Business Studies Paper 1 Questions and Answers - Sukellemo Joint Mock 2020/2021

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SUKELLEMO JOINT MOCK
Kenya Certificate of Secondary Education
BUSINESS STUDIES
PAPER 1

2 HOURS

Instructions to Candidates

  • Answer all the questions
  1. State the most appropriate document as used in home trade. (4mks)
    Circumstances  Document 
     a) A document that contains detailed information
    of a good stocked by a seller
     
     b) A document that shows that the amount owed
    have been reduced by a certain amount
     
     c) A document that contains all information on all transactions
    between a buyer and the seller for a certain period of time
     
     d) Shows that goods have been dispatched
    by a seller to the buyer.
     
  2. Highlight four reasons that compel an insurance company to re-insure. (4mks)
  3. The following items belong to Mlamba Wholesalers as at 31st Dec 2018
    Motor vehicle 75,000
    Stock 4,000
    Overdraft 11,100
    Creditors 5,740
    Debtors 6,200
    Commission paid 2,000
    Cash 10,000
    Returns Outwards 3,400
    Returns Inwards 1,400
    Capital 78,360
    Required, draw Mlamba’s trial balance as at 31st December 2018. (5mks)
  4. The bodaboda motorcycles are very popular both in urban and rural environment. Highlight four disadvantages of this method of transport. (4mks)
  5. With an aid of a diagram, show what happens to the equilibrium price and quantity when demand increases and quantity supplied remains constant. (4mks)
  6. Give four differences between shares and debentures (4mks)
  7. National income under expenditure approach in arrived by adding together expenditure on all final goods and services in the economy. List down four components included in the expenditure approach. (4mks)
  8. Kenya’s young population has been rising rapidly, highlight four disadvantages of this increase. (4mks)
  9. Given the following transactions of Mwaura’s Retailers, identify the journals which the transactions will be recorded. (4mks)
    1. 1st Jan: Sold a motor car worth kshs.145, 000/- for kshs. 140,000/- to Mwazighe on credit.
    2. 2nd May: Cash received from Mwanzi of Kshs. 1,000 receipt no 001.
    3. 6th August: Goods bought on credit worth Kshs. 900 invoice No. 013 from Shah Traders.
    4. 4th February: Credit sales to Ndika Shs 400/-
  10. County Government wants to increase taxes levied on parking. Highlight four principles that they should consider before taking this move. (4mks)
  11. Highlight four methods government gets involved in business activities. (4mks)
  12. Highlight four costs that intermediaries relieves producers from in the process of distributing goods and services. (4mks)
  13. Buketi provided us with the following information.
    Sales   200,000
    Mark up  ¼
    Opening stock  30,000 
    Closing stock  25,000 
    Expenses 15,250 
    Calculate
    1. Gross profit (1mk)
    2. Net profit (1mk)
    3. Rate of stock turnover (2mks)
  14. If you are asked to head a committee to buy some office equipment, suggest four factors that you would put into consideration. (4mks)
  15. Highlight four reasons that would make a trader reject payment by cheque. (4mks)
  16. State whether the following factors constitute internal or external environment to a business. (4mks)
    Factor  Environment 
    a) Shareholders resolutions  
    b) Firms physical infrastructure   
    c) Currency exchange rate  
    d) Cost of finance  
  17. State four features of oligopoly market structure (4mks)
  18. The following transactions relate to Kimau traders for the month of January, 2018
    4th Jan: Deposited sh 70,000 into business bank account from cash till.
    10th Jan: Paid the following bills by cheque:
    Electricity sh 4,000
    Insurance sh 2,000
    20th Jan: Paid 10,000 by cheque for repairs
    Required: Record the transactions in the relevant ledger accounts (4mks)
  19. Company X intends to use personal selling as a method of product promotion. State four disadvantages of using this method. (4mks)
  20. The balance sheet of Peken Enterprises as at 31st March , 2017 showed an initial capital of sh 85,000. As at 31st March 2018, the following information about the business was provided.
    1. Additional investment in the business was sh 30,000
    2. Profit made during the trading period was sh 60,000
    3. The proprietor made monthly drawings of sh 3,000 from 1st April 2017 to 31st December,2017
      Determine the final capital of Peken Entreprises. (4mks)
  21. State any four reasons why many businesses shy away from using public warehouse. (4mks)
  22. List four functions of central bank as a banker to government. (4mks)
  23. Highlight four reasons why the government may encourage businesses to be located all over the country. (4mks)
  24. Highlight four services that facilitates communication to take place in Kenya. (4mks)
  25. Highlight three characteristics of human wants (3mks)

MARKING SCHEME

  1. State the most appropriate document as used in home trade. (4mks)
    Circumstances  Document 
     a) A document that contains detailed information
    of a good stocked by a seller
     Catalogue
     b) A document that shows that the amount owed
    have been reduced by a certain amount
     Debit Note
     c) A document that contains all information on all transactions
    between a buyer and the seller for a certain period of time
     Statement of account
     d) Shows that goods have been dispatched
    by a seller to the buyer.
     Advice note
  2. Highlight four reasons that compel an insurance company to re-insure. (4mks)
    • Value of the property
    • High risk of loss
    • Number of risk covered
    • Need to spread risks
    • Government policy

  3. The following items belong to Mlamba Wholesalers as at 31st Dec 2018
    Motor vehicle 75,000
    Stock 4,000
    Overdraft 11,100
    Creditors 5,740
    Debtors 6,200
    Commission paid 2,000
    Cash 10,000
    Returns Outwards 3,400
    Returns Inwards 1,400
    Capital 78,360
    Required, draw Mlamba’s trial balance as at 31st December 2018. (5mks)
    • Mlamba’s Wholesalers
          Trial Balance
      As at 31st Dec, 2020
      Items DR CR
      Motor vehicle 75,000  
      Stock 4,000  
      Overdraft   11,100
      Creditors   5,740
      Debtors 6,200  
      Commission paid 2,000  
      Cash 10,000  
      Returns Outwards   3,400
      Returns Inwards 1,400  
      Capital   78,360
      Total 98,600 98,600
  4. The bodaboda motorcycles are very popular both in urban and rural environment. Highlight four disadvantages of this method of transport. (4mks)
    • Causes noise pollution
    • Over speeding that my result to accidents or death
    • Affected by extreme weather conditions
    • Carries limited capacity of goods
    • Not suitable for long distances.
    • Not suitable for bulky or heavy goods
    • Some results in social evils e.g theft

  5. With an aid of a diagram, show what happens to the equilibrium price and quantity when demand increases and quantity supplied remains constant. (4mks)
    Bsukpp1q5
  6. Give four differences between shares and debentures (4mks)
    Shares Debentures 
    Shares are certificate of ownership of a company  Debenture are certificate of indebtness of a company 
    Shares are irredeemable  Debentures are redeemable
    Shares have voting rights  Debentures have no voting rights
    Earns dividends  Earns interest 
    During dissolution of company shares are paid last.  During dissolution of a company debentures are paid first
    Shares are units of capital in a company  Debentures are units of a loan given to the company 
    Dividend rates on ordinary shares are based on profits  Interest rates for debentures are fixed at the time of issue. 
  7. National income under expenditure approach in arrived by adding together expenditure on all final goods and services in the economy. List down four components included in the expenditure approach. (4mks)
    • Government spending (G)
    • Expenditure on capital good (I)
    • Expenditure on goods by the public(C)
    • Expenditure on net export(X-M)

  8. Kenya’s young population has been rising rapidly, highlight four disadvantages of this increase. (4mks)
    • High dependency ratio
    • High rate of unemployment
    • Increased social evils
    • Low labour supply
    • Pressure on goods and services
    • Reduced saving and investments
    • Diversion of government expenditure

  9. Given the following transactions of Mwaura’s Retailers, identify the journals which the transactions will be recorded. (4mks)
    1. 1st Jan: Sold a motor car worth kshs.145, 000/- for kshs. 140,000/- to Mwazighe on credit. General journal
    2. 2nd May: Cash received from Mwanzi of Kshs. 1,000 receipt no 001. - Cash receipts journal
    3. 6th August: Goods bought on credit worth Kshs. 900 invoice No. 013 from Shah Traders. - Purchases journal
    4. 4th February: Credit sales to Ndika Shs 400/- - Sales journal

  10. County Government wants to increase taxes levied on parking. Highlight four principles that they should consider before taking this move. (4mks)
    • Maximum social benefit
    • Good financial management
    • Economy in spending
    • Sanction of public spending
    • Elasticity
    • Equity
    • Productivity
    • Surplus

  11. Highlight four methods government gets involved in business activities. (4mks)
    • Regulation
    • Training
    • Trade promotion
    • Provision of public utilities
    • Enabling environment

  12. Highlight four costs that intermediaries relieves producers from in the process of distributing goods and services. (4mks)
    • Transportation costs
    • Storage costs
    • Insurance costs
    • Salaries and wages costs
    • Breaking bulk costs
    • Packing costs
    • Costs of accumulation of bulk

  13. Buketi provided us with the following information.
    Sales   200,000
    Mark up  ¼
    Opening stock  30,000 
    Closing stock  25,000 
    Expenses 15,250 
    Calculate
    1. Gross profit (1mk)
      • Gross profit= Mark-up/Cost of salesx100
        Margin=1/4+1=1/5√
        1/5=x/200,000
        Gross profit=40,000√

    2. Net profit (1mk)
      • Net profit=Gross profit-expenses
        =40,000-15,250√
        =24,750√

    3. Rate of stock turnover (2mks)
      • Rate of stock turnover=Cost of sales/Average stock
        Cost of sale= Sales-gross profit
        =200,000-40,000√
        =160,000√
        ROSTO=160,000/average stock
        =160,000/27,500√
        =5.8 times√

  14. If you are asked to head a committee to buy some office equipment, suggest four factors that you would put into consideration. (4mks)
    • Cost
    • Adaptability
    • Possibility of hiring rather than purchasing
    • Durability
    • Effect on staff morale
    • Availability of complementary resources
    • Availability of manpower
    • Availability of room
    • Security of the equipment

  15. Highlight four reasons that would make a trader reject payment by cheque. (4mks)
    • The trader will be required to deposit the cheque in the bank.
    • Cheque may be dishonored.
    • The trader must have an account with the bank.
    • The trader will incur some bank charges thus reducing his/her profits.
    • Cheques takes time to mature

  16. State whether the following factors constitute internal or external environment to a business. (4mks)
    Factor  Environment 
    a) Shareholders resolutions  Internal
    b) Firms physical infrastructure   Internal
    c) Currency exchange rate  External
    d) Cost of finance  External
  17. State four features of oligopoly market structure (4mks)
    • There are a few large firms controlling a large share of the market.
    • There is interdependence in pricing and output
    • Some firms have their products differentiated.
    • Products are close substitutes.

  18. The following transactions relate to Kimau traders for the month of January, 2018
    4th Jan: Deposited sh 70,000 into business bank account from cash till.
    10th Jan: Paid the following bills by cheque:
    Electricity sh 4,000
    Insurance sh 2,000
    20th Jan: Paid 10,000 by cheque for repairs
    Required: Record the transactions in the relevant ledger accounts (4mks)
    Dr Bank a/c Cr
    Date Particulars Folio Amount   Date Particulars Folio Amount
    4th Jan Cash   70,000  

    10th Jan

    20th Jan

    20th Jan

    Electricity

    Insurance

    Repairs

     

    4,000

    2,000

    10,000


    Dr Cash a/c Cr
    Date Particulars Folio Amount   Date Particulars Folio Amount
               4th Jan  Bank    70,000

    Dr Electricity a/c Cr
    Date Particulars Folio Amount   Date Particulars Folio Amount
     10th Jan  Bank    4,000          

    Dr Insurance a/c Cr
    Date Particulars Folio Amount   Date Particulars Folio Amount
     10th Jan  Bank    2,000          

    Dr Repairs a/c Cr
    Date Particulars Folio Amount   Date Particulars Folio Amount
     20th Jan  Bank    10,000          
  19. Company X intends to use personal selling as a method of product promotion. State four disadvantages of using this method. (4mks)
    • It is expensive it requires trained salespersons who are expensive to hire
    • It is time consuming as salespersons need to walk around.
    • Not suitable where the market is widely spread
    • Managers cannot measure the success of this kind of promotion.
    • It is labour intensive
    • Sales persons may misuse resources eg vehicles
    • Difficult to persuade consumers if sales person lack etiquette.
    • It may inconvenience prospective buyer’s programme.

  20. The balance sheet of Peken Enterprises as at 31st March , 2017 showed an initial capital of sh 85,000. As at 31st March 2018, the following information about the business was provided.
    1. Additional investment in the business was sh 30,000
    2. Profit made during the trading period was sh 60,000
    3. The proprietor made monthly drawings of sh 3,000 from 1st April 2017 to 31st December,2017
      Determine the final capital of Peken Entreprises. (4mks)
      • Final capital= Opening capital+profit+Additional investment-drawings
        =85,000+30,000+60,000 - (3,000x9)
        = 175,000 - 27,000
        =148,000

  21. State any four reasons why many businesses shy away from using public warehouse. (4mks)
    • Hirer may not have an opportunity to physical handle goods
    • Hirer may get poor services
    • During peak season the hirer may miss space due to high competition
    • Long procedure in receiving and releasing of goods
    • Continuous renting of space may be expensive
    • Public warehouse may be located away from the hirer thus incurring extra costs.

  22. List four functions of central bank as a banker to government. (4mks)
    • Collecting credit on behalf of the government from various organization
    • Get credit on behalf of the government
    • Making payment on behalf of the government
    • Give advice to the government on financial issues
    • Receive payments on behalf of government from foreign donors, taxes or custom duty.

  23. Highlight four reasons why the government may encourage businesses to be located all over the country. (4mks)
    • In order to reduce rural-urban migration.
    • To encourage balanced regional development.
    • To provide employment opportunities to people living in rural areas.
    • To encourage utilization of local raw materials.
    • To encourage firms to bring goods and services closer to people in the rural areas.
    • In order to reduce effects caused by occurrence of war, terrorism or natural calamities
    • To provide market for locally produced raw materials
    • Local communities will get produced goods without having to travel far

  24. Highlight four services that facilitates communication to take place in Kenya. (4mks)
    • Mailing services / postal services
    • Telecommunication services
    • Courier services
    • Broadcasting services
    • Print media services
    • Online services.

  25. Highlight three characteristics of human wants (3mks)
    • Insatiable
    • recurrent
    • Compete for attention
    • vary with urgency and intensity
    • Require resources
    • Some are universal.


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