Effects of Business Transactions
14 Grade 10 Business Studies questions on Effects of Business Transactions, with worked marking schemes. 14 questions are available on this topic in full.
Question 1
1 markA trader uses Ksh 180,000 from the business bank account to buy a delivery motorcycle for the business. The effect of this transaction is that
A. total assets increase by Ksh 180,000
B. total assets remain the same
C. liabilities increase by Ksh 180,000
D. capital decreases by Ksh 180,000
(1 mark)
Marking scheme for this question
Create a free account to see itQuestion 2
6 marksExplain the effect of each of the following transactions on the assets, liabilities and capital of a poultry business: (a) the business receives a bank loan of Ksh 100,000 in cash; (b) the owner brings her personal laptop worth Ksh 45,000 into the business; (c) the business sells an old incubator for cash at its book value of Ksh 20,000.
(6 marks)
Marking scheme for this question
Create a free account to see itQuestion 3
2 marksExplain why paying a creditor Ksh 30,000 in cash does not change the capital of a business.
(2 marks)
Marking scheme for this question
Create a free account to see itQuestion 4
4 marksDistinguish between fixed assets and current assets, giving one example of each as found in a bookshop.
(4 marks)
Marking scheme
- Fixed assets: assets bought for long-term use in running the business and not for resale, normally held for more than one year. (1) - Example in a bookshop: shelves, counter, computer or delivery van. (1) - Current assets: assets held for a short period, which keep changing in the course of trading and are easily converted into cash. (1) - Example in a bookshop: stock of books, cash at hand or in bank, debtors. (1)
Question 5
3 marksExplain three ways in which the capital of a business may increase.
(3 marks)
Marking scheme
Award 1 mark for each way correctly explained, to a maximum of 3: - The owner introduces additional money into the business, which raises both cash and the owner's claim - The business earns a net profit, and profit not withdrawn is added to capital - The owner transfers a personal asset, such as a vehicle or laptop, into the business, increasing assets and capital - The owner reduces drawings, leaving more of the profit in the business - Assets of the business are revalued upwards, raising the owner's claim
Question 6
2 marksThe assets of a hardware shop in Kericho are worth Ksh 620,000. The business owes creditors and a bank loan totalling Ksh 245,000. Determine the capital of the business, showing your working.
(2 marks)
Marking scheme for this question
Create a free account to see itQuestion 7
6 marksWanjiku started a grocery with Ksh 400,000 in cash. She then bought stock for cash worth Ksh 150,000, obtained a display fridge worth Ksh 90,000 on credit from a supplier, and later paid that supplier Ksh 40,000 in cash. Determine the total assets, the total liabilities and the capital of the grocery after these transactions.
(6 marks)
Marking scheme
- Cash balance: 400,000 - 150,000 - 40,000 = Ksh 210,000 (1) - Stock: Ksh 150,000 (1) - Display fridge: Ksh 90,000 (1) - Total assets: 210,000 + 150,000 + 90,000 = Ksh 450,000 (1) - Total liabilities (creditor): 90,000 - 40,000 = Ksh 50,000 (1) - Capital: 450,000 - 50,000 = Ksh 400,000 (1) Accept the verification Assets 450,000 = Capital 400,000 + Liabilities 50,000. Award method marks where the working is correct but one figure has been miscopied.
Question 8
1 markA shopkeeper in Kakamega buys goods worth Ksh 60,000 from a wholesaler on credit. The effect of this transaction on the shop is that
A. assets increase and capital increases by Ksh 60,000
B. assets increase and liabilities increase by Ksh 60,000
C. assets decrease and liabilities increase by Ksh 60,000
D. assets and liabilities remain unchanged until the goods are paid for
(1 mark)
Marking scheme for this question
Create a free account to see itQuestion 9
4 marksState the accounting equation and explain what each of the three items in it means.
(4 marks)
Marking scheme
- Accounting equation: Assets = Capital + Liabilities (1) - Assets: the resources or property of value owned by the business, for example stock, cash, furniture or a motor vehicle. (1) - Capital: the resources contributed to the business by the owner, that is, the owner's claim on the assets of the business. (1) - Liabilities: the amounts the business owes to outsiders, for example creditors and a bank loan. (1)
Question 10
1 markThe assets of a bookshop total Ksh 480,000 and the capital of the owner is Ksh 350,000. The liabilities of the bookshop amount to
A. Ksh 830,000
B. Ksh 350,000
C. Ksh 480,000
D. Ksh 130,000
(1 mark)
Marking scheme for this question
Create a free account to see itQuestion 11
1 markA trader sells for Ksh 14,000 cash goods that had cost the business Ksh 10,000. The effect of this sale on the business is that
A. assets increase by Ksh 4,000 and capital increases by Ksh 4,000
B. total assets and capital both remain unchanged
C. assets increase by Ksh 14,000 and capital increases by Ksh 14,000
D. assets increase by Ksh 4,000 and liabilities increase by Ksh 4,000
(1 mark)
Marking scheme for this question
Create a free account to see itQuestion 12
1 markAchieng started a salon by putting Ksh 200,000 of her own savings into the business bank account. The immediate effect of this on the business is that
A. assets increase and capital increases by Ksh 200,000
B. assets increase and capital decreases by Ksh 200,000
C. assets increase and liabilities increase by Ksh 200,000
D. capital increases and liabilities decrease by Ksh 200,000
(1 mark)
Marking scheme for this question
Create a free account to see itQuestion 13
1 markThe owner of a hardware shop takes four bags of cement worth Ksh 3,200 from the shop for building at her home. The effect of this on the business is that
A. stock decreases and capital increases by Ksh 3,200
B. stock decreases and liabilities decrease by Ksh 3,200
C. stock decreases but total assets remain the same
D. stock decreases and capital decreases by Ksh 3,200
(1 mark)
Marking scheme for this question
Create a free account to see itQuestion 14
1 markA trader pays Ksh 40,000 in cash to a supplier to settle part of what the business owes. The effect of this payment is that
A. assets decrease and capital decreases by Ksh 40,000
B. liabilities decrease and capital increases by Ksh 40,000
C. assets decrease and liabilities decrease by Ksh 40,000
D. assets increase and liabilities decrease by Ksh 40,000
(1 mark)
Marking scheme for this question
Create a free account to see it10 more marking schemes are on this page. A free account opens all of them, and lets you build your own paper on the topics you have actually taught, laid out in KNEC format with its full marking scheme.
Create a free account