Business Studies Paper 1 Questions and Answers - Kassu Jet Joint Mock Exams 2023

Instructions to Candidates

• Answer all the questions

For Examiner’s Use Only

QUESTIONS

1. State four demographic factors that may positively influence business operations (4mks)
2. Outline four factors that determine the amount of money one would hold for precautionary motive (4mks)
3. Outline four advantages of a bonded warehouse to the Government (4mks)
4. Describe the following terms (4mks)
   1. Firm
   2. Industry
   3. Localization of firms
   4. Diseconomies of scale
5. State four benefits Kenya would get as a result of exploiting her natural resources (4mks)
6. The curve below shows shift in supply curve
   
   State four factors that may have contributed to the shift from S1S1 to S2S2 (4mks)
7. Highlight four reasons for the increasing popularity of savings and credit co-operative societies (SACCO’s) in Kenya (4mks)
8. The following information was extracted from the records of Mali Mali traders for the period ending 31st December 2022
   Margin 25%
   Stock (01/01/2022) 90,000
   Stock (31/12/2022) 30,000
   Turnover 680,000
   Required: Prepare a Trading account (4mks)
9. State four differences between direct and indirect production (4mks)
   

   Direct Production	Indirect Production

10. The following is a list of ledger accounts Name the ledger book in which they are maintained (4mks)
    

    	Account	Ledger book
    a)	Drawings
    b)	Kamau (Customer)
    c)	Sales
    d)	Machinery

11. Identify the line of communication that suits the statements given below (4mks)
    1. Bank manager giving instructions to the bank teller
    2. A class teacher seeking clarification from the school principal
    3. Accounts manager of Portland cement factory talking to accounts clerk of Bamburi cement factory
    4. Head of mathematics department communicating with head of humanities department in Simba high school
12. Highlight four characteristics of a monopoly market structure (4mks)
13. As an entrepreneur, State four personal factors you would consider when evaluating a business opportunity (4mks)
14. Outline four reasons for the popularity of using motorcycles in the transport sector (4mks)
15. The following information relates to Taptok traders as at December 2022
    Details Kshs
    Drawings 140,000
    Added investment 1,000,000
    Capital (01/01/2022) 6,000,000
    Capital (31/12/2022) 6,500,000
    Calculate Taptok’s profit/loss for the year (4mks)
16. State four ways through which consumers can protect themselves from unscrupulous traders (4mks)
17. Outline four factors that may influence the choice of a channel for distributing milk in a market (4mks)
18. In the table below, indicate the appropriate source document that may provide information to be recorded in the following books of original entry (4mks)
    

    Book of original entry	Source document
    a) Purchases day book
    b) Sales journal
    c) Sales return journal
    d) Cash payment journal

19. Outline four reasons why online advertising would be preferred by a trader (4mks)
20. Outline four circumstances under which an enclosed office layout would be appropriate (4mks)
21. Highlight four components to include when measuring National income using income approach (4mks)
22. Briefly, explain the meaning of the following terms as used in insurance (4mks)
    1. Risk
    2. Policy
    3. Annuity
    4. Claim
23. Fill in the missing figures in the table below (4mks)
    

    	Fixed Assets	Current Assets	Capital	Liabilities
    a)	275,500	a)	315,000	115,500
    b)	182,000	73,600	b)	217,100
    c)	c)	76,400	123,100	91,900
    d)	313,450	211,340	189,170	d)

24. Highlight four factors a seller would consider before giving credit to a customer (4mks)
25. The average consumer price for 1kg of sugar for various months in the year 2023 is shown below
    Month     Consumer price (Ksh)
    January     110
    February   120
    March        130
    April          170
    May           200
    Using January, 2023 as the base month, calculate the consumer price index for the month
    of February, March, April and May (4mks)

QUESTIONS 2

1. Outline four ways in which economic environment may positively influence a business (4 marks)
2. A business opportunity exist where they are gaps to be filled in the needs of the market Identify four such gaps (4 marks)
3. Outline four ways in which introduction of SGR from Mombasa to Nairobi has boosted trade within the country (4 marks)
4. State four benefits that an individual may get by studying business studies
5. State four differences between commercial banks and non-bank financial institutions
   

   	Commercial bank	Non-bank financial institution
   (a)
   (b)
   (c)
   (d)

6. The following figures relate Mambo Leo Traders for the year ended 31st December 2022
   Details                                              Ksh
   Capital (31st December 2022)   1,000,000
   Profit                                           20,000
   Additional Investment                 200,000
   Monthly drawings                      10,000
   Determine the capital as at 1st January 2022
7. State four rules for recording transactions in ledger accounts (4 marks)
8. Mention four types of indirect tax (4 marks)
9. State four characteristics of land as a factor of production (4 marks)
10. Define the following trends in forms of business ownership (4 marks)
    1. Cartels
    2. Check-off system
    3. Globalization
    4. Franchising
11. Outline four factors which may hinder development of a country (4 marks)
12. Outline four external economies of scale that a firm experience when operating on a large scale (4 marks)
13. The following figures relate to the retail business of John traders for the month of January 2021
    Sales 100,000
    Cost of goods sold 80,000
    Expenses were 10% of sales
    
    Calculate: (4 marks)
    Mark – up
    Margin
    Total expenses
    Net profit
14. Bartek Beauty Company intends to venture into flower business Highlight four factors they would consider when promoting the product (4 marks)
15. The diagram below illustrates cyclical in unemployment
    
    
    1. Identify parts marked A and B (2 marks)
       A
       B
    2. Give two possible solutions to a country experiencing the above unemployment (2 marks)
16. Classify the following resources as either renewable or non-renewable by putting a tick in the correct place (4 marks)
    

    	Resources	Renewable	Non-renewable
    (a)	Shoes
    (b)	Natural gas
    (c)	Soda ash
    (d)	Building stones

17. Highlight four features of a departmental store (4 marks)
18. State four merits of face to face communication (4 marks)
19. Study the diagram below
    
    State four causes of the above trend (4 marks)
20. Highlight four factors that may lead to an increase in National income of a country (4 marks)
21. Rafiki Traders had the following ledger account balances as at 31st December 2020 (5 marks)
    Details Shs
    Purchases 30,000
    Sales 50,000
    Return outwards 2,000
    Return inwards 500
    Debtors 16,000
    Wages 8,000
    Creditors 3,000
    Drawings 4,000
    Capital
22. Identify the books of original entry in which the following transactions are recorded
    

    	Transaction	Book of original entry
    (a)	Bought goods on credit worth sh. 10,000 from Kamau
    (b)	Sold furniture worth sh. 18,000 to Koech on credit.
    (c)	Received a credit note worth sh. 5,000 from Jebet
    (d)	Paid Koech sh. 20,000 cash

23. State three motives for holding money (3 marks)
24. Identify the documents described below as used in international trade
    

    	Description	Type of inflation
    (a)	Enables the importer to get goods on credit
    (b)	Shows that the prices charged on goods imported are fair.
    (c)	Shows the shipping charges of goods
    (d)	Written by the exporter to his/her bank authorizing resale of goods being exported after failure by the importer to honour a bill of exchange.

25. The table below shows the average consumer price for 1 kg of sugar for various years
    

    Year	Consumer price (Ksh.)	Consumer price index
    2019	80	100%
    2020	100
    2021	120
    2022	150
    2023	200

    Calculate the consumer price index using 2019 as the base year (4 marks)

MARKING SCHEME

1. State four demographic factors that may positively influence business operations. (4mks)
   • Population size,
   • Population growth rate
   • Migration rate
   • Geographical distribution patterns,
   • Age & Gender
   • Population density,
   • Birth and death rates,
   • Levels of education.
2. Outline four factors that determine the amount of money one would hold for precautionary motive. (4mks)
   • Level of income
   • Family status
   • Age of the individual.
   • Number of dependents
   • Individual’s temperament.
   • Duration between incomes
3. Outline four advantages of a bonded warehouse to the Government. (4mks)
   • Allows government to raise revenue through customs duty.
   • Inspection of goods entering the country is done
   • Can be used to control dumping of illegal goods into the country by verifying the goods imported.
   • Provides the government with useful statistics and information that can be used for budgeting.
   • The government is able to check and verify the documentation of imported goods.
4. Describe the following terms. (4mks)
   1. Firm. - A single unit of business organization that brings together the factors of production to produce a given commodity.
   2. Industry. - All firms producing the similar product for a specific market.
   3. Localization of firms. - Concentration of similar firms in one particular area or region.
   4. Diseconomies of scale. - Problems that a firm experiences due to expansion
5. Outline four benefits Kenya would get as a result of exploiting her natural resources. (4mks)
   1. Provide employment to its citizens
   2. Provide raw materials for industrial use
   3. Provides income/foreign exchange-exports i.e. tourism
   4. Provide food for human/animal consumption
   5. Provide settlement for both human and animals
   6. They are a source of energy.
6. Study the diagram below.
   
   State four causes that have led to the change from S1S1 to S2S2. (4mks)
   • Use of Low level of technology.
   • Unavailability of factors of production.
   • High cost of production
   • Unfavorable/poor climatic conditions
   • Exit of firms in the industry/market
   • Industrial unrest
7. Highlight four reasons for the increasing popularity of savings and credit co-operative societies (SACCO’s) in Kenya. (4mks)
   • They encourage members to save.
   • They provide loans at low interest rate to members
   • If a member dies, beneficiaries are refunded the shares contributed.
   • Loans are provided after few formalities and easy terms.
   • Loans are not secured by property but only guarantors and the member’s shares.
   • SACCOs provide a variety of loans e.g. development, top-up, emergency loans e.t.c.
   • They offer banking facilities through their Front office services.
   • To enjoy the welfare services provided by the SACCO
8. The following information was extracted from the records of Mali Mali traders for the period ending 31st December 2022.
   Margin 25%
   Stock (01/01/2022) 90,000
   Stock (31/12/2022) 30,000
   Turnover 680,000
   Required: Prepare a Trading account (4mks)
   
   • Mali Mali traders
     Trading Account
     For the year ended 31/12/2022
     

     	shs.		shs.
     Op. Stock	90,000	Sales	680,000
     Purchases	450,000
     C.G.A.S	540,000
     Less Cl. Stock	30,000
     C.O.S	510,000
     Gross Profit	170,000
     	680,000		680,000

9. State four differences between direct and indirect production. (4mks)
   

   Direct Production	Indirect Production
   Production for own consumption	Production with exchange idea/for exchange.
   Goods produced are to a great extent of low quality	Quality of goods is usually high due to market competition
   Rudimentary methods of production are used	There is use of modern technology.
   There is hardly any specialization.	There is almost absolute specialization.
   The amount of output is limited.	Results in surplus production/ high quantity

10. The following is a list of ledger accounts. Name the ledger book in which they are maintained. (4mks)
    

    	Account	Ledger book
    a)	Drawings	Private ledger
    b).	Kamau (Customer)	Sales/debtors ledger
    c)	Sales	Nominal ledger
    d).	Machinery	General ledger

11. Identify the line of communication that suits the statements below. (4mks)
    • Bank manager giving instructions to the bank teller. …Vertical downward communication
    • A class teacher seeking clarification from the school principal…. Vertical upward communication
    • Accounts manager of Portland cement factory talking to accounts clerk of Bamburi cement factory…… Diagonal downward communication.
    • Head of mathematics department communicating with head of humanities department in Simba high school……Horizontal communication.
12. Highlight four characteristics of a monopoly market structure. (4mks)
    • There is only one seller/supplier
    • There are barriers to enter the market.
    • Prices are fixed by the supplier
    • Price discrimination may be possible
    • No close substitutes for the commodities supplied in the market.
13. As an entrepreneur. State four personal considerations you would consider when evaluating a business opportunity. (4mks)
    • Skills
    • Objectives
    • Commitments
    • Interest
14. Outline four reasons for the popularity of using motorcycles in the transport sector. (4mks)
    • They are cheaper to buy hence many people can afford to buy them
    • They are very flexible hence can offer door to door services
    • They are cheaper to maintain hence many people can afford the cost
    • They are faster over short distance hence suitable for urgent/perishable goods and services
    • They do not require special training to operate them
    • They can move and reach areas where motor vehicle and other forms cannot reach like places with poor and narrow routes
    • They are found in strategic places where many customers can easily get them
    • They are suitable for carrying one or two persons or few goods.
15. The following information relates to Taptok traders as at December 2022.
    Details Kshs
    Drawings 140,000
    Added investment 1,000,000
    Capital (01/01/2022) 6,000,000
    Capital (31/12/2022) 6,500,000
    Calculate Taptok’s profit/loss for the year. (4mks)
    • C.C = O.C + P + I – D
      6,500,000 = 6,000,000 + P + 1,000,000 – 140,000
      6,500,000 = P + 6,860,000
      P = - 360,000
      Loss = 360,000
16. State four ways through which consumers can protect themselves from unscrupulous traders. (4mks)
    • By reporting traders who are exploiting them to the relevant authority.
    • By boycotting buying their products or services.
    • By joining consumer associations where their grievances are easily heard.
    • Through enlightening themselves on their rights as consumers.
    • By holding peaceful demonstrations against these exploitative traders.
    • Exposing them through mass media platforms, this helps in reducing the exploitation as such traders are put on the limelight of people(consumers)
17. Outline four factors that may influence the choice of a channel of distributing milk in a market. (4mks)
    • Nature of the market
    • Role of intermediary.
    • Resources and size of the firm/producer.
    • Channels used by competitors.
    • Government policy.
    • Marketing risks.
18. In the table below, indicate the appropriate source document that may provide information to be recorded in the following books of original entry. (4mks)
    

    Book of original entry	Source document
    a). Purchases day book	Invoice received
    b). Sales journal	Invoice issued
    c). Sales return journal	Credit note issued
    d). Cash payment journal	Receipt received

19. Outline four reasons why online advertising would be preferred by a trader. (4mks)
    • It reaches the worldwide/large market
    • The delivery of the advert is instant
    • The advert will remain in the computer
    • The advert can be conveyed to a group of people simultaneously
    • An immediate feedback can be got
    • It combines the audio, visual and written elements necessary in advertisement for effective impact.
    • The advert can be edited as need be.
20. Outline four circumstances under which an enclosed office layout would be appropriate. (4mks)
    • When there is need for privacy for confidential discussions and information.
    • When there is less noise and disruption from workers and machines hence enhancing maximum concentration.
    • When there is need to Confers status to top level employee.
    • Are conditioning lightning and heating in the room may be controlled according to the needs of the occupant.
    • When dealing with valuable and sensitive items such as documents and cash
21. Identify four components used in the measurement of national income using income approach. (4mks)
    • Rent
    • Interest rates
    • Profits
    • Public income – Government investments
    • Retained profits
    • Wages
22. Briefly, explain the meaning of the following terms as used in insurance. (4mks)
    • Risk. - Is an event against which an insurance cover is taken.
    • Policy. - a document that contains the terms and conditions of the contract between the insurer and the insured.
    • Annuity. - is a fixed amount of money that an insurer agrees to pay the insured annually until the latter’s death.
    • Claim. - a demand by the insured for compensation from the insurer for the loss arising from an insured risk.
23. Fill in the missing figures in the table below. (4mks)
    

    	Fixed Assets	Current Assets	Capital	Liabilities
    a)	275,500	a). 155,000	315,000	115,500
    b)	182,000	73,600	b). 38,500	217,100
    c)	c). 138,600	76,400	123,100	91,900
    d)	313,450	211,340	189,170	d). 335,620

24. Highlight four factors a seller would consider before giving credit to a customer. (4mks)
    • The value of goods/stock available
    • The duration of payment.
    • Honesty of the buyer
    • Creditworthiness of the buyer
    • Sellers intention of attracting customers
    • Income of the buyer
25. The average consumer price for 1kg of sugar for various months in the yearb2023 is shown below.
    Month Consumer price (Ksh)
    January 110
    February 120
    March 130
    April 170
    May 200
    Using January, 2023 as the base month, calculate the consumer price index for the month of February, March, April and May. (4mks)
    • Consumer price index (C.P.I) = (Price at the current month)/(Price at the base month) x 100
      CPI for February = 120/110 x 100 = 109.09%
      CPI for March = 130/110 x 100 = 118.18%
      CPI for April = 170/110 x 100 = 154.5%
      CPI for May = 200/110 x 100 = 181.8%