Gr 9-Economic and Management Sciences-Study Guide

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ECONOMIC AND MANAGEMENT SCIENCES STUDY GUIDE Grade 9

A member of the FUTURELEARN group

Economic and Management Sciences Study guide

1809-E-EMS-SG01

Í2)È-E-EMS-SG01HÎ

Grade 9

CAPS aligned

JVW Earle SM Earle

Study Guide G09 ~ Economic and Management Sciences

CONTENTS Page in workbook

LESSON ELEMENTS PREFACE YEAR PLAN

UNIT 1

1

Page in study guide

4 6 7 9

Week 1 Revision of Grade 8 work FINANCIAL LITERACY: CASH RECEIPTS AND THE CASH PAYMENTS JOURNALS Week 2 Cash transactions of a trading business Lesson 1 − 2 Activity 1 Week 3 Lesson 3 Effect of cash transactions on the accounting equation Activity 2 1 Activity 3 2 THE ECONOMY: ECONOMIC SYSTEMS Week 4 Lesson 4 The three important economic systems Lesson 5 Origin of the different economical systems Lesson 6 Advantages, disadvantages and characteristics of each of the economic systems and the global economy Activity 4 Activity 5 Activity 6 FINANCIAL LITERACY: GENERAL LEDGER AND TRIAL BALANCE (SOLE TRADER) Week 5 – 6 Posting of cash transactions Lesson 7 − 10 Activity 7 4 Week 7 Lesson 11 − 12 Preparation of a Trial Balance of a trading business Activity 8 9 THE ECONOMY: THE ECONOMIC CYCLE Week 8 Lesson 13 − 14 The participants in the economic cycle of a closed economy Activity 9 Week 9 Lesson 15 Flow of goods and services Lesson 16 Money and factors of production in the cycle of a closed economy Week 10 Lesson 17 − 18 Flow diagram of an economic cycle Activity 10 15 UNIT 2 Week 1 Revision of work done in first term and an overview what will be done in the second term.

FINANCIAL LITERACY: CREDIT TRANSACTIONS – DEBTORS Week 2 Lesson 19 Credit sales and debtors Lesson 20 National Credit Act

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10 12 15 16 19

20 22 23 24 25 25

26 31 35 38

39 41 41 43 43 44 46

47 48

Study Guide G09 ~ Economic and Management Sciences

Week 3 Lesson 21 Lesson 22 Week 4 Lesson 23

Debtors discount Accounting cycle

49 50

Posting of transactions to the Debtors Journal (DJ) Activity 11 Posting of goods received from debtors in the Cash Lesson 24 Receipt Journal Activity 12 THE ECONOMY: PRICE THEORY Week 5 The Law of Demand, supply curve and graphic Lesson 25 representation of the demand curve Activity 13 Activity 14 The Law of Supply, supply curve and graphic Lesson 26 representation of the supply curve Activity 15 Week 6 Lesson 27 Equilibrium price and quantity Activity 16 Lesson 28 Change in the quantity demanded and supplied Week 7 Lesson 29 Increase and decrease of demand and supply Lesson 30 Graphic representation of changes in demand and supply ENTREPRENEURSHIP: SECTORS IN THE ECONOMY Week 8 Lesson 31 Sectors in the economy Lesson 32 Continuous use of resources in the three sectors Activity 17 Activity 18

UNIT 3

15

51 54 55

16

58

61 63 63 64 66 67 68 69 70 72

18

73 76 76 79 81

Week 1 Revision of work done in term 2 and an overview of work to be done in term 3.

THE ECONOMY: TRADE UNIONS Week 2 Lesson 33 Concept of trade unions and their historical development Activity 19 Lesson 34 Roles and responsibilities of trade unions in South-Africa Week 3 Lesson 35 Effect of trade unions on businesses Lesson 36 Contribution of trade unions to sustainable growth and development Activity 20 FINANCIAL LITERACY: CREDIT TRANSACTIONS – DEBTORS Week 4 Lesson 37 –39 Posting to the Debtors journal and the General ledger Week 5 Lesson 40

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The effect of credit transactions on the accounting equation Activity 21

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85 87 87 88 88 89

90

92 21

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Study Guide G09 ~ Economic and Management Sciences

FINANCIAL LITERACY: CREDIT TRANSACTIONS – CREDITORS Week 6 Lesson 41 Creditors and creditors discount Lesson 42 Accounting cycle Activity 22 27 Week 7 Lesson 43 Noting of transactions in the Creditors Journal (CJ) and Creditors Discount Journal (CDJ) Activity 23 28 ENTREPRENEURSHIP: BUSINESS FUNCTIONS Week 8 Lesson 44 Business functions Lesson 45 – 46 The role and importance of business functions Activity 24 30 Activity 25 FINANCIAL LITERACY: CREDIT TRANSACTIONS – CREDITORS (PAYMENTS) Week 9 Lesson 47 Posting of payments to creditors in the Cash payments journal (CPJ) Lesson 48 Posting to the Creditors Ledger and the General Ledger and the effect of credit transactions on the accounting equation Activity 26 35 UNIT 4 Week 1 Revision of work done in term 3 and an overview what is to be done in term 4.

FINANCIAL LITERACY TRANSACTIONS: CASH AND CREDITS TRANSACTIONS Week 2 – 3 Lesson 49 – 51 Posting of cash- and credit transactions of a side trader in the subsidiary journals Week 3 – 4 Lesson 52 – 54 Preparing a Trial Balance Activity 27 35 ENTREPRENEURSHIP AND BUSINESS PLAN Lesson 55 Concept of a business plan Activity 28 Week 5 Lesson 56 Components of a business plan Activity 29 Lesson 57 Format of a business plan Activity 30 Week 6 Lesson 58 Production plan, marketing plan, management plan Activity 31 Lesson 59 SWOT analysis and conclusion Activity 32 Week 7 Lesson 60 Week 8 – 9

100 102

103 105 106 113

114 117

122 124

125 127 137 141 142 143 143 144 144 147 149 150 151

Financial Plan

152

Preparation for the examination; study techniques for the examination.

152

GLOSSARY BIBLIOGRAPHY AND REFERENCES

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158 160

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Study Guide G09 ~ Economic and Management Sciences

YEAR PLAN TERM 1

TOPIC 1

Revision

2

Financial literacy: Cash Receipts Journal and Cash Payments Journal The economy: Economic systems Financial literacy: General Ledger and trial balance The economy: The circular flow Revision

3 4

5 2

STARTING DATE

6 7

Financial literacy: Credit transactions – debtors 8 The economy: Price theory 9 Entrepreneurship: Sectors of the economy 10 June examination 3

11 Revision 12 The economy: Trade unions 13 Financial literacy: Credit transactions – debtors 14 Financial literacy: Credit transactions – creditors 15 Entrepreneurship: Functions of a business 16 Financial literacy: Credit transactions – creditors

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COMPLETION DATE

Study Guide G09 ~ Economic and Management Sciences

4

17 Revision 18 Financial literacy: Transactions – cash and credit 19 Entrepreneurship: Business plan 20 Examination preparation 21 November examination

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Study Guide G09 ~ Economic and Management Sciences

Unit

1

UNIT 1 STUDY/REVISION: Read through the following segment and answer the questions that follow to refresh your memory on what was discussed during Economic and Management Sciences in Grade 8.

Revision activity: Answer the following questions: Indicate whether the following statements are TRUE or FALSE. Households are producers, because they buy products 1 from businesses that produce products.

The government supplies resources and services to 2 households and is therefore a producer.

The Minister of Finances decides how to spend the 3 money collected by the government.

A modern population is industrialised and uses science 4 and thoughts to explain things.

Financial markets are markets where people and 5 companies trade financial assets like shares and effective shares.

A democracy is a system whereby all the inhabitants of 6 a country can vote.

Businesses are consumers, because they buy or use 7 households labour to produce their products or to render a service.

Standard of living describes the availability of things 8 that make people’s live more comfortable.

A market is where people buy and sell goods and 9 services.

10 Businesses are producers, because they produce goods and services to sell.

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True

False

Study Guide G09 ~ Economic and Management Sciences

Unit

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FINANCIAL LITERACY: CASH RECEIPTS JOURNAL AND CASH PAYMENT JOURNAL LEARNING AIMS After completing this lesson, you must be able to do the following: Cash Payments Journal Cash Receipts Journal The effect of cash transactions on the accounting equation.

INTRODUCTION Accounting originates when a transaction takes place. A transaction takes place every time money exchanges hands between the buyer and the seller. This can be for goods bought or sold or for services rendered.

Two types of businesses: 1.

2.

Trading business: Buys and sells goods (trading stock) e.g. supermarket.

Service business: Only provides a service e.g. hairdresser or dentist.

Every time a transaction takes place, a source document is issued; an original with a duplicate. The client receives the original while the business uses the duplicate to record the transaction in different journals.

CASH TRANSACTIONS OF A TRADING BUSINESS Trading businesses sell trading stock at a profit. There are always two amounts involved when trading stock is sold, namely a cost price and a selling price. A trader will add a certain profit mark-up (percentage) to the cost price to calculate the selling price.

Lesson 1 – 2 Let’s look at the calculation of the cost price, profit mark up and the selling price.

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Study Guide G09 ~ Economic and Management Sciences

Unit

COST PRICE + PROFIT MARK-UP = SELLING PRICE Calculating cost price: Use a formula: S .P 100 × 1 100 + % PROFIT Given : S .P = R600 Pr ofit = 20%

C= .P

600 100 × 1 120 = R500

C= .P

(100 + 20)

Calculating percentage profit: Use a formula: Profit margin is calculated on the Cost Price (money invested) Selling Price – Cost Price = Profit Given:

SP = R600

CP = R500

Profit = R600 – R500 = R100 PROFIT 100 × C.P 1 100 100 = × 500 1 = 20%

Profit Margin =

Calculating selling price: Use a formula: C.P 100 + % PROFIT × 1 100 Given : C.P = R500 Pr ofit = 20% 500 120 (100 + 20) S= .P × 1 100 = R600 .P S=

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Study Guide G09 ~ Economic and Management Sciences

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ACTIVITY 1 Complete the following table: Cost price (R) 1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

200 500 (c) (d) 800 1 750 4 450 3 000 (i) 2 800

Profit mark-up % 25 % 30 % 40 % 20 % (e) (f) 60 % (h) 25 % (j)

Selling price (R) (a) (b) 420 2 400 1 200 2 625 (g) 4 050 2 000 3 430

SOURCE DOCUMENTS: Cash is received or paid out on a daily basis. A source document is issued as proof that a transaction took place. The original document is issued to the client. The trader uses the duplicate to record these transactions in the cash receipts and cash payments journal on a daily basis.

CASH RECEIPTS JOURNAL: SOURCE DOCUMENTS Cash Register Roll (CRR) Duplicate Receipts Bank Deposit Slip Bank Statement

TRANSACTION Cash sales Cash received Money deposited in bank account (analysis of receipts in CRJ) Cash directly deposited into bank account Electronic transfers

Example: S. Stevens is the owner of Stevens Traders. Record the following transactions in the Cash Receipts Journal.

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Study Guide G09 ~ Economic and Management Sciences

Unit

Transactions for March 2013 1.

S. Stevens deposited R100 000 as capital contribution. The accountant issued receipt 01.

5.

Cash sales R3 500. Cost price R2 800.

Receive a cheque from B. Bouwer for renting part of the building R7 200.

The accountant issued receipt 02.

10.

Cash sales R2 400. Profit margin 20% on cost price.

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Study Guide G09 ~ Economic and Management Sciences

Unit

Solution: CASH RECEIPT JOURNAL OF STEVENS TRADERS FOR MARCH 20.3 Doc No 01 CRR 02 CRR

Day 1 5 10

Details S. Stevens Sales B. Bouwer Sales

Analysis of Receipts

Bank 100 000

3 500 00 7 200 00 2 400 00

Cost of Sales

Sales 00 00

2 800 00

10 700 00 2 400 00

3 500

2 400 00

2 000 00

113 100 00

5 900 00

4 800 00

CRJ 01

Sundry Accounts Amount Fol. Details 100 000 00 Capital 7 200 00

Rent Income

10 720 00

The analysis of the receipts column does not have a total. All the cash has been deposited in the bank.

On 5 March, two transactions were recorded. The two amounts were added and the total entered in the Bank column.

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Study Guide G09 ~ Economic and Management Sciences

Unit

1

EFFECT OF CASH TRANSACTIONS ON THE ACCOUNTING EQUATION Lesson 3 Effect on Accounting Equation:

1.

5.

10.

ASSETS

OWNER’S EQUITY

+ R100 000

+ R100 000

+ R3 500

+ R700

– R2 800

=

LIABILITIES

Cash increased and capital increased Cash increased Trading stock decrease & R700 profit (Owner’s Equity) Cash increased and owner’s equity increased Cash increased; trading stock decreased Profit on sales = R400

+

+ R7 200

+ R7 200

+ R2 400

+ R400

– R2 000 R108 300

R108 300

REASON

Cash transactions of a trading business and the effect on assets and owner’s equity:

A trading business buys merchandise (goods) with the purpose of selling it at a profit. The merchandise is known as trading stock. Trading stock is a current asset for a trading business because it will be converted to cash within a short period of time (usually one year).

Trading stock is purchased to be sold at a profit.

Purchasing trading stock When a trading business buys trading stock and pays by cheque, the transaction will have the effect of decreasing the asset cash and increasing the asset trading stock.

Trading stock purchased by cheque, R500.

Selling trading stock When a trading business sells trading stock for cash, the transaction will have the effect of increasing the asset cash by the selling price and decreasing the asset trading stock by the original cost. As the selling price is normally greater than the original cost, the owner’s equity increases by the difference, which is the profit.

Trading stock (cost price R500) sold for cash, R800

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Trading stock is a current asset.

Assets – R500 (cash decreases) + R500 (trading stock increases)

Assets + R800 (cash increases) – R500 (trading stock decreases) Hence owner’s equity + R300 (profit)

Study Guide G09 ~ Economic and Management Sciences

Unit

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ACTIVITY 2 This activity must be completed in your workbook.

Show what effect each of the following transactions has on the assets and/or owner’s equity. Use a “+” to indicate an increase and a “–” to indicate a decrease. Give the amount concerned, and a reason in each case.

Transactions by Brown Traders, owner D. Brown July 20.1 1.

2.

3.

4.

5.

6.

7.

D. Brown started a business, Brown Traders, by depositing his capital contribution of R90 000 in current the bank account of the business. Issued receipt 001.

Purchased motor vehicle from Nel Motors, paid by cheque 001, R35 000.

Paid R28 000 to Office Suppliers for equipment, purchased by cheque 002.

Purchased trading stock from Makro, paid by cheque 003, R17 500.

Paid municipality R1 000 by cheque 004 for trading licence.

Wages paid by cheque 005, R500.

Trading stock (cost price R3 500), sold for cash, R5 600.

TOTAL POSSESSIONS = TOTAL OBLIGATIONS ASSETS = OWNER’S EQUITY + LIABILITIES OWNER’S EQUITY = ASSETS – LIABILITIES LIABILITIES = ASSETS – OWNER’S EQUITY Where: Assets (A)

= Possessions of the business with a monetary value.

Owner’s equity (O/E)

= The interest of the owner in the assets of a business.

Liabilities (L)

= Interest of the concerns to whom the business owes money.

CASH PAYMENTS JOURNAL For school accounting purposes, we accept that most payments are done per cheque, although most businesses use internet banking services to do payments. The cheque counterfoil is used as the source document.

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Study Guide G09 ~ Economic and Management Sciences

Unit

1

At the end of the month, the business receives a bank statement from the bank that shows direct payments from the bank account e.g. bank charges, interest on bank overdraft etc.

Example: S. Stevens is the owner of Stevens Traders. Record the following transactions in the Cash payments journal.

Transactions for March 20.1 2.

Issue cheque 01 to ABC Traders for trading stock purchased, R12 800.

3.

Issued cheque 02 to the City Council for R900 to pay for the trading licence.

4.

Bought stationery for R650 and issued a cheque to ANP Stationers.

16.

Issued a cheque for the storeroom R2 500 to N. Nkosi for rent.

22.

According to the bank statement, ABC Bank debited the current account with R210 for bank charges.

28.

Draw cheque to pay wages, R6 000.

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Study Guide G09 ~ Economic and Management Sciences

Unit

CASH PAYMENTS JOURNAL OF STEVENS TRADERS FOR MARCH 20.1 Doc No

Day

Name of Payee

C01 C02 C03 C04 B/S C04

2 3 4 16 22 28

ABC Traders City Council ANP Stationers N Nkosi ABC Bank Cash

Bank

Wages

12 800 900 650 2 500 210 6 000 23 060

Trading Stock

Consumable goods

12 800 900 650 2 500 210 6 000 6 000

12 800

–

Cheque numbers to be in sequence.

If column not provided – use sundry accounts column.

Name of payee column indicates to “whom” the cheque is issued.

To draw a cheque, means cash.

Rent is recorded as rent expense. Not rent only. In the CRJ = rent income. The same for interest.

Total of columns will be transferred to the General Ledger.

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CPJ 01

Sundry Accounts Amount Fol Details

18

Trading licence Stationery Rent expense Bank charges

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Study Guide G09 ~ Economic and Management Sciences

Unit

1

Effect on accounting equation: OWNER’S EQUITY

ASSETS

LIABILITIES

– R12 800 2.

3.

4.

16.

22.

28.

Cash decrease – asset Trading stock increase – asset

+ R12 800 – R900 – R650 – R2 500 – R210 – R6 000

=

– R900 – R650 – R2 500 – R210 – R6 000

REASON

+

Cash decrease Expenses decrease Owner’s equity

ACTIVITY 3 This activity must be completed in your workbook.

Cash Receipts Journal:

Summarises all cash receipts transactions.

Cash Payments Journal:

Summarises all cash payments transactions.

Cash Receipts Journal:

Duplicates of receipts Duplicates of cash invoices Duplicates of deposit slips Cash register roll

Cash Payments Journal:

Cheque counterfoils

Enter the transactions for July 2013 in the Cash Receipts Journal and Cash Payments Journal for Chiva Traders.

Note: The business makes use of a 25% mark-up on cost price.

All payments per cheque.

Transactions: 1.

2.

4.

5.

7.

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The owner, S. Chiva, deposited R120 000 as capital contribution.

Receipt 101 issued.

Bought trading stock for R16 500 and issue cheque 01 to Makro.

Bought a second-hand delivery vehicle from Mac Motors for R65 000.

Paid this amount by cheque (cheque no 02).

Cash sales R8 600. Cost price R6 880.

Issue a cheque to City Council for R800 to pay the trading licence.

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