Business Studies Paper 1 Questions and Answers - KCSE 2022 Mock Exams Set 2

Questions

Instructions

• Answer all questions in the space provided

1. List four reasons why a business exists. (4 Marks)
2. State four elements that constitute the internal business environment. (4 Marks)
3. Most firms are adopting electronic filing systems. Mention 4 demerits of using such a system (4 Marks)
4. Identify the type large scale retailers described by each of the following statements (4Marks)
   1. Huge shopping complexes with many shops under one roof each under a different management 
   2. Many shops under one roof and one management each selling a particular line of products
   3. Businesses where customers make their orders through the post
   4. Shops operated by one company and located in different areas where they sell specialized products 
5. Highlight four circumstances under which a co-operative may be dissolved (4 Marks)
6. Highlight four barriers to effective communication (4Marks)
7. Identify four ways in which the efficiency of a warehouse can be guaranteed (4 Marks)
8. State four circumstances under which an insurance policy may be terminated (4 Marks)
9. Highlight four factors that may cause the supply curve to shift to the right (4 Marks)
10. State four measures that Kenya government may take to attract firms to an area. (4 marks)
11. The following is a representative basket of an average family.
    

    Year	Prices
    2019  2020	6,000 7,200

    Determine the increase in C.P.I using 2019 as a base year. (4 Marks)
12. Highlight four factors which may contribute to business failure (4 Marks)
13. Highlight four problems associated with the income approach of measuring the national income (4 Marks)
14. Highlight four features associated with a monopoly market structure. (4 Marks)
15. Outline four roles of transport in the facilitation of trade (4 Marks)
16. The following balances were extracted from the books of Maua Traders on 31st December, 2020.
    

    	Shs
    Fixed assets  Current assets  Creditors  5 year loan	300,000 123,700 84,500 125,000

    Determine the net worth of the business as at 31st December 2020 (4 Marks)
17. Highlight three ways in which the introduction of money helped eliminate problems faced in barter trade (3 marks)
18. Highlight four forms of economic integration (4 marks)
19. State four measures that the government can use to encourage increase in the country‘s volume of exports. (4 Marks)
20. Unemployment solving has been an agenda to Kenya. Identify the type of unemployment being solved below. (4 marks)
    1. Government initiating irrigation projects to ensure continuous production of food
    2. Retraining teachers to embrace use of technology in teaching and learning
    3. Government and private sectors inventing job advertisement sites for easy access by job seekers
    4. Parliament passing legislation that accommodate the disabled people to acquire jobs………………………………………………………………………………
21. The following information relates to Makini Traders for the year ending 31st December 2015.
    

    Margin  Sales  Purchases  Stock on 1/1/2015  Closing stock

    15% 640,000 480,000 130,000 ?

    Required Trading Account of Makini Traders for the year ending 31st December 2015. (5Marks)
22. State any four types of advertising that a trader may adopt (4 Marks)
23. State any four types of indirect taxes in Kenya (4 Marks)
24. State four problems encountered at the plan implementation stage in economic planning and development (4 Marks)
25. Wanja enterprises had the following assets and liabilities on 5th October 2021.
    

    Item	Kshs
    Equipment Capital Creditors Debtors Stock Cash at bank	800,000 1,200,000 100,000 200,000 250,000 50,000

    The following transactions took place on 7th October 2021.
    1. Bought goods for resale Ksh. 150,000 on credit
    2. A debtor paid Ksh. 50,000 by cheque
    3. Sold the equipment for Ksh. 700,000 cash
       Required : Prepare Wanja enterprises balance sheet after the above transactions (4 Marks)

Marking Scheme

1. List four reasons why a business exists. (4 Marks)
   
   • To make profit.
   • As an outlet of new innovation.
   • To utilize spare time.
   • To utilize local resources.
   • Source of goods.
   • For prestige/to be your own boss
2. State four elements that constitute the internal business environment. (4 Marks)
   
   • Business structure
   • Business culture
   • Business owners
   • Business resources
   • Management styles
   • Business objectives
   • Research and development
3. Most firms are adopting electronic filing systems. Mention 4 demerits of using such a system
   
   • Only suitable for areas with electricity
   • Information cannot be accessed during power failure
   • Information cannot be accessed during computer breakdowns
   • Storage devices can be damaged easily if not properly taken care of
   • Information may be damaged by viruses
   • Criminals may hack confidential information in the system
4. Identify the type large scale retailers described by each of the following statements
   
   • Huge shopping complexes with many shops under one roof each under a different management hyper market
   • Many shops under one roof and one management each selling a particular line of products departmental store
   • Businesses where customers make their orders through the post
   • Mail order business
   • Shops operated by one company and located in different areas where they sell specialized products tied shops
5. Highlight four circumstances under which a co-operative may be dissolved
   
   • When an order for dissolution is made by the Ministry of Co-operative Development
   • When a court of law orders that the co-operative is dissolved
   • When a member withdraw their membership leaving less than 10 members
   • When the co-operative is declared insolvent
   • When the members voluntarily decide to dissolve the co-operative
   • When there is persistent misunderstanding among members
   • When a co-operative fails to meet the purpose it was formed.
6. Highlight four barriers to effective communication
   
   • Language barrier
   • Poor listening
   • Negative attitude
   • Poor timing
   • Wrong medium used
   • Pre judgement
   • Emotional responses
   • Unclear system within the organisation
   • Noise
   • Unfamiliar non-verbal signs
7. Identify four ways in which the efficiency of a warehouse can be guaranteed
   
   • Ensuring that there are adequate handling facilities
   • Ensuring that the staff are well trained
   • Ensuring that appropriate security measures have been put in place
   • Ensuring that the warehouse is fitted with safety equipment/ firefighting equipment/ first aid kits
   • Ensuring that public health requirements have been met
   • Ensuring that all legal requirements have been met
   • Ensuring that a proper record of receipt and release of goods is maintained
   • Ensuring that special storage facilities are provided for goods requiring such facilities
   • Ensuring that the building design is appropriate for the kind of goods to be stored
   • Ensuring that the warehouse is located in a place that is convenient and accessible to the users.
   • Ensuring that the warehouse is spacious enough to allow easy movement and accommodation of goods and personnel
   • Ensuring that the warehouse is fitted with good communication equipment for ease of communication
8. State four circumstances under which an insurance policy may be terminated
   
   • If it is discovered that the insured person did not act in ‘utmost good faith’ / did not disclose all the material information on the subject matter
   • Where the risk occurs and one is compensated i.e under general insurance
   • Where the policy matures and is settled i.e under life assurance
   • When the insured decides to terminate the contract
   • When a court of law orders the termination of the contract
   • When the insured fails to remit premiums
   • When the insured ceases to have insurable interest in the matter
   • Where the insurance company is declared insolvent
9. Highlight four factors that may cause the supply curve to shift to the right
   • Improvement in technology
   • Fall in cost of production
   • Entry of new firms into the industry
   • Provision of subsidies by the government
   • Favorable natural factors
   • Expectation of a drop in future prices
   • Fall in the price of a substitute
   • Increase in the price of a joint product
10. State four measures that Kenya government may take to attract firms to an area. (4 marks)
    • Providing security
    • Providing electricity
    • Building transport networks e.g roads
    • Giving free land or selling land cheaply
    • Tax incentives for businesses located in certain areas
11. The following is a representative basket of an average family.Determine the increase in C.P.I using 2019 as a base year. (4 Marks)
    • Increase in CPI = (Price during the current period – price in the base year) x 100
                                                    Price in the base year
      = (7200-6000) x 100
              6000
      = 20%
12. Highlight four factors which may contribute to business failure (4 Marks)
    • Insufficient capital
    • Lack of business acumen
    • Lack of proper business controls
    • Failure to maintain proper business records
    • Failure to maintain proper business records
    • Poor public or customer relations
    • Failure to carry out a business viability study before establishing it
    • Increase in the level of insecurity in an area
13. Highlight four problems associated with the income approach of measuring the national income (4 Marks)
    • Transfer payment poses a problem since it is difficult to impute the proportion of income constituted by those transfers
    • The problem in accurate data
    • Due to price fluctuation
    • The problem of handling illegal and unrecorded economic activities.
14. Highlight four features associated with a monopoly market structure. (4 Marks)
    • One producer / one seller / one supplier in the market
    • Many buyers in the market
    • Buyers have all the relevant information about the market and will therefore act rationally
    • The firm’s product doesn’t have a close substitute
    • Price is set by the single producer / monopolist is the price maker
    • Barriers to entry and exit from the market exist
15. Outline four roles of transport in the facilitation of trade (4 Marks)
    • Facilitates movement of factors of production and other inputs like raw materials.
    • Enables goods to be moved to the market from their point of production
    • Adds value (place utility) by moving them to their point of consumption
    • Opens up new markets
    • Makes it possible for exploitation of natural resources
    • Allows specialization since it allows people to access goods produced elsewhere
    • Promotes mass production since goods can be moved and be stored and sold elsewhere
16. The following balances were extracted from the books of Maua Traders on 31st December, 2020.
    • Fixed assets 300,000
      Current assets 123,700
      Creditors 84,500
      5 year loan 125,000
      Determine the net worth of the business as at 31st December 2020 (4 Marks)
      Capital = Assets – Liabilities
      = (300,000+123,700) – (84,500+125,000)
      = 214,200
17. Highlight three ways in which the introduction of money helped eliminate problems faced in barter trade (3 marks)
    • Money eliminated the need for double coincidence of wants since it’s a medium of exchange
    • Stores the value of perishable goods by selling them and keeping the money for future use
    • Help in exchange of indivisible commodities since it can be divided into smaller denominations without losing value
    • Ensures that commodities exchanged are of comparable value by offering a standard measure of value
    • Provides a unit of account by which goods and services are valued unlike in barter trade
    • Money is a standard for deferred payment whereas it was not possible to make future payments under barter trade
    • Money enables exchange of immovable property like land
18. Highlight four forms of economic integration (4 marks)
    • Free Trade Area
    • Preferential Trade Area
    • Customs Union
    • Common Market
    • Economic Union
19. State four measures that the government can use to encourage increase in the country‘s volume of exports. (4 Marks)
    • Instituting export compensation scheme
    • Diversifying foreign markets
    • Offering customs drawbacks
    • Lobbying for removal of trade restrictions by the trading partners
    • Devaluing the local currency
20. Unemployment solving has been an agenda to Kenya. Identify the type of unemployment being solved below. (4 marks)
    • Seasonal
    • Structural
    • Frictional
    • Residual
21. The following information relates to Makini Traders for the year ending 31st December 2015.
    Margin 15%
    Sales 640,000
    Purchases 480,000
    Stock on 1/1/2015 130,000
    Closing stock ?
    Required Trading Account of Makini Traders for the year ending 31st December 2015. (5Marks)
    •    
      

      Makini Traders Trading Account For the year ended 31st December 2015
      Opening stock  Purchases  Goods available for sale  Less closing stock  Cost of goods sold  Gross profit c/d	130,000 480,000 610,000 66,000 544,000 96,000	Sales	640,000
      	640,000		640,000

22. State any four types of advertising that a trader may adopt (4 Marks)
    • Primary demand/informative
    • Celebrity
    • Persuasive/competitive
    • Product
    • Institutional
23. State any four types of indirect taxes in Kenya (4 Marks)
    • Sales tax
    • Value added tax
    • Export duty
    • Import duty
    • Excise duty
24. State four problems encountered at the plan implementation stage in economic planning and development (4 Marks)
    • 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
25.    
    

    Wanja Enterprises Balance Sheet As at 7th October 2021
    Current assets Stock    Bank   Cash    Debtors	40,000 100,000 70,000 150,000	Capital  Loss	120,000 (100,000)	1,100,000
    		Short term liabilities Creditors		250,000
    	1,350,000			1,350,000