Business Studies P1 Questions and Answers - Momaliche 4 cycle Post Mock Exams 2021/2022

QUESTIONS

1. State four reasons that would make an individual to engage in business. (4mks)
2. Highlight four circumstances that can lead to creation of a monopoly. (4mks)
3. Outline four differences between insurance and assurance. (4mks)
   

   	Insurance	Assurance
   a
   b
   c
   d

4. Outline four benefits to a business that uses its own warehouse. (4mks)
5. With an aid of a diagram, illustrate a change in equilibrium points following a decrease in demand. (4mks)
6. State four circumstances under which firms would form a cartel. (4mks)
7. Highlight four measures that a government may take to reduce the mortality rate in a country.(4mks)
8. In the recent past, the Kenyan government has been privatizing its state businesses. State four reasons for doing this. (4mks)
9. Highlight three challenges that a person may encounter when using a mobile phone (3mks)
10. Highlight four ways in which a business idea can be implemented. (4mks)
11. Outline four assumptions that would make circular flow of income in a two sector economy to hold.
12. On 1st January 2009, Kerubo Traders had Shs. 8,000.00 in cash and Shs. 70,000.00 at bank. During the month, the following transactions took place:
    January
    08: Paid Onsarigo Traders Shs. 15,000.00 by cheque and was givenShs.1,000.00 cash discount.
    12: Sold goods for Shs. 24,000.00 cash and gave 5% discount
    31: Banked all the cash except Shs. 5,200.00
    Enter the above transactions in cash book and balance it off. (5mks)
13. List four levels of inflation. (4mks)
14. State four ways that may be used to control the amount of money in circulation by the Central Bank of Kenya. (4mks)
15. Outline four characteristics of a good tax system. (4mks)
16. State four reasons why food is considered a basic want. (4mks)
17. The following information was extracted from the books of Toboso Traders on 30th June 2021
    Stock on January 1st 2009 Shs. 60,000.00
    Stock on December 31st 2009 Shs. 30,000.00
    Expenses Shs. 35,000.00
    Sales Shs. 450,000.00
    Margin 25%
    Calculate:
    
    1. Purchases for the year (2mks)
    2. Net profit for the year (2mks)
18. Give four current trends in product promotion. (4mks)
19. Name the ledger in which the following accounts are maintained. (4mks)
    

    	Account	Ledger
    a	Yabasa(a debtor) a/c
    b	Machines a/c
    c	Rent a/c
    d	Capital a/c

20. Highlight four benefits that would accrue to a firm located near other existing firms. (4mks)
21. List four ways though which the government may create a condusive environment for business operations. (4mks)
22. The following information was extracted from the records of Arti Traders for the month of January 2020.
    2010
    Jan 02 : Bought a motor car on credit from Nyakweba Enterprises worth Shs. 23,000.00
    05 : Sold an typewriter to Shon Traders on credit worth Shs. 40,000.00
    08 : Sold old furniture whose book value was Shs. 20,000.00 on credit to Banderas Traders.
    Required: Prepare the relevant book of original entry. (4mks)
23. State four ways in which the balance of payment of a country may be improved. (4mks)
24. Customers to the offices of Fanisi Enterprises have been complaining of lack of etiquette from the secretaries. Highlight four measures that the secretaries can take to improve the office etiquette.(4mks)
25. Highlight four indicators of economic growth that may be observed as a country progresses. (4mks)

MARKING SCHEME

1. State four reasons that would make an individual to engage in business.
   • Provision of goods/ services
   • Provision of employment
   • Exploitation of available resources
   • Exploitation of individuals’ creativity/innovation/hobbies/talents
   • To earn profit/income
   • To be self-reliant and independent/own boss
   • To make use of spare time
   • To take advantage of government incentives eg loans for youth/women
     (1×4)=4mks
2. Highlight four circumstances that can lead to creation of a monopoly. (4mks)
   • Existence of substantial economies of scale due to the size of a firm thus locking out everyone else from the market.
   • Ownership of the source of raw material by a firm.
   • Total control over market patents.
   • Ownership of production rights or patents.
   • Government policy giving exclusive rights to a firm to produce a particular product or offer a particular service.
   • High initial capital investment making it hard for potential competitors to establish firm or firms.
   • Takeovers and mergers of firms to create one big firm.
     (1×4)=4mks
3. Outline four differences between insurance and assurance.
   

   	Insurance	Assurance
   a	Protection offered to property	Protection offered to life
   b	Risk insured against may or may not happen	Risks insured against must happen(time is not known.
   c	The insurance contract is renewable after every year(short term)	Insurance contract is for life and does not require renewal(long term)
   d	Compensation is given to the owner of the property in case of loss/uncertain	Compensation is given to beneficiaries in case of death/certain
   e	A replacement of the goods lost can be given/contract of indemnity.	Lost life can never be replaced/ not a contract of indemnity
   f	Has no surrender value	Has surrender value

   (1×4)=4mks
4. Outline four benefits to a business that uses its own warehouse. (4mks)
   • Business maintains a continuous supply of goods
   • Customers are retained as they are sure of getting the goods on demand
   • Goods are safe from theft
   • Manufacturer can offer steady supply of seasonal goods
   • Goods are protected from physical damage
   • Goods are protected from pilferage
   • Some goods mature/improve in quality eg wine while in warehouse
   • Goods can be prepared for sale.
     (1×4)=4mks
5. With an aid of a diagram, illustrate a change in equilibrium points following a decrease in demand.
6. State four circumstances under which firms would form a cartel.
   • Where there is need to control output by each firm
   • When there is need to be in control of market prices/market
   • When there is need to eliminate stiff competition among the firms
   • Where there is need to restrict entry of new firms into the market
   • Where there is need to increase the firms bargaining power
   • Where there is need to guarantee the income hence financial strength of the firms
     (1×4)=4mks
7. Highlight four measures that a government may take to reduce the mortality rate in a country.
   • Availability of better health care
   • Food security
   • Minimizing internal conflicts and wars
   • Improving environmental sanitation
   • Sensitizing of public on personal hygiene , HIV education, vaccination, family planning
   • Disaster preparedness eg flood, fires
   • Creation of an enabling environment to alleviate poverty
   • Control of drug abuse and alcohol
   • Control crimes
   • Apply measures to reduce accidents
     (1×4)=4mks
8. In the recent past, the Kenyan government has been privatizing its state businesses. State four reasons for doing this.
   • To improve efficiency in their operations
   • To generate revenue to the government through sale of shares
   • To enhance competition
   • To increase public participation in economic activities of the country
   • To reduce government expenditure/dispose loss making public corporations
   • To comply with conditions set by development partners and international donor agencies
   • To enable the government to concentrate on other state responsibilities.
   • To minimize political interference.
     (1×4)=4mks
9. Highlight three challenges that a person may encounter when using a mobile phone
   • May be damaging to ears
   • Are relatively expensive to acquire
   • Calls or messages sent may be tapped
   • Its use may be limited where there is lack of network
   • May not be used under certain circumstances eg banking halls/public service vehicles
   • Possibility of loss of handset to thieves
   • Relatively expensive to operate
   • Requires constant charging
   • Prone to misuse eg fraudsters
   • Channel overloads(network congestion)
   • Difficult to operate especially smart phones
     (1×3)=3mks
10. Highlight four ways in which a business idea can be implemented.
    • Creating a new good(waste materials)
    • Improving an existing good(quality)
    • Improving the process of production(efficiency)
    • Improving marketing strategies
    • Offering unique services
    • Improving the quality of services
    • Improving the quality of goods
      (1×4)=4mks
11. Outline four assumptions that would make circular flow of income in a two sector economy to hold.
    • Households spend all their income to buy goods and services
    • No government participation
    • All goods and services produced sold/no surplus
    • No savings
    • Firms spend all their income to pay for factor services
    • The economy is closed/ no foreign trade
    • A household can’t be a consumer and producer at the same time
      (1×4)=4mks
12. On 1st January 2009, Kerubo Traders had Shs. 8,000.00 in cash and Shs. 70,000.00 at bank. During the month, the following transactions took place:
    January
    08: Paid Onsarigo Traders Shs. 15,000.00 by cheque and was givenShs.1,000.00 cash discount.
    12: Sold goods for Shs. 24,000.00 cash and gave 5% discount
    31: Banked all the cash except Shs. 5,200.00
    Enter the above transactions in cash book and balance it off. (5mks)
13. List four levels of inflation.
    • Hyperinflation/runaway
    • Galloping/rapid
    • Stagflation
    • Creeping inflation/mild/moderate
      (1×4)=4mks
14. State four ways that may be used to control the amount of money in circulation by the Central Bank of Kenya.
    • Instructing commercial banks to only lend in priority areas/ selective credit control
    • Practicing domestic borrowing /open market operations
    • Increasing interest rates on loans advanced by commercial banks / bank rate increases
    • Requirements that commercial bank maintain cash liquidity ratio
    • Special/compulsory deposits
    • Margin requirements higher(higher/lower collateral)
    • Moral Permission
    • Direct action/directives
      (1×4)=4mks
15. Outline four characteristics of a good tax system.
    • Equitably distributes the tax burden according to the payers ability to pay/equity
    • Certain and clearly defines what the payer is expected to pay/certainty
    • Convenient and easy for the taxpayer to meet the tax obligations/convenience
    • Economical and allows the tax to be collected at the least cost/economy
    • Flexible enough to allow for adjustments according to the prevailing conditions/flexibility
    • Diverse as to capture as many sources as possible/diversity/broad based
    • Simple enough to be understood by all the taxpayers/simplicity
    • Elastic and able to generate more revenue with improved economic performance/elasticity
      (1×4)=4mks
16. State four reasons why food is considered a basic want.
    • One cannot do without it
    • It is a felt need
    • It cannot be postponed
    • It has to be satisfied before secondary wants
      (1×4)=4mks
17. The following information was extracted from the books of Toboso Traders on 30th June 2021
    Stock on January 1st 2009 Shs. 60,000.00
    Stock on December 31st 2009 Shs. 30,000.00
    Expenses Shs. 35,000.00
    Sales Shs. 450,000.00
    Margin 25%
    Calculate:
    1. Purchases for the year (2mks)
    2. Net profit for the year (2mks)
18. Give four current trends in product promotion.
    • Increased use of trade fairs and exhibitions, both locally and internationally.
    • Increased use of radio and television for advertising.
    • Emerging importance of public relations as many organizations have PR departments.
    • Increased use of printed adverts due to high levels of literacy.
    • Truthful, accurate and ethical promotion due to stiff competition and public awareness.
    • Stiff competition which has led to fierce promotional strategies.
    • Technological advancement that has resulted in more effective methods of product promotion.
    • Formation of consumer-based pressure groups to lobby for the enactment of laws governing consumer and producer behaviour.
    • Increased government regulation on the promotion of certain products e.g. alcohol
    • Use of different promotional strategies jointly.
    • Product promotion through the internet.
    • Product promotion through the use of trucks and caravans.
      (1×4)=4mks
19. Name the ledger in which the following accounts are maintained.
    

    	Account	Ledger
    a	Yabasa(a debtor) a/c	Sales
    b	Machines a/c	Real/General
    c	Rent a/c	Nominal/General
    d	Capital a/c	Private

    (1×4)=4mks
20. Highlight four benefits that would accrue to a firm located near other existing firms.
    • Enjoyment of existing infrastructure
    • Access to labour
    • Collaboration with existing firms e.g. research and development
    • Auxiliary services
    • Access to markets
    • Social amenities
      (1×4)=4mks
21. List four ways though which the government may create a conducive environment for business operations.
    • Provision of subsidies / financial assistance/loans/ loan guarantee
    • Reduction or removal of taxes/ tax holidays/ duty free privileges
    • Licensing to reduce unhealthy competition
    • Protectionist measures
    • Training business people
    • Getting markets for locally produced goods
    • Provision of infrastructure
    • Provision of security
      (1×4)=4mks
22. The following information was extracted from the records of Arti Traders for the month of January 2020.
    2010
    Jan 02 : Bought a motor car on credit from Nyakweba Enterprises worth Shs. 23,000.00
    05 : Sold an typewriter to Shon Traders on credit worth Shs. 40,000.00 for Shs. 35,000.00
    08 : Sold old furniture whose book value was Shs. 20,000.00 for 25,000.00 on credit to Banderas Traders.
    Required: Prepare the relevant book of original entry. (4mks)
23. State four ways in which the balance of payment of a country may be improved.
    • Restriction of imports
    • Diversification of exports
    • Export promotion
    • Devaluation of the country’s economy
    • Deflation/reduced money supply
    • Value addition to increase the value of exports
    • Encourage foreign investments
    • Restriction of capital outflow.
      (1×4)=4mks
24. Customers to the offices of Fanisi Enterprises have been complaining of lack of etiquette from the secretaries. Highlight four measures that the secretaries can take to improve the office etiquette.
    • Show respect to both colleagues and visitors
    • Observe courtesy in dealing with people
    • Be organized at work at all times
    • Be honest/truthful in performing duties
    • Co-operative with other workers, visitors and management.
    • Be punctual in offering services
    • Be loyal to the organization
    • Be diplomatic
    • Make sound judgment
    • Be accurate
    • Have initiative
      (1×4)=4mks
25. Highlight four indicators of economic growth that may be observed as a country progresses.
    • Increased national income/GNP
    • Increased national output/GDP
    • Improved infrastructure
    • Improvement in the provision of health facilities
    • Increased education opportunities/improved literacy levels
    • Increasing life expectancies
    • Improved housing for the population
    • Provision of more social amenities for leisure
    • Improved standards of living for the citizens/reduction in poverty levels
    • Increased per capita income
    • Increased employment opportunities
    • Reduced dependency ratio/self-reliance
    • Reduced income disparities
    • Good governance/democracy
    • Reduction of negative cultural practices
    • Improved technology
    • Industrialization
    • Increased entrepreneurial activities.
      (1×4)=4mks