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BUSINESS STUDIES PAPER 1 (MARKING SCHEME) SUPAMO JET 2015 1. - Highlight four reasons why many people start businesses in Kenya. to create employment for themselves and others To provide goods and services be own boss. to earn profits to make use of local resources. to apply their talents/skills. to make use of spare time. to emulate other successful business people (role models) 2. - State four characteristics of labour as a factor of production. it is a basic factor of production. it is mobile: geographically/occupationally cannot be stored/ is perishable cannot be separated from the business. labourers sell their labour not themselves. It is human, with ability to think and get annoyed. (4 marks) 3. - Outline four features of an-efficient transport system. must have a wide coverage affordable fast-relay goods within time required. reliable - capable of delivering goods in the required condition. terminals – must be accessible. safety and security 4. A/C Debited Ledger A/C credited Ledger a) Nzioka (debtor) Sales ledger Sales A/C General Ledger b) Rent A/C General Cash A/C Cash book 5. - (Marks ½ x 8 = 4) Outline four factors to be considered when evaluating a business idea. the products the business will sell. the market. competition Management objectives of the business profitability government policy availability of raw materials/ product 1 - level of technology required capital required 6. - State four advantages of using the internet as a means of communication. it is fast operates 24 hours/ day and night it covers the whole word (global)/wide coverage Information can be stored for future reference product promotion can be done it is relatively cheap confidentiality is enhanced (use of password) transactions can be done online. 7. Outline four differences between life assurance and general insurance. Life Assurance -the insured risk is bound to happen - It appreciates in value (sum assured higher at maturity). - May be used as security for a loan. - Principles of indemnity, subrogation and contribution do not apply. - No limit to amount of cover. -has surrender value -one can insure life with different companies -is long term/ no renewal (4 marks) General Insurance -the event insured against may or may not happen. -does not appreciate in value - Cannot be used as security for a loan. -Principles of indemnity, subrogation and contribution do not apply. - Value of property determines amount of cover. -does not have surrender value -one is legally required to insure with only one insurance company -is a short term contract/ requires renewal 8. i) FRANCO: price quoted by the seller includes the cost of goods and all the other expenses until the goods get to the buyer’s premises. ii) F.O.R.: the price quoted includes the cost of goods and their movement to the nearest railway station. iii) LOCO: price quoted is the value of the goods as at the seller’s warehouse. iv) C.I.F.: price quoted includes the value of the goods, transport to the ship, cost of freight and insurance. 2 9. MINGI RETAILERS 2 Column Cash Book Dr Date 2015 Mar 1 ” 2 ” 27 “ 31 Details Lf Bal b/d Sales Debtors Bal c/d Bal Cash Bank Date 2015 Mar 1 ” 12 ” 31 ” 31 13,200 38,000 b/d 6,000 _______ 50,000 51,200 ====== 56,000 ====== 33,000 Details Lf Bal. b/d Creditors Rent Bal. b/d Bal. b/d ” Cash 8,200 10,000 33,000 51,200 ===== Cr Bank 56,000 ______ 56,000 ====== 50,000 ” 31 (Marks 2x ½ = 4 marks) 10. Give four possible reasons behind business success in Kenya. Ability to manage people. proper location/availability of customers. availability of raw materials or stock of goods. adequate finance. lack of stiff competition. favourable government policy good infrastructure political stability commitment to business. proper management of finances. proper debt management. good public relations. being creative and innovative. 11. - Outline four government initiated methods of consumer protection. public health act weights and measures act. sale of goods act food and drugs act. rent tribunal act. Kenya beareau of standards. price control/regulation building and construction safety and standards act licensing awareness campaigns 3 12. - Causes of shift in demand curve decrease in consumer income. decrease in price of substitutes. increase in price of complementary goods. unfavourable government policy e.g. high taxes Decrease in population. unfavourable terms of sale. Change in tastes against product. Future expectation of decrease in prices. 13. - State four components in the economic environment of a business. level of consumer incomes. taxation rates. general prices of goods and services. interest rates/ cost of borrowing 14. - Outline four fiscal measures of controlling inflation. reducing government spending. increase in income taxes. reducing indirect tax. subsidizing production. government producing commodities that are in short supply. 15. 20 x 500,0000 = 100,000 100 500,000 – 10,000 = shs.400,000 Discount = 400,000 – 392,000 = 8,000 2 8000 x 100 = 2% 1 4000,000 16. - Highlight four importance of warehousing to consumers. steady supply of goods. stability in prices. quality goods – kept in good condition. goods are prepared for sale – branding, blending, sorting, packing. consumers can inspect goods before buying. some goods improve in quality while stored. goods are brought closer. variety of goods 4 17. List four channels of distribution used to import maize in Kenya. Foreign farmer → local wholesaler → local consumer Foreign farmer → local wholesaler → local retailer → Local consumers Foreign farmer → Agent → local wholesaler→ local retailers → Local consumers. Foreign farmer → Local Consumer. 18. – - advantages of pay as you earn (PAYE) tax as a source of government revenue. Economical in collection. Tax revenue is certain. Equitable – flexible can be expanded to cover more areas. simple to understand. does not affect price of goods and services. brings redistribution of wealth. society is conscience. 19. a) b) c) d) oligopoly perfect competition. monopoly monopolistic competition. 20. - circumstances under which a firm would be located near the market for its products. Where products are perishable. Where products are fragile. Where there is need to reduce the costs. Where government policy requires that the firms be located in that area. Markets and raw materials are located in the same area. Where goods are specialized and require after sales services. 21. - important documents that are required in the registration of a public company. Memorandum of association. articles of association list of directors. declaration of compliance with registration requirements. statement signed by directors accepting to act as directors. prospectus. 22. - Highlight four ways of decreasing imports. imposing/increasing customs duty imposing quotas on imports/ ban foreign exchange control. administrative drawbacks. devaluation of currency 5 23. 253 x 100 247 = 102.43% 262 x 100 247 = 274 x100 247 = 110.93 285 x 100 247 = 115.38% 24. - 106.07% ways in which the Central Bank acts as a banker to the government. Keeps government accounts. receives finances/revenues on behalf of government. safeguards finances for government. repays foreign loans on behalf of government. financial advisor to government purchasing, selling, government securities on behalf of government. 25. Gross profit CGAS = 20 x sales 100 = 20 x 800,000 = 160,000 100 = = Opening stock + purchases 250,000 + 700,000 = 950,000 Sales – GP = 80,000 – 160,000 = 640,000 Closing stock = 950,000 – 640,000 = 310,000 CGS = 6 Opening stock Add purchases C.G.A.S. Less Closing Stock C.G.S. Gross Profit % Expenses Net Profit c/d MAVUNO TRADERS Trading, Profit and Loss Account For the year ended 31st Dec. 2010 Shs. 250,000 Sales 700,000 950,000 310,000 640,000 160,000 800,000 Gross Profit b/d 10,000 160,000 165,000 175,000 Commission Income ========= Net profit b/d. (Marks 8 x ½ = 4 marks) 7 Shs. 800,000 800,000 15,000 175,000 165,000