Business Studies P1 Questions and Answers - Butula Sub-County Post Mock Exams 2021/2022

INSTRUCTIONS TO CANDIDATE’S

• This paper consists of 25 questions.
• Answer ALL the questions in the spaces provided below each question.

FOR EXAMINER’S USE ONLY:

Questions

1. State four reasons that would make an individual engage in business. (4mks)
2. The following are some of the documents used in home trade: Cash sale slip, Catalogue, invoice and statement of account. Match each document with the appropriate description provided in the table below. (4mks)
   

   Description	Document
   a. Shows details of goods offered for sale.
   b. Give quantity, unit price and total amount to be paid.
   c. Show the transactions since the date of last statement.
   d. Shows description of goods bought, prices and total amount paid.

3. State the best name that can be given to the following set of goods and services. (4mks)
                SET                           NAME
   1. Tea and Coffee ……………………………………………………………………………………..
   2. Education and Security ………………………………………………………………………………
   3. Bus and Diesel ……………………………………………………………………………………..
   4. Beer and Cigarette ……………………………………………………………………………………..
4. List any four sources of capital to public limited companies. (4mks)
5. Outline four tools of monetary policy that a government of Kenya may use to reduce excess money in circulation. (4mks)
6. The balances given below relate to Enotika Traders for the year e. 31st December 2020.
   Shs
   2 year bank loan 230,020
   Creditors 95,200
   Fixed assets 480,000
   Current assets 145,220
   Prepare a balance sheet as at 31st December 2020. (5mks)
7. State four complains that may be received from consumers by consumer association. (4mks)
8. Highlight four circumstances under which personal selling may be appropriate in product in product promotion. (4mks)
9. State four features of liners in sea transport. (4mks)
10. Given the statements in the table below, indicate whether the entry made in the ledger account will be a debit or credit entry. (4mks)
    

    Statement	Type of Entry
    (i) An increase in revenue
    (ii) A decrease in an asset
    (iii) An increase in an expense
    (iv) A decrease in liability

11. State four principles of insurance. (4mks)
12. List three levels of inflation. (3mks)
13. State four channels of distribution that a trader can use to import Covid-19 PPEs from China to Kenya.(4mks)
14. Highlight four characteristics of a perfectly competitive market . (4mks)
15. Zawadi operates a hardware business in her home town. Outline four methods she can use to determine prices for her goods other than the forces of demand and supply. (4mks)
16. Identify the type of utility associated with each the following production activities. (4mks)
            Production            Activity
    1. Distribution …………………………………………………………………
    2. Warehousing …………………………………………………………………
    3. Processing …………………………………………………………………
    4. Selling …………………………………………………………………
17. State four hindrances to entrepreneurial development in Kenya (4mks)
18. State four ways in which a good filling system may facilitate the operations in an office. (4mks)
19. State the book of original entry in which the information will be recorded. (4mks)
           Source of document                               Book of original entry
    1. Received credit notes ……………………………………………………………………..
    2. Cash receipts received ……………………………………………………………………..
    3. Received invoices ……………………………………………………………………..
    4. Issued credit notes ……………………………………………………………………..
20. Outline four reasons for the popularity of WhatsApp as a trend in communication. (4mks)
21. Outline four conditions under which a warehouse may be considered to be operating efficiently. (4mks)
22. Highlight four external factors that may negatively influence the operations of a business. (4mks)
23. State four differences between goods and services. (4mks)
    

    Goods	Services

24. The following information relates to Papap Enterprises.
    Kshs
    Sales 200,000
    Mark-up ¼
    Opening Stock 30,000
    Closing Stock 25,000
    Expenses 15,000 Calculate;
    1. Gross profit 1mk
    2. Net profit 1mk
    3. Rate of stock turnover 2mks
25. Juma bought furniture worth sh.50,000 from Bumala Enterprises for which he paid sh. 30,000 in cash and the rest to be paid later. State four effects of the above transaction on the balance sheet items.(4mks)

MARKING SCHEME

1. What are the reasons that would make an individual engage in business? (4marks)
   1. To provide goods and services.
   2. To create employment.
   3. To exploit economic resources
   4. To earn profit/income
   5. To be self-reliant & independent/own boss
   6. To make use of spare time.
   7. As an outlet for creativity and innovation.
   8. To exploit their talents/hobbies/skills.
   9. For prestige.
   10. To take advantage of government incentives e.g. loans for youth & women.
2.                                                                
   

   Description	Document
   (a) Shows details of goods offered for sale.	Catalogue
   (b) Give quantity, unit price and total amount to be paid	Invoice
   (c) Show the transactions since the date of last statement.	Statement of account
   (d) Shows description of goods bought, prices and total amount paid.	Cash sales slip

3. State the best name that can be given to the following set of items. 4mks SET NAME
   1. Tea and Coffee Substitute goods
   2. Education and Security Secondary wants
   3. Bus and Diesel Complementary goods
   4. Beer and Cigarette Habitual/addictive
4. List any four sources of capital to public limited companies.
   1. Sale of shares.
   2. Sale of debentures.
   3. Profits ploughed back.
   4. Loans from financial institutions.
   5. Renting/leasing out property.
   6. Disposal of assets.
   7. Purchase of goods on credit.
5. Outline four tools of monetary policy that a government may use to reduce excess money in circulation. (4mks)
   1. O.M.O. – to sell government securities through the central bank.
   2. Bank rate – raising interest rates on loans to banks.
   3. Cash/liquidity can be raised for commercial banks.
   4. Directives – can be given to commercial banks to reduce money supply.
   5. Raising margin requirements – raise the value of assets required as security for loans.
   6. Selective credit control – freeze lending to some sectors of the economy.
6.                                                
   

   ENOTIKA TRADERS Balance sheet As at 31st December 2020
   Fixed Assets 480,000 Current Assets 145,220                             625,220	Capital 300,000 Long term liabilities 2 year Bank loan 230,220 Current liabilities Creditors 95,200                       625,220

   (5 x 1 = 5 marks)

7. State four complains that may be received from consumers by consumer associations. 4mks
   1. Poor quality of goods and services/damaged.
   2. Incorrect weight and measures.
   3. Unfair pricing.
   4. Contra – band items/prohibited goods.
   5. Misleading advertisement.
   6. Breach of contract
8. Highlight four circumstances under which personal selling may be appropriate in product in product promotion.
   1. When a new product is being launched in the market.
   2. Where the firm is financially able to finance sales persons.
   3. When the product is tailored to meet customer’s specifications.
   4. Where the product is of high value.
   5. Where it is necessary to demonstrate the use of the product.
   6. Where the market is limited to a small area.
9. State four features of liners in sea transport. 4mks
   1. Ferry passengers or cargo.
   2. Follow a regular time table / schedule.
   3. Call at ports at regular intervals.
   4. Follow a regular route.
   5. Form associations / conferences to protect themselves against unfair competition.
   6. Charge fixed freightage and fare regardless of demand.
10. Given the statements in the table below, indicate the type of entry to be made in the relevant ledger accounts:
    

    Statement	Type of Entry
    (i) An increase in revenue	Credit entry
    (ii) A decrease in an asset	Credit entry
    (iii) An increase in an expense	Credit entry
    (iv) A decrease in liability	Debit entry

11. State four principles of insurance. 4mks
    1. Principle of insurable interest.
    2. Principle of indemnity.
    3. Principle of proximate cause.
    4. Principle of utmost good faith/Ubberima fides
    5. Principle of contribution.
    6. Principle of subrogation.
12. List three levels of inflation. (3mks)
    1. Moderate inflation
    2. Galloping inflation
    3. Hyper-inflation
13. State four channels of distribution that a trader can use to import Covid-19 PPEs from China to Kenya.
    1. Foreign manufacturer →  local consumer
    2. Foreign manufacturer →  local wholesaler → retailer → consumer
    3. Foreign manufacturer →local retailer → consumer
    4. Foreign manufacturer → Chinese embassy in Kenya →  local consumer
    5. Foreign manufacturer →  Kenya Ministry of health → local wholesaler → consumer
    6. Chinese manufacturer→  KEMSA → consumer
14. Highlight four characteristics of a perfectly competitive market (4mks)
    1. Large amount of buyers and sellers
    2. No buyers and sellers have perfect knowledge of the market conditions
    3. No government interference in the market
    4. No transport costs are incurred
    5. Free entry and exit to firms
    6. Perfect mobility of factors of products
    7. Uniformity of buyers and sellers
    8. Both buyers and sellers are price maker
15. Zawadi operates a hardware business in her home town. Outline four methods she can use to determine prices for her goods other than the forces of demand and supply.
    1. Bargaining/Haggling.
    2. Abiding by the government policy.
    3. Tendering
    4. Sale by auction
16. Identify the type of utility associated with each the following production activities.
            Production activity           Utility
    1. Distribution                         Place
    2. Warehousing                      Time
    3. Processing                         Form
    4. Selling                          Possession
17. State four hindrances to entrepreneurial development in Kenya
    1. Difficulties in accessing markets.
    2. Difficulties in accessing resources like capital.
    3. Lack of entrepreneurial culture.
    4. High taxation rates/Unfavourable government policies
    5. Opposition from existing businesses/Stiff competition.
    6. Discouragement from peer groups/members of society with negative remarks.
    7. Lack of self-motivation/self-drive.
    8. Inadequate personnel/labour resources.
    9. Poor infrastructural development.
    10. Lack of support/auxiliary services.
18. State four ways in which a good filling system may facilitate the operations in an office.(4mks)
    1. Office is kept tidy.
    2. Documents are kept neat and tidy.
    3. Facilitates quicker decision making.
    4. Security of document is ensured.
    5. Information is preserved for future reference.
    6. Easy retrieval of information.
    7. Ensures confidentiality of information by controlling access by unauthorized people.
19. State the book of original entry in which the information will be recorded. (4 marks)
    Source of document Book of original entry
    1. Received credit notes Purchase returns/Return outwards journal
    2. Cash receipts received Cash Payments journal
    3. Received invoices Purchases journal
    4. Issued credit notes Sales returns/Return inwards journal
20. Outline FOUR reasons for the popularity of WhatsApp as a trend in communication. 4mks
    1. It offers unlimited messaging.
    2. It has no hidden costs.
    3. It offers international messaging.
    4. It is simple to use/user friendly.
    5. Video calling is available.
    6. It possible to send documents & other media like pictures, videos.
    7. One can send messages to many people at once in WhatsApp groups.
    8. It is secured through use of phone PIN.
    9. It is confidential since messages have end to end encryption.
21. Outline four conditions under which a warehouse may be considered to be operating efficiently. (4 marks)
    1. The warehouse should be conveniently located
    2. There warehouse should be managed by qualified personnel
    3. Operational procedures and guidelines should be in place
    4. Security systems should be in place
    5. Should have suitable buildings
    6. Appropriate equipment
    7. Compliance with one law
    8. Adequate space
    9. Proper record keeping
    10. Good transport system
    11. Good communication network
22. Highlight four external factors that may negatively influence the operations of a business. 4mks
    1. Unfair competition.
    2. Inadequate technology.
    3. Unstable political environment.
    4. Unstable economic environment.
    5. Unfavourable legal framework.
    6. Unreliable supply system.
    7. Strong consumer bargaining power.
    8. Poor physical facilities and infrastructure.
    9. Low population level.
    10. Insecurity.
    11. Unfavourable socio-cultural environment.
    12. Natural calamities.
23. State the differences between goods and services. 4mks
    

    Goods	Services
    They are tangible/can be touched	They are intangible/cannot be touched
    They can be stored	They cannot be stored
    They can be standardized	They cannot be standardized
    They can change possession	They cannot be separated from the provider
    Not all goods are perishable	They are highly perishable
    Most of them can be seen/visible	They cannot be seen/invisible

24. The following information relates to Papap Enterprises.
    Kshs
    Sales 200,000
    Mark-up ¼
    Opening Stock 30,000
    Closing Stock 25,000
    Expenses 15,000
    Calculate;
    1. Gross profit (1mk)
       • Mark up = 1/4
         Margin = 1/4+1 = 1 /5
         Gross profit = 1/ 5 = x / 20,000
         = sh 40,000
    2. Net profit (1mk)
       • Net profit = Gross profit – Expenses
         = 40,000 – 15,000
         = 25,000
    3. Rate of stock turnover (2mks)
       • Cost of sales = Sales – Gross profit
         = 200,000 – 40,000
         = 160,000
         Average stock = (30,000 + 25,000)
                                                 2
         = 27,500
         ROSTO = Cost of Sales
                            Avg. Stock
         = 160,000
              27,500
         = 5.8 times
25. Juma bought furniture worth sh.50,000 from Bumala Enterprises for which he paid sh. 30,000 in cash and the rest to be paid later. State four effects of the above transaction on the balance sheet items. 4mks
    1. Asset furniture increased by sh. 50,000
    2. Asset cash reduced by sh. 30,000
    3. Liability creditors increased by sh. 20,000
    4. Total liabilities increased by sh. 20,000