Business Studies Paper 1 Questions and Answers - Momaliche Joint Mock Exams 2021/2022

Instructions
Attempt ALL questions in the spaces provided. For examiner’s use only

1. Highlight four internal business environments that are necessary for the smooth running of a business. (4mks)
2. Highlight four reasons why the government license businesses. (4mks)
3. For each of the following transactions given below indicate in the appropriate column the source document and the book of original entry in which the transaction should be recorded. (4mks)
   

   TRANSACTION	SOURCE DOCUMENT	BOOK OF ORIGINAL ENTRY
   a) Purchase of goods on credit
   b) Goods returned by customer
   c)Payment to creditor
   d)Sale of goods on credit

4. Timothy, an employee of Safaricom company has decided to join Safaricom SACCO. Identify four benefits that he is likely to enjoy for joining the SACCO. (4mks)
5. Highlight four reasons why it’s important to make choice while satisfying human wants. (4mks)
6. State four reasons why short message services (sms) is replacing letters as a way of communication. (4mks)
7. The following features relate to warehousing. Indicate the most suitable type of warehousing described. (4mks)
   

   Feature	Type
   a. Used to store goods until excise duty is paid
   b. Most located at strategic points and available at a fee
   c. Used to store non-dutible goods from within or outside the country
   d. Usually designed to suit one’s specifications

8. The following information relates to Gaturu Traders for the month of July 2013
   July 4 received cheque Shs. 150,000 from a debtor
   July 9 Paid Kevin shs. 40,000 by cheque for goods bought at shs.66, 000 and the balance in cash
   July 10 sold stock worth shs.20, 000 cash
   Enter the above transaction in relevant ledger accounts. (4mks)
9. Name four documents used in home trade that originate from the buyer. (4mks)
10. Name the factors of production the following resources relate to; (4mks)
    

    Resource	Factor of production
    i. Receptionist ii. Machinery iii. Wind iv. owner

11. State four advantages of promoting goods using radios. (4mks)
12. Outline four negative effect of over population in a nation. (4mks)
13. Highlight four ways in which HIV/AIDS has negatively affected entrepreneurship in Murang’a. (4mks)
14. Anthony had the following balances at the end of the trading period on 31st Dec. 2014
    Shs
    Cash 40,000
    Creditors 140,000
    Premises 400,000
    Fixtures 180,000
    Bank loan 160,000
    Vehicles 100,000
    Debtors 70,000
    Prepare his balance sheet at the end of the trading period. (4mks)
15. Murang’a traders had the following information for the month ending 31st Jan. 2015
    Shs
    Opening stock 200,000
    Closing stock 300,000
    Purchases 500,000
    Margin 20%
    Prepare Murang’a Traders trading account for the month ending 31st Jan. 2015. (4mks)
16. The national income is measured using the expenditure method given as
    Y=C + I + G + (x-m). State what each of the following letter represents. (4mks)
    
    1. C
    2. I
    3. G
    4. (x-m)
17. The figure below shows a shift in demand for a commodity from D0D0 to D1D1
    State four possible causes of this situation. (4mks)
18. List four characteristics of direct production. (4mks)
19. Highlight four factors that may influence the decisions on what goods and services to produce. (4mks)
20. State four roles of intermediaries in the chain of distribution. (4mks)
21. Kariuki has introduced computers in his business operations. Outline four benefits that he may experience. (4mks)
22. Match the following description of errors with the type of errors made when keeping books of accounts. (4mks)
    

    Description	Error type
    a. Occurs where errors in both the debit and credit balances are equal
    b. Occurs where a transaction is not recorded at all in the books
    c. Occurs when entries are made in the wrong class of accounts
    d. Occurs where both the debit and credit entries are made using similar but erroneous figures

23. Draw a well labeled kinked demand curve in an oligopoly type of market. (4mks)
24. The following was obtained from Elias books for the year ended 31st Dec. 2013
    Shs
    Drawings 82,000
    Profit 170,000
    Additional investment 58,000
    Capital 1/1/2013 240,000
    Calculate Elias capital as at 31st Dec. 2015 (4mks)
25. Beth Muya insured her property whose value was shs 1,000,000 for shs 600,000 against the risk of fire. Later fire broke out and the property was burnt causing a loss of shs 500,000. Calculate her compensation. (4mks)

MARKING SCHEME

1.    
   1. Appropriate business structure.
   2. Positive attitude of owners.
   3. Good business culture.
   4. Adequate human resources.
   5. Adequate financial resources.
   6. Adequate physical resources
2. Reasons for licensing businesses
   
   1. Regulate number of business in an area.
   2. Control goods entering/leaving a country
   3. To control illegal businesses.
   4. To raise government revenue.
   5. To ensure that professionals are qualified.
   6. To ensure that traders engage in businesses that they are licensed for. 4 x 1 = 4
3.      
   1. Purchases invoice, purchases journal
   2. Credit note, sales returns journal
   3. Receipt, payment journal
   4. Sales invoice, sales journal
4.    
   • He will get dividends every year
   • He will be able to save money in his sacco account
   • Loans are obtained at low interest rates
   • In case of his death, outstanding loans will be written off
   • It is possible for him to obtain different categories of loans
   • His beneficiaries will receive twice his share contributions in case of his death
   • It is easy for him to obtain loans since only few formalities are required
   • Saccos offer education to their members
   • Sacco may offer banking facilities through their front office services.
5. Importance of making a choice
   
   1. Economic resources are scarce.
   2. Human wants are unlimited.
   3. Human wants vary in intensity/urgency.
   4. Human wants are competitive.
   5. Some human wants are habitual.
6. Reasons why sms is replacing letters as a way of communication.
   
   1. Cheap to use sms services.
   2. Faster than letters.
   3. Can be sent to many people at once.
   4. Provide immediate feedback.
   5. Clarification can be made.
   6. It is reliable.
   7. It is prestigious.
7. Type of warehouse.
   
   1. Bonded/excise warehouse.
   2. Public warehouse.
   3. Free warehouse.
   4. Private warehouse.
8.        
9.      
   • Letter of enquiry
   • Order
   • Goods received note
   • Goods returned note
   • I owe you 4x1=4mks
10. Factor of production
    
    1. Labour
    2. Capital
    3. Land
    4. Entrepreneurship
11. Advantages of promoting products through radios.
    
    1. Reaches many audiences at the same time.
    2. Accessible even in remote areas.
    3. May reach target audience through airing them in their favourite programmes.
    4. May entertain through music/beats
    5. May be aired through different languages.
    6. Serves both literate and illiterate.
    7. May be aired repeatedly.
12. Negative effects of overpopulation
    
    1. Strain on available social amenities.
    2. Low standard of living.
    3. Encouraging rural urban migration.
    4. High dependency ratio.
    5. Imbalance in demand and supply.
    6. Food shortage.
    7. Increase in crime rate.
    8. Environmental degradation 4x1=4mks
13. Way HIV/AIDS has negatively affected entrepreneurship.
    
    1. Lack/reduced product market.
    2. Lack/reduced labour.
    3. High labour turnover affecting performance.
    4. Loss of skilled manpower.
    5. High cost of training new workers.
    6. High cost of insurance/medical cover.
    7. Decreased staff morale when colleagues ail/die.
14. Anthony Traders Balance sheet
    As at 31st Dec. 2014
    

    Shs	Shs
    Cash 40,000√ Premises 400,000√ Fixtures 180,000√ Vehicles 100,000√ Debtors 70,000√ 790,000	Capital 490,000√ Creditors 140,000√ Bank loan 160,000√ 790,000

15. Murang’a Traders
    Trading Account
    For the month ending 31st January 2015
    

    Shs Opening stock  200,000√ Add:Purchases 500,000√ Cost of goods available for sale 700,000√ less: Closing stock 300,000√ CGS 400,000 Gross profit c/d 100,000√√ 500,000

    Shs Sales 500,000√√ 500,000

16.      
    1. C – Consumer expenditure.
    2. I – Investment expenditure
    3. G – Government expenditure
    4. (x-m) – Net exports
17. Causes of shift in demand curve.
    
    1. Fall in price of complementaries.
    2. Rise in household income.
    3. Rise in price of substitutes.
    4. Expected increase in price of the commodity.
    5. Positive taste/preference/fashion.
    6. Favourable seasonal changes.
    7. Favourable government policies
18. Characteristics of direct production.
    
    1. Goods are low quality.
    2. Small scale production.
    3. Little/no specialization.
    4. Mechanization minimal.
    5. Production is mainly for own use/No exchange.
    6. Promotes individualism.
    7. Does not encourage invention/innovation/creativity.
    8. Skill used cannot be improved.
    9. Tools used cannot be improved.
19. Factors that influence decision on what goods/services to produce.
    
    1. Profitability.
    2. Market/demand/customer.
    3. Level of competition.
    4. Availability of resources.
    5. Cost of production.
    6. Government policy
20. Role of intermediaries.
    
    1. Accumulate bulk.
    2. Breaking bulk.
    3. Advice.
    4. Prepare goods for sale.
    5. Store goods until they are needed.
    6. Transport goods to where they are needed.
    7. Product promote.
21. Benefits of using computers in business operations.
    
    1. Computers are fast in operations.
    2. Occupy less space.
    3. Output is presentable.
    4. Assist to reduce fraud.
    5. Are more accurate.
    6. Have large storage facilities.
    7. Have wide range of uses.
    8. Promote prestige.
22. Type of errors.
    
    1. Compensating error.
    2. Error of omission.
    3. Error of principle.
    4. Complete reversal of entries
23.   
    
24. Final capital = open capital + profit + Additional investment – drawings
    = 240,000 + 170,000√ + 58,000√ – 82,000√
    = sh 386,000√
25. Compensation =     sum insured     x actual loss
                               Value of property
    =   600,000 √ x 500,000√
       1000, 000√
    = sh. 300,000√