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2010 KCSE Business Studies Paper 1 Marking Scheme

1. Type of utility created. (4 Marks)

  • Possession utility   (ii)Place utility
  • Time utility           (iv) Form utility
  • Reasons for government to start a parastatal. (4 Marks)
    • To increase revenue collection.
    • To provide strategic goods and services. iii. To encourage foreign investment. iv. To reduce foreign dominance.
    • To address special social needs.
    • To create more employment opportunities.
    • To take care of sensitive ventures like fire arms and printing money.       7. viii. To provide essential goods and services at low costs. ix. To stimulate economic development.

x. To take care of business that requires a large initial capital 

  • Types of warehouses referred to are: (4 Marks)
    • Bonded warehouse           (ii) Public warehouse

                (iii)Wholesalers warehouse   (iv) Manufacturers warehouse         8.

a) 4. Factors that would have caused increase in supply. 

(4 Marks)

i.            Fall in cost of production ii.           Fall in price of competitively produced goods.

  1. Technological progress/Increase in level                b) of/advancement in technology
    1. Favourable weather/climatic conditions e.g. adequate

                        rainfall                                                                                             c)

  • Favourable government policies like reduced tax and increased subsidies
    • Future expectations of fall in price of the commodity
    • Entry of new firm in the industry             d)
    • Increase in factors of production ix. Longer time x. Less strikes

9. xi.       Increase in the price of jointly supplied goods

5. Enotika Traders balance sheet as at 31st December, 2008.

                       (5 Marks)

                                   Enotika Traders

                                   Balance Sheet        

                           As at 31st December, 2008

Fixed Assets     480,000   Current Assets 145,220                                                          625,220Capital                       300,000   Long-Term Liabilities 2 Year Bank Loan    230,000 Current Liabilities Creditors                 95,200                                625,220  


Why a three-column cashbook is used both as a journal and a ledger. (4 Marks)

  1. Cash transactions are entered in three-column cash book directly as they occur
  2. Cash and Bank columns in the cash book act as a ledger and total balances are used to prepare trial balance
  3. Both discount allowed and discount received columns acts as a journal and their total balances are transferred to the ledger.
  4. Both of them have a ledger folio column for crossreferencing. 

Matching functions of the Central Bank.  (3 Marks)

  1. Repayment of Government securities as they matureManagement of national debt.
  2. Receipt of treasury bills to secure loans-Lender of last resort iii. Directing commercial banks on the preferred sectors to lend

money-Credit control

Terms of sale as used in international trade.  (4 Marks) LOCO-this means that the price of goods quoted are as they are at the exporter’s warehouse/premises.  The importer meets all other expenses of moving the good to his/her premises.

C.I.F (Cost Insurance and Freight)- the price quoted includes the cost of goods, insurance and transport.

F.A.S (Free Alongside Ship)-the price quoted includes the expenses from exporter’s premises to the dock including loading expenses. Importer meets other expenses.

F.O.Q (Free on Quay)- this means price quoted includes all expenses up to the quay.

Merits of Management by Walking Around.  (4 Marks)

  1. Manager gets the first-hand information
  2. Manager gets immediate feedback from workers.
  3. It can help control misuse of resources since workers are cautious.
  4. Manager can enhance interpersonal relations with works
  5. Manager can address issues/problems as they arise
  6. Manager can identify and manage absenteeism or lateness. Why government create an enabling environment for investors. (4 Marks)

i. To minimize cost of doing business. ii. To expand tax base and increase revenue.

iii. To enable them create more employment opportunities. iv. To open new areas neglected by investors.

v.  To encourage utilization of local resources. vi. To promote public-private sector relationship.

vii. To enhance country’s economic development. viii. To spur economic growth.

INSURANCE                          ASSURANCE
It deals exclusively with propertyIt deals exclusively with life
Cannot be used as a saving planCan be used as a saving plan
Has no surrender valueHas surrender value.
Has no maturity dateHas maturity date
Policy cannot be used as a security for a loanPolicy can be used as a security for a loan  
In case of loss compensation is given to the insured Compensation is given to beneficiaries in case of death of assured
Sum insured depend with value of property  Sum assured depends with assured’s ability to pay  
Principle of subrogation and indemnity applies  Principles of subrogation and indemnity does not apply  
  1. Differences between insurance and assurance. (4 Marks)
  2. Factors that may influence the level of national income.

(i)Availability of natural factors.   (ii)Availability of (skilled) labour.

(iii) Level of technology.                     (iv)Political stability.

(v) Attitude of citizens towards work. (vi)Size of subsistence sector.

(vii) Level of foreign investment.   (viii)Amount and quality of capital.

(ix) Entrepreneurial culture.              (x) State of Infrastructure

  1. Difference between cash and credit transactions. (2 Marks) (i) In cash transaction goods and money are exchanged immediately/at same time while in credit transaction exchange of goods takes place and payment is done at a later date. (ii) Evidence used in cash transaction is cash receipt while in credit transaction an invoice is used.
  2. Matching types of capital. (3 Marks)

 Statement                                                     Type of capital 

i. Resource invested into business by the owner-Owner’s equity ii. Excess of current assets over current liabilities-Working capital

iii. Amount invested into the business by outsider-Borrowed capital

  1. Ways in which expenditure may stabilize the economy of a country. (4 Marks)

i. Provision of security which creates conducive environment for doing business. ii. Provision of social amenities to cater for social welfare of the citizens

  1. Spending on infrastructure to improve efficiency in economic activities.
    1. Provision of essential goods and services to the public to meet

high demand.

  • Provision of incentives to local industries to encourage

production. vi. Spending on general government administration for effective operation of the economy.

  1. Problems associated with development planning. ( Marks)

(i) Inadequate funds.                    (ii) Political instability.

(iii)Conflicts of interests.             (iv) Lack of political goodwill.

(v)Lack of enough specialists.       (vi) Overambitious plans.

(vii)Natural catastrophes/calamities(viii) Inadequate/inaccurate data.

  1. Services offered by wholesaler to a manufacturer. (4 Marks)

i. Links the manufacturer to the retailers. ii. Breaks bulk on behalf of manufacturers.

iii. Provides storage of goods on behalf of manufacturer. iv. Help manufacturer on distribution of goods.

v. Offers advice and valuable information to manufacturer. vi. Products promotion on behalf of manufacturer.

  1. Why transport flowers by air rather than by sea. (4 Marks)
    1. Air transport is faster than sea transport in case flowers are urgently needed.
    1. Security of air transport is relatively higher than sea and thus flowers will be safe. iii. Flowers are light in weight and hence appropriate to use air transport. iv. Flowers are highly perishable hence air transport which is faster than sea transport.
  2. Letters represents (4 Marks)

P(Axis)-Income per capita/per capita income    


R-Under population

Q-Optimum population

  • Salaries Expense Account   (4 Marks)           DR                 Salaries Expense Account                 CR.
Balance b/d     24,800 Cash                48,200                           73,000Profitt and Loss a/c  20,600 Balance c/d               52,400                                    73,000    
  • Circumstances to start a personal business. (4 Marks)

i. Where there is need to create employment. ii. When there is need for additional income. iii. Where there is need to invest surplus funds. iv. When there is need to utilize extra time

  • When one wants to be own boss.
    • Where there is need to exploits one’s hobbies.
  • Ways in which a business idea can be implemented.(4 Marks)
    • By creating a new product.
    • By improving on an existing product. iii. By improving the quality of products. iv. By expanding the range of services offered.
    • By offering unique services/products.
    • By improving on process of production/inventing new.
  • Measures to improve the working environment an office.
    • Provision of adequate space for working.
    • Provision of adequate equipments and furniture.
    • Maintaining tidiness in the office.
    • Provision of proper and adequate lighting.
    • Provision of safety measures and gadgets.
    • Provision of proper ventilation. vii. Discouraging unnecessary noise.

viii. Decorating and beautifying the office to be attractive.

  • Challenge for using a cell phone (mobile phone). (4 Marks)

i. Are relatively expensive to buy. ii. It requires constant charging. iii. May experience network failure. iv. May be damaging to the ears.

v. There is possibility of been stolen. vi. May be relatively difficult to operate.

vii. Calls or messages may be tapped.

  • Monopolistic competition market curves. (4 Marks)

(i) a-marginal cost curve         (ii) b-average cost curve

(iii) c-average revenue curve.  (iv) d-marginal revenue curve

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