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

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  • Answer all the questions
  1. In a partnership business, partners are classified in to four categories, name these four categories (4marks)
  2. Land transport is a common mode of transport in Kenya. List down any four means of transport under land transport (4marks)
  3. Highlight any four diseconomies of scales that a firm experiences as a result of growth of the entire industry. (4marks)
  4. The diagram below illustrates the concept of optimum population
    BS PVM Q4 2122 PP1
    From the above diagram, highlight what optimum population depicts (4marks)
  5. Study the following balance sheet of Kiboko traders which has been wrongly drawn and prepare a correct on (5marks)
                                                      Kiboko Traders
                                                       Balance sheets
                                                   As at 31st December 2004
    Assets                       Shs                                Liabilities                              Shs

    Stock                       80,000                              Bank overdraft                  80,000
    Creditors                 50,000                              Debtors                             35,000
    Long term loan        65,000                              Land                                 120,000
    Capital                    130,000                             Furniture                            75,000
                                    325,000                            Cash                                  15,000
  6. List down four causes of demand pull inflation (4marks)
  7. Give the full names of the following terms of sale used in international trade (3marks)
    1. F.O.R
    2. DD
    3. C.I.F
  8. Highlight four features of economic union as a form of economic integration (4marks)
  9. Give four indictors of economic development (4marks)
  10. Highlight four characteristics of assets (4marks)
  11. State five circumstances when downwards communication can be used (5marks)
  12. Indicate whether the following items are falling in real, nominal or private accounts (3marks)
    1. Sales
    2. Carriage inwards
    3. Fixtures and fittings
    4. Stock
    5. Cash
    6. Capital
  13. State the type of document described below (4 marks)
    1. Show from which country goods are coming from …………………………………………..
    2. Written by an exporter authorizing his bank to sell goods on his belief …………………………
    3. Allow importer to get goods on credit and cannot be changed the importer without exporters permission ……………………………………….
    4. Document shows that prices charged on the goods are fair as certified by the importing country’s officials …………………………………………………………………………….
  14. State whether the following transactions will have an increase, decrease or no effect on the balance sheet total
    ( 4marks)
     Transaction   Effect 
     Withdrew stock for personal use   
     Paid a creditor by cheque  
     A debtor paid by cheque   
    Bought furniture on credit  
  15. Highlight four methods that can be used by the government to control imported inflation (4marks)
  16. State any four unethical practices in product promotion (4marks)
  17. Highlight factors that have contributed to the growth of self-employment in Kenya (4marks)
  18. Highlight any four advantages of shopping malls to consumers (4marks)
  19. In relation to transport in Kenya, write the full names of the following terms (4marks)
    1. NTSA
    2. LAPSSET
    3. ICD
    4. SGR
  20. State five essential elements of effective communication (5marks)
  21. List down four main types of warehouses (4marks)
  22. Highlight four factors that may necessitate re-insurance (4marks)
  23. Other than price mechanism, name four methods of determining the price of a product. (4marks)
  24. List down any four means of payment available in home trade (4marks)
  25. Name any four transactions that are passed through the general journal (4marks)


  1. Four categories of partners.
    • Role played by the partner
    • Liabilities of the partners for the business debts
    • Ages of the partners
    • Capital contributions (4x1 = 4marks)
  2. Means of transport under land
    • Human porterage
    • Carts
    • Vehicles
    • Trains
    • Pipeline (4x1 = 4marks)
  3. Diseconomies of scale experienced by a firm
    • Scramble for raw materials
    • Non-availability of land for expansion
    • Scramble for available labour
    • Completion for available markets
    • Easy targets especially in time of ware (any 4x1 = 4marks)
  4. What optimum population depicts
    • It is the population that can generate the highest living standards at the available resources and state of technology
    • It is the population size that can lead to the most efficient use of resources while maximizing output per capital
      Population below optimum level implies that resources are underutilized and standards of living are low.
    • An increase in population beyond optimum level leads to over utilization of resources and leads to lower standards of living. (4x1 = 4marks)
  5. A corrected balance sheet
                                                       Kiboko Traders
                                                       Balance sheet (√)
                                         As at 31st December 2004 (10x ½ = 5marks)                                
     Assets   Shs   Shs      Shs  Shs 
     Fixed Assets        Capital     130,000
     Land  120,000     Long term liabilities     
     Furniture    75,000  195,000   Long term loan    65,000
     Current Assets           
     Stock   80,000    Current liabilities    
     Debtors   35,000    Creditors  50,000   
     Cash   15,000  130,000   Bank overdraft  80,000  130,000 
         325,000      325,000
  6. Causes of demand pull inflation (4marks)
    • Increase in government expenditure
    • Effects of credit creation by commercial bank
    • Increase in money incomes
    • General shortages of goods and services
    • Increase in consumer expenditure (any 4 x 1 = 4 marks)
  7. Terms sued in international trade (3marks)
    1. F.O.R – Free on Rail
    2. DD – Delivered Docks
    3. CIF- Cost insurance and freight (3 x 1 = 3 marks)
  8. Features of economic union form of economic integration (4marks)
    • Conducive conditions for internal trade
    • Common external trade barriers
    • Free factors mobility
    • Joint economic institution i.e central bank
    • Common monetary system
    • Common public services such as railways and communication network.(any 4 x 1 = 4 marks)
  9. Indicators of economic development (4marks)
    • Shift from subsistence sector to manufacturing sector.
    • Reduction in illiteracy
    • Increase in skilled man powers
    • Improvement in health facilities
    • Increases in technology
    • Improvement in health facilities
    • Improved infrastructure
    • Improved balance of payments (4 x 1 = 4 marks)
  10. Characteristics of assets (4marks)
    • A resource owned and controlled by the business
    • Must have been acquired in the past
    • An item of value that can be measured reliability in monetary terms
    • Future economic benefit associated with the net expected benefits to be received by the business entity
    • May be either fixed or current (any 4 x 1 = 4 marks)
  11. Circumstances when downward communication may be used.
    • When training the juniors
    • When evaluating performance
    • When delegating duties
    • When solving any problems facing the workers
    • When inspiring and motivating the junior (giving regards) (5 x 1 = 5 marks)
  12. Classification of account (marks)
    1. Sales Nominal
    2. Carriage inwards Nominal
    3. Fixtures and fittings Real
    4. Stock Real
    5. Cash Private
    6. Capital Private (6x ½ = 3marks)
  13. Types of documents
    1. Certificate of origin
    2. Letter of hypothecation
    3. Letter of credit
    4. Consular invoice (1x4=4 marks)
  14. Transaction effect 4marks)
     Transaction   Effect 
     Withdrew stock for personal use   Decrease 
     Paid a creditor by cheque  Decrease
     A debtor paid by cheque   No effect
    Bought furniture on credit  Increase
     (1x4=4 marks)
  15. Methods of controlling imported inflation (4marks)
    • Imposing or increasing import duty.
    • Imposing quotas on imports
    • Foreign exchange control
    • Administration bottle – necks (1x4=4 marks)
  16. Unethical practices in product promotion
    • Polluting the environment
    • Providing misleading information
    • Breaking laws pertaining to product promotion
    • Damaging competitors promotional materials
    • Passing promotional messages that are unacceptable
    • Taking advantage of vulnerable groups such as children (1x4=4 marks)
  17. Reasons for growth of self-employment in Kenya (4marks)
    • One enjoys the profits alone since he/she is own boss
    • Independence / free from control of others
    • Assurance of job security
    • Status and pride
    • Inadequate / not well paying employment jobs
    • Availability of credit
    • Influence by established entrepreneurship
    • Availability of market
    • The need to have several sources of income. Any 4x1=4marks)
  18. Advantage of shopping malls consumers (4marks)
    • One can get many goods and services under one roof
    • Parking spaces available.
    • Less traffic jams since they are located away from town
    • It brings sense of prestige to the shopper Any 4x1=4marks)
  19. Meaning / full names of terms (5marks)
    1. NTSA – National transport and safety Authority
    2. LAPSSET – Lamu Port South Susan Ethiopia Transport
    3. ICD – Inland Container Depot
    4. SGR – Standard gauge railway
  20. Essential elements of effective communication (5marks)
    • The sender / communication
    • Message
    • Medium / channel.
    • The receiver
    • Feedback 1 x 5 marks)
  21. Main types of warehouses (4marks)
    • Private warehouses
    • Public warehouses
    • Bonded ware houses
    • Free warehouses
  22. Factors that may necessitate re-insurance (4marks)
    • Value the property
    • High risk of loss
    • Number of risks covered
    • Need to spread risks
    • Government policy
  23. Other methods of price determination (4marks)
    • Bargaining / Gaggling
    • Government intervention
    • Auction
    • Tendering (4 x 1 = 4marks)
  24. Means of payment available in home trade (4marks)
    • Money order
    • Postal order
    • Cash
    • Cheques
    • Premium bonds
    • Stamps
    • Promissory notes (any 4 x 1 = 4marks)
  25. Transaction that are passed through the general journal (4marks)
    • Purchase of fixed asset on credit
    • Sales of fixed on credit
    • Opening entries
    • Closing entries
    • Correction of errors
    • Writing off bad debts
    • Issue of shares and debentures by companies (any 4 x 1-4marks)
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