Economic Management Sciences

Important concepts and Terminology:

• Assets: Possessions of the business
• Liabilities: Money owed to other entities
• Owners Equity: The interest of the owner in the business
• Income: Amounts that generate money from the business
• Expense: Amounts attributable to the operation of the business
• Profit: Income exceeds expenses
• Accounting: Recording, reporting and interpreting the information of a business
• Transactions: Events between two or more parties
• Source document: Evidence of a transaction
• Journal: book of first entry where info is recorded from the Source document
• Ledger: A collection of accounts in a business
• Debtor: Owes the business money
• Creditor: Someone to whom the business owes.

There are 3 main types of business: Manufacturing (eg Mr Price), Service (A hairdresser) or Tourism (Curio shops/Safari tour)

4 forms of ownership: 

• Sole trader
• Partnership
• Close Corporation
• Company

Market research: Will find out:

• Who is willing to buy the product?
• What price will they be willing to pay?
• Where would be the best place to sell the product?
• What quantity will they be able to sell

3 types of market research: Feasibility study, SWOT analysis (Strengths, Weaknesses , Opportunities, Threats) or different forms of questionnaires.

The four "P"s of marketing: Product, Price, Place, Promotion.

Advertising-Remember AIDA=Attention, Interest, Desire, Attraction.

So the four aspects that need to be considered are:

1. Marketing plan

2. Operations plan

3. Staffing plan 

4. Financial plan.

The General Ledger "notes to self"

Cost price+Gross profit=Selling Price

Cost price x 100+mark up /100=Selling price

(you can change the subject of the formula to get the variable you need)

With Cost of sales, trading stock and sales, what is debited and what is credited?

The Purchasing of stock: Dr Trading stock, Cr bank.

The selling of trading stock: Dr bank, Cr Sales

2nd entry for Cost of sales: Dr Cost of sales, Cr Trading stock.

eg: Unsold stock are called trading stock, and are shown in the trading stock account. Sold stock are called cost of sales, and are shown in the cost of sales account. Therefore, sold stock must be taken out of the trading stock account and taken to the cost of sales account.

Credit sales: Dr Debtors control and Cr Sales.

 Dr Cost of sales and Cr Trading stock.