Business Paper 1 Questions and Answers - Kakamega Evaluation Mock Exams 2022

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  1. Outline four ways in which business studies may be of benefit to an individual. (4mks)
  2. Highlight four demographic factors that may affect the performance of a business. (4mks)
  3. Mention the factor of production to which each of the following resources relate. (4mks)
    Resource Factor of production

    (a) Manager
    (b) Cotton
    (c) Owner
    (d) Factory

  4. Fill in the missing figures in the following table. (4mks) 
    Liabilities Capital  Fixed assets Current assets
    401,400 640,900 750,700 W
    X 739,200 925,600 259,100
    586,800 Y 980,250 205,100
    436,000 340,000 Z 264,900
  5. The diagram below shows shift in supply curve from SoSo to SISI
    State four factors that may account for the above shift. (4mks)
  6. The management of Rembo traders operates an open office layout. State four advantages the management gets from this layout. (4mks)
  7. State four differences between Life Assurance and General insurance. (4mks)
  8. State four benefits that a trader may get by advertising products in a newspaper. (4mks)
  9. Highlight four problems which may be encountered when measuring national income using output approach. (4mks)
  10. Highlight the role of consumer organisations in consumer protection. (4mks)
  11. Maendeleo Traders had the following Assets and Liabilities as at January 2020
    Furniture 300,000
    Equipment   50,000
    Debtors   45,000
    Cash     7,000
    Creditors   48,000
    For the year ended 31st December 2020 there was
    1. Additional capital introduced amounting to Sh. 34,000
    2. Drawings made during the year amounting to Sh. 20,000
    3. Net profit amounting to Sh 34,000
      Determine the capital of the business as at 31st December 2020. (4mks)
  12. Farida company has developed a new product in the market. Outline four methods that may be used to determine the price of the product. (4mks)
  13. Outline four current trends in the transport sector in Kenya. (4mks)
  14. State four features of a parastatal. (4mks)
  15. IIndicate the type of journal in which each of the following transactions would be recorded. (4 mks)
    Transaction Journal
    (i) Purchase of goods on credit
    (ii) Sale of Machinery on credit
    (iii) Goods previously bought on credit returned to the suppliers
    (iv) Correction of an error in account
  16. State the type of unemployment described in each of the following:- (4MKS)
    1. Where people have temporarily lost jobs and are seeking for new ones.
    2. Where people are rendered jobless at a certain period of the year.
    3. Where people lost jobs due to change in technology.
    4. Where people lose jobs during a period of economic recession.
  17. The following balances were extracted from the books of Haraka Traders as at 30th June 2021.
    Sales                           1,400
    Carriage outwards       6,000
    Discount allowed        11,000
    Discount received        5,000
    Returns inwards         12,000
    Commission received   3,000
    Purchases                    2,000
    Bank                           50,000
    Cash                           80,000
    Debtors                       20,000
    Capital                      150,000
    Creditors                      9,000
    Prepare Haraka Traders Trial balance as at 30th June 2021
  18. Outline four factors which may limit the effectiveness of a warehouse. (4MKS)
  19. Mention the type of document described in the statements below:  (4MKS)
    1. A document sent with the purpose of correcting an overcharge.
    2. A document sent to reply to a specific letter of inquiry.
    3. A document sent to demand for payment of goods sold.
    4. A document sent to request the seller to supply goods indicated.
  20. The following information relates to Uwezo traders for the year ended 31st December 2018. (4MKS)
    Sales 480,000
    Stock (1/1/2018   60,000
    Stock (31/12/2018   30,000
    Margin   25%
    1. Gross profit (1 mk)
    2. Cost of sales (1 mk)
    3. Rate of stock turn over. (2 mks)
  21. Outline four features of money that enables it to facilitate the exchange of goods and services. (4 mks)
  22. Mention four circumstances under which a partnership may be dissolved. (4mks)
  23. Highlight four challenges of locating firms at a central place. (4mks)
  24. State four uses of cash book. (4mks)
  25. Outline four characteristics of basic wants. (4mks)


    • Prepares one for future career in business
    • Equips the individual with skills and knowledge to manage the business 
    • Enables one to relate issues affecting business and its environment.
    • Prepares one for further studies
    • Enables one to identify business opportunities to venture into
    • Makes an individual to appreciate the role of government in business
    • Makes an individual disciplined and have positive attitude towards work.
    • Enables one to relate issues affecting business activities taking place globally.
    • Size of the population
    • Population age
    • Population density
    • Sex
    • Level of education
    • Birth rates
    • Death rates
    • Wealth distribution
    Transaction Journal
    (i) Purchase of goods on credit
    (ii) Sale of Machinery on credit
    (iii) Goods previously bought on credit returned to the suppliers
    (iv) Correction of an error in account
    Liabilities Capital  Fixed assets Current assets
    401,400 640,900 750,700 291,600
    445,500 739,200 925,600 259,100
    586,800 598,550 980,250 205,100
    436,000 340,000 511,100 264,900
    • Increase in cost of production
    • Shortage of inputs
    • Exit of firms from the industry
    • Use of poor technology
    • Unfavourable natural factors
    • Price of other related product is low 
    • Easy supervision since workers are in one room
    • Low cost of establishment
    • Easy to locate a worker
    • Reduction in movement of workers
    • Discourages absenteeism
    • Equipment are easily shared
    • Enhances interpersonal relationships
    Life Assurance General Insurance
    (a)Covers life 
    (b)Long term contract 
    (c)Does not require renewal 
    (d)Has surrender value 
    Is not a contract of indemnity 
    Premium paid depend on the ability by the insured
    Cover property
    Short term contract
    Requires renewal
    No surrender value
    Contract of indemnity
    Premium paid depend on the value of property
    • Convey a message for long time
    • Relatively cheap
    • They cover a wider geographical area
    • The message is readily acceptable by the reader
    • Some can be written in local dialects hence suitable for a variety of traders.
    • Inadequate output data
    • Inaccurate data
    • Problem of valuing government output
    • Problem of changing prices
    • Problem of deciding on wanted goods and services to include in measuring national income
    • Problem of valuing illegal activities
    • Problem of valuing output in the subsistence sector.
    • Receiving complains from consumers
    • Seeking legal redress against offenders
    • Educating consumers on their rights
    • Taking consumer complains to the relevant government bodies e.g KEBS.
  11. C=A-L
    Total Assets=300000+50000+45000+7000
    Capital As at 31st Dec 2020
    =Sh 402,000
    • Tendering
    • Hagging/bargaining
    • Auction
    • Forces of demand and supply – price mechanism
    • Price fixing
    • Price control 
    • Taxation
    • Dual carriage
    • Electric trains
    • Containerization
    • Use of boda bodas
    • Bi – passes
    • Super highways
    • Pipeline transport
    • Fully owned by the government
    • Formed by the act of parliament
    • Initial capital is provided by government
    • Directors are appointed by the government
    • Has limited liability
    • Separate legal entity

  15. Transaction Journal
    (i) Purchase of goods on credit
    (ii) Sale of Machinery on credit
    (iii) Goods previously bought on credit returned to the suppliers
    (iv) Correction of an error in account
    Purchases journal
    General journal 
    Purchases return journal
    General journal
    1. Frictional unemployment
    2. Seasonal unemployment
    3. Structural unemployment
    4. Cyclical unemployment 
  17. Haraka traders
    Trial balance
    As at 30th June 2021

    Details Dr(shs) Cr(shs)
    Carriage outwards   
    Discount allowed 
    Discount received
    Returns inwards 
    Commission received 







    • Unsuitable location
    • Inappropriate/lack of proper equipment
    • Lack of qualified personnel
    • Non – compliance with law
    • Inadequate space
    • Poor transport network/communication system
    1. Credit note
    2. Quotation
    3. Invoice
    4. Order 
    1. Margin=gross profit
       25 =    G.P  
      100  480,000 
       = Sh 120,000
    2. Cost of sales =sales – gross profit
      480,000 – 120,000
      = Sh 360,000
    3. Rate of stock = cost of sales
      =      360,000       
      = 8 times
    • Should be scarce
    • Should be easily divisible into different denomination
    • Should not be easy to forge
    • Should be durable
    • Should be portable   
    • When there is a court order to dissolve
    • When partners mutually agree to dissolve
    • Incase of death of a partner
    • If the intended purpose is complete
    • When there is a change in law, rendering the partnership illegal
    • Causes rural – urban migration
    • Causes regional imbalances
    • Leads to pollution of the area
    • Easy target by enemy during war and terrorism
    • Health hazards due to overpopulation congestion in the area
    • Easy monitoring of cash flows in and out of the business
    • Shows total discount allowed or discount received during a given period
    • It helps in his calculation of amount of cash in hand
    • Used to preserve the initial and accurate accounts of cash transactions 
    • It can be used to dedicate any errors has all cash transactions are recorded in the cash book.
    • One cannot do without them
    • They are felt needs
    • They cannot be postponed
    • They are satisfied before secondary wants
    • They are universal

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