Business Paper 1 Questions and Answers - Momaliche Joint Pre Mock Exams 2022

INSTRUCTIONS TO CANDIDATES

• Answer all questions

1. Give four features of basic human wants. (4mks)
2. Define the following terms appropriately. (4mks)
   1. Mortality rate
   2. Fertility rate
   3. Life expectancy
   4. Infant mortality rate
3. Distinguish between the following (5mks)
   

   Debentures	Preference shares

4. State the type of document described below. (4mks)
   1. Show from which country the goods are coming from.
      ..........................................................................................................................................................
   2. Written by an exporter authorizing his bank to sell goods on his behalf
      ........................................................................................................................................................
   3. Allow importer to get goods on credit and cannot be changed by the importer without exporters permission. .................................................................................................................................
   4. Help in quicker clearance and it is issued by country’s official abroad.
      .........................................................................................................................................................
5. Indicate whether the following items are falling in real, nominal or private accounts. (3mks)
   Account
   1. Sales .......................................................................................................
   2. Carriage inwards .........................................................................................................
   3. Fixture and fittings .........................................................................................................
   4. Stock .........................................................................................................
   5. Cash ..........................................................................................................
   6. Capital ..........................................................................................................
6. Outline four characteristics of multiple shops (4mks)
7. Highlight four ways in which the central bank acts as a banker to the government. (4mks)
8. State four negative effects of high taxation in Kenya. (4mks)
9. Write whether the following transactions will have an increase, decrease or no effect on the balance sheet totals. (4mks)
                  Transaction                                    Effect  
   1. Withdrew stock for personal use ......................................................................................
   2. Paid a creditor by cheque            ......................................................................................
   3. A debtor paid by cash                  ......................................................................................
   4. Received a loan by cheque         ......................................................................................
10. Give Meshack four reasons why he should not introduce division of labour in his factory.  (4mks)
11. Highlight four roles played by personal secretary (4mks)
12. In a well labelled illustration, show a shift in the supply curve. (5mks)
13. Given the following information of Elisha Traders (4mks)
    Land and Building.     490,000
    Machinery                  300,000
    5 year loan                 110,000
    2 year loan                   80,000
    Creditors                       90,000
    Debtors                        100,500
    Stock                             75,600
    Cash                              40,000
    Bank overdraft               69,900
    Calculate,
    1. Working capital (1mk)
    2. Current ratio (1mk)
    3. Capital employed  (1 mk)
    4. Capital owned (1mk)
    5. Borrowed capital (1mk)
14. Outline four trends in forms of business units. (4mks)
15. State four reasons that can lead to the termination of an insurance policy. (4mks)
16. State four essential elements in communication. (2mks)
17. Record the following transaction in the General journal.
    June 1^st bought furniture on credit from Wahu traders 25,000/=
    June 2^nd exchange a motor van book value 240,000 for a machine valued at 280,000/=
    June 3^rd sold furniture valued at 15,000 on credit to Erick for 13,400/=
    June 4^th bought a van from c.m.c worth 390,000 paing 300,000 cash the rest to be paid later.   (4mks)
18. State four disadvantages of delocalization of firms. (4mks)
19. State four assumptions of circular flow of income in a two sector economy (4mks)
20. Highlight four roles of advertising agencies in product promotion (4mks)
21. Outline four benefits of commercial production (4mks)
22. Outline four reasons for one to hire human porterage instead of a pick-up to transport goods. (4mks)
23. Highlight four features of perfect competitive market. (4mks)
24. Name four documents that originate from the seller in the home trade. (4mks)
25. State four limitations of trial balance. (4mks)

MARKING SCHEME

1. State four features of basic human wants. (4mks)
   1. Necessary for survival 
   2. They are universal
   3. They are felt needs
   4. They cannot be postponed
2. Define the following terms appropriately. (4mks)
   1. Mortality rate - Number of deaths within a given area over a period of time. Death rate per 1000 people in a population.
   2. Fertility rate - average number of children per women in child bearing age. Productivity of a country’s population
   3. Life expectancy – average age of death of people in a certain area.
   4. Infant mortality rate – number of deaths of children aged one year and below per 1000 infant per year.
3. Distinguish between the following (5mks)
   

   Debentures	Preference shares
   a. Is a loan caqpital	a. Is a share capital
   b. Held by outsiders	b. Held by quasi owners
   c. get interest before preference	c. get dividends after debentures
   d. paid first incase of winding up	d. paid after debentures in case of winding up
   e. earn interest	e. earn dividends

4. State the type of document described below. (4mks                                                                                         
   1. Show from which country the goods are coming from.   certificate of origin 
   2. Written by an exporter authorizing his bank to sell goods on his behalf   letter of hypothecation
   3. Allow importer to get goods on credit and cannot be changed by the importer without exporters permission.     letter of credit 
   4. Help in quicker clearance and it is issued consumer invoice by country’s official abroad.  consumer invoice.
5. Indicate whether the following items are falling in real, nominal or private accounts. (3mks)
                                                Account
   1. Sales                              nominal
   2. Carriage inwards            nominal
   3. Fixture and fittings              real
   4. Stock                                   real
   5. Cash                                   real
   6. Capital                              private
6. Outline four characteristics of multiple shops (4mks)
   1. Many shops in different locality - sell similar goods. 
   2. Shops have similar outward appearance.
   3. Buying is centralised.
   4. Selling is decentralised - goods not selling in one shop can be moved to another shop.
7. Highlight four ways in which the central bank acts as a banker to the government.  (4mks)
   1. Received finance on behalf of the government.
      • Undertake various government transactions for goods/ service
   2. Advance loans to the government on behalf of the government.
      • Repays foreign loans on behalf of the government
   3. Safeguard government finance.
8. State four negative effects of high taxation in Kenya. (4mks)
   1. Defer savings
      • Discourage work.
   2. Humber investment
      • May cause inflation.
   3. May not be equitable 
      • Interfere with resource allocation
   4. Can be expensive to collect. 
9. Write whether the following transactions will have an increase, decrease or no effect on the balance sheet totals. (4mks)
           Transaction                                        effect
   1. Withdrew stock for personal use          decrease
   2. Paid a creditor by cheque                    decrease
   3. A debtor paid by cash                           no effect
   4. Received a loan by cheque                  increase
10. Give Meshack four reasons why he should not introduce division of labour in his factory. (4mks)
    1. Monotony of work.
       • Work lose craftmaship
    2. Bring a lot of dependence
    3. Machines use may create unemployement.
    4. Bring people together create social problem
11. Highlight four roles played by personal secretary (4mks)
    1. Receiving information.
    2. Filing of information
    3. Take minutes for the seniors
    4. Maintain petty cash book
    5. Receive calls for the boss
    6. Make calls for the seniors.
12. In a well labelled illustration, show a shift in the supply curve. (5mks)
    
13. Given the following information of Elisha Traders
    Land and Building. 490,000
    Machinery              300,000
    5 year loan             110,000
    2 year loan               80,000
    Creditors                  90,000
    Debtors                 100,500
    Stock                       75,600
    Cash                        40,000
    Bank overdraft         69,900
    Calculate,
    1. Working capital = CA – CL
       216100 – 159900
       = 56200
    2. Current ratio (1mk)
         CA      :      CL
       216100 : 159900
       = 1.35   :  1
    3. Capital employed (1mk)
       = FA + WC or CO + BC
       = 49000+ 300000+ 56200
       = 846200
    4. Capital owned (1mk)
       =  A- L
       1011100 – 349900
       =  661200
    5. Borrowed capital (1mk)
       = 110000 + 80000
       = 190000
14. Outline four trends in forms of business units. (4mks)
    1. Globalization 
    2. Privatization
    3. Unit trusts
    4. Franchising 
    5. Cartels
    6. Holding companies.
15. State four reasons that can lead to the termination of an insurance policy. (4mks)
    1. Lapse of time
    2. Surrendering  of the policy 
    3. Insured fails to pay premiums
    4. Occurrence of a risk and compensation 
    5. Death of the insured
    6. Maturity of the policy failure to be truthful
    7. For property insurance e.g car disposal or sell of the property to another party.
16. State four essential elements in communication. (2mks)
    1. Sender
    2. Message
    3. Channel 
    4. Receiver
    5. Get back
17. Record the following transaction in the appropriate book of original entry.
    June 1st bought furniture on credit from Wahu traders 25,000/=
    June 2nd exchange a motor van book value 240,000 for a machine valued at 280,000/=
    June 3rd sold furniture valued at 15,000 on credit to Erick for 13,400/=
    June 4th bought a van from c.m.c worth 390,000 paing 300,000 cash the rest to be paid later. (4mks)
    

    DATE	DETAILS	DEBIT	CREDIT
    June 1st	furniture	25000
    	Wahu  (Purchase of furniture on credit)		25,000
    June 2nd	Machine	280,000
    	Motor Van		240,000
    	Gain on exchange  (Exchange of motor van for machine)		40,000
    June 3rd	Erick	13,400
    	Lesson on disposal	1,600
    	Furiniture  (Sale of furniture at a loss)		15,000
    June 4th	Motor van	390,000
    	Cash		300,000
    	c.m.c  (Van bought party by cash)		90,000

18. State four disadvantages of delocalization of firms. (4mks)
    1. Spread of population
    2. Depletion of resources in rural areas
    3. Use of alot of resources to develop  rural areas
    4. Such areas may lack some amenities
    5. Security in such areas may not be guaranteed
19. State four assumptions of circular flow  of income in a two sector economy (4mks)
    1. All incomes earned by firms are spent on factors services
    2. All incomes earned by household are spent on goods and services
    3. Economy is closed (no international trade)
    4. Existence of only two sectors in the economy 
    5. No government intervention 
20. Highlight four roles of advertising agencies in product promotion  (4mks) 
    1. Product promotion
    2. Advertise on behalf of their clients
    3. Design logos, trade marks etc
    4. Advise their clients on selling techniques
    5. Choose appropriate media of advertising
21. Outline four benefits of commercial production (4mks)
    1. Earns revenue to the government
    2. Earns foreign exchange
    3. High output
    4. Encourage specialization
    5. High quality products
22. Outline four reasons for one to hire human porterage instead of a pick-up to transport goods. (4mks) 
    1. Cheaper than a pick-up
    2. Carrier small language 
    3. Convenient over short distance
    4. Flexible
23. Highlight four features of perfect competitive market. (4mks)
    1. Wide knowledge of market
    2. Homogeneous goods
    3. No transport cost
    4. No government intervention/interference
24. Name four documents that originate from the seller in the home trade. (4mks) 
    1. Catalogue
    2. Qutation
    3. Acknowledgement note
    4. Invoice
    5. Credit note 
    6. Debit note
25. State four limitations of trial balance. (4mks) 
    1. Error of commission
    2. Compensating errors
    3. Complete reversal of entries
    4. Error of principle