Business Paper 1 Questions and Answers - Alliance Mock Examinations 2022

QUESTIONS

1. State four duties of an office clerk.
2. Highlight four ways in which effectiveness of a warehouse may be improved.
3. Give four features of Kenya Re-insurance company(KenyaRE).
4. Outline four ways in which aids to trade facilitate trade.
5. The following information was extracted from the books of Salome Traders: Capital Kshs 1,119,300; Long term liabilities Kshs 1807,000; and current liabilities Kshs 978,700.
   Required:
   
   1. Determine Salome Traders Rate of Return on Capital Employed if the business made a net profit of Kshs438,945. (2 marks)
   2. State two importance of the rate of return on Capital employed. (2 marks)
6. Identify the type of production activity associated with each of the following utilities (4 marks)
          Utility   Production Activity
   
   1. Time
   2. Place
   3. Form
   4. Possession
7. State four differences between equity financing and debit financing. (4 marks)
8. Outline four roles played by Kenya chamber of commerce and industry. (4 marks)
9. The following information relates to BiznaTraders rental income.
   1", September, 2021 --Had Kshs. 80,000 in the rent income account at the beginning of the year.
   10 September, 2021-Received kshs. 120,600 from tenants.
   30, September, 2021 - Refunded 30,000 to a tenant who had vacated the premises.
   Required:
   Duly balanced Bizna traders' rental income account. (4 marks)
10. Briefly describe any four types of unemployment that are common in a developing country. (4 marks)
11. Outline four differences between savings account and time deposit account. (4 marks)
12. The following information relates to Bingwa traders:
    

    Land Salaries owing Debtors Creditors Cash Bank Loan from K.I.E Loan from ICEDE Stock Fittings Vehicles

    450,000 10,000 12,500 25,000 5,000 8,000 100,000 75,000 20,000 7,500 250,000

    Determine:
    
    1. Capital owned (1 mark)
    2. Borrowed capital. (1 mark)
    3. Working capital. (1 mark)
    4. Capital employed. (1 mark)
13. Ndayi issued a credit invoice of 399,999 shillings to Sipangwingwi on 3" August, 2022. Terms of trade were 7,4% cash discourt if payment is made within 30 days and trade discount of 6.9%
    
    1. Calculate the amount Sipangwingwi paid if he partially paid 250,000 shillings on 28", August, 2022, 140,999 on 2, September,2022 and the outstanding balance on 8, September,2022. (2 marks)
    2. Identify two measures that Ndayl should put in place to ensure that Sipangwingwi did not default in making payment. (2 marks)
14. Outline four differences between cooperatives and public limited company. (4 marks)
15. The following information relates to Masimo Kamau for the year 2022.
    Turnover 270,000
    Margin 40%
    Rate of turn over 6 times
    Expenses shs 40,000
    From the information above, calculate: (4 marks)
    
    1. Gross profit
    2. Cost of gods sold
    3. Net profit
    4. Average stock
16. BOATZ enterprises operates a fleet of ships. Describe four marine Insurance policies it is likely to undertake to insure his ships. (4 marks)
17. State whether the commodity or service given in the table below would satisfy a basic human want or a secondary human want.(4 marks)
    

    Commodity/Service	Class of human want
    a)A shirt
    b)Education
    c)Housing
    d) A packet of rice
    e)Entertainment
    f)Hair cut
    g)Green grams
    h)A car

18. The government revenue in Kenya for the fiscal year 2020/2021 accumulated to kshs. 1.78 trillion which was slightly higher compared to the previous fiscal year. Outline four reasons for this increase. (4 marks)
19. State four causes of structural inflation. (4 marks)
20. Name the documents described by the statements given below as used in international trade: (2 marks)
    
    1. Request for payment before goods are delivered
    2. Shows ownership or title of goods imported
    3. Shows the country of manufacture of goods
    4. Shows the transportation charges for goods
21. Give the meaning of the following terms as used in motivating the sales force to sell more: (4 marks)
    
    1. Commission
    2. Bonus
    3. Out-of-pocket
    4. Push money
22. Highlight four circumstances under which an under developed country may increase borrowing to finance its expenditure. (4 marks)
23. For each of the following transactions given, indicate in the appropriate columns the source document and the book of original entry in which the transaction should be recorded.
    

    Transaction	Source document	Books of original entry
    Bought goods worth 30,000 shillings on credit from Kineiya.
    Sold furniture worth 60,000 to Mburu on credit.
    Cash cheques issued out
    Goods returned by Nafula worth 50,000.

24. Outline one circumstance under which each of the following telecommunication services may be used: (4 marks)
    
    1. Paging
    2. Facsimile(fax)
    3. Radio call
    4. Telex
25. State four ways in which effective management practices may contribute to success of a business. (4 marks) 

MARKING SCHEME

1.    
   • Handling mail
   • Duplicating documents
   • Indexing and filing
   • Helps in store-keeping or record keeping
   • Ordering, receiving storing and issuing of stationery
   • Operating various office machines
2.    
   • By locating it at a suitable/convenient place near to customers/market
   • By equipping it with proper and appropriate facilities/equipments for handling the type of goods stored.
   • By locating it at a secure place and taking insurance cover
   • Ensuring there is proper transport and communication facilities for
   • Hiring efficient trained staff to handle the goods.
   • Ensuring it has adequate space for storage of commodities.
3.    
   • Commands large financial resources Isis empowered by law to insurance companies
   • Government has a stake in it
   • Guarantees compensation
   • Only deals with corporate Insurance clients. 
4.      
   • Transportation of goods bridges place utility
   • Warehousing enhances time utility and continuous supply of goods
   • Safe custody of cash is achieved/loan capital for investment is availed through banking
   • Insurance boasts confidence in Investors as it guarantees security in their investments
   • Communication entances sharing of ideas, information, suggestions which bridges possession utility
5.    
   1. CE = C + LTL
      1,119,300 + 1,307,000 
      Rate of Return on Capital Employed
      CE = ^NP/_CE x 100
      CE = 438,945/2,926,300 X 100 = 15%
   2. ✓ It enables the business to determine the rate at which net profit is generated in relation to thee total investment into the business with simila ones.
      ✓ Shows whether the financés of the business have been invested wisely or not..
      ✓ To compare the performance of the business with similar ones.
6. 
   

   Utility	Production Activity
   Time Place Form Possession	Warehousing/Storage Transport/Distribution Manufacturing/Construction Trade/Wholesaling/Retailing

7. 
   

   Debt financing (Raising capital through sale of debentures	Equity financing (Raising capital through sale of ordinary shares)
   Usually redeemable	It is a permanent source of capital
   Payment of interest on finance is a legal obligation	Payment of dividends is not a legal obligation
   Rate of interest on finance is fixed	Rate of dividends varies with the amount of profit realised
   Involves costs such as insurance and security	Does not involve such costs
   It is usually secured	It is not secured

8. ✔Issues certificates to those who want to export goods to other countries
   ✔Informing members on all the registration requirements affecting their businesses
   ✔Acting as an agent between the government and businessmen on matters relating to business activities
   ✔Holding courses for the members and discussing problems affecting their businesses 
   ✔ Publishing business journals for members and interested parties 
   ✔ Organising trade shows and participating in national shows
   ✔Organising participation in trade shows outside the country 
   ✔ Collecting statistics which are vital for government budgeting
9. BIZNA TRADERS RENTAL INCOME A/C
   

   DR				CR
   DATE	DETAILS	FOLIO	AMOUNT	DATE	DETAILS	FOLIO	AMOUNT
   01/09/21 30/09/21	Tenant Balance	c/d	30000 170000 200000	01/09/21 10/09/21	Balance Tenant	b/d	80000 120.60 200000

10.    
    • Seasonal unemployement. - This is a type of employment that is characterized by changes in demand for labour during different seasons. For example in agriculture demand for labour is high during harvesting and planting season
    • Structural unemployment - It is a type of employment which is caused by the match in the skills of the job seekor and the skills required in the market due to changes in production methods . Use of ATMs which have reduced staff in the banks. It may also be caused by differences in the locations of the Employer and the job seeker
    • Frictional unamployment - This is unemployment which IPS when workers are unemployed after losing Jobs and are actively looking for new jobs.
    • Cynical unemployment -  It is also known as a nemployment, demand defickt unemployment or en unemployment. It is a type of unemployment which is caused by changes in economie performance such that when the economy is doing well, employment level is high than when the economy is doing poorly
    • Voluntary unemployment - also known as real wape unemployment. - This is unemployment which is caused by a mismatch in wages demanded by job seekers and those offered by firms. Firms may be offering lower wages than what job seekers want to be paid as such many job seekers will remain unemployed voluntarily
    • Involuntary unemployment/open unemployment. - This unemployment occurs when people are looking for Jobs at the prevailing wage rates but cannot find jobs
    • Disguised unemployment/ hidden unemployment. It occurs when the number of people employed exceeds those who are required to the extent that some of them remain lille and therefore are laid off thereby becoming unemployed
    • Residualunemployment. This is a type of unemployment that affects the mentally and physically disabled such that they cannot be employed to do certain jobs thereby remaining unemployed
    • Erratic(casual) unemployment - This occurs when workers are ired for a short period of time after which they again become unemployed. For example a school can hire teachers per wchool to when students are in school
11. 
    

    Time/Fixed deposit accounts	Savings accounts
    Money is not withdrawn until the contract is over Can be used as a security for a bank loan The account remains in force for a specific period of time A large amount of money is required to open the account A separate account is required for each deposit A certificate of deposit is issued once money is deposited in the account Interest earned is high	Money is withdrawn after an agreed Interval Can be used as a security for a bank overdraft The account is in force as long as the minimum balance is maintained A small amount of money is required to open the account All deposits can be made in the same account A passbook or a bank card is issued when deposits are made into the account Interest earned is low

12.      
    1. Capital owned
       C = AL
       = 543,000
    2. Borrowed capital.
       (175,000 + 35000) = 210,000
    3. Working capital
       CA-CL
       45,500 - 35.000 = 10,500
    4. Capital employed
       C.O+LTL
       543.000 + 175,000 = 718,000
13.      
    1. ^92.6/₁₀₀ x 250,000 - 231,500
    2.    
       • Ascertaining the credit worthiness of Sipangwingwi
       • Asking Sipangwingwi to commit him/herself in writing by signing a bill of exchange
       • Requiring Sipangwingwi to have a garanter
       • Requiring Sipangwingwi to pledge his/her property ass security
14. 
    

    Cooperative society	Public limited company
    is welfare motivateed serves members only owned by a minimum of 10 members and no specific maximum governed on the basis of one member one vote cooperates with other cooperatives act goverened by one cooperative act only one class of shareholders by laws	It is profit motivated It serves shareholders and outsiders Formed by a minimum of 7 members and specified maximum Governed on the basis of one share one vote Competes with other companies Governed by the company's act Has several types of shareholder company laws

15.        
    1. ²/₅ x 270,000 = 108.000
    2. 270,000-106,000 = 162,000 
    3. 105,000-40,0000 68,000
    4. ^162,000/₆ = 27,000 
16.      
    • Marina bull policy -This is a policy that covers the ship against loss or damage as a result of riskutse. These risks include, storm, fire, colision and capilding
    • Marine cargo policy. This is a policy that covers cargo against loss or damage while being transported by ship
    • Voyage policy - This is a policy that covers the ship or cargo on a particular journey. The insurer may not compensate if the destination is changed unless such change was necessary to save the shie, cargo or human life
    • Floating policy. This is a policy where several shippers payakumpum to cover their ships while in transit As ships make shipments, the amount of insurance for a partir ement is deducted from the lumpsum. The policy collapses when the insured equals the total value of all the shipment
    • Time policy - This is a policy that covers losses arising within a specified period of time
    • Mixed policy - This a policy that covers ships against losses while on a specified voyage and specified time.
    • Fleet policy. This is a policy which covers a fee of ships against loses under one policy. This is possible where there are many his belonging to one organisation
    • Composite policy - This is a policy that provides cover to one spedis ship which is insured by several Lesurance companies. This is necessary where the sum insured is too large for one insurance company to cover 
    • Construction(builders) policy - This is a policy which covers the risks that a ship is exposed to while it is either being construct e d or delivered
    • Freight policy - This is a policy that covers the s w er against losses arising from failure by the tirer of the ship to pay reicht charges
    • Third party policy - This is a policy that covers daims that may arise from loss caused to other people and property by the ship.
    • Port policy - This is a polity that covers the ship against sea perills when it is at the port
17. 
    

    Commodity/Service	Class of human want
    a)A shirt	basic
    b)Education	secondary
    c)Housing	basic
    d) A packet of rice	basic
    e)Entertainment	secondary
    f)Hair cut	secondary
    g)Green grams	basic
    h)A car	secondary

18.        
    • A fine imposed by counts on offenders
    • Rent and rates paid for using government property
    • License toas paid by those who want to operate businesses
    • Dividends and profits earned from government direct investments
    • Interests arned on loans advanced by the government to firms
    • Proceeds from sale of government property
    • Taxes
    • Government borrowing
19.      
    • Poor entrepreneural culture i.e failures by producers to expand production
    • Shortage of raw materials due to exhaustion or restricted supply
    • Poor infrastructure
    • Shortage of skilled manpower
20.      
    1. Request for payment before goods are delivered - Proforma Invoice
    2. Shows ownership ortide of goods imported - Bill of landing .
    3. Shows the country of manufacture of goods - certificate of origin
    4. Shows the transportation charges for goods - Freight note
21.      
    1. Commission. The amount of money paid to a sales personas a portion of the value of sales made in a given period of time.
    2. Bonus - Acash reward given to a sales personas a portion of the profits made at the end of a trading period.
    3. Out of pocket-The amount of money given to a sales person to facilitate his movement marketing a product
    4. Push money cash reward that a sales person is paid for selling off old or unwanted stock. 
22.      
    • If the country is experiencing a balance of payment deficit.
    • If the revenue collected are less than projected expenditure.
    • If there is gross misappropriation of public funds.
    • If the government wants to stimulate economic growth by building infrastructure
    • If there is a natural disaster that causes diversion of funds
23. 
    

    Transaction	Source document	Books of original entry
    Bought goods worth 30,000 shilli gs on credit from Kineiya.	Incoming invoice	Purchases journal
    Sold furniture worth 60,000 to Mburu on credit.	Outgoing invoice/issued	General journal
    Cash cheques issued out	Cheque folio/recept recieved	Credit note Issued
    Goods returned by Nafula worth 50,000.	Cash payments journal	Sales return journal

24.      
    1. Paging - When there is need to call a person to attend to an emergency in a specific location
    2. Fax - Where there is need to send a copy of a printed document urgently.
    3. Radio call - When there is need to give co-ordinated information through a central paint
    4. Telex - Sanding and receiving written messages
25.      
    1. Proper plas/putting plans in place so that good results can be anticipated to accommodate future
    2. Proper/appropriate relevant strategies so as to achieve desired results.
    3. Setting clear goals/objectives so as to achieve Intended results.
    4. Monitoring evaluating sunrvising planned activities so as to achieve intended results.
    5. Proper coordination to reduce/minimize conflict of activities.
    6. Proper controlling to ensure that the required activities are carried out.
    7. Motivating of staff to Increase their productivity
    8. Directing to ensure activities are geared towards achieving the set goals.
    9. Proper time management to ensure set activities are achieved within the required time.