Business Studies Paper 1 Questions and Answers - Cekana Mock Exams 2023

Instrutions

• Answer all question

QUESTIONS

1. Name four skills that a student acquires by learning business studies. (4marks)
2. Highlight four possible contents of a business plan. (4marks)
3. Outline four benefits of the improved road network in Kenya. (4marks)
4. Nacada began a business on 1^st Jan 2023. With capital of sh 650,00 which he deposited in the business bank account. During the year the following transaction took place
   1. Brought into the business equipment valued at sh. 50,000
   2. Made a profit of sh. 120,000
   3. Withdrew sh, 80,000 from the business bank account to pay for his son’s university fee. Determine Nacada final capital
5. State four incentive that a government may give investors to locate their firms in rural area(4marks)
6. The gap in incomes between the rich and the poor is so wide in Kenya. Highlight four factors that have contributed to this. (4marks)
7. Outline four features of a sole proprietorship form of business unit. (4marks)
8. Give four advantages of using M-pesa as a means of payment. (4marks)
9. Outline four circumstances under which downwards communication may be used. (4marks)
10. Mention the principle of insurance involved in the following statement. (4marks)
    1. One cannot insure the neighbor’s house
    2. Compensation is paid out by an insurance company only if the loss is as a direct result of happening of the event insured against
    3. After having been compensated the insured is not allowed to take the scrap
    4. The aim of the insurance company is to put back the insured to his original material financial position and not to profit him
11. For each of the following daybooks, State the relevant source document
    1. Sales journal……………………………………………………………………………………………..
    2. Cash receipt journal……………………………………………………………………………………
    3. Purchases return journal……………………………………………………………………………..
    4. Sales return journal……………………………………………………………………………….......
12. On 1.5.2015 Kui traders bought 240 carton of battery at ksh.1000 each . Terms of sale were 20%trader discount and cash discount if payment was made on 29.4.2015
    Calculate the amount paid if payment was done on 26.4.2015 (4 marks)
13. Hadjia has an intention of starting a business in the local market. The demand and supply is represented in the diagram below
    
    State four consequences of selling the cabbages at p2 (4marks)
14. Outline four circumstances under which a trade would advertise his products over the radio instead of television (4marks)
15. Outline four ways in which the physical environment may lead business failure (4marks)
16. Give four types of errors that are not disclosed in a trial balance. (4marks)
17. Highlight four reasons for dishonoring a properly drawn cheque (4marks)
18. In each of the following cases,state the type of inflation described. (4marks)
    1. The unrest in Ukraine has resulted to an increase in the price of fertilizers……………………………….
    2. The price of bread has gone up to sh.60 due increase in the price of fertilizers……………………………
    3. A lot of money in circulation has led to the general increase of price………………………………………
    4. Arise in price due to uneven growth in some sectors of the economy ……...................................................
19. The following information relates to average price of exports and imports in 2021 and 2022 of country k
    Year        Average price of export       Average price of imports
    2021        100,000                              400,000
    2022        120,000                              650,000
    Required:
    1. Calculate the terms of trade (3marks)
    2. Comment on the term of trade calculated above (1mark)
20. Rufus trader
    Dr        Three column cash book                                   cr
    

    Date	Details		Cash	Bank	D .All	DATE	Details	f	Cash	Bank	D.REC
    22/1/01 22/1/08 22/1/12	Capital Cash Drawings		20,000 2000	10,000		22/1/01 2/1/08	Capital Bank		10,000	1000

    
    From the above cashbook state the transactions that took place on
    1. 22.1.01 (2marks)
    2. 22/1/08 (1mark)
    3. 22/1/12 (1mark)
21. Outline four problems that the Kenyan government may experience in implementing her vision 2030 (4marks)
22. State four types of business activities in central Kenya (4marks)
23. Outline the significance of the following international terms of sale. (4marks)
    1. Ex-works
    2. Free on rail
    3. Free on board
    4. Cost and freight
24. State four types of direct taxes (4marks)
25. The following transactions took place in the business of Kua traders during the first week of March 2023.
    March 2 issued an invoice no. 840 to Karen sh.80,000
    March 3: Received an invoice no 940 from Mugera Traders sh 50,000 (4marks)
    Record the above information in the relevant ledger accounts.

MARKING SCHEME

1.  Skill acquired in studying business studies
   • Acquire business skills of buying and selling goods
   • create career foundation to the learning students
   • Acquire self reliance skills
   • Acquire critical thinking and making rational judgment
   • Acquire basic recording skills/accounting
   • Acquire negotiations skills/ bargaining skills
   • Acquire management skills
   • Acquire enterpreneunal skills
2. Content of business plan
   • Name of the business
   • Description of the market opportunity
   • Organizational structure
   • Owners of the business
   • Financial requirement
   • Human resources needed
   • Summary of the plan
   • The product or service to be offered
   • Future revenues stream
   • Proposed legal structure
3. Benefits of improved road network in kenya
   • Easy access to market
   • Reduced cost of transport
   • Create time utility/save time
   • Open up productive regions hence exploitation of the idle resources
   • Reduces the cost of operations
   • Provide variety of goods in many regions
                                              Sh
4.  Initial capital                        650,000
   Add additional capital           50,000
                                               700,000
   Add profit                            120,000
                                              820,000
   Less drawings                     80,000
   Final capital                       740,000
5. Incentives given by a government to attract investors
   • ax relief/holidays
   • Giving financial assistance(low interest rate on loans)
   • Provision of security
   • Offering free or cheap land
   • Provision of goods infrastructure
   • Shorten/ease registration process for firm
   • Influencing government policy of delocalization
6. Factors that contribute to disparity in income distribution in Kenya
   • Corruption
   • Disparity in access to education
   • Differences in individual/ personal talent endowment
   • Some people being politically advantaged over others
   • Nepotism in securing good job opportunities
   • Inheritance some people had a lot to inherit from their parents while other did not have anything
   • Disparity in natural resources
7. Features of sole proprietorship
   • Owned by one person/ capital in contributed by one person
   • Is usually small due to limited capital
   • Is highly flexible
   • Secrecy and confidentiality are maintained in this business
   • The proprietor has unlimited liability
   • Lack perpetual succession/its life is limited
   • In law the business and the owner are one
8. Advantages of using M-pesa as a means of payment.
   • Secure means of payment can be accessed 24/7
   • Fast means of payment
   • Can pay large amount of money
   • Accessible to many parts of the country
   • Reduces transport cost when looking for money transfer services
9. Circumstances under which downward communication may be used
   • When senior employee are providing training to the junior employees
   • When senior employees are evaluating performance of junior employees
   • When senior employees are assigning duties and task to the junior workers
   • When management is trying to solve problem affecting workers
   • When management want to inspire or motivate junior employees
10. Principles of insurance
    • Insurable interest
    • proximate cause
    • Subrogation
    • Indemnity
11. Relevant sources of documents
    • Invoice sent/issued/outgoing invoice
    • Cash Receipt issued /cheque received , cash slip issued
    • Credit note received/incoming
    • Credit note issued/outgoing
12.  catalogue price 240 × 100=240,000
    trade discount 20⁄100 × 24000=^48,000/ _sh192000
    cash discount 10⁄100  ×192000=19200
    amount paid (192,00-19,200)=172800
13. Consequences of selling the cabbage at price p2
    • There will be pressure on the price to go down
    • Consumers may go for substitute which are cheaper
    • Demand for cabbages decreases
    • Likely to have surplus cabbages/ less will be bought
14.  
    • When a large audience is targeted
    • When the target is low to afford radio
    • When it is cheaper to advertise through radio than T.V
    • When visual impression of the product is not necessary
    • Where there is need to use local language appropriate to the target group since most T.V stations do use vernacular languages
15. Ways in which physical environment may lead to business failure
    • Poor transport network making it difficult for traders to transport their goods to market
    • Poor terrain making construction of business expensive
    • Poor climate making poor harvest in agricultural goods
    • Inadequate network in valleys
16. Errors not disclosed in trial balance
    • Error of omission:- result from total omission of transaction from ledger account thus there is no record of the transaction
    • Error of commission,- this is committed in the ledger when one or both entries are posted to the correct class of account but wrong personal account
    • Error of principle- Result from double entry of transaction made in the wrong class of account
    • Error of original entry:- made from misreading of figures at the source document
    • Compensation errors:- it arises from two errors of the same magnitude on either side of the ledger cancelling each other
    • Error of complete reversal -this arises from complete reverse of double entry of transaction in the ledger
      (not must for the explanation )
17. Reasons for dishonoring a properly drawn cheque
    • If the drawers account has insufficient funds
    • If the drawer instruct the bank not to honour the cheque
    • If the signature on the face of the cheque differs with the specimen in the bank
    • If the cheque is postdated
    • If the cheque is staled cheque
18.  
    • Imported inflation
    • Cost push
    • Demand pull
    • Structural
19.  
    1.  
       Export price index = 12000⁄100000 × 100%=120%
       import price index= 650000⁄400000  ×100%=162.5%
       export price index = terms of trade= ^{export price}⁄_{import price index} indpx × 100%=120⁄1625  ×100%
    2. Comment on the term of trade calculated above
       • unfavorable terms of trade
20.  
    1. 22/1/01 Started a business with cash of sh 20,000 and a bank overdraft of sh.1000
    2. 22/1/08 deposited 10,000 in the bank account(contra entry)
    3. 22/1/12 took 2000 cash for personal use
21. Problems faced by Kenyan government implementing vision 2030
    • Lack of domestic resources such as skilled personnel
    • Over reliance on donor funding
    • Natural calamities such as diseases, flood, drought
    • Over-ambitious plans
    • Lack of co-operation among executing parties
    • Inflation which may make the estimated value of implementation not be adequate
22. Business activities in central Kenya
    • Trade
    • Manufacturing
    • Processing
    • Construction
    • Provision Of Services
    • Distribution
23. Significance of international terms.
    • Ex-work the price quoted include the cost of goods as they are in the exporters premises
    • Free- on rail-this means that the price is quoted include cost of transporting goods from the seller premises onto the nearest station and loading them to rail
    • Free on board-this means that the price quoted include the cost of goods, carriage cost and the cost of loading goods into ship.
    • Cost and freight-this means that the price quoted include the price for goods as well as shipping charges
24. Types of direct taxes
    • Income Tax/PAYE taxes
    • Estate duty tax
    • Stump duty tax
    • Capital gain tax
    • Residual rental income tax
    • Wealth tax
    • Capital transfer tax
    • Withholding tax
    • Property tax
25. 
    DR                          SALES A/C                                        CR
    

    date 2023	Particulars Kamau	folio	amount	Date 2023	Particulars	folio 840	amount 80,000
    March 2				March	Karen

    DR                         Karen A/C                                        CR
    

    Date 2023	Particulars Sales	Folio 840	Amount 80,000
    March 2

    
    DR                          PURCHASES A/C
    

    Date	Particulars	Folio	Amount
    2023 March 13	mugera	940	50,000

    
                                    MUGERA A/C                                            CR
    

    		Date 2023	Particulars purchases	Folio 940	Amount 1 50,000
    		March13