Business Studies Paper 1 Questions and Answers - Maranda High School Mock Exams 2023

Instructions to Candidates

• Answer ALL the questions
• All your answers must be written in English

1. Outline four services that support trade. (4 marks) 
2. List four examples of an open trade credit. (4 marks)
3. Outline four sources of capital for limited liability companies. (4 marks)
4. Identify four classification of goods described in each of the following statement. (4 marks)
   

   Description	Classification
   a) Have no monetary value.
   b) Goods that require special handling to be used in future
   c) Goods that are not ready for use before further processing
   d) Individual have inclusive right to usage

5. The capital of Mwangi Business on 1^st of January 2022 was sh. 133,000. During the year additional investment of sh. 29,000 and drawing amounting to sh. 45,000 were made. The business earned sh. 107,000 profit for the year ended 31^st December 2022. Calculate the capital as at 31^st December 2022. (4 marks)
6. State four external factors that are considered when evaluating business opportunity. (4 marks) 
7. The following transaction relates to Walimu books of account for the month of April 2023.
   1^st April had the following balances sh. 235,000 cash in hand and sh. 16,000 cash at Bank (Cr)
   6^th April settle his account with Watonga a creditor sh. 97,000 by cheque
   13^th April, received a cheque of sh. 28,000 from Omoyo
   30^th April deposited all the cash into business bank account
   Required: prepare a two column cash book. (4 marks)
8. Highlight four features of a tied shop. (4 marks)
9. Highlight four features a warehouse should have in order for it to function effectively. (4 marks) 
10. Identify the source documents that relate to each of the following transaction. (4 marks)
    

    Transaction	Source document
    a) goods are sold on credit
    b) When correcting an undercharge on customer who failed to return packing cases.
    c) When cash is received for goods sold.
    d) When payment for goods purchased is made by cheque.

11. Outline four advantages of using modern technology in production of goods. (4 marks) 
12. State four circumstances under which an accountant communicates to the accounts clerk. (4 marks) 
13. State four factors that lead to decrease in supply of commodities in a market. (4 marks)
14. Highlight four differences between money order and postal order. (4 marks) 
    

    Money order	Postal order

15. Highlight four benefits of locating a firm near the source of raw materials. (4 marks)
16. The following information were extracted from Shiriki traders’ books of account for the period ended 30^th April 2023
    Land                         100,000
    Capital                        94,000
    10 year Equity loan     20,000
    Debtors                         6,000
    Cash                           15,000
    Stock                           10,000
    Debentures                  14,500
    Creditors                        8,000
    Drawing                         5,500
    Calculate
    1. Working capital. (2 marks)
    2. Capital employed. (2 marks)
17. Outline four factors that may make an insurer to charge high premium. (4 marks)
18. Outline four guidelines that should be followed by the government in its expenditure. (4 marks)
19. State four ways in which government may control monopoly power. (4 marks)
20. Highlight four advantages of m- banking. (4 marks)
21. Give four types of errors that may not be disclosed by a trial balance. (4 marks)
22. Outline four challenges faced by saving credit co-operatives societies (SACCOs) in Kenya today. (4 marks) 
23. Highlight four demerits of giving a product to customers freely for trial. (4 marks)
24. Identify the documents that match the following description as used in the international trade. (4 marks)
    
    

    Description	Document
    a) The document that specify the manufacture to supply goods.
    b) The document that allow the person named therein to claim the goods when arrived at the port destination.
    c) Documents that show that the prices charged in import are fair.
    d) The document that authorizes resale of good being imported.

25. The following is a subsidiary book that was drawn for the first week of the month of May 2023;
    

    Date	Particulars	Credit note no.	Ledger folio	Amount
    May 2023  1  5  14	Mwanzo Enterprises  Kanini Merchants  Jumbo traders	093  179  008	PL   PL   PL	13,000    7,200   19,000
    	Totals to be credited to return Outwards a/c			39,200

    
    
    1. Identify the subsidiary book above. (1 mark) 
    2. Give a reason for your answer above (a). (1 mark)
    3. State the transaction that took place on the following date. (2 marks)
       1. 1^st May 2023
       2. 14^th May 2023 

Marking scheme

1.  
   1. Communication
   2.  Transport
   3.  Warehousing
   4. Insurance
   5. Banking
2.  
   1. Simple credit/ prompt cash
   2. Monthly credit
   3. Budget credit
   4. Trade credit
   5. Credit card facilities
3.  
   1. Sale of shares
   2. Debentures/loans from the public to the company
   3. Leasing and renting of property
   4. Profit ploughed back
   5. Bank overdraft
   6. Goods bought on credit
   7. Acquiring property through hire purchase
4.  
   1. Free goods
   2. perishable goods 
   3. Intermediate goods
   4. Private goods
5. Final capital = initial capital + Additional investment + profit – Drawing = 133,000 + 29,000 + 107,000- 45,000 = 224,000 
6.  
   1. Availability of market
   2.  Technology
   3. Raw material
   4. Government policy
   5. Level of competition
   6. Security
   7. Infrastructure/ water/communication/roads/ electricity
7. 1^st April had the following balances sh. 235,000 cash in hand and sh. 16,000 cash at Bank (Cr)
   6^th April settle his account with Watonga a creditor sh. 97,000 by cheque less 6% cash discount.
   13^th April, received a cheque of sh. 28,000 from Omoyo after him a cash discount of sh. 2300.
   30^th April deposited all the cash into business bank account 
8.  
   1. Sell goods from one manufacture 
   2. Management is control by manufacture 
   3. Price are determined by manufacture 
   4. Prices are same for same region
   5. Outlook design and appearance are similar
9. Highlight four features a warehouse should have in order for it to function effectively. (4 marks)
   1. Good communication
   2. proper building design 
   3. safety facilities 
   4. Appropriate equipment
   5. Good transport system
   6. Adequate space
   7. Appropriate staff
   8. proper recording systems
   9. Suitable location
   10. Compliance with the law 
   11. Appropriate special facilities
10. Identify the source documents that relate to each of the following transaction. (4 marks)

    Transaction	Source document
    a) goods are sold on credit	Sales invoice/ outgoing invoice/ copy of retain invoice/ copy of original invoice
    b) When correcting an undercharge on customer who failed to return packing cases.	Debit note copy /outgoing debit note/ additional invoice
    c) When cash is received for goods sold.	Receipt copy/ retained receipt / receipt issued
    d) When payment for goods purchased is made by cheque.	Original receipt/ incoming receipt/ receipt received

11. Outline four advantages of using modern technology in production of goods. (4 marks)
    1. Save on labour
    2. Fast/time saving 
    3. Accurate in production 
    4. Final product is presentable / uniformity
    5. Help in ensuring control 
    6. Mass production/large scale/ increase production
    7. High quality
12. State four circumstances under which an accountant communicates to the accounts clerk. (4 marks)
    1. When delegating duties
    2. when evaluating performance 
    3. If training
    4. When solving any problems facing them
    5. When inspiring and motivating/Giving rewards
13. State four factors that lead to decrease in supply of commodities in a market. (4 marks) 
    1. Decrease in price
    2. High cost of production
    3. Inviolability/ inadequate raw materials
    4. Use outdated/ obsolete/inappropriate technology
    5. Future expectation of increase in price of commodity 
    6. Unfavorable weather condition
    7. Withdrawal of firms from industry 
14. Highlight four difference between money order and postal order. (4 marks)  
    

    Money order	Postal order
    i). Sold for some of money applied for	i). Sold in fixed denomination
    ii). Fill application form	ii). Bought across counter/ no application
    iii). Paid to payee indicated	iii). Payable to bear
    iv). Payable at specific post office	iv). Payable at any post office
    v). Payable at post office only	v). May be payable at commercial bank
    vi). Payee must identify remitter	vi). Payee not required to identify remitter
    vii). Suitable for large sums	vii). Used for small remittance

15. Highlight four benefits of locating a firm near the source of raw materials. (4 marks) i
    1. Minimize transport cost 
    2. Minimize storage costs
    3. Ensure continuous production
    4. Reduce damages of raw materials 
    5. To be able to select the quality
16. The following information were extracted from Shiriki traders’ books of account for the period ended 30April 2023
    1. Working capital. (2 marks)
       W.C = C.A – C.L √
               = (debtors + cash+ Stock) – (creditors)√
               = 31,000 – 8,000 √
               = 23,000 √
       ( 4 x1/2 ) = 2 b
    2. Capital employed. (2 marks)
       C.E = Total Fixed Assets + working capital √
              = ( Land) + W.C
              = 100,000 √ + 23,000√
               = 123,000 √
       ( 4 x1/2 ) = 2
17. Outline four factors that may make an insurer to charge high premium. (4 marks)
    1. If the extent of the previous losses was high
    2. when the value of property insured is high
    3. If the insured resides in urban/ highly insecure place
    4. Where the period to be covered by the policy is short 
    5. Incase the health condition of the insured is poor/ terminal illness
    6. Where the person or property is old
    7. If there's high chance of risk occurring
    8. Where the insured occupation is risky 
18. Outline four guidelines that should be followed by the government in its expenditure. (4 marks) 
    1. Sanctions 
    2. Maximum social benefit
    3. Flexibility
    4. Economy
    5. Proper financial management
19. State four ways in which government may control monopoly power. (4 marks)
    1. Privatization
    2. Legislations
    3. Licensing
    4. Engaging in Business
    5. Provision of loans to Business people
    6. Antitrust laws
20. Highlight four advantages of m- banking. (4 marks)
    1. Allow top up mobile phone airtime 
    2. Enable one to detect if money has entered an account
    3. Request for mini-statement
    4. Enable to check account balance
    5. Pay utility bills 
    6. Transfer money from bank to mobile 
21. Give four types of errors that may not be disclosed by a trial balance. (4 marks)
    1. Errors of total omission
    2. Errors of original entry 
    3. Error of commission 
    4. Errors of principle 
    5. Compensating Errors 
    6. Complete reversal of entries
22. Outline four challenges faced by saving credit co-operatives societies (SACCOs) in Kenya today.(4 marks) 
    1. Inadequate finance to run.
    2. Mismanagement is common 
    3. Continual defaults by loanees which may cripple the saccos financially
    4. Stiff competition from established institutions 
    5. Corruption and mismanagement of funds 
23. Highlight four demerits of giving a product to customers freely for trial. (4 marks) 
    1. It is an expensive method
    2. It may not lead to increased sales where the product doesn't appeal to consumers
    3. Not appropriate for expensive items 
    4. Some of the people who receive sample products may not be part of the potential customers
24. Identify the documents that match the following description as used in the international trade. (4 marks)
    
    

    Description	Document
    The document that specify the manufacture to supply the goods	Closed Indent
    The document that allow the person named therein to claim the goods when arrived at the port of destination.	Bill of landing
    Documents that shows that the prices charged on import are fair.	Consular invoice
    The document that authorizes resale of goods being imported	Letter of hypothecation

25. The following is a subsidiary book that was drawn for the first week of the month of May 2023;
     

    Date	Particlulars	Credit note no	Ledger folio	Amount
    May 2023 1 5 14	Mwanzo Enterprises Kanini Merchants Jumbo traders	093 179 008	PL PL PL	13,000 7,200 19,000
    	Totals to be credited to  return outwards a/c			39,200

    
    
    1. Identify the subsidiary book above. (1 mark)
       Purchases return journal / return outward journal
    2. Give a reason for your answer above (a). (1 mark)
       Credit note number are not consecutive/ totals are posted to return outwards
    3. State the transaction that took place on the following date. (2 marks)
       1. 1^st May 2023 return goods worth 13,000 to Mwanzo Enterprises, credit no 093 was received
       2. 14^th May 2023 return goods worth 19,000 to Jumbo traders, served with credit note no. 008