Business Studies Paper 1 Questions And Answers - Form 3 Term 2 Opener Exams 2021

BUSINESS STUDIES
PAPER 1
TERM 2 OPENER EXAM

INSTRUCTIONS

• Answer all the questions.
• Candidates should answer all the questions in English.

1. Highlight any four challenges to a country that engages in direct production. (4 mks)
2. State any four circumstances under which a market gap and business opportunity can arise. (4 mks)
3. Name the office machine used for the purpose described below. (4 mks)
   

   Use	Type of machine
   Used for trimming documents into required shapes and sizes
   Used to prepare cash receipts
   Used to transmit printed/written messages eg. Letters, maps, photographs
   Used for destroying unwanted documents

4. State any four common features of small-scale retailers. (4 mks)
5. Outline any four factors that may limit the use of pipeline transport. (4 mks)
6. The following information was extracted from the books of CEKENA enterprises for the year ended 30th June, 2014
   Capital as at 30th June 2014 640,000
   Capital as at 1st July 2013 420,000
   Drawings for the year 180,000
   Net profit for the year 140,000
   Determine the additional capital for the year. (4mks)
7. Describe the procedure for making an insurance claim. (5 mks)
8. Indicate with a tick (√) whether the following factors make-up internal or external business environments. (4 mks)
   

   Factor	External	Internal
   Providing safety equipment in the places of work
   Funding of a school project by donors
   Financial management in the business
   Introduction of a new tax

9. State the level of production to which the following activities relate. (4mks)
   

   Mechanic repairing a vehicle
   A trader selling goods to customers
   A road construction company tarmacking a road
   A mining company extracting minerals

10. Outline any four advantages of face-to-face communication. (4 mks)
11. Outline any four functions of advertising agencies. (4 mks)
12. List down any four types of errors that a trial balance may not show. (4 mks)
13. Name the ledger book used for the following. (4 mks)
    1. Maintain accounts for debtors –
    2. Maintain the cash and bank accounts –
    3. Maintain a record of all the creditors –
    4. Maintain a record of all fixed assets -
14. Highlight any four challenges to a country that experiences a high population growth rate. (4 mks)
15. Give any four reasons why a high national income in a country may not necessarily mean better living standards for the citizens of a country. (4 mks)
16. Outline any four factors that a firm should consider when deciding what goods and services to produce. (4 mks)
17. Jacob insured his vehicle for shs. 900,000. Its actual value was shs. 1,200,000. The vehicle was involved in an accident and the damage was valued to be worth shs. 500,000. Calculate the amount that should be compensated for the vehicle. (5 mks)
18. Outline any four circumstances under which a manufacturer may choose to distribute products through wholesalers. (4 mks)
19. Highlight four factors that can lead to a positive shift of a demand curve. (4 mks)
20. Name the factor of production that each of the following resources relate to: (4 mks)
    1. Manager –
    2. Quarry –
    3. Vehicle –
    4. Owner –
21. Outline any four characteristics of monopolistic competition market. (4 mks)
22. Record the following transactions in the relevant ledger accounts and balance them off on Jan 3. (6 mks)
    Jan 1: Started business with cash shs. 30,000 and cash at Bank shs. 20,000.
    2: Purchased stock of goods shs. 15,000 in cash.
    3: Bought furniture shs. 5,000 by cheque
23. Give the term that best fits the following descriptions. (4 mks)
    1. Owners contribution to start or sustain a business –
    2. The resources/items/money that a business owes to others –
    3. The resources/items owned by the business –
    4. The financial position of a business as shown by assets, liabilities and capital as at particular time –
24. Highlight any four challenges that face the transport sector in the country. (4 mks)

MARKING SCHEME

1. Highlight any four challenges to a country that engages in direct production. (4 mks)
   • Production are of low quality
   • Low output
   • Does not encourage invention and innovation
   • It will encourage individualism
   • There is minimal use of modern technology
2. State any four circumstances under which a market gap and business opportunity can arise. (4 mks)
   • If some goods and services needed by customers are not available.
   • If existing businesses do not offer after sales services.
   • If existing business offer low quality goods and services.
   • If there are inadequate quantities/not enough.
   • If services are poor.
3. The following are types of office machines – cash register, guillotine, paper shredder and facsimile. Name the office machine used for the purpose describe below. (4 mks)
   

   Use	Type of machine
   Used for trimming documents into required shapes and sizes	Guillotine
   Used to prepare cash receipts	Cash register
   Used to transmit printed/written messages eg. Letters, maps, photographs	Facsimile(fax)
   Used for destroying unwanted documents	Paper shredder

4. State any four common features of small-scale retailers. (4 mks)
   • Require little capital to start a business
   • Have low sales volumes
   • Have low running costs
   • Usually flexible
   • Business is easy to start and manage
5. Outline any four factors that may limit the use of pipeline transport. (4 mks)
   • Can only transport liquids and fluids
   • Can only transport one product at a time
   • Transports products in one direction only
   • Initial construction cost is high
   • A leakage not detected in time may lead to massive losses.
   • Pipeline is not flexible.
   • It’s vulnerable to sabotage by enemies.
6. Additional capital = closing capital-opening capiatal-profit+drawings√
   = 640,000-420,000-140,000+180,000√
   = 820,000-560,000√
   = 260,000 √
7. Describe the procedure for making an insurance claim. (5 mks)
   • Notifying the insurer of the occurrence of the risk/reporting
   • Filling in a claim form
   • Investigation by the insurer
   • Calculation of compensation/assessment
   • Payment of the claim
8. Indicate with a tick (√) whether the following factors make-up internal or external business environments. (4 mks)
   

   Factor	External	Internal
   Providing safety equipment in the places of work		√
   Funding of a school project by donors	√
   Financial management in the business		√
   Introduction of a new tax	√

9. State the level of production to which the following activities relate. (4 mks)
   • Tertiary
   • Primary/ extractive
   • Secondary
   • Tertiary
10. Outline any four advantages of face-to-face communication. (4 mks)
    • Provides for immediate feedback
    • Has personal appeal
    • Body language can easily be expressed
    • One can persuade or convince another
    • It does not pass through intermediaries
    • Convenient for confidential messages
11. Outline any four functions of advertising agencies. (4 mks)
    • Help organizations in designing their trade marks, logos and advertising materials.
    • They book space and airtime for their customers in various media.
    • They offer advisory services to their clients on selling techniques
    • They advertise on behalf of their clients
    • They choose on behalf of their clients, the appropriate media to be used.
12. List down any four types of errors that a trial balance may not show. (4 mks)
    • Error of total omission
    • Error of original entry
    • Error of commission
    • Compensating errors
    • Complete reversal of entries
    • Error of principle
13. Name the ledger book used for the following. (4 mks)
    • Maintain accounts for debtors – sales ledger
    • Maintain the cash and bank accounts – cash book
    • Maintain a record of all the creditors – purchases ledger
    • Maintain a record of all fixed assets – general ledger
14. Highlight any four challenges to a country that experiences a high population growth rate. (4 mks)
    • Strain on available social amenities
    • Low standards of living
    • Rural-urban migration
    • High dependency levels
    • Food shortage
    • Increase in crime rate
    • Environmental degradation
15. Give any four reasons why a high national income in a country may not necessarily mean better living standards for the citizens of a country. (4 mks)
    • There could be unequal/uneven income distribution
    • The high national income could have been earned at the expense of leisure.
    • The high national income could have included incomes from illegal activities.
    • High national income may be raised at expense of environment.
    • High incomes could be eroded by high levels of inflation.
16. Outline any four factors that a firm should consider when deciding what goods and services to produce. (4 mks)
    • Profitability
    • Level of competition
    • Availability of resources
    • Government policy
    • Demand/market
    • Cost of production
17. Jacob insured his vehicle for shs. 900,000. Its actual value was shs. 1,200,000. The vehicle was involved in an accident and the damage was valued to be worth shs. 500,000. Calculate the amount that should be compensated for the vehicle. (5 mks)
    Compensation =          sum insured          × actual loss √
                               value of the property
    =    900,000    × 500,000 √
        1,200,000
    = shs. 375,000 √√ (5 x 1 = 5mks)
18. Outline any four circumstances under which a manufacturer may choose to distribute products through wholesalers. (4 mks)
    • Where market is wide
    • If the manufacturer wants to concentrate in production.
    • When manufacturer wishes to avoid risks of distribution
    • If it is a government policy
    • If wholesalers buy in cash
19. Highlight four factors that can lead to a positive shift of the demand curve. (4 mks)
    • Increase in level of consumers income.
    • Increase in price of a substitute good.
    • Decrease in price of a complimentary good.
    • Increase in population.
    • Favourable change in consumers tastes and preference towards a product.
    • Decrease in tax charged on the commodity.
20. Name the factor of production that each of the following resources relate to: (4 mks)
    • Manager – labour
    • Quarry – land
    • Vehicle – capital
    • Owner – entrepreneurship
21. Outline any four characteristics of monopolistic competition market. (4 mks)
    • Sellers and buyers have wide knowledge of the market.
    • There are many sellers and buyers who act independently.
    • There is freedom of entry into and exit from the market.
    • Sellers have differentiated products.
22. Record the following transactions in the relevant ledger accounts and balance them off on Jan 3. (6 mks)
    Jan 1: Started business with cash shs. 30,000 and cash at Bank shs. 20,000.
    2: Purchased stock of goods shs. 15,000 in cash.
    3: Bought furniture shs. 5,000 by cheque
    

    Capital account
    Jan 3 bal c/d 50,000	Jan 1 cash 30,000
    	1 Bank 20,000
    50,000	50,000

    
    
    

    Purchases account
    Jan 2 cash 15,000	Jan 3 bal c/d 15,000

    
    
    
    

    Furniture account
    Jan 3 bank 5,000	Jan 3 bal c/d 5,000

    
    
    
    

    Capital account
    Jan 1 capital 30,000	Jan 2 purchases 15,000
    	3 bal c/d 15,000
    30,000	30,000

    
    
    
    

    Capital account
    Jan 1 capital 20,000	Jan 3 furniture 5,000
    	3 bal c/d 15,000
    20,000	20,000

    
    
    
23. Give the term that best fits the following descriptions. (4 mks)
    • Owners contribution to start or sustain a business – Capital
    • The resources/items/money that a business owes to others – Liabilities
    • The resources/items owned by the business – Assets
    • The financial position of a business as shown by assets, liabilities and capital as at particular time – Networth
24. Highlight any five challenges that face the transport sector in the country. (4 mks)
    • Poor implementation of the road traffic rules
    • Increased road carnage/accidents
    • Poor road network
    • Cartels in the matatu industry
    • Corruption