Business Studies Paper 1 Questions and Answers - Momaliche Post Mock 2020 Exam

Instructions:

• Attempt ALL questions in the spaces provided.

1. State four challenges that a business without a plan will encounter in its operations. (4mks)
2. An entrepreneur may spot a gap in the market which may be converted into a business idea. Identify four such gaps. (4mks)
3. List down four trends in business ownership (4mks)
4. Outline four differences between Direct production and Indirect production (4mks)
5. The following balances were extracted from the books of Kariuki traders on 31st March 2018
   Fixed assets              300,000
   Current assets           123,700
   Creditors                   84,500
   5 year bank loan        125,000
   Determine the networth of the business as at 31st March 2018 (4mks)
6. Highlight four similaritiess between a bill of exchange and a promissory note. (4mks)
7. Indicate the type of journal in which each of the following transactions would be recorded.(4mks)
            Transaction                                                                    Type of journal
   1. Goods previously sold on credit were returned                    …………………….
   2. Goods bought on credit                                                     …………………….
   3. Goods sold for cash                                                          ……………………..
   4. Motor vehicle sold on credit                                               ………………………
8. Outline four ways of solving unemployment. (4mks)
9. Outline four ways in which commercial attachees may promote trade between their country and other countries. (4mks)
10. On 1^st January 2017 Mr. Nyachae started a business with Ksh. 10,000 in cash. The following transactions took place during the first week of his business commencing
    2nd January     Deposited Sh. 5,000 in the bank
    3rd January      Purchased stationery worth Sh. 1,000 in cash.
    4th January      Bought goods worth Sh. 2,000 by cheque
    Enter the above transactions in the relevant “T” accounts. (4mks)
11. Outline four differences between insurance and assurance. (4mks)
12. Give four ways in which consumers benefit from advertising (4mks)
13. State four features of monopolistic competition (4mks)
14. Outline four requirements for one to start a limited liability company as one of the forms of business units. (4mks)
15. State four characteristics of chain stores type of retail business. (4mks)
16. Identify the type of communication described below. (4mks)
    

    Description	Type of communication
    Principal addressing students on assembly
    Rumuors going round that the most hardworking employee will be awarded
    Student group discussion in a class
    An employee seeking for permission

17. Highlight four reasons why E-mail is increasingly becoming popular as a means of communication. (4mks)
18. Give four implications of a declining population (4mks)
19. Highlight four items that affect the asset stock. (4mks)
20. Classify the following accounts into personal, private, real or nominal (4mks)
    

    Account	Type of account
    Office equipment
    Debtor
    Capital
    Salaries

21. Name what the letters a, b, c and d represent in the circular flow of income. (4mks)
22. Omolo insured his house worth sh. 5,000,000 for sh. 4,000,000. His house was damaged by fire to the tune of sh. 3,000,000. Calculate how much Omolo was compensated. (4mks)
23. Identify any four Trade malpractices that consumers need protection against. (4mks)
24. Outline four functions of commercial banks (4mks)
25. State four types of capital in a business. (4mks)

MARKING SCHEME

1. Challenges faced by a business without a business plan
   1. Workers will not be motivated.
   2. Since financiers need this document, it will be difficult to access more finances.
   3. There will be very many mistakes
   4. It will not be able to identify strengths and weaknesses
   5. It will be difficult to know the finances required.
   6. Allocation of resources will be difficult.
   7. Potential investors will not have a reference document
2. Gaps in a business
   1. Poor quality goods and services
   2. High prices of products
   3. Low quantities
   4. Unavailability of a given product in the market
   5. Lack of after sales services
   6. Lack of varieties of goods and services
3. Trends in business ownership
   1. Privatization
   2. Globalization
   3. Amalgamation/merger
   4. Franchising
   5. Internet
   6. Absorptions/take overs
   7. Holding companies
   8. Cartels
   9. Multinationals
   10. Front Office Savings Account
4. Differences between direct production and indirect production.
   

   Direct production	Indirect production
   Production is meant for one’s own consumption	Production is meant for sale
   Production is done on small scale	Production is done on large scale
   Poor quality produce	High quality produce
   Simple methods of production used i.e no use of machines	Modern technology extensively used
   No specialization	There is specialization
   No surplus production	There is surplus production for the market

5. Determining the networth
   Assets = Capital + Liabilities
   Capital = Assets - Liabilities
   Total Assets                             Total liabilities
   Fixed assets    300,000             creditors              84,500
   Current assets 123,700             5 year bank loan 125,000
                         423,700                                      209,500
   Networth = 423,700 – 209,500
                 =214,200
6. Similarities between a bill of exchange and a promissory note
   1. Both can be discounted before maturity
   2. Both are acknowledgement of a debt
   3. Both are negotiable from one person to another
   4. Both allow debtors time to organize for payment.
7. Types of journal
   1. Sales returned journal
   2. Sales journal
   3. Cash receipt journal
   4. General journal
8. Methods of solving unemployment
   1. Encouragement of local and foreign investment to increase production activities
   2. Use of appropriate technology
   3. Adoption of a relevant education system
   4. Population control
   5. Encouraging informal sector in order to encourage self-employment
   6. Transforming rural sector in order to reduce rural-urban migration.
   7. Increased government expenditure
   8. Diversification of the economy
9. Ways in which commercial attatches may promote trade between their country and other countries
   1. Assist in organizing trade fairs and exhibitions
   2. Advise exporters on standards and legal requirements
   3. Carrying out market research
   4. Provide information about business opportunities
   5. Aid in facilitating payments
10. Preparation of ledger accounts. (Title must exist)
11. Differences between insurance and assurance
    

    Insurance	Assurance
    Has no surrender value	Has a surrender value
    The insurance contract is renewed yearly	Insurance contract is for life and does not require renewing
    Has no maturity date	Has maturity date
    There must be proof of insurable interest	There is no proof of insurable interest
    Risk insured may or may not happen	Risk insured against must happen
    Principle of subrogation/ Indemnity applies	Principle of subrogation/Indemnity does not apply
    Cannot be used as a saving scheme	Can be used as a saving scheme
    Protection is offered to property	Protection is offered to life

12. Ways in which consumers benefit from advertising
    1. Consumers get entertained from the adverts
    2. It informs consumers about offers in the market
    3. Consumers are guided on where to get the products
    4. Consumers enjoy a variety of products
    5. Competitions lead to quality products
    6. Consumers are made aware of the products in the market
    7. Consumers get cheaper prices due to competition
13. Features of monopolistic competition.
    1. Firms set similar prices
    2. There is free entry and exit
    3. Factors of production are not controlled
    4. There is perfect knowledge in the market
    5. Sellers sell differentiated products
    6. There are many buyers and sellers
    7. Actions of one firm are closely monitored by other firms
14. Requirements for one to start a limited liability company as one of the business units
    1. Memorandum of association
    2. Article of association
    3. List of directors
    4. Declaration of compliance
    5. Statement of share capital showing the total amount of capital that the company wishes to raise and it’s division into shares
15. Characteristics of a chain store
    1. Similar shop appearance and name
    2. Sell similar types of products
    3. Charge standard prices for their products
    4. All purchases are centralized
    5. Goods are freely transferable from one branch to another
    6. Administration is done from the head office
    7. Operate several branches in the country
    8. Sales are decentralized
16. Types of communication
    1. Downward communication
    2. Informal communication
    3. Horizontal/lateral
    4. Upward
17. Reasons why E-mail is increasingly becoming popular as a means of communication
    1. It is relatively cheap
    2. It is fast
    3. It can be used for future reference
    4. There is easy access to information
    5. There is easy retrieval of information
    6. It is confidential in nature
    7. It has immediate feedback
    8. It is used worldwide
    9. One can send detailed information through attatchment of documents.
18. Implications of a declining population(Both positive and negative)
    1. Less government expenditure on social amenities
    2. Increased job opportunities in a country
    3. Less pressure on economic resources
    4. Leads to even distribution of income in a country
    5. Improved standards of living of the people
    6. Less man power
    7. Less market/ demand
    8. Under utilization of resources
19. Items that affect the asset stock
    1. Sales
    2. Sales retuns
    3. Purchases
    4. Purchases returns
20. Types of accounts
    1. Real account
    2. Personal account
    3. Private account
    4. Nominal account
21. Causes of shift of the demand curve to the right ( Must qualify)
    1. increase in the level of consumer incomes
    2. Increase in the price of substitute goods
    3. Decrease in price of a complimentary good.
    4. Population increase
    5. Future expectation of an increase in price
    6. Favorable government policies e.g low taxation in consumers income
    7. Favorable change in taste/preference/fashion
22. Insurance compensation
    Compensation= Value of Policy x  Loss
                                  Value of property
    400,000 x 3, 000, 000
             5 000 000
    = 2,400,000
23. Trade malpractices that consumers need protection against
    1. False advertisement
    2. Overpricing
    3. False measurements
    4. Misleading advert
    5. Poor hygienic standards
    6. Unhealthy structures
    7. Hoarding
    8. Breach of contract
24. Functions of commercial banks
    1. Accepting deposits
    2. Transfer of money
    3. Lending money
    4. Collecting payments on behalf of customers
    5. Remitting payments on behalf of customers
    6. Facilitating trade
    7. Providing safe custody of valuables
    8. Acting as trustees
    9. Provide foreign exchange services
    10. Acting as referees for their clients
25. Types of capital in a business
    1. Working capital
    2. Borrowed capital
    3. Capital owned
    4. Capital employed
    5. Fixed capital