30.

24 BUSINESS STUDIES STUDIES (565)

30.24.1 Business Studies Paper 1 (565/1)

1.
 Development of individual skills.
 Increased output.
 Production of standardized goods.
 Maximum use of machinery.
 Development of new talents.
 Encourages invention/innovation.
 Saves time.
 Less use of mental and physical effort.
 High quality goods/services produced /offered.
 Increases employment opportunities.
 Reduces training time.
 Facilitates planning and management. (Any 4x1=4
marks)

2.
 Must have at least one director.
 Shares not freely transferable.
 Public not allowed to subscribe for shares/shares not advertised/no prospectus needed.
 Has a minimum membership of two shareholders.
 Can start trading on receipt of a certificate of incorporation.
 Does not need to have the authorized minimum share capital before commencing operation.
(Any 4x1=4
marks)

3.
 Goods can be produced in advance to meet unexpected customer demand.
 Production done steadily without rush.
 Production can be continuous if need arises.
 Manufacturer can offer steady supply of seasonal goods.
 Goods are protected from physical damage.
 Manufacturers can store raw materials.
 Goods are protected from pilferage.
 Goods can be prepared fro final scale by branding, grading, blending etc.
 Some goods mature/improve in quality whole still in warehouse. (Any 4x1= 4
Marks)

4. PQ = 500 - 200
40 40
= 300
40
= 7.50 (4 x 1 = 4 marks)

5.
 Relatively cheap.

Visit: www.kcse-online.info for thousands of past papers & other educational resources
  Relatively fast.
 Enhances confidentiality.
 Sender may get instant feedback.
 Easy to access other information (like advertising).
 Relatively easy to retrieve information.
 It is universal.
 Can advertise to others (wider market).
 Can send detailed information.
 Can be used for future reference/evidence. (Any 4x1=4
marks)

6. (a) Contra entry:- This is a transaction affecting both sides of a two/three column cash book
simultaneously. It is indicated by letter ‘C’.
(b) Cash discount:- This is a reduction/allowance given to a buyer by the setter for
making prompt payment. (4
marks)

7. (a) Sales invoice/outgoing invoice.

(b) Debit note.
(c) Credit note.
(d) Purchases invoice. (4 x 1 = 4
marks)

8. (i) Nominal.
(ii) Nominal.
(iii) Creditors/purchases ledger.
(iv) Real/general ledger. (4 x 1 = 4
marks)

9. (a) Working capital = CA - CL

= 220000 - (98200 + 11800)
= Shs110000 (4 x ½ = 2 marks)

(b) Return on capital = Net Profit x 100

Capital invested
= 85000 x 100
425000
= 20% (4 x ½ = 2 marks)

10. Expenses for the year

Expense A/c______________________
Shs Shs
Cash 85000 31 Dec 2005 Balance b/d 24000
Dec. 2006 Balance c/d 30000 Profit and Loss A/c 91000
115000 115000

OR

Shs
Accrued expenses 31/12/05 30000
Add cash paid 85000
115000
Less: Accrued expenses 31/12/05 24000
91000 (4 x 1 = 4 marks)

Visit: www.kcse-online.info for thousands of past papers & other educational resources
11. (a) Complementary wants: - where wants are simultaneous/when two or more items mut be used
together at the same time for example:- car and petrol. (2 marks)
(b) Wants become habitual: - where one becomes addicted to a particular want/when
one develops a taste/liking for a commodity so that he needs it again and again. (2
marks)
12.
 Potential demand for goods/services.
 Source of raw materials.
 Security in the area.
 Existing infrastructure.
 Auxiliary services.
 Legal requirements/government policy.
 Source of labour.
 Source of capital/technology.
 Possible returns on investment/availability of market.
 Chances of growth/expansion.
 Effects on the environment.
 Competition.
 Social cultural environment.
 Availability of space.
 Political stability. (Any 4x1=4
marks)

13.
 Personal identification.
 Initial deposit required.
 A letter of introduction from an existing customer.
 Physical contact address.
 Be of majority age/above 18 years old.
 Passport size photographs. (Any 4x1=4
marks)

14.
 Cost of the mode.
 Distance from market.
 Type/nature of goods.
 Availability.
 Reliability.
 Security (free from theft, damage).
 Value of the goods.
 Speed and urgency.
 Flexibility in terms of time and place.
 Safety (free from accidents).
 Quantity/amount of goods.
 Terminal facilities.
 Accessibility (ability to reach the required destination). (Any 4x1=4
marks)

Visit: www.kcse-online.info for thousands of past papers & other educational resources
15.
 To encourage selling of quality goods.
 To safeguard cultural practices.
 To encourage disclosure of information about the product.
 To ensure compliance with existing government legislation.
 To curb environmental degradation.
 To safeguard competitors in the market.
 To safeguard consumers against misleading advertisements. (Any 4x1=4
marks)

16.
 Inequitable distribution of income.
 Projects undertaken by the government could be of long-term nature.
 The cost of living may have gone up thus eroding additional income earned.
 Income earned could have been used in ways that do not benefit the people directly.
 High population growth.
 Economic growth may have been obtained through a strain on people’s health.
 Unequal regional development/expenditure pattern of the government. (Any 4x1=4
marks)

17.
 Rise in price of complementaries.
 A fall in household income.
 Fall in the price of substitutes.
 Expected fall in the price of the product.
 Negative tastes/preferences/fashion.
 Decrease in population.
 Unfavorable terms of payment.
 Unfavourable government policy (for example:- a ban on commondity).
 Unfaovourable seasonal changes. (Any 4x1=4
marks)

18. Calculation of capital

Capital = Assets – liabilities
Assets = 200000 + 100000 + 400000 + 160000 + 10000
= Shs 870000
Liabilities = 10000 + 40000
= 140000
Capital = Shs870000 – 140000
= Shs730000 (8 x ½ = 4
marks)

19.
 Check accuracy of posting transactions to the ledger.
 Check the arithmetical accuracy of ledger accounts.
 Provide account balances at year end.
 Check that debit and credit balances are in agreement.
Visit: www.kcse-online.info for thousands of past papers & other educational resources
  Summarizes the information in the ledger account.
 Facilitates the preparation of final accounts. (Any 4x1=4
marks)

20. (a) Assets

 Resource owned and controlled by the business.

 Must have been acquired in the past.
 An item of value that can be measured reliably in monetary terms.
 Future benefits associated with the net expected to be received by business entity.
 They are fixed or current. (Any 2x1=2
marks)

(b) Liability

 A present obligation for a business to settle as a result of past commitments.

 Settlement would reduce business assets.
 Amount involved can be measured reliably in monetary terms.
 Owed to outsiders.
 They are long term or current/short term. (Any 2x1=2
marks)

21.
 Increase interest rate to discourage borrowings.
 Withdraw excess cash in circulation by issuing government bonds and treasury bills.
 Institute policies that make price of commodities steady (price control).
 Increase taxes on income to discourage extra income earned at expense of leisure.
 Raising liquidity ratio/cash ratio of commercial banks.
 Use of selective credit control measures.
 Increasing commercial banks special deposits with the central bank.
 Restriction of imports.
 Restricting wage increases.
 Raising margin requirements.
 Use of buffer stocks.
 Stimulation of production of goods and services.
 Appropriate regulations of printing national currency.
 Moral persuasion by government for people to buy only what is necessary.
(Any 4x1=4
marks)

22. Loss made = 20 x 1,000,000

100
= 200,000

Visit: www.kcse-online.info for thousands of past papers & other educational resources
 Contribution made by:
(i) Zebra = 600,000 x 200 000
1,000,000
= Shs 120,000

(ii) Simba = 400,000 x 200,000

1,000,000
= Shs80000 (8 x ½ = 4
marks)

23.
 Speedy customer service.
 Confidentiality of business records.
 Records can easily be retrieved.
 Time saving.
 Clean and tidy records produced.
 Minimum storage space required/ a large amount of information can be stored.
 Accuracy is enhanced.
 Cost of maintenance is lower.
 Records not easily damaged.
 Records not easily lost.
 Business image is enhanced.
 Less labour required/saves labour cost. (Any 4x1=4
marks)

24.
 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-operate with other workers, visitors and management.
 Be punctual in offering service.
 Be loyal to the organization.
 Be diplomatic.
 Make sound judgment.
 Be accurate.
 Have initiative. (Any 4x1=4
marks)

25.
 The standards for operating business are low/unhealthy operations.
 Generalized exploitation of consumers on weights and measures.
 There is need for the government to enforce existing laws, for example:- trading licence.
 Hoarding is taking place.
 Unsafe buildings.
 Substandard goods.
 Unfair prices.
 False advertising.
Visit: www.kcse-online.info for thousands of past papers & other educational resources
 Breach of contract. (Any 4x1=4
marks)

Visit: www.kcse-online.info for thousands of past papers & other educational resources