Business Studies Paper 1 Questions and Answers - Form 4 Term 2 Opener Exams 2022

Instructions to candidates

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

For Examiners Use Only

QUESTIONS

1. Highlight four reasons why people engage in Business activities.
2. Outline four types of resources that are important in Business. (4mks)
3. State four functions of an entrepreneur in the production of goods and services. (4mks)
4. Identify the machine used to perform the following tasks. (4mks)
   

   Statements	The machine
   a)      To count coins and notes
   b)      To trim paper into required sizes and shapes
   c)      To fold documents, place them in envelope and seal the envelope
   d)     To print postage impression on envelopes

5. Outline four differences between chain stores and departmental stores. (4mks)
   

   Chain stores	Departmental stores
   i)
   ii)
   iii)
   iv)

6. State four statistics that are associated with the measurement of National income. (4mks)
7. Prepare Sunshine Traders Balance sheet from the following list of balances extracted from his books as at31 December 2013. (4mks)
   Capital 357,000
   Stock 40,000
   Machines 150,000
   Furniture 7,000
   Motor vehicles 200,000
   Bank 20,000
   Creditors 25,000
   Cash 5,000
   Debtors 60,000
   Loan from KCB 100,000
8. Outline four characteristics of a good filing system (4mks)
9. Highlight four methods that Government uses to protect consumers. (4mks)
10. State four factors that a manager should bear in mind to ensure that he/she effectively communicates with the employees. (4mks)
11. State the meaning of the following principles of insurance . (4mks)
    1. Subrogation
    2. Contribution
    3. Insurable interest
    4. Indemnity
12. Highlight four characteristics of underdevelopment. (4mks)
13. 
    State four factors that may have caused the change shown in the diagram above. 4mks
14. Highlight four causes of unemployment in Kenya. (4mks)
15. Outline four circumstances under which Mr Ondieki (a farmer) may distribute his products directly to his customers. (4mks)
16. Tripple SSS wholesalers had the following information as at 31 December 2013 (4mks)
    Closing capital 70,000
    Total expenses 5,000
    Drawings of goods 6,000
    Total incomes 3,000
    Calculate the capital at the beginning of the year.
17. Highlight four advantages of localization of firms. (4mks)
18. State four characteristics of good money. (4mks)
19. Identify the day book associated with the following source documents given below. (4mks)
    

    Source documents	Day books
    Invoice received
    Credit note received
    Receipt issued
    Debit note received

20. Highlight four purposes of public finance. (4mks)
21. The following balances were extracted from the books of Okinda wholesalers on 31st December 2006. (4mks)
    Sh
    Capital 800,000
    Sales 250,000
    Debtors 70,000
    Purchases 160,000
    Creditors 45,000
    Opening stock (1.1.2006) 40,000
    Closing stock (31.12.2006) 20,000
    General expenses 50,000
    5 year bank loan 200,000
    Insurance expenses 20,000
    Salaries and wages 80,000
    Required, calculate
    
    1. Mark up (1mk)
    2. Current ratio (1mk)
    3. Rate of stock turnover (1mk)
    4. Rate on return on capital (1mk)
22. Outline four money transfer facilities offered by commercial banks. (4mks)
23. Highlight four uses of a proforma invoice. (4mks)
24. State four factors that affect the productivity of an office worker. (4mks)
25. In each of the following cases, state the type of inflation described (4mks)
    

    a)  The unrest in Libya has resulted to an increase in the price of oil
    b)The price of bread has gone upto sh.60 due to increase in the price of wheat
    c) A lot of money in circulation has led to the general increase of price
    d) Arise in price due to uneven growth in some sectors of the economy.

MARKING SCHEME

1. Highlight four reasons why people engage in Business activities. (4mks)
   1. To create employment opportunities
   2. To make use of available local resources
   3. To be their own bosses
   4. To increase their present income
   5. To utilize their free time
   6. To commercialize their skills and talents
2. Outline four types of resources that are important in Business. (4mks)
   1. Human resources
   2. Financial resources
   3. Physical resources
   4. Technology
3. State four functions of an entrepreneur in the production of goods and services. (4mks)
   1. They bear all the risks associated with production
   2. They provide the required capital to carry out production
   3. They acquire all other factors of production
   4. They identify and set up viable business
   5. They coordinate and organize the other factors of production
4. Identify the machine used to perform the following tasks. (4mks)
   

   Statements	The machine
   a)      To count coins and notes	Money counting machine
   b)      To trim paper into required sizes and shapes	Gullotine
   c)      To fold documents, place them in envelope and seal the envelope	Composite machine
   d)     To print postage impression on envelopes	Franking machine

5. Outline four differences between chain stores and departmental stores. (4mks)
   

   Chain stores	Departmental stores
   i)  They have branches all over the country e.g ART Ltd	All departments operate under one roof
   ii) Stock a limited variety of goods	Stock a wide variety of goods
   iii) All branches sell similar goods. Purchases are centralized	Each department deals with different line of goods. Purchases are decentralized
   iv) Prices are uniform in all branches	Each department sets its own price

6. State four statistics that are associated with the measurement of National income. (4mks)
   1. Gross National Product
   2. Net National product
   3. Gross Domestic product
   4. Net Domestic product
7. Prepare Sunshine Traders Balance sheet from the following list of balances extracted from his books as at31 December 2013. (4mks)
   Capital 357,000
   Stock 40,000
   Machines 150,000
   Furniture 7,000
   Motor vehicles 200,000
   Bank 20,000
   Creditors 25,000
   Cash 5,000
   Debtors 60,000
   Loan from KCB 100,000
   SUNSHINE TRADERS
   BALANCE SHEET
   AS AT 31/12/2013
   

   Assets                                     Sh.	Capital + Liabilities          Sh.
   Stock                                      40,000 Machines                              150,000 Furniture                                   7,000 Motor vehicles                      200,000 Bank                                        20,000 Cash                                           5,000 Debtors                                    60,000                                                 482,000	Capital                                                  357,000 Liabilities Creditors                                                  25,000 Loan from KCB                                    100,000                                                              482,000

8. Outline four characteristics of a good filing system (4mks)
   1. Simplicity
   2. Compactness i.e occupy little office space
   3. Suitability
   4. Should be economical
   5. Safety
   6. Accessibility
9. Highlight four methods that Government uses to protect consumers. (4mks)
   1. Setting up standards
   2. By licensing
   3. Weights and measures act
   4. Food and drug act
   5. Trade description act / sale of good act
   6. Public health act
   7. Rent and tribunal act
10. State four factors that a manager should bear in mind to ensure that he/she effectively communicates with the employees. (4mks)
    1. The timing of sending / passing information should be appropriate
    2. There should be mutual respect between the two parties
    3. Should speak in a proper language the is understood by all parties
    4. The manager should into have negative attitude towards any employee
    5. The manager should not have pre judgement
11. State the meaning of the following principles of insurance. (4mks)
    1. Subrogation - This states that after the insured has been compensated the remnant of the insured item becomes the property of the insurer
    2. Contribution - When a property is insured by more than one insurance company upon the occurrence of the event of loss, all the insurance companies will share the loss proportionately.
    3. Insurable interest - One can only insure a property whose loss will affect him financial.
    4. Indemnity- States that the insured can only be compensated for the actual loss suffered.
12. Highlight four characteristics of underdevelopment. (4mks)
    • Low standards of living in the country.
    • Low per capita of income
    • Rapid population on growth rate
    • Under- utilized natural resources
    • Low literacy levels
    • Use of simple / rudimentary technologies in production
    • Pronounced income inequalities
    • Low levels of productivity
    • Poor infrastructure
    • High levels of unemployment
13. 
    State four factors that may have caused the change shown in the diagram above. 4mks
    1. Use of traditional techniques in production process
    2. Unfavourable weather conditions
    3. Inadequate supply of factors of production
    4. Unfavourable change in government policy
    5. High cost of production
    6. Expected increase in the price of the product in future
14. Highlight four causes of unemployment in Kenya. (4mks)
    1. Rapid population growth rate
    2. Introduction of capital intensive methods of production
    3. Inappropriate education system which is white collar job oriented
    4. The people may be too selective when choosing the jobs they want which may not be available.
    5. Low demand for goods and services due to low incomes.
    6. Inadequate resources required for production to be carried out.
    7. Rural – urban migration.
    8. Changes in seasons particularly in tourism and agricultural sectors.
15. Outline four circumstances under which Mr Ondieki (a farmer) may distribute his products directly to his customers. (4mks)
    1. Where the goods are produced according to customer’s specifications
    2. Where goods are technical in nature
    3. Where goods are perishable in nature
    4. Where the farmer is very close to the market
    5. Where the market being targeted is small
    6. Where the producer wants to have direct contacts with the customers
    7. Where the producer has his own retail outlets
16. Tripple SSS wholesalers had the following information as at 31 December 2013 (4mks)

    • Closing capital 70,000
      Total expenses 5,000
      Drawings of goods 6,000
      Total incomes 3,000

      Calculate the capital at the beginning of the year.
      O.C – L – D = C.C
      O.C – (5000 – 3000) – 6000 = 70,000
      O.C – 2000 – 6000 = 70,000
      O.C – 8000 = 70,000
      O.C = 78,000 

17. Highlight four advantages of localization of firms. (4mks)
    1. A pool of skilled labour is created where the firms con get employees from
    2. Employment is created in such areas
    3. Development of infrastructure may be carried out in areas where localized firms are
    4. Joint management of waste can be carried out by all firms
    5. Establishment of solid amenities such as hospitals and schools
    6. Firms may benefit from already established markets
    7. It leads to development of auxiliary firms such as banks and insurance in he area.
18. State four characteristics of good money. (4mks)
    • General acceptability
    • Stability
    • Scarcity
    • Cognizability
    • Durability
    • Homogeneity
    • Divisibility
    • Malleability
    • Portability
19. Identify the day book associated with the following source documents given below. (4mks)
    

    Source documents	Day books
    Invoice received	Purchases Journal
    Credit note received	Purchases Returns Journal
    Receipt issued	Cash receipt journal
    Credit note issued	Sales returns journal

20. Highlight four purposes of public finance. (4mks)
    1. To provide essential goods and services
    2. To control consumption of certain products
    3. Re-distribution of wealth
    4. To promote balanced regional development
    5. To raise revenue for the government
    6. To control balance of payments
21. The following balances were extracted from the books of Okinda wholesalers on 31st December 2006. (4mks)
    Sh
    Capital 800,000
    Sales 250,000
    Debtors 70,000
    Purchases 160,000
    Creditors 45,000
    Opening stock (1.1.2006) 40,000
    Closing stock (31.12.2006) 20,000
    General expenses 50,000
    5 year bank loan 200,000
    Insurance expenses 20,000
    Salaries and wages 80,000
    Required, calculate
    
    1. Mark up = Gross Profit x 100     70,000 x 100 (1mk)
                        Cost of goods sold      180,000
       = 38.88%
    2. Current ratio (1mk)
         Current assets   = 90,000
       Current liabilities    45,000
       = 2:1
    3. Rate of stock turnover (1mk)
       Cost of goods 180,000
       Average stock 30,000
       Average stock = 40,000 + 20,000 = 6 times
                                               2
    4. Rate on return on capital (1mk)
       Net loss
       Capital invested
       80,000 x 100%
       720,000
       = 11.11% or 1:9
22. Outline four money transfer facilities offered by commercial banks. 4mks
    1. Use of cheques
    2. Telegraphic transfer
    3. Electronic fund transfer
    4. Standing order
23. Highlight four uses of a proforma invoice. (4mks)
    1. It can be used to serve as quotation
    2. Sent to show what the buyer would have to pay if the order s approved
    3. Issued to an agent who sells goods on behalf of the seller
    4. Used by importers to get customers clearance before goods are delivered
    5. Sent when the seller does not want to give credit
24. State four factors that affect the productivity of an office worker. (4mks)
    1. Personal attributes e.g hygiene and moral behaviours
    2. Office etiquette e.g respect and punctuality
    3. Knowledge and skills
    4. Emotional qualities
25. In each of the following cases, state the type of inflation described (4mks)
    

    a)  The unrest in Libya has resulted to an increase in the price of oil	Imported inflation
    b)The price of bread has gone upto sh.60 due to increase in the price of wheat	Cost-push inflation
    c) A lot of money in circulation has led to the general increase of price	Demand pull inflation
    d) Arise in price due to uneven growth in some sectors of the economy.	Structural inflation