Business Studies Questions and Answers - Form 3 Mid Term 2 2022

INSTRUCTIONS

• Write your name, admission and class in the spaces provided
• Answer ALL questions in the spaces provided.

Questions

1. State four reasons that would make an individual engage in business. (4mks)
2. State four reasons why a new business may fail. (4mks)
3. Outline four benefits that a saving and credit co-operative society (SACCO) provides (4mks)
4. State four principles of insurance (4mks)
5. The diagram below shows supply of a certain commodity
   
   Outline four factors that may have caused the shift in the supply curve from So SO to S1 S1. (4mks)
6. Outline four reasons why a firm may remain small. (4mks)
7. The diagram below represent the circular flow of income in a two sector closed economy.
   
   Identify four factors represented by each of the arrows labeled 1 – 4 . (4mks)
8. The following balances were extracted from the Books of Anestar traders for the year ended 30th June 2019
                          sh.
   Capital         550,000
   Debtors       120,000
   Creditors     60,000
   Machinery   450,000
   Cash at hand 70,000
   Cash at bank 180,000
   5 years loan    270,000
   Stock                60,000
   Prepare Anestar traders balance sheet as at 30th June 2019. (4mks)
9. Explain the following four types of unemployment. (8mks)
   1. Seasonal unemployment
   2. Frictional unemployment
   3. Cyclical unemployment
   4. Involuntary unemployment.
10. The following balances were extracted from the books of Mwangi traders on 1st January 2020
    Details                 sh.
    Furniture           56,000
    Capital             80,000
    Creditors         20,000
    Debtors          25,000
    Bank              11,000
    Cash              8,000
    During the month, the following transactions took place.
    Paid a creditor sh. 45,000 in cash.
    Took sh. 3,000 from the bank for family use.
    Bought stock for sh. 18,600 on creditor.
    Acquired a 10 year bank loan sh. 165,000 which was paid to the business bank account.
    Purchased land worth sh. 82,000 paying by cheque.
    Converted a family table worth sh. 5,500 to business use.
    Received sh. 7,300 in cash from a debtor.
    Prepare Mwangi traders balance sheet as at 31st January 2020. (10mks)

Marking Scheme

1. State four reasons that would make an individual engage in business. (4mks)
   • Provision of goods and services
   • Provision of employment
   • Exploitation of economic resources
   • Exploitation of individual creativity
   • To earn profit
   To be self reliant and independent.
2. State four reasons why a new business may fail. (4mks)
   

   • Inadequate / lack of capital funds
   • Poor / inappropriate marketing / poor strategies.
   • Stiff/ unfair competition.
   • Lack of inadequate / inefficient / poor management skills.
   • Lack of inadequate use of technology
   • Unfriendly / poor government policies
   • Lack of market
   • Political instability
   • Poor customer relations

3. Outline four benefits that a saving and credit co-operative society (SACCO) provides (4mks)
   

   • Encouraging members to save by making regular contributions
   • Provide loans at low interest rate to members.
   • Education to members
   • The loans are based on members' contributions
   • Some SACCO's have front office services.
   • They give dividends to members.

4. State four principles of insurance (4mks)
   

   • Utmost good faith " Uberima Fides "
   • Insurance interest
   • Contribution 
   • Subrogation
   • Indemnity
   • Proximate cause

5. The diagram below shows supply of a certain commodity
   Outline four factors that may have caused the shift in the supply curve from So SO to S1 S1. (4mks)
   

   • A fall in the cost production
   • Fall in price of competitively produced goods.
   • Technological improvement.
   • Conducive natural factors eg Good weather  season.
   • Favored Government policies e.g Tax
   • Future expectation of fall in price of the commodity.
   • Increase in factors of production 
   • Longer time.
   • Less strikes

6. Outline four reasons why a firm may remain small. (4mks)
   

   • The target market is small
   • Limited production capacity.
   • Nature of the product offered.
   • Owner’s decision to remain small.
   • inappropriate technology.
   • Small capital
   • Belief that small firms are easily manageable.

7. The diagram below represent the circular flow of income in a two sector closed economy.
   Identify four factors represented by each of the arrows labeled 1 – 4 . (4mks)
   1. Factors of production.
   2. Payment for factors of production
   3. Expenditure on goods and services
   4. Sale of goods and services
8. The following balances were extracted from the Books of Anestar traders for the year ended 30th June 2019
                          sh.
   Capital         550,000
   Debtors       120,000
   Creditors     60,000
   Machinery   450,000
   Cash at hand 70,000
   Cash at bank 180,000
   5 years loan    270,000
   Stock                60,000
   Prepare Anestar traders balance sheet as at 30th June 2019. (4mks)
   

   Anesta Traders Balance sheet As at 30th June 2019
   Assets	sh.	Capital + Liabilities	sh.
   Fixed Assets		Capital	550,000
   Machinery	450,000	Long term Liabilities
   Current Assets		5 year loan	270, 000
   Stock	60,000	Short term liabilities
   Debtors	120,000	Creditors	60,000
   Bank	180,000
   Cash	70,000
   	880,000		880,000

9. Explain the following four types of unemployment. (8mks)
   

   a. Seasonal unemployment is the type of unemployment caused by seasonal variations such that during the peak period, there is high demand for labour and during off peak the demand for labour declines.
   b. Frictional unemployment is kind of unemployment occurs when people lose jobs and go looking for new ones. People often spend time looking for new jobs.
   c. Cyclical unemployment occurs repeatedly at similar times. In this case a country goes through cycles of economic activities alternating from boom to recession.
   d. Involutary unemployment occurs when people are actively looking for jobs at the existing wage rate but cannot get them.

10. The following balances were extracted from the books of Mwangi traders on 1st January 2020
    Details                 sh.
    Furniture           56,000
    Capital             80,000
    Creditors         20,000
    Debtors          25,000
    Bank              11,000
    Cash              8,000
    During the month, the following transactions took place.
    Paid a creditor sh. 45,000 in cash.
    Took sh. 3,000 from the bank for family use.
    Bought stock for sh. 18,600 on creditor.
    Acquired a 10 year bank loan sh. 165,000 which was paid to the business bank account.
    Purchased land worth sh. 82,000 paying by cheque.
    Converted a family table worth sh. 5,500 to business use.
    Received sh. 7,300 in cash from a debtor.
    Prepare Mwangi traders balance sheet as at 31st January 2020. (10mks)
    

    Mwangi traders Balance sheet As at 31st January 2020
    Assets			Capital + Liabilities
    Fixed Assets			Capital	82,500
    Land	82,000		Long term  liabilities
    Furniture	61,500	143,500	10 years Bank loan	165,000
    Current  Assets			Short term liabilities
    Stock	18,600		Creditors	34,100
    Debtors	17,700
    Bank	91,000
    Cash	10,800	138,100
    		281,600		281,600