A complete summary of the content of Economic and Management Science Grade 8 [accounting which is therefore part 2], which meets the requirements as set out in the CAPS / CAPS curriculum. Colorful side notes have been added to enhance the learning experience. Creates a love for future Accountants!
EMS
CHAPTER 1 : ECONOMIC SYSTEMS
WHAT IS AN ECONOMIC SYSTEM?
, BASIC PRINCIPLES
9(
ACCOUNTING CONCEPTS:
→form of business where only ONE PERSON owns (and operates) the
Sole owner business & is FULLY responsible for debts of the business and "creates"
all the profits
2 TYPES OF BUSINESSES:
u Service business> not selling goods, not producing anything, providing
a service
u Trading business> buy goods to sell again at a higher price
Debit= left side of G/L ACCOUNT [Statement of Income & Expenditure→
Debit & Credit expense]
Credit= right side of G/L ACCOUNT [Statement of Income &
Expenditure→ income]
DOUBLE ENTRY PRINCIPLE = every transaction of a business has a debit
AND a credit
→Money or other assets that the owner contributes to the business to
Capital
START the business
u Loan from the bank
u Investments by friends / family
u Own money (owner)
→Represents the owner's interest in the business [consisting of capital
Owner's
contribution, withdrawals and profit]
interest →TOTAL capital contribution made by the owner to the business
(equity) CAPITAL - LOSS - WITHDRAWALS = OWNER'S INTEREST
CAPITAL + PROFIT = OWNER'S INTEREST
CAPITAL + PROFIT – WITHDRAWALS = OWNER'S INTEREST
→The money that business receives through the provision of services
Income or the sale of goods [equity of business is increased]
OPERATING INCOME
→money earned by business for SERVICES PROVIDED
RENT INCOME
→money the business earns when premises are rented
→The money that business spends on goods and services [decrease
Expenses
equity of the business]
BUYING ASSET = NOT AN EXPENSE!
u Pay rent> payment for use of premises
u Telephone> for BUSINESS USE
u Water and electricity> for BUSINESS USE
u Salaries and loans> pay to people who work for the business
, u Trade license> consent for delivery of services / sale of products
u Stationery> paper, printer ink, business cards etc.
u Consumables> items used for DELIVERY of service / making of
products
→favorable surplus of total income minus the total expenses of the
Profit business [measured within a financial year]
PROFIT MOTIVE > business is conducted with the AIM of making a profit
PROFIT (LOSS) = REVENUE - EXPENSE
→when EXPENDITURE is more than INCOME
Losses
→occurs when money changes hands between businesses and other
Transactions parties
→record of every income and expense that occurred within the
business
SOURCE DOCUMENT = book transaction > used to obtain necessary
information so that the books of the business can be drawn up
[bookkeeper]
→burden or debt that a business enters into with a person or institution
Liabilities 2 TYPES OF BURDENS:
LONG TERM LIABILITY (Repaid in more than a year)
ALSO CALLED > non-current liabilities
u Mortgage loan
u Vehicle financing
u Loans for business expansions
OPERATING LIABILITIES OR CURRENT LIABILITIES (will be paid back in
less than a year > few months)
u Overdraft bank account
u Creditors
u Income tax [VAT]
→articles bought by business > country period use & help business to
Assets make profit
2 TYPES OF ASSETS:
FIXED ASSETS (lifetime more than one year > used to operate and
maintain business)
u Grounds and infrastructure
u Vehicles
u Equipment
CURRENT ASSETS (converted into cash within one year > used within
business and value changed)
u Debtors
u Cash
→payments for services (useful) provided by banks for example:
Banking u Loans for help with cash flow through an overdraft bank account
[pays interest]
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through EFT, credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying this summary from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller notedx19. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy this summary for R100,00. You're not tied to anything after your purchase.
