Business Studies Paper 1 Questions and Answers - KCSE 2022 Mock Exams Set 1

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ANSWER ALL QUESTIONS IN THIS PAPER

QUESTIONS

  1. Outline four benefits that consumers get from warehousing. (4mks)
  2. Name the business document that each of the following descriptions refers.(4 Marks)

    Description

    Document

    a)It is used to correct an overcharge in an invoice

     

    b)It is used to alert the buyer that ordered goods are on the way

     

    c)Summarize all monthly credit transactions between regular buyer and seller.

     

    d)It is a reply to an inquiry which contains descriptions, illustrations, terms of sale and prices of goods

     
  3. Outline four reasons why a business person may prefer written communication to verbal communication. (4 Marks)
  4. Outline factors that may lead to a shift in the supply curve to the right. (4mks)
  5. Using a tick(√) indicate the effect of the following transactions on capital(4mks)

    Transaction

    Increase

    Decrease

    No effect

    a)Withdrew cash for personal use

         

    b)Used personal savings to buy stock

         

    c)Paid a creditor by cheque

         

    d)Bought office furniture in cash

         
  6. Omamo a trader had the following assets and liabilities on 1st February 2020.

                    Shs
    Capital 120,000
    Machinery 80,000
    Trade creditors 10,000
    Trade Debtors 20,000
    Stock in trade 25,000
    Cash at hand 5,000

    On 2nd Feb the following transactions took place
    Purchased goods on credit for shs. 15,000
    Received a cheque sh. 10,000 from a debtor
    Sold the machinery for shs. 90,000 in cash

    Required: Prepare Omamo Balance Sheet as at 2nd January 2020 after the above transactions (5mks)

  7. State four external factors that may positively influence the operation of a business.(4mks)
  8. Outline four circumstances when the government may introduce regulatory measures to protect consumers from exploitation by business people. (4mks)
  9. State four features of a perfectly competitive market (4mks)
  10. Identify four factors that may cause demand- pull inflation to occur in a country (4 Marks)
  11. The following transactions relate to Salim traders
    1. 15th Feb 2020 sold an old business vehicle for shs. 150,000 on credit to Recovery Motors
    2. 20th Feb 2020 bought a new sewing machine on credit from singer limited for shs.50,000
      Required: Record the above transactions in a General Journal
  12. State four demerits that are associated with water transport. (4 Marks)
  13. State four advantages of an open office layout to an organization (4mks)
  14. Highlight four features private limited company (4 Marks)
  15. 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.
  16. Outline four circumstances where personal selling is appropriate. (4 Marks)
  17. Highlight four benefits that a firm may enjoy by preparing a business plan. (4 Marks)
  18. Highlight four forms of economic integration (4 Marks)
  19. A business had the following record for the year ended 31st December 2018
    Capital as at 31/12/18 64,000
    Net profit for the year 14,000
    Capital as at 1st Jan 2018 42,000
    Monthly drawings 1,500
    Calculate the additional investments made during the year (4 Marks)
  20. Outline four principles that guide a government in spending public finance (4 Marks)
  21. State four negative implications of ageing population in a country (4 Marks)
  22. State four errors which may affect the agreement of a trial balance(4mks)
  23. The following information relates to Mumbua traders for the year ended 31st April 2020.
    Cash at bank 30,000
    Cash in hand 40,000
    Current liability 500,000
    Sales 920,000
    Opening stock 150,000
    Closing stock 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. Outline four benefits that consumers get from warehousing. (4mks)
    • Consumers are assured of a steady supply of goods
    • They are assured of quality goods and stable prices.
    • They get goods in convenient quantities
    • They are able to get a variety of goods
    • Are able to choose the right goods where they are branded or blended
  2. Name the business document that each of the following descriptions refers.(4 Marks)

    Description

    Document

    a)It is used to correct an overcharge in an invoice

    Credit note

    b)It is used to alert the buyer that ordered goods are on the way

    Advice note

    c)Summarize all monthly credit transactions between regular buyer and seller.

    Statement of account

    d)It is a reply to an inquiry which contains descriptions, illustrations, terms of sale and prices of goods

    Catalogue

  3. Outline four reasons why a business person may prefer written communication to verbal communication. (4mks)
    • Can be re-read over again for better understanding/cannot be distorted
    • Can be used for reference purposes
    • Can be reproduced
    • Can be used as evidence in the law court
    • Can be used to convey confidential matters/information
  4. Outline factors that may lead to a shift in the supply curve to the right. (4mks)
    • Reduced cost of production
    • Favorable climate conditions/ inseason
    • Increase in the price of jointly produced production
    • Favourable government policy
    • Entry of new firms into the market.
    • Reduced incidence of industrial strikes
    • Availability of factors of production
    • Future expectations of a fall in price.
  5. Using a tick(√) indicate the effect of the following transactions on capital (4mks)

    Transaction

    Increase

    Decrease

    No effect

    a)Withdrew cash for personal use

     

     

    b)Used personal savings to buy stock

       

    c)Paid a creditor by cheque

       

    d)Bought office furniture in cash

       

  6. Omamo a trader had the following assets and liabilities on 1st February 2020.
    Omamo Trader
    Balance sheet
    As at 2nd February 2020
      sh   sh
    Stock in trade
    (25,000 + 15,000)
    40,000 Capital  120,000
    Trade debtors 
    (20,000 – 10,000)
    10,000 Add capital gain  10,000
    Bank(5,000 +10,000) 15,000   130,000
    Cash 90,000 Total Creditors
    10,000 + 15,000
    25,000
       155,000   155,000
    10 x ½ = 5mks
    NB: Correct total on both sides one tick √
  7. State four external factors that may positively influence the operation of a business.(4mks)
    • Fair competition/lack of competition
    • Use of appropriate technology in production
    • Stable political environment
    • A favourable legal framework/favourable government policies such as low taxes
    • Reliable supply systems
    • Well developed physical facilities/infrastructure
    • Increasing/high population
    • Favourable social cultural environment
    • Enhanced security
    • Positive publicity by media houses.
  8. Outline four circumstances when the government may introduce regulatory measures to protect consumers from exploitation by business people.
    • Where standards for operating business a low/unhealthy
    • Where hearding is taking place
    • Where there unsafe buildings
    • Where customers are being charged unfairly high prices
    • Where false advertising is taking place
    • Where there are rampant branch of contract
    • Where customers are being exploital on weights and measurements
    • Where there is need to enforce trading laws
  9. State four features of a perfectly competitive market (4mks)
    • Large number of buyers and sellers
    • Buyers and sales have perfect knowledge e.g market 
    • There is no government interference
    • No transport costs are incurred
    • There is free entry and exit by firms
    • The products are identical
    • There is no excess demand/ supply
    • There is uniformity of buyers and sellers
    • Both the buyers and sellers are price takers
  10. Factors that may cause demand- pull inflation to occur in a country (4 Marks)
    • Increased government expenditure
    • Increase in population
    • Expectation of price increment
    • General shortage of goods and services
    • Increased credit creation by commercial banks
    • A fall in savings
    • Increased in money incomes
  11. The following transactions relate to Salim traders
    GENERAL JOURNAL

    Date

    Feb: 2020

    Particulars

    Folio

    Debit

    Credit

    15th

    Recovery motors

            Vehicle

    (Sale of vehicle on credit)

    S.L

    150,000

     

    150,000

    20th

    Sewing machine

            Singer limited

    (Purchase of sewing machine on credit)

    G.L

    P.L

    50,000

     

    50,000

  12. State four demerits that are associated with water transport.
    • Relatively slow – hence unsuitable for transporting perishable and urgently required goods.
    • Limited availability – since its only applicable where large water bodies are available and in places with navigable rivers
    • Water ways may be affected by adverse weather conditions such as storms which hinder movement of water vessels
    • High costs to construct and maintain /expensive to construct ports etc. unaffordable to many/some countries
    • May lack flexibility – Door to door facilities may not be available/some follow fixed schedules/routes
    • May be prove to piracy – leading to huge losses and increased insurance costs
    • High cost of unit of carriage vessels. Thus unaffordable to many
  13. State four advantages of an open office layout to an organization (4mks)
    • Easier to communicate
    • Supervision is enhanced
    • Resources are evenly shared
    • Saving on space
    • Easier/cheaper to construct
    • Enhance interpersonal relationship
    • Workflow is made easy
    • Service delivery is enhanced
    • Reorganization is easier/cheaper
    • Cheaper to decorate
    • Cheaper to maintain
    • Optimum use of resources.
  14. Features private limited company (4 Marks)
    • Shareholders have limited liabilities
    • Managed by a minimum of 1 director
    • Owned by a minimum of 1 (or 2) to a maximum of 50 shareholders
    • Does not advertise its shares to the public
    • Share transfer is restricted
    • Not required to publish its financial reports
  15. Open relevant ledger accounts using the following information (4 Marks)

    Dr                                             Capital A/c                                                              Cr

                                

                 1.2.2011 cash     10,000

                 1,2,2011 Bank    50,000

    Dr                                                 Cash a/c                                                                    cr

    1.2.2011 capital       10,000

    4.2.2011 Bank            2,000

                                     

    Dr                                              Purchases a/c                                                                cr

    2.2.2011  LK Trdaders  5,000ü

     

    Dr                                       LK Traders a/c                                                                    cr

     

       2.2.2011 purchases    5000

    Dr                                            Bank a/c                                                                       cr

    1.2.2011 Capital         50,000

                         4.2.2011 Cash          2000

  16. Outline four circumstances where personal selling is appropriate.
    • When the product requires demonstration. Example technical products
    • When the market is concentrated in one area e.g bank sales representative will go to institutions like school to sell their products.
    • Where the organization has resources since personal selling is expensive to various expenses incurred.
    • Where the product is new in the market, hence awareness creation persuasion and convincing is necessary
    • Where a product is customer tailored that is where products are made to meet specific needs of customers who have different tastes and preference
  17. Benefits that a firm may enjoy by preparing a business plan.
    • Source of finance/capital/loans/credit – can be used to convince financial institutions investors to fund the firms operation
    • A tool for evaluation – it can be used to determine whether the firms is achieving it’s goal/objectives/helps make necessary adjustment. It can be used for structuring the implementation of the firm’s activities /functions
    • A tool for planning/organizing/directing/staffing/co-ordinating/budgeting/communication/controlling
    • Gives the firm a competitive edge – it enables the firm to get better understanding of the market of competitors
    • Enhances efficiency in the use of resources – (of the firm) ensures that the resources available are allocated/used in the best way possible without waste fullness
    • Motivational tool – it inspires management/employees – creates teamwork. In accomplishing the objectives of the firm.
    • Framework/blueprint/road map for implementing a new business thus assisting management in decision/ actions on a day to day basis.
    • Increasing tool for analyzing possible strengths/weakness/opportunities/threats/unforeseen circumstances/ministries impact of disruptions
    • Evidence proof of commitment (by the owner)who will devote his/her efforts to the success of the business/who is forced to think clearly through the business idea before starting it.
    • A tool for testing business idea to determine whether it can succeed/not succeed.
    • Adaptability tool – created room to cope with changing/prevailing circumstances/situations
  18. Highlight four forms of economic integration (4 Marks)
    • Free Trade Area
    • Preferential Trade Area
    • Customs Union
    • Common Market
    • Economic Union
  19. A business had the following record for the year ended 31st December 2018
    • 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
  20. Principles that guide a government in spending public finance
    • Maximum social benefit
    • Efficient allocation (wealth distribution)
    • Proper financial management
    • Flexibility –allow changes
    • Economy in spending
    • Surplus /reserve
  21. Negative implications of ageing population in a country
    • Low labour supply/shortage of labour/manpower
    • 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 change
    • Less progressive/low/savings and low investment
  22. State four errors which may affect the agreement of a trial balance
    • Single entry for a transaction in the account
    • Overcasting entry in an account
    • Under costing entry in the account
    • Wrong balance of an account/error of additional/arithmetical error
    • Posting a balance on the wrong side of the trial balance
  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 x 920000) = 230,000 – 138,000
                       100
      = 92,000 1mk
  24. Money transfer facilities offered by commercial banks
    • Cheques
    • Credit transfer
    • Bank drafts/bankers cheques
    • Standing orders
    • Telegraphic transfers
    • Debit cards
    • Electronic funds transfer
  25. Problems encountered at the plan implementation stage in economic planning and develop
    • 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

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