BUSINESS STUDIES PAPER 1 - KCSE 2019 STAREHE PRE MOCK EXAMINATION (WITH MARKING SCHEME)

1. Highlight four ways in which the introduction of money helped eliminate problems faced in barter trade. (4mks)
2. The following information relates to Kibet traders for the month of August 2012.
                                               (Sh.)
   Opening stock                       40,000
   Purchases                             46,000
   Carriage inwards                    2,100
   Closing stock                        22,500
   Goods are usually sold at a markup of 20%.         
   Required: Prepare a trading account for Kibet Traders for the month ended 31^st August 2012. (4mks)

3. Indicate the type of journal in which each of the following transactions would be recorded. (4mks)
   

   Transaction	Journal
   a) Sale of goods on credit
   b) correction of an undercharge
   c) Goods returned by customers
   d) Purchases on credit

              

4. State four conditions which must be met inorder for an insurance contract to be valid. (4mks)                  

5. The following table represents information related to three business (i) (ii) (iii) and (iv). (4mks)
   

   	Assets	Capital	Liabilities
   i) ii) iii) iv)	700,000 Y 600,000 67,000	X 500,000 410,000 W	50,000 225,000 Z 24,705

6. Outline four measures that may be taken by the government to curb unemployment. (4mks)
7. The following is a table of activities. Name the utility that is created by each activity. (4mks)
   

   Activity	Utility
   a)Making chairs from timber
   b)Delivering milk to consumers early in the morning
   c)Shop keepers selling sugar to consumers
   d)Pharmacist delivering drugs to a hospital

8. Outline four roles of transport in the facilitation of trade. (4mks)
9. State four disadvantages of division of labour. (4mks)

10. Outline four features of a public corporation.     (4mks)  

11. Outline four benefits that may accrue to a business from political stability. (4mks)

12. Highlight four benefits of national income statistics to the government. (4mks)

13. Highlight four advantages of using billboards as a medium of advertising. (4mks)    

14. Highlight four circumstances under which a proforma invoice can be used. (4mks)  

15. State four duties of the office clerk. (4mks)

16. State four reasons for maintaining a cash book in a business enterprise. (4mks)
17. State four demerits of government involvement in business activities. (4mks)

18. Name the type of warehouse associated with each of the statement given below. (4mks)
    

    Statement	Type of warehouse
    a)Goods can be stored before payment of custom duties.
    b)Individuals can hire storage facilities.
    c)Goods are stored from several manufacturers
    d)Specialized goods are stored

19. Outline four disadvantages of using internet in communication. (4mks)

20. Highlight four characteristics of economic resources. (4mks)
21. The following diagram shows the demand and supply curves of a commodity.
    
    State four things that will happen to equilibrium   price, Pe and quantity, Qe, if the supply of the commodity increases while demand remains constant  (4mks)

22. State the effect of each of the following transactions on the balance sheet totals by writing increase or decrease or no effect in each case. (4mks)
    

    Transaction	Effect
    a) Bought machinery on credit
    b) Withdrew cash from the business   for personal use.
    c) Purchased stock in cash
    d) Paid outstanding loan by cheque

23. Identify the types of ledger in which each of the following accounts would be found . (4mks)
    

    Account	Type of ledger
    a) Otieno (buyer)
    b) Carriage outwards
    c) Mueni (supplier)
    d) Cash at bank

                                          
24. List four sources of business ideas.        (4mks)

25. Outline four factors that a firm may consider when deciding on what goods and services to Produce.    (4mks)

MARKING SCHEME

1. Ways in which the introduction of money helped to eliminate problems faced in the conduct of barter trade include.
   • Money eliminates the need for double coincidence of wants since it’s a medium of exchange.
   • Stores the value of perishable goods by selling them and keeping the money for future use.
   • Ensures that commodities exchanged are of comparable value by offering a standard measure of value.
   • Helps in the exchange of indivisible commodities since it can be dividend into smaller denominations without losing value.
   • Money provides unit of account by which goods and services are valued unlike in barter trade.
   • Money is a standard for deferred payment whereas it was not possible to make payments in future under the barter system.
   • Money enables the exchange of fixed properties like land.
   • Money helps to solve the problem of transporting heavy and bulky goods since its portable.
     NB: Allow a mark if the candidate writes the functions of money.

2.  
    
3.  
   • Sales journal
   • Cash receipts journal/cash book.
   • Sales returns journal
   • Purchases journal

4. Conditions that must be met inorder for an insurance contract to be valid.
   • It must be for a legal purpose.
   • The parties must have legal capacity to contract.
   • The terms and conditions of the contract should be acceptable to both the insured and the insurer.
   • There must be a payment and a consideration.

5. X= Shs 650,000.
   Y=shs 725,000.
   Z = shs 190,000
   W = Shs 42,295

6. Measures taken by the government to curb unemployment.
   • Diversification of economic activities.
   • Control of population growth.
   • Adoption of policies that encourage labour intensive methods of production/appropriate technology.
   • Partner with the private sector to create employment
   • Adopting a relevant education system/training.
   • Encouraging direct foreign investment.
   • Encouraging efficient exploitation and use of locally available resources.
   • Availing investment funds through favourable credit like the youth fund and uwezo fund.
   • Increasing government expenditure.
   • Rural development/delocalization of industries.
   • Exporting excess labour.
7.  
   • Form utility
   • Place utility
   • Possession utility.
   • Place utility.

8. Roles of transport in the facilitation of trade.
   • Facilitates the movement of factors of production and other inputs like raw materials.
   • Enables goods to be moved to the market from their point of production/enables buyers to move to the market.
   • Adds value to goods and services by moving them to the point of consumption/create place utility.
   • Opens up new markets.
   • Makes it possible for the exploitation of natural resources.
   • Allows for specialization since it allows people to access goods produced elsewhere.
   • Saves time hence avoids wastage.

9. Disadvantages of division of labour.
   • Too much use of machines may cause unemployment.
   • Converts human beings into machine like creatures hampering creativity.
   • Work becomes monotonous and boring.
   • Lack of motivation since individual workers never identify themselves with the final products.
   • Makes an individual depend on one trade which may lead to redundancy if demand for his/her product

10. Features of a public corporation.
    • Created under an Act of parliament.
    • Not aimed at profit maximization.
    • The board of directors are appointed by the government.
    • They are their own legal entities separate from the government.
    • They fall under the specific ministries of the government.
    • The government is the main source of capital.

11. Benefits that may accrue from political stability.
    • Accessibility to the market is enhanced.
    • Cost of operation of the business is low.
    • Easy to obtain capital for expansion
    • High probability of achieving the set goals.
12. Benefits of national income statistics to the government.
    • Provides information on the country’s economic performance over a period of time.
    • Provides information to be used for making economic policies/budgeting/planning.
    • Provides information on the contribution of each sector of the economy to the national income.
    • Provides a breakdown on a consumer expenditure and government expenditure.
    • Provides information on the distribution of income.
    • Provides information that is used to measure the standard of living in the country.
    • Provide information used for compare economic performance of country across two more years.
    • Provides information used for compare economic performance of the country with other countries.

13. Advantages of Bill Boards.
    • They have a fairly long lasting visual
    • They are seen by a large number of people i.e. wide coverage.
    • Most electronic bill boards can display more than one advertisement.
    • They are very attractive therefore they catch the attention of potential customers easily.
    • They can be read quickly since they contain advertising appeals of the selling point. They are not highly worded.
14. Circumstances under which a proforma invoice can be used.
    • When payment for goods is required in advance.
    • When replying to a letter of inquiry/quotation.
    • Serves as a polite request for payment before delivery of goods.
    • When goods are sent to an agent to show selling prices.
    • When the seller does not want to give credit to the buyer.
    • When the importer wants written clearance before goods are sent.

15. Duties of an office clerk.
    • Handling mails.
    • Operating various office machines.
    • Filing and indexing.
    • Record keeping/simple book keeping/petty cash.
    • Helps in store keeping.
    • Ordering/receiving/storing and issuing stationery.
    • Reproduction of documents.

16. Reasons for maintaining a cash book in a business.
    • To reduce the number of entries made into the general ledger.
    • To easily show/avail cash balances.
    • To enhance specialization in book keeping by allocating different ledgers to different workers.
    • To easily monitor cash inflows/receipts.
    • To show the sources of funds into the business.
    • To show the expenditure in the business.
    • To easily monitor the cash outflows (payments).
    • to show discount allowed to the debtors.
    • To show discount received from creditors.

17. Demerits of government involvement in business.
    • Some of the managerial posts are filled by political appointees.
    • May discourage investments by private entrepreneurs.
    • Mismanagement due to political patronage and corruption.
    • Where the government is the only service provider consumer choice is restricted
    • Poor quality of services due to lack of competition.
    • Poor controls which leads to corruption and embezzlement of funds.
18.  
    • Bonded warehouse.
    • Public warehouse
    • Wholesalers warehouse
    • Manufacturer’s warehouse.

19. Disadvantages of using the internet in communication.
    • Information may not be secure since other people can access the information.
    • Information may be diverted by competitors who may know the password.
    • Computers may be invaded by viruses that will interfere with its programmes.
    • Incase of low network coverage, it may take long to access the information.
20. Characteristics of economic resources.
    • They are scarce.
    • Have money value.
    • Are unevenly distributed.
    • Have alternative uses.
    • Can be combined in various proportions .
    • Have utility/usefulness.
    • Can change possession/transferable.
    • Quality can be improved.

21. Effect on equilibrium price and quantity.
    • The price of the commodity will decrease/lowered.
    • Equilibrium quantity will increase.
    • Equilibrium price will decrease
    • The supply of the commodity will increase.
22.  
    • No effect.
    • Sales ledger/debtor ledger.
    • Nominal ledger/general ledger.
    • Purchases ledger/creditors ledger/bought ledger.
    • Cash book.

24. Sources of business ideas.
    • Shows and exhibitions.
    • Magazine articles.
    • Vocational training and experience.
    • Waste products.
    • Listening to what people say.
    • Spotting a market gap (niche)

25. Factors to consider when deciding on what goods and services to produce by a firm.
    • Level of competition.
    • Availability of resources
    • Government policy.
    • Demand/market.
    • Cost of production.