KCSE 2012 Business Studies Paper 1 with Marking Scheme

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  1. Outline four circumstances under which cash with order may be used. (4 marks)
  2. State four benefits that a farmer may derive from being a member of a Producer Co-operative Society.
    (4 marks)
  3. Highlight three benefits of globalization to a business enterprise. (3 marks)
  4. Highlight four ways in which consumers may protect themselves against exploitation by traders.
    (4 marks)
  5. Outline one circumstance under which each of the following telecommunication services may be used:
    (3 marks)
    1. Paging
    2. Facsimile (fax)
    3. Radio call
  6. The following information was extracted from the books of Marigi Traders on 30th June 2009.
     Item   Shs. 
     Purchases   720,000 
     Opening stock   165,000
     Closing stock    ?
     Sales  980,600
     Margin  20%
    Prepare the Trading Account of Marigi Traders for the year ended 30th June 2009. (5 marks
  7. Outline four tools of monetary policy that a government may use to reduce excess money in circulation. (4 marks)
  8. Outline one circumstance under which each of the following types of inflation may occur:  (4 marks)
    1. Creeping inflation
    2. Hyperinflation
  9. State four forms of economic integration that may exist between countries. (4 marks)
  10. Highlight four problems of development planning that a country may experience. (4 marks)
  11. Nyaboke operates a shop in a farming area. State four ways in which the farming community can benefit from the business activity. (4 marks)
  12. Outline four features of indirect production. (4 marks)
  13. State four factors that may lead to the success of a business. (4 marks)
  14. State four ways in which a good filing system may facilitate the operations in an office.   (4 marks)
  15. Highlight four benefits that a country gets by encouraging trade among her citizens (4 marks)
  16. Outline four challenges that may be encountered when measuring national income using the output approach. (4 marks)
  17. Highlight four measures that a government may take to reduce the mortality rate in a country.  (4 marks)
  18. The following balances were extracted from the books of Highlife General Stores on 31st December 2008:
     Items   Shs. 
     Land and buildings   650,000 
     Stock  470,000
     Bank overdraft  80,000
     Debtors  350,000
     10 year Bank loan  500,000
     Creditors  220,000
     Cash  50,000
     Motor van  150,000
     Capital    ?
    Prepare the balance sheet of Highlife General Stores as at 31st December, 2008. (5 marks)
  19. Given the statements in the table below, indicate the type of entry to be made in the relevant ledger accounts: (4 marks)
     Statement   Type of Entry  
     (i) An increase in revenue   
     (ii) A decrease in an  
     (iii) An increase in an expense   
     (iv) A decrease in liability  
  20. In the spaces provided in the table below, name the document Jambi Ltd. would issue under the circumstances described: (4 marks)
     Circumstance   Document to issue  
     (i) Jambii Ltd sold goods worth Sh. 54,000
    on credit to Jamilar Traders.
     (ii) Osuri Enterprises which had bought goods
    worth Sh 27,000 was erroneously charged for
    only Shs 25,000.
     (iii) Guru Traders paid Shs 33,900 by
    cheque to Jambi Ltd. for goods which had
    been supplied.
     (iv) Goods sold to Jamilar Traders had been
    overpriced by Shs 4,000.
  21. Outline four conditions under which a warehouse may be considered to be operating efficiently. (4 marks)
  22. Highlight four advantages of promoting sales through the internet. (4 marks)
  23. Zawadi operates a hardware business in her home town. Outline four methods she may use to determine prices for her goods other than the forces of demand and supply. (4 marks)
  24. Highlight four factors that a firm may consider when deciding on the goods to produce.    (4 marks)
  25. State four features of a perfectly


  1. Circumstances under which cash with order may be used include:
    1. When the business is being conducted through post/mail order business.
    2. When the buyer is new to the seller.
    3. When the buyer's credit worthiness is in doubt.
    4. When it is the seller's policy not to advance credit.
    5. When the seller wants to avoid the high cost of debt collection.
    6. When the seller needs working capital.
      (Any 4 x1 = 4 marks)
  2. Benefits that a farmer may derive from being a member of a producer co-operative society include:
    1. May receive inputs e.g. fertilizer at fair prices.
    2. The society may get better prices for the member's produce.
    3. May get transport facilities for produce to the market.
    4. May get better storage facilities for the produce.
    5. The society may grade, package and process the produce for the member.
    6. May receive input on credit from the society.
    7. Can acquire skills on better methods of production.
    8. May get dividends earned on shares held.
      (Any 4 x 1 = 4 marks)
  3. Benefits of globalization to a business enterprise include:
    1. Facilitates application of better technology for improved products.
    2. Encourages collaboration among businesses from different countries.
    3. Makes it possible to share new production techniques among the countries of the world.
    4. The business accesses a wider market.
    5. Facilitates the sharing of research findings by business globally.
    6. Enables business enterprises to take advantage of resources found in other parts of the world without relocating there.
      (Any 3 x 1 = 3 marks)
  4. Ways in which consumers may protect themselves against exploitation include:
    1. Inspecting goods before buying.
    2. Enlightening themselves about their rights as consumers.
    3. Familiarizing themselves with the obligations of traders.
    4. Forming consumer associations.
    5. Reporting cases of exploitation by traders to relevant authorities.
    6. Avoiding traders identified as exploiters.
    7. Demonstrate peacefully against the exploiter.
    8. Complain through the media.
      (Any 4x1 = 4 marks)
  5. Circumstances under which the following communication services may be used are:
    1. Paging - when there is need to call a person to attend to an emergency in a specific location.
    2. Facsimile (fax) - where there is need to send a copy of a printed document urgently.
    3. Radio call - when there is need to give co-ordinated information through a central point.
      (3x1 = 3 marks)

  6.                            Marigi Traders
                              Trading Account
                    for the year ended 30th June 2009
    Opening Stock                             165,000
    Add: Purchases                            720,000
    Cost of goods available for sale      885,000
    Less: Closing stock                       100,520
    Cost of goods sold                        784,480
    Gross profit (20/100 × 980,600)     196,120
    Sales       980,600

                                                                       (10 x ½ = 5 marks)
  7. Tools of monetary policy that may be used by a government to reduce excess money in circulation include:
    1. Open market operations - to sell government securities through the Central Bank
    2. Bank rate - raising interest rate on loans to banks.
    3. Cash/Liquidity ratio can be raised for commercial banks.
    4. Directives - can be given to commercial banks to charge higher interest rates on credit.
    5. Raising margin requirement - raise the value of assets required as security
    6. Selective credit control - freeze lending to some sectors of the economy.
    7. Increase compulsory deposits made by banks to the central bank.
    8. Use moral persuasion to reduce the supply of money
      (Any 4 × 1 = 4 marks)
  8. Circumstances under which each of the following types of inflation may occur include:
    1. Creeping inflation
      1. When the general price levels rise gradually over a period of time usually at single digit.
      2. Where the value of money tends to be stable over time and the effects on the economy is not severe.
        (Any 1 x 2 = 2 marks)
    2. Hyper inflation
      1. Where the general price levels rise at high rate usually more than two digits.
      2. Where there is drastic loss in the value of money and the effect on the economy is very severe
        (Any 1 x 2 = 2 marks)
  9. Forms of economic integration include:
    1. Common Markets to have a common currency to increase free trade and full mobility of factors of production.
    2. Free Trade Areas - where barriers such as tariffs and quotas are removed.
    3. Customs Unions -member countries charge common external tariffs.
    4. Economic Union - where common economic institutions like banks are set to deal with monetary policy.
      (4 x 1 = 4 marks)
  10. Problems of development planning that a country may experience include:
    1. Inadequate data on economic performance. 
    2. Unreliable data which may not be useful in planning. 
    3. Less qualified personnel to cope with the tasks of development planning.
    4. Private sector activities are not easily coordinated. 
    5. Political rigidity.
    6. Inappropriate use of technology.
    7. Unplanned population.
    8. Over-reliance on donor funding,
      (Any 4 x 1 = 4 marks)
  11. Benefits that a farming community would get from Nyaboke's shop include:
    1. They can buy farm inputs from the shop.
    2. They can buy consumer goods from the shop.
    3. They can get goods on credit.
    4. They can sell some of the farm produce to Nyaboke.
    5. The shop can be used as a communication centre.
    6. The shop can offer employment opportunities.
    7. The shop ensures steady supply of goods to them.
      (Any 4x1 = 4 marks)
  12. Features of indirect production include:
    1. Goods are produced for sale.
    2. Goods are produced in large quantities.
    3. There is specialization in production.
    4. High quality goods are produced
    5. Modern technology is extensively used.
    6. Promotes interdependence.
      (Any 4x1 = 4 marks)
  13. Factors that may lead to the success of a business include:
    1. Availability of capital.
    2. Developed infrastructure.
    3. Availability of skilled labour. 
    4. Government support.
    5. Access to markets.
    6. Aggressive marketing.
    7. Proper management of the business. 
    8. Availability of security.
    9. Political stability.
      (Any 4x1 = 4 marks)
  14. Ways in which a good filing system facilitates the operations in an office include:
    1. Easy retrieval of information.
    2. Office is kept tidy.
    3. Information is preserved for future reference
    4. Security of documents is ensured.
    5. Facilitates quicker decision making.
    6. Ensures confidentiality of information by controlling access by unauthorized people.
    7. Saves on office space.
      (Any 4 x 1 = 4 marks)
  15. Benefits that a country gets by encouraging trade among her citizens include:
    1. Facilitates exchange of goods between people from different regions.
    2. Creates employment opportunities.
    3. Earns tax revenue from businesses.
    4. Enhances relationships between communities.
    5. Opens up remote areas.
    6. Encourages specialization.
    7. Improves the standards of living for citizens.
    8. The country is able to dispose off her surplus produce.
      (Any 4 x 1 = 4 marks)
  16. Challenges that may be encountered in measuring national income using the output approach include:
    1. Deciding on what goods and services to include in measuring national income.
    2. Inadequate output data.
    3. Some activities earning income are considered illegal and not included in the measurement of national income.
    4. Determining the value of national output.
    5. How to value output in the subsistence sector.
    6. Deciding on the price to use for the goods that have been kept as stock.
    7. Problem of valuing government input as they are not factored at market rates.
      (Any 4 x 1 = 4 marks)
  17. Measures that a government may take to reduce the mortality rate in a country include:
    1. Availability of modern medicine.
    2. Improved standards of living.
    3. Minimizing internal conflicts and wars.
    4. Improving environmental sanitation.
    5. Sensitization on public and personal hygiene.
    6. Disaster preparedness e.g. on floods, fires.
    7. Effect traffic laws to curb road accidents.
    8. Control abuse of alcohol and drugs.
      (Any 4 x 1 = 4 marks)
    KCSE 2012 BS PP1 Ans S18PNG
                                                                          (10 x ½ = 5 marks)
  19. Entries to be made:
    1. Credit entry.
    2. Credit entry
    3. Debit entry.
    4. Debit entry.
      (4x1 = 4 marks)
  20. Documents to issue:
    1. Invoice.
    2. Debit Note.
    3. Receipt.
    4. Credit Note.
      (4x1 = 4 marks)
  21. Conditions under which a warehouse may be considered to be operating efficiently include:
    1. The warehouse should be conveniently located.
    2. The warehouse should be managed by qualified personnel.
    3. Operational procedures and guidelines should be in place.
    4. Security systems should be in place.
    5. Should have specialized buildings and equipment.
    6. Should have good communication network.
    7. Should ensure proper record keeping.
      (Any 4.x 1 = 4 marks)
  22. Advantages of promoting sales through the internet include:
    1. A firm can advertise goods universally
    2. Access to world markets for increased sales.
    3. Instant receipt of orders from all over the world.
    4. Payment received through electronic fund transfer EFT.
    5. Reduced paperwork on customer records.
    6. Reduced cost of sales promotion.
      (Any 4x1 = 4 marks)
  23. Methods of determining prices other than the forces of demand and supply include:
    1. Bargaining Haggling.
    2. Abiding by government policy
    3. Tendering - offers are invited to quote for a price. Goods are sold to buyers with the quotation that best meets Zawadi's expectations.
    4. Bidders make offers for goods and the bidder with the highest offer takes the goods (sale by auction).
    5. Retail price maintenance - sell goods according to the dictates of the producer
    6. Can make use of written, audio, visual and motion facilities.
    7. Offers faster delivery of adverts.
    8. Price discrimination.
      (Any 4 x 1 = 4 marks)
  24. Factors that a firm may consider when deciding on the goods to produce include:
    1. Expected demand - Where demand is low, a firm will only produce a few goods or not produce at all.
    2. Availability of capital resources - this would help decide on the level of production,
    3. Time period - the firm must consider whether short or long term production is required.
    4. Availability of labour - labour supply of the relevant skills would be required. 
    5. Cost of raw materials - the firm must consider availability and cost of buying and transporting raw materials.
    6. Government policy - the firm must abide by the rules and regulations of the country.
      (Any 4x1 = 4 marks)
  25. Features of a perfectly competitive market include:
    1. Large number of buyers and sellers.
    2. The buyers and sellers have perfect knowledge of the market conditions
    3. No government interference in the market.
    4. No transport costs are incurred.
    5. Free entry and exit of firms.
    6. There is perfect mobility of factors of production
    7. Both buyers and sellers are prize takers.
    8. There is perfect mobility of factors of production.
      (Any 4x1 = 4 marks)
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