Business Studies Paper 1 Questions and Answers - Kigumo Mocks 2021 Exams

Instructions

Write your name and index number in the spaces provided above
Sign and write the date of the examination in the spaces provided above
Answer all questions in the spaces provided in the question paper
Candidate should answer the questions in English

QUESTIONS

Commerce is trade and aids to trade List four aids to trade (4 Mks)
State four objectives of a business (4 Mks)
Resources are categorized broadly into economic and free resources Identify any four free resources (4 Mks)
State four roles of an entrepreneur in production (4 Mks)
State four benefits of registering a company with the stock exchange market (4 Mks)
Highlight four ways in which consumers may protect themselves against exploitation by traders (4 Mks)
State four advantages of having a dry port or an inland container depot(4 Mks)
State four measures that the Kenyan government can take to solve unemployment problem (4 Mks)
Highlight four benefits that would accrue to a firm located near other existing firms (4 Mks)
The following information was extracted from the books of Turaga traders on 31st’Dec 2019
Shs
Turn over 608,000
Purchases 580,000
Opening stock 160,000
Closing stock 200,000
Prepare Turaga traders trading account (4 Mks)
State four objectives of product promotion (2 Mks)
Highlight four benefits of globalization to a business enterprise (4 Mks)
State four problems experienced by a trader who stores goods in a public warehouse (4 Mks)
State four factors that determine the amount of money held for transaction motive (4 Mks)
Outline four factors that may cause the supply curve to shift to the left(4 Mks)
Rahisi traders had the following information in its books of account on 1st’Jan 2019
Kshs
Machinery 500,000
Bank overdraft 38,000
Capital 620,000
Debtors 38,000
Cash in hand 100,000
Creditors 280,000
Stock 300,000
For the year ended 31st’2019, the following information was available;
1. Sold all the stock for Ksh 330,000 and received the amount by cheque
2. Brought into the business cash from a private source Kshs200,000
  Required;
  Draw a balance sheet as at 31st’ Dec 2019 (4 Mks)
Outline four factors that affect the circular flow of income (4 Mks)
Outline four features of monopoly (4 Mks)
Given the following books of original entry, identify the source document used for each (4 Mks)
Book of original entry Source document
1. Purchases journal
2. Cash book
3. Sales return book
4. Sales journal
State four roles of the insurance industry in the Kenya’s entrepreneurial development (4 Mks)
State four levels of inflation (4 Mks)
State four benefits enjoyed by a trader who does not sell on credit (4 Mks)
Highlight four factors that may determine the amount of revenue to be collected through taxation (4 Mks)
Outline four factors that hinder economic integration (4 Mks)
State four benefits of preparing a development plan

MARKING SCHEME

Aids to trade. (4 Mks)
- Warehousing
- Banking
- Transport
- Communication
- Insurance
- Advertisement
Objectives of a business. (4 Mks)
- Profit maximization
- Growth and expansion
- Provision of services to customers
- Survival (beating competitors)
- Creating employment
Free resources. (4 Mks)
- Air
- Sunlight
- Rain
- River/Lake/Ocean water
Roles of an entrepreneur in production. (4 Mks)
- Starts the business/project
- Controls the production process
- Makes the decision on what to produce and when to produce
- Acquires and pays for all the factors of production
- Bears all the risks
- Enjoys the profit
- Pays for expenses
- Owns the whole project
Benefits of registering a company with the stock exchange market. Advice on management
- Sell shares
- Performance barometer
- Good management
- Included in journals published by market
- Facilitates raising of more funds.
Ways in which consumers may protect themselves against exploitation by traders. (4 Mks)
- Checking goods e.g. prices, expiry dates, side effects
- Enlightening themselves about their rights as consumers.
- Forming consumer associations
- Take the exploiter to court
- Complain through the media
- Peaceful demonstration against the exploiter
- Avoid traders identified as exploiters
Advantages of having a dry port or an inland container depot. (4 Mks)
- It reduces the cost of movement of cargo to the far away far ports
- Solves the problem of congestion at the main port
- The owners of the goods or exporters do not need to travel very far to the port
- It makes it easier for handling of cargo by inland importers and exporters
- It facilitates inspection of goods by the custom officials
Measures that the Kenyan government can take to solve unemployment problem. (4 Mks)
- Control population growth
- Encourage self-employment/educate people on self-employment
- Encourage investment in the country
- Encourage use of labour intensive methods of production
- Encourage people to seek jobs outside
- Provide capital for people to set up businesses.
Benefits that would accrue to a firm located near other existing firms.
- Enjoy use of existing infrastructure
- Access available labour
- Collaboration with existing firms
- Enjoy existing auxiliary services
- Access available raw materials

Turaga traders
Trading Account
For the year ended 31st’ Dec 2019√

Opening stock 160,000√

Add purchases 580,000√

COGAFS 740,000√

Less Closing stock 200,000√

COGS 540,000√

GP c/d 68,000√

608,000

Sales 608,000√

608,000

(8×1/2=4 Mks)

Objectives of product promotion. (4Mks)
- Give information about a product.
- Persuade to buy
- Create public interest to buy
- Sustain public interest to continue buying
- Create sales
- Launch a new product
- Retain market
Benefits of globalization to a business enterprise. (4 Mks)
- Provide a wide market.
- Encourage collaboration among businesses from different countries.
- Share technology
- Access to resources like raw materials from other countries.
- Facilitate sharing of research findings by businesses globally/sharing of information.
Problems experienced by a trader who stores goods in a public warehouse.
- Charges levied are relatively high
- Owner pays extra charges if goods overstay
- Location may not suit the trader
- Long procedure in documentation
- Competition for space with other traders
- Goods may get damaged
- Trader may lose contact with customers since they get goods from rented warehouse.
Factors that determine the amount of money held for transaction motive.
- The level of income
- The frequency of payment of an individual
- Individuals spending habits
- Availability of spending habits
- The rate of inflation/high price of commodities.
Outline four factors that may cause the supply curve to shift to the left.
- Increase in cost of production
- Lack of government incentives e.g. subsidies
- Decrease in price of complementary goods
- Withdrawal of firms from the market
- Incidences of strikes
- Inadequate factors of production.

Rahisi traders Balance Sheet.
RAHISI TRADERS
BALANCE SHEET
AS AT 31^ST DEC 2019

Fixed Assets

Machinery 500,000√

Current Assets

Bank 292,000√

Debtors 38,000√

Cash 300,000 √

1,130,000

Capital 620,000√

Add profit 30,000√

Add investment 200,000√

850,000

Liabilities

Creditors 280,000√

1,130,000

Factors that affect the circular flow of income. (4 Mks)
- Investment
- Government expenditure
- Savings
- Foreign trade
Outline four features of monopoly. (4 Mks)
- Single seller and many buyers
- The commodity does not have close substitute
- It is difficult for other firms to enter the market/restrictions to entry
- Prices are usually fixed by the supplier
- The firm controls the entire output

Source document used for each.

Book of 0rinal entry	Source document
(a) Purchases journal	Incoming invoice
(b) Cash book	Receipt/Bank slip
(c) Sales return book	Credit note issued
(d) Sales journal	Outgoing invoice

Roles of the insurance industry in the Kenya’s entrepreneurial development.
- It guarantees continuity of business
- Mobilizes funds into investment project
- Encourages business people to venture into risky projects
- Insurance policy can be used as collateral/security for loans
- Contributes to government revenue
Levels of inflation. (4 Mks)
- Hyper/Run-away inflation
- Stagflation
- Creeping/moderate/gradual/mild inflation
- Rapid inflation
Benefits enjoyed by a trader who does not sell on credit. (4 Mks)
- Does not suffer from bad debts
- Does not spend money on debt collection
- Does not incur cost of keeping records of debtors
- Does not suffer cash flow shortage/working capital is readily available
- Does not waste time following customers to pay.
Factors that may determine the amount of revenue to be collected through taxation. (4 Mks)
- Distribution of incomes
- Social and political factors
- Honesty and efficiency of tax authorities
- Citizens level of real incomes
- Economic structure of a country
Factors that hinder economic integration
- Homogeneity of products
- Lack of foreign exchange
- Retrogressive political ideologies
- Poor infrastructure
- Political instability
- Language barrier
- Differences in levels of development
Benefits of preparing a development plan.
- Enables mobilization and allocation of resources
- Can be used to secure foreign aid
- Used to evaluate projects at different stages of implementation to assess whether they are in line with expected income
- It enables coordinated investment to prevent regional imbalances
- It helps to minimize wastage or duplication of industries
- It is used to increase the rate of capital formation.