Business Studies Paper 1 Questions and Answers - Form 4 Term 1 Opener Exams 2021

BUSINESS
PAPER 1
FORM 4 TERM 1 OPENER EXAMS
TIME: 2 HOURS

INSTRUCTIONS TO CANDIDATES

• Answer all questions
• Avoid one word answers unless necessary

1. State four external factors that may adversely affect the efficient operations of a business enterprise.(4 mks)
2. Likoni traders a newly established firm has constructed an office block. Outline four factors that will be considered when deciding on the type of office layout.(4mks)
3. State the document used for the following function.4mks
   1. To inform a buyer that his or her account has reduced by a certain amount
   2. To request a supplier to provide a particular service to a customer
   3. To determine the credit worthiness of a customer
   4. To show that transport has been hired to deliver specified goods to a particular buyer
4. Classify each of the following accounts in the table below as either real, nominal, or personal (4mks)
   

   Account	classification
   Premises
   Rental income
   Debtor otieno
   Discount allowed

   
   
   
5. The demand for oranges doubled even if the price of the oranges remained the same over the same period. State four factors that may account for this.(4mks)
6. Joshua insured his vehicle against theft, later the vehicle was stolen in a packing bay. Outline the procedure he would follow when making insurance claim for his vehicle.(5mks)
7. Highlight four benefits of transporting oil from Turkana to Mombasa by pipeline.(4mks)
8. List four drawbacks of verbal communication in an organization.(4mks)
9. Identify four ways through which the government encourages establishment of industries throughout the country.(4mks)
10. List four factors that adversely affect the functioning of a warehouse.(4mks)
11. Use the diagram below to answer the questions that follow.(3mks)
    
    Quantity
    1. Identify the market structure to which the diagram above belongs…………………………………
    2. Curve labeled a-a……………………………………………..…. …………………………………
    3. Name the part labeled b………………….………………………………………………………………
12. Outline four factors that hinder entrepreneurship in Kenya.(4mks)
13. Outline four benefits that Kamau would get for being a member of  SACCO.(4mks)
14. Kenya is one of the countries experiencing unemployment problems. Identify four causes of the problem.(4mks)
15. Outline four characteristics of direct production(4mks)
16. Highlight four reasons why a firm may choose to remain small.(4mks)
17. Outline four reasons why ethical practices are necessary in product promotion.(4mks)
18. Highlight four factors that may lead to low level of national income.(4mks)
19. Outline four reasons that make it difficult to satisfy all our wants.(4mks)
20. The following information has been extracted from the books of Akili as at 30th june 2001
    

    Land and building	235,000
    Machinery	142,000
    Motor vehicle	198,000
    Debtors	25,000
    Capital	330,000
    Creditors	50,000
    Bank overdraft	200,000
    Net profit for the year	62,000

    From the information above, calculate Akili’s drawings for the year.(4mks)
21. Nyundo had the following assets and liabilities on 1st march 2006.
    

    Capital	120,000
    Machinery	80,000
    Creditors	10,000
    Debtors	20,000
    Stock in trade	25,000
    Cash at bank	5,000

    On 2nd march he had the following transactions;
    Purchased goods for 15,000 on credit.
    Received a cheque of 10,000 from a debtor.
    Sold machinery for 90,000 in cash.
    Prepare his balance sheet on 2nd march, 2006.(4mks)
22. Mention four purposes of preparing a trial balance.(4mks)
23. Outline four factors that may cause the capital of an ongoing business to change.(4mks)
24. Yogen had the following transactions with a creditor, Sulem, 2017
    June 1 Balance from May 14,000
    2 Bought stock from Sulem on credit Kshs. 80,000
    4 Returned faulty goods to Sulem Kshs. 2,000
    7 Paid Sulem the debt by cash less 2% discount.
    Prepare Sulem’s account as it would appear in the books of Yogen.(4mks)
25. In the two column cash book given below, enter the missing figures.4mks

Waria Traders

Two Column Cash Book

For The Month ofJuly, 2008

MARKING SCHEME

1. State four external factors that may adversely affect the efficient operations of a business enterprise.(4 mks)
   • Political instability
   • Corruption in the country
   • Lengthy licensing procedures
   • Insecurity in the country
   • High cost of finance
   • High taxation rates
   • Inadequate factor inputs
   • Poor weather conditions/climate
   • Unstable exchange rates
   • Poor technology.
   • Poor infrastructure
   • Low population
   • Unfavourable lawa/government policy
   • Stiff/unhealthy competition
     
     
2. Likoni traders a newly established firm has constructed an office block. Outline four factors that will be considered when deciding on the type of office layout.(4mks)
   • The number of office staff to be accommodated
   • Staff movement within the office
   • Cost of setting up
   • Physical appearance / prestige
   • Ability to co-ordinate / supervise
   • Maintenance cost.
   • Type of equipment used
   • Nature of work done in the office
     
     
3. State the document used for the following function.4mks
   1. To inform a buyer that his or her account has reduced by a certain amount
      Credit note
      
      
   2. To request a supplier to provide a particular service to a customer
      Local service order
      
      
   3. To determine the credit worthiness of a customer
      Credit status inquiry
      
      
   4. To show that transport has been hired to deliver specified goods to a particular buyer
      consignment note
      
      
4. Classify each of the following accounts in the table below as either real, nominal, or personal (4mks)
   

   Account	classification
   Premises	Real
   Rental income	Nominal
   Debtor otieno	Personal
   Discount allowed	Nominal

5. The demand for oranges doubled even if the price of the oranges remained the same over the same period. State four factors that may account for this.(4mks)
   • Increase in consumer income
   • Increase in population
   • Favorable change in taste fashion and preferences for oranges
   • Increase in the price of substitutes
   • Favorable government policy
   • Better terms of sale
   • Favorable weather.
     
     
6. Joshua insured his vehicle against theft, later the vehicle was stolen in a packing bay. Outline the procedure he would follow when making insurance claim for his vehicle.(5mks)
   • Notify the insurer
   • Filling a claim form
   • Investigation/assessment of the claim
   • Assessment report
   • Compensation/payment
     
     
7. Highlight four benefits of transporting oil from Turkana to Mombasa by pipeline.(4mks)
   • Reduced road accidents
   • Low operation cost/low labour cost
   • Less environmental pollution
   • Minimal road congestion and damage
   • Reduced shortage
   • Continuous supply 24/7 hours
   • Easy supervision and monitoring
     
     
8. List four drawbacks of verbal communication in an organization.(4mks)
   • No record for future reference
   • Affected by language barrier
   • Time consuming
   • Prone to prejudice
   • Added transport cost when the sender and receiver are far apart
   • May not be used as evidence in case of dispute
     
     
9. Identify four ways through which the government encourages establishment of industries throughout the country.(4mks)
   • Improvement of transport
   • Tax exemption for industries set up in some areas
   • Access to cheap credit
   • Providing social amenities in most parts of the country
   • Enhancing security in the country
     
     
10. List four factors that adversely affect the functioning of a warehouse.(4mks)
    • Inappropriate location
    • Inadequate handling equipment
    • Lack of properly trained personnel
    • Lack of clear operating procedure
    • Insufficient security
    • Lack of proper storage equipment
      
      
11. Use the diagram below to answer the questions that follow.(3mks)
    
    Quantity
    1. Identify the market structure to which the diagram above belongs - oligopoly
    2. Curve labeled a-a - demand curve
    3. Name the part labeled b - kink
       
       
12. Outline four factors that hinder entrepreneurship in Kenya.(4mks)
    • Long licensing procedure
    • Poor infrastructure
    • Inappropriate education system
    • Political instability
    • Lack of business culture
    • Unfair competition
    • Poor technology
    • Inadequate resources
      
      
13. Outline four benefits that Kamau would get for being a member of  SACCO.(4mks)
    • Get loan at low interest rates
    • Few formalities to follow when getting a loan
    • Enjoy dividend from the profits of the sacco
    • In case of death the loan is written off
    • In case of death the beneficiaries receive double the savings he has
    • A variety of loans
    • Education through education days organized by the sacco
    • Savings are insured
    • Easy saving through checkoff system
    • Front office banking facilities
      
      
14. Kenya is one of the countries experiencing unemployment problems. Identify four causes of the problem.(4mks)
    • Rapid population growth
    • Inappropriate education system
    • Use of capital intensive technology
    • Corruption and mismanagement of resources by the government
    • Rural urban migration
    • Increased importation
    • Inadequate resources
    • Low effective demand
    • Over specialization
    • Laziness where some people generally detest work
    • Off peak season
      
      
15. Outline four characteristics of direct production(4mks)
    • Goods/services are of low quality
    • Encourages individualism
    • Use of simple methods of production
    • Little/no specialization
    • Done in small scale/low output
    • Production for own use
    • Discourages creativity/innovation
      
      
16. Highlight four reasons why a firm may choose to remain small.(4mks)
    • Owners decision to retain the small size
    • Limited target market
    • Flexibility of a small firm
    • Personal services requires/ necessitates the firm to remain small
    • Limited production capacity
    • Un-availability of appropriate technology
    • Belief that small firms are easy to manage
      
      
17. Outline four reasons why ethical practices are necessary in product promotion.(4mks)
    • Improves business image
    • Maintains morality in the society
    • Ensures fair competition among businesses
    • Protects the environment from degradation
    • Ensures businesses comply with the law
    • Ensures that the consumers rights are protected
      
      
18. Highlight four factors that may lead to low level of national income.(4mks)
    • Reduced labour supply
    • Poor natural resource endowment
    • Low level of technology
    • Political instability
    • Negative attitude towards work
    • Presence of large subsistence sector
    • Reduced foreign investment
    • Poor entrepreneurial skills
    • Low level of capital
      
      
19. Outline four reasons that make it difficult to satisfy all our wants.(4mks)
    • Wants are unlimited/endless
    • Resources are scarce/limited
    • Some human wants are recurrent.
    • Wants keep changing according to age, season, gender, social status etc.
      
      
20. The following information has been extracted from the books of Akili as at 30th june 2001
    

    Land and building	235,000
    Machinery	142,000
    Motor vehicle	198,000
    Debtors	25,000
    Capital	330,000
    Creditors	50,000
    Bank overdraft	200,000
    Net profit for the year	62,000

    From the information above, calculate Akili’s drawings for the year.(4mks)
    Assets =capital+ liabilities
    A=235,000√+142,000√+198,000√+25,000√=600,000
    L=50,000√+200,000√=250,000
    C=600,000√-250,000√=350,000
    C=opening capital+net profit –drawings
    350,000=330,000+62,000-drawings√
    Drawings=330,000+62,000-350,000=42,000√√ 1/3 x 12= 4mks
    
    
21. Nyundo had the following assets and liabilities on 1st march 2006.
    

    Capital	120,000
    Machinery	80,000
    Creditors	10,000
    Debtors	20,000
    Stock in trade	25,000
    Cash at bank	5,000

    On 2nd march he had the following transactions;
    Purchased goods for 15,000 on credit.
    Received a cheque of 10,000 from a debtor.
    Sold machinery for 90,000 in cash.
    Prepare his balance sheet on 2nd march, 2006.(4mks)
    
    

    Nyundo’s√ Balance sheet As at 2nd march, 2016
    Stock in trade 40,000 Debtors          10,000 Cash at bank   15,000 Cash in hand   90,000	capital   130,000 creditors  25,000
    155,000	155,000√

     

22. Mention four purposes of preparing a trial balance.(4mks)
    • To check arithmetical accuracy of the accounts
    • The check whether the rule of double entry has been followed
    • To disclose errors that may have been made in the ledger
    • Used as a basis of preparing the final accounts.
      
      
23. Outline four factors that may cause the capital of an ongoing business to change.(4mks)
    • Additional investment
    • Increase in net profit
    • Net loss
    • Drawings.
      
      
24. Yogen had the following transactions with a creditor, Sulem, 2017
    June 1 Balance from May 14,000
    2 Bought stock from Sulem on credit Kshs. 80,000
    4 Returned faulty goods to Sulem Kshs. 2,000
    7 Paid Sulem the debt by cash less 2% discount.
    Prepare Sulem’s account as it would appear in the books of Yogen.(4mks)
    

    Dr                           Sulem’s Account                                Cr
    2017	details	amount	2017	details	amount
    June 4 7 7	Return out. √ Disc. Recvd √ Cash	2,000 √ 1,840 √ 90,160 √	June 1 2	Bal b/d√ Purchases √	14,000√ 80,000√
    		94,000			94,000

    12 x 1/3 = 4mks

25. In the two column cash book given below, enter the missing figures.4mks

Waria Traders

Two Column Cash Book

For The Month ofJuly, 2008