Business Studies Paper 1 Questions and Answers - Achievers Joint Mock Exams 2023

Instructions

1. Answer all the questions
2. All answers should be written in the spaces provided in this booklet
3. Candidates should check the question paper to ascertain that all the pages are printed as indicated and that no questions are missing
4. Candidates should answer all the questions in English

For Examiner’s Use Only

QUESTIONS

1. Identify the rewards of the following factors of production (4Marks)
          Factor                Reward
   1. Limestone
   2. Teacher
   3. Exchange of goods
   4. Landlords
2. Outline four circumstances under which a firm would be located near the market for its p product (4Marks)
3. State four unethical practices that traders should avoid in product promotion (4Marks)
4. Nundu and Thuku bought a building for Kshs 12,000,000 The building was insured for 8,000,000 against the risk of fire Later the building was partially destroyed by fire to a tune of Kshs 6,000,000
   1. State the amount of compensation likely to be paid by the insurance company (3Marks)
   2. Give a reason for your answer (1Mark)
5. Outline three reasons why a seller may prefer cash with order (CWO) Policy in his operation (3Marks)
6. Study the diagram below and answer questions that follow
   
   
   1. What does this diagram represent? (1Mark)
   2. Identify what letters A,B,C and D represent
      A ....................................... (1Mark)
      B ....................................... (1Mark)
      C ....................................... (1Mark)
      D ....................................... (1Mark)
7. The final capital for Mundu’s business for the year ended 30th June 2022 was Kshs90, 000 During the trading period he made a loss of Kshs5000 and the additional investment of Kshs46, 000 and drawings of Kshs5, 100 Calculate the initial capital (4Marks)
8. The per capita income in a country X was £350 in January 2020 At the end of the year the per capita income had increased to £420 State four reasons why the standards of living of the people in the country X may not have risen during the year (4Marks)
9. Highlight four reasons why motorbikes have replaced bicycles as the choice for transport(4mks
10. The diagram below shows a demand curve DoDo and DIDI Highlight four factors to account for the above shift (4Marks)
    
11. A business opportunity exists where there is a gap to be filled in the market State four situations that may create a gap (4Marks)
12. State four factors that may limit an individual’s ability to satisfy his basic human wants(4mks)
13. The following details relate to Kango Traders as at 31.12.22
                  Shs
    Sales 300,000
    Stock (1/1/23) 45,000
    Stock (31/12/23) 35,000
    General expenses 25,000
    Capital 400,000
    Margin 25%
    Calculate;
    1. Purchases (2Marks)
    2. Net profit (1Mark)
    3. Rate of turnover (1Mark)
    4. Rate of return on capital (1Mark)
14. State three reasons why people hold money (3Marks)
15. Name four features that distinguish economic growth from economic development (4Marks)
16. Outline four circumstances under which partnership may be dissolved (4Marks)
17. As a banker to the government state four services that the central Bank renders to the government (4Marks)
18. The following transaction relate to Mawo traders Indicate the accounts to be debited and credited (4Marks)
    

    Transactions	Account to be debited	Account to be credited
    (a)   Withdraw cash from the bank for office use.
    (b)   Bought goods on credit
    (c)   Took shs 500,000 from the cash till to pay his son’s dowry
    (d) Converted his lorry into  business motor vehicle.

19. Highlight four circumstances under which a manufacturer would not require substantial warehousing (4Marks)
20. State four uses of an invoice to a seller of goods (4 Marks)
21. Outline four errors which do not affect the agreement of a trial balance (4 Marks)
22. Match the accounts below with the appropriate types of ledger where they are kept (4 Marks)
    1. Returns inwards
    2. Drawings
    3. Bank
    4. Discount received
23. Enter the following transactions is the two-column cash book of Katundu traders given below (4Marks)
    2021
    Feb 10 - Paid a creditor Shs7, 500 by cheque
    20 - Received Shs5, 000 in cash from Muthiani a debtor
    25 - Deposited Shs12, 500 into a bank
    28 - Paid wages Shs2, 400 in cash
24. Mula and Museba have each taken life assurance cover State four reasons why Mula is to pay higher premiums than Museba (4 Marks)
25. State four limitations of using mobile phone in communication (4Marks)

MARKING SCHEME

1. Rewards of factors of production
   1. Limestone - Rent
   2. Teacher - Salary/wages
   3. Exchange of goods - Profit/loss
   4. Landlords - Rent
2. Circumstances under which a firm would be located near the market for its product
   1. If the product is bulky
   2. If the market is localized
   3. If the products is highly perishable
   4. If the product is delicate
   5. When the firm wishes to reduce the cost of production
   6. When the value of the product is low
3. Unethical practices that traders should avoid in product promotion
   1. False or misleading information
   2. Negative information about competition
   3. Offering fake goods/counterfeit goods
   4. Pollution of the environment
   5. Use of offensive language
   6. Failure to reveal the side effects of a product (content)
   7. Promoting goods at lower prices than the actual selling prices
4.                      
   1.  A = S.X x Loss
             A.V
      = x 6,000,000
      = Shs.4,000,000
   2. The building had been under-insured
5. Reasons for preferring cash with order policy
   1. If the buyer is new to the seller
   2. If the buyer’s credit worthiness is in doubt
   3. Where the seller is operating a mail order business
   4. If C.W.O. is the policy of the business
   5. If the business is in an urgent need of cash
6.                    
   1. Circular flow of income
   2. A – Factors of production
      B - Rewards of the factors of production
      C - Goods and services
      D - Expenditure on goods and services
7. C₁ = C_O + I + P - D - L
   90,000 =C_o + 46,000 - 5,000 - 5,100
   Co = 90,000- 46,000 + 5,000 + 5,100
   = 54,100
8.              
   1. The income distribution could be uneven with so much of it in the hands of very few citizens and too little in the hands of the majority
   2. Incorrect statistics might have been used thus getting wrong figure of the national income.
   3. Higher income might have caused labour force leisure time or working under difficult conditions.
   4. The income might have been realized through activities that were detrimental to the environment or health of the workers
   5. The income might have been realized from illegal activities
   6. The effect of inflation may not be shown in the national income statistics yet it affects the purchasing power hence welfare of the citizens
9. Reasons why motorbikes are quickly replacing bicycles in transport
   1. They are faster than bicycles
   2. Motorbikes are economical in fuel consumption
   3. Motorbikes can travel longer distances
   4. They create employment opportunities
   5. They operate even at night
   6. They are more suitable for emergency situations.
   7. They generate more income than bicycles
   8. Can carry bigger capacities
   9. They are more comfortable than bicycles
10. Reasons for the rightwards shift of the demand curve
    1. Increase in consumer’s income
    2. Favourable government policies
    3. Future expectation of increase in the price of the commodity
    4. Future expectation of shortage in the supply of a commodity
    5. Decrease in price of the substitutes
    6. Increase in population size
    7. Positive change in consumer taste and preferences
       Any other relevant point.
11. Situations that may create a gap
    1. In availability of a product
    2. Absence of appropriate quality products
    3. Insufficient quality of a product in the market
    4. High prices being charged
    5. Identification of the market
12. Factors that may limit an individual’s ability to satisfy his basic human wants
    1. Low income
    2. Poor health
    3. High prices of goods and services
    4. Scarcity of goods and services
    5. Political instability
13.              
    1. GP = 25 x 300,000
                100
       = 75,000
       
       Therefore:
       = C.O.S = sales - GP
       = 300,000 - 75,000
       = 225,000√
       
       C.O.S = O.S + P - C.S
       
       Therefore:
       P = 225,000 - 45,000 + 35,000
       = 215,000√
    2. NP = GP - Expenses
       = 75,000 - 25,000
       = 50,000√
    3. R.O.T = cos = 225,000
                     A.S     40,000
       = 5.6 times √ = 6 times
    4. R.O.C. = N11 x 100
                        capital
       =  50 000    x 100
          400 000
       = 12.5%√
14. Reasons for holding money
    1. Speculation reasons
    2. Transaction reasons
    3. Precautionary reasons
15.              
    

    Economic growth	Economic development
    Refers to increase in national income over a period of one year It’s a quantitative increase in the size of a country’s national income There can be economic growth without economic development Can be measured at the rate of GDP changes from year to year	-It’s sustained rate of increase in national income over a long period e.g 10 years -It is qualitative and quantitative increment in the well being of a country’s economy -There cannot be economic development without economic growth -Can be measured in terms of welfare of life e.g improved standards of living.

    Any other relevant points
16. Circumstances for dissolving partnership
    1. If the partners mutually agree to dissolve the business
    2. When there is death, insanity or bankruptcy of a partner
    3. If the intended purpose is competed or the agreed time ends
    4. If a court orders for the dissolution of the business
    5. Where a partner requests for dissolution in writing
    6. If the business engages in unlawful practices
    7. If a partner retires or a new partner is admitted
    8. If there is a continued disagreement among the partners
17. The role of the CBK to the government
    1. It receives deposits on behalf of the government from foreign donors, income tax department, custom department etc
    2. It pays cheques drawn on the central bank
    3. Advances short-term and long-term loans
    4. Arranges national and foreign loans for the government
    5. Maintains and operates special accounts or the government
    6. Pays or remits funds abroad on behalf of the government
    7. Accepts deposit or custody funds received from abroad on behalf of the government
    8. Purchases, sells, transfers and accepts for custody cheques, bills of exchange and othersecurities on behalf of the government.
    9. Advices the government on financial matters
18.                          
    

    	Debit	Credit
    a)	Cash √	Bank √
    b)	Purchases √	Creditors √
    c)	Drawings √	Cash √
    d)	Motor vehicle√	Capital √ ½ x 8 = 4mks

19. Circumstances under which a manufacturer would not require a warehousing
    1. Where the scale of production is low due to shortage of the factors of production
    2. Where goods are produced as per order
    3. Where there are many wholesalers who can provide warehousing services
    4. Where demand is higher than the rate of production
    5. If goods are expensive and complicated to produce hence taking a lot of time to finish
    6. Where there are many large scale retailers offering warehousing services
    7. Where storage risks are very high.
20. Use of an invoice to a seller of goods
    1. Demands payment for the goods supplied to the buyer
    2. Acts as a cash receipt of sale
    3. Shows details of goods sold
    4. Used as a source document
    5. Shows that the buyer has been allowed to pay at later date
21. Errors which do not affect the agreement of a trial balance
    1. Omission of a transaction error
    2. Error of commission
    3. Error of principle
    4. Error of original entry
    5. Compensating error
    6. Error of complete reversal of entry
22. Accounts                       Types of ledger
    1. Returns inwards -Sales/ ledger/ debtors ledger
    2. Drawings Private ledger
    3. Bank -Cash book
    4. Discount received -Nominal ledger
23.                
    
    

    DATE	DETAILS	CASH	BANK	DATE	DETAILS	CASH	BANK
    2011				2011
    Feb 20	Receipts	5,000√		Feb. 10	Creditors		7,500√
    25			12,500√	28	Wages	2,400√
    				29	Bal C/d	2,600√	5,000√
    		5,000√	12,500√			5,000	12,500
    29	Bal b/d	2,600	5,000	½ x 8 = 4mks

24. Reasons for Mula paying higher premiums
    1. She might be more aged than Museba
    2. Her occupation might be exposing her to more risks than that of Museba
    3. She might be having a poor health
    4. Her hobby may be more exposed to risks than that of Museba
    5. She might have taken endowment policy while Museba might have taken whole life policy
    6. Her area of residence might be exposing her to greater risks than that of Museba
25. Limitation of using mobile phone in communication.
    1. Poor network coverage
    2. Not suitable for the deaf
    3. May be health hazard to the user
    4. May be distractive
    5. Expensive to operate
    6. Prone to frauds