Business Studies Paper 1 Questions and Answers - Sunrise 2 Evaluation Mock Exams 2022

• Answer all the questions in the spaces provided.

1. Outline four benefits that a business gain from its environment. (4mrks)
2. Highlight four limitations that small scale retailer operators face. (4mrks)
3. Outline four factors that influence the location of a public warehouse.  (4 mks)
4. Outline four ways in which inflation can be controlled by the government. (4mrks)
5. The following items belong to Mlamba Wholesalers as at 31^st Dec 2018 
   

   Motor Vehicle	75,000
   Stock	4,000
   Overdraft	11,100
   Creditors	5,740
   Debtors	6,200
   Commission paid	2,000
   Cash	10,000
   Returns Outwards	3,400
   Returns Inwards	1,400
   Capital	78,360

    Required, draw Mlamba’s trial balance as at 31^st December 2018. (5mks)
6. The bodaboda motorcycles are very popular both in urban and rural environment. Highlight four disadvantages of this method of transport.  (4mks)
7. Lopez who completed building a house has insured it against the risk of fire. State four circumstances that may prevent her from being compensated in an event of loss occurring.                                                     
   Outline four benefits that a business gain from its environment. (4mrks)
8. Outline four characteristics of economic resources. (4mks)
9. Outline four disadvantages of division of labour.      (4mks)
10. Outline four negative effects of an ageing population in an economy. (4mks)
11. Shaban started a shop dealing in ladies clothing but failed after two years. Outline four factors that may have caused this failure. (4mks)
12. Highlight four challenges passed to a country by a rapidly growing population.  (4mks)           
13. State the type of utility created by each of the following activities:                    (4mks)
    1. Delivery Milk to a customer ………………………………………………………………
    2. Keeping money in the bank………………………………………………………………
    3. Selling bread to a student……………………………………………………………………
    4. Making uniform for students………………………………………………………………
14. Highlight four factors which hinder economic development in a country.    (4mks)
15. Outline four means used by commercial banks to transfer money.                  (4mks)
16. Mention four unethical Practices in product promotion.                                      (4mks)
17. State four reasons why the volume of exports from less developed countries to the developed countries  tend to be low.      (4mks)
18. The average consumer price for a commodity for various years is shown below
    

    Year	Consumer price	Consumer price index
    	shs
    2004	120	100
    2005	145	a.
    2006	160	b.
    2007	170	c.
    2008	175	d.

    Calculate the consumer price index using year 2004 as the base year. (4mks)
19. State four benefits that consumers get from small scale retailers. (4mrks)
20. The following information was obtained from the books of Okame Traders on 30th June 2018.
    Opening stock             8,000
    Purchases                 53,000
    Sales                         62,900
    Returns outwards        2,700
    Closing stock             12,700
    Prepare Okame Trading Accounts for the year ended 30^th June 2018. (4 marks)
21. Give four features that differentiate a public corporation from a public limited company. (4marks)
22. Highlight four features that should be observed when coming up with a good tax system                                       (4mks)
23. Give four advantages of landscape  office layout   (4mks)
24. State four importance of balance sheet. (4marks)
25. The following balances were extracted from Mwangaza traders’ books of accounts.
                                      Shs.
    Opening stock           25,000
    Closing stock             35,000
    Purchases                190,000
    Mark - up                    20%
    Calculate:
    1. Cost of sales (1mark)
    2. Gross profit (1 mark)
    3. Sales (1 mark)
    4. Rate of stock turnover(ROSTO) (1 mark)

MARKING SCHEME

1. The benefits that a business gains from its environment  .                                       4mks           
   1. It obtains raw materials from local supplies.   
   2. It recruits workers (labour) from the local community.
   3. It gets security from the local personal eg police station.
   4. It obtains land for expansion from the community.
   5. The natural environment e.g. good weather may favour the business
2. The limitation that small –scale retail operators face                                          4mks
   1. They have limited access to credit facilities especially loan.
   2. They have a low turnover because of the little capital invested.
   3. They may suffer bad debts if they give credit to customers who may not be honest.
   4. They don’t enjoy economics of scale
   5. They don’t hire specialists as technical stuff because of limited capital. This may lead to effiency in business.
   6. The owners are usually over worked
3. Factors that influence the location of a public warehouse.                                       4mks
   1. Security
   2. Accessibility
   3. Availability of space
   4. Availability of labour
   5. Government policy
   6. Good communication network
4. Ways in which inflation can be controlled by the government.                                4mks
   • Institute price control on specific industries as a temporary way of keeping prices stable.
   • Control consumption of imports through imposition of import duties / Quotas which led o the transfer of controlling imported inflation.
   • Sale treasury bonds / securities to the public to reduce the amount of money in circulation.
   • Control on the level of exports to help build reserve stocks which will maintain adequate supply in the price level.
   • Through /controlling foreign exchange lowers the amount of imports and hence controls imported inflation.
   • Reduce spending in order to reduce demand for goods.
5. The following items belong to Mlamba Wholesalers as at 31^st Dec 2018
   Required, draw Mlamba’s trial balance as at 31^st December 2018. (5mks)
                                                                           Mlamba’s  Wholesalers
                                                                                    Trial Balance
                                                                              As at 31^st Dec, 2020
   

   Items	DR	CR
   Motor vehicle	75,000
   Stock	4,000
   Overdraft		11,100
   Creditors		5,740
   Debtors	6,200
   Commission paid	2,000
   Cash	10,000
   Returns Outwards		3,400
   Returns Inwards	1,400
   Capital		78,360
   Total	98,600	98,600

6. The bodaboda motorcycles are very popular both in urban and rural environment. Highlight four disadvantages of this method of transport.                                  (4mks)
   1. Causes noise pollution
   2. Over speeding that my result to accidents or death
   3. Affected by extreme weather conditions
   4. Carries limited capacity of goods
   5. Not suitable for long distances.
   6. Not suitable for bulky or heavy goods
   7. Some results in social evils e.g theft
7. Circumstances that may prevent her from being compensated in an event of loss occurring. (4mks)
   1. When the insured does not have insurable interest in the properties destroyed as she would not suffer financial loss.
   2. When she did not disclose as the relevant facts of facing the policy.
   3. If the policy was not in force at natural disaster as the risk are not insurable.
   4. When the loss occurred due to willful action of the insured.
   5. When the insurance company is insolvent hence unable to meet its financial obligations.
   6. When Lopez follow improper procedures when claiming compensation.
   7. When she failed to claim compensation with (stipulated) time.                                         
8. Outline four characteristics of economic resources. (4mks)
   1. Scarce in supply
   2. Have money value
   3. Unevenly distributed
   4. Have utility
   5. Have alternative uses
   6. Can change ownership
   7. Can be combined
   8. Can be complementary
9. Outline four disadvantages of division of labour.      (4mks)
   1. Social problems
   2. Creates monotony and boredom
   3. Create unemployment
   4. Difficult to know who to identify with the final product
   5. Convents man into a machine like creature
   6. Makes man dependent on only one trade
10. Outline four negative effects of an ageing population in an economy.        (4mks)
    1. High dependence of old people on working population
    2. Old people tend to provide a less mobile labour force.
    3. Low labor supply as old people tends to be less productive.
    4. Society become less progressive as it lacks input of energetic youth.
    5. Lead to unemployment due to fall in demand of goods and services required by the  youth.
11. Factors that may have cause failure of Shaban’s shop after two years include:   ( 4mks)
    1. Poor location of the business may have made it inaccessible to customers.
    2. Stiff competition from other retailers.
    3. Inadequate finances to meet the obligations of the business.
    4. Shaban’s lack of commitments to the business
    5. Insecurity 
    6. Improper management practices.
    7. Poor customer relations.
    8. Inappropriate pricing practices.
    9. Political instability/war
    10. Lack of market/ low demand
    11. Unfavorable government policy e.g high taxes
    12. Poor marketing strategies.
    13. Inadequate stock
    14. Lack of suitable labour.
12. Highlight four challenges passed to a country by a rapidly growing population.            (4mks)
    1. Unemployment
    2. Strain on social amenities
    3. High dependently ratio.
    4. High poverty rate
13. State the type of utility created by each of the following activities:            (4mks)
    1. Delivery Milk to a customer – Place
    2. Keeping money in the bank - Time
    3. Selling bread to a student - Possession
    4. Making uniform for students - Form
14. Highlight four factors which hinder economic development in a country.                      (4mks)
    1. Lack of adequate capital
    2. Use of in appropriate technology.
    3. Rapid population growth rate.
    4. Low level of education.
    5. Inadequate natural resource
15. Outline four means used by commercial banks to transfer money.                          (4mks)
    1. Cheques                             
    2. Standing orders               
    3. Credit transfer
    4. Bank drafts
    5. Credit cards
    6. Travelers’ cheque
16. Mention four unethical Practices in product promotion.                                  (4mks)
    1. On the performance of the product.
    2. Cheating Cheating on ingredients.
    3. Not disclosing side effects
    4. False pricing.
    5. Having negative effect on environment.
    6. Causing cultural conflict.
17. Reason why volume of exports from less developed countries to the developed countries tend to   be low
    1. Use of out dated technology in production
    2. Inadequate capital to exploit available resources /low out put.
    3. Poor entrepreneurial culture leading to low production
    4. Poor governance / corruption instability
    5. Unfavorable government policy/ lack of support or local infant industries
    6. Unfair trading practices among developed trading partners
    7. Over – dependence on agriculture  / unprocessed raw materials / exports.
18. 2005   145 x 100 = 120.8
               120
    2006    160 x 100 = 133.3   
                120
    2007 170 x 100=145.8
             120
    4x1=4mks
19. State  four benefits that consumers get from small scale retailers. (4 marks)
    1. Free advice on product use/comparison/availability etc✔
    2. Personal attention✔
    3. Stable prices✔
    4. Steady supply of goods
    5. Credit facilities✔
    6. Place utility i.e goods are bought nearer✔
    7. Small quantities( break bulk)✔
       4x@ 1 mark=4 marks
20.                                                                                         OKAME TRADERS
                                                                                            TRADING ACCOUNT
       DR.                                                                     FOR THE YEAR ENDED 30-6-2018                                                                  CR     
    

    Sh. Opening stock                       8,000✔ Add purchases                     53,000✔ Less returns outwards            2,700✔ COGAFS                               58,300 Less closing stock                 12,700✔ Cost of goods sold(COGS)    45,600 Gross profit                            17,300✔✔                                                62,900

    Sh. Sales                                    62,900✔                                                       ______                                              62,900

    8x@  ½  mark=4 marks
21. Give four features that  differentiate a public corporation from a public limited company.                               (4 marks)
    

    Public corporation	Public limited company
    Formed under Act of Parliament Fully owned by the government Initial capital is by the government Management/ board appointed by government/president Set up to offer essential services Profits are earned by the government Financial statements presented to parliament	Formed under Company’s Act Owned by private people with shares Initial capital through share issue Management/Board elected by shareholders Set up to make profit Profits shared by share holders as dividends Financial statements presented in press

22. Characteristics of a good tax system (4mks)
    1. Equitable
    2. Certain
    3. Convenient
    4. Economical
    5. Flexible
    6. Ability to pay
    7. Diversified
23. SimplicityFour advantages of a landscape office layout (4mks)
    1. Promotes team work among employees
    2. Promotes sharing of office equipment
    3. Supervision of workers
    4. Maintenance cost is low
    5. Easy location of workers
    6. Discourage absenteeism
    7. Decoration found in the office creates an attractive and conducive environment to work in.
24. State four importance of balance sheet. (4marks)
    1. Financiers will know whether the business will be able to meet its claims
    2. Shareholders will determine whether their funds are invested wisely
    3. It is a requirement for taxation by the government
    4. Potential investors will be able to make decisions on which shares to buy
    5. The management will be able to compare its performance between periods or with other similar businesses to identify areas of urgent actions for business success.
25. The following balances were extracted from Mwangaza traders’ books of accounts.
                                 Shs.
    Opening stock      25,000
    Closing stock        35,000
    Purchases           190,000
    Mark - up               20%
    Calculate:
    1. Cost of sales (1mark)
       = Opening stock + purchases – closing stock
       = kshs 25000 + kshs190000 − kshs35000                          
       = sh. 180,000
    2. Gross profit (1 mark)
       = Cost Of Sales × Mark – up
       = kshs 180000 x ¹/₅              
       = sh. 36,000
        
    3. Sales
       
       = Cost of sales + Gross Profit
       = shs180, 000 + shs36, 000
       = sh. 216,000                    
    4. R.O.S.T.O
       Avg. Stock = (opening stock + closing stock) ÷2
                        = (shs 35000 + shs25000) ÷2 = kshs 30000
       R.O.S.T.O =  Cost of Sales 
                               Avg. Stock
       = shs (180,000÷ 30,000)
       =  6 times