Business Paper 1 Questions and Answers - Mokasa II Mock Examination 2021/2022

BUSINESS STUDIES
Paper 1

Instructions to candidates

• Answer ALL the questions in the spaces provided.

Questions

1. Highlight four benefits of learning business studies. (4 marks)
2. In the table below, indicate the level of production associated with the following occupations
   

   Occupation	Level of production
   a)Retailer
   b)fishing
   c)Plumbing
   d)Store keeping

3. Outline four types of open trade credit (4 marks)
4. Highlight four circumstances under which down ward communication can be used in an organization (4marks)
5. Highlight four features of oligopoly market. (4 marks)
6. The following transactions were extracted from the books of Impact traders for the month of November 2018.
   November 15: Sold goods worth Ksh.150,000 paying by cheque.
   November 18: Paid salaries Ksh.20,000 in cash.
   Record the above transactions in the relevant ledger accounts and balance them off as at 18 November, 2018. (4 marks)
7. Highlight four features of non-bank financial institutions. (4 marks)
8. Highlight four methods used to restrict trade with other countries (4 marks)
9. Describe the type of unemployment identified below ( 4 marks)
   1. Frictional
   2. Structural
   3. Involuntary
   4. Residual
10. State four ways in which the external business environment may negatively influence the operations of the business (4marks)
11. Highlight four importance of ethical practices in the running of a business activity. (4marks)
12. Highlight four circumstances under which a public corporation could be dissolved. (4marks)
13. Record the following transactions in the relevant books of original entry. (4marks)
    2020
    April 1: Received an invoice from K.T suppliers for sh 40,000, Ochokitraders sh8000.
    April 2: Received a credit note from K.T suppliers sh 1000, Ochoki traders sh 1500.
    April 4: Received an invoice from Kiptui Enterprise sh 36,000,K.T suppliers sh 15,000.
    April 6. Received a credit note from Kiptui Enterprise Sh. 3,500, K.T suppliers Sh. 4,000
14. Identify four types of direct taxes. (4marks)
15. Alvin took an insurance policy against fire with an insurance company. Give four reasons why he was unable to get compensation when he made a claim later during the year. (4marks)
16. Highlight four factors that may be considered when choosing the channel of distribution of bread to schools in Kenya (4marks)
17. Give the meaning of the following terms as used in Book-keeping. (4marks)
    1. Goods
    2. Liabilities
    3. Creditors
    4. Capital
18. State four features of economic resources. (4 marks)
19. Highlight four prescribed code of behavior of an office staff. (4 marks)
20. The table below show the demand of furniture in Kimumu market for the year 2019.
    

    Month	Quantity demanded
    March	1000
    April	800
    May	700
    June	600
    July	500
    August	300
    September	250

    State four causes of the above trend. (4 marks)
21. Outline four Fiscal policy measures that may be used to control inflation. (4 marks)
22. Highlight four problems encountered when measuring national income using income approach. (4 marks)
23. State whether each of the following transactions increase (+) decrease (-) or have no effect (NE) on asset, liabilities, capital and the balance sheet totals.
    ​

    	Transaction	Effects on
    		Assets	Liabilities	Capital	Balance Sheet totals
    a	Received cash from a debtor
    b	The proprietor deposited extra cash into business bank account from personal sources
    c	Paid a creditor by cheque
    d	Bought office equipment in cash

24. Outline four importance of transport in the facilitation of trade. (4 marks)
25. The information relates to Soila traders for the month of June 2021.
    

    	Sh.
    Opening stock  Purchases  General expenses  Closing stock  Sales  Capital	75,000 395,000 60,000 170,000 500,000 1,000,000

    Determine;
    1. Cost of sales (1 mark)
    2. Gross profit (1 mark)
    3. Rate of return on capital. (2 marks) 

Marking Scheme

1. Importance of business studies
   • Equip the individual with skills and knowledge to manage business
   • prepare one for future carreer in business
   • help one to relate issues affecting business to its environment.
   • prepare one for further studies.
   • enables one to think critically and make critical judgment
     
     
2. In the table below, indicate the level of production associated with the following occupation
   

   Occupation	Level of production
   a)Retailer	Tertiary
   b)fishing	Primary
   c)Plumbing	Secondary
   d)Store keeping	Tertiary

3. Outline four types of open trade credit (4 marks)
   • Simple credit –credit extended to a customer for a short time
   • Monthly credit –credit extended to a buyer and payment is end of the month.
   • Budget accounts-
   • Trade credit –credit extended to another trader who buys goods on credit for reselling
   • Credit card facilities-
     
     
4. Circumstances when downward communication can be used in an organization (4marks)
   • When training juniors
   • When evaluating performance
   • When delegating duties
   • When solving any problem facing workers
   • When motivating junior
     
     
5. Features of oligopoly
   • firms are interdependent in decision making
   • Firms deal in products that are homogenous/similar./deal with differentiated products.
   • Firms under oligopoly engage in non price competition
   • there might be price leadership where large firms dictate the price market
   • There’s limiting factors to entry, like large capital investment for one to be a player in the market.
   • They have a kinked demand curve
   • Few sellers with many buyers
6. Ledgers
   

   Dr	Sales A/c							Cr
   Date	Details	Folio	Amount		Date	Details	Folio	Amount
   18/11/18	Balance c/d		150 000		15/11/18	Bank		150 000
   			150 000					150 000
   					18/11/18	Bal b/d		150 000

   
   

   Dr	Bank A/C							Cr
   Date	Details	Folio	Amount		Date	Details	Folio	Amount
   15/11/18	Sales		150 000		18/11/18	bal c/d		150 000
   			150 000					150 000
   18/11/18	bal b/d		150 000

   
   

   Dr	Salaries A/c							Cr
   Date	Details	Folio	Amount		Date	Details	Folio	Amount
   18/11/18	Cash		20 000		18/11/2018	Bal c/d		20 000
   			20 000					20 000
   18/11/18	Bal b/d		20 000

   
   

   Dr	Cash A/c							Cr
   Date	Details	Folio	Amount		Date	Details	Folio	Amount
   18/11/18	Bal c/d		20 000		18/11/2018	Salaries		20 000
   			20 000					20 000
   					18/11/2018	Bal c/d		20 000

7.          
   1. Frictional: It arises when one looses job and is in the process of looking for another one
   2. Structural: Arises out of mismatch between the skills possessed by the potential employee and the job available.
   3. Involuntary: Arises when people are looking for jobs in the existing wage rate but cannot get one
   4. Residual: it affects people who are either physically or mentally challenged.
      
      
8. Features of non bank financial institutions. (4 marks)
   • they offer savings and fixed deposits
   • they provide medium long term finance
   • they provide finance for specific sectors only
   • provide finance for capital development
   • they don’t participate in the clearing houses since they don’t have cheque facilities
   • they do not safe guard valuables they not under direct control of central bank
   • they don’t offer draft facilities since they don’t operate current account
     
     
9. Methods trade restrictions. (4 marks)
   • Tariffs –increase in tariffs discourages imports whereas decease encourages
   • Quotas- restriction of the quantity of imports into the country
   • Administrative bottlenecks-long procedures to be followed to impot
   • Foreign exchange control- government making it difficult in the acquisition of foreign currency to facilitate international trade.
   • Moral persuasion- government making appeals to importers or exporters no to engage in trade of certain commodities.
     
     
10. Ways in which the external environment of the business may negatively affect its operations (4marks)
    • Poor road network
    • High lending interest rates
    • Increasing inflation tendencies
    • Reducing population due to emigration
    • Political instability
      
      
11. Importance of ethical practices in business (4marks)
    • Ensures that the rights of all customers/clients are upheld or respected
    • It ensures that all employees are treated by the owner of the business fairly like promotion is based on merit
    • It ensures that all the activities of the business do not pollute the environment
    • It ensures that the business complies with all government policies such as payment of taxes, renewing of licenses etc
    • It ensures that the business achieves its objectives in the most appropriate manner- conducting business free of corruption etc
    • It ensures that the business engages in fair competition with their competitors
    • It ensures that the business respects the interests and rights of people living with disability
    • It ensures that the business complies with gender requirements during employment
      
      
12. Circumstances under which a public corporation could be dissolved (4marks)
    • If there is persistent loss making
    • In case of bankruptcy- where the corporation cannot pay its debts
    • Where there is change in the act of parliament that formed the corporation
    • In case of privatization
    • Where there is mismanagement, resulting in poor management of the corporation
      
      
13. Record the following transactions in the relevant books of original entry (4marks)
    

    Purchase Journal
    Date	Details	Invoice No.	L.F	Amount
    2020 April 2 ,, 2 ,, 4 ,, 4	K.T Suppliers Ochoki traders Kiptui Suppliers K.T Suppliers Totals posted to the Purchase account (Dr) in the general ledger			40,000 8,000 36,000 15,000 99,000

    
    

    Purchase Returns Journal
    Date	Details	Credit note No.	L.F	Amount
    2020 April 1 ,, 1 ,, 4 ,, 4	K.T Suppliers Ochoki traders Kiptui Suppliers K.T Suppliers Totals posted to the Purchase returns account (Cr) in the general ledger			1,000 1,500 3,500 4,000 10,000

14. Types of direct taxes (4marks)
    • Personal income tax
    • Corporate tax
    • Estate (death) duty
    • Capital gain tax
    • Wealth tax
    • Stamp duty
    • Capital transfer (gift) tax
      
      
15. Reasons why an insured is unable to get compensation (4mks)
    • If the insurance company is bankrupt
    • If the cause of the loss is not the risk that was insured
    • If the insured never paid the required premium
    • If the insurer learns that the insured caused the loss/damage deliberately
    • If the insured had not provided certain material facts about the matter both at taking the policy on when making the claim
    • If the claim was made unreasonably long time after the occurrence of the risk
    • If the insured has no insurable interest for instance he/she already disposed the property in question
      
      
16. Factors to consider when choosing the channel of distribution of bread to schools in Kenya (4mks)
    • The nature of the market- use intermediaries/long channel since secondary schools are spread over a wide area
    • Requirements of the law
    • Since bread is perishable, shorter channels are preferable
    • Consider the effectiveness of the channels used by competitors
    • Marketing risks
    • The amount of resources available for the bakery to distribute bread….with enough delivery vans, the bakery can distribute directly hence a shorter channel
      
      
17. Give the meaning of the following terms as used in Book-keeping (4mks)
    • Goods- These are items bought for the purpose of resale.
    • Liabilities - This includes all what outsiders claim as theirs in the business
    • Creditors - A person or organization to whom money is owed
    • Capital – It is also called owner’s equity meaning it is what the owner claims as his/hers in the business
      
      
18. State four features of economic resources. (4 marks)
    • Scarce in supply
    • Unevenly distributed
    • Complimentary
    • Have monetary value
    • Have utility
    • Can change ownership
    • Have alternative uses
      
      
19. Highlight four prescribed code of behavior of an office staff. (4 marks)
    • Respect
    • Courtesy
    • Loyalty
    • Cooperation
    • Honesty
    • Accuracy
    • Punctuality
    • Diplomacy
      
      
20. The table below show the demand of furniture in Kimumu market for the year 2019.
    

    Month	Quantity demanded
    March	1000
    April	800
    May	700
    June	600
    July	500
    August	300
    September	250

    State four causes of the above trend. (4 marks)
    • Decrease in population
    • Decreased consumers income
    • Unfavourable government policy
    • Unfavourable change in taste, fashion and preference.
    • Future expectation of decrease in price.
    • Unfavourable terms of sale
    • Unfavourableseasoal changes
    • Increase in price of the commodity.
      
      
21. Outline four Fiscal policy measures that may be used to control inflation. (4 marks)
    • Increasing personal income taxes
    • Reducing government spending
    • Reducing tax on inputs on production
    • Subsidizing production
    • Producing commodities that are in short supply to minimize shortage.
      
      
22. Highlight four problems encountered when measuring national income using income approach. (4 marks)
    • Problem of transfer payments
    • Inaccurate data
    • Price fluctuation/inflation
    • Problem of handling illegal and unrecorded economic activities
    • Problem of double counting
    • The problem of the subsistence sector
    • Problem of valuing government income
      
      
23. State whether each of the following transactions increase (+) decrease (-) or have no effect (NE) on asset, liabilities, capital and the balance sheet totals.
    ​

    	Transaction	Effects on
    		Assets	Liabilities	Capital	Balance Sheet totals
    a	Received cash from a debtor	NE	NE	NE	NE
    b	The proprietor deposited extra cash into business bank account from personal sources	+	NE	+	+
    c	Paid a creditor by cheque	-	-	NE	-
    d	Bought office equipment in cash	NE	NE	NE	NE

24. Outline four importance of transport in the facilitation of trade. (4 marks)
    • Facilitates the movement of factors of production and other inputs like raw materials.
    • Opens up new markets
    • Makes it possible for the exploitation of natural resources
    • Adds value to goods and services by moving them to the point of consumption
    • Allows for specialization
    • Promotes mass production since goods can be moved to be stored and sold elsewhere.
    • Enables goods to be moved to the market.
      
      
25. The information relates to Soila traders for the month of June 2021.
    

    	Sh.
    Opening stock  Purchases  General expenses  Closing stock  Sales  Capital	75,000 395,000 60,000 170,000 500,000 1,000,000

    
    Determine;
    1. Cost of sales (1 mark)
       • Opening stock + Purchases – closing stock
         = 75,000 + 395,000 – 170,000
         = Shs.300,000
         
         
    2. Gross profit (1 mark)
       • Sales – logs = 500,000 – 300,000
         = shs.200,000
         
         
    3. Rate of return on capital. (2 marks)
       • =    Net profit x 100
             Capital invested
         N.P = GP – Expenses = 200,000 – 60,000 = 140,000
         ROC = 140,000 x 100
                      1,000,000
         = 14%