goods; carriage outwards is a selling expense and goes in the profit and loss account. Mixing the two is the most common lost mark. Write the title in full, with the business name and the period, and use clear headings.
KCSE Business Studies Paper 2 Questions and Answers (Essay Practice)
2. (a) Explain five circumstances under which an insurance company may refuse to compensate the insured. (10 marks)
Marking points: If the loss was caused deliberately by the insured, because insurance covers accidental loss only; if the insured had no insurable interest in the property; if material facts were hidden or false information was given, which breaks the principle of utmost good faith; if the loss came from a risk not covered by the policy; if the policy had lapsed because premiums were not paid; if the insured broke a condition of the policy, such as leaving a vehicle unlocked. Each point needs the circumstance plus one sentence of explanation for 2 marks.
2. (b) Explain five measures the Central Bank of Kenya may take to reduce inflation. (10 marks)
Marking points: Raising the Central Bank Rate so that commercial banks charge more for loans and people borrow less (CBK publishes the current rate on its CBK monetary policy page); selling government securities through open market operations to take money out of circulation; raising the cash reserve ratio so that banks have less money to lend; selective credit control, which directs lending away from less productive uses; moral suasion, persuading banks to lend less. Explain how each step reduces the amount of money in circulation.
3. (a) Explain five factors a trader should consider when choosing a means of transport. (10 marks)
Marking points: Cost compared with the value of the goods; urgency, since air is fastest for urgent goods; the nature of the goods, such as perishable, fragile or bulky goods; distance and the route; reliability of the service; security of the goods on the way; availability of the means in that area. Any five, each explained.
3. (b) With the help of diagrams, explain the difference between a movement along a demand curve and a shift of the demand curve. (10 marks)
Marking points: A movement along the curve is caused only by a change in the price of the good itself: a fall in price leads to an extension of demand (moving down the curve) and a rise leads to a contraction (moving up). A shift happens when a factor other than price changes, such as income, tastes, the price of substitutes or complements, or population: the whole curve moves right (an increase in demand) or left (a decrease). Draw one diagram for each, label the axes (price and quantity), label the curves D and D1, and show the old and new quantities.
How to Score Well in Paper 2
Write each essay point as a short paragraph: a clear heading word, then one or two sentences that explain it. Number your points so the examiner can count them. Do not list ten points when the question asks for five; only the first five are marked. Keep about 25 minutes for each question, and use the spare five minutes to check totals in your accounts.
Next Steps for Business Studies Paper 2
Read the KCSE Business Studies Paper 2 revision guide, try the timed Business Studies Paper 2 challenge and the KCSE Business Studies quiz. Short-answer practice for Paper 1 is on the KCSE Business Studies Paper 1 (565/1) practice page, and the full week is in our KCSE 2026 timetable paper-by-paper guide. Browse every subject from the KCSE hub.
Frequently Asked Questions
How many questions do you answer in KCSE Business Studies Paper 2?
Any five of the six questions. Each is worth 20 marks, for a total of 100 marks in 2 hours 30 minutes.
Is there always an accounts question in Business Studies Paper 2?
Usually at least one part asks for accounts such as a cash book, a trial balance or a trading, profit and loss account, but always follow your own paper.
When is Business Studies Paper 2 in 2026?
Thursday 19 November 2026, 8.00 am to 10.30 am. Paper 1 is on Tuesday 17 November.
Do you have the KCSE Business Studies Paper 2 marking scheme?
No. These are original questions with worked answers that follow the marking style, not KNEC material.
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