Business Studies Paper 1 Questions and Answers - Asumbi Girls Mock Examinations 2022

• This paper consists of 25 questions.
• Answer ALL questions.
• Candidates should answer the questions in English

1. State four merits associated with internal borrowing (4 marks)
2. State four consequences that may arise due to poor arrangement of goods in a warehouse    (4 marks)
3. The inflation rate in county moved from 6.1% to 7.6%.  State four positive outcomes of this change (4 marks)                                           
4. The following balance sheet was incorrectly prepared
                                                                          CHUMA Enterprises
                                                                                Balance sheet
                                                                      As at 31st October 2020
                                  
   Prepare the correct balance sheet arranged in order of liquidity to show fixed assets, current assets, current liabilities and capital. 
   (4 marks)
5. Highlight four circumstances under which a manufacturer would find it necessary to carry out market research.         (4 marks)
6. State four factors that determine the amount of revenue collected by Kenyan government through taxation.                           (4marks)
7. Other than the use computers in an office, mention four recent trends in office management.            (4 marks)
8. State any four principles that govern the operations of co-operative societies in Kenya (4 marks)
9. The table below represents quantity of commodity X demanded by consumer A and B. 
   

   Price per unit of x	Quantity of x demanded by A in a week.	Quantity of commodity X demanded by B in a week.
   20	200	400
   10	200	600
   5	300	700
   2	400	800

   State four possible reasons why B demands more of commodity X at every price than A (4 marks)
10. Outline four ways in which a good business structure is of benefit to a business organization (4 marks)
11. Outline four factors that determine the amount of money that an individual may hold in order to meet unexpected expenses (4 marks)
12. Give four reasons why the Kenya government has been organizing seminars and workshops for training youth in businesses (4 marks)
13. Mention four circumstances under which an entrepreneur may establish his/her business where other businesses already exist
    (4 marks)
14. Give four differences between a public limited company and a partnership. (4 marks)
15. Highlight four measures that a government may take to correct a balance of payment deficit in the county (4 marks)
16. Juma traders had the following information
    Opening stock   40,000
    Closing stock     55,000
    purchases          200,000
    Margin                25%
    Required
    1. Calculate Juma’s Rate of stock turn over. (3marks)
    2. State the importance of having a low rate of stock turnover. (1mark)
17. Outline four ways in which the nature of a product influences the choice of distribution channel. (4 marks)
18. Mention four circumstances under which a retailer may return goods to a wholesaler. (4 marks)
19. State four reasons why billboards are popular in product promotions (4 marks)
20. The following balances were obtained from the books of sunset traders as at 30th June, 2004.
    Stock 1st July 2003       45,000
    Purchases                    159,000
    Sales                            235,000
    Stock 30/June/2014       33,000
    Capital                            75,000
    Return outwards              3,000
    Operating expenses      13,000
    Calculate:
    1. Stock turnover rate.  (2 marks)
    2. Return on capital. (2 marks)
21. State four ways in which legal political environment may improve business performance (4 marks)
22. Distinguish the following types of goods as used in production.
    1. Producer goods and consumer goods. (2 marks)
    2. Intermediate goods and finished goods.     (2 marks)
23. The following cashbook was prepared by Kajuka Traders for the month of July 2021.
                                                                     kajuka traders’
                                                                        Cash book
    Dr                                                                                                                                                                                                                Cr.
    

    Date	Details	If	Cash	Bank	Date	Details	LF	Cash	Bank
    2021 July 2  July 8 July 18 July 25	Balance  Sales Akinyi Sales	b/d	Y  20,000	50,000  120,000  170,000	2021  July 4  July 13  July 21  July 27	Balance  Purchases  Rent  Balance	b/f  c/d	6,000  P  60,000	60,000  30,000    Q    R

    Calculate the missing figures.                                          (4 marks)
    1. Y ………………………………………………………………………………………………………
    2. P ………………………………………………………………………………………………………
    3. Q ……………………………………………………………………………………………………..
    4. R ………………………………………………………………………………………………………
24. Mention four benefits that may be enjoyed in a country that is experiencing over- population (4 marks)
25. Highlight four limitations posed by the use of national income statistics as a way of comparing the living standards of people for different countries. (4 marks)

MARKING SCHEME

1. Merits associated with internal borrowing.
   • No strings attached.
   • Can also solve inflation problems.
   • Maintains sovereignty.
   • Is flexible.
     Any 4 correct points x 1 = 4 Marks
2. Consequences that may arise due to poor arrangement of goods in a warehouse.
   • Damage /breakages of goods.
   • Pilferage / Theft of goods
   • Wastage of time/delays one search for the required goods.
   • Uneconomical /wastage of space in the warehouse.
   • Possible /loss of government revenue in bonded warehouse
   • Limits use of holding equipment’s machines in the warehouse
   • Increased overhead costs/labor costs
     Any 4x1=4mks
3. Positive outcomes  of increased inflation from 6.1% to 7.6%.
   • Debtors may pay less in real terms.
   • Sellers may earn more.
   • Motivates people to work order to cope with rise in inflation.
   • Better utilization of available resources .
   • Increased production in order to maintain living standards.  Any 4x1=4mks
4.                                                            CHUMA traders
                                                             Balance sheet
                                                       As at 31^st October 2020
   
    NB. Order of liquidity MUST be followed to score.              8ticks @½= 4mks
5. Circumstances under which a manufacturer would find it necessary to carry out marks research.
   • Where he wants to determine the competition level and how to face it.
   • Where there need to establish the best price that will suit the consumer.
   • Where he intends to find out the best method of distributing the goods.
   • Where he intends to establish appropriate quantity and packaging of the goods.
   • Where the products is new.
   • Where  he intends to find one the changes in demand for the product.
   • Where he intends to determine the suitable methods of promoting the product.         Any 4x1=4mks
6. Factors that determine the amount of revenue collected by Kenyan government through taxation.
   • Distribution of income /gap between rich and poor.
   • Social and political factors.
   • Honesty and efficiency of tax authorities.
   • Citizens level of real incomes.
   • Economic structure of the county.                                Any 4x1=4mks
7. Recent treads in office management.
   • Office structure/prestigious landscape office plans.
   • Automation which is the use of machine at place of work.
   • Location of offices in the outskirts of towns.
   • Merging duties.
   • Employment identification. E.g use of badges/names tags.
   • Out sourcing where businesses contract services from other business.
   • Use of casual uniforms /branded uniforms on Fridays/weekends.      Any 4x1=4mks
8. Principles that govern the operations of co-operative societies in Kenya.
   • Voluntary membership.
   • Democratic administration.
   • Education for members.
   • Limited interest on share capital.
   • Dividend to members. Any correct 4 @ 1 Mark = 4 Marks
9. Reasons why B demands more of commodity X at every price than A. (4mks)
   • B may be having more income than A.
   • B may be having a large family than A
   • B may be having a positive taste towards commodity X than A.
   • B may be lacking substitute for commodity x while A has that substitute. Any 4x1=4mks
10. Outline four ways in which a good business structure is of benefit to a business organization(4mks)
    • Facilitates easy control of workers
    • Facilitates easy evaluation of workers
    • Reduces confusion among workers
    • Enhances teamwork (4x1=4mks)     Any 4x1=4mks
11. Factors that determine the amount of money that an individual may hold in order to meet unexpected expenses.
    • Level of income.
    • Family status.
    • Age of an individual.
    • Number of dependants.
    • Individuals temperament /attitude towards life.
    • Duration between incomes /frequency of obtaining income.     Any 4x1=4mks
12. Reasons why the Kenya government has been organizing seminars and workshops for training youth in business.
    • Exposure them to modern development in business.
    • Education them on efficient methods of operating business.
    • To impart proper business ethics.
    • Inform them on the actions available profitable business opportunities.
    • Expose them on government policy on business activities in the country.
    • Expose them to problems facing them  and the possible solutions.                                Any 4x1=4mk
13. Circumstances under which an entrepreneur may establish his/her business where other business already exists.
    • When he wants to benefit from the already existing or available trained and skilled labor force.
    • When he want to benefit from the already available improved infrastructure.
    • When he want to benefit from services such as banking and insurance that will be readily available.
    • When he want to benefit from complementally industries /goods that will be readily available.
    • If he want to benefit from joint research with other business.
    • If he want to benefit from already available market /readily available market from other firms.
    • If he wants to benefit from the joint disposal of wastes products with other firms.              Any 4x1=4mks
14. Difference between a public limited company and a partnership. 
    

    	Public limited company	partnership
    (i)	Formed by a minimum of shareholders and no maximum.	Formed by between 2 to 20 partners except for special partnership.
    (ii)	Shareholders have limited liability	Partners have unlimited liability except for the limited partners.
    (iii)	Its operations are governed by the article &memorandum of association.	Its operations are guided by the partnership deed /act.
    (iv)	Must file annual returns and publish their accounts.	Are not required to file annual returns or publish their accounts.
    (v)	Managed by a board of directors.	Managed by partners themselves.
    (vi)	Shares are freely transferred become a shareholder /no need for consent for the exist shareholders.	Admission of new partners is through consen of other partners.
    (vii)	Invites public to subscribe/by its share through the security exchange	Does not invite public to subscribes its shares.
    (viii)	Has perpetual life	Has limited life /death of a partner/insanity of a partner offers the life of partnership

    Any 4x1=4mks
    Differences MUST match to score
15. Measures that a government may take to correct a balance of payment deficit in the county.
    • Export promotion.
    • Import restriction.
    • Devaluation of a county’s currency.
    • Diversification of exports.
    • Encouraging foreign investment into the county.
    • Restricting capital outflow                        4x1=4mks
16. Calculation of prices
    2012 112 = x.190
                         90
                 x = 1.2 × 90 = 100.8
                          100
    2013 115 = x × 100
                              90
                 x = 115 × 90  = 103.5
                                100
    2014  117 = x × 100
                               90
               x = 117 × 90  = 105.3
                             100
    2015 120 = x.100
                         90
    x = 120 × 120 = 108
                    100
17. ways in which the nature of a product influences the choice of distribution channel.
    • Perishable goods require shortest channel than durable products .
    • Bulky products require shorter channels.
    • Highly valuable goods require short channels.
    • Technical goods require shorter channels.
    • Heavy goods require short- channel than light goods.     4x1=4mks
18. Circumstances under which a retailer may return goods to a wholesaler.
    • Incase they are damaged.
    • Incase the quality is different from the one requested for /incase of poor quality than expected.
    • Incase they are of the wrong type / where the description /order differs from what has been supplied.
    • Incase excess quantity being supplied.     4x1=4mks
19. Reasons why billboards are popular in product promotions.
    • They are positioned at strategic positions where they can read by many people /accessed by many potential consumers.
    • The advertising message in not heavily wounded thus making it possible to be under stored and remembered easily.
    • They convey message for a long time since they are relatively permanent.
    • They are conspicuous and hence attractive to the audience.       4x1=4mks
20. Calculate:
    1. Stock turnover rate.  ( R. O.S.T) 
       Rate of stock turn over = cost of sales 
                                               Average stock
       cost of Sales = opening stock +purchase – eturn outwards − closing stock
       = 45,000+159,000 − 3,000 − 33,000
       = 168,000
       Average stock = Opening Stock + Closing Stock
                                                             2
       = 45,000 + 33,000
                      2
       = 39,000
       R.O.S.T. = 168,000√
                          39,000
       = 4.3076
       = 4 TIMES√
       2ticks x1=2mks
    2. Return on capital (R.O.C) =      NET profit     
                                                    Capital invested
       NP = GP − EXPENSES
       5400 = 67000 − 13000
       ROC = 54000√ = 18√  or  0.72:1 or 18:25 or 72%
                   75000       25
       2ticks x1=2mks
21. Ways in which legal political environment may improve business performance.
    • Improved infrastructural network may attract more businesses.
    • Improvement/favorable political stability may make it attractive.
    • Increased subsidies lower costs of production and subsequently consumers may enjoy lower prices for goods.
    • Reduced taxes may attracts more business and lower production costs.
    • Abolishing price controls enable business to compete and enjoy better profit margins.
    • Favorable legislation/low amake it attractive to new and existing business to operate /reducing beauticratical procedures in licensing /operating business.
      4x1=4mks
22. Distinguish between :
    1. Producer goods and consumer goods.
       • Producer goods are goods which are used in the creation production of other goods e.g machinery /traders while consumers goods are goods that already satisfy needs and wants of a consumer /they are meant for immediate  consumption e.g drinks, clothes,books . 1x2=2mks
    2. Intermediate goods and finished goods.
       • Intermediate goods are goods that are not ready for use before they are further processed. E.g sugarcane /wood/wheat/skins/while finished goods are final products that come out of production in the required from (output)e.g ugali from maize flour/furniture from timber.         1x2=2mks
23.  
    1. Y = Ksh 40,000
    2. P= ksh. 54,000
    3. Q= ksh.80,000
    4. R= ksh170,000         4x1=4mks
24. Benefits that may be enjoyed by a country that is experiencing over- population.
    • Wide market for goods /services.
    • Better utilization of resources .
    • Creates a pool of labour supply /skilled labour force.
    • Enhance creativity and innovation.
    • Stimulates investments.
    • Promotes labour mobility.      4x1=4mks
25. Limitations posed by the use of national income statistics as a way of comparing the living standards of people for different countries.
    • Use of different currencies
    • Varied preferences and tastes
    • Varied distribution.
    • Inaccurate statistics                       Any 4 correct points x 1 = 4 Marks