Business Studies Paper 1 Questions and Answers - BSJE Mock Exams 2023

• This paper consist of 25 questions 
• Answer all the questions

1. Name the internal environment described by the following statements. (4 marks) 
   

   Description	Type of Internal  Environment
   a) Allows duties to be allocated to the right people thus  resulting in higher productivity.
   b) Helps the business achieve its objectives e.g. higher  production level of goods and services.
   c) Makes employees to acquire norms and code of conduct  that is acceptable to all.
   d) Level of knowledge of the entrepreneur

2. State four reasons why choice should be made in satisfying human wants. (4 marks)
3. You have been charged with a duty of preparing an Article of Association for your company. State four items that you will include in your Article of Association. (4 marks)
4. State four reasons why consumers need protection from unscrupulous traders. (4 marks)
5. Highlight four contents of a cover note. (4 marks)
6. State the books of original entry in which each of the following transactions would be recorded.  (4 marks)
   

   	Transactions	Books of original entry
   i	Bought a machinery on credit
   ii	Received sh. 40,000 from Mweni a debtor
   iii	Sold goods worth sh. 20,000 on credit to Salama
   iv	Returned goods previously bought on credit to Wainaina

7. The following information relates to commodity ‘X’.
   Year Price (shs) 
   2010 450
   2014 675
   1. Calculate the consumer price index. (3 marks)
   2. Comment on your answer. (1 mark)
8. State four benefits that consumers get from warehousing. (4 marks)
9. The following information relates to Kitui Traders for the year 2013.
   Turn over Sh. 270,000
   Margin 40%
   Rate of turnover 6 times
   Expenses Sh. 40,000
   From the information given above, Calculate:-
   1. Net profit. (2 marks) (b) Average stock (2 marks)
10. Outline four differences between perfect competition and monopoly. (4 marks)
    

    Perfect competition	Monopoly
    (a)
    (b)
    (c)
    (d)

11. Outline four features of an economic union level of economic integration. (4 marks) 
12. Highlight four monetary tools that may be employed by the government to increase the amount  of money in circulation. (4 marks)
13. State four ways of creating the utility of goods and services. (4 marks)
14. Outline four sources of business idea. (4 marks)
15. State whether the tax described below is direct or indirect (4 marks)
    1. Stamp duty
    2. Wealth tax
    3. Excise duty
    4. Value added tax
16. Outline four current trends in the road transport in Kenya today. (4 marks)
17. State four negative implications of production activities on the community. (4 marks) 
18. Give any four causes of changes in asset stock. (4 marks)
19. State four benefits a trader may get by advertising products using posters. (4 marks)
20. Outline four goals of development. (4 marks)
21. A business enterprise had a cash balance of 50,000 and overdraft of sh 15,000 on 1st June 2007. The following transactions were conducted.
    June 2, A debtor paid sh 40,000 by cheques
    June 10, The business bought stock sh 10,000 in cash and paid a creditor sh. 5,000 by  cheque
    June 15, Sold goods sh 30,000 cash.
    Required: Prepare a two column cash book. (4 marks)
22. The diagram below represents the demand and supply of bananas in the local market. 
                                           
    Highlight four consequences of selling the bananas at price P₂. (4 marks)
23. Outline four circumstances under which one may use signs in communication. (4 marks)
24. State four circumstances under which a business organization may decide to dispose off a  machine. (4 marks)
25. Omamo bought goods worth Sh. 100,000 from Jabali Traders on 2nd January 2022. He was  given 5% trade discount and a cash discount as follows; 2% if payment is made within 30 days,  5% if payment is made within 15 days and 10% if payment is made within 10 days. Calculate the amount he will pay after a fortnight. (4 marks) 

                                                                             MARKING SCHEME

1.  
   

   EFFECT	Internal   Environment
   (a) Allows duties to be allocated to the right people thus resulting           in higher productivity.	Business   structure
   (b) Helps the business achieve its objectives e.g. higher                         production level of goods and services.	Business   resources
   (c) Makes employees to acquire norms and code of conduct that            is acceptable to all.	Business culture
   (d) Level of knowledge of the entrepreneur	Business owner

2. Reasons why choice should be made in satisfying human wants.
   1. Because resources available for satisfying human wants are limited/scarce.
   2. Because human wants are unlimited/endless/too many
   3. Because human wants vary in urgency and intensity.
   4. Because there is variation in tastes and preferences of human wants.
   5. Because human wants are too many to be satisfied at once.
   6. Resources have different prices
   7. Some wants are more urgent than others            Any 4 x 1 = 4 marks
3. Items that you will include in your Article of Association.
   1. Rights of the share holders
   2. Methods of calling and conducting meetings
   3. Rules governing election of officials
   4. Rules regarding preparation and auditing of accounts
   5. Powers and duties of directors
   6. List of directors and their particulars
   7. Dividends/loan capital/reserves policies                 Any 4 x 1 = 4 marks
4. Reasons why consumers need protection from unscrupulous traders. 
   1. Ensure commodities are of good quality
   2. Right quantity  and size of goods
   3. Ensure standards of health are maintained
   4. Ensure building construction and safety standards are maintained
   5. Ensure fair prices are charged
   6. Ensure  commodities are available
   7. Protect consumers from false advertising
   8. Protect consumers from sale of harmful commodities
   9. Protect consumers against breach of contract                       Any 4 x 1 = 4 marks
5. Contents of a cover note.
   1. Name of insurer
   2. Name of Insured
   3. Date of taking insurance cover
   4. Sum insured
   5. Period of cover
   6. Premiums payable
   7. Risk covered
   8. Subject matter covered                   Any 4 x 1 = 4 marks
6. State the books of original entry
   

   	Transactions	Books of original entry
   (i)	Bought a machinery on credit	General journal
   (ii)	Received sh. 40,000 from Mweni a debtor	Cash receipts journal
   (iii)	Sold goods worth sh. 20,000 on credit to Salama	Sales journal
   (iv)	Returned goods previously bought on credit to   Wainaina	Purchases returns journal/returns outwards       journal

7. The following information relates to commodity ‘X’.
                               Year                    Price (shs)
                               2010                   450
                               2014                   675
   1. Calculate the consumer price index. (3 marks)
      Consumer price index (CP1) = P₁ x 100
                                                        P₀
                                                    = 675 x 100  = 150%
                                                        450
   2. The price of commodity ‘x’ in 2014 is 150% it’s  price in 2010. Which indicates that the price of this commodity rose by 50% since 2010/inflation by 50%
8. Benefits that consumers get from warehousing.
   1. Steady flow/supply of goods
   2. Stability in prices
   3. Get goods in convenient sizes as a result of warehouse breaking bulk.
   4. One can inspect the goods before buying.
   5. Quality goods as some goods improve in quality while in the warehouse.
   6. Some goods are prepared for sale while in the warehouse through grading/breaking bulk/packing etc    Any 4 x 1 = 4 marks
9. The following information relates to Kitui Traders for the year 2013.
            Turn over shs  270,000
            Margin 40%
            Rate of turnover 6 times
            Expenses sh 40,000
            From the information given above, Calculate:-
   1. Net profit. (2 marks)
      Gross profit
      Margin                        = Gross profit x 100
                                                  Sales
      40%                            =     G.P  x 100
                                            270,000
      G.P                             = sh 108,000
      Net profit                    = G.P – Expenses
                                         = 108,000 – 40,000
      Net profit                     = sh 68,000
   2. Average stock (2 marks)
      R.O.S.T =  C.O.G.S  
                        Ave. Stock
      C.O.G.S = sales – G.P
                     = 270,000 – 108,000
      C.O.G.S = sh 162,000
      6 times = 162,000
                     Ave stock
      Ave stock = sh 27,000
10. Differences between perfect competition and monopoly.
    

    	Perfect Competition	Monopoly
    (i)	Many sellers or suppliers	A single seller, producer in the market
    (ii)	Price taker – price fixed by forces of demand   and supply	Price is fixed by the monopoly   firm
    (iii)	Free entry or exit of form in the market	Difficult for other firms to enter   the market
    (iv)	Commodities are similar in all ways e.g.   size,   brand, quality	Commodities do not have close   substitutes.
    (v)	A single seller cannot influence the price in   the market	Seller can influence the price

                                                 Any 4 x 1 = 4 marks
11. Features of an economic union level of economic integration.
    1. Conducive conditions for internal trade
    2. Common external trade barriers
    3. Free mobility of the factors of production
    4. Joint economic institutions such as the central bank
    5. Common monetary system
    6. Common public services such as railway and communication            Any 4 x 1 = 4 marks
12. Monetary tools that may be employed by the government to increase the amount of money in circulation. 
    1. Reducing compulsory deposits/reserve requirements
    2. Buying government securities
    3. Lowering interest rates to encourage borrowing/discourage savings
    4. Reducing cash/liquidity ratio
    5. Moral persuasion to banks to lend out money freely
    6. Directing/instructing banks to lend out money freely                  Any 4 x 1 = 4 marks
13. Ways of creating utility of goods and services.
    1. Transporting the goods
    2. Keeping/storing/warehousing
    3. Selling/donating/
    4. Manufacturing/Processing/changing the form        Any 4 x 1 = 4 marks
14. Sources of business idea.
    1. Newspapers/magazines/periodicals/journals 
    2. Shows and exhibitions 
    3. Hobbies 
    4. Vocational training and experience
    5. Surveys
    6. Listening to what people say
    7. Waste products
    8. Spotting a market gap/niche
    9. Mass media                                Any 4 x 1 = 4 marks
15. State whether the tax described below is direct or indirect
    1. Stamp duty          -   direct
    2. Wealth tax           -   direct
    3. Excise duty          -   indirect
    4. Value added tax   -   indirect
16. Current trends in the road transport in Kenya today.
    1. The introduction of alcohol blow
    2. Registration of all public service vehicles in saccos
    3. Introduction of tamper proof speed governors
    4. Construction of super highways/ roads with dual carriage.
    5. Some public service vehicles are fitted with wi-fi
    6. Payment of fare using cards/M-pesa              Any 4 x 1 = 4 marks
17.  Negative implications of production activities on the community.
    1. Pollution of the environment
    2. Outbreak of diseases
    3. Insecurity
    4. Destruction of the environment/degradation         Any 4 x 1 = 4 marks
18. Causes of changes in asset stock.
    1. When stock is purchased/purchases
    2. When goods are sold/sales
    3. When goods bought are returned to suppliers/purchases returns/returns outwards
    4. When goods sold are returned by customers/sales returns/returns inwards
    5. When goods are taken for personal/private use/drawings      Any 4 x 1 = 4 marks
19. Benefits a trader may get by advertising products using posters. 
    1. Conveys messages to a large audience
    2. Saves on cost of advertising especially on transport/Economical
    3. It uses different colours
    4. It appeals to both the literate and illiterate
    5. They may last for a long period of time
    6. They are easy to prepare
20. Goals of development.
    1. Reduction of poverty
    2. Attain high and sustainable economic growth
    3. Reduce unemployment
    4. Attain equitable distribution of incomes
    5. Ensure food security in the country
    6. Provide security and maintain political stability
    7. Provide adequate health facilities
    8. Alleviate illiteracy
    9. Diversification of the economy to reduce over- reliance on few products
    10. Environmental conservation               Any 4 x 1 = 4 marks
21. 
    
                                                                                                                                                                              8 ticks x ½  = 4 marks
22. Effects of increase in price
    1. Demand for the bananas will reduce
    2. Sellers may incur losses as a result of decline in demand
    3. The sellers may be forced to reduce the price in order to sell all the bananas
    4. The bananas may go bad due to decline in demand                   Any 4 x 1 = 4 marks
23. Circumstances under which one may use signs in communication.
    1. When the recipient is deaf
    2. When the communicator is dumb
    3. When the people communicating are far apart but can see each other.
    4. Where silence is vital e.g. in hospital
    5. Where the environment is noisy e.g. in a factory
    6. Where there is language barrier
    7. Where there is noiseAny                 4 x 1 = 4 marks
24. Circumstances under which a business organization may decide to dispose off a machine.
    1. Where the machine has become obsolete
    2. Where the machine has become inadequate/cannot cope with the requirements of the business
    3. Where hiring a machine is cheaper than maintaining one
    4. Where spare parts are no longer available
    5. Where skills to operate the machine are not available
    6. When the business has changed line of business hence has become irrelevant
    7. When the business want to buy a new one to replace the old one                    Any 4 x 1 = 4 mark
25. Calculation of discounts    (4 marks)