Business Studies Paper 1 Questions - Alliance Girl's High School Mock December 2020

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1. The following statements relates to the discipline that make up business studies. Match the statement with the appropriate discipline.

Statement Discipline 
a) Systematic way of recording business transactions for future reference  
b) Study of trade and aids to trade   
c) Study of how human beings strive to satisfy their endless wants using available scarce resources  
d) All activities that take place in the office  

2. State four reasons why Otiato a graduate at university of Nairobi would prefer to start his own business rather than seeking employment from established firms. (4mks)
3. State four characteristics of economic resources. (4mks)
4. Highlight four features of indirect production. (4mks)
5. Outline four challenges faced by an organization that uses machines in most of their operations. (4mks)
6. List any four sources of business ideas. (4mks)
7. State four advantages of shopping in a supermarket. (4mks)
8. Highlight four limitations that a sole trader faces in his business. (4mks)
9. Mention any four types of public utilities. (4mks)
10. State four stakeholders that are interested in the balance sheet of a public limited company, (4mks)
11. Outline any four barriers to effective communication (4mks)
12. List four activities that take place in a warehouse. (4mks)
13. State four methods used to determine the price of a product. (4mks)
14. Highlight four advantages of localization of firms. (4mks)
15. Outline four assumptions of monopolistic competition market structure (4mks)
16. State four uses of national income statistics. (4mks)
17. Classify each of the following items of government expenditure as either development or recurrent.

Item  Type of expenditure 
a. Payments of teachers salaries  
b. Purchase of medicine for hospitals  
c. Purchase of tractors for agricultural use  
d. Construction of a new road  

18. Highlight four negative effects of inflation to an economy. (4mks)
19. The following information was extracted from county X and Y for the year 2008 - 2009.

  Country X Sh (Billions)  County Y Sh (billions)
Visible imports   3400  249,526
Invisible imports  1000  79,800
Visible exports  3100  148,798
Invisible exports  1900  155,559


  1. Country X balance of trade. (1mk)
  2. Country Y balance of trade. (1mk)
  3. Country X balance of payments. (1mk)
  4. Country Y balance of payments (1mk)

20. For each of the following transactions, indicate in the spaces provided, the book of original entry in which the transaction would be recorded

Transaction.  Book of original entry. 
a. Bought office furniture on credit.  
b. Withdrew cash for personal use.  
C. Sold goods on credit.  
d. Returned goods bought for sale on credit  

21. The following account balances here extracted from the books of Wairimu Traders on 30th November 2009.

Sales                                600,000
Closing stock                     220,000
Return Inwards                  60,000
Purchases                          340,000
Opening stock                    240,000


  1. Selling margin (2mks)
  2. Rate of stock turnover. (2mks)

22. Given below is the balance sheet of Langat Traders as at 1st August 2020

 Langat Traders
Balance sheet
As at 1st Aug 2020 
   Shs.    Shs.
Furniture  80,000 Capital  136,000
Stock  45,000 Creditors  20,00
Cash at bank  26,000    
cash in hand  5,000    
   156.000    156.000

On 2nd Aug 2020, the business had the following transactions

  1. Purchased a motor van for shs. 400,000 on credit from GT Motors.
  2. Paid a creditor for shs. 2,000 in cash
  3. Bought furniture for shs.13,000 and paid by cheque Prepare Langat Traders balance as at 2nd Aug 2020 (3mks)

23. For each of the ledger accounts given in the table below indicate the ledge in which the accounts are kept. (5mks)

Ledger account  Ledger 
 J.M Kimani ( a debtor)  
 Furniture and fitting  
 Omollo (a creditor)  
 Cash in hand  

24. Highlight four services rendered by wholesalers to retailers (4mks)
25. Outline four circumstances that may lead to dissolution of private limited companies (4mks.)

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