KCSE 2015 Business Paper 1 with Marking Scheme

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  1. What are the reasons that would make an individual engage in business? (4 marks)
  2. List four types of utility and the production activity associated with each of them. (4 marks)
  3. Outline four ways in which the office facilitates effective handling of documents. (4 marks)
  4. Highlight four factors that may influence a consumer to purchase products from a kiosk rather than a supermarket. (4 marks)
  5. State four circumstances under which hire purchase may be used to acquire goods. (4 marks)
  6. Give four reasons for the increased use of mobile phones when banking. (4 marks)
  7. Outline four methods that the Government of Kenya uses to regulate business activities.(4 marks)
  8. State four disadvantages of using the internet as a means of communication. (4 marks)
  9. State four differences between life assurance and general insurance. (4 marks)
  10. Give four reasons for observing ethical practices in product promotion. (4 marks)
  11. The graph given below represents the demand and supply curves of milk.
    demand and supply curves KCSE 2015
    State four effects of a shift of the demand curve to the right. (4 marks)
  12. Outline four disadvantages that a manufacturer would suffer if wholesalers were eliminated from the chain of distribution. (4 marks)
  13. The following balance sheet was incorrectly prepared.



    FOR THE YEAR ENDED 31.12.12



    Stock 5,000

    Debtors 50,000

    Bank overdraft 5,000

    Furniture 7,000

    Cash 9,000

    Capital 66,000




    Prepare a corrected balance sheet.(4 marks)
  14. The following figures relate to Jumbo Traders for the year ended 31.12.13.
    Details                                                  Ksh
    Capital (31.12.13)                                 940,000
    Net loss                                                 20,000
    Additional investment                            420,000
    Monthly drawings                                   5,000
    Determine the capital as at 1.01.13. (4 marks)
  15. Identify the ledgers in which the following accounts are maintained. (5 marks)ledger KCSE 2015
  16. List three levels of inflation. (3 marks)
  17. Name the documents described by the statements given below used in International Trade. (4 marks)
    1. Request for payment before goods are delivered
    2. Shows ownership or title of goods imported
    3. Shows the country of manufacture of goods.
    4. Shows the transportation charges for goods.
  18. The following Purchase Returns Journal relates to Farasi Traders.




























    Mimi Supplies










    Post the information above to the relevant ledger accounts. (4 marks)
  19. Outline four goals of development to a country. (4 marks)
  20. The following information relates to Kahawa Traders as at 31st December 2012.
    Stock                1.1.12                 Ksh 80,000
    Stock                 31.1.12              Ksh 120,000
    Purchases                                   Ksh 1,000,000
    Margin                                         20%
    Prepare a trading account. (5 marks)
  21. State four reasons that make it necessary for firms to maintain a healthy environment. (4 marks)
  22. Highlight four benefits of business plan to an entrepreneur. (4 marks)
  23. Outline four benefits of sea transport over air transport. (4 marks)
  24. In which ways can an investor benefit from stock exchange? (4 marks)
  25. State three clauses found in the Memorandum of Association. (3 marks)


  1. Reasons that would make an individual engage in business include:
    1. Provision of goods and services.
    2. provision of employment.
    3. Exploitation of economic resources.
    4. Exploitation of individuals creativity/innovation/talents/hobbies/skills.
    5. To earn a profit/income. To be self reliant and independent/own boss.
    6. To make use of spare time.
    7. For prestidge
    8. To take advantage of government incentives eg. loans for youth and women.
      Any 4 @ 1 = 4 marks
  2. Types of utility and the production activity associated with each of them.
             Utility    Production activity
    1. Time - Warehousing /storage
    2. Place - Transport
    3. Form - Manufacturing processing/construction
    4. Possession - Trade/exchange
  3. Ways in which the office facilitates effective handling of documents includes:
    1. Receiving documents
    2. Recording documents
    3. Reproducing documents
    4. Distributing / mailing documents
    5. Storing/filing of documents.
    6. Employing qualified staff.
    7. Safeguarding documents.
    8. Provision of relevant equipment.
      4@ 1 = 4 marks
  4. Factors that may influence a consumer to purchase products from a kiosk rather than a supermarket include:
    1. Kiosks may offer credit facilities without any security offered.
    2. Kiosks bring goods closer to consumers.
    3. Kiosks provide sizes/quantities consumer can afford.
    4. Kiosk owners have personal contact/touch with consumers.
    5. Kiosks may be accessed beyond the normal working routine when the need arises.
    6. Kiosks may allow for bargaining.
    7. Kiosks may offer advice. To promote the kiosk owner.
      = 4 marks
  5. Circumstances under which Hire purchase may be used to acquire goods include:
    1. When the buyer does not have enough money to pay at once.
    2. When the product is expensive.
    3. When the buyer wants to use the item immediately before completing paying.
    4. When the buyer is a salaried employee/has regular income.
    5. When the buyer desires to own luxurious items.
    6. When the buyer wants to save in the form of goods.
    7. When the goods are durable in nature.
    8. When the goods can generate income to pay the installments.
      = 4 marks
  6. Reasons for the increased use of mobile phones in banking includes:
    1. Safer than carrying cash.
    2. Easy to transact
    3. It is convenient because transactions can be conducted anywhere.
    4. It saves on time since there is no travelling and queuing for the services.
    5. The speed of transaction is fast.
    6. It reduces paper work by eliminating the need for physical files and other documentations.
    7. The use of PIN enhances security. 
    8. Increased ownership of mobile phones.
    9. Transactions can be conducted at any time.
    10. Reduced transaction costs.
    11. Easy access to transaction records.
      Any 4 @ 1 = 4 marks
  7. Methods of regulating business activities in Kenya include:
    1. Licensing business activities;
    2. Setting of standards;
    3. Formulation of policies/enacting laws/legislation;
    4. Setting quotas;
    5. Enforcement of laws;
    6. Imposing total ban;
    7. Subsidizing business;
    8. Taxation;
    9. Price control.
      =  4 marks
  8. Disadvantages of using internet as a means of communication include:
    1. Most hardware required is expensive to buy/ acquire.
    2. Accessing / using the internet is expensive/software;
    3. Requires knowledge and skills to operate;
    4. Prone to attack by fraudesters/hackers/lacks confidentiality;
    5. Affected by lack / disruptions of network/links; 
    6. It may be affected by computer virus;
    7. Limited internet connectivity;
    8. It may be affected by power failure;
    9. It is prone to network overload (congestion).
      = 4 marks
  9. Differences between life assurance and general insurance include:
    (i) Has surrender value
    (ii) Long term contract
    (iii) Can be assigned to beneficiaries
    (iv) Principle of indemnity will not apply.
    (v) Assured benefits from double insurance.
    (vi) Principle of subrogation will not apply
    (vii) It deals with life
    (viii) Risk is certain
    No surrender value 
    Short term contract / annual contract
    Cannot be assigned to beneficiaries / third party.
    Principles of indemnity applies.
    Insured loses out on double insurance.
    Principle of subrogation will apply.
    It deals with property
    Risk may or may not occur
    =  4 marks
  10. Reasons for observing ethical practices in product promotion include:
    1. Ensures fair competition among businesses.
    2. Ensures consumer's interests are protected eg. false advertisement, overpricing.
    3. Ensures that businesses comply with the law.
    4. It protects the environment from degradation.
    5. Improves the image of the business.
    6. Maintain morality in the society/cultural values.
      Any 4 @ 1 = 4 marks
  11. Effects of a shift of the demand curve to the right.
    1. The price will increase.
    2. The quantity demanded will increase/demand will increase.
    3. The equilibrium quantity shifts to the right/increases.
    4. The equilibrium price shifts upwards / increase.
    5. The equilibrium shifts upwards to the right.
      Any 4 @ 1 = 4 marks
  12. Disadvantages to the manufacturer if wholesalers are eliminated from the chain of distribution include:
    1. Manufacturer will have to break bulk;
    2. Incur cost of storage;
    3. Incur cost of transporting goods to the retailers; 
    4. Incur cost of advertising / promoting products;
    5. Bear risks associated with distribution eg. damages, fall in prices;
    6. Manufacturer will have to prepare goods for sale eg. blending, branding, sorting etc;
    7. Manufacturer will have to carry out market research;
    8. Manufacture will have to give credit to retailers who are many.
      Any 4 @ 1 = 4 marks
  13. Correct balance sheet
    Balance Sheet
    As at 31st December, 2012
    Furniture 50,000
    Stock 5,000
    Debtors 7,000
    Cash 9,000
    Capital 66,000
    Bank overdraft 5,000

    (8 ticks = 4 marks)
  14. Determining the capital as at 1.1.13.
    Initial capital = closing capital + net loss + drawings - additional investments
    IC = CC + NL+D - AI
    = 940,000 + 20,000 + (5,000 x12) - 420,000
    = 600,000
    (8 ticks @ "Y, = 4 marks)
  15. Ledgers in which the following accounts are maintained.
    Account Ledger 
    Debtors  Sales/debtors
    Machinery General 
    Rent  Nominal  
    Capital  Private 
    Juma (Creditor)  Purchases/creditors 
    = 5 marks
  16. Levels of inflation include:
    1. Mild / moderate inflation;
    2. Gradual / creeping inflation;
    3. Galloping / hyper inflation;
    4. Stagflation.
  17. The documents described by the given statements
    1. Proforma invoice
    2. Bill of lading
    3. Certificate of origin
    4. Freight note
  18. Relevant ledger accounts
    Junior Account  
    Dr  Cr
    2012             Ksh 
    March 1 Purchases
    Returns 2,000


    MIMI Supplies Account
    Dr Cr
    2012             Ksh
    March 3 Purchases
    Returns 4,000


     Kilimanjaro Account
    Dr Cr
    2012               Ksh
    March 4  Purchases
    Returns      5,000

    Purchases Returns Account
    Dr Cr
      2012                                                 Ksh 
    March 4   Total for the month   Kshs 11,000
    = 4 marks
  19. Goals of development in a country include:
    1. Alleviation of poverty
    2. Attainment of high and sustainable economic growth.
    3. Provision of adequate social ammenities eg. health facilities.
    4. Diversification of the economy to reduce over-reliance on a few products.
    5. Alleviation of unemployment.
    6. Attainment of more equitable distribution of incomes.
    7. Enhancement / upholding of human freedom, rights and self esteem/democracy.
    8. Provision of security.
    9. Maintenance of political stability/good governance.
    10. Attainment of food security for population.
    11. Alleviation of illiteracy.
    12. Technological advancement.
    13. Elimination of harmful cultural practices.
      = 4 marks

    For the year ended 31st December 2012
    Opening stock       80,000
    Add purchases  1,000,000
    COGAS Less      1,080,000
    Closing stock       120,000
    Cost of sales        960,000
    Gross profit c/d    240.000

    Sales       1,200,000

    Gross b/d   240,000
    (= 5 marks)
  21. Reasons that make it necessary for firms to maintain a healthy environment include:
    1. To protect /safeguard human health eg. employees, customers, surrounding community;
    2. To maintain the ecological balance;
    3. To conserve natural resources / raw materials;
    4. For sustainable economic development;
    5. For environmental conservation;
    6. To comply with the set laws;
    7. As part of corporate social responsibility;
    8. To enhance corporate.
      Any 4 @ 1 = 4 marks
  22. Benefits of a business plan to an entrepreneur include:
    1. Facilitates acquisition of loans from financial institutions and other financiers.
    2. Provides guidance for opening new or expanding existing business.
    3. It acts as a management / monitoring tool for the business.
    4. It's a tool for evaluating business performance.
    5. It lays the strategy to be used in marketing the products.
    6. It enhances the credibility of the business.
    7. It is a motivational tool.
    8. To avoid mistakes.
    9. Proper allocation of resources.
      Any 4 @ 1 = 4 marks
  23. Benefits of sea transport over air transport include:
    1. Large carrying capacity which is ideal for bulky/heavy goods.
    2. Sea transports large quantities of goods.
    3. Low cost of transportation over long distances.
    4. Special ships are available for carrying special goods.
    5. Its more economical to operate.
      = 4 marks
  24. Ways in which an investor may benefit from the stock exchange include:
    1. Provide information on share prices that guides investors on when to buy / sell shares.
    2. Provide market /mechanism for buying / selling shares / other securities.
    3. Protecting investor interest by requiring quoted companies to maintain certain standards of management.
    4. Provide information on company performance that help investors to make investment decision.
    5. Listing share prices enables investor to monitor their wealth.
    6. Encourage savings in form of shares.
    7. Enables investors to spread risks by buying different types of shares/port folio.
    8. Avails a variety of securities to chose from.
      Any 4 @ 1 = 4 marks
  25. Clauses found in the Memorandum of Association include:
    1. Name clause
    2. Liability clause
    3. Capital clause
    4. Situation clause
    5. Objects clause
    6. Association and subscription clause
    7. Declaration clause.
      Any 3 @ 1 = 3 marks
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