Business Studies Paper 1 Questions and Answers - KCSE 2022 Prediction

INSTRUCTIONS TO CANDIDATES
Answer all the questions in the spaces provided.

Questions

1. Onazi Secondary School will wish to change from an enclosed office to an open office. Highlight four advantages that will accrue from this. (4mks)
2. Motor cycles have recently become a very popular mode of transport in Kenya. List four benefits a commuters enjoy by using them. (4mks)
3. Outline four factors that may make it necessary for insurance company to reinsure. (4mks)
4. The following diagram shows a shift in demand curve. Outline four reasons that can lead to this shift. (4mks)
   
5. Kenya has a few oligopoly firms. Highlight four sources of oligopoly powers to these firms. (4mks)
6. Highlight four ways in which capital of a business may change (4mks)
7. For each of the following transactions, indicate with tick in the spaces provided whether it will increase, decrease or have no effect on the balance sheet totals. (4mks)
   

   Transaction	Increase	Decrease	No effect
   a)Investing more cash in business
   b)Paying creditors in cash
   c)Buying a piece of furniture in cash
   d)Paying a creditor using money from private source

8. Below are some entries in the cash book of Romeo Traders for the month of July 2021.
   Cash Book
   Dr                                                                                                                              Cr
   

   Date(2021)	Details	Cash (shs)	Bank(shs)	Date(2021)	Details	Cash (shs)	Bank(shs)
   July: 1	Bal b/f	15,000		July: 1	Bal b/f		100,000
   6	cash		20,000	6	bank	20,000
   20	sales		15,000	15	wages	5,000
   28	Debtors	20.000		29	stock		10,000
   				31		19,000

   State the meaning of the following entries. (4mks)
   
   1. July 1, bal b/f bank column shs.100,000
   2. July 6, cash shs. 20,000 and Bank shs. 20,000
   3. July, 28 debtors shs. 20,000
   4. July 31 2010, balance c/f shs. 10,000
9. Highlight four roles of an entrepreneur to the economy of a country. (4mks)
10. Identify the source documents used to enter the following journals. (4mks)
    

    Journal	Source document
    (i)Purchase journal	(i)
    (ii)Returns outwards journal	(ii)
    (iii) Sales journal	(iii)
    (iv)Cash receipt journal	(iv)

11. State four ways in which consumers are likely to suffer when there is no warehousing. (4mks)
12. Highlight four disadvantages of concentrating many firms in Nairobi town. (4mks)
13. Oscar imports goods from South Africa to Kenya. State four conditions that would determine the choice of his distribution channel (4mks)
14. State four ways in which Kenya as a country can conserve her economic resources. (4mks)
15. Outline four ways in which the legal political environment can influence the activities of a business. (4mks)
16. For each of the following descriptions, identify the corresponding method of product promotion. (4mks)
    

    DESCRIPTION	METHOD OF PROMOTION
    Free promotion of a product
    Strategies to increase sales at the point of promotion.
    Impersonal presentation of a product through the mass media
    Ment to improve the reputation of a firm

17. Outline four factors that influence the amount of money held by an individual for precautionary motive. (4mks)
18. The following balances relates to the business of Super loaf traders during the period ended 30th June 2021.
                                         Shs.
    Rent received            12,000
    Salaries and wages   48,000
    Gross profit              120,000
    Discounts received      7,500
    Insurance                  12,500
    Carriage on sales      15,000
    Discounts allowed       6,000
    Prepare the business’s Profit & loss a/c for the period ended 30th June 2021.
19. The following transaction was extracted from books of Kuria business on 31st
    March 2004.
    Stock (01/04/05) 8,000
    Stock (31/03/06) 9,000
    Purchases 4,500
    Sales 21,000
    Calculate:
    
    1. Margin (2mks)
    2. Rate of stock turn over. (2mks)
20. Highlight four factors that must be considered before spending public funds. (4mks)
21. Outline four circumstances under which a firm may be located near the source of its raw materials. (4mks)
22. Highlight four circumstances under which face – to face communication would be preferred to written communication in a firm. (4mks)
23. State four ways how consumers can protect themselves against malpractices by private business people. (4mks)
24. Highlight four problems associated with the measurement of national income using the output approach. (4mks)
25. The aggressive campaign for citizens to plan their families seems to be causing a decline in the country's population growth. Outline four possible effects of this. (4mks)

Marking Scheme

1.    
   • Easy supervision
   • Construction cost is low
   • Easy location of workers
   • Staff movement is minimised
   • Promotes team work
   • Floor space is saved
   • Cheap to decorate
   • Discourages absenteeism by employees
2.    
   • Highly flexible for the consumers/Lack fixed routes
   • Offer door to door services
   • Convenient to the consumer, no time schedule
   • Relatively fast/saves on time/no delay
   • Readily available/relaible
   • Can negotiate fares
3.    
   • Value of property is high.
   • High risk of loss
   • Number of risk covered ,if many
   • Need to spread risks
   • If it’s the government policy
   • To create clients confidance.
4.    
   • Increase in consumers level of income
   • Postive taste and preference
   • Consumers expectations in price increase and shortages
   • Large population size
   • Reduced taxes on the commodities
5.    
   • Barriers to entry
   • Control source of raw material by a few firms
   • A few firms may hold patent rights
   • Large capital outlay that hinders other firms to enter
   • Some firms may be aggressive which may make firms to withdraw
   • Large ecomomies of scale enabling them to produce at low costs
6.    
   • Additional investment
   • Profits made
   • Losses made
   • Drawings made
7. 
   

   Transanction	Increase	Decrease	No effect
   A
   B
   C
   D

8.    
   1. Opening balance of ksh100,000(cr) in bank.The business had bank overdraft of Kshs. 100,000
   2. Business trasfered ksh 20,000 from cash to bank
   3. Debtors settled their debt of ksh 20,000 in cash
   4. Balancing figure in cash column[diff bwn the dr side and the cr. Side/ the business remained with Kshs.19000 cash in hand
9.      
   • Produce goods and services.
   • Promote both local and international trade
   • Promote development of infrastructure
   • Create wealth
   • Create employment opportunities
   • Promote use of technology
   • Satisfaction of human wants
   • Resource mobilization
10.    
    1. Incoming invoice
    2. Credit note
    3. Outgoing invoice
    4. Receipt
11.      
    • Consumers will not be assured a steady flow of goods
    • Quality of goods may be compromised
    • Prices of goods are likely be unstable
    • Ponsumers may not get goods in convenient quantities
    • Consumers may not enjoy lower prices from economies of scale as a result of ware housing
12.    
    • Create regional economic imbalances
    • Increased crime rate/congestion
    • Concentration of pollution in one area
    • Can create un employment if such firms collapse
    • Risky for a country incase of external war
    • Creates overdependence among the firms
    • Creation of slums due to overpopulation
    • Social evils like prostitution.
13.    
    • Nature of goods
    • Uncertainties in the market
    • Nature of competition
    • Government of policy
    • Cost of the channel.
14. State four ways in which Kenya as a country can conserve her economic resources.
    • Government appropriate policies governing exploitation of natural resources should be put in place.
    • Harmonized licencing of resource exploitation to prevent imbalanced and overexploitation of particular resources.
    • Putting in place severe penalties on those found carrying out illegal exploitation of resources e.g. pourchers, lumbers.
    • Intensifying soil, forest e.t.c. conservation campaigns.
    • Encouraging use of alternative source of fuel to prevent deforestation.
    • Educating people on the proper disposal of waste to prevent pollution i.e. solid, air, water.
    • Demarcating forests and wildlife reserves to prevent human settlement.
15. Outline four ways in which the legal political environment can influence the activities of a business.
    • To start a business one must obtain a trading license.
    • Taxes are imposed by government on the activities of a business.
    • Government offers subsidies to producers.
    • The law requires that goods sold must meet certain specified standards.
    • Political stability creates a conducive environment for business to thrive.
16. For each of the following descriptions, identify the corresponding method of product promotion.
    

    DESCRIPTION	METHOD OF PROMOTION
    Free promotion of a product	Free publicity
    Strategies to increase sales at the point of promotion.	Personal selling
    Impersonal presentation of a product through the mass media	Advertising
    Ment to improve the reputation of a firm	Public relations

17. Outline four factors that influence the amount of money held by an individual for precautionary motive.
    • The level of income
    • The family status
    • The age of the individual
    • The number of dependant one has.
    • The individual temperament
    • The duration between incomes of an individual/intervals between incomes.
18. The following balances relates to the business of Manji Traders during the period ended 30th June 2013.
                                          Shs.
    Rent received            12,000
    Salaries and wages   48,000
    Gross profit              120,000
    Discounts received      7,500
    Insurance                  12,500
    Carriage on sales      15,000
    Discounts allowed       6,000
    Prepare the business’s Profit & loss a/c for the period ended 30th June 2021.
    Super Loaf Traders
    Profit & Loss account
    For the period ended 30th June 2021.
    

    Kshs. Discounts allowed      6,000 Insurance                 12,500 Salaries and wages  48,000 Carriage on sales     15,000 Net profit                   58,000                                139,500

    Kshs. Gross profit b/d   120,000 Discounts received 7,500 Rent received       12,000                             139,500

19. The following transaction was extracted from books of Kemboi business on 31st March 2004.
    Stock (01/04/05) 8,000
    Stock (31/03/06) 9,000
    Purchases 4,500
    Sales 21,000
    Calculate:
    1. Margin
       Margin = Gross profit x 100
                        Net sales
       Gross profit = Sales - cost of sales
       = Shs. 21,000 - shs.(8,000 + 4,500 - 9,000)
       = Shs.21,000 - 3,500
       = Shs.17,500
       Margin = Shs.17,500 x 100
                      shs.21,000
       = 83.3%
    2. Rate of stock turn over.
       = Cost of goods sold
              Average stock
       ∴ ROSTO = shs.3,500
                           shs.8,500
       = 0.41 times
       but average stock = Opening stock + Closing stock
                                                                  2
       = 8,000 + 9,000
                   2
       = shs.8,500
20. Highlight four factors that must be considered before spending public funds.
    • Sanctions
    • Maximum social benefit
    • Flexibility
    • Economy
    • Proper financial management
    • Equity
    • Productivity.
21. Outline four circumstances under which a firm may be located near the source of its raw materials.
    • Where the raw materials are too bulky compared to the final product.
    • Where the raw materials are perishable.
    • Where the raw materials are located near the market for the final product.
    • Where the government policy requires such firms to be located at the raw material’s source to reduce pollution.
    • Where the raw materials are fragile
22. Circumstances under which face to face would be preferred to written.
    • When the information is confidential.
    • When giving instructions
    • When no evidence is required
    • When there is need to promote informal atmosphere.
    • When there’s need for immediate feedback
    • When introducing an employee
    • When there’s need to discuss issues.
23. Ways how consumer can protect themselves against malpractices by private traders.
    • By forming consumer association
    • By boycotting to buy from such trader
    • By voicing the complaints through the mass-media
    • By reporting such trader to the relevant authority
    • By going to the court.
24. Problems associated with the measurement of national income using the output approach.
    • The problem of valuing output approach sector
    • The problem of deciding on the goods and services to include
    • The problem of valuation due to in availability or in accuracy of output figure especially in the subsistence sector.
    • Problem of valuing governments output as many of its services are not sold in the market
    • Valuing illegal activities e.g drug trafficking.
25. Reduced pressure on land
    • Shrinking market for goods and service/ low market
    • Reduced levels of unemployment
    • Reducing government expenditure on the provision of social amenities.
    • Reduced dependency burden
    • Low labour supply.
    • Reduced social problems like crime, lack of housing, traffic jams.