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

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BUSINESS STUDIES
PAPER 1

  1. Name the discipline of business studies described in the statements below: (4marks)
    1. The systematic way of recording business activities for easier decision making
    2. The study of how human beings strive to satisfy their unlimited wants using the available scarce resources
    3. The study of the activities involved in the process of identifying a business opportunity and acquiring the necessary resources to start and run a business
    4. The study of trade and aids to trade……………………………………………..
  2. Outline four external factors that may negatively influence the operations of a business (4marks)
  3. State four circumstances under which a trader would adopt a policy of cash with order (C.W.O). (4marks)
  4. Highlight four functions of an office in an organization. (4marks
  5. The following balances were extracted from the books of Wekesa Traders on 31st December 2009.
    Items Kshs
    Capital
    Cash in hand
    Buildings
    Furniture 
    Motor vehicle
    Creditors
    Debtors
    Bank
    Bank loan
    500,000
    20,000
    200,000
    25,000
    400,000
    18,000
    36,000
    100,000
    263,000
    Using the above information, prepare Wekesa Traders Trial Balance on 31st December 2009. (5marks)
  6. Identify four legislations used by the government to protect Kenyan consumers against unscrupulous traders (4marks)
  7. The following information relates to Kimani Traders
    Purchases
    Returns outwards
    Closing stock
    Opening stock
    Margin
    2,700,000
    600,000
    500,000
    1,200,000
    2/9 
    Calculate:
    1. Cost of sales (2marks)
    2. Gross profit (2marks)
  8. State three features of basic human wants (3marks)
  9. Outline four reasons why an increase in per capita income may not necessarily lead to rise in the standard of living of the citizens. (4marks)
  10. State the relevant books of original entry into which information extracted from the source documents given below would be recorded. (4marks)
    Source Documents Book of Original Entry
    Incoming invoice  
    Outgoing credit note  
    Outgoing cash sale slip  
    Incoming debit note  
  11. Highlight four features of co-operative societies. (4marks)
  12. Outline four measures that the Kenya government may take to curb the problem of unemployment. (4marks)
  13. State four factors that may cause the supply curve to shift to the right. (4marks)
  14. By use of the balance sheet equation, determine the missing figures in the table below. (4marks)
    Business Assets (shs) Capital (shs) Liabilities (shs)
     A 40,000     15,734
    B    158,300  61,500
    17,670 5680  
    D 67,000   24,705 
  15. List four types of small scale retail business that one can run without a shop (4marks)
  16. Highlight four measures the government of Kenya can take to decrease the amount of money in circulation. (4marks)
  17. Outline four circumstances under which a trader may use air transport. (4marks)
  18. Highlight four factors that would make two people taking the same type of life assurance policy with the same insurer to pay different amounts of premium. (4marks)
  19. State four benefits of a bonded warehouse to the government. (4marks)
  20. Outline four functions of a general journal as a book of prime entry. (4marks)
  21. Regina, a university graduate wants to start a business. State four areas she can source business ideas from. (4marks)
  22. The following balance sheet belongs to Nyakwar Atiyo during the period ended 30th June 2020.
      Nyakwar Atiyo Traders
    Balance sheet
    As at 30.06.2020  
    Assets
    Machinery
    Current assets
    Stock
    Debtors
    Bank
    .
     .
    45,000

    7,750
     1,375
    25,375
    79,500
    Capital + liabilities
    Capital 
    Bank loan
    Creditors
     



    65,000
     10,000
    45,000


    79,500

    The following transactions took place on July 1 2020.
    1. Paid creditors Sh 2000 by cheque.
    2. Nyakwar Atiyo took stock worth Shs 7500 from the business for his son‘s birthday.
    3. Motor vehicle previously owned by Nyakwar Atiyo values at sh 200,000 was converted into business vehicles.
      Required: Prepare the balance sheet of Nyakwar Atiyo traders as at 2nd July 2020. (4 Marks)
  23. Outline four factors that may be considered when measuring the size of a firm. (4marks)
  24. Highlight four challenges that a person may encounter when using a cellphone. (4marks)
  25. State four qualities of a successful salesperson. (4marks)

MARKING SCHEME

  1. Name the discipline of business studies described in the statements below: (4marks)
    1. The systematic way of recording business activities for easier decision making
      • Accounting
    2. The study of how human beings strive to satisfy their unlimited wants using the available scarce resources
      • Economics
    3. The study of the activities involved in the process of identifying a business opportunity and acquiring the necessary resources to start and run a business
      • Entrepreneurship
    4. The study of trade and aids to trade
      • Commerce

  2. Outline four external factors that may negatively influence the operations of a business (4marks)
    • Political instability
    • High taxation by the government
    • Declining population/low population
    • Poor infrastructure/unfavorable physical environment
    • Stiff competition
    • Poor technology/unavailability of modern technology

  3. State four circumstances under which a trader would adopt a policy of cash with order (C.W.O). (4marks)
    • Where the buyer’s creditworthiness is questionable.
    • Where the seller is operating a mail order business.
    • If it’s the policy/culture of the business.
    • Where the buyer is new to the seller.
    • Where the buyer is a minor.

  4. Highlight four functions of an office in an organization. (4marks)
    • Mailing
    • Safeguarding the organization property
    • Customer care services
    • Filing/management of records
    • Distribution/dissemination of information.
    • A centre for processing data
    • An administration centre for the organization.

  5. The following balances were extracted from the books of Wekesa Traders on 31st December 2009.
    Items Kshs
    Capital
    Cash in hand
    Buildings
    Furniture 
    Motor vehicle
    Creditors
    Debtors
    Bank
    Bank loan
    500,000
    20,000
    200,000
    25,000
    400,000
    18,000
    36,000
    100,000
    263,000

    • Using the above information, prepare Wekesa Traders Trial Balance on 31st December 2009. (5marks)
      Wekesa Traders
      Trial Balance
      As at 31/12/2009   
      PARTICULARS DR CR
      Capital   500 000
      Cash in hand 20 000  
      Buildings 200 000  
      Furniture  25 000  
      Motor vehicles 400 000  
      Creditors   18 000
      Debtors 36 000  
      Bank 100 000  
      Bank on loan   263 000
        781 000 781 000
  6. Identify four legislations used by the government to protect Kenyan consumers against unscrupulous traders (4 marks)
    • Weights and measures act
    • Trade description act
    • Sale of goods act
    • Rent tribunal act
    • Public health act

  7. The following information relates to Kimani Traders

    Calculate:
    1. Cost of sales (2marks)
      • C.O.S = O.S + (purchases – returns outwards) – C.S
        (1,200,000 + (2,700,000 – 600,000) – 500,000)
        = 2,800,000
    2. Gross profit (2marks)
      Mark – up = 2/9-2 = 2/7
      Mark – up = G.P/C.O.S
      2/7 = G.P/2,800,000 = Shs 800,000

  8. State three features of basic human wants (3marks)
    • They cannot be postponed
    • One cannot do without them/ They are necessary for survival
    • They are satisfied before secondary wantsThey are universal

  9. Outline four reasons why an increase in per capita income may not necessarily lead to rise in the standard of living of the citizens. (4marks)
    • Per capita figures may be high but income may be unevenly distributed
    • Inflation may affect the purchasing power of the citizens
    • Those not involved in the generation of the national income are also included in the calculation
    • Increased per capita income may be as a result of citizens working for long hours at the expense of their health and leisure time
    • High taxes may erode the real value of per capita income

  10. State the relevant books of original entry into which information extracted from the source documents given below would be recorded. (4marks)
    Source Documents Book of Original Entry
    Incoming invoice Purchases journal/ bought journal
    Outgoing credit note Returns inwards journal/
    sales returns journal
    Outgoing cash sale slip Cash book/cash receipts journal
    Incoming debit note Purchases journal/ bought journal
  11. Highlight four features of co-operative societies. (4marks)
    • Formed by a minimum of 10 membersRun by a management committee
    • Governed using by-laws
    • It has perpetual succession/Has continuity
    • It has limited liability
    • It has no maximum membership/membership is infinite
    • Its main source of capital is the shares contributed by members
    • No single member is allowed to own more than 5% of the total share capital
    • Its formed by people with common interest/problem
    • Surplus profit is distributed to members
    • Has separate legal entity from the members

  12. Outline four measures that the Kenya government may take to curb the problem of unemployment. (4marks)
    • Controlling population growth
    • Increasing government expenditure
    • Diversification of economic activities
    • Partnering with the private sector to create more employment
    • Kenya should export excess labour
    • Adoption of policies that encourage use of labour intensive methods of production
    • Adopting a relevant education system
    • Encouraging direct foreign investment
    • Development of rural areas/delocalisation of industries
    • Availing investment funds through favorable crdit like Youth Fund and Uwezo Fund
    • Encourage efficient exploitation and use of locallty available resources

  13. State four factors that may cause the supply curve to shift to the right. (4marks)
    • Favorable natural factors
    • Improvement in technology
    • Entry of new firms into the industry
    • Decrease in cost of production
    • Favorable government policies/low taxation/increased subsidies
    • Availability of factors of production
    • Future expectation of decrease in prices

  14. By use of the balance sheet equation, determine the missing figures in the table below. (4marks)
    Business Assets (shs) Capital (shs) Liabilities (shs)
     A 40,000  -24 266   15,734
    B -219 800   158,300  61,500
    17,670 5680 -11 990 
    D 67,000 -42 295  24,705 
  15. List four types of small scale retail business that one can run without a shop (4marks)
    • On-line selling
    • Road side selling
    • Hawking
    • Peddling
    • Open air market trading
    • Automatic vending by use of a machine

  16. Highlight four measures the government of Kenya can take to decrease the amount of money in circulation. (4marks)
    • Increasing bank rate
    • Selling government securities to Kenyans through OMO
    • Increasing cash/liquidity ratio requirement
    • Directive to commercial banks to increase their lending interest rates
    • Increasing the compulsory deposit amount
    • Requests by central bank to commercial banks to contract credit activities
    • Increasing the number of sectors under selective credit control measure

  17. Outline four circumstances under which a trader may use air transport. (4marks)
    • When transporting perishable goods
    • In case the goods are of high vale
    • Where distance to be covered is too large
    • In case of an emergency delivery required
    • Where security of goods is of valuable consideration
    • Where other means of transport are unaivailable
    • Where destination is remote making it inaccessible by other means
    • If it’s the policy of the business

  18. Highlight four factors that would make two people taking the same type of life assurance policy with the same insurer to pay different amounts of premium. (4marks)
    • Financial capability
    • Age difference
    • Health status
    • Occupation
    • Residence
    • Period to be covered

  19. State four benefits of a bonded warehouse to the government. (4marks)
    • Helps the government to collect revenue
    • Helps to prevent entry of illegal goods
    • Helps to prevent entry of harmful goods
    • The government is able to know the volumes of goods entering into the country
    • The government is able to control the qualities of goods entering into the country
    • The government is able to inspect type or nature of goods imported
    • The government is able to verify documents for goods in transit

  20. Outline four functions of a general journal as a book of prime entry. (4marks)
    • For recording issue of shares and debentures by companies
    • Recording purchase of a fixed asset on credit
    • Recording sale of a fixed asset on credit
    • Writing off bad debts
    • Correction of errors
    • Recording opening entries for a new business or a business that was not keeping records

  21. Regina, a university graduate wants to start a business. State four areas she can source business ideas from. (4marks)
    • Print media e.g. newspapers, journals & magazines
    • Electronic media e.g. TV, computer
    • Hobbies/talents
    • Unutilised waste materials
    • Listening to what other people say
    • Spotting a market niche/gap
    • Brainstorming
    • Shows and exhibitions
    • Observing established entrepreneurs/role models
    • Research and development
    • Experience
    • Business seminars/workshops   
  22.       
      Nyakwar Atiyo Traders
    Balance sheet
    As at 30.06.2020  
    Assets
    Machinery
    Motor vehicles
    Current assets
    Stock
    Debtors
    Bank
    .
    .
     .
    45,000
    200,000

    7,000
     1,375
    25,375
    .
    276,500
    Capital + liabilities
    .
    Capital 
    Add Additional capital
    Less drawings
    Net capital
    Bank loan
    Creditors

     

    .
    .
    65,000
    200,000
    (750)
    264,250
     10,000
    2,500
    276,750

  23. Outline four factors that may be considered when measuring the size of a firm. (4marks)
    • Production methods
    • Amount of capital invested
    • Market served
    • The number of employees
    • Volume of output
    • Floor area covered by premises
    • Sales volume

  24. Highlight four challenges that a person may encounter when using a cellphone. (4marks)
    • Its prone to damage
    • Needs constant recharging/electricity is an extra requirement
    • Possibility of loss of handset to thieves
    • Relatively expensive to maintain
    • Its use may be limited where there is lack of network
    • It can cause ear cancer
    • Calls or messages sent may be tapped
    • May not be used under certain circumstances e.g. banking halls, public service vehicles

  25. State four qualities of a successful salesperson. (4marks)
    • Well-groomed and presentable
    • Possess good communication skills
    • Be intelligent and tactful to understand the mood of customers
    • Have good knowledge of the product
    • Have prior knowledge of the customers
    • High level of commitment/hardworking
    • High sense of integrity/honesty
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