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

INSTRUCTIONS

• Answer ALL the questions in the spaces provided.

1. State four reasons why a consumer should satisfy basic wants before secondary wants(4mks)
2. Outline four documents required by the registrar of companies to facilitate registration of limited liability companies(4mks)
3. A lucrative business has been constantly releasing toxic wastes into the neighbourhood.Outline four measures you can take to stop the firm from such malpractices(4mks)
4. Highlight four reasons that may make insurance firms to decline to insure acts of nature(4mks)
5. The cash account below was extracted from Anestar traders during the month of March 2021.
                                              ANESTAR TRADERS
                                                CASH A/C
    DR                                                                                                 CR
   

   DATE	DETAILS	AMOUNT	DATE	DETAILS	AMOUNT
   March 2	Capital	3000	March 3	Purchases	2000
   March 4	Sales	1500	March 6	Wages	3000

   State the possible transactions that could have given rise to the entries above
   1. March 2^nd……………………………………………………...(1mk)
   2. March 3^rd………………………………………………………(1mk)
   3. March 4^th………………………………………………………(1mk)
   4. March 6^th……………………………………………………….(1mk)
6. The government has raised the retirement age of civil servants from 55years to 60years.Highlight four effects of such a move(4mks)
7. Outline four circumstances under which business resources maybe viewed as a weakness to a firm(4mks)
8. Outline any four factors that may make firms communicate in writing to their staff(4mks)
9. Highlight four factors that may determine the amount of revenue tobe collected through taxation(4mks)
10. Outline four roles played by Nairobi securities exchange in the Kenyan economy(4mks)
11. Highlight any four limitations of using after a sale service as a method of promoting products(4mks)
12. For each of the following transactions, indicate the book of original entry in which the transaction would be recorded(4mks)
    

    	transaction	Book of original entry
    (a)	Bought office equipments on credit
    (b)	Received cash 30000 from Joel
    (c)	Sold goods on credit to Mokua
    (d)	Returned goods previously bought on credit to owalo traders

13. Highlight four measures that a country like Kenya may take to correct unfavorable balance of payments(4mks)
14. Outline four circumstances under which consumer associations may find it difficult to protect consumers against exploitation.(4mks)
15. The following balance sheet relates to Uzuri traders
                                                       UZURI TRADERS
                                                           Balance Sheet
                                                      As at 31^st May 2015
    

    sh. Sh.  Fixed Assets  Land                   1,800,000  Motor vehicle      1,000,000 Furniture                   30,000       2,830,000  Current assets   Stock                      80,000  Debtors                   50,000 Cash at bank            32,000  Cash in hand           20,000          182,000                                                     3,012,000

    Capital and Liabilities Capital                                            2,172,000 Long term liabilities Loan from KCB              400,000 Loan from K.I.E              300,000      700,000 Short term liabilities Creditors                        100,000 Salary owing                    40,000      140,000 ________                                                        3,012,000

    Required:
    Calculate 
    1. Capital owned (1 mark)
    2. Borrowed capital (1 mark)
    3. Working capital (1 mark)
    4. Capital employed (1 mark)
16. The table shows the show the quantity demanded for commodity Y per month by consumers A and B
    

    Price per unit(sh)	Quantity demanded by A	Quantity demanded by B
    10	100	300
    8	200	400
    5	300	500
    3	400	700

    State four reasons why B demands more of commodity Y at every price than A (4mks)
17. State the term given to each of the following descriptions(4mks)
    1. Document used to demand payment before goods are delivered…………….
    2. Document sent by the seller to the buyer to inform him/her that goods ordered have been dispatched …………………………..
    3. A document supporting a credit sale………………………………
    4. Document sent by the seller to the buyer when goods are returned…………………
18. Highlight four reasons why national income obtained using output approach may not give correct position of a country’s standards of living(4mks)
19. State the factor of production that each of the following resources relateto (5mks)
    

    	resource	Factor of production
    (a)	manager
    (b)	quarry
    (c)	vehicle
    (d)	water
    (e)	owner

20. Give the term that best fit the following description(4mks)
    1. Money brought into the business by the owner……………………………………………
    2. Goods bought for resale ………………………………………………………………….
    3. Money withdrawn by owner of business for personal use………………………………..
    4. Money borrowed from outsiders……………………………………………………….
21. Outline four eature that characterize land as an economic resource(4mks)
22. The following information relates to BIDII wholesalers on 30/6/1999.
    Closing stock            55,000
    Opening stock          62,000
    Sales                        200,000
    Mark up                        25%
    Draw BIDII’s trading account. (4 marks)
23. Identify four channels for distributing locally produced goods (4mks)
24. Outline four characteristics of under developed countries (4mks)
25. Outline three reasons why the government issue license to drivers. (3mks)

MARKING SCHEME

1. State four reasons why a consumer should satisfy basic wants before secondary wants(4mks)
   
   • Because they are essential for survival.
     
   • They cannot be postponed.
     
   • They are felt needs.
     
   • Since the consumer has limited resources
2. Outline four documents required by the registrar of companies to facilitate registration of limited liability companies(4mks)
   
   • Memorandum for association.
     
   • Articles of association.
     
   • List of directors
     
   • Declaration of compliance.
     
   • Directors statement
3. A lucrative business has been constantly releasing toxic wastes into the neighbourhood.Outline four measures you can take to stop the firm from such malpractices(4mks)
   
   • Educating the firm on proper waste disposal methods.
     
   • Taking legal actions against such a firm.
     
   • Encouraging afforestation to reduce carbon (iv) oxide in atmosphere.
     
   • Encouraging the use of protective gear.
4. Highlight four reasons that may make insurance firms to decline to insure acts of nature(4mks)
   
   • The loss may affect many people at ago.
     
   • The value of the loss may not easily be determined.
     
   • The loss is unpredictable.
     
   • The possibility of the loss occurring is certain.
     
   • It may not be easy to determine premium to be paid
5. The cash account below was extracted from Anestar traders during the month of march 2021.
   State the possible transactions that could have given rise to the entries above
   1. March 2nd - Started a business with cash 3000
   2. March 3rd - Bought goods/stock worth 2000 in cash
   3. March 4th - Sold goods worth 1500 in cash
   4. March 6th - Paid wages in cash for 3000
      NB// the word cash should be in the transaction
6. The government has raised the retirement age of civil servants from 55years to 60years.Highlight four effects of such a move(4mks)
   • Retention of experienced and stilled manpower
   • High unemployment for the youth.
   • More revenue to the government.
   • Non-training for the employees.
   • More savings in pension.
7. Outline four circumstances under which business resources maybe viewed as a weakness to a firm(4mks)
   • When there is inadequate trained personnel
   • When there is inadequate physical resources
   • In case of inadequate finances.
   • Where outdated inferior technology is used.
8. Outline any four factors that may make firms communicate in writing to their staff(4mks)
   • For Confidentiality
   • To enhance the accuracy of the message.
   • To facilitate records for future reference.
   • It is economical/cost effective.
   • It is reliable/trusted means of communicating
9. Highlight four factors that may determine the amount of revenue to be collected through taxation(4mks)
   • Distribution of income.
   • Social and political factors.
   • Honesty and efficiency of tax authorities.
   • Citizens level of real incomes.
   • Economic structure of the country.
10. Outline four roles played by Nairobi securities exchange in the Kenyan economy(4mks)
    • A measure of the country’s economic performance as reflected in the prices of shares
    • Sets the price/value of securities based on the forces of demand and supply.
    • Promotes economic growth through disinvestment and reinvestment.
    • Promotes saving and investment among the populations
    • Provides ready market for sale and purchase of shares hence improving liquidity.
    • Promotes local ownership of companies through sale and purchase of shares.
11. Highlight any four limitations of using after a sale service as a method of promoting products(4mks)
    • Consumers may be tied to one trader who may not offer quality goods/services.
    • Encourage careless handling of goods by the consumer
    • Traders incur extra expenses or costs thus reducing his profit margin.
    • Trader sells his goods at high prices leading to low volumes of sales in an effort to recover the after sales cost incurred
12. For each of the following transactions, indicate the book of original entry in which the transaction would be recorded(4mks)

    	transaction	Book of original entry
    (a)	Bought office equipments on credit	Generaljournal/journal proper/the journal
    (b)	Received cash 30000 from Joel	Cash receipt journal/cash rceipt day book
    (c)	Sold goods on credit to Mokua	Sales journal/sales day book
    (d)	Returned goods previously bought on credit to owalo traders	Purchase returns/returns outward journal/returns outwards daybook.

13. Highlight four measures that a country like Kenya may take to correct unfavorable balance of payments(4mks)
    • restricting imports
    • promoting exports
    • devaluating home currency
    • Encouraging foreign investment in the country.
    • Restricting outflow of capital.
14. Outline four circumstances under which consumer associations may find it difficult to protect consumers against exploitation.(4mks)
    • Where consumers have not reported exploitative practices to the organization.
    • Where there is lack of political will in support of consumer’s organization.
    • Where consumers associations lack funds to handle exploitative practices.
    • When the consumers are ignorant of exploitative tendencies
15.  
    1. Capital owned = 2172000√ (1)
    2. Borrowed capital = long term liabilities
                                  = 400000 + 300000
                                   = 700,000√ (1)
    3. Working capital = Current assets – current liabilities
                                = 182000 – 140000
                                 = 42000√ (1)
    4. Capital employed = C.O + B.C = 2172000 + 700000 = 2872000 √
                                                    OR
                                    FC + WC = 2830000 + 42000 = 2872000                     4 x 1 = 4 marks)
16. The table shows the show the quantity demanded for commodity Y per month by consumers A and B
    State for reasons why B demands more of commodity at every price than A (4mks)
    1. B maybe having higher income than A
    2. B may be lacking substitute for commodity Y which A has .
    3. B may be living in a geographical/climatical region favouring demand for commodity Y.
    4. B maybe having a more positive attitude towards commodity Y than A.
17. State the term given to each of the following descriptions
    1. Document used to demand payment before goods are delivered proforma invoice
    2. Document sent by the seller to the buyers to inform him/her that goods ordered have been dispatched advice note
    3. A document supporting a credit sale invoice
    4. Document sent by the seller to the buyer when goods are returned credit note
18. Highlight four reasons why national income obtained using output approach may not give correct position of a country’s standards of living(4mks)
    • Inaccurate/in availability of output data from the private sector.
    • Incorrectly valued illegal economic activities.
    • Unmarked government output.
    • Problems of fluctuation of prices.
    • Wrong valuation of output in the subsistence sector.
    • Failure to differentiate primary inputs from intermediate inputs which may result to double counting.
19. State the factor of production that each of the following resources relate to (5mks)
    

    	resource	Factor of production
    (a)	manager	Labour
    (b)	quarry	Land
    (c)	vehicle	Capital
    (d)	water	Land
    (e)	owner	Entreprenuership

20. Give the term that best fit the following description
    1. Money brought into the business by the owner.   Capital
    2. Goods bought for resale  Stock
    3. Money withdrawn by owner of business for personal use  Drawings
    4. Money borrowed from outsiders   Loans (liabilities)
21. Outline four features that characterize land as an economicresource(4mks)
    • unevenly distribution(distributed)
    • has utility
    • can change ownership
    • Has monetary value.
    • Has an alternative use.
22.                           BIDII WHOLESALERS
                                  TRADING ACCOUNT
                              FOR THE YEAR ENDED 30/6/1999
    

    Opening stock                            62,000 Add: Purchases                        153,000 Good available for sale            215,000 Less closing stock                      55,000 Cost of goods sold                   160,000 Gross profit                                 40,000                                                  200,000

    Sales     200,000                200,000

23. Identify four channels for distributing locally produced goods(4mks)
    local manufacture → local consumers
    local manufacturer → retailers → local consumers
    local manufacturer → wholeseller → retailer → local consumer
    local manufacturer → govt agent → retailer → local consumer
    local manufacturer → govt agent → wholeseller → retailer → local consumer
    nb/The arrows must be there for every channel to be correct
24. Outline four characteristics of under developed countries
    • A rapid population growth rate
    • High dependency ratio.
    • Presence of low per capita income
    • Dominant subsistence sector
    • Low saving rate.
25. Outline three reasons why the government issue license to drivers.
    • It is a source of revenue to the govt
    • To reduce road accidents by allowing only qualified drivers on roads
    • To ensure that those who drive meet the minimum requirements.
    • To ensure that drivers are responsible