Business Studies Paper 1 Questions and Answers - Form 4 End Term 2 Exams 2023

INSTRUCTIONS:

• ANSWER ALL THE QUESTIONS IN THE SPACES PROVIDED.

1. Outline four ways in which business studies may be of benefit to an individual. (4mks)
2. Outline four features of capital as a factor of production. (4mks)
3. Kamwenje a sole proprietor who operates a private school bought blankets for SH. 100,000. The terms of sale were 20% trade and 5% cash discount if payment was made within two weeks. Calculate the net amount he paid after one week. (4mks)
4. Highlight four reasons why the government trains business people. (4mks)
5. The conditions given below are for a monopoly firm or a firm operating in the perfect competition. Write the correct market structure against each of the conditions in the spaces provided.
   

   Condition	Market structure
   a) Market structure determines price for the product
   b) There is free entry and exit
   c) Product involved is homogenous
   d) Market structure regulates the supply of the product

6. Outline four elements of transport. (4mks)
7. State whether each of the following transactions will increase, decrease or have no effect on the balance sheet totals. (4mks)
   

   Transaction	Effect
   a) The owner deposited additional cash into the business from his private sources.
   b) Paid a bank loan
   c) Sold an old machine and bank the money in the business account.
   d) Bought office machines on credit.

8. Outline four tools of monetary policy that the government may use to reduce excess money in circulation. (4mks)
9. State four factors that may lead to unfavorable terms of trade. (4mks)
10. Highlight four characteristics of basic human wants. (4mks)
11. Outline four differences between shares and debentures. (4mks)
12. The government has risen the retirement age for civil servants from 55 years to 60 years. Highlight four economic effects of such a move. (4mks)
13. State the meaning of the following entries in the following ledger accounts. (4mks)
    
14. Highlight four reasons why there is need for a business to observe ethics. (4mks)
15. State four characteristics of a good filing system. (4mks)
16. Indicate in the spaces provided whether the following taxes are either direct taxes or indirect taxes. (4mks)
    

    Tax	Types of Tax
    a) Corporation tax
    b) Capital gain tax
    c) Value added tax
    d) Income tax

17. The following figures relate to Jumbo traders for the year ended 31.12.20.
    

    Details	Sh.
    Capital (31.12.20)	940,000
    Net loss	20,000
    Additional investment	420,000
    Monthly drawing	5,000

    Determine the capital as at 01/01/20. (4mks)
18. Identify the source documents into which the information given in the table below would be recorded. (4mks)
    

    Information	Source documents
    a) Payments received from debtors
    b) Purchases made on credit
    c) Validating payments made by the cashier.
    d) Requesting for additional payments from debtor.

19. State four types of expenditure that are included in measuring national income using expenditure approach. (4mks)
20. Christine provided the following information for the month of January 2021.
                                                             Sh.
    Stock as at 1/1/21                            20,000
    Stock as at 31/1/21                          30,000
    Purchases                                        50,000
    Margin                                              20%
    Prepare her trading account for the period ended 31^st January 2021. (4mks)
21. State four reasons for cost push inflation. (4mks)
22. State the line of communication involved in each of the following. (4mks)
    1. The manager of EFG company Ltd talking to the manager of XYZ company Ltd. ------------------
    2. A secretary asking for time off from her boss --------------------
    3. The production manager giving instructions to the secretary of the sales manager -------------------------
    4. The store keeper giving explanations to the chief accountant ---------------------
23. State four elements of the economic environment that may influence the operations of a business. (4mks)
24. Highlight four benefits that accrues to a trader who advertises goods using a radio. (4mks)
25. Achieng owned a motor vehicle valued at Sh. 1,000,000. She comprehensively insured the car at Sh. 300,000. The motor vehicle was involved in an accident and declared a write off. Calculate the amount Achieng should get from the insurer. (4mks)

MARKING SCHEME

1. Outline four ways in which business studies may be of benefit to an individual. (4mks)
   1. Equips the individual with skills and knowledge to manage a business.
   2. Prepares one for further career in business
   3. Enables one to relate issues affecting business to its environment.
   4. Enables one to identify business opportunities to venture.
   5. Prepares one for further studies.
   6. Makes an individual to appreciate the role of government in business activities.
2. Outline four features of capital as a factor of production. (4mks)
   1. Capital can move from one place to another/ it is geographically mobile.
   2. It is man-made resource.
   3. It is subject to depreciation.
   4. Capital can be improved due to advancement of technology.
   5. It is a basic factor of production.
3. Kamwenje a sole proprietor who operates a private school bought blankets for SH. 100,000. The terms of sale were 20% trade and 5% cash discount if payment was made within two weeks. Calculate the net amount he paid after one week. (4mks)
   ²⁰/₁₀₀ × 100,000 =20,000
   100,000 − 20,000= 80,000
   ⁵/₁₀₀ × 80,000 = 4,000
   80,000 −  4,000
   =Sh. 76,000
4. Highlight four reasons why the government trains business people. (4mks)
   1. To expose them to modern development in management.
   2. To impart proper business ethics
   3. To educate them to efficient methods of operating their businesses
   4. To educate them on how to maximize their profits at minimal costs.
   5. To inform them on available profitable opportunities they can venture in.
   6. To identify their problems and look for possible solutions.
5. The conditions given below are for a monopoly firm or a firm operating in the perfect competition. Write the correct market structure against each of the conditions in the spaces provided.
   

   Condition	Market structure
   a) Market structure determines price for the product	Monopoly
   b) There is free entry and exit	Perfect competition
   c) Product involved is homogenous	Perfect competition
   d) Market structure regulates the supply of the product	Monopoly

6. Outline four elements of transport. (4mks)
   • Unit of carriage
   • Method of propulsion.
   • The way.
   • Terminal.
7. State whether each of the following transactions will increase, decrease or have no effect on the balance sheet totals. (4mks)
   
   

   Transaction	Effect on balance sheet
   a) The owner deposited additional cash into the business from his private sources.	increase
   b) Paid a bank loan	decrease
   c) Sold an old machine and bank the money in the business account.	No effect
   d) Bought office machines on credit.	increase

8. Outline four tools of monetary policy that the government may use to reduce excess money in circulation. (4mks)
   1. Open market operations by selling securities to the public.
   2. Raising bank rate.
   3. Raising cash liquidity ratio
   4. Raising margin requirements
   5. Directives
   6. Instituting selective credit control.
9. State four factors that may lead to unfavorable terms of trade. (4mks)
   1. Appreciation of foreign currency
   2. Higher increase in the price of imports
   3. Fall in demand for exports
   4. Devaluation /depreciation of local currency
   5. Competition from similar export products.
   6. High demand for imports.
10. Highlight four characteristics of basic human wants. (4mks)
    1. They are felt needs
    2. Cannot be postponed
    3. Are essential for human survival
       
    4. Are satisfied before secondary want
    5. Are universal.
11. Outline four differences between shares and debentures. (4mks)
    

    Shares	Debentures
    a) Are units for capital	Are units of loan
    b) Shareholders earn dividend	Holders earn interest
    c) Holders have voting rights	Holders have no voting rights
    d) Dividends paid only when declared	Interest on loans must be paid yearly
    e) During dissolution of a company shares are paid last	During dissolution of a company, debentures are paid first.

12. The government has risen the retirement age for civil servants from 55 years to 60 years. Highlight four economic effects of such a move. (4mks)
    1. Retention of experienced and skilled man power
    2. High unemployment for the youth who have to wait.
    3. Savings in pensions.
    4. Revenue to the government.
    5. Non-training for new employees.
13. State the meaning of the following entries in the following ledger accounts. (4mks)
    1. Started business in June 15^th 2021 with Sh. 500,000 in bank.
    2. Bought a motor vehicle in June 16^th 2021 for Sh. 250,000, payment made by cheque.
14. Highlight four reasons why there is need for a business to observe ethics. (4mks)
    1. Ensures no discrimination in business
    2. To create fairness in competition
    3. To ensure protection of the environment
    4. To ensure rights of employees are upheld.
    5. To avoid consumer exploitation.
    6. To eliminate the use of unfair means of achieving business objectives.
15. State four characteristics of a good filing system. (4mks)
    1. Should be simple
    2. Should be suitable.
    3. Should be compact
    4. Should be economical
    5. Should be safe
    6. Should be flexible
16. Indicate in the spaces provided whether the following taxes are either direct taxes or indirect taxes. (4mks)
    
    

    Tax	Types of Tax
    a) Corporation tax	Direct
    b) Capital gain tax	Direct
    c) Value added tax	Indirect
    d) Income tax	Direct

17. The following figures relate to Jumbo traders for the year ended 31.12.20.
    Determine the capital as at 01/01/20. (4mks)
    Initial capital = closing capital + net loss + drawing − additional investment
    IC = CC + NL + D − AI
    = 940,000 + 20,000 + (5,000 × 12) − 420,000
    =Sh. 600,000
18. Identify the source documents into which the information given in the table below would be recorded. (4mks)
    
    

    Information	Source documents
    a) Payments received from debtors	Outgoing receipts/issued receipts/ duplicate copy of receipts
    b) Purchases made on credit	Incoming invoice/ received invoice / purchase invoice
    c) Validating payments made by the cashier.	Payment voucher/ cash payment voucher
    d) Requesting for additional payments from debtor.	Debit note

19. State four types of expenditure that are included in measuring national income using expenditure approach. (4mks)
    1. Personal expenditure
    2. Investment
    3. Government expenditure
    4. Import
    5. Export
20. Christine provided the following information for the month of January 2021.
                                                           Sh.
    Stock as at 1/1/21                          20,000
    Stock as at 31/1/21                        30,000
    Purchases                                      50,000
    Margin                                                20%
    Prepare her trading account for the period ended 31^st January 2021. (4mks)
    
                                                                          CHRISTINE
                                                                     TRADING ACCOUNT
                                                           FOR THE PERIOD ENDED 31ST JANUARY 2021
    

    OPENING                                  20,000 +PURCHASES                          50,000 COGAS                                     70,000 -CLOSING STOCK                    30,000 COGS                                        40,000 GROSS PROFIT C/D                10,000                                                       50,000

    SALES                                          50,000                                                        50,000

21. State four causes of cost push inflation. (4mks)
    • Rise in wages and salaries
    • Increase in taxes.
    • Increase in profit margin
    • Increase in cost of inputs other than labor
    • Reduction subsidies
22. State the line of communication involved in each of the following. (4mks)
    1. The manager of EFG company Ltd talking to the manager of XYZ company Ltd. Horizontal communication
    2. A secretary asking for time off from her boss upward vertical communication
    3. The production manager giving instructions to the secretary of the sales manager
       Downward diagonal communication
    4. The store keeper giving explanations to the chief accountant upward diagonal communication.
23. State four elements of the economic environment that may influence the operations of a business. (4mks)
    1. Interest rate
    2. Inflation
    3. Changes in buyer’s income / purchasing power
    4. Prices of goods and services.
24. Highlight four benefits that accrues to a trader who advertises goods using a radio. (4mks)
    1. Different languages may be used to reach different people.
    2. One can choose the time to advertise to reach a particular group of listeners
    3. It has a wide coverage because many people listen to the radio
    4. It can be used to reach the blind as it requires listening only.
    5. The advert can be repeated several times to reach more people
    6. Use of entertainment or music in the advertisement can attract people.
    7. The advertisement can reach both literate and illiterate people since it only requires listening to the message.
25. Achieng owned a motor vehicle valued at Sh. 1,000,000. She comprehensively insured the car at Sh. 300,000. The motor vehicle was involved in an accident and declared a write off. Calculate the amount Achieng should get from the insurer. (4mks)
    AMOUNT OF COMPENSATION = SUM INSURED × ACTUAL LOSS
                                                                   VALUE OF PROPERTY
                                                        = 300,000 × 1,000,000
                                                                 1,000,000
                                                       = Sh. 300,000