Business Studies Paper 1 Questions and Answers - Joint Pre-Mock Exams 2021/2022

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 INSTRUCTIONS TO CANDIDATES

  • Answer all the questions in the spaces provided.
  1. Outline four internal environment factors that may negatively influence the operations of a business. (4 marks)
  2. State the characteristic of human wants that match the descriptions given below: (4 marks)
     Description   Characteristics 
     a)Satisfaction of one want automatically leads to creation of another   
     b)Some human wants are experienced by all human beings  
     c) Human wants can never be fully satisfied  
     d) After some wants are satisfied, they recur  
  3. Give four reasons why direct production is undesirable in a country. (4 marks)
  4. Highlight four reasons why the Kenyan government encourages entrepreneurship in the country. (4 marks)
  5. State four modern developments in office management. (4 marks)
  6. Give four differences between a Public Limited Company and a Public Corporation. (4 mks)
  7. Highlight four advantages of mail-order business. (4 marks)
  8. Give four reasons for the popularity of Mpesa as a means of payment in Kenya.(4 marks)
  9. The following balances were extracted from books Hussein trades on 30th October 2019.
    Cash            20,000
    Bank            160,000
    Premises      200,000
    Debtors        40,000
    Creditors      95,000
    2 years loan 258,000
    Stock            210,000
    Prepare the balance sheet for Hussein Traders as at 30th October 2019. (5 mks)
  10. State four reasons for government involvement in business activities. (4 marks)
  11. Outline four problems associated with boda boda (motor cycle) as a means of transport. (4 marks)
  12. For each of the statements below, state the appropriate term as used in insurance. (4 marks)
     Statement   Terms 
     a)Specified amount of money paid at regular intervals by the insured to the insurer for coverage against losses   
     b)People employed by an insurance company to compute expected losses and value of premiums  
     c)Amount of money refundable to the insured by the insurer in case the former terminates contract before it matures  
     d) Loss incurred by a business as a result of disruption of business in the event of the insured risk occurring  
  13. Highlight four problems that would be experienced by consumers in the absence of warehousing. (4 markS)
  14. State four benefits of advertising to a consumer. (4 marks)
  15. Identify the source documents used to record the following transactions in the books of original entry. (4 marks)
     Transaction   Source Document 
     (a) Credit purchases   
     (b) Sales returns  
     (c) Cash sales  
     (d) Cash purchases  
  16. Outline four circumstances that may make a producer to bypass the wholesaler when distributing his goods. (4 marks)
  17. Highlight four external economies of scale that a firm may get as a result of growth in the industry. (4 marks)
  18. Highlight four characteristics of oligopoly market structure. (4 marks)
  19. State the type of unemployment relating to each of the following descriptions: (4 marks)
    1. Caused by alternating trading patterns occurring at similar times ______________
    2. Arises where workers have more skills and higher qualifications than the job requirements ______________
    3. Arises out of a mismatch between the skills possessed by potential employees and the location of the jobs available ____________________
    4. Arises when people are unwilling to take up jobs due to low pay _______________________
  20. The diagram below shows a change in the supply of a product. Outline four factors which may have caused such a change. (4 marks)
    BS Joint PM PP1 Q20 2122
  21. The following information relates to Jumbo Traders on 31/12/2020
    Details                                 Shs
    Capital (31/12/2020)           940,000
    Net loss                               20,000
    Additional Investments       420,000
    Monthly drawings                  5,000
    Determine the capital as at 1/01/2021 (3 marks)
  22. Outline four roles played by the Nairobi Securities Exchange in the Kenyan economy. (4 marks)
  23. Listed below is a set of transaction. In each case state whether the transaction will increase, decrease or have no effect on capital. (4 marks)
     Transaction   Effect  
     (a) Additional cash invested by the owner   
     (b) Receiving cash from a debtor  
     (c) Losses incurred by a business  
     (d) Owner takes some stock for own use  
  24. Mention four disadvantages of an ageing population to a country. (4 marks)
  25. Given below is a cash book extract from the books of accounts of Patel Enterprises.
    Dr                                                                                                                                                                             Cr
     Date   Details   F   Discount allowed   Cash   Bank   Date   Details   F   Discount received   Cash   Bank 
     2009             2009           
     1/12  Bal b/d      1,500   90,000   14/12   Bank  C    30,000   
     2/12  Rono     2,000  36,000     20/12  Equipment         80,000 
     14/12   Cash   C      30,000  30/12  Drawings      7,000  
    In relation to the entries appearing in the cash book extract, state the transactions that took place on each of the following dates. (4 marks)
    1. 2nd December 2009
    2. 14th December 2009
    3. 20th December 2009
    4. 30th December 2009


MARKING SCHEME

  1. Outline four internal environment factors that may negatively influence the operations of a business. (4 marks)
    • A well laid out business structur
    • Adequate human resources/ skilled workers
    • Adequate finances/ proper management of finances
    • A positive business culture
    • Use of modern technology
    • Good management styles
    • Research and development
    • Clear objectives
    • Good decisions by the owners
  2. State the characteristic of human wants that match the descriptions given below: (4 marks)
     Description   Characteristics 
     a)Satisfaction of one want automatically leads to creation of another   Complementary 
     b)Some human wants are experienced by all human beings  Universal
     c) Human wants can never be fully satisfied  Insatiable
     d) After some wants are satisfied, they recur  Recurrent/repetitive 
  3. Give four reasons why direct production is undesirable in a country. (4 marks)
    • Quality and quantity of goods produced is low
    • Leads to low standards of living
    • Discourages the use of machines
    • Encourages individualism
    • Discourages invention and innovation
    • Time is wasted as one moves from one job to another
  4. Highlight four reasons why the Kenyan government encourages entrepreneurship in the country. (4 marks)
    • It helps in employment creation
    • Helps to reduce rural-urban migration/ promotes regional balance in development
    • Raises the standards of living
    • Saving on imports
    • Improving of infrastructure
    • Reducing foreign dominance
    • Making use of local resources/creates market for goods
    • Promotion of technology
    • Promotion of entrepreneurial culture
    • Improves people’s standards of living
  5. State four modern developments in office management. (4 marks)
    • Offices are moving away from enclosed office layout to open and landscape
    • Automation/use of machines for various tasks
    • Use of computers for storage of information/communication
    • Setting up of offices away from CBD to the outskirts/ suburban/ periurban areas
    • Traditional procedures and routines have become outdated due to automation
    • Use of cell phones/mobile phones in communication
    • Employee identification – by wearing shirts with logos/ badges
    • Merging of duties to reduce costs
    • Outsourcing/contracting services
  6. Give four differences between a Public Limited Company and a Public Corporation. (4 mks)
     Public Limited Company   Public Corporation 
     i)Owned by Shareholders
    ii) Formed under the Companies Act
    iii) Main source of capital is the sale of shares
    iv) Directors elected by shareholders
    v) Formed mainly to make profits
    vi) Profits shared by shareholders as dividends 
    i)Owned by the Government
    ii) Formed by an Act of Parliament
    iii) Capital comes from the government
    iv) Directors appointed by the government
    v) Formed to provide essential services
    v) Profits go to the government
  7. Highlight four advantages of mail-order business. (4 marks)
    • They save the business the cost of renting offices
    • They reach customers who far away from the shopping centres
    • Does not require the services of sales personnel/ requires few employees
    • No need for skilled labour since selling is routine
    • May not require transport facilities
    • Stocks according to requisition so no cases of overstocking
    • Customers are able to select their purchases and order from home
  8. Give four reasons for the popularity of Mpesa as a means of payment in Kenya.(4 marks)
    • Confidentiality/ safety secret PIN protects the Customer’s mpesa account
    • Ease of use – the service is easy to use
    • Speed – money transfer is instant/ fast
    • Convenient- sender and receiver just need to go to the nearest agent to transact
    • Accessible – Mpesa agents are located in most parts of the country
    • Affordability – the charges for mpesa transactions are relatively low
  9. The following balances were extracted from books Hussein trades on 30th October 2009.
    Cash 20,000
    Bank 160,000
    Premises 200,000
    Debtors 40,000
    Creditors 95,000
    2 years loan 258,000
    Stock 210,000
    Prepare a balance sheet (5 mks)
                                                        Hussein traders
                                                         Balance sheet
                                                       As at 30th oct 2009
    Fixed asset             Shs                    Shs
    Premises                                           200000
    Current assets
    Stock                   210,000
    Debtors                  40,000
    Bank                    160,000
    Cash                      20,000                430,000
                                                             630,000 
    Capital                                 277,000

    Long term liabilities

    2 year loan                          258,000
    Current liabilities
    Creditor                                 95,000

     

  10. State four reasons for government involvement in business activities. (4 marks)
    • To create employment
    • To attract foreign investment
    • To provide essential goods and services
    • To produce goods and services that require a large amount of capital
    • To produce goods and services that are too sensitive to be left in private hands
    • To prevent foreign dominance
    • To protect consumers from exploitation
  11. Outline four problems associated with boda boda (motor cycle) as a means of transport. (4 marks)
    • They have a small carrying capacity / carry a limited amount of goods
    • The riders are careless/not trained, thus they cause a lot of accidents on the roads
    • Are only suitable over short distances
    • Cause/contribute to the congestion on the roads
    • Affected by adverse weather conditions
  12. For each of the statements below, state the appropriate term as used in insurance. (4mks)
     Statement     Terms 
     a)Specified amount of money paid at regular intervals by the insured to the insurer for coverage against losses   Premiums 
     b)People employed by an insurance company to compute expected losses and value of premiums  Actuaries
     c)Amount of money refundable to the insured by the insurer in case the former terminates contract before it matures  Surrender Value
     d) Loss incurred by a business as a result of disruption of business in the event of the insured risk occurring  Consequential loss    
  13. Highlight four problems that would be experienced by consumers in the absence of warehousing. (4 markS)
    • Supply of goods would not be steady
    • Prices would be unstable
    • Goods would be of poor quality
    • Some goods would not improve in quality
    • Buyers would not be able to inspect the goods before buying
  14. State four benefits of advertising to a consumer. (4 marks)
    • Consumers are educated on how to use the goods
    • Consumers are informed about the offers in the market
    • Consumers benefit from reduced prices from competitive advertising
    • Information about price and other features of the product is availed
    • Customers enjoy wide variety of goods produced as firms strive to outdo each other
    • Consumers are made aware of goods available in the market
    • Consumers are informed on where to get the product
  15. Identify the source documents used to record the following transactions in the books of original entry. (4 marks)
     Transaction   Source Document 
     (a) Credit purchases     Incoming Invoice
     (b) Sales returns   Outgoing Credit Note 
     (c) Cash sales   Outgoing Receipt
     (d) Cash purchases   Incoming Invoice
  16. Outline four circumstances that may make a producer to bypass the wholesaler when distributing his goods. (4 marks)
    • When the goods are perishable in nature
    • If government policy requires that the product should not be sold through wholesalers
    • If the wholesaler is not playing an important role in the distribution
    • When level of competition is high/ the producer wants to compete favourably
    • When producer wants to have direct personal contact with the customers
    • When product is tailored to customer satisfaction
    • When the value of the product is high
    • If there is need to avoid increase in price of product
    • If producer is operating on a small scale/ quantity produced is low
    • If the producer is able to bear the risks/ costs in distribution
  17. Highlight four external economies of scale that a firm may enjoy as a result of growth in the industry. (4 marks)
    • Firms may get skilled labour
    • Ready market from surrounding industries
    • Firms may be able to dispose of waste products easily
    • Improved infrastructure
    • Auxiliary services eg banks, post offfices etc
    • Easy access to raw materials
    • Mutual consultation/collaboration
  18. Highlight four characteristics of oligopoly market structure. (4 marks)
    • Few large firms controlling a large share of the market
    • Products may be homogeneous or differentiated
    • Some firms get involved in collusion to maximize profits
    • Firms are interdependent
    • Faces price rigidity/ kinked demand curve
  19. State the type of unemployment relating to each of the following descriptions: (4 marks)
    1. Caused by alternating trading patterns occurring at similar times -Cyclic Unemployment
    2. Arises where workers have more skills and higher qualifications than the job requirements Disguised/ Hidden Unemployment
    3. Arises out of a mismatch between the skills possessed by potential employees and the location of the jobs available Frictional Unemployment
    4. Arises when people are unwilling to take up jobs due to low pay Real Wage / Voluntary Unemployment
  20. The diagram below shows a change in the supply of a product. Outline four factors which may have caused such a change. (4 marks)
    • Decrease in the cost of production
    • Increased availability of factors of production
    • Improvement in technology
    • Favourable government policy
    • Future expectation of decrease in price
    • Favourable natural factors
    • Entry of new firms into the industry
  21. The following information relates to Jumbo Traders on 31/12/2020
    Details                            Shs
    Capital (1/12/2020)        940,000
    Net loss                         20,000
    Additional Investments  420,000
    Monthly drawings           5,000
    Determine the capital as at 1/01/2021 (3 marks)
    CC = OC + I – L – D
    CC = 940,000 + 420,000 – 20,000 – 60,000
    = 1,360,000 – 80,000
    = Sh. 1,280,000
  22. Outline four roles played by the Nairobi Securities Exchange in the Kenyan economy. (4 marks)
    • Facilitates buying of shares
    • Facilitates selling of shares
    • Safeguards investors interests
    • Provides useful information
    • Assists companies to raise interest
    • Creation of employment
    • Raising revenue for the government
    • Availing variety of securities
    • Fixing prices of shares
    • Measure of the country’s economic progress
    • Promotes the culture of saving
  23. Listed below is a set of transaction. In each case state whether the transaction will increase, decrease or have no effect on capital. (4 marks). 
     Transaction   Effect  
     (a) Additional cash invested by the owner   Increase 
     (b) Receiving cash from a debtor  No Effect 
     (c) Losses incurred by a business  Increase
     (d) Owner takes some stock for own use  Decrease 
  24. Mention four disadvantages of an ageing population to a country. (4 marks)
    • Less mobile labour force
    • Low labour supply
    • High dependency ratio
    • Less progressive society
    • Fall in demand for goods and services used by the youth
    • Increased burden of pension/ taking care of the old
  25. Given below is a cash book extract from the books of accounts of Patel Enterprises.
    In relation to the entries appearing in the cash book extract, state the transactions that took place on each of the following dates. (4 marks)
    1. 2nd December 2009: Received cash Sh. 36,000 from Rono, having allowed him a discount of Sh. 2000
    2. 14th December 2009: Deposited Sh. 30,000 into the bank from the cash till
    3. 20th December 2009: Bought equipment worth Sh. 80,000, paying by cheque
    4. 30th December 2009: Patel/owner took Sh. 7,000 cash from business for personal use
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