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

BUSINESS STUDIES
PAPER 1

INSTRUCTIONS TO CANDIDATES

• Write your name, admission number and class in the spaces provided.
• All questions should be written in the spaces provided.
• Candidates should answer the questions in English.

1. Identify four importance of learning business studies to an individual. (4 Marks)
2. Identify four factors that influence entrepreneurial practices in Kenya. (4 Marks)
3. Identify four ways in which an office is important to a business. (4 Marks)
4. Outline four ways in which a well laid out business structure is likely to lead to success of the business. (4 Marks)
5. Highlight four forms of economic integration (4 Marks)
6. Outline the importance of trade to a country. (4 Marks)
7. The quantity demanded and supplied of a certain commodity can be expressed as Qd=50+16p and QS= 20+20p respectively.
   Find
   1. Equilibrium price (2 Marks)
   2. Equilibrium quantity (2 Marks)
8. Highlight four disadvantages of direct production. (4 Marks)
9. List four circumstances under which the location of a warehouse can be inappropriate. (4 Marks)
10. State four circumstances that will make the standard gauge railway more desirable than road. (4 Marks)
11. Outline four characteristics of sole proprietorship form of business (4 Marks)
12. A business had the following record for the year ended 31st December 2018 (4 Marks)
    

    sh.
    Capital as at 31/12/18 Net profit for the year Capital as at 1st Jan 2018 Monthly drawings	64,000 14,000 42,000 1,500

    Calculate the additional investments made during the year
13. Give four limitations of consumer initiated methods in consumer protection. (4 Marks)
14. In the table below, indicate the type of advertising which fits the description. (4 Marks)
    

    Description	Type
    a) Create awareness about a product b) Promotes the name of the manufacturer  c) Persuades a particular brand of a product  d) Promotes a particular brand of a product

15. Highlight four factors to be considered by a business when choosing a means of communication (4 Marks)
16. State the meaning of the following terms as used in insurance (4 Marks)
    1. Indemnity
    2. Third party motor vehicle insurance
    3. Contribution.
    4. Subrogation
17. State 4 features of a monopolistic market that differentiates it from a monopoly market (4 Marks)
18. Open relevant ledger accounts using the following information. (4 Marks)
    1/2/2011 started business with sh. 10,000 in cash and sh. 50,000 at bank.
    2/2/2011 Bought goods on credit from LK traders worth sh.5000
    4/2/2011 Withdrew sh. 2000 from bank for office use.
19. Outline four principles that guide a government in spending public finance (4 Marks)
20. State four negative implications of ageing population in a country (4 Marks)
21. Identify four factors that may cause demand- pull inflation to occur in a country (4 Marks)
22. Identify the book of original entry associated with the following source documents given below. (4 Marks)
    

    Source documents	Book of original entry
    Invoice received Credit note received Receipt issued Credit note issued

23. The following information relates to Mumbua traders for the year ended 31st April 2020.
    

    	Shs.
    Cash at bank Cash in hand Current liability Sales Opening stock Closing stock	30,000 40,000 500,000 920,000 150,000 230,000
    Margin 25% Expenses 15% of sales

    Determine
    1. Gross profit (1Mark)
    2. cost of sales (1Mark)
    3. Purchases for the year (1Mark)
    4. Net profit (1Mark)
24. State any four money transfer facilities offered by commercial banks (4 Marks)
25. State four problems encountered at the plan implementation stage in economic planning and development (4 Marks)

MARKING SCHEME

1. Importance of learning business studies to an individual. (4 mks)
   • Students acquire knowledge on how to be environmentally friendly.
   • Students learn skills on how to acquire resources and use these skills to create goods and services for the country.
   • Created goods/services earn foreign exchange.
   • Created goods help to reduce volume of imports hence check balance of payment problems.
   • Learners acquire practical skills on how to start and run businesses therefore create employment.
     
     
2. Factors that influence entrepreneurial practices in Kenya. (4marks)
   • Government policy
   • Infrastructure
   • Levels of education and skills
   • Availability of markets
   • Availability of resources
   • Culture
   • Competition
   • Political stability
   • Natural factors
     
     
3. Importance of an office in a business (4marks)
   • Facilitates receiving and recording information
   • Distribution (dissemination ) of information
   • Facilitates mailing
   • Facilitates reproduction of documents
   • Safeguarding and controlling of organization’s property
   • Facilitates communication
   • Facilitates filing
     
     
4. Outline four ways in which a well laid out business structure is likely to lead to success of the business. (4 Marks)
   • Each of the employees know what is expected from them
   • There will be no conflicts or confusion among the workers
   • Teamwork is enhanced
   • Ensures proper control which in turn promotes efficiency
     
     
5. Forms of economic integration (4 Marks)
   • Free Trade Area
   • Preferential Trade Area
   • Customs Union
   • Common Market
   • Economic Union
     
     
6. Importance of trade to a country. (4marks)
   • Helps a country to acquire what it cannot produce.
   • Enables a country to obtain a variety of goods and services.
   • Helps a country to dispose of its surplus produce.
   • Creates employment.
   • Encourages a country to specialize.
   • Promotes social relations and understanding between countries involved.
   • Source of income to the country
   • Ensures steady supply of goods and services.
     
     
7. The quantity demanded and supplied of a certain commodity can be expressed as Qd=50+16p and QS= 20+20p respectively.
   1. Equilibrium price (2marks)
      • 50+16p = 20+20p
        20p-16p = 50 -20
        4p= 30 P= 7.5
        
        
   2. Equilibrium quantity ( 2 marks)
      • Q = 50+ 16p
        = 50 + 20(7.5)= 140 units
        Or
        Q = 20 + 20(7.5) = 140 units
        
        
8. Disadvantages of direct production. (4marks)
   • Goods and services are of low quality and quantity.
   • Encourages individualism
   • Leads to low standards of living
   • Can be very tiring
   • Does not encourage invention and innovation.
   • A lot of time is wasted as one move from one job to another.
   • No one has the ability to provide all that he/she requires.
     
     
9. Circumstances under which the location of a warehouse can be inappropriate. (4marks)
   • When it is not accessible/ poor infrastructure e.g roads
   • When it is away from the terminal/source of goods.
   • Where there is insecurity
   • Where there is no communication /no network.
   • Where there is no electricity
   • Where the terrain is poor
     
     
10. Circumstances under which a trader may decide to transport his goods by air (4marks)
    • If the goods are perishable in nature since they go bad/get damaged.
    • If the goods are of high per unit value since they are prone to theft.
    • Where goods require to arrive al the destination promptly.
    • Where security of goods is of valuable consideration.
    • Where other means of transport are unavailable.
    • Where distance to be covered is too large.
    • Where it ¡s the policy of the business which needs to be followed.
    • Where destination is remote making it inaccessible by other means
      
      
11. Outline four characteristics of sole proprietorship business (4 mks)
    • Owned by one person
    • Managed by the owner with help of family members
    • Has unlimited liabilities
    • Main source of capital is owners contribution
    • Its life is limited to the life of the owner
    • Formed under the business names Act
    • It is not a separate legal entity from the owner
      
      
12. A business had the following record for the year ended 31st December 2018(4 Marks)
    • Final = Opening + Net + Additional – drawings – Net
      Capital capital profit investments
      64,000 = 42,000 + 14,000 + Ai – 18,000
      64000 = 38,000 + AI
      Additional = 64,000 – 38,000
      investments
      Ans = Shs. 26,000
      
      
13. limitations of consumer initiated methods in consumer protection.(4marks)
    • Inadequate support by the government
    • Insufficient finance / capital
    • Ignorance of consumers
    • Reluctance of consumers to join these associations
    • Apathy: lack of initiative from consumer to report cases of exploitive traders.
      
      
14. In the table below, indicate the type of advertising which fits the description. (4 Marks)
    

    Description	Type
    a) Create awareness about a product b) Promotes the name of the manufacturer c) Persuades a particular brand of a product d) Promotes a particular brand of a product	Informative advertising/pry demand Institutional advertising Persuasive/competitive advertising Product advertising

15. Factors to be considered by a business when choosing a means of communication(4 Marks)
    • Nature of information ie length of the message, confidentiality etc
    • Urgency/ speed/ time
    • Distance/ destination
    • Availability
    • Need for evidence/ future reference
    • Reliability
    • Impression to be created
      
      
16. State the meaning of the following terms as used in insurance (4 Marks)
    • Indemnity: this is a principle where insured is restored to the original financial position before the loss occurred.
    • Third party motor vehicle insurance: covers damages suffered by persons other than the owner.
    • Contribution: where more than one insurance covers are taken for the same property against the same risk, in case of a loss the insurance companies shall contribute proportionately to compensate the insured
    • Subrogation –Once an insured is fully compensated for loss suffered, whatever remains belongs to the insurer
      
      
17. Features of a monopolistic market (4 Marks)
    
    • Many independent buyers and sellers. Therefore there is no major influence in terms of price and quantity of product
    • Close substitutes: the products are close substitute, but differ by branding, names, shapes, colour and scent
    • Free entry and exit: no barriers for new firms that wish to join or leave
    • Wide knowledge of the market: buyers and sellers are all aware of the price/output and factor condition of the commodity
    • No firm controls the factors of production. firms acquire factors of production at the prevailing market price/condition
18.               
    

    Capital A/c  Dr                                                            Cr
    	1.2.2011 cash 10,000✔ 1,2,2011 Bank 50,000✔

    
    

    Cash a/c Dr                                                                         Cr
    1.2.2011 capital 10,000✔ 4.2.2011 Bank 2,000✔

    
    

    Purchases a/c  Dr                                                                       Cr
    2.2.2011 LK Trdaders 5,000✔

    
    

    LK Traders a/c Dr                                                                              Cr
    	2.2.2011 purchases 5000✔

    
    

    Bank a/c  Dr                                                                   Cr
    1.2.2011 Capital 50,000	4.2.2011 Cash 2000✔

    (8x1/2 = 4 mks)
    NB: date and details must be correct to score.
19. Principles that guide a government in spending public finance (4 Marks)
    • Maximum social benefit
    • Efficient allocation (wealth distribution)
    • Proper financial management
    • Flexibility –allow changes
    • Economy in spending
    • Surplus /reserve
      
      
20. Negative implications of ageing population in a country (4 Marks)
    • Low labour supply/shortage of labour/man power
    • High dependency burden as majority are 65years and above
    • Strain on economic resources to carter for the welfare of the aged eg health and homes
    • Low standards of living /low per capita income since national income is spread over a large non-productive population.Rigidity to chang
    • Less progressive/low/savings and low investment
      
      
21. Factors that may cause demand- pull inflation too occur in a country (4 Marks)
    • Increased government expenditure
    • Increase in populationExpectation of price increment
    • General shortage of goods and services
    • Increased credit creation by commercial banks
    • A fall in savings
    • Increased in money incomes
22.           
    

    Source documents	Books of original entry
    Invoice received Credit note received Receipt issued Credit note issued	Purchase journal Purchases returns / returns outward journal Cash receipt journal Sales returns journal

23. The following information relates to Mumbua traders for the year ended 31st April 2020.
    • Gross profit
      1. Margin =      Gp      x 100
                           Sales
         
         Gp =        25 x100   
                     920,000
         
           100 Gp = 920000 x 25
          100               100
         Gp = 230,000 1 mk
         
         
      2. cost of sales
         sales – Gp = 920,000 – 230,000 = 690,000 1mk
         
         
      3. Purchases for the year
         COGS = OS + P + CI– RO – CS
         690,000 = 150,000 + P – 230,000 = 770,000 1mk
         
         
      4. Net profit
         Gp – expenses
         230,000 – (¹⁵/₁₀₀ x 920000) = 230,000 – 138,000
         = 92,000 1mk
         
         
24. Money transfer facilities offered by commercial banks (4 Marks)
    • Cheques
    • Credit transfer
    • Bank drafts/bankers cheques
    • Standing ordersTelegraphic transfers
    • Debit cards
    • Electronic funds transfer
      
      
25. Problems encountered at the plan implementation stage in economic planning and development (4 Marks)
    • Reliance on donor funding
    • Lack of domestic resources
    • Failure to involve local people in planning
    • Occurrence of natural calamities
    • Over ambitious plans
    • Lack of co-operation among the executing parties
    • Effects of inflation
    • Lack of political goodwill