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BUSINESS STUDIES
PAPER 1 JULY 2024
TIMES; 2 HOURS

PANGANI GRLS HIGH SCHOOL

MARKING SCHEME
Kenya certificate of secondary education
BUSINESS STUDIE PAPER 1 2024

INSTRUCTIONS TO CANDIDATES
 Write your name and index number in the spaces provided above
 Sign and write the date of examination in the space provided above.
 Answer all the questions in the paper.
 All question should be written in the spaces provided after each above.
 This paper consists of 11 printed pages
 Candidates should check the question paper to ascertain that all pages are printed as indicated and that no
question are missing
 Candidates should answer the questions in English
For examiner’s use only

Question 1 2 3 4 5 6 7 8 9 10 11 12
Mark
Question 13 14 15 16 17 18 19 20 21 22 23 24 25
marks

Totals marks

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1. Define the following terms as used in economics.
a) Scarcity.
 used to describe the limited nature of economic resources compared to unlimited
human wants.
b) Choice.
 Act of deciding what wants to satisfy first with scarce or inadequate resources
available.
c) Opportunity cost.
 Is the value of foregone alternative where choice was made.
d) Scale of preference
 is a list of unsatisfied wants arranged in order of priority.
2. State four distinct features of departmental stores. (4 marks)
 Each department has its own manager
 Each department sells only one line of products
 All departmental managers are answerable to a general manger
 They offer a wide variety of goods at relatively low prices
 They sell goods strictly on cash basis
 They are usually in town centers
 Goods are not transferable from one department to another as each has its own
variety of goods.
 Goods sold are bought centrally
3. Highlight four circumstances under which payment by cheque is considered appropriate. (4 marks)
 Where the amount involved is large.
 Where it is the policy of the business.
 Where it is the only means available.
 Where there is need to avoid risks associated with other means of payment.
 Where drawer expects funds to be available in future, can issue postdated cheque.
 Where payee requests for payment by cheque.
 Where drawer operates a current accounts.
 Where evidence of payment is required.

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4. Outline four documents used in delivery of goods to the buyer in home trade. (4 marks)
 Advice note – document sent by the seller to the buyer to inform the buyer that goods
have been dispatch.
 Packing note – prepared to accompany goods packed/ describe goods packed in a
container.
 Delivery note – prepared by the seller for buyer to confirm goods if received.
 Consignment note – document prepared by transporting company when hired by
seller to transport goods to the buyer.
5. Highlight four hurdles preventing the growth of cooperatives society in Kenya. (4marks)
 Poor management of cooperatives since they elect members who are unqualified or have no
skills required to the operations.
 Financial problems may lead to collapse of cooperative societies.
 Low interest on members’ deposits discourages their participation
 Low share capital due to small capital contribution.
 Lack of co-operative education and awareness among potential members
 Political interference in management.
 Corruption and embezzlement of funds.
 Low share membership
6. Highlight four documents required in registration of a company. (4 marks)
 Memorandum of association which contains the relationship between the company
and outsiders.
 Articles of association which contains rules governing internal affairs of the
company.
 A list of directors (giving their names, occupations and contacts)
 A declaration statement (stating that registration requirements as laid down in law
have been met)
 A statement signed by directors stating they have agreed to act as directors
7. State four circumstances of dissolution of a company through a court order. (4 marks)
 If the number of shareholders fall below the minimum.
 If the company acts ultra-vires.
 When the company fails to start business one year after it’s incorporations.
 When the court declares company bankruptcy.
 When there is change of law.

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8. Outline four difficulties encountered when determining the national income using the output approach.
 Problem of valuing government output/services since they may not be paid for or not
offered at market price.
 Problem of subsistence output since goods and services are not offered for sale.
 Difficulty in valuing stock at end of accounting period/ unsold stock as this differs with
value at production time and at current moment.
 It is difficult to estimate value of depreciation hence failure to record accurately value of
fixed assets.
 Fluctuations in price which may cause output to appreciate/depreciate in value
 Problem of double counting as it is difficult to distinguish between intermediate and finished
good.
 Difficulty in deciding which good/service to include as some services like wife output are
difficult to quantify yet its service.
 Inadequate/ incomplete data leading to wrong valuation
 Inadequate finance/equipment/technology which may limit computation of data
 Inadequate/unqualified/unskilled personnel leading to inefficiency in collection/computation
of data.
9. Highlight four reasons why government get involved in business. (4 marks)
 To prevent the exploitation of consumers by business people. Such exploitation may include
selling of commodities at high prices or selling poor quality commodities.
 To provide essential goods and services in areas where private business do not operate due
to low profitability.
 To provide essential goods and services which the private sector is unable because they
require high capital e.g. electricity.
 To attract foreign investors into the country by initiating major business projects which
attract foreign investors.
 To stimulate economic growth and development in the country
 To provide very sensitive goods and services which cannot be left in the hands of the private
sector e.g. fire arms.
 To create employment opportunities through initiating projects which create jobs.
 To prevent dominance of foreign investors in the economy. It does this by investing in areas
where the local people are unable to invest in.

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10. State four advantages of standard gauge railway to an economy. (4marks)
 They are relatively secure as cases of theft and accidents are minimal
 They follow a fixed timetable hence allowing the transporter to plan for the transport of
his/her goods
 They are economical (relatively cheaper) for transporting heavy and bulky goods over long
distances
 Trains may have facilities for carrying special categories of goods e.g. gas, petrol and
vehicles.
 Transportation of goods for long distances for a short period of time.
11. Highlight four circumstances for using the short messages services (sms) to communicate. (4 marks)
 When sending official messages.
 When communicating parties have access to mobile.
 If there is need for immediate feedback.
 If there is need to send detailed messages.
 If there is need a record for future reference/evidence of communication.
 When communicating to a group of people at same time.
12. Outline the significance of each of the following insurance policies a trader may taker for his business.
(4 marks)
a) Fidelity guarantee
 This is a policy that covers the owner of the business against losses arising from
activities of his/her dishonest employees.
b) Workman’s compensation
 This is a policy that covers employees who may suffer injuries while on official duty.
c) Public liability
 This is a policy that covers losses, injuries or damages caused accidentally by a
business or its employees to the members of the public.
d) Consequential loss
 This is a policy that provide cover against loss of profits resulting from interruptions
in business causing the business to close down temporarily.

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13. Highlight four characteristics of a public warehouse. (4marks)
 The goods held in the warehouse can be used as collateral security to access loans
from the warehousing firm and other financial institutions.
 Located close to the source of goods they deal in.
 Are served by good transport system eg., at terminals.
 Used to store dutiable(bonded) or non-dutiable goods.
 Can be used by any member of the public to hire storage space.
 Provide safety for the goods.
 Have appropriate handling equipment.
 Follow lengthy procedure of receiving and issuing of goods.

14. The following balances were extracted from the books of Murungari General Stores. (4marks)
Premises 350,000
Creditors 150,000
5 years bank loan 100,000
Motor vehicle 200,000
Bank over draft 250,000
Stock 170,000
Required:
Prepare a balance sheet as at 30th April 2014

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15. Outline four methods of sales promotion. (4 marks)
 Organizing shows, trade fairs and exhibitions
 Giving free gifts to customers
 Giving free samples to customers
 Showroom sales
 Window displays
 Allowing customers credit facilities
 Giving customers after sale services
 Offering guarantees
 Giving discounts to customers
 Using loss leaders
 Using psychological selling
 Giving coupons to customers
 Self-service
 Personal attention
 Proper pricing
16. The graph below represents the demand and supply curve for milk.

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 State four effects of shift of the demand curve to the right. (4mks)
 There will be an increase in demand while supply remains constant leading to shortage.
 Price will increase.
 As a result, quantity demanded will reduces while quantity supplied inceases.
 Equilibrium point will move upwards to the right.
 Equilibrium price will increase
 Equilibrium quantity will increase.
17. Highlight four benefits that would accrue to a firm located near the market. (4mks)
 Perishable goods can reach market while still fresh.
 Reduces cost of transporting bulky goods to the market.
 Enable goods to get to the customers fast hence favourable competition.
 The firm reduces cost of storage, as they will be produced on demand and released to the
market.
 Can obtain direct feedback from market.
 Reduces distribution costs.
 Reduces length of channel of distribution/cost of itermediaries hence lower prices for
products.
 Reduces losses that may result from breakages as the product is transported to the market.
18. Outline four distinct features of oligopoly market structure. (4marks)
 Products can be identical or differentiated.
 There is rivalry among firms.
 Composed of few but large firms.
 There is interdependence among firms i.e. actions of one firm affects the actions of other
firms.
 There is non-price competition i.e. firms tend to follow the fixed price for a long period of
time.
 No freedom of entry of new firms into the market. This is achieved through the use of
barriers such as patents and high capital requirements.
 High advertising and selling costs due to need for a lot of product promotion.
 Firms tend to work as a group in decision making so as to protect the interest of all firms.
 Have a kinked demand curve.

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19. Outline four ways in which the nature of a product influences the choice of a distribution channel.
(4marks)
 If the products are durable, long channel can be used in their distribution.
 Perishable goods goods require shorter channels in order to reach the consumer when
still fresh.
 Bulky products need short channels to reduce transportation and handling goods.
 Fragile goods require a short channel.
 Urgently needed goods require direct distribution.
20. Below are some entries in the cash book of Romano Traders for the month of July 2010:

Date Details Cash(sh) Bank Date Details Cash Bank

2010 (sh) (sh) (sh)

July 1 Bal b/d 15,000 July 1 Bal b/d 10,000

July 6 Cash 20,000 July 6 Bank 20,000
July 20 Sales 15,000 July 15
July 28 Debtors 20,000 July 29 Stock 10,000
July 31 Bal c/d 10,000

State the meaning of the following entries: - (4marks)

a) July 1, 2010 balance b/d, bank column, sh. 10,000
 Romano Traders had sh.10,000 bank overdraft.
b) July 6, 2010 cash sh. 20,000 and bank sh. 20,000
 Deposited cash sh.20,000 into the bank from cash.
c) July 28,2010 debtors sh. 20,000
 Received cash sh.20,000 from debtor.
d) July 31, 2010 balance c/d sh. 10,000
 Balance carried down of cash sh.10,000/debit balance of cash sh.10,000
21. State four disadvantages that a country may experience with a shrinking young population. (4marks)
 Discourages investments.
 Lack of labour mobility since old people will rarely move
 Low labour supply
 High dependence level leading to low productivity
 Slow economic growth rates due to poor productivity
 Low demand for goods and services required by the youth resulting in closure of firms and
unemployment.
 Less creativity
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22. State how the following types of unemployment may occur in a country. (4marks)
(a) Disguised
 occurs when the number of people employed exceeds those who are required to the
extent that some of them remain idle and therefore are laid off thereby becoming
unemployed.

(b) Frictional
 This is unemployment which occurs when workers are unemployed after losing jobs and are
actively looking for new jobs.

(c) Cyclical
 It is a type of unemployment which is caused by changes in economic performance such that
when the economy is doing well, employment level is high than when the economy is doing
poorly.
(d) Seasonal
 This is a type of employment that is characterized by changes in demand for labour during
different seasons.

23. Outline four methods of money transfer used by commercial banks. (4 marks)
 Credit transfer
This is method where one cheque is used to pay a given number of people whose
account numbers and names are written on the cheques
 Telegraphic transfer
This is a method of transferring money from one account holder to another. The sender
fills an application form containing the details of the payee
 Electronic funds transfer
This is a method of transferring money from one account holder to another via
computers within the same bank or between different banks
 Cheque
This is a written order by the account holder (drawer) to his bank to pay on demand a
specified amount of money to the person named on its face (payee) or to the bearer.
 Credit cards
These are cards which allows the customer to obtain goods and services from specified
sellers without paying for them in cash. The value of the goods is deducted directly
from the buyer’s bank account and the money remitted to the seller
 Travelers cheques
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 These are cheques which are issued to travelers in and out of the country to settle their
debts in the country’s they are visiting.
 Standing order
This is an instruction to the bank from the account holder to be paying a given amount
of money to a named person at given intervals for as specific period of time.

24. State four factors that determine the amount of revenue collected by the Kenyan Government through
taxation. (4mks)
 Distribution of incomes
The government will collect more tax when incomes are evenly distributed unlike
when incomes are unevenly distributed. This is because almost everybody is brought
into the tax bracket
 Social and political factors
When a country is politically stable, the amount of tax collected is more than when
there is political instability
 Honesty and efficiency of tax authorities
Transparency among the officials charged with tax collection will enable the
government raise more revenue through taxation since they will guard against
corruption
 Level of incomes
When citizens earn more, they pay more tax than when they earn less
 Economic structure of the country
Refers to the relative sizes of commercial and subsistence sectors. When the
commercial sector is larger than the subsistence sector, more tax is collected from the
incomes created.

25. The following balances were extracted from Mwangaza traders’ books of accounts.
Shs.
Opening stock 25,000
Closing stock 35,000
Purchases 190,000

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Mark - up 20%
Calculate:
a) Cost of sales (1mark)

b) Gross profit (1mark)

c) Sales (1mark)

d) Rate of stock turnover (ROSTO) (1mark)

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