2022 Mock Examinations Business Studies Paper 1 with Answers-Kapsabet High School

2022 Mock Examinations Business Studies Paper 1 with Answers-Kapsabet High School


• Attempt ALL questions in the spaces provided.

1. State four challenges that a business without a plan will encounter in its operations. (4mks)

2. An entrepreneur may spot a gap in the market which may be converted into a business idea. Identify four such gaps. (4mks)

3. List down four trends in business ownership (4mks)

4. Outline four differences between Direct production and Indirect production (4mks)

5. The following balances were extracted from the books of Kariuki traders on 31st March 2018 Fixed assets 300,000

Current assets 123,700

Creditors 84,500

5 year bank loan 125,000

Determine the networth of the business as at 31st March 2018 (4mks)

6. Highlight four similarities between a bill of exchange and a promissory note. (4mks)

7. Indicate the type of journal in which each of the following transactions would be recorded.(4mks)

Transaction Type of journal

i. Goods previously sold on credit were returned

ii. Goods bought on credit

iii. Goods sold for cash

iv. Motor vehicle sold on credit

8. Outline four ways of solving unemployment. (4mks)

9. Outline four ways in which commercial attachees may promote trade between their country and other countries. (4mks)

10. On 1st January 2017 Mr. Nyachae started a business with Ksh. 10,000 in cash. The following transactions took place during the first week of his business commencing

2nd January Deposited Sh. 5,000 in the bank 3rd January Purchased stationery worth Sh. 1,000 in cash. 4th January Bought goods worth Sh. 2,000 by cheque

Enter the above transactions in the relevant “T” accounts. (4mks)

11. Outline four differences between insurance and assurance. (4mks)

12. Give four ways in which consumers benefit from advertising (4mks)

13. State four features of monopolistic competition (4mks)

14. Outline four requirements for one to start a limited liability company as one of the forms of business units. (4mks)

15. State four characteristics of chain stores type of retail business. (4mks)

16. Identify the type of communication described below. (4mks)

Type of communication   

a) Principal addressing students
on assembly   
b) Rumuors going round that the most hardworking employee
will be awarded   
c) Student group discussion in a

d) An employee seeking for permission

17. Highlight four reasons why E-mail is increasingly becoming popular as a means of communication. (4mks)

18. Give four implications of a declining population (4mks)

19. Highlight four items that affect the asset stock. (4mks)

20. Classify the following accounts into personal, private, real or nominal (4mks)

Type of account   
i) Office equipment   
ii) Debtor   
iii) Capital   
iv) Salaries   

21. Name what the letters a, b, c and d represent in the circular flow of income. (4mks)

22. Omolo insured his house worth sh. 5,000,000 for sh. 4,000,000. His house was damaged by fire to

the tune of sh. 3,000,000. Calculate how much Omolo was compensated. (4mks)

23. Identify any four Trade malpractices that consumers need protection against. (4mks)

24. Outline four functions of commercial banks (4mks)

25. State four types of capital in a business. (4mks


1. Challenges faced by a business without a business plan

i. Workers will not be motivated.

ii. Since financiers need this document, it will be difficult to access more finances.

iii. There will be very many mistakes

iv. It will not be able to identify strengths and weaknesses

v. It will be difficult to know the finances required.

vi. Allocation of resources will be difficult.

vii. Potential investors will not have a reference document

2. Gaps in a business

i. Poor quality goods and services

ii. High prices of products

iii. Low quantities

iv. Unavailability of a given product in the market

v. Lack of after sales services

vi. Lack of varieties of goods and services

3. Trends in business ownership

i. Privatization

ii. Globalization

iii. Amalgamation/merger

iv. Franchising

v. Internet

vi. Absorptions/take overs

vii. Holding companies

viii. Cartels

ix. Multinationals

x. Front Office Savings Account

4. Differences between direct production and indirect production.

Direct productionIndirect production

i) Production is meant for one’s own


Production is meant for sale
ii) Production is done on small scale   
Production is done on large scale   
iii) Poor quality produce   
High quality produce   

iv) Simple methods of production used i.e
no use of machines
Modern technology extensively used   
v) No specialization   
There is specialization   
vi) No surplus production   
There is surplus production for the market   

5. Determining the networth

Assets = Capital + Liabilities

Capital = Assets – Liabilities

Total Assets

Total liabilities

Fixed assets 300,000 creditors 84,500

Current assets 123,700 5 year bank loan 125,000

423,700 209,500

Networth = 423,700 – 209,500


6. Similarities between a bill of exchange and a promissory note

i. Both can be discounted before maturity

ii. Both are acknowledgement of a debt

iii. Both are negotiable from one person to another

iv. Both allow debtors time to organize for payment.

7. Types of journal

i. Sales returned journal

ii. Sales journal

iii. Cash receipt journal

iv. General journal

8. Methods of solving unemployment

i. Encouragement of local and foreign investment to increase production activities

ii. Use of appropriate technology

iii. Adoption of a relevant education system

iv. Population control

v. Encouraging informal sector in order to encourage self-employment

vi. Transforming rural sector in order to reduce rural-urban migration.

vii. Increased government expenditure

viii. Diversification of the economy

9. Ways in which commercial attatches may promote trade between their country and other countries

i. Assist in organizing trade fairs and exhibitions

ii. Advise exporters on standards and legal requirements

iii. Carrying out market research

iv. Provide information about business opportunities

v. Aid in facilitating payments

10. Preparation of ledger accounts. (Title must exist)

11. Differences between insurance and assurance

nsurance Assurance

i) Has no surrender value Has a surrender value

ii) The insurance contract is renewed

yearly Insurance contract is for life and does not

require renewing

iii) Has no maturity date Has maturity date

iv) There must be proof of insurable

Interest There is no proof of insurable interest

v) Risk insured may or may not happen Risk insured against must happen

vi) Principle of subrogation/ Indemnity

applies Principle of subrogation/Indemnity does

not apply

vii) Cannot be used as a saving scheme Can be used as a saving scheme

viii) Protection is offered to property Protection is offered to life

12. Ways in which consumers benefit from advertising

i. Consumers get entertained from the adverts

ii. It informs consumers about offers in the market

iii. Consumers are guided on where to get the products

iv. Consumers enjoy a variety of products

v. Competitions lead to quality products

vi. Consumers are made aware of the products in the market

vii. Consumers get cheaper prices due to competition

13. Features of monopolistic competition.

i. Firms set similar prices

ii. There is free entry and exit

iii. Factors of production are not controlled

iv. There is perfect knowledge in the market

v. Sellers sell differentiated products

vi. There are many buyers and sellers

vii. Actions of one firm are closely monitored by other firms

14. Requirements for one to start a limited liability company as one of the business units

i. Memorandum of association

ii. Article of association

iii. List of directors

iv. Declaration of compliance

v. Statement of share capital showing the total amount of capital that the company wishes to raise and it’s division into shares

15. Characteristics of a chain store

i. Similar shop appearance and name

ii. Sell similar types of products

iii. Charge standard prices for their products

iv. All purchases are centralized

v. Goods are freely transferable from one branch to another

vi. Administration is done from the head office

vii. Operate several branches in the country

viii. Sales are decentralized

16. Types of communication

i. Downward communication

ii. Informal communication

iii. Horizontal/lateral

iv. Upward

17. Reasons why E-mail is increasingly becoming popular as a means of communication

i. It is relatively cheap

ii. It is fast

iii. It can be used for future reference

iv. There is easy access to information

v. There is easy retrieval of information

vi. It is confidential in nature

vii. It has immediate feedback

viii. It is used worldwide

ix. One can send detailed information through attatchment of documents.

18. Implications of a declining population(Both positive and negative)

i. Less government expenditure on social amenities

ii. Increased job opportunities in a country

iii. Less pressure on economic resources

iv. Leads to even distribution of income in a country

v. Improved standards of living of the people

vi. Less man power

vii. Less market/ demand

viii. Under utilization of resources

19. Items that affect the asset stock

i. Sales

ii. Sales retuns

iii. Purchases

iv. Purchases returns

20. Types of accounts

i. Real account

ii. Personal account

iii. Private account

iv. Nominal account

21. Causes of shift of the demand curve to the right ( Must qualify)

i. increase in the level of consumer incomes

ii. Increase in the price of substitute goods

iii. Decrease in price of a complimentary good.

iv. Population increase

v. Future expectation of an increase in price

vi. Favorable government policies e.g low taxation in consumers income

vii. Favorable change in taste/preference/fashion

22. Insurance compensation

Compensation = Valueof Policy x Loss

Value of property

4,000,000 x 3, 000, 000

SOOO 000

= 2,400,000

23. Trade malpractices that consumers need protection against

i. False advertisement

ii. Overpricing

iii. False measurements

iv. Misleading advert

v. Poor hygienic standards

vi. Unhealthy structures

vii. Hoarding

viii. Breach of contract

24. Functions of commercial banks

i. Accepting deposits

ii. Transfer of money

iii. Lending money

iv. Collecting payments on behalf of customers

v. Remitting payments on behalf of customers

vi. Facilitating trade

vii. Providing safe custody of valuables

viii. Acting as trustees

ix. Provide foreign exchange services

x. Acting as referees for their clients

25. Types of capital in a business

i. Working capital

ii. Borrowed capital

iii. Capital owned

iv. Capital employed

v. Fixed capital