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

Instructions to Candidates

• Answer all the questions

1. Highlight four characteristics of basic human wants. (4marks)
2. Outline four macro environment that may affect the performance of business negatively.(4marks)
3. State four ways in which the government of Kenya may create an enabling environment for business to be sustained. (4 marks)
4. Highlight four ways in which small scale farmers benefit from activities of produce cooperative societies (4marks)
5. Highlight four sources of monopoly power. (4marks)
6. In the spaces provided, state the source document for each of the subsidiary books given below.(4marks)
   

   Subsidiary book		Source document
   (i)	Sales Journal
   (ii)	Purchases Journal
   (iii)	Returns inwards journal
   (iv)	Cash payment journal

7. Highlight four factors that influences transactionary motive of holding money (4marks)
8. Outline four reasons why a business may be located near the source of its raw materials  (4marks)
9. State four factors that may necessitate reinsurance. (4marks)
10. State four ethical practices in product promotion that a trader should observe.(4marks)
11. State four factors which account for continued existence of small scale firms despite of benefit enjoyed by large firms
12. State four reasons why a person would prefer a letter to telephone to communicate.(4marks)
13. The following information was extracted from the books of Maendeleo traders for the year ending 31^st December 2021.
                                                   ksh
    Opening stock                       30,000
    Closing stock                         50,000
    Sales                                     400,000
    Rate of stock Turn over          5 times
    Prepare a trading account for the year ended 31^st December 2021. (4 marks)
14. The following balances were extracted from BoraBora traders on 31 st Dec. 2020.
                                         Shs.
    Capital                        17,000
    Cash                           10,000
    Return Inwards             5,000
    Rent                            15,000
    Sales                           40,000
    Purchases                   30,000
    Commission received  8,000
    Drawings                      5,000
    Required prepare the trial balance (5marks)
15. List four assumptions to the circulation of income in a two sector economy (4marks)
16. Outline three ways of safeguarding organization’s property. (3 marks)
17. Highlight four features of a bonded warehouse (4 marks)
18. The equation given below relate to quantity demanded and quantity supplied at the equilibrium point.
    De = 4p + 50              Se = 8 + 30
    Determine the equilibrium price and quantity (4marks)
19. State Four factors that may be considered when measuring the size of the firm.
20. Outline four features of liners in sea transport. (4marks)
21. List four types of small-scale retail businesses that one can run without a shop. (4marks)
22. Indicate the level of production associated with each of the occupations. (4marks)
    

    	Occupation	Level of production
    (a)	Mining
    (b)	Oil refining
    (c)	Insurace
    (d)	Teachinig

23. Outline four factors that Demka Daivics would consider when selecting a channel to distribute their fresh milk. (4marks)
24. Highlight four positive implications of a youthful population to an economy (4marks)
25. State the effect of each of the following transactions on the balance sheet totals by writing increase, decrease or no effect in each case. (4marks)
    

    	Transaction	Effect
    (a)	Bought machines on credit
    (b)	Purchased stock in cash
    (c)	Paid outstanding loan by cheque
    (d)	Withdrew cash from the business for personal use

MARKING SCHEME

1. Four circumstances under which a kiosk owner in Thika town will insist on cash with order terms of payment
   1. When the buyer is new to the seller
   2. If the seller requires working capital.
   3. Where the seller went to the cost of maintain a lot of debtors records.
   4. Where the creditworthiness of the customer is in doubt.
   5. Where the seller requires cash urgently.
   6. If C.W.O is the business policy.
   7. Where the seller want avoid bad debts.
      
   8. Where the seller is operating a mail order business.
   9. Incase the buyer is new to the seller
   10. If the seller want to minimize the cost of collecting debts.
2. Four macro environment that may affect a business negatively.
   1. Unfavourable government polices.
   2. Poorly developed infrastructure.
   3. Political instability.
   4. Unfavourable natural factors
   5. Stiff competition
   6. Negative social-cultural factors.
   7. Unfavourable economic factors/Natural calamities.
   8. Unsteady and unreliable supply.
   9. Strong consumer bargain power.
   10. Low population
   11. Inarticulate technology.
3. Four ways in which the government may create an enabling environment.
   1. Training and educating entrepreneurs.
   2. Promisor of subsidies.
   3. Formulating favourable policies to protect local industries from foreign competition.
   4. Loan guarantee.
   5. Marketing final products of producers.
   6. Giving incentives such as tax wavers and holidays.
   7. Ensuring political stability.
   8. Training and educating population to create a pool of sailed labour.
4. Four ways in which small scale farmers benefit from activities of producer cooperative societies.
   1. May receive input at fair prices and on credit
   2. May get transport facilities for product to the mark.
   3. May get better storage facilities
   4. May be educate on better production methods
   5. May benefit from processing grading and packing of his produce.
   6. Society negotiates for better prices for the farmers produces.
   7. The farmer may get loans on easy terms and conditions
   8. The society search for ready market for the farmers produces.
5. Four sources of monopoly power.
   1. Control and ownership of source of a strategic input.
   2. Exclusive rights given by the government,
   3. Small size of the market at is best served by one from.
   4. High initial capital requirement.
   5. Ownership of production/patent/copy rights
   6. Greater internal economies of scales.
   7. Absorption/ merger/acquisition of firms to form one large firm.
6. Subsidiary book Source document

   Subsidiary book		Source document
   (i)	Sales Journal	Sales/outgoing/issued invoice
   (ii)	Purchases Journal	Purchases/incoming/Received/invoice
   (iii)	Returns inwards journal	Outgoing/issued credit note
   (iv)	Cash payment journal	Received/incoming cash receipt.

7. Four factors that influences transaction motive
   1. Interval between income receipts
   2. Number on dependents
   3. Individual’s level of income
   4. Individual’s spending habits
   5. Availability of credit
   6. Rate of inflation/ price of products.
8. Four reasons why a business may be located near the source of its raw materials
   1. If the raw materials are highly perishable
   2. Incase the raw materials are heavy and bulky than the finished.
   3. If it is the government policy
   4. If the raw material are bulky
   5. Where the is save on the cost of transportation
9. Four factors that may necessitate re-insurance
   1. Need to create clients confidence
   2. Need to speed risks
   3. Requirement by the government
   4. Incase the insurance firm has insured many risks
   5. If the value of the property insured is high
   6. Chances of losses occurring is high
10. Four ethical practices in product promotion a trader should observe.
    1. Avoiding cheating on the ingredient of a product.
    2. Avoiding false pricing
    3. Awarding environmental pollution
    4. Avoiding portraying rival business negatively
    5. Complying to government laws
    6. Avoiding false advertising
    7. Not cheating on the product performance
    8. Avoiding conflict with social-cultural values of consumers.
11. Four factors which account for continued existence of small scale firms despite of benefit enjoyed by large firms.
    1. Requires little capital to start.
    2. Small businesses are easy to manage.
    3. Small size of the market that is best served by small firms
    4. Government legal constraints
    5. Small firms are flexible
    6. Decision making is fast
    7. Business scarcest are maintained
    8. Owners wish to remain small
12. Four reasons why one preferred a letter to telephone to communicate.
    1. Letters provide record for future reference and evidence
    2. Letters provide confidentiality than telephone
    3. Letters are relatively.
    4. Letters can be provided to many copies
    5. Where the message in not urgent
    6. Where immediate feedback is not required
    7. Letter can communicate more detailed information.
    8. Where the recipient is literate
13.                                                                            Maendeleo Trader
                                                                                 Trading A/C
                                                                 For the year ending 31^st December 2021
    Opening stock           30,000                       Sales                 400,000
    Purchases               670,000
    AFS                         700,000
    Closing stock           500,000
    C.O.G.S                  200,000
    Gross profit             230,000
                                    400,000
14.                                                                             BoraBora Traders
                                                                                   Trial Balance
    

    Details	Dr	Cr
    Capital		17,000
    Cash	10,000
    Return inwards	5,000
    Rent	15,000
    Sales		40,000
    Purchases	30,000
    Commission received		8,000
    Drawings	5,000
    	65,000	65,000

15. Four assumptions to the circular flow of income in a two-sector economy
    1. There are only two player in the economy- household and firms
    2. House hold spend all incomes in goods and service without saving.
    3. Firms spend all their revenues on purchases of factors of production.
    4. There is no government interference
    5. The economy is closed there no exports or imports.
    6. All output produced by firms is purchased by household
    7. There is no surplus
    8. There is no injection of income
16. 3 ways of safe guarding organization properties
    1. Ensuring security through eg CCTV, employing security guards.
    2. Taking insurance covers
    3. Proper repairs and maintenance
    4. Physical stocking taking.
    5. Maintaining records of assist movement.
17. Four features of a bonded warehouse.
    1. Are located at entry pints.
    2. Are meant for storage of exports and imports
    3. Requires a release warrant for goods to be released from the warehouses.
    4. Works hand in hand with custom duty officials
    5. Custom duty payment is exempted if goods are re-exported.
    6. Custom duty burden is transferred to the new buyer if goods are sold while in the warehouse.
    7. Guarantees custom duty payment.
    8. Goods can be auctioned by the government if not collected from the warehouse within the stipulated period of time.
18. 4p +50 = 80+30
    8p – 4p = 50-30
    4p = 20
    P = sh 5.
    Equilibrium price = sh 5
    Equilibrium quantity = (4x5) + 50
                                     =70
19. Four factors that may be considered when measuring the size of the firm.
    1. Volume of sale
    2. Size of the market served.
    3. Initial capital invested
    4. Methods of production used
    5. Number of employees
    6. Floor space occupied by the firms premises.
20. Four features of linear in sea transport
    1. Ferry passengers or Cargo
    2. Follow a regular timetable or schedule
    3. Call at ports at regular intervals
    4. Follow a regular route
    5. Charges are fixed
    6. Have fixed/ follow regular route
    7. Form associations called conferences to protect themselves against unfair competition.
21. Small scale retail business without on shop.
    1. Automatic vending machine
    2. Open air market trading
    3. Online selling
    4. Hawking
    5. peddling
    6. Road-side- serving
22.  
    

    	Occupation	Level of production
    (a)	Mining	primary
    (b)	Oil refining	secondary
    (c)	Insurace	Tertiary
    (d)	Teachinig	Tertiary

23. Factors to consider when selecting a chance to distribute
    1. Cost of the channel
    2. Geographical spread of the customers
    3. Level of cooperation
    4. Government policy
    5. Reliability of the channel
    6. Perishability of the milk
    7. Calculability of middlemen
    8. Availability of distribution resources.
    9. Goods size of the market
24. Positive implication of a youthful population
    1. Less expenditure on social security and pension
    2. Wide market for goods meant for the youth
    3. Guaranteed continuous supply of labour
    4. Flexibility and adaptability to technological changes which improve production.
    5. Faster growth in sectors like music fashion and fast food industries.
    6. Increased incretion due to youth’s adventurous nature.
25.  
    

    	Transaction	Effect
    (a)	Bought machines on credit	Increase
    (b)	Purchased stock in cash	No effect
    (c)	Paid outstanding loan by cheque	Decrease
    (d)	Withdrew cash from the business for personal use	Decrease