Business Studies Paper 1 Questions and Answers - Mangu High School Mock Exams 2022

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  1. State four components of business studies. (4 marks)
  2. Identify the business environment described in each case below. (4marks)
    1. The level of know-how and efficient use of tools equipment and other resources
    2. Price levels, income, interest rates, inflation and taxation
    3. Where firm try to outdo each other
    4. Considers age, population density and market size
  3. State the best type of machine one would use to perform the following tasks. (4 marks)
       Function  Types of machines
     a  To store large volume of data  
     b  To create postage impression on envelope  
     c  To make exact copies of certain original documents  
     d  To destroy sensitive but unwanted documents  
  4. Use the following terms indicated below to match with the given statement: (4mks)
    1. Total value of all goods and services produced by citizens of a country wherever they are
    2. Total value of goods and services produced by citizens within a country's border
    3. Total value of goods and services produced by individuals within and outside the country less depreciation
    4. Gross domestic product less depreciation 
  5. Outline any four gaps of a business opportunity that exist in a market. (4 marks)
  6. State four characteristics of a viable tax system. (4 marks)
  7. Classify each of the following goods as either producer or consumer.
       Goods  Classification
     a  Tools  
     b  Private vehicle  
     c  Factory  
     d  Clothing  
  8. State four benefits of a balance sheet. (4 marks)
  9. Study the diagram below and answer the questions that follows.
    9 aadada
    State four efforts of fixing the price at P1 (4 marks)
  10. Outline four contents of a memorandum of association. (4 marks)
  11. Outline four consequences of poor arrangement of goods in a warehouse. (4 marks)
  12. Outline four functions of advertising agencies. (4 marks)
  13. State four features associated with Economic Development. (4 marks)
  14. The following information relates to Masaku Enterprises for the period ended 31st December 2005.
    Sales 1,000,000 
    Opening stock  100,000
    Gross profit margin  20%
    Closing stock   25% of cost sales
    Required: Prepare his trading account for the period ended 31st December. (4 marks)
  15. Outline four ways in which the government creates an enabling environment for business. (4 marks)
  16. Identify the ledger in which the following accounts are kept. (4 marks)
       Account  Ledger
     a  Equipment A/c  
     b  Drawing A/c  
     c  Creditors A/c  
     d  Cash A/c  
  17. Highlight four importance of insurance to individuals. (4 marks)
  18. Outline four financial services Central Bank offers to the government. (4 marks)
  19. Mention four adverse effects of inflation in Kenya. (4 marks)
  20. Outline four circumstances that lead to a traders decline in giving credit facilities to a customers. (4 marks)
  21. The following information relate to Agatha Enterprises for the year ended 31st December 2004.
    Capital as at 31/12/2004                 85,000
    Drawings for the year                     13,000
    Net loss for the year                       6,000
    Capital introduced in the year        33,000
    Determine Agatha's capital on 1st January 2004 (4 marks)
  22. State four channels of distributing locally produced agricultural products. (4 marks)
  23. Outline four differences between a monopolistic competition and monopoly market. (4 marks)
      Monopoly  Monopolistic competition
  24. From the following transactions indicate the account to be debited or to be credit.
       Transaction  Account Dr. Account Cr
     a  Started a business with 10,000 in cash    
     b  Purchased goods worth shs 10,000 on credit    
     c  Sold goods worth shs 20,000 payment received by cheque    
     d Received a cheque from the debtor shs 2,000    
  25. Outline four benefits Kenya derives as a member of East Africa community (4 marks)


  1. Four components of business studies
    • Economics
    • Commerce
    • Entrepreneurship 
    • Office practice
    • Accounting
      4 x 14mks
  2. Four parties to which business is socially
    1. Technology
    2. economic
    3. competitive
    4. demographic
  3. Four types of machines
    1. Computer
    2. Franking machine
    3. Photocopier
    4. Paper shredder
      4 x 1=4mks
  4. Four terms
    1. GNP
    2. GDP 
    3. NNP 
    4. NDP
      4 x 1=4mks
  5. Four business gaps
    • Poor services 
    • unaffordable prices
    • poor quality of products
    • in availability of products
    • insufficient quantities
  6. Four characteristics of a viable tax system
    • simple
    • elastic
    • equitable
    • convenient to collect
    • flexible
    • hard to evade 4x1=4mks
  7. Classification
    • producer 
    • consumer 
    • producer 
    • consumer
      4x1 = 4mks
  8. Four benefits of a balance sheet
    • shows solvency or insolvency 
    • shows whether funds are invested well or not 
    • used for taxation by government 
    • used to compare performances/decision making 
    • used by investors to know which shares to buy
      4 x 1 = 4mks
  9. Four effects of fixing price at P1
    • demand increases/excess demand
    • supply decreases
    • shortage in the market 
    • hoarding of goods 
    • black market may arise/smuggling 
    • price discrimination
      4x1 = 4mks
  10. Four contents of memorandum association 
    • name clause 
    • objective clause
    • location clause 
    • declaration clause 
    • capital clause 
    • liability clause
      4x1 = 4mks
  11. Four consequences of poor arrangement of goods in a warehouse 
    • loss of goods /theft 
    • damage of goods 
    • time wastage 
    • wastage of space 
    • spoilage of space 
    • expiry of goods
      4x1 = 4mks
  12. Four functions of advertising agencies
    • designs trade marks, logos, etc
    • booking space 
    • airtime in media
    • advertising on behalf of clients
    • chooses appropriate medium for clients
      4x1 = 4mks
  13. Four features of economic development
    • decrease in poverty
    • improvement in technology 
    • reduction in illiteracy 
    • better health care 
    • agriculture to manufacturing 
    • bridging of gap between rich and poor
  14. Masaku Enterprises Traders
    Account for the period ended
    31st December 2005
     Open stock 100,000    Sale   1000000
     Purchases 900000    
    Gas  1000000    
     Less closing Stock  200000    
     Cost of sales  800000    
     Gross profit 200000    
      1000000   1000000
    8 x 1/2 = 4 mks  
  15. Four ways in which government creates enabling business environment
    • incentives eg tax holidays 
    • subsidies eg cheap finance 
    • protection from foreign competition 
    • loan guarantees eg when borrowing from international institution 
    • security 
    • infrastructure eg roads
      4 x 1 = 4mks
  16. Ledger books
    • General 
    • General/Private/nominal 
    • Purchase
    • Cashbook
      4x1 = 4mks 
  17. Four importance of insurance individuals
    • employment creation
    • creating confidence in investment
    • spreading risks in investment
    • encourages savings
      4x1 = 4mks
  18.  Four services of central Bank to government
    • receives revenues/incomes 
    • advances loans to government
    • undertakes transactions on behalf of government keeps custody of all government revenues 
    • pays loans on behalf of government
      4x1 = 4mks
  19. Four adverse effects of inflation in Kenya
    • low standard of living 
    • loss of confidence in our currency 
    • conflict between employees and employers 
    • decline in economic growth 
    • adverse BOP
      4x1 = 4mks
  20. Four circumstances that will make a trader not to give credit 
    • uncreditworth customers/unreliable customers 
    • when stock levels is too low 
    • where customer has doubtful characters
    • when it is the business policy
    • where rate of turnover is low
      4x1 = 4mks
  21. OC/IC = EC + L +D-I
    = 85000 + 6000 + 13000 - 33000W
    = 710007
    4x1 = 4mks
  22. Four channels of distributing local agricultural products
    1. Farmer → consumers 
    2. Farmer →Retailer → consumer 
    3. Farmer -→ wholesaler → retailer → consumer 
    4. Farmer → co-operative society → wholesalers → retailer → consumer
      Dr  Cr
     a cash  capital
     b purchases  creditors
     c bank  sales
     d bank  debtors
    4 x 1 = 4mks
     a  One seller  Many sellers
     b  No competition  Stiff competiton
     c  Barriers to entry   Free entry exit
    d Similar products   Differentiated products
  25. Four benefits to Kenya as a member of East Africa Community (EAC) 
    • Wider market 
    • encourages specialisation 
    • high quality goods and services 
    • creates employment 
    • promotes peace with our neighbours
      4x1 = 4mks
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