Name:…………………………………………………………………Dam.

No……………………

BUSINESS STUDIES
FORM THREE
PAPER I

TIME: 2 HOURS

Instructions to Candidates

Answer all questions in the spaces provided

1. Mention four methods of price determination. (4 Marks)

a) …………………………………………………………………………………………………

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 b) …………………………………………………………………………………………………
c) …………………………………………………………………………………………………
d) …………………………………………………………………………………………………
2. State four benefits of operating a small scale business over a large-scale business. (4 Marks)
a) …………………………………………………………………………………………………
b) …………………………………………………………………………………………………
c) …………………………………………………………………………………………………
d) …………………………………………………………………………………………………
3. Outline four circumstances under which a buyer can return goods to the seller. (4 Marks)
a) …………………………………………………………………………………………………
b) …………………………………………………………………………………………………
c) …………………………………………………………………………………………………
d) …………………………………………………………………………………………………
4. Identify the type of advertisement described by each of the following statements. (5 Marks)
Statement Type
a) Promotes the name of the manufacturer
b) Creates awareness about a product
c) Uses names of famous persons to promote a
product
d) Portrays a product as better than another
e) Promotes a particular brand of a product

5. State three differences between perfect competition and a monopoly market. (3 Marks)
Perfect competition market Monopoly market
a)
b)
c)

6. Outline four circumstances under which a gap may exist in the market. (4 Marks)
a) …………………………………………………………………………………………………

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 b) …………………………………………………………………………………………………
c) …………………………………………………………………………………………………
d) …………………………………………………………………………………………………
7. Highlight three reasons why a consumer would prefer to buy goods directly from a producer.
(3 Marks)
a) …………………………………………………………………………………………………
b) …………………………………………………………………………………………………
c) …………………………………………………………………………………………………
8. Identify four sources of energy naturally found in Kenya. (4
Marks)
a) …………………………………………………………………………………………………
b) …………………………………………………………………………………………………
c) …………………………………………………………………………………………………
d) …………………………………………………………………………………………………
9. State four features of an efficient transport system. (4 Marks)
a) …………………………………………………………………………………………………
b) …………………………………………………………………………………………………
c) …………………………………………………………………………………………………
d) …………………………………………………………………………………………………
10. Indicate using a tick () whether the following factors influence demand or supply. (5marks)

Factor Demand Supply

a) Increase in income
b) Changes in tastes and preferences
c) Increases in population
d) Shortage of factors of production
e) Increase in price of inputs

11. Give four demerits of under-population to a country. (4 Marks)

a) …………………………………………………………………………………………………
b) …………………………………………………………………………………………………

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 c) …………………………………………………………………………………………………
d) …………………………………………………………………………………………………
12. Highlight four clauses of a Memorandum of Association. (4 Marks)
a) …………………………………………………………………………………………………
b) …………………………………………………………………………………………………
c) …………………………………………………………………………………………………
d) …………………………………………………………………………………………………
13. The following diagram shows the circular flow of income in a two sector (simple) economy.
Identify what the arrows represent as indicated below. (4 Marks)

FIRMS

A C B D

HOUSEHOLDS

A - …………………………………………………………………………………………………
B - …………………………………………………………………………………………………
C - …………………………………………………………………………………………………
D - …………………………………………………………………………………………………

14. Outline four factors that may interfere with effectiveness of face to face communication.
(4 Marks)
a) …………………………………………………………………………………………………
b) …………………………………………………………………………………………………
c) …………………………………………………………………………………………………
d) …………………………………………………………………………………………………

15. The following balances of assets and liabilities were extracted from books of nyamakima books
of accounts as at 1st January 2010.

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 Cash in hand - Ksh. 10,000
Motor vehicle - Ksh. 300,000
Debtors (John) - Ksh. 15,000
Creditors (Kim) - Ksh. 65,000
The following transactions took place from January 2nd 2010.
a) Received a cheque of Ksh.3,500 from John, a debtor on 4th Jan. 2010
b) Issued a cheque of Ksh.2,000 to Kim (Creditors) on 5th Jan. 2010.
Required:
Prepare nyamakima Traders balance sheet as at 6th Jan. 2010.
(5marks)

16. State three reasons why most people in Kenya are not insured. (3 Marks)
a) …………………………………………………………………………………………………
b) …………………………………………………………………………………………………
c) …………………………………………………………………………………………………
17. Outline four merits of parastatals. (4 Marks)
a) …………………………………………………………………………………………………
b) …………………………………………………………………………………………………

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 c) …………………………………………………………………………………………………
d) …………………………………………………………………………………………………
18. State the types of utility created by the following activities. (4 Marks)
Activity Utility
a) Delivering goods to the market
b) Selling meat in a butchery
c) Storing beans
d) Grinding maize

19. Mention any four types of unemployment in Kenya. (4 Marks)

a) …………………………………………………………………………………………………
b) …………………………………………………………………………………………………
c) …………………………………………………………………………………………………
d) …………………………………………………………………………………………………
20. Enter the following transactions in the Cash Book of Onyango Traders as at 10th January 2011
and balance it off.
Jan 1 - Cash in hand Ksh.20,000
Cash at Bank Ksh. 3,000 (Cr)
Jan 2 - Received a cheque of Ksh.45,000 from Onyango
Jan 3 - Cash sales Ksh. 15,000
Jan 5 - Paid salaries in Cash Ksh.5,000
Jan 8 - Withdrew Ksh.2,000 from bank for personal use (5 Marks)

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21. Define the following terms as used in business. (3 Marks)
a) Asset
…………………………………………………………………………………………………
…………………………………………………………………………………………………
b) Liability
…………………………………………………………………………………………………
…………………………………………………………………………………………………
c) Capital
…………………………………………………………………………………………………
…………………………………………………………………………………………………
22. Identify four factors that determine the period for which documents should be stored. (4 Marks)
a) …………………………………………………………………………………………………
b) …………………………………………………………………………………………………
c) …………………………………………………………………………………………………
d) …………………………………………………………………………………………………
23. State the effect of the following transactions on the balance sheet totals.
Transaction Effect on balance sheet totals
a) Owner took cash from the business to buy
food for his family
b) Received a cheque from a debtor
c) Issued a cheque to clear a loan (KCB)
d) Bought goods on credit

24. Outline four advantages of a conducive business environment to a firm. (4 Marks)

a) …………………………………………………………………………………………………
b) …………………………………………………………………………………………………
c) …………………………………………………………………………………………………
d) …………………………………………………………………………………………………

25. Enter the following transactions in the ledger accounts (4marks).

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1st Jan - Bought goods on credit from Njeri Traders Ksh. 3,000
3rd Jan - Sold goods worth Ksh.2,000 by cash
5th Jan - Took Ksh.500 cash from the business to pay school fees for his son.
8th Jan - Paid Njeri Traders Ksh.2,000 in cash