Business Studies Paper 1 Questions and Answers - Murang'a County Mocks 2020/2021

565/1
BUSINESS STUDIES
PAPER 1
2 HOURS

INSTRUCTIONS TO CANDIDATES

1. Write your name, admission number and class in the spaces provided.
2. All questions should be written in the spaces provided.
3. This paper consists of 9 pages.
4. Candidates should answer the questions in English.

Questions

1. Outline four elements of demographic environment that may influence the operation of a business. (4 marks)
2. In the spaces provided below, indicate the type of utility created by each of the following business activities
   Business activity                                      Type of utility (4marks)
   Selling face masks to customers
   Transporting onions
   Storing onions in a granary
   Making a camera
3. Highlight four importance of consumer protection. (4 marks)
4. Highlight four disciplines of business studies. (4 mks)
5. State four benefits of “pooling of risks” to insurance company. (4marks)
6. State four reasons why the concept of choice is important in economics. (4mks)
7. The diagram below shows a shift in demand curve of a commodity from D_oD_o to D₁D₁.
   
   Outline four factors that may have contributed to the above shift. (4 mks)
8. Identify the book of original entry associated with the following sources documents given below. (4 marks)
   Source documents Books of original entry
   1. Invoice received
   2. Credit note received
   3. Receipt issued
   4. Credit note issued
9. State the unit of carriage for each of the following modes of transport 4mks)
   Mode of transport                                 unit of carriage
   
   Porterage                                            ______________
   Cartage                                              _______________
   Sea                                                    _______________
   Air                                                     _______________
10. Highlight four characteristics of money as a means of payment. (4mks)
11. State four ways of improving service delivery in parastatals and state corporation. (4marks)
12. State four circumstances under which a trader may require less warehousing space (4mks)
13. The use of electronic boards is becoming increasingly popular as a mean of product promotion. State four advantages derived from their use. (4 marks)
14. Outline four contributions of the households to the national income of a country. (4marks)
15. Outline four factors that an entrepreneur will consider when determining the most viable business opportunity. (4 mks)
16. List four factors that may discourage the use of pipeline as a means of transporting petroleum products in a country. (4 marks)
17. Open relevant ledger accounts using the following information. (4 mks)
    1/2/2011 started business with sh. 10,000 in cash and sh. 50,000 at bank.
    2/2/2011 Bought goods on credit from LK traders worth sh.5000
    4/2/2011 Withdrew sh. 2000 from bank for office use.
18. Outline four circumstances under which deffered payment may be used (4marks)
19. The following information relates to Mumbua traders for the year ended 31st April 2015.
                                        Shs.
    Cash at bank                 30,000
    Cash in hand                 40,000
    Current liability              500,000
    Sales                            920,000
    Opening stock               150,000
    Closing stock                 230,000
    Margin 25%
    Expenses 15% of sales
    
    Determine
    1. Gross profit (1mark)
    2. cost of sales (1mark)
    3. Purchase for the year (1mark)
    4. Net profit (1mark)
20. Identify four benefits of international trade to a country (4marks)
21. State four basic features of a market. (4 mks)
22. State four circumstances under which a business firm may use photocopying as a means of reproducing documents. (4 marks)
23. A business had the following record for the year ended 31st December 2018 (4mks)
                                                  sh.
    capital as at 31/12/18              64,000
    net profit for the year               14,000
    capital as at 1st Jan 2018         42,000
    Monthly drawings                       1,500
    Calculate the additional investments made during the year
24. Highlight four circumstances under which the heads of sales department may need to communicate with the head of production department in a business. (4 marks)
25. Hekima private limited company would like to open up a subsidiary branch in Mombasa. Outline factors it would consider before setting up the manufacturing unit (4mks)

Marking Scheme

1. Elements of demographic environment that may influence operation of business
   • Population size
   • Geographic distribution of population
   • The population density
   • Distribution of population by sex/gender
   • Distribution of population by age
   • Population growth rate. 4x1=4
2. utility created by each of the following business activities
   • Possession
   • Place
   • Time
   • Form 4x1=mks
3. Highlight four importance of consumer protection. ( 4 marks)
   • Protect consumer from wastage caused by hoarding
   • Protect them from underweight goods
   • Protect them from being overcharged
   • Protect them from harmful goods
   • protect them from false advertisement
4. Highlight four disciplines of business studies. (4 mks)
   • Accounting
   • Economics
   • Entrepreneurship
   • Commerce
   • Office practice
5. Circumstances under which differed payment may be appropriate
   • When the seller wants to attract or retain customers
   • When the seller wants to increase sales
   • When the seller wants to use credit facilities as a competing tool
   • When the seller want to dispose off slow moving stock
   • When credit worthiness of a customer is unquestionable 4x1=4
6. State four reasons why the concept of choice is important in Economics. (4mks)
   • Limited resources
   • unlimited human wants/needs
   • Scarcity of goods and services
   • Limited skills technology to produce goods.
   • Limited time to produce goods.
7. The diagram below shows a shift in demand curve of a commodity from DoDo to D1D1.
   Outline four factors that may have contributed to the above shift. (4 mks)
   • Decrease in consumers’ income
   • Unfair distribution of income
   • Decrease in population
   • Unfavourable tastes and preference
   • Decrease in price of substitute goods
   • Unfavourble weather changes
   • Unfavourable government policies
8. Identify the book of original entry associated with the following sources documents given below. ( 4 marks)
   Source documents                           Books of original entry
   
   Invoice received                              Purchase journal
   Credit note received                        Purchases returns / returns outward journal
   Receipt issued                                 Cash receipt journal
   Credit note issued                           Sales returns journal
9. Benefits of international trade to a country
   • Enable a country to sell (dispose of its surplus)
   • Enable a country to acquire goods and services which its unable to produce locally
   • A source of government revenue when import taxes are received
   • Creates employment to people when they engage in various trading activities
   • Enable a country to get variety of goods 4x1=4 marks
10. Highlight four characteristics of money as a means of payment. (4mks)
    • Malleability
    • Cognisability
    • Portability
    • Divisibility
    • Homogeneity
    • Complexity
    • Durability
    • Scarcity
    • General acceptability
11. Ways of improving service delivery in parastatals and state corporation
    • Regular auditing of books of accounts
    • Setting targets to be achieved by all firms
    • Retrenching some of the idle workers
    • Make them adapt modern technology
    • Employing qualified /skilled managers
    • Workers signing performance contract 4 x 1 = 4
12. State four circumstances under which a trader may require less warehousing space.
    • If he/she is dealing with perishable goods
    • When demand is very high
    • If he is located near customers
    • If dealing with fast moving goods.
    • If goods are of high value
    • If dealing with foods that require order.
13. The use of electronic boards is becoming increasingly popular as a mean of product promotion .State four advantages derived from their use. ( 4 marks)
    • Very attractive and cannot be easily ignored
    • Offer 24 hours service
    • Advert repeated over and over again
    • Can be used to demonstrate the use of the product
    • Creates a long lasting impression
    • They are strategically located to increase their coverage
14. Contributions of households to the national income of a country
    • Providing a ready market for commodities produced
    • Providing labour for firms
    • Paying taxes to the government
    • Providing savings and investments in the country
    • Providing land to firms
    • Offering capital to firms to facilitate production. 4 x 1 = 4mks
15. Outline factors that an entrepreneur will consider when determining the most viable business opportunity. (4 mks)
    • The profitability of business
    • Availabilty of required skills to manage the business
    • Availability of security
    • The level of competition
    • availability of market
    • Govt policy
    • Capital required
    • Possibilty of expansion
16. List four factors that may discourage the use of pipeline as a means of transporting petroleum products in a country. (4 marks)
    • Lack of adequate capital / finance for installation of pipelines
    • Nature of product may not require pipelines
    • Lack of appropriate technology for installation of pipes
    • Availability of other means of transports that is cheaper.
    • Rugged terrain that make it difficult and expensive to construct
17. Open relevant ledger accounts using the following information. (4 mks)
    1/2/2011 started business with sh. 10,000 in cash and sh. 50,000 at bank.
    2/2/2011 Bought goods on credit from LK traders worth sh.5000
    4/2/2011 Withdrew sh. 2000 from bank for office use.
    (8 x ¹/₂ = 4 mks)
    NB: date and details must be correct to score.
18. Circumstances under which deferrsed payment may be appropriat
    • When the seller wants to attract or retain customers
    • When the seller wants to increase sales
    • When the seller wants to use credit facilities as a competing tool
    • When the seller want to dispose off slow moving stock
    • When credit worthiness of a customer is unquestionable 4x1=4
19. Gross profit
    1. Margin =  Gp   x 100
                    Sales
       Gp = 25 x100
               920,000
       
       100Gp = 920000 x 25
       100              100
       
       Gp = 230,000 1 mk
    2. cost of sales
       sales – Gp = 920,000 – 230,000
       = 690,000 1mk
    3. Purchase for the year
       COGS = OS + P + CI – RO – CS
       690,000 = 150,000 + P – 230,000
       = 770,000 1mk
    4. Net profit
       Gp – expenses
       230,000 – (15 x 920000) = 230,000 – 138,000
                        100
       = 92,000        1mk
20. Benefits of international trade to a country
    • Enable a country to sell (dispose of its surplus)
    • Enable a country to acquire goods and services which its unable to produce locally
    • A source of government revenue when import taxes are received
    • Creates employment to people when they engage in various trading activitie
    • Enable a country to get variety of goods 4x1=4 marks
21. State four basic features of a market. (4 mks)
    • Availability of buyers
    • Availability of goods and services
    • Availability of sellers
    • Availability of medium of exchange
    • freedom to buy and sell
    • Area/a place
    • Interaction between buyers and sellers
22. Circumstances under which a business firm may use photocopying as a means of reproducing documents
    • When high quality copies are required
    • When copies are required fast since it quicker than duplicating or printing
    • When coloured copies are required
    • When there is no need for comparison with original
    • When the business does not want to pollute the environment
23. A business had the following record for the year ended 31st December 2018 (4mks)
    
    Capital as at 31/12/2018                 64,000
    Net profit for the year                      14,000
    Capital as at 1st Jan 2018                42,000
    Monthly drawings                              1500
    Calculate the additional investments made during the year.
    Final = Opening + Net + Additional – drawings – Net
    Capital capital profit investments
    
    64,000 = 42,000 + 14,000 + Ai – 18,000
    64000 = 38,000 + AI
    Additional investments = 64,000 – 38,000
    Ans = Shs. 26,000
24. Highlight four circumstances under which the heads of sales department may need to communicate with the head of production department in a business. ( 4 marks)
    • When he wants to co-ordinate and harmonize different activities to avoid waste
    • To help set achievable goals
    • To create teamwork within department
    • To share experiences on how to motivate the juniors
25. Hekima private limited company would like to open up a subsidiary branch in Mombasa, outline factors it would consider before setting up the manufacturing unit.
    • Potential demand for the goods
    • Source of raw materials
    • Security
    • Existing of instracture
    • Auxiliary services
    • Legal requirements
    • Effects on environment.