Business Studies Paper 1 Pre Mock Questions and Answers - Mokasa I Joint Examination July 2021

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Instructions to candidates:

  1. Write your name, class, index number, admission number, signature and date of the examination.
  2. Answer all questions in the spaces provided.
  3. The question paper has 9 printed pages. Please check to ensure all questions are printed and no question is missing.


QUESTIONS

  1. Mention the four essential elements of transport (4mks)
  2. Give four reasons why shelter is a basic human want. (4mks)
  3. For each of the following source documents, identify the book of original entry in which the information will be recorded. (4mks)
    Source document Book of original entry

     

    Source document

    Book of original entry

    a.

    Received credit notes

     

    b.

    Cash receipts received

     

    c.

    Received invoices

     

    d.

    Issued credit notes

     
  4. Mention four assumptions in the circular flow of income in a two sector economy (4mks)
  5. Outline four benefits of a youthful population to an economy. (4mks)
  6. State whether the following transactions will increase, decrease or have no effect on the balance sheet items and totals (4mks)

     

    Transaction

    Assets

    Capital

    Liabilities

    Totals

    a.

    Took a loan from KCB and used it to pay a KIE loan

           

    b.

    Bought furniture and paid by cheque

           

    c.

    Took stock of goods and donated to a local church

           

    d.

    Sold stock of goods on credit at a profit

           
  7. Highlight four features of the oligopoly market structure (4mks)
  8. Define the following principles as used in insurance (4mks)
    1. Indemnity
    2. Utmost good faith
    3. Subrogation
    4. Contribution
  9. Complete the following diagram (4mks)
    BUSINESS 1 JGAJHD
  10. Outline four importance of entrepreneurship in an economy. (4mks)
  11. Highlight four advantages of a public warehouse to a trader. (4mks)
  12. State the level of production that matches the following occupations (4mks)

     

    Occupation

    Level of production

    a.

    Carpentry

     

    b.

    Lumbering

     

    c.

    Fishing

     

    d.

    Banking

     
  13. Highlight four ways in which the internal business environment may affect a business negatively. (4mks)
  14. State four sources of capital to public limited companies. (4mks)
  15. Outline four circumstances under which personal selling may be appropriate in product promotion. (4mks)
  16. The following transactions were obtained from the books of Kimende Traders for the month of February 2017.
    2nd Feb. 2017. Opening balance: cash in hand kshs 500,000 and cash at bank kshs 50,000.
    3rd Feb. 2017. James, a debtor, paid kshs 20,000 by cheque.
    5th Feb 2017. Purchased a motor vehicle worth kshs 300,000 from Shah Motors on credit.
    Required: Record the transactions in the relevant ledger accounts (4mks)
  17. State four reasons for popularity of WhatsApp as a trend in communication. (4mks)
  18. State four benefits that may accrue to a firm as a result of growth of the industry. (4mks)
  19. The following information was extracted from the books of Kemei Traders for the month of December 2010;
    Opening stock Shs. 60,000
    Sales Shs. 360,000
    Gross profit 25% of sales
    Closing stock Shs. 70,000
    Calculate;
    1. Mark-up (2mks)
    2. Rate of stock turn over (2mks)
  20. Highlight four reasons why the government trains potential entrepreneurs. (4mks)
  21. Complete the table below. (4mks)

    Assets

    Capital

    Liabilities

    100,000

               a.

    35,000

           b.

    112,000

    80,000

    310,000

    100,000

        c.

        d.

    140,000

    60,000

  22. Give four reasons why a producer may prefer to sell directly to consumers. (4mks)
  23. Highlight four reasons for the shift below. (4mks)
    BUSINESS 2GHJUSHGJHFS
  24. Highlight four reasons why most organizations prefer locating their offices in the outskirts of town. (4mks)
  25. Below is a two column cashbook showing the transactions which took place in the business of Anyango in the month of June the year 2003.
    Dr                                                  Two column cashbook C                                                                                            r

    DATE

    DETAILS

    F

    CASH

    BANK

    DATE

    DETAILS

    F

    CASH

    BANK

    1/6/03

    Bal b/d

     

    15,000

     

    1/6/03

    Bal b/d

       

    20,000

    3/6/03

    Onyango

       

    35,000

    7/6/03

    Rent

     

    5,000

     

    10/6/03

    Bank

     

    10,000

     

    10/6/03

    Cash

       

    10,000

             

    15/6/03

    Onyango

       

    35,000

    30/6/03

    Bal c/d

       

    30,000

    30/6/03

    Bal c/d

     

    10,000

     
         

    15,000

    65,000

         

    15,000

    65,000

    State the transaction that took place during the following dates: (4mks)
    1. 1st June 2003.
    2. 7th June 2003.
    3. 10th June 2003.
    4. 15th June 2003


MARKING SCHEME

  1. The essential elements of transport (4mks)
    • The way
    • The unit of carriage
    • Method of propulsion
    • Terminals
  2. Reasons why shelter is considered a basic want. (4mks)
    • Shelter protects us from wild animals.
    • It prevents diseases.
    • For purpose of privacy
    • Provides space for relaxation and sleeping.
    • Provides warmth to the body.
    • Protects man against adverse weather conditions.
    • For storage of basic wants.
  3. The book of original entry in which the information will be recorded. (4mks)

     

    Source document

    Book of original entry

    a.

    Received credit notes

    Purchase returns journal

    b.

    Cash receipts received

    Cash payment journal

    c.

    Received invoices

    Purchase journal

    d.

    Issued credit notes

    Sales returns journal

  4. Assumptions in the circular flow of income in a two sector economy (4mks)
    • Existence of two sectors only. It is assumed that the economy has only two sectors that is households and firms. The households provide the factors of production while firms are involved in the production of goods and services.
    • Total spending by households. It is assumed that the households spend all their income on the goods and services produced by the firms i.e. no savings.
    • Total spending by the firms. It is assumed that the firms spend the money received from the sale of goods and services to pay for the rewards of production factors.
    • Lack of government intervention. The government does not influence how the firms and households carry out their activities. Such interventions are in the form of taxes, price controls among others.
    • Closed economy. Exports and imports do not exist in such an economy.
  5. Benefits of youthful population to an economy. (4mks)
    • Provide large and cheap labour force
    • Market for products demanded by the youth
    • Greater invention and innovation
    • Provide a large tax base for the country
    • Provides a more mobile labour force
  6. Effects of transactions on the balance sheet items and totals (4mks)

     

    Transaction

    Assets

    Capital

    Liabilities

    Totals

    a.

    Took a loan from KCB and used it to pay a KIE loan

    No effect

    No effect

    No effect

    No effect

    b.

    Bought furniture and paid by cheque

    No effect

    No effect

    No effect

    No effect

    c.

    Took stock of goods and donated to a local church

    Decrease

    decrease

    No effect

    Decrease

    d.

    Sold stock of goods on credit at a profit

    Increase

    Increase

    No effect

    Increase

  7. Features of the oligopoly market structure (4mks)
    • Has few large sellers and many buyers.
    • The firms are interdependent among themselves especially in their output and pricing.
    • Non-price competition, firms are in a position to influence the prices. However, they try to avoid price competition for the fear of price war.
    • There is barriers to entry of firms due to reasons such as; requirement of large capital, Ownership of production rights, control over crucial raw materials, Restrictive practices etc
    • High cost of selling through methods of advertisement due to severe competition.
    • Products produced are either homogeneous or differentiated.
    • Uncertain demand curve due to the inter-dependence among the firms. Hence the shifting of the demand curve is not definite.
    • There is price rigidity i.e. once a price has been arrived at in an oligopolistic market, it tends to remain stable.
  8. Define the following principles as used in insurance (4mks)
    1. Indemnity
      • During compensation, insurance aims to reinstate the insured back to the financial situation he/she was just before the risk occurred
    2. Utmost good faith
      • When taking an insurance policy or making a claim, the insured is expected to disclose all material facts to the insurer.
    3. Subrogation
      • Once the insured has been compensated appropriately, any other benefits that he/she may get will revert to the insurer.
    4. Contribution
      • In case of double insurance, any compensation due to an insured will be paid by the insurers in an agreed proportion so as to conform to the principle of indemnity
  9. Complete the following diagram (4mks)
    BUSINESS 1 JGAJHD
    1. Home trade
    2. Wholesale trade
    3. Foreign trade
    4. Export trade
  10. Importance of entrepreneurship in an economy. (4mks)
    • Creation of employment to the owner and others
    • Formation of capital from profits made and salaries and wages paid to workers
    • Raising standards of living due to access to varieties of goods and services
    • Encourages utilization of local resources that could have been left idle.
    • Improving infrastructural facilities like roads, security etc
    • Savings on imports
    • Reducing foreign dominance of the economy
    • Promotion of technology/promotion of innovation, research and development
    • Promotion of entrepreneurial culture/helps in the creation of role models
    • It contributes to government revenue
    • It promotes economic growth
    • It may promote self-actualization and esteem.
  11. Advantages of a public warehouse to a trader. (4mks)
    • A trader can get a short-term loan by using goods stored in the warehouse as security.
    • Goods are stored against risks such as damage by fire.
    • Traders do not incur the high initial cost of constructing their own warehouse.
    • Trader can look for the market for goods while they are still in the warehouse.
  12. Level of production that matches the following occupations (4mks)

     

    Occupation

    Level of production

    a.

    Carpentry

    Secondary

    b.

    Lumbering

    Primary

    c.

    Fishing

    Primary

    d.

    Banking

    Tertiary

  13. Ways in which internal business environment may affect business negatively. (4mks)
    • Poor business structure may lead confusion.
    • Inadequate finances hampering resource acquisition.
    • Poor business culture leading to wastage of time.
    • Non-committal owner leading to poor management.
    • Unskilled personnel leading to poor implementations of decisions.
    • Lack of innovation and invention leading poor quality production
  14. Sources of capital to public limited companies. (4mks)
    • ale of shares
    • Sale of debentures
    • Profits ploughed back
    • Loans from financial institutions
    • Renting and leasing out property
    • Disposal of assets
    • Purchase of goods on credit
  15. Circumstances under which personal selling may be appropriate in product promotion. (4mks)
    • When the product is being launched in the market.
    • Where the firm is financially able to finance sales persons.
    • When the product is tailored to meet customers specification.
    • Where the product is of high value.
    • Where it is necessary to demonstrate the use of the product.
    • Where the market is limited to a small local area.
  16. The following transactions were obtained from the books of Kimende traders in the month of February 2017.
    2nd Feb. 2017. Opening balance cash in hand kshs 500,000 and cash at bank kshs 50,000.
    3rd Feb. 2017. James, a debtor, paid kshs 20,000 by cheque.
    5th Feb 2017. Purchased a motor vehicle worth kshs 300,000 from Shah motors on credit.Capital account
    Capital account   cash account
      2/2/17 cash 500,000 2/2/17 capital 500,000  
      2/2/17 bank 50,000    
     Bank account  James account
    3/2/17 James 20,000      3/2/17 bank 20,000
     Motor vehicle account  shah motors account
    5/2/17 shah motors 300,000     5/2/17motor veh.300000
  17. Reasons for popularity of WhatsApp as a trend in communication. (4mks)
    • It offers unlimited messaging
    • It has no hidden costs
    • It offers international messaging
    • It is simple to use
    • Video calling available
    • It is possible to send documents
  18. Benefits that may accrue to a firm as a result of growth of the industry. (4mks)
    • Easier access to labour- where many firms are located in one area a pool of labour of various skills is usually available. Therefore firms relocating to the area find it easy to obtain.
    • Improved/efficient infrastructure- usually where many firms are located, infrastructure would be highly developed e.g. roads, power, water and communication facilities. Firms relocating in that area thus enjoy the services of infrastructure already in place.
    • Firms may be able to dispose off their waste product easily
    • Ready market may be available from the surrounding firms
    • Readily available services such as banking, insurance and medical care
    • Adequate supply of power due to large volume of consumption e.t.c
  19. The following information was extracted from the books of Kemei traders for the month December 2010;
    Opening stock shs60,000
    Sales shs 360,000
    Gross profit 25% of sales
    Closing stock 70,000
    Calculate;
    1. Mark-up. (2mks)
      Mark-up= Gross profit/cost of sales
      = 90000/270000
      = 1/3
    2. Rate of stock turnover. (2mks)
      ROSTO= C.O. S/A.S
      = 270000/65000
      = 4.15Times
  20. Reasons why the government trains potential traders. (4mks)
    • Expose them to modern developments in management.
    • Educate them on efficient methods of operating business.
    • Expose business people to problems facing them and their possible solution.
    • Impart proper business ethics.
    • Educate them on how to use available resources to minimize costs and maximize profits.
    • Inform them on various available profitable business opportunities in their environment.
    • Expose them to government policies regarding business activities in the country.
  21. Complete the table (4mks)

    Assets

    Capital

    Liabilities

    100,000

     65,000

    35,000

    192,000

    112,000

    80,000

    310,000

    100,000

    210,000

    200,000

    140,000

    60,000

  22. Reasons why a producer may prefer to sell directly to consumers. (4mks)
    • Financial strength. Can use own retail outlets established in the market.
    • Number of established /regular customers. If the established number is low, then direct sales are viable.
    • Perishable goods. There is need to reach customers fast to avoid spoilage.
    • Technical goods. So that he can demonstrate how they are used.
    • Feedback required. In order to get quick response from the customer about their feelings on the product.
    • Scale of production. When the producer has a small amount of output can sell directly
    • Need to keep prices low. Producers may want to control prices and keep them low by avoiding middlemen.
    • Customer specification. If customers order goods directly, then direct sales are done. 
    • Concentrated markets. Where large markets are concentrated and accessible, then direct sales can be done.
    • Government policy. When the government dictates that direct sales be done
    • Sensitive goods. To be handled by producers themselves direct to consumers.
    • Nature of the consumers. If customers can afford to buy large quantities, then direct sales can be done.
    • Profit maximization. Producers may want to by-pass middlemen to leap maximum profits from direct sales.
    • Level of competition. If there is stiff competition, the producer may sell directly to consumers to capture the market and outdo other products of competitors.
    • When goods are quite expensive for middlemen, then the producer has no option but shoulder all the sales direct to consumers.
  23. Reasons for the shift of supply curve to the left. (4mks)
    • Increase in the cost of production
    • Shortage of factors of production
    • Decrease in the levels of technology
    • Unfavourable government policies such as an increase in tax
    • Future expectation of an increase in price
    • Unfavourable natural factors e.g. floods
    • Wrong timing. E.g agricultural products are only available during certain times.
    • Withdrawal of firms from the industry
  24. Reasons why most organizations prefer locating their offices in the outskirts of town. (4mks)
    • To get ample parking space.
    • Enough space for future expansion.
    • Avoid traffic jam.
    • To avoid noise interruptions associated with CBD.
    • Cuts on rental charges/cost.
  25. Nature of transactions. (4mks)
    1. Began business with cash in hand Sh.15,000 and a bank overdraft of sh. 20,000
    2. Rent of sh. 5,000 was paid in cash.
    3. Sh.10,000 was withdrawn from Bank for office use.
    4. A cheque of sh. 35,000 from Onyango was dishonored.
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