BS Rev P1-002 MS

2010 KCSE BS Revision P1-002MS




1.         Government  influence to increase the demand of a product.                              (4mks)

Reduce tax levied on the product to reduce the price of the product.

–           Offer subsidies to the firm producing the product

–           Impose higher taxes on the substitute product

–           Ensuring stability of the political sphere

–           Increase income of the consumers of the product      Any four points           ( 4 x 1 = 4mks

2.         List FOUR monetary tools the Central Bank uses to control credit.                                (4mks)

–           Interest rate

–           Open market operations

–           Cash / liquidity ratio requirement

–           Compulsory deposit requirements

–           Selective credit control

–           Directives and requests Any four points           ( 4 x 1 = 4mks

3.         Outline FOUR roles of an entrepreneur in an organization.                                            (4mks)

–           Pays for other factors of production e.g land, labour

–           Makes decisions in the organizations

–           Bears all the risks while he / she enjoys the profits

–           Pays for expenses such as electricity , water

–           Controls the business

–           Owns the whole projects Any four points           ( 4 x 1 = 4mks

4.         (i)         Exchange of goods without use of money                                                               (4mks)

Barter trade

(ii)        A state – owned company is called a


(iii)       The person who issues a cheque is called the ——- of the cheque


(iv)       A wholesaler who does not sell on credit and does not provide transport to the buyer is a —– wholesales.

Cash and carry wholesaler

5.         Under what circumstances will the manager of an organization communicate to the subordinate staff.                                                                                                            ( 4 mks)

–           When giving instructions

–           When training them

–           When evaluating their performance

–           When delegating duties

–           When solving problems facing them

–           When inspiring and motivating the surbodinate staff

6.         Factors that could hasten the economic development of a country.                     (4mks)

–           Availability / Endonment of natural resources

–           Improved technology

–           Adequate infractural development

–           Changing production from agricultural sector to manufacturing sector

–           Maximum utilization of resources to ensure employment

–           Educating  the population on family planning methods

–           Improving entrepreneurial culture through training and offering investment incentives

Any four points           ( 4 x 1 = 4mks


Eshitoyi Enterprises

Trading Account

For the year ended 30th June 2008

Opening stock                           60,000 


Add: Purchases                       330,000

Cost of goods available          390,000

Less : Closing stock                 30,000

Cost of sales                          360 ,000

Gross profit                            180 ,000


Sales 540,000ü 

540 ,000


Date Transaction Account to be debited Account to be credited
i) Purchases Bank
ii) Cash / Bank Capital / additional investment
iii) bank Sales
iv) Rent Rent Accrued

½ x 8 = 4mks

9.         Under what circumstances would insurance companies in Kenya opt to reinsurance themselves.                                                                                                                               (4mks)

–           When the company covers very many risks

–           When it is a mandatory government requirement / policy that insurance companies re – insure

When the possibilities of the risk occupying are very high

–           When the value of the item / property insured is too high and would not easily be compensated by the company.

–           Where there is used to spread various risks insured by the company.

10.       Highlight FOUR ways in which the government can use to control inflation.                (4mks)

–           Use of bank rates

–           Open market operation

–           Selective credit control

–           Reserve requirements

–           Price control and income policy

–           Increased imports

–           Reductions of exports and expanding domestic production

–           Reduction of government expenditure

–           Reduction of taxes                                                      Any four points           ( 4 x 1 = 4mks

11.       The book keeper of Alpha Traders extracted the following information from the accounting records

Total Debtos A/C
Bal b/f 525, 000 Discount allowed 15,000
Dishonoured cheque 10,000 Sales Returns 30 ,000
Credit sales 910,000 Receipts from debtors 800,000
Bal c/d 600, 000

Total sales = credit sales + cash sales

= 910,00 + 150,000

= 1,06 000                                                                               ½ Mks X 10 = 5

12.       Give FOUR assumptions associated with monopolistic competition market structure.(4mks)

–           Many buyers and sellers

–           Sell differentiate products

–           Free entry and exit of firms

–           Perfect knowledge about the market by buyers and sellers

–           Sell substitutes goods

–           The firms are price makers

13.       State FOUR reasons for starting a business.                                                                      (4mks)

–           To earn profit

–           To create employment

–           To make use of local resources

–           To utilize spare / leisure time

–           To be an own boss

–           As an outlet of new innovation

14.                                                                                                                                                       (4mks)

(i)         Place utility

Ware housing / Transport

(ii)        Possession utility

–           Trade / Exchange

(iii)       Time utility

–           Transport / warehousing

(iv)       Form Utility

–           Production

15.       What FOUR factors determine the size of a firm.                                                             (4mks)

–           Number of employees

–           Output

–           Area of capacity of the operational premises

–           Amount of capital invested

–           Size of market served

–           Level  of technology

–           Sales volume


17.       Kenya is fast embracing East Africa Community what benefits is Kenya likely to experience from this arrangement.                                                                                                 (4mks)

Availability of market for her produce

Kenya can specialize to produce quality goods

Promotion of peace with trading partners

Common bargaining front

Employment creation

Transfer of factors of production freely

Coordinate development of industries

High quality and cheap products produced

Importing goods from member countries cheaply      Any four points          ( 4 x 1 = 4mks

18.       How can effective management of a business lead to its success.                                      (4mks)

–           Proper planning

–           Proper coordination

–           Proper organization

–           Effective staffing

–           Effective controlling

–           Objective directing                                                     Any four points           ( 4 x 1 = 4mks

19.       Complete the following table.                                                                                               (4mks)

Fixed Assets Currents Assets Long term Liabilities Sh. Current Liabilities Sh. Owner Equity 


Working capital
100,000 20,000 60,000 10,000 50 ,000 tick 10,000  tick
175,000 tick 50,000 40,000 35,000 tick 150,000 15,000
200,000 100,000 tick 150,000 80,000 70,000 tick 20,000
350,000 50,000 280,000 tick 20,000 100,000 30,000  tick

½ x 8 = 4mks

20.       Despite air transport being expensive, it is the preferred mode of transport over long distance. Outline FOUR reasons for this preference.                                                 (4mks)

Can be used to transport perishable and fragile goods

–           Planes move where other means of transport cannot such as poles and a cross the mountains

–           Most suitable as it connects continents

–           It’s the fastest means of transport

–           Ideal for transporting valuable goods

–           Risk of loss through theft is minimal

–           Relatively flexible as remote areas can accessed by helicopters and chartered planes

Any four points           ( 4 x 1 = 4mks

21.       The government raises most of its revenue through taxes. High FOUR reasons for taxation.

–           Discourages comsuption of certain products

–           Discourage importation of certain products to protect local industries

–           Reducing inequality in income distribution

–           Controlling inflation

–           Help in locating business

–           Correcting balancing of payments                              Any four points           ( 4 x 1 = 4mks

22.       Name the source document and source books to which each of the following description relate.                                                                                                                                             ( 4mks)

Cash sale / Receipt Cash book
b) Invoice Purchases journal
c) Credit note Purchase returns journal
d) Statement of account Statement of Account

23.       State FOUR ways in which office document can be reproduced.                                                (4mks)

–           Photocopying

–           Duplicating

–           Carbon copying

–           Printing by computers

–           Offset lithography                                                      Any four points           ( 4 x 1 = 4mks

24.       Why would a business choose to use bill boards to promote its products.                       (4mks)

–           They are positioned at strategic positions whey they can be read by many people

–           The advertising message is not heavily worded make it possible for the message to be understood and remembered easily

They can convey message for a long time as they can be relatively permanent

They are conspicuous and hence attractive to the audience

They reach a wide audience

Can be modified to rotate in orders to accommodate more than one product

Any four points           ( 4 x 1 = 4mks

25. Factors leading to a decline in birth rates

–           Delayed marriage due to education

–           Craving high standards of living

–           Desire to have children live better lives than parents

–           Where a small family is considered fashionable

–           Improve confidence that few children will survive due to decline in mortality rate

–           Availability of viable retirement benefits schemes making people to stop viewing children as security in old age.                                                       Any four points           ( 4 x 1 = 4mks




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3 responses to “BS Rev P1-002 MS

  1. Paulo Mutui

    September 13, 2012 at 3:40 pm

    surely that paper was good

  2. paulo mutui

    November 24, 2012 at 1:05 pm

    thankyou once more


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