BUSINESS STUDIES PAPER 1 - 2019 LANJET JOINT MOCK EXAMINATION

1. Atieno is employed as a filing clerk at ministry of land offices. Highlight four challenges that the office is facing as a result of Atieno’s incompetence.    (4 marks
2. For each of the following situations, name the most suitable means of payment to be used.            ( 4 marks)
   

   	Situation	Means
   a)	To pay salary of 50 employees using one cheque
   b)	Paying school fees for a student from Nairobi who is at Nakuru school
   c)	Paying insurance premium to UAP Insurance
   d)	Njoki wishes to transfer kshs 100,000 immediately from her account to Mwende’s account

3. Give four reasons why extractive level of production is the highest income earner in most third world countries.       (4 marks)
4. The following extract is from Manga traders as at 31^st December, 2018.
                                                                             Kshs.
   Capital                                                             2,000,000.
   Net profit                                                         500,000.
   Borrowed capital                                               1,430,000.
   Fixed assets                                                     2,880,000.
   Current assets                                                  2,350,000.
   Current liabilities                                              1,300,000.
   Determine:-
   1. Working capital (1 mk)
   2. Current ratio (1 mk)
   3. Capital employed (1 mk)
   4. Rate of return on capital employed (1 mk)
5. State four advantages of using social media to a business person.         (4 marks)
6. State whether the following taxes are direct or indirect          (4 marks)
   

   Type of tax	Classification
   a)      Sales tax
   b)      Corporate tax
   c)      Value added tax
   d)     Excise duty

7. Indicate four indicators of workers who are poorly motivated in an organization (4 marks)
8. Name four advantages of operating a public limited company             (4 marks)
9. Janet observed that there are many small scale retail businesses in her home town that are surviving despite the presence of large supermarkets. Write four reasons that may explain this scenario.       (4 mks)
10. In the transactions below, indicate whether the balance sheet totals are going to increase(+),decrease(-), or remain the same(No effect)             (4 mks)
    

    	Transaction	Effect
    a)	Sold some old furniture on credit
    b)	Borrowed a bank loan of Ksh 100,000 in cash
    c)	Sold stock worth Kshs 5,000 and was paid by cheque
    d)	The owner added kshs 20,000 to the business cash from personal sources

11. The following table represents the demand for tomatoes
    

    Price of tomatoes (Shs)	Quantity demanded of tomatoes per week (Kgs)
    50	10
    100	8
    150	6
    200	4
    250	2

    
    From the above demand schedule plot the demand curve for tomatoes.                            (4mks)

12. Highlight four challenges that a new entrepreneur faces when carrying out business activities.       (4mks)
13. Highlight four differences between monopoly and monopolistic market structures. (4mks)
14. Mention four features of capital as a factor of production.                        (4mks)
15. A TV set was sold for sh.20,000. If the buyer was allowed a trade discount of 5% and a cash discount of 2% if payment is made within a month. Determine the amount received by the seller if payment is made within 2 weeks.                                                (4 mks)
16. Give four reasons that make insurance companies decline to insure acts of nature such as earth quakes, floods, etc.          (4 mks)
17. The following information was extracted from the books of soma label traders on 31^st march, 2009
                                                                                            shs
    Stock(1^st April, 2008)                                                    650,000
    Purchases                                                                     2,400,000
    Sales                                                                            3,200,000
    Mark up                                                                        25%
    Stock ( 31^st march, 2009)                                               x
    Required:
    Use the information above to prepare a trading account for the year ended 31^st march, 2009.

18. Highlight four reasons why a business plan is important to a business unit. ( 4 marks)
19. Outline four reasons why different businesses merge                             (4 marks)
20. Name the element of transport represented by each of the following items (4 marks)
    

    Item	Element
    a)      Bus station
    b)      Bicycle
    c)      Railway line
    d)      Diesel engine

21. Mawingu company would like to erect billboards for product promotion purposes. Highlight four short comings of using this method       ( 4 marks)

22. Record the following transactions in the relevant ledger accounts of Karua’s business. ( 4 mks)
    1. Jan 20^th : the owner took stock worth kshs 1500 to his aunt while on a visit
    2. Feb 12^th : bought a business motor cycle worth shs 80,000 on credit from Nakuru motors ltd.
    3. March 18^th : withdrew shs. 10,000 from bank for business use
    4. Received an invoice on April 10^th from summer wholesalers worth sh 50,000.
23. Outline four drawbacks that accrue to a society that practice subsistence production.(4 marks)
24. Highlight four measures that the government may use to control demand pull inflation.      ( 4 marks)
25. Outline four reasons for maintaining a trial balance. ( 4 marks)

MARKING SCHEME

1. Atieno is employed as a filing clerk at ministry of land offices. Highlight four challenges that the office is facing as a result of Atieno’s incompetence. (4 marks)
   1. Insecurity/loss of documents.
   2. Access of information by unauthorized persons.
   3. Difficult to retrieve /access documents.
   4. Untidy/unpleasant office.
   5. Lack of confidentiality/secrecy.
   6. Poor communication.
   7. Loss of guarantee for future reference.

2. For each of the following situations, name the most suitable means of payment to be used.      ( 4 marks)
   

   	Situation	Means
   a)	To pay salary of 50 employees using one cheque	Credit transfer
   b)	Paying school fees for a student from Nairobi who is at Nakuru school	Bankers cheque/ bank draft
   c)	Paying insurance premium to UAP Insurance	Standing orders
   d)	Njoki wishes to transfer kshs 100,000 immediately from her account to Mwende’s account	Electrical fund tranfers

3. Give four reasons why extractive level of production is the highest income earner in most third world countries.     (4 marks)
   1. Poor technology to engage in other sectors.
   2. Existence of vast/abundant of natural resources.
   3. Government policies that favor agricultule.
   4. Shortage of capital for manufacturing.
   5. Lack of skills required for secondary stage
   6. Limited market for finished goods due to poverty.
   7. Favourable weather for agriculture.
   8. Negative cultural behaviours that difer growth of secondary sector.
   9. Presence of a large substance sector.

4. The following extract is from Manga traders as at 31^st December, 2018.
                                                        Kshs.
   Capital                                           2,000,000.
   Net profit                                       500,000.
   Borrowed capital                             1,430,000.
   Fixed assets                                   2,880,000.
   Current assets                                2,350,000.
   Current liabilities                             1,300,000.
   
   Determine:-
   
   
   1. Working capital =C.A-C.L
      =2,350, 000-1,300, 000 √
      =1,050,000√ 
   2.  
                              

5. State four advantages of using social media to a business person.   (4 marks)
   1. Immediate feedback from customers.
   2. Wide coverage/wider market.
   3. Can advertise/promote his products.
   4. Flexible- can be used outside office.
   5. Can sell online/ get orders.
   6. Message can be more detailed e.g. use of graphics, sound, photos.
   7. Can target specific customers.
   8. Easy to convince/persuade.

6. State whether the following taxes are direct or indirect                           ( 4 marks)
   

   Type of tax	Classification
   a)      Sales tax	Indirect
   b)      Corporate tax	Direct
   c)      Value added tax	Indirect
   d)     Excise duty	indirect

7. Indicate four indicators of workers who are poorly motivated in an organization (4 marks)
   1. More accidents/breakages.
   2. Aggressive /uncooperative.
   3. Late coming absenteeism.
   4. High level of antisocial behavior.
   5. High rate of claim of sickness.
   6. Leaving work earlier than expected.

8. Name four advantages of operating a public limited company
   1. Easy to raise capital.
   2. Continuity/ perpetrial existence.
   3. Has limited liability.
   4. Qualified management.
   5. Wider source of capital.
   6. Easy to transfer shares.

9. Janet observed that there are many small scale retail businesses in her home town that are surviving despite the presence of large supermarkets. Write four reasons that may explain this scenario.
   1. Easy to start.
   2. Belief that they are easy to manage.
   3. May offer credit.
   4. Easy to attract/ retain customers.
   5. Consumer’s ignorance.
   6. Nature of product being sold.
   7. Owner’s commitment due to personal interest.

10. In the transactions below, indicate whether the balance sheet totals are going to increase(+),decrease(-), or remain the same(RC)
    

    	Transaction	Effect
    a)	Decrease	(-)
    b)	Increase	(+)
    c)	No effect	(RC)
    d)	Increase	(+)

11. The following table represents the demand for tomatoes.
    

    Price of tomatoes (Shs)	Quantity demanded of tomatoes per week (Kgs)
    50	10
    100	8
    150	6
    200	4
    250	2

    From the above demand schedule plot the demand curve for tomatoes.       (4mks)
    

12. Highlight four challenges that entrepreneurs face when carrying out business activities. (4mks)
    1. Lack of skills.
    2. Competition
    3. Poor transport network.
    4. Lack of funds/ access to loans.
    5. High cost of finance.
    6. Regenerative culture.
    7. Lack of government support.
    8. Lack of b/s consultancy.
    9. High energy/fuel cost.
    10. Corruption/harassment.
13. Highlight four differences between monopoly and monopolistic market structures.(4mks)
    

    	monopoly		monopolistic
    1.	One supplier for entire market	1.	There are many sellers
    2.	Commodity does not have a close substitute	2.	Commodities similar but highly differentiated
    3.	Difficult for other forms to enter market	3.	No barriers to entry or exit
    4.	Firm spends only on informative adverting	4.	Heavy expenditure on persuasive advertising
    5.	There is price discrimination	5.	No price discrimination
    6.	Price fixed by supplier	6.	Interdependence in price fixing

14. Mention four features of capital as a factor of production.                (4mks)
    1. Its man-made
    2. Basic factors of production.
    3. Its subject to depreciation through wear/tear
    4. Can be improved through technology.
15. A TV set was sold for sh.20, 000. If the buyer was allowed a trade discount of 5% and cash discount of 2% if payment is made within a month. Determine the amount received by the seller if payment is made within 2 weeks. (4 mks)
    5/200 × 20000 = 1000
    Amount to be paid = 20,000-1000
    =19,000
    Cash discount = 2/100 × 19000 = 380
    Amount paid finally = 19,000-380=18,620

16. Give four reasons that make insurance companies decline to insure acts of nature such as earth quakes, floods, etc.
    1. The loss may affect many people at once.
    2. The value of loss may not be easily determined.
    3. Very few people may be willing to be involved to form a pool.
    4. Not easy to determine premiums to be paid.
    5. Loss is unpredictable.
    6. Possibility of risk occurring is certain.
17. the following information was extracted from the books of soma label traders on 31^st march, 2009
                                                                        shs
    Stock (1^st April, 2008)                                       650,000
    Purchases                                                       2,400,000
    Sales                                                              3,200,000
    Mark up                                                      25%
    Stock (31st march, 2009)                            x
    
    Required:
    
    Use the information above to prepare a trading account for the year ended 31^st march, 2009.
    

18. Highlight four reasons why a business plan is important to a business unit. ( 4 marks)
    1. A tool of raising capital.
    2. Helps in identifying strength and weakness.
    3. Assists in allocation of resources.
    4. Helps to avoid making mistakes.
    5. Provides a tool for control to avoid inefficiencies and wastage,
    6. It’s a motivating factor.
    7. Helps in controlling completion.
    8. Helps in reducing uncertainties and risks.

19. Outline four reasons why different businesses merge                             ( 4 marks)
    1. To eliminate wasteful completion.
    2. To expand capital base.
    3. Enjoy economic of scale.
    4. Attract credit facilities.
    5. Increase human resources.
    6. To earn high profits.
    7. Lower cost of operation.
    8. Enable diversification of operation.

20. Name the element of transport represented by each of the following items ( 4 marks)
    

    Item	Element
    a)      Bus station	Terminal
    b)      Bicycle	Unit of carriage
    c)      Railway line	Way
    d)      Diesel engine	Methods of propulsion

21. Mawingu Company would like to erect billboards for product promotion purposes. Highlight four short comings of using this method ( 4 marks)
    1. Prone to vandalism.
    2. Exposed to elements of weather.
    3. Not useful to the blind.
    4. Can distract motorists.
    5. Can be easily ignored. –they are silent
    6. Do not target a particular group.
    7. May be too many in one place hence not effective.

22. Record the following transactions in the relevant ledger accounts of Karua’s business. ( 4 mk)
    1. Jan 20^th : the owner took stock worth kshs 1500 to his aunt while on a visit
    2. Feb 12^th: bought a business motor cycle worth shs 80,000 on credit from Nakuru motors ltd.
    3. March 18^th: withdrew shs. 10,000 from bank for business use
    4. Received an invoice on April 10^th from summer wholesalers worth sh 50,000.
       

23. Outline four drawbacks that accrue to a society that practice subsistence production.   (4 marks)
    1. Poor quality goods.
    2. Low standard of living.
    3. Production in small scale.
    4. No mechanization/specification.
    5. Lack of creativity/innovation.
    6. Highlight four measures that the government may use to control demand pull inflation. ( 4 marks)
    7. Increase lending rates selling government secunutues.
    8. Increase cash liquidity ratio.
    9. Increase compulsory deposits.
    10. Selective credit control.
    11. Reduce government spending.
    12. Increase income taxes.
    13. Control wages and salaries.

25. Outline four reasons for maintaining a trial balance. ( 4 marks)
    1. Check accuracy of ledgers.
    2. Summary of information in ledgers.
    3. Quick reference of balances.
    4. For preparation of financial accounts.