Business Studies Paper 1 Questions and Answers - Form 4 Term 3 Opener Exams 2023

INSTRUCTIONS:

• ANSWER ALL THE QUESTIONS IN THE SPACES PROVIDED

1. Outline four components of business studies. (4mks)
2. Outline four features of secondary wants. (4mks)
3. Outline four causes of unemployment. (4mks)
4. Outline four circumstances under which a business man would choose to transport goods by air. (4mks)
5. The following information relates to Otieno retailers for the month of July 2021.
   Sales                      50,000
   Cost of sales          40,000
   Calculate:
   1. Mark up. (2mks)
   2. Margin. (2mks)
6. State four ways in which government may regulate business in a country. (4mks)
7. Highlight four duties of a clerk in an office. (4mks)
8. Highlight four internal diseconomies of scale in firm. (4mks)
9. The following information related to businesses A, B, C and D. 
   

   Business	Assets	Liabilities	Capital
   A	250,000	M	150,000
   B	N	400,000	600,000
   C	150,000	60,000	P
   D	350,000	Q	250,000

   Determine the figures represented by M, N, P and Q. (4mks)
10. State four ways in which commercial banks help in facilitating business activities in a country. (4mks)
11. Highlight four circumstances under which a business would prefer to use email instead of a telephone. (4mks)
12. Identify the external factors affecting business operations as described by the following statements. (4mks)
    1. Law and policies that regulate business activities ………………………………..
    2. Affects buyers’ ability to buy commodities offered by a business……………………..
    3. Firms selling similar products trying to outdo each other in their efforts to maximize profits…………………………
    4. Dictates how people live and what products they consume………………………
13. State four factors that may affect capital of a business. (4mks)
14. Kamau retail shop carried out the transactions given in the table below. For each transaction state the source document applicable 4mks
    

    Transaction	Source document
    a) Sold goods on credit
    b) Informed a customer of an undercharge
    c) Sold goods for cash
    d) Received allowance for goods returned to the supplier

15. Highlight four disadvantages of a long chain of distribution to a buyer. (4mks)
16. Highlight four ways in which a firm can improve the productivity of its labour. (4mks)
17. Outline four factors that may lead to a shift in demand curve to the right. (4mks)
18. Outline four ways that can be taken to improve the efficiency of parastatals in Kenya. (4mks)
19. Enter the following transactions in the relevant ledgers. (4mks)
    2010 March 1 started a business with sh. 150,000 in cash
              March 3 bought furniture worth sh. 15,000 on credit
20. Classify the following taxes as either direct or indirect taxes. (4mks)
    

    Tax	Classification
    a) Income tax
    b) Value Added Tax (VAT)
    c) Excise tax
    d) Estate or death duty

21. Outline four uses of a cash book. (4mks)
22. Outline four reasons why it is advisable to take endowment policy instead of a whole life policy. (4mks)
23. Highlight four factors that discourage entrepreneurial development in Kenya. (4mks)
24. Highlight four circumstances under which the per capita income would be a good indicator of the standard of living of the people of a country. (4mks)
25. Identify the type of inflation described. (4mks)
    

    Description	Type of inflation
    a) A rise in prices due to an increase in money supply
    b) A rise in prices due to an increase in the cost of factors of production
    c) A rise in prices due to buying expensive goods from foreign countries
    d) A rise in prices due to uneven growth in some sectors of the economy

MARKING SCHEME

1. Outline four components of business studies.                                (4mks)
   1. Accounting
   2. Commerce
   3. Entrepreneurship
   4. Office practice
   5. Economics
2. Outline four features of secondary wants.                                        ( 4mks)
   1. One can survive without them
   2. They are satisfied after basic wants
   3. They make a person’s life more comfortable
   4. They are competitive
   5. They can be postponed
   6. They are not felt needs
3. Outline four causes of unemployment.                                               ( 4mks)
   1. Rapid population growth
   2. Inappropriate education system
   3. Inappropriate production methods
   4. Seasonality in production
   5. Lack of capital investments
   6. Rural urban migration
   7. Trade union demands for high wages
   8. Low demand for goods and services
4. Outline four circumstances under which a business man would choose to transport goods by air.           (4mks)
   1. If it is the policy of a business
   2. In case it is a government requirement
   3. When goods transported are perishable
   4. If goods transported are urgently required
   5. When goods are transported across borders/long distance.
5. The following information relates to Otieno retailers for the month of July 2021.
   Sales                                                                       50,000
   Cost of sales                                                           40,000
   Calculate:
   1. Mark up.                       ( 2mks)
      GP = 50,000 − 40,000
            =10,000
      Mark up =  10,000 × 100   = 25%
                        40,000           
   2. Margin.                            (2mks)
      Margin= 10,000  × 100
                     50,000
                 = 20%
6. State four ways in which governance may regulate business in a country.    (4mks)
   1. By licensing of business in the country
   2. Imposing taxation
   3. Setting standards for both locally produced and imported goods
   4. Formulation of rules and regulations that must be adhered to in various business operations
   5. Fixing quotas
   6. Imposing total ban on new businesses
7. Highlight four duties of a clerk in an office.                             (4mks)
   1. Handling incoming and outgoing mails.
   2. Filing and indexing of files
   3. Reproduction of documents and operating various office machines
   4. Performing simple bookkeeping function
   5. Assist in  store keeping and record keeping
   6. Prepares payroll
8. Highlight four internal diseconomies of scale in firm.                   (4mks)
   1. Managerial and administrative problems.
   2. Slow decision making
   3. Huge overheads
   4. Problem of equipment operating below full capacity
   5. Problem of getting market for surplus output
   6. Stages of production become very interdependent
   7. Problem of acquiring extra factors of production
9. The following information related to businesses A, B, C and D.
   Determine the figures represented by M, N, P and Q.                                 ( 4mks)
   

   Business	Assets	Liabilities	Capital
   A	250,000	M - 100,000	150,000
   B	N - 1,000,000	400,000	600,000
   C	150,000	60,000	P - 90,000
   D	350,000	Q - 100,000	250,000

10. State four ways in which commercial banks help in facilitating business activities in a country.            (4mks)
    1. Accepting deposits of money from their customers
    2. Lending both short term and long -term loans to business people
    3. Enabling business people to access goods from other countries on credit by issuing letters of credit
    4. Offering means of payment to enable the business people carry out their transactions smoothly
    5. Offering advice on financial and investment matters
11. Highlight four circumstances under which a business would prefer to use email instead of a telephone.                 (4mks)
    1. When there is need of evidence
    2. When there is need of future reference
    3. When there is need to communicate to more than one person at the same time
    4. When there is need to send messages that contain photographs and diagrams
    5. When there is need of details.
12. Identify the external factors affecting business operations as described by the following statements.          ( 4mks)
    1. Law and policies that regulate business activities    legal political environment     
    2. Affects buyers’ ability to buy commodities offered by a business economic environment
    3. Firms selling similar products trying to outdo each other in their efforts to maximize profits competitive environment
    4. Dictates how people live and what products they consume cultural environment
13. State four factors that may affect capital of a business.                  (4mks)
    1. Profits
    2. Additional capital /investments
    3. Losses
    4. Drawings
14. Kamau retail shop carried out the transactions given in the table below. For each transaction state the source document applicable.     (4mks)
    

    Transaction	Source document
    a) Sold goods on credit	Issued /outgoing/sales invoice
    b) Informed a customer of an undercharge	Issued /outgoing debit note
    c) Sold goods for cash	Issued receipts/ cash sale slip
    d) Received allowance for goods returned to the supplier	Issued receipts

15. Highlight four disadvantages of a long chain of distribution to a buyer.      (4mks)
    1. Leads to increased prices of goods
    2. There is likelihood of delay of goods
    3. There are chances of damage of goods
    4. Perishable goods go bad due to delay
16. Highlight four ways in which a firm can improve the productivity of its labor.  (4mks)
    1. Education and training of workers
    2. Compensating (paying) workers according to their work
    3. Providing workers with suitable working equipment
    4. Providing good working conditions eg. Proper lighting
    5. Allowing employees to own part of the company by buying shares
    6. Offering benefits such as transport facilities, housing, lunch and insurance cover.
    7. Promoting good working relationships between workers and management
    8. Giving promotions and offering awards to deserving workers.
17. Outline four factors that may lead to a shift in demand curve to the right.           (4mks)
    1. Increase in population
    2. Favorable terms of sale
    3. Increase in consumers disposable income
    4. Future expectation of price increase
    5. Favorable tastes and preference toward the product
    6. Favorable season/ festivity
18. Outline four ways that can be taken to improve the efficiency of parastatals in Kenya. (4mks)
    1. Employing qualified staff
    2. Eliminating political influence in the running of parastatals
    3. Restricting the organizations to make them more competitive
    4. Motivating employees through various means such as promotions and salary increments
    5. Use of legal means to deal with embezzlement of funds and corruption
19. Enter the following transactions in the relevant ledgers.                        (4mks)
    2010 March 1 started a business with sh. 150,000 in cash
             March 3 bought furniture worth sh. 15,000 on credit
    Dr                                        Capital a/c                                                                    Cr
    

    March 1 cash                150,000

    
    Dr                                          Cash a/c                                                                     Cr
    

    March 1 Capital                150,000

    
    Dr                                          Creditors a/c                                                               Cr
    

    March 3 furniture                150,000

    
    Dr                                       furniture a/c                                                                   Cr
    

    March 1 creditors                150,000

    
    

    Dr.  capital   a/c	✓ Cr
    	1/3/2010       cash                   150,000

    
    

    Dr.  capital   a/c	✓ Cr
    1/3/2010   capital     150,000

    
    

    Dr.  furniture  a/c	✓ Cr
    3/3/2010  cash     15,000
    Dr.  creditors   a/c	✓Cr
    	3/3/2010       furniture         15,000

    8 ticks*1/2 = 4mks
20. Classify the following takes as either direct or indirect taxes.                     (4mks)
    

    Tax	Classification
    a) Income tax	Direct tax
    b) Value Added Tas (VAT)	Indirect tax
    c) Excise tax	Indirect tax
    d) Estate or death duty	Direct tax

21. Outline four uses of a cash book.                                                           (4mks)
    1. It serves as a ledger for cash and bank discounts
    2. Discloses discount received and discount allowed
    3. Relieves the main ledger of the many entries pertaining to cash and bank transactions
    4. Helps to ascertain the amount of cash in hand and at the bank at a given time
    5. Shows money paid out in form of cash or cheque
22. Outline four reasons why it is advisable to take endowment policy instead of a whole life policy.         (4mks)
    1. Premiums are paid during an agreed period
    2. Compensation is paid after the expiry of an agreed period.
    3. Assured benefits until death precedes the expiry of the agreed period
    4. Acts as a saving plan for future investment
23. Highlight four factors that discourage entrepreneurial development in Kenya.   (4mks)
    1. Unfavorable government policies eg. High tax
    2. Lack of relevant education and skills
    3. Poor infrastructure
    4. Lack of market
    5. Lack of resources such as capital, human, physical and technological resources
    6. Unable to cope with competition
    7. Political instability
24. Highlight four circumstances under which the per capita income would be a good indicator of the standard of living of the people of a country.                            (4mks)
    1. If the national income is evenly distributed among the people.
    2. In case the data used to compute is accurate and not based on projections or assumptions
    3. If the country is not experiencing inflation
    4. When the income per capita is not as a result of people being overworked
    5. In case the output is based on essential and final goods and services that are consumed by the masses
25. Identify the type of inflation described                                                      (4mks)
    
    

    Description	Type of inflation
    a) A rise in prices due to an increase in money supply	Demand pull inflation
    b) A rise in prices due to an increase in the cost of factors of production	Cost push inflation
    c) A rise in prices due to buying expensive goods from foreign countries	Imported inflation
    d) A rise in prices due to uneven growth in some sectors of the economy	Cost push inflation