Business Paper 1 Questions and Answers - Mwakican Joint Pre Mock Examination 2021

INSTRUCTIONS TO CANDIDATES

1. Write your name, class and admission number in the spaces provided above.
2. Answer all the questions.
3. All the answers should be written in the spaces provided in this booklet.
4. All the questions should be answered in English.

1. State four characteristics of services. (4mks)
   
   1. …………………………………………………………………………………………...
   2. ……………………………………………………………………………………………
   3. …………………………………………………………………………………………...
   4. ………………………………………………………………………………………….
2. Outline four disadvantages of division of labour. (4mks)
   
   1. ……………………………………………………………………………………..
   2. ……………………………………………………………………………………..
   3. ……………………………………………………………………………………….
   4. ………………………………………………………………………………………...
3. Mention four advantages of using Automatic Vending Machines. (4mks)
   
   1. ……………………………………………………………………………………...
   2. …………………………………………………………………………………………..
   3. ……………………………………………………………………………………………
   4. …………………………………………………………………………………………....
4. Give four benefits one gets from self-employment. (4mks)
   
   1. ………………………………………………………………………………………….
   2. ……………………………………………………………………………………………
   3. ………………………………………………………………………………………….
   4. …………………………………………………………………………………………..
5. Outline four factors to consider when intending to buy office furniture. (4mks)
   
   1. ………………………………………………………………………………………..
   2. …………………………………………………………………………………………..
   3. ……………………………………………………………………………………………
   4. …………………………………………………………………………………………..
6. Name the source document to which each of the following description relate. (4mks)
                         Description                                          source document
   1. Issued by the seller to a buyer for cash paid
   2. Used for processing and authorizing payments
   3. Sent to a credit buyer to demand payment
   4. Used to correct undercharge
7. Outline four principles of co-operatives. (4mks)
   1. ………………………………………………………………………………………….
   2. ………………………………………………………………………………………...
   3. …………………………………………………………………………………………..
   4. ………………………………………………………………………………………..
8. Highlight four measures that the government puts in place to create conditions that will be favorable for business development. (4mks)
   1. ……………………………………………………………………………………….
   2. …………………………………………………………………………………………
   3. ………………………………………………………………………………………..
   4. ………………………………………………………………………………………..
9. State four advantages of transporting oil by pipeline rather than by road. (4mks)
   1. …………………………………………………………………………………………
   2. ………………………………………………………………………………………….
   3. …………………………………………………………………………………………
   4. ………………………………………………………………………………………….
10. Outline four advantages of audio-visual communication. (4mks)
    1. ………………………………………………………………………………………...
    2. ……………………………………………………………………………………...
    3. ………………………………………………………………………………………….
    4. …………………………………………………………………………………………..
11. Highlight four ways in which the production activities of firms in your country affect the environment. (4mks)
    1. …………………………………………………………………………………………....
    2. …………………………………………………………………………………………..
    3. ………………………………………………………………………………………….
    4. …………………………………………………………………………………………..
12. Highlight four disadvantages of a private warehouse. (4mks)
    1. ………………………………………………………………………………………...
    2. …………………………………………………………………………………………
    3. ………………………………………………………………………………………..
    4. ………………………………………………………………………………………….
13. Ragati and Nzonge operates a business with a stock valued at ksh.350,000 and have interests of 3/5 and 2/5 respectively. Ragati decided to insure 2/4 of the stock against fire. Sometimes later fire occurred at their business premises and destroyed stock worth ksh. 250,000. Calculate the amount of compensation Ragati would get from the insurance company. (4mk
14. Outline four sources of monopoly power. (4mks)
    1. ………………………………………………………………………………………...
    2. ……………………………………………………………………………………………
    3. ………………………………………………………………………………………….
    4. ………………………………………………………………………………………….
15. Name four sources of public finance. (4mks)
    1. ……………………………………………………………………………………….
    2. …………………………………………………………………………………………..
    3. ………………………………………………………………………………………….
    4. ………………………………………………………………………………………….
16. State four benefits that would accrue to a customer who borrows a loan from a non-bank financial institution. (4mks)
    1. …………………………………………………………………………………………..
    2. ……………………………………………………………………………………….
    3. ………………………………………………………………………………………….
    4. …………………………………………………………………………………………..
17. Match each of the statements given below with the relevant type of capital. (4mks)
                                       Statement                                  Type of capital
    1. Resource invested into a business by the owner
    2. Excess of current assets over current liabilities
    3. Amount invested into the business by outsiders
    4. Represents total finance in a firm
18. The following information was extracted from the books of farmers choice supermarket on 31st Dec 2009
    shs
    Average stock     30,000
    Closing stock      40,000
    Purchases            336,000
    Carriage inwards  2,000
    Return outwards  18,000
    Margin 1/6
    Required. Calculate sales for the year . 4mks
19. Outline four important characteristics of a general journal. (4mks)
    1. …………………………………………………………………………………………..
    2. ………………………………………………………………………………………….
    3. …………………………………………………………………………………………...
    4. ………………………………………………………………………………………….
20. Apex traders provided you with the following
    Margin 25%
    Cost of sales 15,000
    Opening stock 2,000
    Closing stock 1,000
    Operating expenses 2% of capital
    Sales and capital are in the ratio of 1:4
    Calculate :
    1. Rate of stock turnover
    2. Purchases
    3. Return on capital
21. Indicate the subsidiary ledger in which each of the following should be recorded. 4mks
                  Account                  Subsidiary ledger
    1. Return inwards
    2. Bank
    3. Drawings
    4. Juma traders ( a debtor)
    5. Discount received
    6. Uchumi wholesalers (a supplier) …………………………………
22. Highlight four types of advertising. (4mks)
    1. ………………………………………………………………………………...
    2. ………………………………………………………………………………….
    3. …………………………………………………………………………………….
    4. ……………………………………………………………………………………….
23. State four natural sources of energy in Kenya. (4mks)
    1. ……………………………………………………………………………………….
    2. ……………………………………………………………………………………….
    3. ……………………………………………………………………………………….
    4. ………………………………………………………………………………………..
24. The statement below described various types of goods. Identify the type of goods best described by each statement. (4mks)
    1. Owned by the government on behalf of its citizens.
    2. Goods that are capable of directly satisfying human want.
    3. Goods that are used to make other goods.
    4. Goods that get spoilt within a very short time.
25. Identify four reasons why many youths in urban centre are starting hawking businesses. (4mks)
26. ………………………………………………………………………………………….
    1. ………………………………………………………………………………………….
    2. …………………………………………………………………………………………....
    3. …………………………………………………………………………………………....

MARKING SCHEME

1. Characteristics of services
   
   • are intangible/invisible
   • are inseparable from the provider
   • highly perishable.
   • quality cannot be standardized
   • price paid is for experience nor ownership
   • cannot be stored
     Any 4 x 1 = 4mks
2. Disadvantages of division of labour
   
   • social problems
   • creates monotony and boredom
   • create unemployment
   • difficult to know who to identify with the final product
   • convents man into a machine like creature
   • makes man dependent on only one trade
     Any 4 x 1 = 4mks
3. Advantages of Automatic Vending Machines
   
   • give 24 hour service
   • saves on labour cost.
   • quick customer service
   • accurate service
   • save rent expenses
     Any 4 x 1 = 4mks
4. Advantages of self-employment
   
   • independence
   • enjoys all the profits
   • job security
   • personal satisfaction
   • enjoys status and pride
     Any 4 x 1 = 4mks
5. Factors to consider when intending to buy office furniture
   
   • compatibility with the intended use and place
   • affordability –economical to acquire and maintain
   • size of the firm
   • durability
   • adaptability to future needs
   • availability of spare parts
   • possibility of hiring rather than buying
   • effect on staff morale
     Any 4 x 1 = 4mks
6.    
   1. cash sale receipt
   2. payment voucher
   3. invoice
   4. debit note
      Any 4 x 1 = 4mks
7. principles of co-operatives
   
   • open an voluntary membership
   • limited interest on share capital
   • democratic administration
   • dividend repayment
   • education to members
   • co-operation with other co-operatives
   • have a common bond
     Any 4 x 1 = 4mks
8. providing an enabling environment
   
   • provide security
   • political stability
   • favourable legislation
   • provide basic infrastructure
   • provide credit finance
   • giving subsidies/reducing taxes
     Any 4 x 1 = 4 mks
9. pipeline transport
   
   • transport cost is reduced
   • reduced environmental pollution
   • loss through accidents on the road is reduced.
   • cases of theft of oil are reduced.
   • fast transportation
   • loss damage on roads
   • reduced accidents
   • regular /reliable supply
     Any 4 x 1 = 4mks
10. advantages of Audio-visual communication
    
    1. reach a large audience at the same time.
    2. have entertainment value.
    3. enhances the impact made by oral and written communication
    4. draws quick attention
    5. suitable for illiterate receivers
    6. increases the audience’s concentration span
       Any 4 x 1 = 4mks
11. effects of production on the environment
    
    • depletion of productive resources
    • degradation of environment leading to climate change
    • pollution if air and water which is detrimental to human and animal life.
    • problem of solid and plastic waste disposal which may result in spread of diseases.
    • noise pollution which may cause hearing problems to human beings.
      Any 4 x 1 = 4mks
12. disadvantages of a private warehouse
    
    • expensive to put up.
    • holding too much stock exposes a business to problems such as a fall in prices, expiry of goods, fire, fall in demand e.t.c
    • discourages specialization
    • poor arrangement can lead to contamination and inaccessibility of goods.
    • could be operating in excess capacity during low seasons which can lead to laying off some workers.
    • adds administrative costs.
      Any 4 x 1 = 4mks
13. Ragati interest 3/5 of 350,000= 210,000
    He insured ¾ of 350,000=262,500
    ( over-insurance)
    Ragatis loss after fire 3/5 of 250,000 =150,000
    Compensation =150,000
    Any 4 x 1 = 4mks
14. Sources of monopoly power.
    
    • control of an important factor of production
    • legal protection through patent rights and copy rights
    • merger/amalgamation
    • govt control to eliminate wasteful competition
    • where the production requires heavy capital it’s not affordable to many firms
      Any 4 x 1 = 4mks
15. Sources of public finance
    
    • taxes
    • licenses
    • count fines
    • fees for government services
    • rent and rates for use of government property
    • escheats
    • interest earned on loans
    • government borrowing
    • proceeds from the sale of government property
    • surplus from public corporations
      Any 4 x 1 = 4mks
16. Benefits of borrowing a loan from NBFI
    
    • get long-term loan
    • get finance for capital development
    • low interest rates on loans
    • management advice on the project
    • lower collateral value
    • longer grace period
      Any 4 x 1 = 4mks
17.    
    1. owner’s equity
    2. working capital
    3. borrowed capital
    4. capital employed
       4 x 1 = 4mks
18. sales = cost of sales + gross profit
    
    • cost of sales = opening stock + purchases + carriage inwards – return outwards _ closing stock
    • average stock = opening stock + closing stock
                                                  2
      Opening stock = (30,000 x 2 ) – 40,000 = 20,000
      Cost of sales = 20,000 + (336000 + 2000 – 18000)-40000= 300,000
      Margin = 1/6 – 1 = 1/5
      Gross profit = 1/5 x 300000= 60,000
      Sales = 300,000 + 60,000 = 360,000
      5 x 1 = 5
19. characteristics of a general journal
    
    • A book of original entry – initial stage of recording
    • It’s a day book – day to day records are made
    • Chronological record – record kept in order of occurrence
    • each entry is accompanied by a narration
    • amounts are recorded in debit and credit columns side by side
      Any 4 x 1 = 4mks
20.    
    1. ROSTO = cost of sales  15000/(2000 + 1000) = 15000
                        Av. Stock                        2               1500
       = 10 times
    2. purchases= cost of sales = opening stock + purchases – closing stock
       = COS – O.P stock + CL stock
       = 15000 – 2000 + 1000 = 14000
    3. return on capital sales = GP + COS
       mark up = ¼ - 1 = 1/3 = 5000 + 15000 = 20,000
       capital = 20,000 x 4 = 80,000
       gross profit = 1/3 x 15000=5000 expenses = 2/100 x 80000=1600
       net profit = gross profit – expenses
       =5000 – 16000
       = 3400
       ROC = net profit x 100 = 3400 x 100 = 4.25%
                         Capital             80,000           
       ½ x 8 = 4mks
21.    
    1. general ledger
    2. cash book
    3. general ledger
    4. sales ledger
    5. nominal ledger
    6. purchases ledger
       ½ x 6 = 3mks
22. Types of advertising
    
    • primary demand
    • institutional advertising
    • informative
    • persuasive
    • celebrity
    • corrective
      Any 4 x 1 = 4mks
23. Sources of energy
    
    • solar
    • firewood
    • geothermal
    • biogas
    • hydro-electric power
      4 x 1 = 4mks
24. Type of goods
    
    1. Public goods
    2. Consumer goods
    3. Producer/ capital goods
    4. Non-durable goods
       Any 4 x 1 = 4mks
25. The business
    
    • requires low starting capital
    • low overhead costs
    • is flexible
    • easy to manage
    • few legal formalities
      Any 4 x 1 = 4mks