Business Studies Paper 1 Questions and Answers - Kangundo Subcounty Pre Mock Exams 2021/2022

Instructions
Answer all questions on the provided spaces.

State Four internal (Micro) environment factors that influence the business positively. (4mks)
Outline Four disadvantages of division of labour (4mks)
Your neighbour intends to start a business and has come to you for advice on how to identify a business idea. Highlight four sources she can use. (4mks)
Name Four machines/equipments found in a general office. (4mks)
Outline Four factors to consider when intending to buy office furniture (4mks)
State Four challenges facing small scale businesses in Kenya (4mks)
Give Four instances when a seller may send a proforma invoice to a buyer (4mks)
Identify Four Clauses of a memorandum of association (4mks)
Outline Four benefits Kenyan traders have enjoyed from globalization (4mks)
State Four advantages of transporting oil by pipeline rather than road. (4mks)
Highlight Four ways in which warehousing is useful to a trader. (4mks)
Highlight Four ways that the government may put in place to create a favourable business environment. (4mks)
Outline Four advantages of audio-visual communication (4mks)
State Four policies covered under general insurance (4mks)
Name Four types of advertising (4mks)
Explain Four factors that may lead to the shift of the supply curve to the right (4mks)
Highlight Four ways in which the production activities of firms in your country affect the environment negativity. (4mks)
Fill in the missing figures in the table below. (4mks)

Fixed asset Current Assets Capital Liabilities

a 275 500 315 000 115 500

b 182 000 108 700 217 100

c 76 400 123 100 91 900

d 313 450 211 340 189 170
The following balances were extracted from the books of Raji Enterprises on 1st July 2019
Shs.
Capital 550,000
Motor Van 185,000
Debtors 68,000
Cash 200,000
Stock 50,000
Furniture 160,000
Creditors 95,000
Bank Loan 18, 000
The following transactions took place during the month.
1. Sold some of the old furniture for sh. 50,000 for which sh. 45, 000 was paid by cash and the balance to be settled later.
2. The owner took sh. 8,500 cash from the business to cater for family shopping
3. Bought goods for resale for cash sh. 59, 800.
  Required:
  Prepare Raji Enterprises balance sheet as at 30th July 2019 (4mks)
Record the transaction given below in their relevant ledger A/cs. (4mks)
2018
May 1 Started business with Ksh. 400,000 cash.
3 Purchased office furniture by cash sh. 90,000
5 Paid Wages by Cash sh. 3,000.
10 Bought stock of goods by Cash sh. 190,00
The following information relates to Ali General Stores for the year ended 31st Dec 2018.
Opening stock shs. 24,000
Carriage on Sales shs. 12,000
Purchases shs. 370,000
Sales shs. 442,500
Closing Stock shs. 40, 000
Expenses 10% on gross profit
Prepare Trading profit and loss account for the year ended 31st Dec 2018 (5mks)
Apex traders provided you with the following .
Margin 25%
Cost of Sales 15,000
Opening Stock 2,000
Closing Stock 1,000
Operating expenses 2% of Capital
Sales and capital are in ratio of 1:4
Calculate
1. Rate of Stock turnover (2mk)
2. Purchases (1mk)
3. Return on Capital (1mk)
Give Four roles played by the Central Bank of Kenya in the economy (4mks)
Name Three sources of public finance (3mks)
Give Four benefits one gets from self –employment (4mks)

MARKING SCHEME

State internal (Micro ) environment factors that influence the business positively
- Good management style by owner
- Availability of / a lot / adequate financial / capital
- Well laid out business structure
- modern bus facilities/adequate/sufficient facilities
- effective communication systems
- motivated workers/human resource
- progressive business culture
Outline disadvantages of division of labour
- social problems
- create monotony and boredom
- create unemployment
- difficult to know who to identify with the final product
- converts man into a machine like creature
- makes man dependent on only one trade
Your neighbor intends to start a business and has come to you for advice on how to identify a business idea. Highlight four sources she can use
- Print media e.g. newspapers
- Electronic Media E.G Television
- Vocational Training
- Hobbies/talents
- Shows and exhibitations / trade fairs
- Business seminars / workshops / Training
- Listening to what people say
- Brainstorming with friends and relatives
Name four machines /equipments found in a general office
- computers
- Paper punch
- Stapler / stapling machine
- Telephone
- Staples remover
- Paper shredder
- Guillotine
Outline four factors to consider when intending to buy office furniture
- Compatibility with the intended use and place
- Affordability
- Size of the firm
- Durability
- Adaptability to future needs
- Availability of spare parts
- Possibility of hiring rather than buying
- Effect on staff morale
State four challenges facing small scale business in Kenya
- Small capital – limited sources of capital
- May lack division of labour and specialization
- Limited managerial skills
- Lacks continuity since it depends on the life of the owner
- Lacks skills to choose a viable investment
Give four instances when a seller may send a proforma invoice to a buyer
- When terms of sale are cash with order (C.W.O) or cash on delivery (C.O.D)
- When it acts as a quotation
- When the seller is selling through agents
- When goods are custom made
- When buyer needs it to seek for funds from financial institutions to pay for the goods
- When seller does not wish to sell on credit
- When buyer needs to prepare for custom clearance in foreign trade
Identify four clauses of a memorandum of association
- Name clause
- Liability clause
- Objects clause
- Declaration clause
- Capital clause
- Situation clause
outline four benefits Kenyan traders have enjoyed from globalization
- Job creation worldwide
- Easy transfer of technology from developed countries
- Wider flow of information on business activities e.g better production skills, new techniques
- Wider market for Kenyan goods and services
- Easy access to goods and services from other countries
- Interdependence among countries create better understanding, peace and harmony in the world conducive for business operations.
- Sharing of research findings globally
- Access to information on available raw materials
State four advantages of transporting oil by pipeline rather than road.
- Transport cost is reduced
- Reduced environmental pollution
- Loss through accidents on the road is reduced
- Cases of theft of oil are reduced
- Fast transportation
- Regular/reliable supply
Highlight four ways in which warehousing is useful to a trader.
- Stabilizes supply of goods to the market
- Goods are protected against damages caused by weather e.g. rains, sunlight
- Protects goods from theft
- Trader can prepare goods for resale while in the warehouse
- Prices of goods are stabilized as they are released steadily as need arises
- Some goods improve in quality while stored e.g. wine and bananas thus earning /fetching higher prices
Highlight four ways that the government may put in place to create a favorable business environment
- Provide security
- Political stability
- Favourable legislation
- Provide basic infrastructure
- Provide credit finance
- Giving subsidies/reducing taxes
- Providing an enabling environment
Outline four advantages of audio –visual communication
- Reach a large audience at the same time
- Have entertainment valu
- Enhances the impact made by oral and written communication
- Draws quick attention
- Suitable for illiterate receivers
- Increases the audience’s concentration span
State four policies covered under general insurance
- Motor vehicle policies
- Workmen compensation scheme
- Aviation policies
- Personal accident cover
- Fidelity guarantee
- Constructors liability
- Bad debts
- Crops and livestock cover
- Fire and related perils
- Terrorism
- Riots cover
- Cash in transit and goods in transit
Highlight four types of advertising
- Primary demand
- Institutional advertising
- Informative
- Persuasive
- Celebrity
- Corrective
Explain four factors that may lead to the shift of the supply curve to the right.
- Improved technology / use of modern techniques
- Decrease in cost of production
- Favourable government policies e.g. reduced taxation
- Expectation of a fall in price of the commodity
- Favourable climatic / weather conditions for an agricultural product
- Absence of industrial strikes
- Entry of more firms in the industry
- Fall in price of substitute product
  NB: Increase in price of the product is wrong
Highlight four ways in which the production activities of firms in your country affect the environment negatibity
- Depletion of production resources
- Degradation of environment leading to climate change
- Pollution of air and water which is detrimental to human and animal life
- Problem of solid and plastic waste disposal which may result in spread of diseases
- Noise pollution which may cause hearing problems to human beings

Fill in the missing figures in the table below

	Fixed asset	Current Assets	Capital	Liabilities
a	275 500	115 000	315 000	115 500
b	182 000	108 700	73 600	217 100
c	138 600	76 400	123 100	91 900
d	313 450	211 340	189 170	335 620

The following balances were extracted from the books of Raji Enterprises on 1st July 2019
Raji Enterprises
Balance Sheet
As at 30th July 2019

Fixed assets Shs Shs
Motor van 185000
Furniture 110000
TFA 295000
Current assets
Stock 109800
Debtors 73000
Cash 176700
354500
664500

shs
capital 550000
drawings 8500
net capital 541500
Current liabilities
Bank loan 18000
creditors 95,000

Record the transactions given

DR CASH A/C CR
2018 Shs. May 1 capital A/c 400000	2018 Shs. May 3 Office Furniture A/c 90000 May 5 Wages A/c 3000 May 10 Purchases A/c 190000

DR CAPITAL A/C CR
	2018 shs. May 1 Cash A/c 400000

DR OFFICE FURNITURE A/C CR
2018 shs. May 3 cash A/c 90000

DR WAGES A/C CR
2018 shs. May 5 Cash A/c 3000

DR PURCHASES A/C CR
2018 shs. May 10 Cahs A/c 190000

24 ticks X 1/6 = 4mks
NB :

If there is no A/c heading do not mark
If there is no year do not mark the date

Prepare Trading profit and loss account for the year ended 31st Dec 2018
ALI GENERAL STORES
TRADING, PROFIT AND LOSS A/C
FOR YOUR ENDED 31ST DEC. 2018

Shs.
Opening stock 24000
Purchases 370000
Cost of goods available 394 000
Less closing stock -40000
Cost of goods sold 354000
Gross profit C/d 88500
442500
Carriage on sales 12000
Expenses 88500
Total expenses 20850
Net profit c/d 67650
88500

Shs.
sales 442500

442500
Gross profit b/d 885000

88500

10 ticks x ½ = 5mks

Calculate
1. ROSTO = Cost of sales = 15000 / (2000 + 1000)
  AV Stock 2
  = 15000 = 10 times
  1500
2. Purchases = COS – O.P stock + CR stock
  = 15000 – 2000 + 1000
  ksh = 14000
3. Return on capital sales = G.P + C.O.S
  Mark up = ¼ -1 = ¹/₃ = 5000 + 15000
  = 20000
  Capital = 20000 x 4
  = 80000
  Gross profit = ¹/₃ x 15000 = 5000 expenses = ²/₁₀₀ x 80000
  = 1600
  Net profit = gross profit – expenses
  5000 – 1600
  = 3400
  ROC = Net Profit x 100 = 3400 x 100 = 4.25%
  Capital 80000
Give four roles played by the central bank of Kenya in the economy.
- Issue of currency
- Banker to commercial banks
- Banker to government
- Controls foreign exchange
- Control commercial banks / supervises the banks
- Advisor to the government on monetary policies
- Controls money supply / credit control using various tools e.g. bank rate
- Lender of last resort to commercial banks
- Managing public debt
- Clearing house for all commercial banks cheques
- Custodian of foreign currency reserves
- Collection of statistics and conducting research on monetary policies
Name three sources of public finance
- taxes
- Licenses
- Court fines
- Fees for government services
- Rent and rates for use government property
- Escheats
- Interest earned on loans
- Government borrowing
- Proceeds from the sale of government property
- Surplus from public corporations
Give four benefits one gets from self -employement
- independence
- Enjoys all the profits
- Job security
- Personal satisfaction
- Enjoys stus and pride