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

Instructions to Candidates

1. Write your name in the spaces provided above.
2.  Sign and write the date of the examination in the spaces provided above
3.  Answer all the questions
4.  All answers must be written in the spaces provided in this booklet
5.  Candidates should check the question paper to ascertain that all pages are printed as indicated and no questions are missing.

QUESTIONS

1. Outline 4 skills that an individual would develop when learning business studies.(4mks)
2. Kenya usually hosts international sporting events such as world cross country championship. Highlight 4 business opportunities that arise out of such events. (4mks)
3. Outline 4 characteristics of public goods.(4mks)
4. Highlight 4 reasons why businesses should observe ethical practices. (4mks)
5. Outline 4 circumstances that would make an office manager to replace an existing machine with modern one.(4mks)
6. Outline 4 measures that may be taken to conserve forests in Kenya.(4mks)
7. State 4 similarities between a bill of exchange and a promissory note.(4mks)
8. John and Peter bought a Nissan matatu worth sh. 3,000,000. John paid sh. 2,000,000 and Peter sh. 1,000,000. They insured the matatu for a comprehensive cover for shs 2,500,000. Later the matatu was involved in an accident to a loss of sh 1,500,000. How much were they compensated and give a reason in support of your answer? (4 marks)
9. Outline 4 benefits that accrue to the government as a result of privatization of public enterprises.(4mks)
10. State 4 types of complaints that a consumer organization may receive from consumers.(4mks)
11. On 1st October 2021, Sambu bought goods on credit quoted at sh 240,000. Terms of sale were: 20% trade discount, and 10% cash discount if payment was made on 29th October 2021. Calculate the amount paid if payment was made on 26th October 2021. (4mks)
12. Give 4 reasons why countries are opting for electric trains instead of diesel engine trains.(4mks)
13. Outline 4 benefits of using the internet for office communication.(4mks)
14. State 4 characteristics of assets. (4mks)
15. Outline 4 circumstances under which a firm would be located near the market.(4mks)
16. State 4 causes of negative shift in demand curve.(4mks)
17. Mention 4 features of a market.(4mks)
18. Using a (+) for increase, (-) for decrease and (0) for no effect, indicate the effects of the following transactions on Assets, Liabilities, Capital and the balance sheet totals. (4 marks)

    Description	Assets	Liabilities	Capital	Balance sheet totals
    a)      Bought goods worth shs 5000 on credit
    b)      Sold goods worth shs7000 for shs 8000 Cash
    c)      The Proprietor took goods worth shs 2000 for personal use
    d)     The Proprietor donated personal motor vehicle worth shs 500,000 to the business

19. State 4 reasons why most companies have adopted the use of roadshows to promote their products.(4mks)
20. Give 4 reasons for the increased use of mobile phones in banking. (4mks)
21. State 4 negative effects of long chain of distribution to the buyer. (4mks)
22. Given the statements in the table below, indicate the type of entry to be made in the relevant ledger accounts. (4mks)
    

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

23. State 4 activities that take place in a warehouse.(4mks)
24. Highlight 4 challenges that cooperative societies in Kenya face.(4mks)
25. The following information relates to Nyeri Enterprise for the period ended 31st December 2020
    Sales sh 1,000,000
    Opening stock sh 100,000
    Closing stock 25% of cost of sales
    Gross profit margin 20%  (4mks)
    Calculate:
    
    1. Gross profit
    2. Cost of sales
    3. Purchases
    4. Rate of stock turnover 

MARKING SCHEME

1. Outline 4 skills that an individual would develop when learning business studies.(4mks)
   • Skills to use in starting and running a business
   • Skills in training in business retaed courses
   • Skills in understanding subjects that are relater to business studies
   • Skills in hard work
   • Skills in interacting with othr members of the society
   • Skills necessary for rational buying and selling
   • Skills on critical thinking and rational judgement
2. Kenya usually hosts international sporting events such as world cross country championship. Highlight 4 business opportunities that arise out of such events. (4mks)
   • showcasing Kenya as a tourist destination
   • Accommodation in hotels
   • Tour guiding
   • Transport faiclities for the guests
   • Sale of sports equipment
   • Sale of curios, drinks
3. Outline 4 characteristics of public goods.(4mks)
   • They are provided by the government
   • They are inclusive ,that is, anyone can use them
   • They tend to be provided at no cost (for free ) or at a lower price to benefit as many people as possible
   • Their production is financed by taxation or other government resources
   • Their consumtion may not reduce the amount available for others e.g government security
4. Highlight 4 reasons why businesses should observe ethical practices. (4mks)
   • To ensure fair competition
   • To protect consumers/customers
   • To avoid discrimation in business
   • To protect the rights of employees to promote social responsibility
   • To maintain a positive image
   • To abide by the countrys laws
   • To maintain suppliers
   • To promote positive cultural practises
5. Outline 4 circumstances that would make an office manager to replace an existing machine with modern one.(4mks)
   • When it has outlived its usefulness(obsolescence)
   • Where a fatser machine is required
   • Where maintenance costs are higher than the cost of acquiring modern machine
   • Where there is need for increased production
   • Where train ing skills have changed
   • Where high quality work is required/ accuracy
   • Where he wants to save on labour
   • Where there is need to improve image of company/prestige
   • If the new one is capable of multiple uses
   • If the machine is capable of reducing fraud
6. Outline 4 measures that may be taken to conserve forests in Kenya.(4mks)
   • Prosecuting those who cut trees
   • Practicing reforestation
   • Practicing afforestation
   • Banning charcoal burning
   • Using alternative sources of energy e.g biogas, solar energy
   • Practising agroforestry
   • Conducting tree planting campaigns e.g cut one tree , plant two
7. State 4 similarities between a bill of exchange and a promissory note.(4mks)
   • Both are negotiable
   • Both are evidence of a debt
   • Both may be discounted or endorsed before maturity
   • Both allo adequate time within which to organize for the payment of the value of the bill or note
8. John and Peter bought a Nissan matatu worth sh. 3,000,000. John paid sh. 2,000,000 and Peter sh. 1,000,000. They insured the matatu for a comprehensive cover for shs 2,500,000. Later the matatu was involved in an accident to a loss of sh 1,500,000. How much were they compensated and give a reason in support of your answer? (4 marks)
   • Compensation = Sum insured x loss sustained
                                 Actual value of the property
     2,500,000 x 1,500,000        = shs1, 250,000√ 
               3,000,000
     John - 2/3 x 1,250,000 = shs 833, 333√
     Peter - 1/3 x 1,250,000 =shs 416,667√
     Reason: They had under insured the Matatu√
9. Outline 4 benefits that accrue to the government as a result of privatization of public enterprises.(4mks)
   • Government obtains revenue from the proceeds/sale of shares
   • Government can concentrate on other state responsibilities
   • Offers opportunities for private citizens to participate in business
   • To enhance efficiency in the management
   • Reduce government expenditures
   • Obtain revenue from taxes
   • Attract foreign aid
   • Attract foreign investments
10. State 4 types of complaints that a consumer organization may receive from consumers.(4mks)
    • Poor quality goods and serices
    • /damaged goods
    • Incorrect weight and measures
    • unfair pricing
    • Poor hygienic conditions
    • Expired goods
    • Non-compliance to building regulations
    • Contra-band items/ prohibited goods
    • Harmful goods
    • Hoarding
    • Misleading advertisements
11. On 1st October 2021, Sambu bought goods on credit quoted at sh 240,000. Terms of sale were: 20% trade discount, and 10% cash discount if payment was made on 29th October 2021. Calculate the amount paid if payment was made on 26th October 2021. (4mks)
    • 20% X 240,000 = 48,000√
      Price to be paid 240,000 – 48,000 = 192,000√
      Cash discount 10% X 192,000 = 19, 200√
      Amount paid 192,000 – 19,200 = 172,800√
      Alternative
      80% X 240,000√ = 192,000√
      90% X 192,000√ = 172,800√
      4 X1 =4mks
12. Give 4 reasons why countries are opting for electric trains instead of diesel engine trains.(4mks)
    • Electric trains are fasters than diesel trains
    • Electric trains are more economical than diesel trains
    • Electric trains are eco friendly
    • Electric trains require less manpower than diesel trains
    • Electric trains are safer that diesel trains
    • Electric trains have lower costs of maintenance as compared to diesel trains
13. Outline 4 benefits of using the internet for office communication.(4mks)
    • Reduced cost of communication
    • Provides unlimited space for filing
    • A fast means of communication
    • Provides a source of information for research
    • Facilitates quick decision making reduce paper work and the need for files
    • Convenient while communicating
    • Communication can take place at all times
    • Information can be passed to many people at different places at the same time
14. State 4 characteristics of assets. (4mks)
    • A resource owned and controlled by the business
    • Must have been acquired in the past
    • An item of value that can be measured reliably in monetary terms
    • They can fixed or current
    • Future economic benefit associated with the net expected to be received by business entity
15. Outline 4 circumstances under which a firm would be located near the market.(4mks)
    • Where the final product is bulky
    • Where the market is localized
    • Where products are highly perishable
    • Where products are fragile/delicate/breaking
    • Where the firm aims at reducing transportation/ distribution costs
    • Where the firm is very small in size
    • Incase it is government policy
    • Where the value of final product is low
16. State 4 causes of negative shift in demand curve.(4mks)
    • Negative taste towards the product
    • Decrease in price of substitutes
    • Increase in the price of complementary goods
    • Decrease in population
    • Fall in consumers incomes
    • Unfavourable seasonal changes
    • Future expectations of price reductions
17.  Mention 4 features of a market.(4mks)
    • Availability of buyers / consumers
    • Availability of goods / services ( products)
    • A platform for conducting transactions(area/situation/ interaction)
    • Availability of sellers/ producers
    • Availability of medium of exchange
18.  Using a (+) for increase, (-) for decrease and (0) for no effect, indicate the effects of the following transactions on Assets, Liabilities, Capital and the balance sheet total. (4 marks)
    

    Description	Assets	Liabilities	Capital	Balance sheet totals
    a)Bought goods worth sh 5000 on credit	+	+	0	+
    b)Sold goods worth sh 7000 for sh 8000/= Cash	+	0	+	+
    c)The Proprietor took goods worth sh 2000 for personal use	-	0	-	-
    d)The Proprietor donated personal motor vehicle to the business	+	0	+	+

    16×1/4=4 marks
19. State 4 reasons why most companies have adopted the use of roadshows to promote their products.(4mks)
    • The interaction between the sales people and consumers enable them to get immediate feedback
    • It covers a wide geographical area
    • It has a personal appeal accompanied by entertainment
    • It is convenient because goods come to the consumer’s doorstep
    • Consumers can clarify issues about the product and company
    • Demonstration is possible to explain various features of their products
20. Give 4 reasons for the increased use of mobile phones in banking. (4mks)
    • They are safe than carrying cash
    • Easy to transact (easy operation)
    • Its convenient because transactions can be conducted anywhere/portability
    • It saves on time since there is no travelling/queuing for the service
    • The speed of transaction is fast/quick speed
    • It reduces paperwork by eliminating the need for physical files and oher documentation
    • The use of pin enhances security
    • Reduced transaction costst ( travel and bank charges)
    • Easy access to transaction records e.g mini statements, salaries in accounts
    • Easy access to credit facilities e.g M-shwari
    • It is a requirement by service providers e.g utility bills
21.  State 4 negative effects of long chain of distribution to the buyer. (4mks)
    • Results in increased commodity prices
    • Delay in delivery of goods
    • High risks of damage of goods during handling
    • Perishable goods may be damaged
    • Tampering with the quality of goods
22. Given the statements in the table below, indicate the type of entry to be made in the relevant ledger accounts. (4mks)
    

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

23. State 4 activities that take place in a warehouse.(4mks)
    • Receiving goods into the warehouse
    • Storing the goods
    • Protection of the goods from all types of risks e.g theft, breakage and deterioration from adverse weather condition
    • Releasing of goods from the warehouse
24. Highlight 4 challenges that cooperative societies in Kenya face.(4mks)
    • Interference from the government and politicians
    • Inadequate resources whoich incldes capital to fund their operations
    • Poor management
    • Corruption and misuse of funds by the members
    • Withdrawal of members leading to cash flow problems
    • There is lack of commitment to the cooperative by the members
    • Most cooperatives fail to maintain their secrets
25. The following information relates to Nyeri Enterprise for the period ended 31st December 2020
    Sales sh 1,000,000
    Opening stock sh 100,000
    Closing stock 25% of cost of sales
    Gross profit margin 20%                    (4mks)
    Calculate:
    
    1. Gross profit
       • Margin = GP/ Net Sales X 100
         20% = GP/1,000,000 √
         GP = 200,000√
    2. Cost of sales
       • = Sales - GP
         =1,000,000 - 200,000√
         = 800,000√
    3. Purchases
       • Cost of sales = opening stock + purchases closing stock
         Purchases = Cost of sales + closing stock opening stock
         = 800,000 + 200,000 – 100,000√
         = 900,000√
    4. Rate of stock turnover
       • = Cost of sales / average stock
         Average stock = opening stock + closing stock / 2
         100,000 + 200,000/ 2 = 150,000
         ROSTO = 800,000 / 150,000√
         = 5.33 times√