Business Studies Paper 1 Questions and Answers - Lainaku 1 Joint PreMock Exams 2023

Instructions to candidates

• This paper consists of 25 questions.
• Answer all the questions in this paper.
• Non –programmable silent electronic calculator may be used.
• Candidates should check the question paper to ascertain that all pages are printed as indicated and that no questions are missing.
• Candidates must answer the questions in English.

1. Identify the type of production activity associated with each of the following utilities. (4 marks)
   

   UTILITY	PRODUCTION ACTIVITY
   (a) Time
   (b) Place
   (c) Form
   (c) Possession

2. Highlight four circumstances under which a firm would prefer open office layout. (4 marks)
3. Outline four limitations of Barter trade. (4 marks)
4. State four negative effects of over population in a nation. (4 marks)
5. State four factors that influence entrepreneurial practices in Kenya. (4 marks)
6. Highlight four factors which may render face to face communication ineffective. (4 marks)
7. State four features of a supermarket. (4 marks)
8. Outline four features of private limited company. (4 marks)
9. State four factors that insurance companies consider before determining premiums to be paid. (4 marks)
10. Indicate the effect of the following transactions on the capital of a business. Use increase, decrease or no effect. (4 marks)
    

    Transactions	Effects
    (a) Owner took cash from the business for personal use.
    (b) Payment of business expenses in cash.
    (c) Owner deposited additional cash from personal saving.
    (d) The business made loss from trading.

11. Omamo a trader had the following assets and liabilities on 1st February 2020.
                  Capital 120,000
                  Machinery 80,000
                  Trade creditors 10,000
                  Trade debtors 20,000
                  Stock of goods 25,000
                  Cash at hand 5,000
    On 2nd February, the following transactions took place:
                  Purchased goods on credit for Sh. 15,000
                  Received a cheque Sh. 10,000 from a debtor
                  Sold the machinery for Sh. 90,000 in cash
    Required: Prepare Omamo’s balance sheet as at 2nd February 2020. (4 marks)
12. State four uses of a cashbook. (4 marks)
13. Highlight four roles played by intermediaries to a producer in the chain of distribution. (4 marks)
14. Name four means of land transport. (4 marks)
15. Highlight four circumstances under which the government may issue licenses to Businesses.  (4 marks)
16. Study the diagram below and answer the questions that follows:
                                         
    State four effects of fixing the price at P₁ (4 marks)
17. Highlight four consequences of poor arrangement of goods in warehouses. (4 marks)
18. Highlight four features of a perfect competition market. (4 marks)
19. Identify the book of original entry in which the following transactions can be recorded. (4 marks)
    

    Transaction	Book of original entry
    (a) Paid salaries by cheque
    (b) Returned goods to a supplier
    (c) Sold goods on credit
    (d) Bought delivery van on credit

20. State four uses of national income statistics. (4 marks)
21. Open the relevant ledger accounts using the following information: (4 marks)
    2011 Feb 1: Started business with Sh. 10,000 in cash and 50,000 at bank.
          ”  Feb 2: Withdrew sh. 2,000 from bank for office use.
    

    Date	Details	Folio	Amount	Date	Details	Folio	Amount

    
    

    Date	Details	Folio	Amount	Date	Details	Folio	Amount

    
    

    Date	Details	Folio	Amount	Date	Details	Folio	Amount

22. State four factors that influence what goods and services a firm should produce. (4 marks)
23. The following information relates to Kasuku traders for the year 2022.
                       Turnover                          270,000
                       Margin                                40%
                       Rate of stock turnover        6 times
                       Expenses                        40,000
    From the information above, calculate:
    1. Gross profit. (1 mark)
    2. Cost of goods sold. (1 mark)
    3. Net profit. (1 mark)
    4. Average stock. (1 mark)
24. Outline four reasons why people start businesses. (4 marks)
25. State the type of human want one would satisfy in each of the following: (4 marks)
    1. A tourist going to Maasai Mara National park …………
    2. Cooking food for school children …………
    3. Playing football. ………
    4. Weaving clothes. …………

                                                                             MARKING SCHEME

1.  
   1. Warehousing/storage
   2. Transport/Distribution
   3. Manufacturing/processing/Construction
   4. Trade/wholesaling/retailing                                 (4 x 1= 4marks)
2. Circumstances under which a firm would prefer open office.
   1. Where there is need to promote teamwork.
   2. Where there is need to reduce maintenance costs.
   3. Where there is need to reduce cost of construction.
   4. Where there is need to save cost of decoration.
   5. Where there is need to discourage absenteeism.
   6. Where there is need to save cost of buying office equipment.             (4 x 1= 4marks)
3. Limitations of Barter trade.
   1. Indivisibility of some commodities.
   2. Lack of standard of measure of value.
   3. Lack of accounts.
   4. Perishability of commodities.
   5. Lack of double coincidence of wants.
   6. Lack of standard measure of deferred payments.    (4 x 1= 4marks)
4. Four negative effects of over population in a nation.
   1. Strain on available social amenities.
   2. High dependency ratio.
   3. Increase in crime rate.
   4. Food shortage
   5. Imbalance in demand and supply.
   6. Encourage rural-urban migration.
   7. Environmental degradation.                  (4 x 1= 4marks)
5. Factors that influence entrepreneurial practices in Kenya.
   1. Government policy.
   2. Infrastructure.
   3. Availability of markets.
   4. Political stability.
   5. Competition.
   6. Culture of the people.
   7. Natural factors.
   8. Availability of resources/land/capital/labour            (4 x 1= 4marks)
6. Factors that may render face to face communication ineffective.
   1. Use of unfamiliar language.
   2. Use of unfamiliar non-verbal signs.
   3. Wrong timing.
   4. Prejudice.
   5. Poor listening skills.
   6. Noise
   7. Emotional responses.         (4 x 1= 4marks)
7. Features of a supermarket.
   1. Requires large capital to start.
   2. Stocks variety of goods.
   3. Offer self-service facilities.
   4. Goods have price tags
   5. Prices of goods are fixed.
   6. No credit facilities are offered.
   7. Sells at relatively low prices.          (4 x 1= 4marks)
8. Features of a private limited company.
   1. Managed by one or two directors.
   2. Shares are not freely transferable.
   3. Shares are not advertised publicly.
   4. Have a minimum of two and a maximum of 50 shareholders.
   5. Can start trading on receipt of certificate of incorporation.
   6. No authorized minimum share capital.                   (4 x 1= 4marks)
9. Factors that insurance companies consider before determining premium to be paid.
   1. Value of the property
   2. Occupation of the insured.
   3. Time the policy covers.
   4. Age of the assured person/property.
   5. Health of the assured.
   6. Sum assured.
   7. Residence of the assured.         (4 x 1= 4marks)
10.  
    1. Decrease✔
    2. No effects✔
    3. Increase✔
    4. Decrease✔
11. 
                                                                    Omamo traders
                                                                    Balance sheet
                                                            As at 2nd February 2020✔
    

    Assets   Stock of goods            40,000✔   Trade debtors              10,000✔   Bank                            10,000✔   Cash                             95,000✔                                       155,000✔

    Capital + liabilities   Capital             130,000✔   Creditors          25,000✔                            155,000

                                                                                                                                                   (8 x 12 = 4 marks)
12. Uses of a cashbook
    1. It is where receipt of money in cash or by cheque is kept.
    2. It is where payments of money in cash or by cheque is kept.
    3. Shows discount allowed or discount received during a given period.
    4. Serves as a ledger for cash or bank accounts.
    5. Relieves the main ledger of many transactions involving cash and bank.
    6. Help to ascertain the cash in hand and at bank at any given period.           (4 x 1= 4marks)
13. Role played by intermediaries to a producer in the chain of distribution.
    1. Reduces transaction between producers and consumers.
    2. Breaking bulk.
    3. Accumulating bulk.
    4. Providing finances.
    5. Passing relevant information.
    6. Transportation services.
    7. Product promotion.
    8. Warehousing/storage services.                (4 x 1= 4marks)
14. Means of land transport.
    1. Human Porterage
    2. Carts
    3. Vehicles/Motorcars
    4. Trains
    5. pipelines               (4 x 1= 4marks)
15. Circumstances under which Government Issue licenses to Business.
    1. When there is need to regulate the number of business to avoid unhealthy competition
    2. When the government want to control the type of goods entering and leaving the country
    3. When the government want to ensure there are no illegal business.
    4. If government want to ensure traders engage in business they have been licensed to operate.
    5. When the government want to ensure that those who engage in professional activities meet the required standards for the profession.
    6. If government want to raise revenue                (4 x 1= 4marks)
16. Effects of fixing price at P₁
    1. Excess supply/surplus.
    2. Demand increases in the long run
    3. Shift of supply curve to the right
    4. Increase in equilibrium quantity from Q_O to Q₁.   (4 x 1= 4marks)
17. Consequences of poor arrangements of goods in a warehouse.
    1. Loss of goods/theft.
    2. Damage of goods.
    3. Expiry of goods.
    4. Time wastage in trying to access the goods.
    5. Contamination of goods.
    6. Wastage of space.                 (4 x 1= 4marks)
18. Features of a perfect competition market.
    1. Large number of buyers/sellers
    2. No government interference.
    3. Free mobility of factors of production.
    4. There is wide knowledge of market.
    5. No transport costs.
    6. Uniformity of buyer/seller.             (4 x 1= 4marks)
19.  
    1. Cash payment journal✔
    2. Purchases return journal✔
    3. Sales journal✔
    4. General journal✔
20. Four uses of national income statistics.
    1. Indicators of standards of living.
    2. Comparison of standards of living between different countries.
    3. Assessing performance of an economy overtime.
    4. Government uses it in planning.
    5. Helps investors to make investment decision.
    6. Compare economic performance over different period of time.            (4 x 1= 4marks)
21.  
      DR                                                                                                            CR
    

    Date	Details	Folio	Amount	Date	Details	Folio	Amount
    01/02/11  04/02/11	Capital✔  Bank✔		10,000✔  2,000✔

    
      DR                                                                                                            CR
    

    Date	Details	Folio	Amount	Date	Details	Folio	Amount
    01/02/11	Capital✔		50,000✔	04/02/11	Cash✔		2,000✔

    
      DR                                                                                                            CR
    

    Date	Details	Folio	Amount	Date	Details	Folio	Amount
    				01/02/11  01/02/11	Cash✔  Bank✔		10,000✔  50,000✔

                                                                                                                                                     (8 x 12 = 4 marks)
22. Factors that influence what a firm should produce.
    1. Level of competition.
    2. Profitability.
    3. Availability of factors of production.
    4. Cost of production.
    5. Government policy.
    6. Market demand.
    7. Consumers taste and preference
    8. Availability of technology.                      (4 x 1= 4marks)
23.  
    1. Gross profit = 40 ×270,000✔
                             100
                          = 108,000✔                         (1x 1 = 1 mark)
    2. Cost of goods sold = 270,000 – 108,000✔
                                      = 162,000✔                     (1x 1 = 1 mark)
    3. Net profit = 108,000 – 40,000✔
                      = 68,000✔                                (1 x 1 = 1 mark)
    4.  Average stock = 162,000✔
                                        6
                                = 27,000✔         (1 x 1 = 1 mark)
24. Reasons why people start Businesses.
    1. To make profit.
    2. To create employment to themselves and others.
    3. To produce goods and provide services to others.
    4. To be their own bosses.
    5. To make use of free time well.
    6. To make use of available local resources.
    7. As an outlet for new innovations.             (4 x 1= 4marks)
25.  
    1. Secondary want✔
    2. Basic want✔
    3. Secondary want✔
    4. Basic want✔