Business Studies Paper 1 Questions and Answers - Form 4 Opener Term 1 Exams 2022

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Answer all questions in the spaces provided


  1. State the term given to each of the following descriptions. (4 marks)
    Description Term
    Study of activities that are carried out in an office  
    Study of the process of identifying a business opportunity,
    acquiring the resources to start and run a business
    Study of trade and aids to trade  
    Study of a systematic record keeping  
  2. A survey conducted in Kenya shows an upward trend in entrepreneurial activities among citizens. Highlight four possible factors that may be leading to such a trend. (4 marks)
  3. Outline FOUR challenges associated with a high ageing population in a country. (4 Marks)
  4. Outline FOUR items that are included when computing national income using the expenditure approach. (4 Marks)
  5. Outline FOUR features that constitute a market. (4 Marks)
  6. Name the accounts to be debited and credited for each of the transactions shown in the table below. (4marks)
    Transaction A/c to debit A/c to credit
    Bought goods on credit from Kamene    
    Took soda from stock to entertain own children    
    Paid for office expenses in cash    
    Sold old motor vehicle and received a cheque    
  7. State four factors that may necessitate re-insurance. (4marks)
  8. Name three types of wholesalers according to the goods they handle. (3marks)
  9. State four reasons why consumers need protection from unscrupulous traders (4 mks)
  10. State four merits of a bonded warehouse to the Government (4 mks)
  11. Identify what is represented by the letters W,X, Y and Z in the diagram below(4 mks)

  12. The following balances were extracted from the books of Mwenge Traders on 30th June 2010.
    Ten-year loan Loan 
    Closing Stock 
    Cash in hand 
    120 000
    240 000
    400 000
    25 000
    50 000
    30 000
    700 000
    Required : Prepare a Balance Sheet as at 30th June 2010 (4mks)
  13. Identify four circumstances under which face to face communication would be appropriate (4marks)
  14. Outline four factors you would consider before setting up a business (4marks)
  15. State four benefits of a business plan to a business (4marks)
  16. Outline four features of perfect competition market (4marks)
  17. Outline four factors to consider when choosing a method of promoting products (4marks)
  18. List any four characteristics of services. (4 mks)
  19. Complete the table below by identifying whether the factor is within the internal or external business environment. (4 mks)
    Business objectives  
    Goodwill from customers  
    Marketing strategies  
  20. A TV set was sold for sh.10,000. If the buyer was allowed a trade discount of 5% and a cash discount of 2% if payment is made within a month. Determine the amount received by the seller if payment is made within 2 weeks. (4 mks)
  21. Highlight four channels of distribution for local agricultural products. (4 mks)
  22. Enter the following transactions in the relevant journal
    1. On 5th may 2001 an old tractor worth shs. 80,000 was sold to wakulima entreprices on credit
    2. On 10th may an old furniture worth shs. 80,000 was sold on credit to Bumbere Restaurant for shs 90,000.
    3. On 20th may a machine whose book value was shs. 80,000 was sold to Yusuf for shs. 50,000 on credit.
  23. State four functions of an office in an organization (4mks)
  24. Identify four errors that may cause a trial balance to agree (4mks)
  25. State the four factors that may limit a persons ability to satisfy human wants (4mks)
  26. Give five differences between a cooperative and a parastatal (5 marks)
     a                                                             a                                                               
     b                b          
     c    c  
     d    d  
     e    e  
     f    f  

Marking Scheme

    • Office practice
    • Entrepreneurship
    • Commerce
    • Accounting
      (1× 4 = 4 marks)
    •  Favourable government policies e.g. fair taxation
    • Availability of market of local produce
    • High level of education and training on business issues
    • Improved infrastructure
    • Political stability and security in the country
    • Adequate capital
    • Positive entrepreneurial culture
    • Fair competition
    • Favorable natural factors (Any 4 × 1 = 4 marks)

  3. FOUR challenges associated with a high ageing population in a country. (4 Marks)
    • High dependency ratio from many retirees.
    • Low mobility of labour since older people are less mobile.
    • Restricted patterns of consumption which lower demand.
    • Less progress due to resistance of the older people to change.
    • Low labour supply.

  4. FOUR items that are included when computing national income using expenditure approach. (4 Marks)
    • Consumption by general public on consumer goods (personal expenditures – C)
    • Expenditure by general public on capital goods (Investments – I)
    • Government expenditure on goods and services (G)
    • Net expenditure on foreign goods (x – m)

  5. Four features of a market include. (4 marks)
    • The product (a good or service offered for sale)
    • Existence of buyers and sellers
    • A place (a specific location)
    • Interaction between buyers and sellers (exchange of goods or services for money)
      A/c to debit  A/c to credit 
     a Purchases✔ Kamene✔
     b Drawings✔ Purchases✔
     c Office expenses✔ Cash✔
     d Bank✔ Motor vehicles✔
    ( 8 x ½ = 4marks)

  7. Factors that may necessitate re-insurance
    • High value of the property
    • When chances of loss through insured risk are high
    • When the insurance company has insured many different risks
    • When the insurance company wishes to share liability in the event of loss
    • When it is a legal requirement for an insurance company to re-insure

  8. Types of wholesalers
    • General merchandise wholesalers
    • General line wholesalers
    • Specialized wholesalers

  9. Need for consumer protection
    • Ensure commodities are of good quality
    • Right quantity and size of goods
    • Ensure standards of health are maintained
    • Ensure building construction and safety standards are maintained
    • Ensure fair prices are charged
    • Ensure commodities are available
    • Protect consumers from false advertising
    • Protect consumers from sale of harmful commodities
    • Protect consumers against breach of contract
      Any 4@√ =1mk x 4 =4mks

  10. Advantages of bonded warehouse to Government
    • Government revenue
    • Control of entry of harmful goods
    • Gvt can verify documents for goods in transit
    • Gvt checks quality of goods entering country
    • Gvt controls quantity of goods entering the country
    • Gvt can inspect type/nature of goods imported
    • Gvt can check on illegal goods entering the county
    • Equilibrium price
    • Demand curve
    • Supply curve
    • Equilibrium quantity @√ 1= 1mk x4 = 4mks
     Mwenge Traders
    Balance Sheet
    as at 30th June 2010
    70,000 √
    25,000 √
    Cash in Hand  50,000    √ 255,000√
    Debtors  120,000√ Creditors
    10 year loan 
      895,000    895,000√
    @√ = ½ mk x 8 = 4mks
  13. Circumstances under which face to face communication would be appropriate
    • When there is need to promote informal communication/ chatting
    • When giving routine instructions to subordinate
    • When there is need to discuss issues between workers and management
    • When no written evidence of the communication is required
    • When there is need for immediate feedback Any 4 x 1 = 4mks

  14. Factors to consider before setting up a business
    • Potential demand for goods/ services
    • Source of raw materials
    • Security in the area
    • Land availability
    • Political stability
    • Existing infrastructure
    • Auxiliary services
    • Legal requirement
    • Source of labour
    • Sources of technology
    • Possible return on income
    • Chances of growth
    • Effects in the environment
    • Competition
    • Social cultural environment

  15. Benefits of a business plan to a business
    • Used to attract funding from potential investors and lenders Tests the business idea on paperore its implemented
    • It minimises the impact of disruptions of business activities that may arise due to unforeseen ircumstances
    • It can be used to evaluate the performance of a business
    • It guides management decisions and actions on day to day basis
      Any 4 x 1 = 4mks

  16. Features of perfect completion
    • Freedom to entry and exit
    • Products sold are homogeneous
    • Many sellers in the market
    • Perfect knowledge of the market by buyers and sellers
    • No government interference (4marks)

  17. Four factors to consider when choosing a method of promoting products
    • Nature of the target group
    • The size of the market
    • Nature of the product
    • The method used by the competitors
    • Flexibility of the method / medium
    • Availability of the medium
    • Cost of the medium
    • Physical characteristics of the medium
    • Governments policy (4mks)
    • Internal
    • External
    • External
    • Internal
    • Trade discount =    5    x 10,000 = 500
      Amount to be paid = 10000 – 500
                                   = 9500
      Cash discount =     2    x 9500 = 190
      Amount paid to seller = 9500 – 190 = 9310
    • Producer → Customer
    • Producer → wholesaler → Consumer
    • Producer → Wholesaler → Retailer → Consumer
    • Producer → Retailer → Consumer
    • Producer → M. board → Wholesaler → Retailer → Consumer
    • Producer → Co-op → M. board → Consumer

    May 5


    May 10th

    May 20th


    Wakulima enterprises a/c

    Tractor a/c
    (being record of sale of an old tractor on credit)

    Bumbere restaurant a/c

    Office furniture a/c
    Gaon on disposal a/c
    (being sale of office furniture at a gain)

    Yusuf traders a/c
    Loss on disposal a/c

    Machine a/c
    (being sale of a machine on credit)


    80 000


    90 000

    50 000
    30 000


    80 000


    80 000
    10 000


    80 000

    (8 X ½ MARKS)
  22. Functions of an office in an organization (1x4)
    • Receiving mails
    • Distribution of mails
    • Filing documents for future reference
    • Reproduction of documents
    • Co-ordinating other department in an organization
    • Safeguarding an organizations property

  23. Errors that may cause a trial balance to balance (1x4)
    • Error of total omission of a transaction
    • Error of commission
    • Error of principle
    • Error of complete reversal of entries
    • Compensating errors
    • Error of original entry
    • Transposition error
    • Differences in quality of goods and services
    • Insufficient incomes
    • High prices of goods and services
    • Scarcity of goods and services
    • Political instability (1x4)

  25. Give five differences between a cooperative and a parastatal (5 marks)
     a Owned by share holders  a  Owned by government
     b Capital contributed by shareholders  b capital contributed by government
     c Profit goes to shareholders  c profit goes to government
     d Managed by a committee elected by members  d managed by a board of directors appointed by president
     e Formed and governed by cooperative act  e formed and governed by act of parliament
     f Formed to provide services to members  f formed to provide essential services to members of public

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