Business Studies Paper 1 Questions and Answers - Momaliche Pre Mock Exams 2023

INSTRUCTIONS:

• ANSWER ALL QUESTIONS.

1. Outline four benefits of entrepreneurship in a country. (4mks)
2. Name any four occupations that are found at the extractive level of production. (4mks)
3. The table below describes goods produced in a country. Name the goods described below; (4mks)
   

   Description of goods	Classification
   (i) Goods used to produce other goods
   (ii) Goods for final use by the consumers
   (iii) Goods offered freely by the state
   (iv) Goods still in the production process

4. State four benefits of SACCOs to members. (4mks)
5. Highlight four features of a parastatal. (4mks)
6. State the principle of insurance described in the statements given below. (4mks)
   1. Restoring the insured’s financial position after suffering loss from an insured risk
   2. Existence of a very close relationship between the losses suffered and insured risk.
   3. The insurer taking ownership of the remains of the remains of the destroyed property after the insured is duly compensated…………………………………………………………….
   4. Proof that the insured will suffer direct financial loss if the property is destroyed
7. Give four measures that the government may take to create employment for the youth. (4mks)
8. Outline four channels of distribution that a local farmer may use to distribute her farm produce locally. (4mks)
9. The following is a format of the credit side of a three column cash book
   

   Date	(a)	(b)	(c)	(d)

   Name the columns labeled a, b, c and d (4mks)
10. Give four assumptions associated with the circular flow of income in a two sector economy. (4mks)
11. State four challenges that a business without a plan will encounter in its operations. (4mks)
12. Outline four circumstances under which gaps in the market may be identified. (4mks)
13. Outline any four trends in product promotion. (4mks)
14. Highlight four functions of commercial attaches. (4mks)
15. State four types of internal economies of scale to a firm. (4mks)
16. Outline four reasons why an organization needs to file its documents. (4mks)
17. For each of the following source documents, name the relevant book of original entry. (4mks)
    

    Source document	Book of original entry
    (a) Invoice issued
    (b) Credit note received
    (c) Cheque received
    (d) Invoice received

18. Sherry traders had the following assets and liabilities as at 1^st January 2004
                               SHS
    Furniture             350,000
    Debtors               45,000
    Cash                     7,000
    Creditors              48,000
    During the year the following were realized
    1. Additional capital was Sh. 24,000
    2. Drawings were Sh. 20,000
    3. Net profit was Sh. 34,000
       Determine the capital as at 31st December 2004 (4mks)
19. State four characteristics of money
20. Calculate the gross profit given the margin of ¹/₆ and the cost of goods sold is Ksh.400,000 (4mks)
21. The following information was extracted from the records of Kimani Traders for the month of January 2022. Record in the relevant book of original entry. (4mrks)
    January 2^nd: Bought a motor car on credit from Onyango enterprises worth Ksh. 250,000.
22. Record the following transactions in the respective ledger accounts:
    2022
    January 1^st: Returned goods worth Ksh. 5000 to Mary Mount Wholesalers
    January 3^rd: Bought goods on credit from Kanze worth Ksh. 6000.
23. Show the effect of each of the following transactions on the capital, liabilities and assets indicating whether it is an increase, a decrease or no effect. (4mks)
    

    Transaction	Capital	Assets	Liabilities
    a) Converted private land into business land
    b) Paid creditors in cash
    c) Sold goods on credit
    d) Sold a business van valued at Shs.600,000 for Shs.400,000 on credit

24. Outline four measures that the government may take to attract firms to an area. (4mks)
25. Outline four factors that may negatively affect the demand for a product. (4mks)

MARKING SCHEME

1. Outline four benefits of entrepreneurship in a country.               (4mks)
   1. Helps in raising the standards of living of the people in the country
   2. Helps in the creation of employment in the country
   3. Helps the country to earn foreign exchange
   4. Provides the government with revenue
   5. Helps in exploitation of economic resources
   6. Helps in creation of an entrepreneurial culture
   7. Attracts infrastructural development in areas with production units
   8. Helps in stabilization of prices
2. Name any four occupations that are found at the extractive level of production.   (4mks)
   1. Fishing
   2. Mining
   3. Lumbering
   4. Farming
3. The table below describes goods produced in a country. Name the goods described below;                      (4mks)
   

   Description of goods	Classification
   (i) Goods used to produce other goods	Producer/capital goods
   (ii) Goods for final use by the consumers	Consumer goods
   (iii) Goods offered freely by the state	Public goods
   (iv) Goods still in the production process	Intermediate goods

4. State four benefits of SACCOs to members.                           (4mks) .
   1. It is easier to get a loan.
   2. Members enjoy dividends
   3. Members’ savings are secured.
   4. Members are charged low interest rates.
   5. Members are subjected to fewer formalities when applying for the loan.
   6. Upon death of a member, his or her beneficiaries receive double the savings.
   7. A loan is written off when a member dies.
5. Highlight four features of a parastatal.   
   1. They are started under an act of parliament
   2. They are fully owned by the government.
   3. They are established to provide essential goods and services.
   4. They are managed by a board of directors appointed by the government/president/minister.
   5. Initial capital is provided by the government.
   6. Profits generated go the government.
   7. They have limited liability.
   8. They maybe started as monopolies to curb wasteful competition.   
6. State the principle of insurance described in the statements given below.                  (4mks)
   1. Restoring the insured’s financial position after suffering loss from an insured risk
      • Principle of indemnity
   2. Existence of a very close relationship between the losses suffered and insured risk.
      • Principle of proximate cause
   3. The insurer taking ownership of the remains of the remains of the destroyed property after the insured is duly compensated
      • Principle of subrogation
   4. Proof that the insured will suffer direct financial loss if the property is destroyed
      • Principle of insurable interest.
7. Give four measures that the government may take to create employment for the youth. (4mks)
   1. Adopting relevant education system.
   2. Adopting relevant technology
   3. Increase government expenditure
   4. Improving infrastructure in rural areas.
   5. Greater exploitation of natural resources.
   6. Initiating government projects that benefits the youths
   7. Increasing access to credit by the youth to enable them to start a business
8. Outline four channels of distribution that a local farmer may use to distribute her farm produce locally.                  (4mks)
   1. Farmer  →  Consumer
   2. Farmer  →   Retailer    →  Consumer
   3. Farmer  →  Wholesaler  →     Retailer   →  Consumer
   4. Farmer  →  Cooperative society  →   Marketing Boards   →  Wholesaler     →   Retailer   →   Consumer
9. The following is a format of the credit side of a three column cash book. Name the columns labeled a, b, c and d                     (4mks) a) 
   1. Ledger folio colum
   2. Discount received column
   3. Cash (paid) column
   4. Bank column
10. Give four assumptions associated with the circular flow of income in a two sector economy.                                      (4mks)
    1. The economy is made up firms and households
    2. There are no savings
    3. There is no government participation
    4. There are no injections, neither do we have leakages.
    5. Households consume all goods produced by the firms
    6. Households use all their incomes to buy goods and services produced by the firms.
    7. Firms spend all their revenue in buying factors of production.
11. State four challenges that a business without a plan will encounter in its operations.             (4mks)
    1. It will not be able to raise enough capital.
    2. It will not be able to allocate resources well
    3. It will be difficult to identify the strengths and weaknesses of the business.
    4. Many mistakes may be committed.
    5. It will be difficult to determine the finances required.
    6. Lack of motivation to workers
    7. Lack a tool for control
12. Outline four circumstances under which gaps in the market may be identified.     (4mks)
    1. When goods and services are highly priced.
    2. When there is inadequate supply of goods or a service
    3. When the goods and services are of low quality
    4. When goods and services are lacking in the market.
    5. Where there are no aftersales services.
13. Outline any four trends in product promotion.       (4mks)                                                         
    1. Extensive use of billboards.
    2. Increased use of road shows.
    3. Extensive use of internet in advertising.
    4. Introduction of outdoor advertising using LCD screens,
    5. Greater use of vernacular advertising through the various vernacular radio stations.
    6. Use of social media
    7. Extensive use of branded T-shirts and shirts
14. Highlight four functions of commercial attaches.        (4mks)
    1. Looking for markets for the country’s exports abroad.
    2. Giving advice to exporters on standards required for exports.
    3. Publishing useful information that can be used by exporters.
    4. Organizing seminars and education forums for exporters.
    5. Maintaining useful statistics on the volume of exports.
    6. Organizing shows and exhibitions in foreign countries to market his or her country’s exports
15. State four types of internal economies of scale to a firm.                            (4mks)
    1. Financial economies
    2. Managerial economies.
    3. Technical economies
    4. Marketing economies
    5. Research economies.
    6. Risk bearing economies.
    7. Welfare economies.
16. Outline four reasons why an organization needs to file its documents.      (4mks)
    1. To secure the documents.
    2. To guarantee confidentiality of information.
    3. To facilitate easier and faster retrieval of documents.
    4. To enhance tidiness and orderliness in the office.
    5. For easier future reference.
    6. To promote good communication
17. For each of the following source documents, name the relevant book of original entry.    (4mks)
    

    Source document	Book of original entry
    (a) Invoice issued	Sales journal/ Returns inwards journal
    (b) Credit note received	Purchases returns journal/ Returns outwards
    (c) Cheque received	Cash receipts journal/Three column cashbook
    (d) Invoice received	Purchases journal

18. Sherry traders had the following assets and liabilities as at 1^st January 2004
                                               SHS
    Furniture                             350,000
    Debtors                               45,000
    Cash                                     7,000
    Creditors                              48,000
    During the year the following were realized
    1. Additional capital was 24000
    2. Drawings were 20,000
    3. Net profit was 34,000
       Determine the capital as at 31^st December 2004            (4mks)
       Initial Capital =  Assets – Liabities
       Total assets   = Furniture+ Debtors + Cash
                             = 350,000 + 45,000 + 7,000
                             = 402,000
       Initial capital  = 402,000 – 48,000
                             = 354,000
       Final capital   = Initial capital   + Additional investment + Net profit – Drawings
                             = 354,000 + 24,000 + 34,000 – 20,000
                             = Ksh.392,000
19. State four characteristics of money
    For anything to serve as money, it must have the following characteristics:
    1. Acceptability
    2. Durability
    3. Divisibility
    4. Cognizability
    5. Homogeneity
    6. Portability
    7. Stability in value:
    8. Liquidity
    9. Scarcity
    10. Malleability
    11. Not easy to forge
20. Calculate the gross profit given the margin of 1/6 and the cost of goods solids said to be Sh.400, 000             (4mks)
    Mark up =  1                             01   
                     6-1
                 = ¹/₅
    Mark up = Gross profit
                         Cogs
    1 =       GP                01                       
    5       400000
    5GP = 400000
    GP = 400000                             01
                   5
     GP = Ksh.80,000                       01
21. The following information was extracted from the records of Kimani Traders for the month of January 2022. Record in the relevant book of original entry.
    January 2^nd: Bought a motor car on credit from Onyango enterprises worth Ksh.250,000
                                                                 Kimani Traders                                                           
                                                                General Journal     √\✓
    

    Date	Particulars	L.f	Dr (Sh)	Cr (Sh)
    January 2nd 2022	Motor cars ✓  Onyango ✓  (being a record of purchase of motor car from Onyango on credit) ✓		250,000  ✓  250,000 ✓	250,000 ✓  250,000 ✓

22. Record the following transactions in the respective ledger accounts.
    2022
    January 1^st: Returned goods worth sh.5000 to Mary Mount Wholesalers 
            ‘’    3^rd: Bought goods on credit from Kanze worth sh.6000
    
23. Show the effect of each of the following transactions on the capital, liabilities and assets indicating whether it is an increase, a decrease or no effect.                      (4mks)
    

    Transaction	Capital	Assets	Liabilities
    a) Converted private land into business land	Increase	Increase	No effect
    b) Paid creditors in cash	No effect	Decrease	Decrease
    c) Sold goods on credit	No effect	No effect	No effect
    d) Sold a business van valued at Shs.600,000 for Shs.400,000 on credit	Decrease	Decrease	No effect

24. Outline four measures that the government may take to attract firms to an area.             
    1. Provide security in the area
    2. By giving entrepreneurs free or cheap land to construct their firms.
    3. By providing subsidies to the entrepreneurs in that area.
    4. By offering financial assistance to industries in that area.
    5. By providing appropriate infrastructure in that area
    6. By providing social amenities like schools in that area
    7. By giving out cheap loans to entrepreneurs in that area.
    8. By giving tax incentives to those who locate industries in that area.
25. Outline four factors that may negatively affect the demand for a product.                       
    1. Increase in the price of the commodity
    2. Unfavourable government policy
    3. Future expectation of reduction in prices
    4. Decrease in the size of population
    5. Unfavourable terms of sale
    6. Increase in the price of complementary goods
    7. Decrease in the price of substitute goods.
    8. Reduction in the consumers’ disposable income.
    9. Incomes that are poorly distributed