BUSINESS STUDIES PAPER 1 - FORM 4 END TERM 1 EXAMS 2020

INSTRUCTIONS TO CANDIDATES

1. Write your name, class and admission number in the spaces provided above.
2. Answer all the questions.
3. All the answers should be written in the spaces provided in this booklet.
4. All the questions should be answered in English.

QUESTIONS

1. State four characteristics of services.   (4mks)
2. Outline four disadvantages of division of labour.     (4mks)
3. Mention four advantages of using Automatic Vending Machines.   (4mks)
4. Give four benefits one gets from self-employment. (4mks)
5. Outline four factors to consider when intending to buy office furniture. (4mks)
6. Name the source document to which each of the following description relate. (4mks)
   Description                                                                            source document
   1. Issued by the seller to a buyer for cash paid                     _______________      
   2. Used for processing and authorizing payments                   _______________
   3. Sent to a credit buyer to demand payment                        _______________
   4. Used to correct undercharge                                             _______________
7. Outline four principles of co-operatives.   (4mks)
8. Highlight four measures that the government puts in place to create conditions that will be favorable for business development.   (4mks)
9. State four advantages of transporting oil by pipeline rather than by road. (4mks)
10. Outline four advantages of audio-visual communication. (4mks)
11. Highlight four ways in which the production activities of firms in your country affect the environment. (4mks)
12. Highlight four disadvantages of a private warehouse. (4mks)
13. Ragati and Nzonge operates a business with a stock valued at ksh. 350,000 and have interests of ³/₅ and ²/₅ respectively. Ragati decided to insure 2/4 of the stock against fire. Sometimes later fire occurred at their business premises and destroyed stock worth ksh. 250,000. Calculate the amount of compensation Ragati would get from the insurance company. (4mks)
14. Outline four sources of monopoly power. (4mks)
15. Name four sources of public finance. (4mks)
16. State four benefits that would accrue to a customer who borrows a loan from a non-bank financial institution. (4mks)
17. Match each of the statements given below with the relevant type of capital. (4mks)
    Statement                                                                           Type of capital
    1. Resource invested into a business by the owner             ________________                    
    2. Excess of current assets over current liabilities                ________________
    3. Amount invested into the business by outsiders               ________________
    4. Represents total finance in a firm
18. The following information was extracted from the books of farmers’ choice supermarket on 31^st Dec 2009
                                                                 shs
    Average stock                                         30,000
    Closing stock                                           40,000
    Purchases                                              336,000
    Carriage inwards                                       2,000
    Return outwards                                     18,000
    Margin                                                      1/6
    Required. Calculate sales for the year.                                       4mks
19. Outline four important characteristics of a general journal.   (4mks)
20. Apex traders provided you with the following
    Margin                                25%
    Cost of sales                    15,000
    Opening stock                 2,000
    Closing stock                   1,000
    Operating expenses 2% of capital
    Sales and capital are in the ratio of 1:4
    Calculate:
    1. Rate of stock turnover
    2. Purchases
    3. Return on capital
21. Indicate the subsidiary ledger in which each of the following should be recorded. 4mks
    Account                                                                       Subsidiary ledger
    1. Return inwards                                                    ________________
    2. Bank                                                                  ________________
    3. Drawings                                                            ________________
    4. Juma traders (a debtor)                                       ________________
    5. Discount received                                                ________________
    6. Uchumi wholesalers (a supplier)                           ________________
22. Highlight four types of advertising.                     (4mks)
23. State four natural sources of energy in Kenya. (4mks)
24. The statement below described various types of goods. Identify the type of goods best described by each statement. (4mks)
    1. Owned by the government on behalf of its citizens.
    2. Goods that are capable of directly satisfying human want.
    3. Goods that are used to make other goods.
    4. Goods that get spoilt within a very short time.
25. Identify four reasons why many youths in urban centre are starting hawking businesses. (4mks)

MARKING SCHEME

1. Characteristics of services
   -are intangible/invisible
   -are inseparable from the provider
   -highly perishable.
   -quality cannot be standardized
   -price paid is for experience nor ownership
   -cannot be stored        Any 4 x 1 = 4mks

2. Disadvantages of division of labour
   -social problems
   -creates monotony and boredom
   -create unemployment
   -difficult to know who to identify with the final product
   -convents man into a machine like creature
   -makes man dependent on only one trade      Any 4 x 1 = 4mks

3. Advantages of Automatic Vending Machines
   -give 24 hour service
   -saves on labour cost.
   -quick customer service
   -accurate service
   -save rent expenses                                         Any 4 x 1 = 4mks

4. Advantages of self-employment
   -independence
   -enjoys all the profits
   -job security
   -personal satisfaction
   -enjoys status and pride                                  Any 4 x 1 = 4mks

5. Factors to consider when intending to buy office furniture
   -compatibility with the intended use and place
   -affordability –economical to acquire and maintain
   -size of the firm
   -durability
   -adaptability to future needs
   -availability of spare parts
   -possibility of hiring rather than buying
   -effect on staff morale                                     Any 4 x 1 = 4mks

6.  
   1. cash sale receipt
   2. payment voucher
   3. invoice
   4. debit note Any 4 x 1 = 4mks
7. principles of co-operatives
   -open an voluntary membership
   -limited interest on share capital
   -democratic administration
   -dividend repayment
   -education to members
   -co-operation with other co-operatives
   -have a common bond                                    Any 4 x 1 = 4mks

8. providing an enabling environment
   -provide security
   -political stability
   -favourable legislation
   -provide basic infrastructure
   -provide credit finance
   -giving subsidies/reducing taxes                     Any 4 x 1 = 4 mks

9. pipeline transport
   -transport cost is reduced
   -reduced environmental pollution
   -loss through accidents on the road is reduced.
   -cases of theft of oil are reduced.
   -fast transportation
   -loss damage on roads
   -reduced accidents
   -regular /reliable supply                                  Any 4 x 1 = 4mks

10. advantages of Audio-visual communication
    -reach a large audience at the same time.
    -have entertainment value.
    -enhances the impact made by oral and written communication
    -draws quick attention
    -suitable for illiterate receivers
    -increases the audience’s concentration span Any 4 x 1 = 4mks

11. effects of production on the environment
    -depletion of productive resources
    -degradation of environment leading to climate change
    -pollution if air and water which is detrimental to human and animal life.
    -problem of solid and plastic waste disposal which may result in spread of diseases.
    -noise pollution which may cause hearing problems to human beings.         Any 4 x 1 = 4mks

12. disadvantages of a private warehouse
    -expensive to put up.
    -holding too much stock exposes a business to problems such as a fall in prices, expiry of goods, fire, fall in demand e.t.c
    -discourages specialization
    -poor arrangement can lead to contamination and inaccessibility of goods.
    -could be operating in excess capacity during low seasons which can lead to laying off some workers.
    -adds administrative costs.                  Any 4 x 1 = 4mks

13. Ragati interest   ³/₅ of 350,000= 210,000
    He insured           ¾ of 350,000=262,500
                                                   (over-insurance)
    Ragatis loss after fire 3/5 of 250,000 =150,000
    Compensation                                     =150,000         Any 4 x 1 = 4mks

14. Sources of monopoly power.
    -control of an important factor of production
    -legal protection through patent rights and copy rights
    -merger/amalgamation
    -govt control to eliminate wasteful competition
    -where the production requires heavy capital it’s not affordable to many firms        Any 4 x 1 = 4mks

15. Sources of public finance
    -taxes
    -licenses
    -count fines
    -fees for government services
    -rent and rates for use of government property
    -escheats
    -interest earned on loans
    -government borrowing
    -proceeds from the sale of government property
    -surplus from public corporations                   Any 4 x 1 = 4mks

16. Benefits of borrowing a loan from NBFI
    -get long-term loan
    -get finance for capital development
    -low interest rates on loans
    -management advice on the project
    -lower collateral value
    -longer grace period                            Any 4 x 1 = 4mks

17.  
    1. owner’s equity
    2. working capital
    3. borrowed capital
    4. capital employed Any 4 x 1 = 4mks
18. sales = cost of sales + gross profit
    -cost of sales = opening stock + purchases + carriage inwards – return outwards _ closing   stock
    -average stock = opening stock + closing stock
                                                   2
    Opening stock = (30,000 x 2) – 40,000 = 20,000
    Cost of sales = 20,000 + (336000 + 2000 – 18000)-40000= 300,000
    Margin = 1/6 – 1 = ¹/₅
    Gross profit = ¹/₅ x 300000= 60,000
    Sales = 300,000 + 60,000 = 360,000              Any 5 x 1 = 5mks

19. characteristics of a general journal
    -A book of original entry – initial stage of recording
    -It’s a day book – day to day records are made
    -Chronological record – record kept in order of occurrence
    -each entry is accompanied by a narration
    -amounts are recorded in debit and credit columns side by side Any 4 x 1 = 4mks

20.  
    1. ROSTO = cost of sales       =         15000        = 15000
                       Av. Stock               ^{(2000 + 1000)}/₂      1500
       = 10 times
    2. purchases= cost of sales = opening stock + purchases – closing stock
       = COS – O.P stock + CL stock
       = 15000 – 2000 + 1000 = 14000
    3. return on capital sales = GP + COS
       mark up = ¼ - 1 = 1/3 =     5000 + 15000 = 20,000
       capital = 20,000 x 4 = 80,000
       gross profit = 1/3 x 15000=5000       expenses = 2/100 x 80000=1600
       net profit = gross profit – expenses
       =5000 – 16000
       = 3400
       ROC = net profit x 100 =   3400 x 100
                         Capital             80,000           = 4.25%
        ½ x 8 = 4mks

21.  
    1. general ledger
    2. cash book
    3. general ledger
    4. sales ledger
    5. nominal ledger
    6. purchases ledger ½ x 6 = 3mks
22. Types of advertising
    -primary demand
    -institutional advertising
    -informative
    -persuasive
    -celebrity
    -corrective                                                       Any 4 x 1 = 4mks

23. Sources of energy
    -solar
    -firewood
    -geothermal
    -biogas
    -hydro-electric power                                    4 x 1 = 4mks

24. Type of goods
    1. Public goods
    2. Consumer goods
    3. Producer/ capital goods
    4. Non-durable goods Any 4 x 1 = 4mks
25. The business
    -requires low starting capital
    -low overhead costs
    -is flexible
    -easy to manage
    -few legal formalities                                      Any 4 x 1 = 4mks