Business Studies Paper 1 Questions And Answers - Form 4 Term 2 Opener 2021

Instructions to candidates

• Answer ALL the questions.
• All answers must be written in the spaces provided.
• Candidates should answer all the questions in English.

1. Highlight four reasons why people engage in Business activities.
2. Outline four types of resources that are important in Business. (4mks)
3. State four functions of an entrepreneur in the production of goods and services. (4mks)
4. Identify the machine used to perform the following tasks. (4mks)
   

   Statements	The machine
   (a) To count coins and notes
   (b) To trim paper into required sizes and shapes
   (c) To fold documents, place them in envelope and seal the envelope
   (d) To print postage impression on envelopes

5. Outline four differences between chain stores and departmental stores. (4mks)
6. State four statistics that are associated with the measurement of National income. (4mks)
7. Prepare Sunshine Traders Balance sheet from the following list of balances extracted from his books as at 31 December 2013. (4mks)
   Capital                              357,000
   Stock                                40,000
   Machines                           150,000
   Furniture                             7,000
   Motor vehicles                    200,000
   Bank                                   20,000
   Creditors                             25,000
   Cash                                   5,000
   Debtors                             60,000
   Loan from KCB                   100,000
8. Outline four characteristics of a good filing system (4mks)
9. Highlight four methods that Government uses to protect consumers. (4mks)
10. State four factors that a manager should bear in mind to ensure that he/she effectively communicates with the employees. (4mks)
11. State the meaning of the following principles of insurance . (4mks)
    1. Subrogation
    2. Contribution
    3. Insurable interest
    4. Indemnity
12. Highlight four characteristics of underdevelopment. (4mks)
13. State four benefits that would accrue to a customer who borrows a loan from a non-bank financial institution.  (4mks)
14. Highlight four causes of unemployment in Kenya. (4mks)
15. Outline four circumstances under which Mr Ondieki (a farmer) may distribute his products directly to his customers. (4mks)
16. Tripple SSS wholesalers had the following information as at 31 December 2013 (4mks)
    Closing capital            70,000
    Total expenses              5,000
    Drawings of goods         6,000
    Total incomes                3,000
    Calculate the capital at the beginning of the year.
17. Highlight four advantages of localization of firms. (4mks)
18. State four characteristics of good money. (4mks)
19. Identify the day book associated with the following source documents given below. (4mks)
    

    Source documents	Day books
    Invoice received
    Credit note received
    Receipt issued
    Debit note received

20. Highlight four purposes of public finance. (4mks)
21. The following balances were extracted from the books of Okinda wholesalers on 31^st December 2006. (4mks)
                                                      Sh
    Capital                                    800,000
    Sales                                       250,000
    Debtors                                     70,000
    Purchases                                160,000
    Creditors                                   45,000
    Opening stock (1.1.2006)           40,000
    Closing stock (31.12.2006)         20,000
    General expenses                       50,000
    5 year bank loan                       200,000
    Insurance expenses                    20,000
    Salaries and wages                      80,000
    
    Required, calculate
    1. Mark up (1mk)
    2. Current ratio (1mk)
    3. Rate of stock turnover (1mk)
    4. Rate on return on capital (1mk)
22. Highlight four uses of a proforma invoice. (4mks)
23. State four factors that affect the productivity of an office worker. (4mks)
24. In each of the following cases, state the type of inflation described (4mks)
    

    a) The unrest in Libya has resulted to an increase in the price of oil
    b)The price of bread has gone upto sh.60 due to increase in the price of wheat
    c)A lot of money in circulation has led to the general increase of price
    d) Arise in price due to uneven growth in some sectors of the economy.

MARKING SCHEME

1. Highlight four reasons why people engage in Business activities. (4mks)
   1. To create employment opportunities
   2. To make use of available local resources
   3. To be their own bosses
   4. To increase their present income
   5. To utilize their free time
   6. To commercialize their skills and talents
2. Outline four types of resources that are important in Business. (4mks)
   1. Human resources
   2. Financial resources
   3. Physical resources
   4. Technology
3. State four functions of an entrepreneur in the production of goods and services. (4mks)
   1. They bear all the risks associated with production
   2. They provide the required capital to carry out production
   3. They acquire all other factors of production
   4. They identify and set up viable business
   5. They coordinate and organize the other factors of production
4. Identify the machine used to perform the following tasks. (4mks)
   

   Statements	The machine
   (a) To count coins and notes	Money counting machine
   (b) To trim paper into required sizes and shapes	Gullotine
   (c) To fold documents, place them in envelope and seal the envelope	Composite machine
   (d) To print postage impression on envelopes	Franking machine

5. Outline four differences between chain stores and departmental stores. (4mks)
   

   Chain stores	Departmental stores
   i)They have branches all over the country e.g ART   Ltd	All departments operate under one roof
   ii)Stock a limited variety of goods	Stock a wide variety of goods
   iii) All branches sell similar goods.        Purchases are centralized	Each department deals with different line of goods. Purchases are decentralized
   iv) Prices are uniform in all branches	Each department sets its own price

6. State four statistics that are associated with the measurement of National income. (4mks)
   1. Gross National Product
   2. Net National product
   3. Gross Domestic product
   4. Net Domestic product
7. Prepare Sunshine Traders Balance sheet from the following list of balances extracted from his books as at31 December 2013. (4mks)
   

   Assets             sh	Capital + Liabilities          Sh.
   Stock                 40,000 Machines          150,000 Furniture              7,000 Motor vehicles   200,000 Bank                  20,000 Cash                    5,000 Debtors              60,000                         482,000	Capital 357,000 Liabilities Creditors 25,000 Loan from KCB 100,000                                     482,000

8. Outline four characteristics of a good filing system (4mks)
   1. Simplicity
   2. Compactness i.e occupy little office space
   3. Suitability
   4. Should be economical
   5. Safety
   6. Accessibility
9. Highlight four methods that Government uses to protect consumers. (4mks)
   1. Setting up standards
   2. By licensing
   3. Weights and measures act
   4. Food and drug ac
   5. Trade description act / sale of good act
   6. Public health act
   7. Rent and tribunal act
10. State four factors that a manager should bear in mind to ensure that he/she effectively communicates with the employees. (4mks)
    1. The timing of sending / passing information should be appropriate
    2. There should be mutual respect between the two parties
    3. Should speak in a proper language the is understood by all parties
    4. The manager should into have negative attitude towards any employee
    5. The manager should not have pre judgement
11. State the meaning of the following principles of insurance. (4mks)
    1. Subrogation - This states that after the insured has been compensated the remnant of the insured item becomes the property of the insurer
    2. Contribution - When a property is insured by more than one insurance company upon the occurrence of the event of loss, all the insurance companies will share the loss proportionately.
    3. Insurable interest - One can only insure a property whose loss will affect him financial.
    4. Indemnity- States that the insured can only be compensated for the actual loss suffered.
12. Highlight four characteristics of underdevelopment. (4mks)
    • Low standards of living in the country.
    • Low per capita of income
    • Rapid population on growth rate
    • Under- utilized natural resources
    • Low literacy levels
    • Use of simple / rudimentary technologies in production
    • Pronounced income inequalities
    • Low levels of productivity
    • Poor infrastructure
    • High levels of unemployment
13. State four benefits that would accrue to a customer who borrows a loan from a non-bank financial institution.
    • 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
14. Highlight four causes of unemployment in Kenya. (4mks)
    • Rapid population growth rate
    • Introduction of capital intensive methods of production
    • Inappropriate education system which is white collar job oriented
    • The people may be too selective when choosing the jobs they want which may not be available.
    • Low demand for goods and services due to low incomes.
    • Inadequate resources required for production to be carried out.
    • Rural – urban migration.
    • Changes in seasons particularly in tourism and agricultural sectors.
15. Outline four circumstances under which Mr Ondieki (a farmer) may distribute his products directly to his customers. (4mks)
    1. Where the goods are produced according to customer’s specifications
    2. Where goods are technical in nature
    3. Where goods are perishable in nature
    4. Where the farmer is very close to the market
    5. Where the market being targeted is small
    6. Where the producer wants to have direct contacts with the customers
    7. Where the producer has his own retail outlets
16. Tripple SSS wholesalers had the following information as at 31 December 2013 (4mks)
    Closing capital 70,000
    Total expenses 5,000
    Drawings of goods 6,000
    Total incomes 3,000
    Calculate the capital at the beginning of the year.
    O.C – L – D = C.C
    O.C – (5000 – 3000) – 6000 = 70,000
    O.C – 2000 – 6000 = 70,000
    O.C – 8000 = 70,000
    O.C = 78,000  ✓
17. Highlight four advantages of localization of firms. (4mks)
    1. A pool of skilled labour is created where the firms con get employees from
    2. Employment is created in such areas
    3. Development of infrastructure may be carried out in areas where localized firms are
    4. Joint management of waste can be carried out by all firms
    5. Establishment of solid amenities such as hospitals and schools
    6. Firms may benefit from already established markets
    7. It leads to development of auxiliary firms such as banks and insurance in he area.
18. State four characteristics of good money. (4mks)
    • General acceptability - Stability
    • Scarcity - Cognizability
    • Durability - Homogeneity
    • Divisibility - Malleability
    • Portability
19. Identify the day book associated with the following source documents given below. (4mks)
    

    Source documents	Day books
    Invoice received	Purchases Journal
    Credit note received	Puirchases Returns Journal
    Receipt issued	Cash receipt journal
    Debit note received	Sales returns journal

20. Highlight four purposes of public finance. (4mks)
    1. To provide essential goods and services
    2. To control consumption of certain products
    3. Re-distribution of wealth
    4. To promote balanced regional development
    5. To raise revenue for the government
    6. To control balance of payments
21. The following balances were extracted from the books of Okinda wholesalers on 31st December 2006. (4mks)|
                                                Sh
    Capital                                800,000
    Sales                                  250,000
    Debtors                                70,000
    Purchases                            160,000
    Creditors                               45,000
    Opening stock (1.1.2006)       40,000
    Closing stock (31.12.2006)     20,000
    General expenses                   50,000
    5 year bank loan                  200,000
    Insurance expenses               20,000
    Salaries and wages                80,000
    
    Required, calculate
    1. Mark up = Gross Profit x 100             70,000 x 100 (1mk)
                       Cost of goods sold                 180,000
                    = 38.88%
    2. Current ratio (1mk)
       Current assets              = 90,000
       Current liabilities             45,000 = 2:1
    3. Rate of stock turnover (1mk)
       Cost of goods 180,000
       Average stock 30,000
       Average stock = 40,000 + 20,000  = 6 times
                                           2
    4. Rate on return on capital (1mk)
       Net loss
       Capital invested
       80,000    x   100%
       720,000
       = 11.11% or 1:9
22. Highlight four uses of a proforma invoice. (4mks)
    1. It can be used to serve as quotation
    2. Sent to show what the buyer would have to pay if the order s approved
    3. Issued to an agent who sells goods on behalf of the seller
    4. Used by importers to get customers clearance before goods are delivered
    5. Sent when the seller does not want to give credit
23. State four factors that affect the productivity of an office worker. (4mks)
    1. Personal attributes e.g hygiene and moral behaviours
    2. Office etiquette e.g respect and punctuality
    3. Knowledge and skills
    4. Emotional qualities
24. In each of the following cases, state the type of inflation described (4mks)
    

    a) The unrest in Libya has resulted to an increase in the price of oil	Imported inflation
    b)The price of bread has gone upto sh.60 due to increase in the price of wheat	Cost-push inflation
    c)A lot of money in circulation has led to the general increase of price	Demand pull inflation
    d) Arise in price due to uneven growth in some sectors of the economy.	Structural inflation