Economic and Management Sciences
Grade 9
By:
Siyavula Uploaders
Economic and Management Sciences
Grade 9
By:
Siyavula Uploaders
Online:
< http://cnx.Org/content/colll074/l.l/ >
CONNEXIONS
Rice University, Houston, Texas
This selection and arrangement of content as a collection is copyrighted by Siyavula Uploaders. It is licensed under
the Creative Commons Attribution 3.0 license (http://creativecommons.Org/licenses/by/3.0/).
Collection structure revised: September 15, 2009
PDF generated: February 6, 2011
For copyright and attribution information for the modules contained in this collection, see p. 144.
Table of Contents
1 Term 1
1.1 The flow of money, production factors and goods (revised) 1
1.2 Explaining business enterprises 3
1.3 The economic cycle and markets 5
1.4 The foreign sector in the economic cycle 7
1.5 Price-fixing through supply and demand 12
1.6 The influence of trade unions 16
1.7 The national budget, growth and economical equalities 19
2 Term 2
2.1 Reconstruction and development programme 23
2.2 Regional and international agreements 27
2.3 Savings and investment 30
2.4 Productivity 31
3 Term 3
3.1 An idea for an enterprise 35
3.2 Develop a business plan 40
3.3 Ownership of a business 43
4 Term 4
4.1 Difference between an income statement and a balance sheet 47
4.2 Social and environmental responsibilities of businesses 60
4.3 Recording cash transactions of service and commercial enterprises 62
4.4 Recording credit transactions of commercial and service enterprises 77
4.5 Recording payments received from debtors 82
4.6 Recording payments to creditors 87
4.7 Ledger entries 98
4.8 Transferring the auxiliary journals to the ledger 106
4.9 Drawing up a trial balance 121
4.10 Analysing financial statements 139
4.11 Forms of credit purchases and methods of payment 141
Attributions 144
IV
Chapter 1
Term 1
1.1 The flow of money, production factors and goods (revised) 1
1.1.1 ECONOMIC AND MANAGEMENT SCIENCES
1.1.2 Grade 9
1.1.3 THE ECONOMIC CYCLE
1.1.4 Module 1
1.1.5 THE FLOW OF MONEY, PRODUCTION FACTORS AND GOODS
1.1.5.1 ASSESSMENT STANDARD 1.1:
1.1.5.2 THE FLOW OF MONEY, PRODUCTION FACTORS AND GOODS
ON COMPLETING THIS SECTION YOU WILL BE ABLE TO DESCRIBE THE FLOW OF MONEY,
PRODUCTION FACTORS AND GOODS AND SERVICES IN THE ECONOMIC CYCLE OF THE
SOUTH AFRICAN ECONOMY.
In order for us to understand the economic cycle, we need to analyse the participants in the economy,
who are naturally also the participants in the cycle:
The first participants are the CONSUMERS or the HOUSEHOLDS.
Consumers have certain NEEDS that have to be met in order for them to survive, namely the need
for FOOD, CLOTHING, HOUSING and SAFETY. In order to satisfy these basic needs, the consumers
or households will have to use or apply their means or FACTORS OF PRODUCTION. In other words,
they must use / apply their LABOUR, CAPITAL, LAND and ENTREPRENEURIAL TALENT in order
to produce the necessary products.
Activity 1: HUMAN NEEDS
SELF:
Make a list of human needs and give good examples in each case. (Hint: Start off by making a list of
your own needs.)
1.
2.
3.
4.
5.
Activity 2: HUMAN NEEDS
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2 CHAPTER 1. TERM 1
GROUP:
Which of the previously mentioned needs are the most compelling ones?
1.
2.
3.
4.
5.
The consumers will thus have to "sell" their factor of production to the second participant in the cycle,
the PRODUCER or the BUSINESS ENTERPRISE, who will then organise and arrange to produce products
that will meet the needs of the consumers. The producer will "remunerate" the consumer for the use of his
/ her factors of production (in the following way) :
• A WAGE is paid for the use of LABOUR;
• INTEREST is paid for the use of CAPITAL;
• RENT is paid for the use of LAND; and
• The consumer is paid a share of the profit for the use of his / her ENTREPRENEURIAL TALENT.
• This compensation is used by the consumer to purchase products from the producer (his supply of
goods and services) in order to satisfy his needs.
1.1.6 Assessment
Learning Outcomes (LUs)
LO 1
the economic cycle
The learner will be able to demonstrate knowledge and understanding of the economic cycle within the
context of "the economic problem."
Assessment Standards(ASs)
We know this when the learner:
1.5 explains the different flows of money, factors of production, goods and services in the economic cycle
within the South African economy;
1.6 discusses the role of the foreign sector in the economic cycle;
1.7 illustrates by means of a graph and discusses how demand and supply influence prices;
1.8 critically assesses the influence and actions (strikes and stayaways) of trade unions in general and
during the apartheid era on:
• the South African economy;
• political, economic and social transformation;
• labour issues;
1.9 discusses the effect of the national budget on the economy (e.g. taxation and expenditure on education,
social welfare, health and security.)
1.1.7 Memorandum
ACTIVITY 1: Human needs
SELF:
A list of the needs of people:
Food, clothing, housing, protection, recreation, music, love, power, etc.
ACTIVITY 2: Human needs
GROUP:
The most urgent needs:
Food, clothing, housing, protection, recreation
1.2 Explaining business enterprises 2
1.2.1 ECONOMIC AND MANAGEMENT SCIENCES
1.2.2 Grade 9
1.2.3 THE ECONOMIC CYCLE
1.2.4 Module 2
1.2.5 EXPLAINING BUSINESS ENTERPRISES
1.2.5.1 Activity l:PRODUCTION ACTIVITIES
SELF:
Classify, with relevant examples, the different activities of the industries / business enterprises.
1.
2.
3.
4.
Activity 2: PRODUCTION FACTORS
GROUP:
Picture a household / family in which all the factors of production are present. Explain the role of each
member to show how he / she participates in the production process. The members of each group must
explain their examples to the rest of the class and also describe them fully.
Therefore the economic cycle could be presented as follows in its simplest form:
PRODUCERS / BUSINESS ENTERPRISES
On analysing the cycle, one can see very clearly that there are TWO streams, namely a MONEY STREAM
and a GOODS STREAM. These two streams flow in opposite directions and will be equal in a "closed"
economy. The reason for this is simply that the businesses cannot spend more than what they have received
as "income". Note that their "income" is equal to the value of the goods and services that they have produced
and sold on the markets for consumer goods. On the other hand the households can also spend only the
"money" that they have received as compensation for the services of their production factors.
1.2.6 Assessment
Learning Outcomes (LUs)
LO 1
the economic cycle
The learner will be able to demonstrate knowledge and understanding of the economic cycle within the
context of "the economic problem."
Assessment Standards(ASs)
We know this when the learner:
1.5 explains the different flows of money, factors of production, goods and services in the economic cycle
within the South African economy;
1.6 discusses the role of the foreign sector in the economic cycle;
1.7 illustrates by means of a graph and discusses how demand and supply influence prices;
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CHAPTER 1. TERM 1
1.8 critically assesses the influence and actions (strikes and stayaways) of trade unions in
general and during the apartheid era on:
• the South African economy;
• political, economic and social transformation;
• labour issues;
1.9 discusses the effect of the national budget on the economy (e.g. taxation and expenditure on education,
social welfare, health and security.)
1.2.7 Memorandum
ACTIVITY 1: Production activities
SELF:
Activities of industries / business enterprises
primary industries, e.g. agriculture, stock farming, forestry, mining, fisheries, etc.
Secondary industries, e.g. processing industries involving fish factories, abattoirs, etc.
Tertiary industries, e.g. distributing industries involving transport, shops, cafes, etc.
Service industries, e.g. doctors, lawyers, hairdressers, etc.
ACTIVITY2: Factors of production
GROUP:
Family representing all the factors of production (example)
Father:
Farmer and landowner(primary
industry)
• Entrepreneurial talent and
owner of production factor,
land.
Mother:
Doctor in private practice(service
industry)
• Entrepreneurial talent and
labour
Son:
Cabinet maker(secondary indus-
try)
• Labour
Daughter:
Owner, cash loans bank(tertiary
industry)
• Provider of capital
Table 1.1
1.3 The economic cycle and markets 3
1.3.1 ECONOMIC AND MANAGEMENT SCIENCES
1.3.2 Grade 9
1.3.3 THE ECONOMIC CYCLE
1.3.4 Module 3
1.3.5 THE ECONOMIC CYCLE AND MARKETS
1.3.5.1 Activity 1: ECONOMIC CYCLE
SELF:
Draw your own version of the economic cycle so that both the participants and the flow are clear. Insert
the diagram on a separate sheet.
1.3.5.2 Activity 2: MARKET FOR FACTORS OF PRODUCTION
GROUP:
Classify all the factors of production factors that will be available on the market for factors of production
and indicate what remuneration will be paid to each.
1. FACTOR OF PRODUCTION
2. EXAMPLE
3. COMPENSATION
1.3.5.3 Activity 3: MARKET FOR CONSUMER GOODS
GROUP:
Classify the products that are traded on the market for consumer goods. Give two appropriate examples
in each case.
1. TYPE OF PRODUCT
2. EXAMPLES
In a "closed" economy the STATE also plays an important role, seeing that the state is also a consumer (e.g.
state hospitals that purchase food products and medical supplies on the market for consumer products) . In
addition, the state is also a producer (hospitals supply medical services to consumers).
Furthermore, the consumers pay taxes to the state and from these "funds" certain services that are of
national interest are delivered, for example education and police services. In this way, when the state pays
for the use of the services of the factor of production, for example salaries, the "tax money" flows back to
the consumers.
1.3.5.4
1.3.5.5 Activity 4: ECONOMIC CYCLE THAT INCLUDES THE STATE
SELF:
Draw your own version of the economic cycle (that includes the state) so that both the participants and
the flow are clear. Insert the diagram on a separate sheet.
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CHAPTER 1. TERM 1
1.3.5.6 Activity 5: SERVICES OFFERED BY THE STATE [LO 1.1]
GROUP:
Classify the services that are delivered by the state and give appropriate examples of each:
1. SERVICES DELIVERED BY THE STATE
2. EXAMPLES
1,3.6 Assessment
Learning Outcomes (LUs)
LO 1
the economic cycleThe learner will be able to demonstrate knowledge and understanding of the eco-
nomic cycle within the context of "the economic problem."
Assessment Standards(ASs)
We know this when the learner:
1.5 explains the different flows of money, factors of production, goods and services in the economic cycle
within the South African economy;
1.6 discusses the role of the foreign sector in the economic cycle;
1.7 illustrates by means of a graph and discusses how demand and supply influence prices;
1.8 critically assesses the influence and actions (strikes and stayaways) of trade unions in general and
during the apartheid era on:
the South African economy;
political, economic and social transformation;
labour issues;
1.9 discusses the effect of the national budget on the economy (e.g. taxation and expenditure on education,
social welfare, health and security.)
Table 1.2
1.3.7 Memorandum
ACTIVITY 1: The economic cycle
SELF:
Diagram illustrating economic cycle.
ACTIVITY 2: Market for production factors
GROUP:
Classification of production factors
Natural resources - Landowner - Rent
Capital - Loan from bank - Interest
Labour - Working as cabinet maker - Wages / salary
Entrepreneurial talent - Owner/manager - Profit
ACTIVITY 3: Market for consumer goods
Classification of products in market for consumer goods
1. Durable goods, e.g. cars, furniture, equipment, etc. (long-term use)
2. Semi-durable goods, e.g. a pen, pencil, etc.
3. Non-durable goods, e.g. foods, fuel, etc. (once-only use)
4. Services, e.g. medical services, etc.
ACTIVITY 5: Services provided by the state
Classification of services provided by the state
• Ensuring security:
SAPS, SANDF, Correctional Services.
• Ensuring social services:
Hospitals, pensions, schools, low-cost housing.
Regulating relations in business: Legislation with regard to labour, pollution, etc.
Financial organisation by means of the Land Bank, SARS, etc.
Research by means of the CSIR, SABS, etc
• Supplies economic infrastructure:
Electricity, roads, traffic control, etc.
1.4 The foreign sector in the economic cycle 4
1.4.1 ECONOMIC AND MANAGEMENT SCIENCES
1.4.2 Grade 9
1.4.3 THE ECONOMIC CYCLE
1.4.4 Module 4
1.4.5 THE FOREIGN SECTOR IN THE ECONOMIC CYCLE
1.4.5.1 ASSESSMENT STANDARD 1.2:FOREIGN SECTOR IN THE ECONOMIC CYCLE
UPON COMPLETING THIS SECTION YOU WILL BE ABLE TO INDICATE THE ROLE OF THE
FOREIGN SECTOR IN THE ECONOMIC CYCLE.
Up to now we have assumed that all economic activities of a country occur solely within its borders.
However, with present-day technological developments in the field of communication and transport, as well
as the benefits that arise from the use of large-scale production, we find that product markets are exploited
not only domestically, but also internationally. Consider in this regard South Africa's export trade in coal
and other minerals, as well as agricultural products such as wine, sugar and wool, and also the imports of
technological products and machinery that are imported from foreign countries.
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8 CHAPTER 1. TERM 1
The aim of international trade as explained in the previous paragraph, is mainly to satisfy the needs of
the citizens of the country more effectively. In this way, a country can reach a stage where it is no longer
dependent solely on its own resources / production, but where it can also utilise other countries' products.
That means, for example, that we in South Africa can now import sophisticated computers, while there are
other countries that will want to purchase iron ore and gold from South Africa.
This international trade between countries has two components, namely:
• The flow of goods and services that are dispatched and received (also known as international trade);
and
• The mutual payment for these goods and services in the monetary unit of each country (also known
as currency transactions).
•
• International trade takes place because:
• certain countries have an excess of certain resources; for instance, South Africa has an abundance of
gold and other minerals that can be exported, while there are no natural oil resources;
• climatic conditions vary from country to country. As a result of the erratic rainfall in South Africa
there are certain agricultural products that cannot be cultivated here, and that have to be imported,
for example coffee;
•
• the level of technological development varies; for instance, the Japanese are renowned for their expertise
in computer technology;
• transport and communication have improved drastically. For example, fresh flowers from South Africa
are supplied to markets throughout Europe on a daily basis.
1.4.5.2 Activity 1:
1.4.5.3 FOREIGN SECTOR
SELF:
Draw your own version of the economic cycle (that includes the foreign sector) so that both the partici-
pants and the flow are evident. Insert the diagram on a separate sheet.
1.4.5.4 Activity 2:
1.4.5.5 REASONS FOR FOREIGN TRADE
GROUP:
Refer to the reasons for foreign trade supplied below, and in each case give examples that could explain
the South African situation.
REASON
RSA EXAMPLES
1. Availability of resources:
continued on next page
1. Differing climatic conditions:
1. Level of technology:
1. Transport and communication:
Table 1.3
The inclusion of the foreign sector as the fourth participant in the economic cycle is also linked by way of
two streams, namely the goods stream and the monetary stream, as explained above. The inclusion of the
foreign sector has resulted in the fact that the economy is no longer "closed", but that it has become more
"open", because imports and exports have caused "more" goods and money to flow into / flow out of the two
streams as indicated earlier.
1.4.5.6 Activity 3:
1.4.5.7 FOREIGN TRADE
SELF / GROUP:
Make a list of goods that are exported from and imported to South Africa. Indicate, as far as possible,
where the goods are exported to and from where these goods are imported.
RSA EXPORTS AND ITS DESTINATION
RSA IMPORTS AND ITS ORIGIN
Table 1.4
1.4.5.8 Activity 4:
1.4.5.9 FOREIGN TRADE
SELF/GROUP:
Name the monetary unit of each country that has been listed in the table below:
10
CHAPTER 1. TERM 1
COUNTRY
MONETARY UNIT
1. Japan
1. Russia
1. USA
1. Britain
1. Botswana
1. India
1. Germany
8. France
Table 1.5
1.4.5.10 Activity 5:
1.4.5.11 GRAPH OF FOREIGN EXCHANGE
GROUP:
On every Wednesday for at least eight weeks, indicate what the exchange rate is between the South
African Rand and the following monetary units: (Divide the class into four groups for this purpose.)
Week:
(Group
1) Rand/USA
Dollar
(Group
2)Rand/Euro
(Group
3) Rand/Pound
(Group
4)Rand/Pula
continued on next page
11
1.
2.
3.
4.
5.
6.
7.
8.
Table 1.6
GROUP:
At the end of the eight weeks each group must indicate their findings on a graph and then explain to the
rest of the class what tendency prevailed in the course of the eight weeks.
1,4,6 Assessment
Learning Outcomes(LUs)
LO 1
the economic cycle
The learner will be able to demonstrate knowledge and understanding of the economic cycle within the
context of "the economic problem."
Assessment Standards(ASs)
We know this when the learner:
1.5 explains the different flows of money, factors of production, goods and services in the economic cycle
within the South African economy;
1.6 discusses the role of the foreign sector in the economic cycle;
1.7 illustrates by means of a graph and discusses how demand and supply influence prices;
1.8 critically assesses the influence and actions (strikes and stayaways) of trade unions in general and
during the apartheid era on:
the South African economy;
political, economic and social transformation;
labour issues;
1.9 discusses the effect of the national budget on the economy (e.g. taxation and expenditure on education,
social welfare, health and security.)
1,4,7 Memorandum
ACTIVITY 2: Reasons for foreign trade
Provide reasons for foreign trade
Availability of resources: The RSA has a variety of minerals, but no natural oil.
Differing climatic conditions: The RSA produces maize, oranges, etc, but no coffee, rubber.
Level of technology: The RSA has to import watches, computers, etc.
1. Transport and communication: RSA has good transport and communications facilities.
ACTIVITY 3: Foreign trade
List of goods that are imported and exported.
12
CHAPTER 1. TERM 1
EXPORTS
IMPORTS
Maize (African countries)
Computers (USA)
Wine (Europe)
Watches (Switzerland)
Iron ore (Japan)
Cars (Japan)
Table 1.7
ACTIVITY 4: Foreign exchange (means of payment)
Provide the monetary unit of the following countries
JAPAN: yen
RUSSIA: rouble
USA: dollar
BRITTAIN: pound sterling
BOTSWANA: pula
INDIA: rupee
ACTIVITY 5: Graph illustrating foreign exchange
Collect data relating to rates of exchange and draw the graph with the help of the information obtained.
1.5 Price-fixing through supply and demand 5
1.5.1 ECONOMIC AND MANAGEMENT SCIENCES
1.5.2 Grade 9
1.5.3 THE ECONOMIC CYCLE
1.5.4 Module 5
1.5.5 PRIECE-FIXING THROUGH SUPPLY AND DEMAND
1.5.5.1 ASSESSMENT STANDARD 1.3:
1.5.5.2 PRICE-FIXING THROUGH SUPPLY AND DEMAND
In order to make bartering and business transactions possible, it is necessary that the value of a product be
expressed by the dealer in terms of a monetary amount, or as we know it, a price. It is common for us to
walk into a shop and compare the prices of products on the shelves in order to decide which product (s) we
want to buy. However, the question is: How are these prices determined?
The price that is given to a product by a dealer depends on (1) the price that he paid for the product
and (2) the price at which he is prepared to sell the product. This raises the principle of DEMAND for a
product or products at a specific price, in a specific quantity or number (of the product) and at a specific
time. As a simple example one can refer to the municipal fresh produce market or an auction where livestock
is sold. Note that at such markets the sellers and the prices that they ask for their products, as well as the
number of products available, can differ from day to day.
The following data are given concerning the SUPPLY of cabbages on the municipal fresh produce market:
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13
PRICE PER CABBAGE
NUMBER SUPPLIED
R0.80
400
R0.70
350
R0.60
300
R0.50
200
R0.40
100
Table 1.8
1.5.5.3 Activity 1: SUPPLY CURVE
Make use of the data supplied in the table above and draw the supply curve. Insert it on a separate page.
From this the LAW OF SUPPLY can be deduced, which states that "the number / quantity of goods that
are offered will rise in proportion to rises, in the price and vice versa, namely that the number / quantity
supplied will fall when the price shows a decline".
1.5.5.4 Activity 2: SUPPLY
Draw up a list of the factors that will influence the number / quantity supplied.
1
.6
2.
7.
3.
8.
4.
9.
5.
Table 1.9
The price that a consumer is willing to pay for a product depends mainly on (1) how urgent his need is
and (2) the amount of money that the consumer has available. Here we have to do with the DEMAND for
a product or products that is / are valid at a specific price, in specific numbers / quantity and at a specific
time. Once again it is possible that the indicated prices and numbers / amounts may differ from day to day.
The following data concerning the DEMAND for cabbage on the municipal fresh produce market on 14
January are also supplied:
PRICE PER CABBAGE
NUMBER SUPPLIED
R0.80
150
R0.70
200
R0.60
300
R0.50
450
R0.40
650
Table 1.10
14 CHAPTER 1. TERM 1
1.5.5.5 Activity 3: DEMAND CURVE
Make use of the data supplied in the table above and draw the demand curve. Insert it on a separate page.
From this the LAW OF DEMAND can be deduced, which states that "the number / quantity demanded
will rise in proportion to the decline in price, and vice versa, namely that the number / quantity demanded
will fall when the price shows an inclination to rise".
Draw up a list of the factors that will influence the number / quantity demanded.
1
.6.
2.
7.
3.
8.
4.
9.
5.
Table 1.11
When the above-mentioned supply and demand curves are drawn on the same axis, we see that the two
curves meet at a specific point, namely when the price is R0,60, the sellers are prepared to supply 300 heads
of cabbage and the buyers are prepared to purchase 300 heads of cabbage at that price. This price is known
as the MARKET EQUILIBRIUM PRICE
and it represents the price at which the buyer and the seller are prepared to barter. At any other price
the parties will not be able to agree and they will not be prepared to conclude a transaction.
1.5.5.6 Activity 4: SUPPLY AND DEMAND CURVE
Use the data that are supplied above and draw the Supply and Demand Curve on the same axis system:
(Insert a separate page.)
Now read the following data from the graph:
1. The market equilibrium price:
2. The quantity demanded / supplied:
1,5.6 Assessment
Learning Outcomes (LUs)
LO 1
the economic cycleThe learner will be able to demonstrate knowledge and understanding of the eco-
nomic cycle within the context of "the economic problem."
Assessment Standards(ASs)
We know this when the learner:
continued on next page
15
1.5 explains the different flows of money, factors of production, goods and services in the economic cycle
within the South African economy;
1.6 discusses the role of the foreign sector in the economic cycle;
1.7 illustrates by means of a graph and discusses how demand and supply influence prices;
1.8 critically assesses the influence and actions (strikes and stayaways) of trade unions in general and
during the apartheid era on:
the South African economy;
political, economic and social transformation;
labour issues;
1.9 discusses the effect of the national budget on the economy (e.g. taxation and expenditure on education,
social welfare, health and security.)
Table 1.12
1.5.7 Memorandum
ACTIVITY 1: Supply curve
Draw the graph according to the information supplied in the table.
ACTIVITY 2: Supply
Factors that will affect the amount that is supplied
Cost of production - the greater the cost, the longer it takes to establish a supply.
Price of products - the higher the price, the greater the quantity offered.
Production techniques - better techniques at lower prices can increase the quantity offered.
Competition - when there is little competition, the producer will limit the supply in order to increase
the price.
Market conditions - if there are more sellers than buyers, the producer will lower prices in order to sell
the supply.
Tax levies - increase the price, which decreases the demand, as well as the supply.
Climatic conditions - if the rainfall is insufficient, production will decrease, which will also lower the
supply.
ACTIVITY 3: Demand curve
Draw the graph according to the information supplied in the table.
Factors that will affect the quantity that is demanded
Price - if prices increase, the demand will probably decrease.
Tastes and custom - changes can result in price fluctuations.
Change in income - if incomes increase, the demand may increase.
Substitution goods - a cheaper substitute will cause a decrease in the demand.
Tax - the price increases, which lowers the demand for the product.
Economic conditions - in times of prosperity, the demand, especially for luxury goods, will increase.
ACTIVITY 4: Supply and demand curve
Draw the supply and demand curve from the above data and provide the answers to the following:
16 CHAPTER 1. TERM 1
The market equilibrium price: 60c
The demand and supply amount: 300 heads of cauliflower
1.6 The influence of trade unions 6
1.6.1 ECONOMIC AND MANAGEMENT SCIENCES
1.6.2 Grade 9
1.6.3 THE ECONOMIC CYCLE
1.6.4 Module
1.6.5 THE INFLUENCE OF TRADE UNIONS
1.6.5.1 ASSESSMENT STANDARD 1.4:
1.6.5.2 THE INFLUENCE OF TRADE UNIONS
The Labour Relations Act of 1997 provides for the right (1) to fair labour practice, (2) to establish a trade
union and to become a member of it, (3) to organise for joint bargaining, and (4) to strike and to be locked
out.
Trade unions are the mouthpiece of the workers that they represent, seeing that they represent the
workers in a certain sector in order to establish good relations between the employees and the employers.
The relevant trade union should therefore strive towards promoting the social, economic and political interests
of the employees. It is important to note that an employee is free to join a trade union and he / she may
neither be prevented from doing so, nor be dismissed by the employer when he / she joins a trade union.
According to the Labour Relations Act trade unions have the following rights:
ACCESS TO THE WORKPLACE: The trade union has the right to canvass members within the work-
place and to hold meetings during off hours.
MEMBERSHIP FEES: Contributions towards membership fees may be deducted from employees' wages
/ salaries.
ELECTIONS: Representatives of the trade unions may be elected within the workplace.
SERVICE TO THE TRADE UNION: Trade union members are entitled to taking paid leave in order to
perform their duties as trade union representatives and also for the purpose of undergoing training.
DISCLOSING INFORMATION: The trade union is entitled to any information that has a bearing on
issues that concern the employees within the workplace.
According to the Labour Relations Act (1997) employees have the right to STRIKE (i.e. refusal to
work, to work at a slower pace, and an embargo on working overtime), while employers have the right to
LOCK OUT employees (i.e. physically preventing employees from entering the workplace). The two actions
could, amongst other things, result from (1) an insistence on a wage or salary increase, (2) an insistence on
recognising a trade union, or (3) an insistence on changing conditions in the workplace.
In general it is fair to expect that the activities of trade unions should be of such a nature that not only
are the employees' social, economic and political interests served, but that the interests of the South African
economy as a whole should be fostered.
Judge the following translated extract from a report that appeared in Die Burger during October 2002,
and evaluate the impact that strikes, in other words trade union action, had during 2001.
'Last year strikes more than doubled and the country lost 1,25 million working days as a result of strikes,
but it was a one-time occurrence and strike figures will drop again significantly in the next two years,' allege
Andrew Levy and Associates in their latest annual report on labour relations. Last year 1,25 million working
days were lost as a result of strike action, as opposed to 5 000 000 the previous year.
6 This content is available online at <http://cnx.Org/content/m22933/l.l/>.
17
In view of the recent changes to the Labour Relations Act that allow strike action, labour cut-backs
could give rise to more strikes this year. 'This could lead to conflict in the public sector on the matter
of privatisation, but it will probably be a brief strike after which the government will continue with its
privatisation programme,' declares Levy.
Labour cut-backs as a result of the decline in the world economy will also place job opportunities in
greater jeopardy this year as compared to last year, Levy believes. The average wage / salary increase
that was negotiated in central bargaining forums was 7,8% and the average rate for wage increases in other
negotiations was 7,4% as opposed to the average inflation rate (CPI) of 5,7% last year. The highest agreement
was 9% in the car production industry, where a drawn-out strike in August last year lasted for 15 working
days. That led to a loss of 315 000 working days. Mr Andrew Levy who wrote the annual report, expects
that average wage agreements will be between 8,2% and 8,5% this year. There is no fear that wage increases
will lead to inflation pressure this year, but in the next two to three years it could be cause for concern
because real wages increase very slightly while imported inflation pressure increases steadily. Levy predicts
that the number of HIV positive people will increase from approximately 4 million at present to 6 million
within two years. 'Organisations can expect to lose more than 4% of their labour force in the following ten
years.'
Trade union membership has again begun to increase after a slight drop in 2000 and presently it stands
at 3,5 million. COSATU, the country's largest federation of trade unions, has 1,883 million members. The
membership has increased since last year despite severe labour cut-backs. FEDUSA, the second largest
federation of trade unions, represents 503 241 members, and NACTU, the third largest, represents 398 106
employees.
Source: Die Burger, October 2002
1.6.6 Activity 1: STRIKES
Judge the influence of the strikes from the following table:
Influence of:
Social conditions
Economic conditions
1. Working days lost
1. Labour cut-backs
1. Wage increases
1. HIV/ AIDS
Table 1.13
The political role played by trade unions in South Africa is clearly to be seen in the activities of the
CONGRESS OF SOUTH AFRICAN TRADE UNIONS (COSATU), an organisation that was established as
early as 1985. COSATU is a federation of a group of South African trade unions. In 1985 COSATU joined
the UNITED DEMOCRATIC FRONT (UDF) in the MASS DEMOCRATIC MOVEMENT and actively
18 CHAPTER 1. TERM 1
supported the movement in its fight against apartheid. Conditions in the workplace were politicised through
strikes, stay-aways and the so-called "go-slows" that had a severely negative effect on production.
Their active participation in the struggle for political and economic change in South Africa led to the
fact that COSATU joined the African National Congress (ANC) and the South African Communist Party
(SACP) as a partner in the 1994 election campaign. This partnership won the election with an impressive
majority. Today COSATU is still part of the three party partnership that governs South Africa. As an equal
partner in the alliance it is thus possible that COSATU, which represents a great mass of the workers in
South Africa, could offer a significant contribution and exert a profound influence on economic and political
policy.
1.6.7 Activity 2: TRADE UNIONS
Explain the following abbreviations and indicate which occupations are represented by these federations of
trade unions:
1. FEDUSA:
2. NACTU:
3. NUM: NUMSA:
1.6.8 Assessment
Learning Outcomes (LUs)
LO 1
the economic cycleThe learner will be able to demonstrate knowledge and understanding of the economic
cycle within the context of "the economic problem."
Assessment Standards (ASs)
We know this when the learner:
1.5 explains the different flows of money, factors of production, goods and services in the economic cycle
within the South African economy;
1.6 discusses the role of the foreign sector in the economic cycle;
1.7 illustrates by means of a graph and discusses how demand and supply influence prices;
1.8 critically assesses the influence and actions (strikes and stayaways) of trade unions in general and
during the apartheid era on:
the South African economy;
continued on next page
19
political, economic and social transformation;
labour issues;
1.9 discusses the effect of the national budget on the economy (e.g. taxation and expenditure on education,
social welfare, health and security.)
Table 1.14
1.6.9 Memorandum
ACTIVITYl: Strikes
Effect of strike action
Social conditions
Economic conditions
Work days lost
loss of income - poorer
production decreases - losses
Labour cuts
loss of employment opportunities- poorer
production decreases - losses
Wage increases
improvement in expendable income
input costs increase - inflation
HIV/ AIDS
greater pressure on health services
work force diminished - losses
Table 1.15
ACTIVITY 2: Unions
Identify labour unions
1. FEDUSA: Federated Unions of South Africa - General
2. NACTU: National Congress of Trade Unions - General
3. NUM: National Union of Mineworkers - Mineworkers
4. NUMSA: National Union of Metalworkers of SA - Workers in the automobile industry
1.7 The national budget, growth and economical equalities 7
1.7.1 ECONOMIC AND MANAGEMENT SCIENCES
1.7.2 Grade 9
1.7.3 THE ECONOMIC CYCLE
1.7.4 Module 7
1.7.5 THE NATIONAL BUDGET
1.7.5.1 ASSESSMENT STANDARD 1.5:
1.7.5.2 THE NATIONAL BUDGET
• The national budget is a document that is drawn up annually by the Minister of Finance, and in
which a forecast is made of the government's expected income and expenditure for the coming year.
7 This content is available online at <http://cnx.Org/content/m21498/l.l/>.
20
CHAPTER 1. TERM 1
The national budget is regarded as the planned framework within which the state must operate, and
therefore it has the following two main objectives:
• the announcement of expected government expenditure and tax income; and
• an indication of government strategy to keep the economy on a specific course.
In planning the national budget the first important step is that the different state departments must compile
their own budgets in which an indication is given of their needs / expenditure. When all the departments
have submitted their budgets, these are processed in order to obtain a complete view of all state expenditure.
• GOVERNMENT EXPENDITURE can be distinguished in the following four groups of functions that
are fulfilled by the state and for which funds are needed (also called the FUNCTIONAL CLASSIFI-
CATION):
• GENERAL OR COLLECTIVE SERVICES are services such as defence, maintenance of law and order
and general state administration.
• COMMUNITY SERVICES are services that are provided where a great number of people live together
(for example services such as road construction, sanitation and refuse removal).
• SOCIAL SERVICES such as health care, education and housing that are covered mainly by taxes.
• ECONOMIC SERVICES such as expenditure on direct production and research.
Hereafter planning is done to find the necessary funds to cover the expenses. These funds are mainly
generated by levying TAXES such as DIRECT TAXES (for instance personal income tax that is levied on
an individual's income) and INDIRECT TAXES (for instance customs and excise tax, and value added tax
or VAT).
A brief summary of the annual budget for the fiscal year 1999-2000 is given below:
ANNUAL BUDGET (1999 -
2000)
ALLOCATED AMOUNT
PERCENTAGE OF TOTAL
EXPENDITURE (%)
Total income:
190,3
Total expenditure:
Transport and communication
8,2
3,7
Interest (on loans)
48,5
22,1
Salaries (government service
staff)
86,5
51,0
Education
48,5
22,1
Health
24,0
10,9
continued on next page
21
Community security and welfare
services
19,8
9,0
Housing and community develop-
ment
9,6
4,5
Police
15,3
7,0
Defence
35,5
5,5
Prison services (Correctional ser-
vices)
5,4
2,7
Justice (administration of jus-
tice)
2,8
1,3
Agriculture, Forestry and Fish-
eries
3,6
1,6
Deficit
25,1
Table 1.16
1.7.5.3
1.7.5.4 Activity 1: NATIONAL BUDGET
Refer to the table above and answer the following questions:
1. Which expenditure is expected to be the greatest?
2. Which expected expenditure is the greatest: on Defence or on Education?
1.7.5.5 Activity 2: NATIONAL BUDGET
The last column indicates the percentage of the total expenditure for each department.
Use the information to draw a bar graph in order to indicate how much is spent on each category. Insert
the graph on a separate sheet.
1.7.5.6 Activity 3: RANKING ORDER OF EXPENDITURE
Refer to the graph and indicate in order from the highest to the lowest expenditure how the expenses (in
order of importance) are prioritised.
1.7.5.7 Activity 4: ASSESSMENT OF RANKING
Do the group members agree with the priority list as presented in the table above?
Decide how your group will spend the available funds according to your own priority list and then redesign
the column graph according to your division.
1.7.6 Assessment
Learning Outcomes (LUs)
LO 1
the economic cycle
The learner will be able to demonstrate knowledge and understanding of the economic cycle within the
context of "the economic problem."
22 CHAPTER 1. TERM 1
Assessment Standards(ASs)
We know this when the learner:
1.5 explains the different flows of money, factors of production, goods and services in the economic cycle
within the South African economy;
1.6 discusses the role of the foreign sector in the economic cycle;
1.7 illustrates by means of a graph and discusses how demand and supply influence prices;
1.8 critically assesses the influence and actions (strikes and stayaways) of trade unions in general and
during the apartheid era on:
• the South African economy;
• political, economic and social transformation;
• labour issues;
1.9 discusses the effect of the national budget on the economy (e.g. taxation and expenditure on education,
social welfare, health and security.)
1.7.7 Memorandum
ACTIVITYl: National budget
SELF:
Answers related to the table:
Salaries of civil service employees.
Education 22,15% compared to the 5,5% of Defence.
ACTIVITY 2: Graphic representation of budget figures
Draw a column graph to show the percentage of the contribution to the budget with regard to each kind
of expenditure.
ACTIVITY 3: Ranking of expenditure
SELF:
Evaluate the learners' priorities.
ACTIVITY 4: Evaluation of ranking
GROUP:
Evaluate the group's classification and their priorities
Chapter 2
Term 2
2.1 Reconstruction and development programme 1
2.1.1 ECONOMIC AND MANAGEMENT SCIENCES
2.1.2 Grade 9
2.1.3 SUSTAINABLE GROWTH AND DEVELOPMENT
2.1.4 Module 8
2.1.5 THE RECONSTRUCTION AND DEVELOPMENT PROGRAMME
(RDP)
In order to counteracting the deep-rooted inequalities of south african society, which were established through
colonization, racism, sexism and repressive labour and other legislation, the present ANC-led government for-
mulatedthe RECONSTRUCTION AND DEVELOPMENT PROGRAMME (RDP) in 1994. The realisation
of the programme was to be achieved throughFIVE programmes.
1. The FIRST PROGRAMME would focus on PROVIDING THE BASIC NEEDS OF THE POP-
ULATION to ensure that everyone has access to the following "basic necessities":
a) Creation of EMPLOYMENT OPPORTUNITIES by means of co-ordinated government plans that
would also ensure maximum participation by women and young job seekers.
b) LAND REFORM, with redistribution of land and resettlement of formerly disadvantaged people as
key components;
c) HOUSING AND SERVICES, as the responsibility of the democratic government, to ensure secure
dwelling places for all;
d) WATER AND SANITATION to meet the health and functional needs of all for cultivating products,
and to support economic development;
e) PROVISION OF POWER AND ELECTRIFICATION for all households to increase the capacity for
production and to provide services to schools, clinics and providers of water;
f) TELECOMMUNICATION to ensure universal access to basic services, particularly for disadvantaged
communities;
g) TRANSPORT that makes provision for safety, affordability and availability and is in the interest of
society in general;
h) ENVIRONMENTAL CONSERVATION that could ensure a "good life" for all by means of sustainable
use of natural resources, particularly with regard to access, safety, health and participation in decision making
lr This content is available online at <http://cnx.Org/content/m21501/l.l/>.
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24 CHAPTER 2. TERM 2
i) NUTRITION, by which is meant that all persons should gain access to feeding programmes as soon as
possible (within three years) to ensure that there will be no fear of famine;.
j) HEALTH CARE that would be affordable and would lead to improvement in physical and mental
health, while attending to combating disease, also in the southern african region;
k) COMMUNITY CARE AND PROSPERITY, which has the aim of achieving communal rights for all,
eradicating the inequalities of the past through affirmative action and the empowerment of communities to
participate in local, provincial and national initiatives.
2.1.5.1
2.1.5.2 Activity 1: Providing basic needs
Discuss and do research on successes that have been achieved in the above programmes since 1994. Also
evaluate the shortcomings of the programmes and the reasons for failure to realise objectives. NB:Evaiuate
conditions in your immediate environment.
• Prepare your presentation thoroughly so that you can report your findings to the class for discussion
of each aspect. The written presentation should be presented in folio format and a summary must be
presented.
2. The SECOND PROGRAMME was to focus on the development of human resources, to ensure that
each person would be enabled to attain his or her full potential at the following levels of society:
a) EDUCATION AND TRAINING, in which equal opportunities were to be made available to all,
independent of race, colour, gender, language, age, religion, geographical background, political or other
orientation, so that the necessary knowledge and skills can be developed to provide quality products and
improved quality of life for all.
b) ART AND CULTURE that would promote freedom of expression and creativity so that all might
gain access to resources and facilities to be able to satisfy their need for artistic and cultural expression and
literacy and escape the cultural impoverishment of the past.
c) SPORT AND RECREATION that would promote representative participation and full availability of
facilities and training from grassroots level.
d) YOUTH DEVELOPMENT PROGRAMMES that would focus on education, training and job creation
to empower the youth to attain their full potential for participating in their communities.
2.1.5.3 Activity 2: Development of human resources
Discuss and do research on successes that have been achieved in the above programmes since 1994. Also
evaluate the shortcomings of the programmes and the reasons for failure to realise objectives. NB: Evaluate
conditions in your immediate environment.
• Prepare a thorough presentation so that you can report your findings to the class for discussion of
each aspect. The written presentation should be presented in folio format and a summary must be
presented:
3. The THIRD PROGRAMME was to focus on the development of ThE economy, so that strengths, such
a mining, manufacturing, agriculture, commercial and financial services and the well-developed infrastructure
could be utilised to benefit everyone with regard to:
a) INTEGRATION OF RECONSTRUCTION AND DEVELOPMENT, with the aim of having the public
sector playing a leading role in development planning, because it was expected that
the market mechanism by itself would not be able to make the structural adjustment benefit the wider
population.
b) MANUFACTURING, TRADE AND INDUSTRY which attempts to utilise public sector and govern-
ment interests and support to enhance investment possibilities, in particular with regard to manufacturing,
job creation and satisfaction of basic needs
25
c) RESOURCE-BASED INDUSTRIES like mining, agriculture, fisheries and forestry which were previ-
ously dominated by the white minority, are to be utilised to the advantage of the whole population in terms
of ownership, job creation and empowerment.
d) UPGRADING OF INFRASTRUCTURE, like electricity, telecommunication and transport, so that
this will lead to improved satisfaction of basic needs, as well as new and effective economic activity.
e) REFORM OF THE FINANCIAL SECTOR, which, at present, is centred in a number of dominant
financial groups, so that the aspirations of new sectors of the economy and the needs of informal and micro-
enterprises can be met satisfactorily.
f) LABOUR AND WORKER RIGHTS that would ensure that organised labour is empowered to effective
as a force in the reconstruction and development of the country.
g) Southern african regional poliCy which signifies that reconstruction and development in South Africa
have to be realised in relation to developments, conditions and planning for Africa as a whole to make use
of the mutual advantages.
2.1.5.4 Activity 3: Growing the economy [LO 2.3]
Investigate the following initiatives that were initiated, mainly from South Africa, in an effort to co-ordinate
and expand economic development in Africa:
1. The establishment of the African Union (AU)
2. NEW ECONOMIC PROGRAMME FOR AFRICAN DEVELOPMENT (NEPAD)
• Provide a report of (at most) two pages per initiative and format each report to fit the following
framework: Introduction, Objectives, Functions, Advantage for South Africa, Sources of Reference.
4. The FOURTH PROGRAMME was to focus on the democratisation of state and society and aimed
at opening the way to a new democratic order in South Africa by means of democracy, development and a
people-centred approach.
The programme set out the role of the Constitution and the Charter of Human Rights, the role of National,
Provincial and Local government, administration of justice, the private sector, semi-state organisations, the
police and security services, community services, non-governmental organisations (NGOs) and a democratic
information system for facilitating socio-economic development.
2.1.5.5 Activity 4: Democratisation of state and society
Group 1:
Do research into the basic content of the Constitution and the Charter of Human Rights and provide a
comprehensive report of at least two pages on each. This must also be used for the presentation to the class.
Provide your own summary of the information contained in the presentation.
Group 2:
Do research on the structure (in organogram format) of National, Provincial and Local Government.
Provide three posters showing the different government structures. These posters must also be used for
presentation to the class.
Group 3:
Do research on the semi-state organisations (including those of the previous government) and provide a
report of three pages (at most) which indicates the name and function of each. This must also be used for
presentation to the class.
Group 4:
Do research into TWO non-governmental organisations (NGOs) that operate in South Africa and provide
a report of two to three pages on each. The reports must indicate the names and functions of the NGOs and
must also be used for presentation to the class.
5. The FIFTH PROGRAMME was to focus on the implementation of the RDP and involved the
establishment of effective RDP structures at national, provincial and local government levels to monitor the
progress of the programmes. The important aspects of the programme involved:
26 CHAPTER 2. TERM 2
a) FRAMEWORKS FOR PLANNING that would take place within a comprehensive national framework
guided by provincial governments endowed with specific authority and functions
b) FINANCING FOR THE RDP that is regarded as a national priority to be funded accordingly. Alloca-
tions to be made from national sources with acknowledgment of existing inequalities between the provinces,
as well as factors such as population size, development handicaps, etc.
2.1.5.6 Activity 5: The Reconstruction and Development Programme (RDP) [LO 2.2]
Do critical evaluation of the development of the different Reconstruction and Development Programmes
since 1994. Refer to successes and shortcomings and offer your own recommendations for eliminating such
shortcomings. Present this in
the form of a 2 to 3 page report. Provide your own summary of the information contained in the
presentation.
2.1.5.7 Source:
• ANC, 1994: THE RECONSTRUCTION AND DEVELOPMENT PROGRAMME: A Policy Frame-
work. Umanyano Publications, PO Box 3851, Johannesburg, 1994
2,1,6 Assessment
Learning outcomes (Los)
LO 2
SUSTAINABLE GROWTH AND DEVELOPMENTThe learner will be able to demonstrate an
understanding of sustainable growth, reconstruction and development, and to reflect on related processes.
Assessment standards (ASs)
We know this when the learner:
2.1 discusses how the national budget, regional and international agreements can be used to facilitate
sustainable growth and development;
2.2 investigates and debates the successes and shortcomings of the RDP;
2.3 explains the role of savings and investments in economic prosperity and growth;
2.4 discusses productivity and growth and its effects on economic prosperity, growth and global competi-
tion.
Table 2.1
2,1,7 Memorandum
ACTIVITY 1: PROVIDING BASIC NEEDS
Let learners examine instances of "better" satisfaction of basic needs in their own environment. Failures
should also be discussed, together with possible reasons for the lack of success of programmes.
ACTIVITY 2: DEVELOPMENT OF HUMAN RESOURCES
Let learners examine programmes aimed at improving training in their own environment. They also need
to evaluate failures and provide possible reasons to explain why projects failed
ACTIVITY 3: GROWING THE ECONOMY
27
Let learners investigate the AU (African Union) as replacement for the OAU (organisation FoR African
Unity) and the objectives that are pursued.
Learners also have to research the NEW ECONOMIC PROGRAMME FOR AFRICAN DEVELOP-
MENT (NEPAD) to gain clarity concerning the planned objectives of the programme.
ACTIVITY 4: DEMOCRATISATION OF STATE AND SOCIETY
Let the groups do research into:
1. The basic content of the Constitution and the Charter of Human Rights
2. The structure of National, Provincial and Local government structures (poster format)
3. The semi-state organisations, e.g. SASOL, ISCOR, KRYGKOR, etc.
4. Two non-governmental organisations (NGOs) that operate in South Africa.
ACTIVITY 5: RECONSTRUCTION AND DEVELOPMENT PROGRAMME (RDP)
Following from the above research, the learner has to undertake critical evaluation of the RDP, with
particular reference to its successes and shortcomings. Encourage the learners to offer their own recommen-
dations.
2.2 Regional and international agreements 2
2.2.1 ECONOMIC AND MANAGEMENT SCIENCES
2.2.2 Grade 9
2.2.3 SUSTAINABLE GROWTH AND DEVELOPMENT
2.2.4 Module 8
2.2.5 REGIONAL AND INTERNATIONAL AGREEMENTS
The existence of definite inequalities between the different regions is a characteristic of the South African
economy. These inequalities are mainly attributable to the ethnic divisions that formed the basis of regional
development policy during the previous political dispensation. Ethnic groupings were localised in particular
regions in which so-called "homelands" were allocated to each group. Any particular group had to facilitate its
social, political and economic development within the homeland allocated to it. This enforced segregation or
separation and industrial decentralization placed whole communities in areas where their economic existence
was threatened by disadvantageous results like poverty, underfeeding, overpopulation, crime, etc. Close to
half of the black population were forced to remain in the homelands where the per capita income was less
that a quarter of the national average.
2.2.5.1 Activityl: Homelands Policy [LO 2.1]
Identify the so-called former independent and self-governing states that existed under the previous dispen-
sation and indicate the ethnic groups that had to find their political, social and economic refuge in each
"homeland".
• Present the information that you have gathered:
The results of the above-mentioned regional development policy was stagnation of economic growth, a con-
siderable decrease in investments and considerable lowering of real income over a number of decades. The
economy was mainly dependent on exportation of minerals and the manufacturing sector was unable to pro-
vide the required employment opportunities that would supply the needs of the population. Because of the
apartheid policies, there was very little economic co-operation with other African states and South Africa
found itself in a situation of isolation.
2 This content is available online at <http://cnx.Org/content/m21503/l.l/>.
28 CHAPTER 2. TERM 2
The following was suggested to achieve and extend regional and international co-operation against this
background, and in accordance with RDP objectives for a strong, dynamic and balanced economy:
a) Elimination of poverty, low wages and the extreme inequalities in wages and prosperity that resulted
from the policies of the previous government;
b) Easing of economic imbalances and unequal development opportunities within and among the different
South African regions;
c) Development of a progressive and balanced regional policy based on the principles of equity and mutual
benefit; and
d) Integration into the international economy in such a way that viable and effective local manufacturing
capacity and increased potential for exportation of manufactured goods would be sustained.
Sustainable growth and development are only possible if the above principles are incorporated in policy
and budget structures. The democratic government will play a leading role in this and it is expected that
a dynamic balance between government initiatives, the private sector and community development will
be consistently pursued. Broadly representative institutions that will plan strategies for job creation and
community development must be established to assist growth in local economies. Examples would include the
raising of community development funds in the private sector, investment strategies, training, small business
enterprises, agricultural development, etc. If necessary, the government could make subsidies available for
job creation and development projects. The ultimate goal is that projects must eventually be individually
sustainable.
Local development should aim towards a land reform plan that will attempt to transfer ineffective, debt-
ridden, ecology-threatening farm ownership to those who want to earn an income from farming in a more
sustainable manner. Improved access to affordable services and infrastructure is a prerequisite, especially in
the former "homelands".
2.2.5.2 Activity 2: Land Reform
Discuss land reform and make suggestions about what can/should be done to effect land reform in South
Africa in a manner that will allow "better" distribution of available land without running the risk of doing
damage to production or economic development. (Refer to the present situation in Zimbabwe.)
• Provide a report of two pages, at most, for presentation to the class, and summarise the report.
It is accepted that sustainable reconstruction and development in South Africa presupposes sustainable
reconstruction and development in Southern Africa as continued joblessness and under-employment in one
region can result in migration to other regions, with detrimental results for those economies. That is
why continuous negotiation with neighbouring states remains important for finding a common basis for co-
operation, co-ordination and integration. In spite of the fact that present trade patterns between South Africa
and the rest of Africa are relatively unbalanced (South African exports to the rest of Africa exceeds those
of the rest of Africa to South Africa by five to one) , fresh negotiations in this area should focus on achieving
a better balance. There should be an attempt to improve possibilities for manufacturing in neighbouring
states, so that the possibility of exportation can improve accordingly. The development of regional and
industrial strategies for specific sub-sectors, e.g. mineral enrichment, motorcar parts and textiles can be
mentioned as examples. The development of combined and mutually advantageous projects with regard, for
instance, to water sources, electricity and power supply, transport and communication, and agriculture and
food production for the region should also be encouraged.
2.2.5.3 Activity3: Regional Co-operation
Do research on the ways in which regional co-operation occurs with regard to the use of water sources in
Southern Africa. Refer to existing projects and provide a brief description of each.
29
2.2.5.4 Activity4: States in Southern Africa
Provide (or draw) a map of Southern Africa to show the states that border on South Africa. Also show the
products that South Africa exports to its neighbours and the products that are imported from them.
2,2,6 Assessering
Learning outcomes (Los)
LO 2
SUSTAINABLE GROWTH AND DEVELOPMENTThe learner will be able to demonstrate an
understanding of sustainable growth, reconstruction and development, and to reflect on related processes.
Assessment standards (ASs)
We know this when the learner:
2.1 discusses how the national budget, regional and international agreements can be used to facilitate
sustainable growth and development;
2.2 investigates and debates the successes and shortcomings of the RDP;
2.3 explains the role of savings and investments in economic prosperity and growth;
2.4 discusses productivity and growth and its effects on economic prosperity, growth and global competi-
tion.
Table 2.2
2,2,7 Memorandum
ACTIVITY 1: HOMELANDS POLICY
Identify the former independent and self-governing states that existed under the previous dispensation.
Independent states:VENDA, BOPHUTHATSWANA, TRANSKEI EN CISKEI
Self-governing states:QwaQwa, KwaNDEBELE, KWAZULU, LEBOWA, GAZANKULU, KaNGWANE
ACTIVITY 2: LAND REFORM
The groups are to state their points of view with regard to land reform in South Africa, and should be
encouraged to discuss the issue in regard to the present situation in Zimbabwe.
ACTIVITY 3: REGIONAL CO-OPERATION
The learners are required to do research on the Lesotho Highland Project and on the Cabora Bassa
project and should be encouraged to point out the value of the projects as examples of regional co-operation.
ACTIVITY 4: STATES IN SOUTHERN AFRICA
Each learner has to design and present a map of South Africa on which imports and exports are indicated
(the main products only).
30 CHAPTER 2. TERM 2
2.3 Savings and investment 3
2.3.1 ECONOMIC AND MANAGEMENT SCIENCES
2.3.2 Grade 9
2.3.3 SUSTAINABLE GROWTH AND DEVELOPMENT
2.3.4 Module 10
2.3.5 SAVINGS AND INVESTMENT
If the savings of individual people and of investors are made available for the expansion of the production
capacity, the idea is to produce more goods and services. This also has the effect that people are employed,
which, in turn, leads to improvement in the standard of living of the population. The savings are used for
INVESTMENT in capital goods (like buildings, equipment and machinery for production).
When the volume of investments increases, the potential for further investment expands and this eventu-
ally increases the economy's capacity for growth in terms of an increase in goods and services. This can help
to improve the standard of living, provide more job opportunities and greater prosperity, which is indicative
of improved economic growth.
When the volume of investments DEcreases, the potential for further investment decreases and this
means that fewer goods and services will be available for satisfying needs, which will result in the eventual
shrinking of possibilities for economic growth. Communities in which this happens will eventually become
poorer and the possibility of further savings might be eliminated, with catastrophic results for investment
and any capacity for economic growth, increasing poverty, unemployment, etc.
The above makes it clear that economic growth is a process by which a country's capacity to provide goods
and services increases in such a manner that there will be an increase in real compensation/remuneration.
(Real compensation/remuneration signifies the compensation after changes in price rises have been calcu-
lated.) The increase signifies that the physical compensation or wealth of the population has improved, with
an accompanying improvement in the standard of living and improved economic growth.
While ECONOMIC GROWTH has to do with an increase in the production capacity of the economy
(i.e. the possibility to deliver more goods and services), ECONOMIC DEVELOPMENT signifies an increase
in economic growth accompanying an improvement in the quality of life which relates to improved access to
education, housing, and other basic infrastructure. Economic development therefore is a more comprehensive
concept that includes economic growth.
2.3.5.1 Activity 1: Economic Growth and Development
Provide your own explanation of the following:
• SAVING is:
• INVESTMENT is:
• ECONOMIC GROWTH is achieved when:
• ECONOMIC DEVELOPMENT therefore has to do with:
• Assessment
Learning outcomes (Los)
continued on next page
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LO 2
SUSTAINABLE GROWTH AND DEVELOPMENTThe learner will be able to demonstrate an
understanding of sustainable growth, reconstruction and development, and to reflect on related processes.
Assessment standards (ASs)
We know this when the learner:
2.1 discusses how the national budget, regional and international agreements can be used to facilitate
sustainable growth and development;
2.2 investigates and debates the successes and shortcomings of the RDP;
2.3 explains the role of savings and investments in economic prosperity and growth;
2.4 discusses productivity and growth and its effects on economic prosperity, growth and global competi-
tion.
Table 2.3
2.3.6 Memorandum
ACTIVITY 1: ECONOMIC GROWTH AND DEVELOPMENT
The learner has to complete the following (in her or his own words):
SAVING is the postponement of satisfying personal needs.
INVESTMENT is capital that is invested to make production possible.
ECONOMIC GROWTH is achieved when the increase in the production of a country is larger than the
increase in population, which means that the increase in the amount of available goods has created wealth.
ECONOMIC DEVELOPMENT therefore has to do with the fact that the greater prosperity made
possible by economic growth has also improved the general quality of the lives of the population, which
involves improved access to education, water, housing, etc.
2.4 Productivity 4
2.4.1 ECONOMIC AND MANAGEMENT SCIENCES
2.4.2 Grade 9
2.4.3 SUSTAINABLE GROWTH AND DEVELOPMENT
2.4.4 Module 11
2.4.5 PRODUCTIVITY
Productivity can be described as the amount of goods and services produced per worker per hour. This
refers to the ratio between real production and the number of inputs that are needed to manufacture it; the
productivity of labour increases, for example, if the output (the number of units that are produced) increases
by 10% while the input (number of working hours) remains the same.
There is an important relationship between productivity and economic growth in the sense that improved
productivity always is a prerequisite for economic growth.
For the effect of productivity on economic growth to be understood, it is necessary to distinguish between
the following concepts:
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32 CHAPTER 2. TERM 2
1. EXTENSIVE ECONOMIC GROWTH refers to the extension of total production of goods and services
irrespective of whether there is increased productivity per person. According to this, extensive economic
growth is possible even though there may be no increase in production per person
2. INTENSIVE ECONOMIC GROWTH refers to the increase in production per person (or per capita).
When intensive economic growth occurs, total production increases more rapidly than the population. Per
capita growth (or income) therefore is an indicator of economic growth.
When a community's production of goods and services expands more rapidly than the population in-
creases, real per capita income rises. This generally means that the economic prosperity of the population
will increase, which reflects economic growth.
Therefore: growth in production that is larger than growth in population leads to:
• rise in real per capita income, which leads to
• increased economic growth and
• economic prosperity
Inversely, a decrease in real per capita income will occur if the population increase is greater than the increase
in production. Economic decline, the opposite of intensive growth, will therefore occur.
Therefore: growth in production that is smaller than growth in population leads to
• decline in real per capita income, which leads to:
• economic decline and
• decline in economic prosperity (rising poverty)
With increased productivity, the products of a country become more competitive on international markets
and this can lead to increased exports. The reason for this is that
increased productivity can absorb wage increases, which makes it possible for business enterprises to keep
the prices of their products stable.
2.4.5.1 Activity 1: Productivity of Labour
Identify TEN factors that could lead to improvement in labour productivity. Provide a full explanation of
each one.
• Also provide a report for presentation to the class.
2.4.5.2 Activity 2: Labour Productivity in South Africa [LO 2.4]
Do you think labour productivity in South Africa is of a standard that makes it possible to compete effectively
on international markets? Motivate your answer so that points of view can be debated in the class.
2.4.5.3 Sources:
• Gwartney, James D ECONOMICS, Private and Public Choice, Sixth Edition
• Stroup, Richard L The Dryden Press, Harcourt Brace College Publishers, Orlando, 1992
2,4,6 Assessment
33
Learning outcomes (Los)
LO 2
SUSTAINABLE GROWTH AND DEVELOPMENTThe learner will be able to demonstrate an
understanding of sustainable growth, reconstruction and development, and to reflect on related processes.
Assessment standards (ASs)
We know this when the learner:
2.1 discusses how the national budget, regional and international agreements can be used to facilitate
sustainable growth and development;
2.2 investigates and debates the successes and shortcomings of the RDP;
2.3 explains the role of savings and investments in economic prosperity and growth;
2.4 discusses productivity and growth and its effects on economic prosperity, growth and global competi-
tion.
Table 2.4
2.4.7 Memorandum
ACTIVITY 1: PRODUCTIVITY OF LABOUR
Factors that could lead to improvement in labour productivity (the concepts should be defined clearly
and explained adequately).
1. Climate
2. Own culture
3. Renumeration of wages
4. Working hours
5. Working conditions
6. Health and strength
7. Intelligence
8. Training and education
9. Social attitude
10. Organisation of labour
ACTIVITY 2: LABOUR PRODUCTIVITY IN SOUTH AFRICA
Groups are to state their points of view regarding labour productivity in South Africa, taking note
particularly of conditions or situations in their own environment where contractors do not operate effectively
and workers do not provide maximum input to benefit their employers.
34 CHAPTER 2. TERM 2
Chapter 3
Term 3
3.1 An idea for an enterprise 1
3.1.1 ECONOMIC AND MANAGEMENT SCIENCES
3.1.2 Grade 9
3.1.3 ENTREPRENEURSHIP
3.1.4 Module 12
3.1.5 AN IDEA FOR AN ENTERPRISE
Activity 1:
To discuss the value of entrepreneurship for the community, and generate business ideas by means of a
SWOT analysis
[LO 4.5, 4.1]
Read the following report from Die Burger of 5 July 2003 about the efforts of an entrepreneur in Cape
Town:
A LONG WIRE FROM POVERTY TO A BETTER LIFE
Nellie Brand
Mr Unite Chimbadzo has come a far way from the streets of Johannesburg and Cape Town to the
showroom in a building in Kloof Street where interesting wire art can be seen through dusty windowpanes.
On Tuesday evening his wire art took pride of place at the dazzling rugby dinner of the new Springbok
team in the Cape Town international conference centre that was held to raise money for injured rugby
players.
It is in the showroom and workshop in 8 Kloof Street where Loxionwires, the close corporation which was
established by him and five other artists, is run. Previously their wire ornaments were made and displayed
in the city streets.
He made 60 wire balls for the Springbok dinner, and this is the kind of order that the close corporation
would like to get more of.
According to him they established Loxionwires so that they would be able to get larger projects. "We
want to give our clients the confidence to place orders with us. If we keep on working in the streets we will
never get big orders," he says.
He has an intense desire to train other unemployed people and to save them from the morass of poverty,
crime and drugs - a commonplace phenomenon in Khayelitsha where he lives. He says that the decision to
establish the close corporation was driven by this desire.
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36 CHAPTER 3. TERM 3
The name of the concern is pronounced in the way that the ordinary township people say "location" -
"the dwelling-place of those for whom we want to create work," he says.
At present Loxionwires employs 42 people.
He says unemployed people are trained to ensure that the day they get a big order, they will be able to
produce high quality products which will satisfy their clients.
He expects that business will improve towards the end of the year when they will be making wire
Christmas trees.
He talks about unemployed young people who turn to crime in order to survive.
"It isn't safe for me to be the only one in my township who goes home at night with money in my pocket,"
he says. "I know that I will encounter danger somewhere along the way."
He hopes that his example will convince such people that there are other ways of earning an income. "If
I can do it, others can too. All I use is my hands and my brains to make an ornament that will sell and on
which I won't make a loss," he says.
It has taken him 10 years since he came to South Africa from Zimbabwe in search of a better life to earn
a reasonably fixed stream of income from his craft.
As a 19- year-old who had passed matric with five distinctions - amongst others in maths and science -
but who was unable to get a fixed job since 1993, he saw how people in Johannesburg were able to survive
on their earnings from wire art.
He has set his hopes on getting assistance from a financier who will help them to get their business in
order so that they can open a training workshop.
Chimbadzo can be contacted at 083 752 9806.
(Source: Die Burger, 5 July 2003)
1. What are the qualities of an entrepreneur that you recognise in Mr Chimbadzo?
2. What contribution is Mr Chimbadzo making towards the upliftment of the community?
3.1.5.1 Research assignment
Undertake research of entrepreneurial activities in one or more poor communities and use the information
to write a report of about 900 words (three to four A4 pages) on the following topic:
Entrepreneurs play an important role in the upliftment of the standard of living of a community.
See to it that through your research you become acquainted with SMMEs: (Small, Medium and Micro
Enterprises). Select the best examples of successful initiatives about which you were able to get information
and explain in each case why the initiative was successful and how it contributes (contributed) to the
upliftment of the community. Add your report to your portfolio immediately after this page.
3.1.5.2 Class discussion 1: A SWOT-analysis of Chimbadzo's initiative.
• A SWOT analysis is a handy instrument with which to evaluate the viability of an initiative. It is an
analysis of the strengths, weaknesses, opportunities and threats related to the initiative. This is where
the word SWOT comes from. Read the report on Chimbadzo carefully again and then as a class do a
SWOT analysis of his initiative. Write down the points on which the class agrees here:
• Strengths
• Weaknesses
• Opportunities
• Threats
3.1.5.3 Class discussion 2: SWOT-analysis of possible business ideas.
Have a class discussion on possible business ideas in your area. Identify possibilities in manufacturing, service
provision and tourism. Pay specific attention to the positive impact that each initiative could have on the
needs and upliftment of the community, e.g. in terms of creating job opportunities.
Make a list of the ideas:
37
Ideas with a focus on manufacturing (at least one with a focus on tourism)
Ideas with a focus on service provision (at least one with a focus on tourism)
As a class, do a SWOT analysis of each of the ideas and choose the three best ones in each of the two
groups. Underline them in the list.
3.1.5.4 Activity 2:
3.1.5.5 To test the viability of an identified business idea
3.1.5.6 [LO 4.2, 4.3]
Choose one of the business ideas that were identified as the six best ones in Activity 1. It must be the one
you like best and one you think you will make a success of.
Test the viability of the idea that you chose in the following way:
1. Read the following guidelines on how to develop a business idea:
Three basic elements of a business: The following can always be applied to a business and must be taken
into account when a business idea is considered:
A specific product (or number of products) or service must be offered.
The manufacturing or sourcing of the product (s), or provision of the service, must be sustained.
There must be buyers who want the product(s) or service, and who can pay for it.
Creative thinking is essential: An entrepreneur does not imitate, but does something new or improves
on something that already exists.
The actions taken by an entrepreneur can be divided into different groups. The following is a broad
division within which further subdivisions can be made:
Something that already exists and is readily available and plentiful could be used for something else (new
purpose). For example: Someone decided to buy the pieces of broken brick that could not be used on a
building site and used it for paving at a price which no other paving businesses could match. It was a great
success.
Something that already exists can be altered by way of an improvement (improvement) . The development
of the microchip in computer technology is a good example. Another example is the reduction in size of
huge computers that filled a whole room, to personal computers (desktops) and later to laptops. A totally
different example is where a shop owner decides to diversify by expanding his range of products. He improves
upon his existing service.
Something new can be developed that altogether replaces something that is available on the market
(substitution). At present plastic lenses for spectacles are replacing the older type of glass lenses.
2. Research and describe the idea fully. Make rough notes first and then write down the final description
here. Do this thoroughly, because you are going to use this idea for the rest of the module.
My business idea
• Product or service (indicate whether it is a new purpose, improvement or replacement)
• Manufacturing and/or sourcing
• The market (who is going to buy, why, and why they will be able to afford it)
• Marketing strategy
3. Now you must test the financial viability of the business idea. Up to now we have looked at the business
idea in terms of product, manufacturing and sourcing, the market (buyers) and the way in which we are
going to get the buyers to buy the product (marketing strategy). However, now we must make sure that the
idea is actually financially viable. A business is only a business if it shows a profit. That means that we
should not sell our product or service at a loss and that the breakeven point (the number of items or service
contracts that we have to sell in order to break even) is realistically attainable.
To be capable of doing that, we need to look at the following:
38 CHAPTER 3. TERM 3
• the selling price;
• the direct cost of providing the product or service;
• the costs involved in running the business (e.g. transport and marketing)
The selling price
The selling price is determined provisionally beforehand on the basis of market research. The research is
used to determine which similar products or services exist and what they cost.
The cost of the product
A product cannot easily be created without any costs. For example, even if spring water is drawn and
sold, the containers (bottles) still cost money.
Operating costs
Operating costs include anything that is needed to keep the business going, such as transport, salaries,
marketing, postage, telephone costs, and so on. Let us do a calculation to determine the viability of a specific
business idea. Let us assume that we are going to sell hot dogs at an athletics meeting. It will be only a
small meeting and we think we'll be able to sell 100 hot dogs. After doing some research we decide that
R6,00 is an acceptable price. The frankfurters cost R3,00 each and the rolls are R0,60 each. The various
sauces that we'll need cost R25,00. We find out that we'll have to rent a stall at R50,00 and that we'll need
20 posters at R8,00 each to market the stall.
This is what our calculation will look like:
Sales: 100 hot dogs @ R6,00 each = R600,00
Cost of products: 100 hot dogs @ R2,75 each, and sauce @ R25,00 = R300,00
Gross profit as first indicator (sales less cost of product) = R300,00
Operating costs: Stall @ R50,00 and 20 posters @ R8,00 each = R210,00
Operational profit = R 90,00
It seems, therefore, that the enterprise will be profitable. The selling price, as provisionally determined
by taking the market indicators into account, can thus remain unchanged. If the calculation did not show a
profit, we could have considered adjusting the selling price upwards.
There are important tests that have to be done to ensure that the project is truly viable: we have to
determine where the breakeven point is in case we are not able to reach the goal of selling 100 hot dogs.
3.1.5.7 ASSIGNMENT:
Determine the financial viability of your business idea by carrying out the above-mentioned steps, using your
data.
3.1.6 Assessment
Learning Outcomes (LOs)
LO 4
Business, Consumer and Financial Knowledge and SkillsThe learner is able to apply, in a respon-
sible manner, a range of business, consumer and financial skills.
Assessment Standards(ASs)
continued on next page
39
We know this if the learner:
4.1 generates, through SWOT analysis, possible business ideas to meet the need for manufactured goods
or services;
4.2 develops a business plan (including a budget) for a manufacturing, service or tourism concern based
on the best business opportunity from the ideas generated;
4.3 engages in the business activity planned and discusses the reasons for choosing a particular form of
ownership;
4.4 conducts a marketing campaign to promote a product and discusses the self-selected advertising media;
4.5 researches the role of small, medium and micro enterprises in wealth and job processes.
Table 3.1
3.1.7
3.1.8 Memorandum
ACTIVITY 1
1. Seek and utilise new opportunities
Perseverance
Dedication
Takes chances (moved from Jhb to Cape Town)
Quality
1. Job creation
Improvement of quality of life
Training
• The aim of the research assignment is to make the learners realise that support opportunities do
exist and that one does not necessarily have to fall back on one's own resources. Learners must also
realise that the government regards successful small business initiatives as important, and supports
such initiatives.
The purpose of the class discussions is to make the learners
realise that opportunities exist where one does not expect to find them or that there are opportunities
one might not have thought of before;
become accustomed to lateral thinking;
understand that ideas should be tested properly right from the start; that one cannot embark on some-
thing, and spend time and money on an enterprise just to realise later that it isn't working.
A further aim is to generate work of a high quality in the classroom. Otherwise learners could easily keep
themselves occupied with ideas that are not suitable for exercises later in the module.
ACTIVITY 2
• This activity has been set out in such a way that the learners can work through it on their own with
some support from you. You do not need additional guidelines.
• A major part of the activity is the same as the work covered in Grade 8. However, it must be done
again, seeing that it is the preamble to the following activity.
•
• The comments to the Grade 8 teacher are repeated here as they are very important:
40 CHAPTER 3. TERM 3
• Testing the viability of the business idea allows the learner to deal with important concepts in the field
of financial business management and you must make sure that they fully understand the concepts.
The difference between product costs and operational costs and the meaning of gross profit must be
fully understood. If the product cost is too high in relation to the selling price, the gross profit will be
too low to be able to afford essential operational necessities such as salaries and marketing.
• The examples in the module can be used to check whether the learners' calculations are correct.
3.2 Develop a business plan 2
3.2.1 ECONOMIC AND MANAGEMENT SCIENCES
3.2.2 Grade 9
3.2.3 ENTREPRENEURSHIP
3.2.4 Module 13
3.2.5 DEVELOP A BUSINESS PLAN AND BUDGET
3.2.5.1 Activity:
3.2.5.2 To turn a business idea into a business plan
3.2.5.3 [LO 4.4]
Once the business idea has passed the viability test it must be developed into a business plan.
A business plan is a core document in terms of which a business is managed.
Business plans can be set out in a variety of ways. The following framework was based on a business
plan of a company that has been using it for the past few years. It has been tested in practice.
BUSINESS PLAN
1. Vision of the enterprise
The vision of an enterprise says in a few words how the enterprise would like to see itself now as well as
in the medium to long term. It does not change much from one year to the next.
Example:
To be the leading supplier of garden services in the Ermelo urban area.
2. Mission
The mission briefly states how the enterprise will go about pursuing its vision. The mission is adapted
according to the changes that take place both within and outside the enterprise, and can therefore change
from one year to the next.
Example:
Gardens are kept weed-free and neat and the soil is cultivated to increase fertility.
3. Organogram
The organogram explains the structure of an organisation in terms of the functions and employees, and
it indicates who reports to whom.
4. The market
4.1 Potential clients
It is important to give as much information as possible about potential clients. Market research is
essential. It can be done by way of questionnaires, interviews and telephone calls, as well as by studying the
newspapers and any documents that contain information about the community.
4.2 Competitors
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It is essential to have information about competitors. There should be an indication of who the com-
petitors are and what their strengths are, but more importantly what their weaknesses are, what people say
about them, exactly what they sell and what their marketing strategies are.
5. Goals for the year in question (in this case 2004)
A business always sets specific goals that it wants to achieve in a particular year.
Example:
5.1 To be contracted by 200 home owners for the care of their gardens
5.2 To reach sales of R980 000,00
• To achieve a profit equal to 20% of the sales
6. Steps in pursuing the goals in the particular year
For each of the goals there will be an indication of what is to be done to achieve the goal.
Example:
6.1 Goals 5.1 and 5.2 will be achieved by
tailoring the product or service to the needs of the clients,
pricing it right,
advertising in the newspaper,
making personal visits to all the homes in the area,
giving excellent service to existing clients so that they advertise the undertaking, and offering a 20%
discount on the normal price.
6.2 Goal 5.3 will be achieved by
cutting out unnecessary expenses, etc.
A little more about marketing:
• Pursuing business goals without effective marketing is not possible and therefore marketing should get
a great deal of attention in this part of the business plan. It is often said that it is easier to sell a poor
product if the marketing is good, than to sell a good product if the marketing is poor.
• As far as the marketing of a business is concerned, two phases can be distinguished:
Phase 1 entails the market research that must be completed early in the planning process, to ensure that
the nature and price of the product or service are determined correctly.
Phase 2 entails the planning and execution of a marketing campaign.
• Place, time and promotion are the three key words. Firstly, the marketing campaigns must take place
at the right time at the right place. For instance, it is pointless to display the product at a venue when
there are no people. Furthermore, the campaigns must catch the attention of the potential clients
(promotion).
• Advertisements have a very important role to play in this phase. Advertisements must draw attention,
be interesting and compel the viewer to take action.
• The choice of media is also important. The media that are probably used most frequently are posters,
newspapers, radio and television.
•
7. Budget for the year
The budget is the most important part of the business plan. All the planning, mentioned above, can only
be realised if the necessary finances are available. The budget that shows whether this is possible or not.
The income statement done in Activity 1.2 is an important part of the budget, but must be augmented
by a balance sheet and cash flow statement. In this module we shall only look at the income statement.
8. Projection for the following year (in this case 2005)
A business always looks ahead of the present year and attempts to make an informed estimate of what
should be attained in the next year or two.
42 CHAPTER 3. TERM 3
The income statement format can be used for this purpose. All possible factors are taken into consider-
ation and then it is decided whether the sales ought to increase, (e.g. by 10%), whether there will be new
costs that will reduce the profit, (e.g. if it is expected that additional marketing needs to be done, etc.).
ASSIGNMENT:
Follow the example given in the preceding section and turn your business idea into a business plan. Use
the captions on the next page to write a business plan.
My Business Plan
Period to
1. Vision:
2. Mission:
3. Organogram:
4. The market:
4.1 Potential clients (based on research)
4.2 Competitors (based on research)
5. Goals (Remember: Specifically for the period indicated in the heading.)
6. Steps in pursuing the goals (Remember to set out your marketing strategy here.)
7. Budget (for the period indicated in the heading)
Data:
• Selling price
• Number of units that will be sold
• Product cost per unit
• Expected operational costs (Remember to make sufficient provision for the market)
Calculations:
• Sales
• Cost of product
Gross profit as first indicator (sales less cost of product)
•
•
Operational costs
• Operational profit
8. Projection (for the period following the period indicated in the heading)
• Sales
• Cost of product
• Gross profit as first indicator
(sales less cost of product)
• Operational costs
• Operational profit
3.2,6 Assessment
43
Learning Outcomes (LOs)
LO 4
Business, Consumer and Financial Knowledge and SkillsThe learner is able to apply, in a respon-
sible manner, a range of business, consumer and financial skills.
Assessment Standards(ASs)
We know this if the learner:
4.1 generates, through SWOT analysis, possible business ideas to meet the need for manufactured goods
or services;
4.2 develops a business plan (including a budget) for a manufacturing, service or tourism concern based
on the best business opportunity from the ideas generated;
4.3 engages in the business activity planned and discusses the reasons for choosing a particular form of
ownership;
4.4 conducts a marketing campaign to promote a product and discusses the self-selected advertising media;
4.5 researches the role of small, medium and micro enterprises in wealth and job processes.
Table 3.2
3.3 Ownership of a business 3
3.3.1 ECONOMIC AND MANAGEMENT SCIENCES
3.3.2 Grade 9
3.3.3 ENTREPRENEURSHIP
3.3.4 Module 14
3.3.5 OWNERSHIP OF A BUSINESS
3.3.5.1 Activity:
3.3.5.2 To discuss the different kinds of ownership of a business
3.3.5.3 [LO 4.3]
When you plan to start a business you must decide to whom the business will belong.
There are mainly four options: you as individual could be the owner, you could establish a close corpo-
ration, you could create a company or you could take up a concession.
3.3.5.4 Option 1: You assume ownership as individual
You can own the business in your personal capacity. That means that you as person
• will be taxed on any profits of the business (maximum 40%), and
• will be held accountable for debts that are incurred by the business (which means that, should the
business not be in a position to pay the debts, you could lose your possessions and means of livelihood).
You could also invite other people to become co-owners, but that is dangerous, because there is always the
possibility of misunderstandings and tension in the management of the business.
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44 CHAPTER 3. TERM 3
3.3.5.5 Option 2: You establish a close corporation
In this case you become a member of the corporation and your personal assets are protected. Your ac-
countability for any debts of the corporation does not exceed the amount of capital that you contributed.
Furthermore the income tax is fixed at 30%, which is substantially less than in the case of an individual. You
can also allow other people to become members, which means that you obtain additional financial support
and do not stand altogether alone. As a close corporation functions in terms of a specific law, the interests
of all the members are protected. The books of a CC must be done by a chartered accountant. There can
be 1 - 10 members.
The name of a close corporation always ends in CC, for example Laser Services CC.
3.3.5.6 Option 3: You create a private company
A company is managed in terms of a specific act and a number of requirements must be met that are not
applicable to a close corporation. There must be a board of directors and the names of the board members
must be made available to the Public Registrar of Companies. Fully audited annual statements must be
submitted annually. Annual general meetings must be
held according to prescribed guidelines. All these requirements make the process of establishing a private
company quite expensive.
The name of a private company ends in (Pty) Ltd.
3.3.5.7 Option 4: You take up a franchise
A franchise has many advantages for an individual, becomes a business owner, but has the support of the
group and shares in advantages such as purchasing stock at lower prices, having access to tried and tested
recipes (e.g. in the case of a restaurant), etc. Well-known names such as SPAR and 7-Eleven are examples
of franchises.
Assessment
Learning Outcomes (LOs)
LO 4
Business, Consumer and Financial Knowledge and SkillsThe learner is able to apply, in a respon-
sible manner, a range of business, consumer and financial skills.
Assessment Standards(ASs)
We know this if the learner:
4.1 generates, through SWOT analysis, possible business ideas to meet the need for manufactured goods
or services;
4.2 develops a business plan (including a budget) for a manufacturing, service or tourism concern based
on the best business opportunity from the ideas generated;
4.3 engages in the business activity planned and discusses the reasons for choosing a particular form of
ownership;
continued on next page
45
4.4 conducts a marketing campaign to promote a product and discusses the self-selected advertising media;
4.5 researches the role of small, medium and micro enterprises in wealth and job processes.
Table 3.3
In Conclusion:
How would you feel if your name were to appear like this in the newspapers some day?
SOURCE
BLOEMFONTEIN BOASTS TWO IT MILLIONAIRES
Gert Coetzee
Once again an inhabitant of Bloemfontein has made a great hit in the field of information technology.
This time it is Mr Brian Lackey (54), a jovial businessman who sold a computer program for tens of millions
of rands to a foreign company.
Lackey's success follows hot on the heels of that of Mr Igme Hatting (27), a computer programmer who
also hails from Bloemfontein. He sold his program for access control and equipment operation in stadiums
to a foreign company for "somewhere between R106 million and R700 million".
Lackey has confirmed that his 4D group has sold the right of use for a combined program for the micro-
loaning industry and credit life insurance to the Australian division of an international company which has
its headquarters in the United States of America.
This company may use the program in every country in the world except in South Africa. Lackey has
retained the South African rights because he has many local clients and the business prospects in this country
are "unlimited".
Owing to the sensitivity of the transaction he cannot reveal the name of the foreign buyer or the purchase
price.
According to a reliable source the purchase price is "round about R400 million". According to Lackey the
transaction has been finalised pending a condition that the program be made "web friendly".
A team of workers has already been working on this for 12 to 15 hours per day for the past months.
Payment will be done in US dollars once the program has been adapted.
Lackey, who was born in Walvis Bay, was the provincial manager of a catering business in the Free State
until the '80s, when he started his own business.
In 1993 he started a micro-lending business. He asked a friend to write a program for the administration
of loans so that he could manage the data of his 900 clients.
This program was hired out to other micro-lenders, some of them even in Cape Town. "Before we
knew where we were, we were being inundated with calls. It was an easy decision to bid farewell to the
micro-lending business in favour of the new venture of developing software."
The 4D group, with companies such as Proloan Marketing and 4D Insurance Solutions in its stable, and
with 30 employees in offices in Bloemfontein, Centurion and Cape Town, was established then.
Lackey does not write the programs himself, but conceives them. His employees do the rest.
Initially Lackey kept the good news to himself and did not tell his employees. Once it leaked out, he
informed them about the new developments "so that they would not read about everything in the newspapers".
Every employee will receive a bonus.
(Source: Die Burger, 31 July 2003)
46 CHAPTER 3. TERM 3
Chapter 4
Term 4
4.1 Difference between an income statement and a balance sheet 1
4.1.1 ECONOMIC- AND MANAGEMENT SCIENCES
4.1.2 Grade 9
4.1.3 BUSINESS, CONSUMER AND FINANCIAL KNOWLEDGE AND
SKILLS
4.1.4 Module 15
4.1.5 DIFFERENCE BETWEEN THE INCOME STATEMENT AND BAL-
ANCE SHEET
ACTIVITY 1:
To be able to distinguish between an income statement and a balance sheet
[LO 3.1]
Financial statements are documents which give information about finances of a business. The balance
sheet and the income statements are two of these. They give a summary of the financial state of a business.
It is important that financial statements are easy to set out and understand.
The information in financial statements makes it possible to plan and make good decisions for a business.
All financial statements have to be drawn up according to the rules of Generally Accepted Accounting
Practice.
The main purpose of the income statement is to show the profit or loss made over a particular period.
The main purpose of the balance sheet is to show the financial position of a business on a
particular date. The balance sheet is divided into the following sections:
1. Assets - Non-current Assets and Current Assets.
2. Equity and Liabilities - Ownership Interest, Non-current Liabilities and Current Liabilities.
• In your own words, describe the difference between an income statement and a balance sheet.
ACTIVITY 2:
To draw up income statements for a service enterprise and a commercial enterprise
[LO 3.1]
• The following examples are Income Statements of a service enterprise and a commercial enterprise:
1 This content is available online at <http://cnx.Org/content/m31771/l.l/>.
47
48
CHAPTER 4. TERM 4
Z. ZulekiTrading as XYZ Plumbers Income Statement for the year ended 31 December 2003
Current Income
55 000
Operating Expenditure
(38 274)
Telephone
3 420
Water and Electricity
5 620
Rental
12 000
Fuel
3 730
Stationery
3 680
Wages
9 824
Net Income for the year
16 726
Table 4.1
S. SolaniTrading as Solani Dealers Income Statement for the year ended 31 December 2003
Sales
324 000
Selling costs
(200 000)
Gross Profit
124 000
Other current income
14 400
Rental income
12 000
Interest income
2 400
Gross Current Income
138 400
Operating expenditure
(32 800)
Salaries and Wages
23 000
Stationery
800
Insurance
2 400
Telephone
500
Advertising costs
600
Interest on bond
2 500
Rates and taxes
3 000
Net Profit for the year
105 600
Table 4.2
ASSIGNMENT 1 : Income Statement of a Service Enterprise
• The accounting period of Fixit Plumbers (owner F. Fix) ends on 30 June every year. The trial balance
below appears in their books on 30 June 2003. Use the information to draw up the Income Statement
for the year ended 30 June 2003. (Paper will be provided.)
TRIAL BALANCE OF FIXIT PLUMBERS
49
Dt.
Cr.
Balance Sheet section
Capital
Bl
138 629
Withdrawals
B2
15 800
Land and Buildings
B3
100 000
Vehicles
B4
28 000
Equipment
B5
12 740
Bank
B6
3 963
Nominal Accounts section
Cost of materials
Nl
6 084
Insurance
N2
531
Advertisements
N3
389
Salaries
N4
12 500
Wages
N5
4 715
Current Income
N6
52 871
Fuel
N7
3 186
Repairs
N8
917
Telephone
N9
1 008
Stationery
N10
492
Water and Electricity
Nil
1 175
191 500
191 500
Table 4.3
ASSIGNMENT 2 : Income Statement of a Commercial Enterprise
• Use the information below to complete the Income Statement of Hendrikse Dealers (Owner: H. Hen-
drikse) for the year ended 30 June 2003. (Paper will be provided.)
TRIAL BALANCE OF HENDRIKSE DEALERS AS AT 30 JUNE 2003
50
CHAPTER 4. TERM 4
Dt.
Cr.
Balance Sheet section
Capital
Bl
166 047
Withdrawals
B2
6 320
Land and Buildings
B3
140 000
Equipment
B4
18 600
Trading inventory
B5
8 860
Debtors control
B6
11 224
Bank
B7
7 621
Change
B8
150
Petty cash
B9
110
Creditors control
BIO
9 216
Nominal Accounts section
Sales
Nl
83 706
Selling costs
N2
55 804
Rental income
N3
3 200
Telephone
N4
640
Water and Electricity
N5
760
Salaries
N6
8 900
Wages
N7
1 100
Postage
N8
120
Stationery
N9
680
Packaging material
N10
1 280
262 169
262 169
Table 4.4
ACITVITY 3:
To draw up Balance Sheets for a service enterprise and a commercial enterprise respectively
[LO 3.1]
• The following examples are Balance Sheets of a service enterprise and a commercial enterprise:
M. MuvaloTrading as Muvalo Hairdressing Salon Balance Sheet as at 28 February 2003
51
Assets
Non-current Assets
Fixed Assets 1
49 700
Current Assets
2 840
Total Assets
52 540
Equity and Liabilities
Ownership Interest 2
52 540
Current Liabilities
-
Total Equity and Liabilities
52 540
Table 4.5
M. MuvaloTrading as Muvalo Hairdressing Salon Notes to the financial statements for the
year ended 28 February 2003
1. Fixed Assets
Vehicles
35 000
Equipment
14 700
49 700
2. Ownership Interest
Balance as at 28 February 2002/last day of previous year
45 000
Net Profit for the year
18 140
Additional capital contributed
-
Withdrawals
(10 600)
Balance as at 28 February 2003/ last day of current year
52 540
Table 4.6
F. Foxie Trading as Fox and Co. Balance Sheet as at 31 December 2003
52
CHAPTER 4. TERM 4
Assets
Non-current Assets
Fixed Assets 1
158 600
Current Assets
27 965
Trading inventory
8 860
Debtors
11 224
Cash 2
7 881
Total Assets
186 565
Equities and Liabilities
Ownership Interest 3
177 349
Current Liabilities
9 216
Creditors
9 216
Total Equity and Liabilities
186 565
Table 4.7
F. Foxie Trading as Fox and Co. Notes to the financial statements for the year ended 31
December 2003
1. Fixed Assets
Land and Buildings
140 000
Equipment
18 600
158 600
2. Cash
Bank
7 621
Change
150
Petty cash
110
7 881
3. Ownership Interest
Balance as at 31 December 2002
166 047
Net Profit for the year
17 622
Withdrawals
(6 320)
Balance as at 31 December 2003
177 349
Table 4.8
ASSIGNMENT 1: Balance Sheet of a Service Enterprise
53
• Use the information of Activity 1.2 and draw up the Balance Sheet of Fixit Plumbers. (Paper will be
provided.)
ASSIGNMENT 2: Income Statement of a commercial enterprise
• The financial year of Orange Dealers (Owner: O. Sitro) ends on the last day of February every year.
• The Trial Balance below appeared on their books on 28 February 2003.
• Draw up the Income Statement for the business for the relevant accounting period. (Paper will be
provided.)
ASSIGNMENT 3 : Balance Sheet of a Commercial Enterprise
• Draw up the Balance Sheet as at 28 February 2003. (Paper will be provided.)
TRIAL BALANCE OF ORANGE DEALERS AS AT 28 FEBRUARY 2003
Dt.
Cr.
Balance Sheet section
Capital
Bl
200 000
Withdrawals
B2
4 700
Land and Buildings
B3
150 800
Vehicles
B4
36 200
Equipment
B5
29 000
Trading inventory
B6
16 700
Debtors control
B7
3 980
Bank
B8
2 550
Change
B9
660
Petty cash
B10
110
Creditors Control
Bll
16 000
Nominal Accounts section
Sales
Nl
192 557
Selling costs
N2
115 440
Rental Income
N3
8 400
Rates and Taxes
N4
2 720
Wages
N5
9 600
Salaries
N6
30 000
Repairs
N7
2 416
Advertisements
N8
819
Insurance
N9
2 690
Water and Electricity
N10
3 670
Telephone
Nil
4 902
416 957
416 957
54 CHAPTER 4. TERM 4
Table 4.9
4.1.6 Assessment
Learning Outcomes (LOs)
LO 3
MANAGERIAL, Consumer and Financial Knowledge and SkillsThe learner will be able to demonstrate
knowledge and the ability to apply responsibly a range of managerial, consumer and financial skills.
Assessment Standards (ASs)
We know this if the learner :
3.1 completes a basic income statement and balance sheet for a service and retail business;
3.2 investigates the public relations, social responsibility and environmental responsibility strategies and
actions of different businesses and organisations;
3.3 completes cash and credit transactions in the books of service and retail businesses;
3.4 uses keyboard skills and function keys in developing, storing, retrieving and editing business docu-
mentation;
3.5 analyses financial statements for decision-making at a basic level;
3.6 differentiates between the forms of credit purchases.
Table 4.10
4.1.7 Memorandum
ACTIVITY 1
Difference between an income statement and a balance sheet. Accept the learners' wording. The time
aspect is important: over a period (income statement) and on a specific date (balance sheet).
ACTIVITY 2
ASSIGNMENT 1
55
F. Fok
Trading as FjjnJJ.PIumDera|
IncorriE statEmEnt for the year -Ended 3D June 2DD3
Cu rre nt inco me 52 371
Operating expenditure (30 '997)
Cast of materials
5DB4
Insurance
531
Advertisements
339
Salaries
12 500
Wages
4715
Fuel
3iee
Re pa irs
917
Te le p ho ne
iooe
Stationery
492
Water and Electricity
1 175
I Inco me for the year
21 374
Figure 4.1
ASSIGNMENT 2
H-tt&ndrjJWi
Trading as yej^drikse. Dealers
Income state me nt for the year ended 3D June2DD3
Sales S3 705
Belling costs f5E ED4j
Gross Profit 27 902
Other Operating Income 3 200
Rental income
3 200
pe rating expe nd rtu re
(13 4BD>
G'dss Operating Income
31 102
Telephone
5 + D
Water and Electricity
"53
Salaries
3 900
/VagiE-
1 133
Postage
120
Stationery
53D
Packaging material
1230
Met Profit for the year
17 522
Figure 4.2
ACTIVITY 2
ASSIGNMENT 1
56
CHAPTER 4. TERM 4
F. Fok
Trading as Fjjujj. PI limbers!
IncomE state m e nt f or the year -Ended 3D June2DD3
Cu ne nt inco me 52S71
Operating expenditure (30 '997)
Cast of materials
5DB4
Insurance
531
Advertisements
339
Salaries
12 500
Wages
4715
Fuel
3 136
Re pa irs
917
Te le p ho ne
1003
Stationery
492
Water and Electricity
1 175
I Inco me for the year
21 374
Figure 4.3
ASSIGNMENT 2
H-tt&ndfiJSLS.
Trading as ttanj&iksa. Dealers
IncomE EitatEmEnt for the year ended 3D June 2D D3
Sates S3 706
Selling costs (55 304)
Gross Profit 27 902
Other-Operating Income 3 200
Rental income
3 200
pe rating expe nd rtu re
(13 430)
G'dss Operating Income
31 102
Telephone
5 + D
Water and Electricity
760
Salaries
3 900
A'agiE-
1 133
Postage
120
Stationery
630
Packaging material
1230
Met Profit forthe year
17 522
Figure 4.4
57
ACTIVITY 3
ASSIGNMENT 1
F. Fix Trading as Fixit PlumbersBalance sheet as at 30 June 2003
Assets
Non-current assets
Fixed assets 1
140 740
Current assets
3 963
Cash
3 963
Total Assets
144 703
Equity and Liabilities
Ownership interest 2
144 703
Total Equity and Liabilities
144 703
Table 4.11
F. Fix Trading as Fixit PlumbersNotes to the financial statements for the year ended 30 June 2003
1 Fixed Assets:
Land and Buildings
100 000
Vehicles
28 000
Equipment
12 740
140 740
2 Ownership interest
Balance as at 30 June 2002
138 629
Net Income for the year
21 874
Withdrawals
(15 800)
Balance as at 30 June 2003
144 703
Table 4.12
ASSIGNMENT 2
58
CHAPTER 4. TERM 4
Trading as Orange Dealers
^omE statement for the year ended 21
Sales
Selling costs
Gross Profit
OtherOpe rating Income
Rental income
Operating Expenditure
G'dss Operating Income
Rates and Taxes
Wages
Salaries
Repairs
Advertisements
Insurance
Water and Electricity
Te le p h rj ne
Met Profit farthe year
Figure 4.5
February 2003
192 557
(115 44D)
77 117
B4DD
3^33
23 703
[55317)
35517
2 720
9600
30 000
2415
319
2 590
3 670
4 002
ASSIGNMENT 3
59
o.�Jfta
Trading a 5 Orange Dealers
Balance sheetas at 2B February 20D3
Assets
Mon^current Assets
Fixed Assets 1
Cu ne nt Assets
215333
2^333
Stock
Debtors
Cash
2
3
16 700
3 960
3 320
Tata I Assets
243 303
Equity and Liabilities
Ownership interest
Current Liabilities
224 000
15333
Creditors
16 000
Total Equity and Liabilities
243 300
Figure 4.6
O. SitroTrading as Orange DealersNotes to the financial statements for the year ended 28 February 2003
60
CHAPTER 4. TERM 4
1 Fixed Assets
Land and Buildings
150 800
Vehicles
36 200
Equipment
29 000
216 000
2 Cash
Bank
2 550
Petty cash
110
Change
660
3 320
3 Ownership interest
Balance as at 28 February 2003
200 000
Net Profit for the year
28 700
Withdrawals
(4 700)
Balance as at 28 February 2003
224 000
Table 4.13
4.2 Social and environmental responsibilities of businesses 2
4.2.1 ECONOMIC- AND MANAGEMENT SCIENCES
4.2.2 Grade 9
4.2.3 BUSINESS, CONSUMER AND FINANCIAL KNOWLEDGE AND
SKILLS
4.2.4 Module 16
4.2.5 SOCIAL AND ENVIRONMENTAL RESPONSIBILITIES OF BUSI-
NESSES
ACTIVITY 1:
To discuss the social and environmental responsibilities of businesses
[LO 3.2]
When businesses focus on maximising profit, they often forget their responsibilities towards society and
the environment. No business should make money at the expense of nature and the well-being of the
community.
Manufacturing businesses should take care that the waste products, that are the result of their production
processes, do not pollute the environment especially water sources. Natural resources are irreplaceable and
misuse or overutilisation could deplete them so much that development in the future becomes impossible.
2 This content is available online at <http://cnx.Org/content/m31769/l.l/>.
61
Commercial enterprises should ensure that the products they sell are not harmful to the youth. Alcohol,
cigarettes, undesirable books and magazines, are harmful to young people. The owners of bookshops and
music shops should be aware of the content of the books, magazines and music they sell.
Any dealer has a social and moral obligation towards society.
Businesses can make a positive contribution to society by putting part of their profits back into the
community by aiding the development of sport and training for disadvantaged groups or providing housing
for the poor.
Group Assignment
• Split into groups of three and identify problems in your area that are the result of businesses not
honouring their obligations. Approach the businesses if possible and try to find practical solutions to
the problems.
• Make sure that you do not choose the same problems as the other groups. Use a sheet of cardboard
and pictures or drawings to illustrate your report. Make a presentation to the rest of the class.
4.2.6 Assignment
Learning Outcomes (LOs)
LO 3
MANAGERIAL, Consumer and Financial Knowledge and SkillsThe learner will be able to demonstrate
knowledge and the ability to apply responsibly a range of managerial, consumer and financial skills.
Assessment Standards (ASs)
We know this if the learner :
3.1 completes a basic income statement and balance sheet for a service and retail business;
3.2 investigates the public relations, social responsibility and environmental responsibility strategies and
actions of different businesses and organisations;
3.3 completes cash and credit transactions in the books of service and retail businesses;
3.4 uses keyboard skills and function keys in developing, storing, retrieving and editing business docu-
mentation;
3.5 analyses financial statements for decision-making at a basic level;
3.6 differentiates between the forms of credit purchases.
Table 4.14
4.2.7 Memorandum
GROUP ASSIGNMENT
• Possible problems that could be investigated:
Environmental problems such as air, water and environmental pollution can be given attention.
Attempts by the government and businesses to limit the use of plastic bags, as well as the involvement
of businesses in the recycling of waste material, must be mentioned.
62 CHAPTER 4. TERM 4
• Sale of cigarettes and alcohol to minors. Undesirable material with regard to videos, magazines, etc.
• Exploitation of the consumer by exorbitant prices, especially with regard to daily necessities.
4.3 Recording cash transactions of service and commercial
enterprises 3
ECONOMIC- AND MANAGEMENT SCIENCES
4.3.1 Grade 9
4.3.2 BUSINESS, CONSUMER AND FINANCIAL KNOWLEDGE AND
SKILLS
4.3.3 Module 17
4.3.3.1 RECORDING CASH TRANSACTIONS OF SERVICE AND COMMERCIAL EN-
TERPRISES
Section 1: Auxiliary Journals
ACTIVITY 1:
To record cash transactions of service and commercial enterprises
[LO 3.3]
The following cash transactions regularly occur in service and commercial enterprises:
CRJ
• Capital contribution, capital increase or capital reduction by the owner
• Receipt of cash for services provided
• Sale of goods for cash
CPJ
• Purchase of goods and other items for cash
• Payment of operating expenditure
These transactions, where cash is received or paid, are recorded in the CRJ or the CPJ.
ASSIGNMENT 1:
• Complete a CRJ and CPJ for the service enterprise, Mzondi Plumbers. Use CRJ 3.1.1 and
CPJ 3.1.1 on the pages that follow.
• Service enterprises are businesses that get an income from providing services and their income is
recorded in the CRJ in a column headed: Current Income.
• Z. Mzondi started a business called Mzondi Plumbers. The transactions below occurred during Septem-
ber. Record them in the CRJ and the CPJ and close the journals on 30 September 2003.
3 This content is available online at <http://cnx.Org/content/m31768/l.l/>.
63
September 1 Z. Mzondi starts the business by depositing his capital contribution of R50 000 in the current
bank account
September 3 Rents a building from Denvon Properties and pays the rent of R525 by cheque 001
September 6 Purchases service materials to the value of Rl 009 from Puma Stores and pays by cheque
002
September 8 Issues cheque 003 for R4 500 to Lundi Stores for equipment purchased
September 11 Receives stationery from Bundu Dealers and pays R487 by cheque 004
September 12 Receives R2 073 cash as per cash-register roll for services provided
September 14 Pays the municpality R390 by cheque 005 for water and electricity
September 15 Cashes cheque 006 for R190 for wages
September 21 Receives Rl 795 cash as per cash-register roll for services provided
September 25 Pays Telkom R106 by cheque 007 for telephone
September 27 Cheque 008 for R477 is issued to Mpula Insurers for insurance
September 29 Wages of R210 are paid by cheque 009
September 30 Purchases a vehicle for R28 000 from Mdantsane Motors and pays by cheque 010
Cash-register roll shows R2 418 received for services provided
ASSIGNMENT 2:
• Complete a CRJ and CPJ for the commercial enterprise, Levubu Dealers.
• In the case of a commercial enterprise, goods are purchased and sold to make a profit. Goods are
purchased at a certain price (cost price) and sold at a higher price (selling price) in order to make a
profit .
• Both the cost price and the selling price are recorded in the CRJ so that the profit can be calculated
at the end of the period. In the CRJ columns provision must be made for sales and the cost price of
sales instead of current income, as in the case of a service enterprise.
• Use the information provided and show the entries in the Cash Receipts Journal and the Cash Payments
Journal of Levubu Dealers (CRJ 3.1.2 and CPJ 3.1.2 on the pages that follow).
• On 1 July 2003 G. Levu started the business with a capital contribution of R130 000 deposited in the
current bank account.
• According to the cheque counterfoils the following cheques were issued in July:
Date 2003
Cheque No.
Payee
For
Amount
July 2
001
Levubu Builders
Rent
R 1 400
July 6
002
Wilger Suppliers
Equipment
R6 000
July 8
003
Municipality
Trade licence
R 150
July 12
004
A Z Dealers
Goods
R 7 800
July 15
005
Levubu Motors
Delivery vehicle
R23 300
July 18
006
Telkom
Telephone
R 125
July 20
007
Northern Suppliers
Goods
R6 700
July 24
008
Waldo Dealers
Stationery
R 220
July 26
009
A Jansen
Salary
R 2 650
July 28
010
Levubu Motors
Fuel
R78
July 30
011
Municipality
Water and Electricity
R 56
July 31
012
Cash
Wages
R 1 330
64
CHAPTER 4. TERM 4
Table 4.15
• Cash sales of goods
July 17 Rl 600 (cost price Rl 280)
July 24 R3 900 (cost price R3 120)
July 31 R5 400 (cost price R4 320) In the case of sales at a commercial enterprise, the cost price
sometimes needs to be determined. Every business works on a fixed profit percentage. This means that the
profit percentage is added to the cost price to determine the selling price. The cost price of sales is regarded
as an expenditure and therefore reduces the ownership interest. If the selling price and the % profit on the
cost price are known, the following formula is used to calculate the cost price:
sp = cp + profit
(a) If the item is sold at R750 and a profit percentage of 25% is applied, the cost price will be calculated
as follows:
sp = cp + profit
750 = cp + 25% x cp
cp + ^cp = 750
1,25 cp = 750
cp = 600
(b) At a profit of 331/3% and a selling price of R400 the cost price will be calculated as follows:
sp = cp + profit
cp + 33,3% cp = 400
1,333 cp = 400
cp = 300
OPDRAG 3:
• Complete the CRJ and calculate the cost price for Lubbe Dealers using the information
below. (Use CRJ 3.1.3 on the next page.)
• Goods are sold at cost price plus 331/3%. Close the journals by calculating the column totals.
• Transactions for May 2003
1 The owner, H. Lubbe, deposits R80 000 in the current bank account as his capital contribution
13 Cash sales of goods R 760
24 Cash sales of goods R 960
28 Cash sales of goods Rl 240
CASH RECEIPTS JOURNAL OF MZONDI PLUMBERS - SEPTEMBER 2003 CRJ 3.1.1
Doc.
Day
Deta
ilFol.
Analysis
Bank
Current
income
Sundries ac-
counts
Amoui
ltFol.
Details
continued on next page
65
Table 4.16
CASH PAYMENTS JOURNAL OF MZONDI PLUMBERS - SEPTEMBER 2003 CPJ 3.1.1
Doc.
Day
Nam
of
ben-
efi-
ciarj
eFol.
Bank
Cost of
materi-
Stationery
Equipmem
Wag
es
Sundries ac-
counts
als
AmountFol.
Details
Table 4.17
CASH RECEIPTS JOURNAL OF LEVUBU DEALERS - JULY 2003 CRJ 3.1.2
Doc.
Day
Deta
ilFol.
Analysis
Bank
Sales
Selling
costs
Sundries ac-
counts
Amoui
ltFol.
Details
continued on next page
66
CHAPTER 4. TERM 4
Table 4.18
CASH PAYMENTS JOURNAL OF LEVUBU DEALERS - JULY 2003 CPJ 3.1.2
Doc.
Day
Nam
of-
ben-
efi-
ciarj
eFol.
Bank
Cost
ofmateri-
Stationery
Sundries ac-
counts
als
AmountFol.
Details
Table 4.19
ASSIGNMENT 4:
• Complete the CRJ and the CPJ of the combined commercial and service enterprise,
Donovan Motors. (Use CRJ 3.1.4 and CPJ 3.1.3)
• Mr D. Daniels opened a business called Donovan Motors on 1 December 2003. He deals in fuel, oil and
tyres. He provides services in the form of repairs and panel-beating of vehicles.
• The business maintains a profit margin of 25% on the cost price.
• Cash transactions concluded in December 2003:
67
1 D. Daniels deposits his capital contribution of R80 000 in the current bank account opened in the name
of the business
Draws a cheque for R300 to pay the trade licence
Pays R540 by cheque to Enlen as rental for the premises
Pays the insurance premium of R175 by cheque to Petru Insurance Brokers
2 Purchases materials for R5 625 and goods to the value of R7 350 from Nissau Car Sales and pays by
cheque 025
Draws a cheque for change, R350
3 Purchases equipment from Motoquip Co. for R10 500 and pays by cheque 026
Purchases stationery from Scribble Ltd. and pays by cheque
7 Draws a cheque of Rl 280 for the week's wages
8 Sells goods for R3 000 cash
13 Purchases additional equipment from Motoquip Co. for Rl 125 and pays by cheque
14 Purchases a delivery vehicle for R30 445 from Mobile Motors and pays by cheque
Draws a cheque of Rl 745 for wages
16 Receives additional stationery from Scribble Ltd. and pays R85 by cheque
17 Receives cash of R5 262 for services provided
Sells goods for R6 500 cash
20 Purchases materials from Alfa Car Suppliers and pays Rl 721 by cheque
Purchases goods to the value of R585 from Nissau Car Sales and pays by cheque
21 Draws a cheque of Rl 250 for the week's wages
22 D. Daniels (owner) cashes a cheque of R250 for his own use
23 Receives R3 558 in cash for services provided
Sells goods for R3 855 cash
24 Purchases materials for Rl 500 and goods for R3 500 from Tika Suppliers and pays by cheque
28 Draws a cheque of R2 335 for the week's wages
30 Draws a cheque of R2 950 in favour of the manager, H. Hedwig, for his salary
Draws a cheque of R335 in favour of Telkom for the owner's personal telephone account
CASH RECEIPTS JOURNAL OF LUBBE DEALERS - MAY 2003 CRJ 3.1.3
Doc.
Day
Deta
ilFol.
Analysis
Bank
Sales
Selling
costs
Sundries ac-
counts
Amoui
ltFol.
Details
Table 4.20
CASH RECEIPTS JOURNAL OF DONOVAN MOTORS - DECEMBER 2003 CRJ 3.1.4
68
CHAPTER 4. TERM 4
Doc.
Day
Deta
ilFol.
Analysis
Bank
Current
income
Sales
Selling
costs
Sundries ac-
counts
AmountFol.
Details
Table 4.21
CASH PAYMENTS JOURNAL OF DONOVAN MOTORS - DECEMBER 2003 CPJ 3.1.3
Doc.
Day
Nam
of
ben-
efi-
ciar}
eFol.
Bank
Trading
inven-
Stationery
Cost of
materi-
Wag
es
Sundries ac-
counts
tory
als
AmountFol.
Details
Table 4.22
4,3.4 Assessment
69
Learning Outcomes (LOs)
LO 3
MANAGERIAL, Consumer and Financial Knowledge and SkillsThe learner will be able to demonstrate
knowledge and the ability to apply responsibly a range of managerial, consumer and financial skills.
Assessment Standards (ASs)
We know this if the learner :
3.1 completes a basic income statement and balance sheet for a service and retail business;
3.2 investigates the public relations, social responsibility and environmental responsibility strategies and
actions of different businesses and organisations;
3.3 completes cash and credit transactions in the books of service and retail businesses;
3.4 uses keyboard skills and function keys in developing, storing, retrieving and editing business docu-
mentation;
3.5 analyses financial statements for decision-making at a basic level;
3.6 differentiates between the forms of credit purchases.
Table 4.23
4.3.5 Memorandum
ACTIVITY 1
ASSIGNMENT 1
CASH RECEIPTS JOURNAL OF MZONDI PLUMBERS - SEPTEMBER 2003 CRJ 3.1.1
Doc
Day
Dets
ilFol
Analysis
Bank
Current
income
Sundries ac-
count
Amoui
ltFol
Details
101
1
Z.
Mzo
idi
50
000
-
50
000
-
Bl
Capi
CR
12
Serv
pro-
vide!
ces
1
2
073
2
073
2
073
CR
21
Serv
pro-
vide!
ces
1
1
795
1
795
1
795
continued on next page
70
CHAPTER 4. TERM 4
CR
30
Serv
pro-
vide!
ces
i
2
418
2
418
2
418
56
286
-
6
286
-
50
000
-
B2
Nl
Table 4.24
ACTIVITY 1
ASSIGNMENT 1
CASH PAYMENTS JOURNAL OF MZONDI PLUMBERS
SEPTEMBER 2003 CPJ 3.1.1
Doc
Day
Nam
of
paye
eFol
3
Bank
Cost of
materi-
als
Stationery
Equip-
ment
Wages
Sundries ac-
count
AmountFol
Details
i
001
3
Dem
Prop
er-
ties
r on
525
525
Renl
ex-
pen-
di-
ture
al
002
6
Pum
Stor
a
1
009
-
1
009
-
003
8
Lunc
Stor
li
4
500
-
4
500
-
004
11
Bum
Deal
ers
lu
487
487
005
14
Mun
icipali
ty390
390
Wat.
and
Elec
tric-
ity
;r
006
15
Casl
190
-
190
-
007
25
Telk
)m
106
-
106
Tele
)h
008
27
Mpu
In-
sur-
ers
la
477
477
Insu
•ai
continued or
next page
one
71
009
29
Casl
210
-
210
010
30
Mda
Mo-
tors
itsan(
i 28
000
28
000
Vehi
35
-
1
-
487
-
4
-
400
-
29
-
894
009
500
498
Table 4.25
ACTIVITY 1
ASSIGNMENT 2
CASH RECEIPTS JOURNAL OF LEVUBU DEALERS
JULY 2003 CRJ 3.1.2
Doc
Day
Dets
ilFol
Analysis
Bank
Sales
Selling
costs
Sundries ac-
count
AmountFol
Details
1
G.
Levi
130
000
-
130
000
-
Bl
Capi
CR
17
Sales
1
600
-
1
600
-
1
600
-
1
280
-
CR
24
Sales
3
900
-
3
900
-
3
900
-
3
120
-
CR
31
Sales
5
400
-
5
400
-
5
400
-
4
320
-
140
900
-
10
900
-
8
720
-
130
000
-
B3
Nl
B2/1
12
Table 4.26
ACTIVITY 1
ASSIGNMENT 2
CASH PAYMENTS JOURNAL OF LEVUBU DEALERS - JULY 2003 CPJ 3.1.2
Doc
Day
Nam
of
paye
eFol
3
Bank
Trading
inven-
tory
Stationery
Sundries ac-
count
Amoui
ltFol
Details
continued on next page
72
CHAPTER 4. TERM 4
001
Levi: bu
Builders
1
400
1
400
N2
Rental
ex-
pen-
di-
ture
002
Wil^
Sup
pli-
6
000
6
000
Bl
Equipment
003
Municipalitjl50
150
N3
Trade
li-
cence
004
12
AZ
Deal
ers
7
800
7
800
005
15
Leviibu
Mo-
tors
23
300
23
300
B2
Vehi cles
006
18
Telkom
125
125
N4
Telephone
007
20
Northern
Sup-
pli-
ers
6
700
6
700
008
24
Waldo
Deal
crs
220
220
009
26
Janssn
2
650
2
650
N5
Sala: - y
010
28
Leviibu
Mo-
tors
78
78
N6
Fuel
011
30
Municipality
56
N7
Wat
and
Elec
tric-
ity
or
continued on next page
73
012
31
Casl
1
330
-
1
330
-
N8
Wag
ns
49
809
-
14
500
-
220
-
35
089
-
B4
B3
Nl
Table 4.27
ACTIVITY 1
ASSIGNMENT 3
CASH RECEIPTS JOURNAL OF LUBBE DEALERS
MAY 2003 CRJ 3.1.3
Doc
Day
Deta
ilFol
Analysis
Bank
Sales
Selling
costs
Sundries ac-
count
AmountFol
Details
1
H.
Lubl
>e
80
000
-
80
000
-
Bl
Capi
CR
13
Sales
760
-
760
-
760
-
570
-
CR
24
Sales
960
-
960
-
960
-
720
-
CR
28
Sales
1
240
-
1
240
-
1
240
-
930
-
82
960
-
2
960
-
2
220
-
80
000
-
B3
Nl
B2/1
12
Table 4.28
ACTIVITY 1
ASSIGNMENT 4
CASH RECEIPTS JOURNAL OF DONOVAN MOTORS - DECEMBER 2003 CRJ 3.1.4
Doc
Day
Deta
ilFol
Analysis
Bank
Current
income
Sales
Selling
costs
Sundries ac-
count
Amoui
ltFol
Details
1
D.
Dam
els
80
000
-
80
000
-
Capi
CR
8
Sales
3
000
-
3
000
-
3
000
-
2
400
-
continued or
next page
74
CHAPTER 4. TERM 4
CR
17
Serv
pro-
vide!
ces
1
5
262
5
262
5
262
CR
Sales
6
500
-
6
500
-
6
500
-
5
200
-
CR
23
Serv
pro-
vide!
ces
1
3
558
3
558
3
558
CR
Sales
3
855
-
3
855
-
3
855
-
3
084
-
102
-
8
-
13
-
10
-
80
-
175
820
355
684
000
Table 4.29
ACTIVITY 1
ASSIGNMENT 4
CASH PAYMENTS JOURNAL OF DONOVAN MOTORS
DECEMBER 2003 CPJ 3.1.3
Doc
Day
Nam
of
payek
eFol
Bank
Cost of
materi-
als
Trading
inven-
tory
Wages
Stationery
Sundries
count
AmountFol
Details
01
Municipality300
300
Trade
li-
cence
02
Enlen
540
540
Rental
ex-
pen-
di-
ture
03
Petrji
In-
sur-
ance
Bro-
kers
175
175
Insu
continued on next page
75
04
Niss&u
Car
Sales
12
975
5
625
7
350
05
Cast
350
350
Chan
gc
pment
06
Motoquip
Co.
10
500
10
500
Equi
07
Scribble
Ltd.
352
352
08
Casl
1
280
1
280
09
13
Motoquip
Co.
1
125
1
125
Equi
pment
10
14
Mobile
Mo-
tors
30
445
30
445
Vehi cle
11
Casl
1
745
1
745
12
16
Scriqible
Ltd.
85
85
13
20
Alfa
Car
Sup-
pli-
ers
1
721
1
721
14
Nissiu
Car
Sales
585
585
15
21
Casl
1
250
1
250
16
22
D.
Daniels
250
250
Withdrawals
17
24
Tika
Sup
pli-
crs
5
000
1
500
3
500
18
28
Casl
2
335
2
335
19
30
H
Hed
wig
2
950
2
950
Salary
20
Telkom
335
335
Withdrawals
74
298
846
11
435
6
610
437
46
970
Table 4.30
76
CHAPTER 4. TERM 4
4.4 Recording credit transactions of commercial and service
enterprises 4
4.4.1
4.4.2 ECONOMIC AND MANAGEMENT SCIENCES
4.4.3 Grade 9
4.4.4 BUSINESS, CONSUMER AND FINANCIAL KNOWLEDGE AND
SKILLS
4.4.5 Module 18
4.4.6 RECORDING CREDIT TRANSACTIONS OF COMMERCIAL ANS
SERVICE ENTERPRISES
4.4.6.1 ACTIVITY 1:
4.4.6.2 To record credit transactions of commercial and service enterprises
4.4.6.3 [LO 3.3]
Not all transactions done by businesses are cash transactions. Sometimes transactions are on credit, in other
words payment is only made at a later date.
When credit transactions are done, they must be recorded in order to have a record and to ensure that
the amounts owing are paid on the due date and are received. The entries are usually made from the credit
invoices.
The business can sell goods on credit to clients. The persons who owe money to the business are called
debtors and are a current liability to the business.
These transactions are entered in the Debtors Journal. It is important that the cost price of sales be
taken into account to be able to calculate the correct profit.
The entry is made as follows in the Debtors Journal:
Invoice
Day
Debtors
Fol.
Sales
Selling costs
101
1
S. Swanepoel
140
100
Table 4.31
The effect of such transactions on the accounting equation is as follows:
(a) Asset + (debtor's debt decreases) Ownership interest + (income increases)
(b) Ownership interest - (expenditure increases)Asset - (trading inventory decreases)
The purchase of goods or other items on credit means that the business owes money to another business
or person, called a creditor. A creditor is regarded as a current liability to the business. These entries are
based on credit invoices and are made in the Creditors Journal as follows:
In- voice
Day
Creditor
Creditors
control
Trading
inven-
tory
Statio-
nery
Sundries accounts
Amount
Fol.
Details
continued on next page
4 This content is available online at <http://cnx.Org/content/m31766/l.l/>.
77
001
1
Werda
Suppli-
ers
R520
R520
Table 4.32
The effect of such transactions on the accounting equation is as follows:
(a) If an asset is purchased on credit: Asset + (trading inventory increases) Liability + (creditors increase)
(b) If credit expenditure is incurred: Ownership interest - (expenditure increases) Liability + (creditors
increase)
ASSIGNMENT 1:
Record the transactions below in the Debtors Journal of Gesina Dealers and close the
journal by adding up the column totals. (Use DJ 3.2.1 on the next page.)
The information for April 2003 is as follows:
Goods are sold at a profit of 331/3%.
Invoice
Date
To whom
Selling price
713
April 3
C. Simpson
R210
714
April 10
C. Simpson
R346
715
April 11
N. Nguni
R920
716
April 16
C. Simpson
R400
717
April 18
L. Naidoo
R312
Table 4.33
ASSIGNMENT 2:
Record the transactions in the Creditors Journal of Toledo Dealers and close the journal
by adding up the column totals. (Use CJ 3.2.1 on the following pages.)
The information for May 2003 is as follows:
Original invoices received from suppliers have been renumbered as follows:
2003
May 1 No. 225 from Transo Dealers for equipment, R380
5 No. 226 from Trixo Suppliers for goods, Rl 328
8 No. 227 from S & S Distributors for goods purchased, R625, and stationery, R185
12 No. 228 from Computec for repairs to the computer, R500
15 No. 229 from Trixo Suppliers for goods, R300, and packaging material, R260
22 No. 230 from S & S Distributors for goods, R530
25 No. 231 from Zee Signs for advertising poster, R285
31 No. 232 from Trixo Suppliers for stationery, R220, and packaging material, R345
4,4,7 Assessment
Learning Outcomes (LOs)
continued on next page
78
CHAPTER 4. TERM 4
LO 3
MANAGERIAL, Consumer and Financial Knowledge and SkillsThe learner will be able to demonstrate
knowledge and the ability to apply responsibly a range of managerial, consumer and financial skills.
Assessment Standards (ASs)
We know this if the learner :
3.1 completes a basic income statement and balance sheet for a service and retail business;
3.2 investigates the public relations, social responsibility and environmental responsibility strategies and
actions of different businesses and organisations;
3.3 completes cash and credit transactions in the books of service and retail businesses;
3.4 uses keyboard skills and function keys in developing, storing, retrieving and editing business docu-
mentation;
3.5 analyses financial statements for decision-making at a basic level;
3.6 differentiates between the forms of credit purchases.
Table 4.34
4.4.8 Memorandum
ACTIVITYl
ASSIGNMENT 1
4.4.8.1 Debtors journal of gesina dealers - April 2003DJ 3.2.1
Invoice
Day
Debtors
Fol
Sales
Selling costs
713
3
C. Simpson
210
157.50
714
10
C. Simpson
346
259.50
715
11
N. Nguni
920
690-
716
16
C. Simpson
400
300-
717
18
L. Naidoo
312
234-
2 188
1 641
B2/N1
B1/N2
Table 4.35
ACTIVITYl
ASSIGNMENT 2
4.4.8.2 CREDITORS JOURNAL OF TOLEDO DEALERS - MAY 2003CJ 3.2.1
79
In-
voice
Day
Cred
itBnfe
Creditors
control
Trading
inven-
Stationery
Packaging
material
Sundries ac-
count
tory
AmountFol
Details
225
1
Iran
Deal
ers
so
380
380
Bl
Equi
226
5
Trix
Sup-
pli-
ers
)
1
328
1
328
227
8
S
&
S
Dis-
trib-
u-
tors
810
625
185
228
12
Com
putec
500
-
500
-
N3
Rep;
229
15
Trix
Sup-
pli-
ers
)
560
300
260
230
22
S
&
S
Dis-
trib-
u-
tors
530
530
continued on next page
80
CHAPTER 4. TERM 4
231
25
Zee
Sign
5
285
-
285
-
N4
Adv(
232
31
Trix
Sup-
pli-
ers
)
565
220
345
4
-
2
-
405
-
605
-
1
-
958
783
165
B3
B2
Nl
N2
Table 4.36
4.5 Recording payments received from debtors 5
4.5.1 ECONOMIC AND MANAGEMENT SCIENCES
4.5.2 Grade 9
4.5.3 BUSINESS, CONSUMER AND FINANCIAL KNOWLEDGE AND
SKILLS
4.5.4 Module 19
4.5.5 RECORDING PAYMENTS RECEIVED FROM DEBTORS
ACTIVITYl:
To record payments received from debtors
[LO 3.3]
When debtors pay their debt, the cash received is recorded in the CRJ. The CRJ makes provision for an
additional column headed Debtors Control.
A receipt is issued to the debtor as proof that the money was received. This is called the source document
for the entry.
The effect of the transaction on the accounting equation is as follows:
• Assets + (Cash in bank increases)
• Assets - (Debtors' debt decreases)
ASSIGNMENT 1:
• Using the information below, complete the Cash Receipts Journal (CRJ) and Debtors Journal (DJ) of
Highway Dealers.
Highway Dealers sells goods on credit and for cash.
• The following transactions must be recorded in DJ 3.3.1 for May and DJ 3.3.2 for June 2003, and in
CRJ 3.3.1 for June 2003.
5 This content is available online at <http://cnx.Org/content/m31772/l.l/>.
81
May 2003
3 Sells goods for R320 on credit to S. Westonand issues invoice no. 141 (cp. R256)
8 Issues invoice 142 to A. Niemand for goods sold on credit for R240 (cp. R192)
10 Sells goods for R160 on credit to H. Olwage and issues invoice no. 143 (cp. R128)
12 Sells goods on credit to:
S. Selby for R280, invoice no. 144 (cp. R224)
W. Willow for R120, invoice no. 145 (cp. R96)
June 2003
3 Receives a cheque from S. Weston for R320, issues receipt no. 61
Cash sales of goods, R4 000 (cp. R3 200)
5 Receives R160 cash from H. Olwage and issues receipt no. 62 to him
Cash sales of goods, Rl 600 (cp. Rl 280)
6 Receives a cheque for R280 from S. Selby and issues receipt no. 63
Cash sales of goods, Rl 200 (cp. R960)
14 Sells goods on credit to:
W. Willow for R80, invoice no. 146 (cp. R64)
A. Niemand for R40, invoice no. 147 (cp. R32)
24 Supplies goods on credit to:
S. Selby together with invoice no. 148 for R120 (cp. R96)
30 Cash sales of goods, R4 800 (cp. R3 840)
4.5.5.1 DEBTORS JOURNAL OF HIGHWAY DEALERS - MAY 2003DJ 3.3.1
In- voice
Day
Debtors
Fol.
Sales
Selling costs
Table 4.37
82
CHAPTER 4. TERM 4
4.5.5.2 DEBTORS JOURNAL OF HIGHWAY DEALERS - JUNE 2003DJ 3.3.2
In- voice
Day
Debtors
Fol.
Sales
Selling costs
Table 4.38
4.5.5.3 CASH RECEIPTS JOURNAL OF HIGHWAY DEALERS - JUNE 2003CRJ 3.3.1
Doc.
Day
Deta
ilFol.
Analysis
Bank
Sales
Selling
costs
Debtors
control
Sundries accounts
Amount
Fol.
Deta
ils
Table 4.39
83
4,5.6 Assessment
Learning Outcomes (LOs)
LO 3
MANAGERIAL, Consumer and Financial Knowledge and SkillsThe learner will be able to demonstrate
knowledge and the ability to apply responsibly a range of managerial, consumer and financial skills.
Assessment Standards (ASs)
We know this if the learner :
3.1 completes a basic income statement and balance sheet for a service and retail business;
3.2 investigates the public relations, social responsibility and environmental responsibility strategies and
actions of different businesses and organisations;
3.3 completes cash and credit transactions in the books of service and retail businesses;
3.4 uses keyboard skills and function keys in developing, storing, retrieving and editing business docu-
mentation;
3.5 analyses financial statements for decision-making at a basic level;
3.6 differentiates between the forms of credit purchases.
Table 4.40
4.5.7 Memorandum
ACTIVITY 1
4.5.7.1 Debtors journal of Highway dealers - May 2003DJ 3.3.1
Invoice
Day
Debtors
Fol
Sales
Selling costs
141
3
S. Weston
320
256
142
8
A. Niemand
240
192
143
10
H. 01 wage
160
128
144
12
S. Selby
280
224
145
W. Willow
120
96
1 120
896
B2/N1
B1/N2
Table 4.41
84
CHAPTER 4. TERM 4
4.5.7.2 Debtors journal of Highway dealers - June 2003DJ 3.3.2
Invoice
Day
Debtors
Fol
Sales
Selling costs
146
14
W. Willow
80
64
147
A. Niemand
40
32
148
24
S. Selby
120
96
240
192
B2/N1
B1/N2
ACTIVITY 1
Table 4.42
4.5.7.3 CASH RECEIPTS JOURNAL OF HIGHWAY DEALERS - JUNE 2003CRJ 3.3.1
Doc
Day
Dets
ilFol
Analysis
Bank
Sales
Selling
costs
Debtors
control
Sundries account
Amount
Fol
Deta
ils
61
3
S.
We-
ston
320
320
CR
Sales
4
000
-
4
320
-
4
000
-
3
200
-
62
5
H.
01-
wag(
160
160
CR
Sales
1
600
-
1
760
-
1
600
-
1
280
-
63
6
S.
Selb;
'
280
-
280
-
CR
Sales
1
200
-
1
480
-
1
200
-
960
-
CR
30
Sales
4
800
-
4
800
4
800
-
3
840
-
12
-
11
-
9
-
760
-
360
600
280
continued on next page
85
B3
Nl
B1/N2
B2
Table 4.43
4.6 Recording payments to creditors 6
4.6.1 ECONOMIC AND MANAGEMENT SCIENCES
4.6.2 Grade 9
4.6.3 BUSINESS, CONSUMER AND FINANCIAL KNOWLEDGE AND
SKILLS
4.6.4 Module 20
4.6.5 RECORDING PAYMENTS TO CREDITORS
ACTIVITYl:
To record payments to creditors
[LO 3.3]
When the amounts owed to creditors are paid, a cheque (that serves as source document) is issued. The
entry is made in the CPJ in an additional column headed Creditors Control.
The effect of the transaction on the accounting equation is as follows:
• Assets - (Bank decreases)
• Liabilities - (Creditors decrease)
ASSIGNMENT 1: Creditors Journal and Cash Payments Journal
• Record the following information for Marais Dealers in CJ 3.4.1 for March and CJ 3.4.2 for April 2003,
and in CPJ 3.4.1 for April 2003. The original invoices received from suppliers have been renumbered.
2003
March 3 No. 316 from Bengo Wholesalers for goods, Rl 560
4 No. 317 from Situ and Co. for packaging material, R625
5 No. 318 from Banda Ltd. for repairs to vehicle, R380
6 No. 319 from Pento and Son for stationery, R345
10 No. 320 from Pento and Son for advertising poster, R258
20 No. 321 from Bengo Wholesalers for goods, R780
2003
April 4 No. 322 from Situ and Co. for goods, R560
8 No. 323 from Bergtuin Motors for delivery vehicle, R7 500
12 No. 324 from Banda Ltd. for repairs to delivery vehicle, R330
16 No. 325 from Pento and Son for stationery, R280
20 No. 326 from Bengo Wholesalers for goods, R757
• Cheque counterfoils
6 This content is available online at <http://cnx.Org/content/m31773/l.l/>.
86
CHAPTER 4. TERM 4
2003
April 2 No. 642 to Bengo Wholesalers in settlement of account, R2 340
3 No. 643 to Pento and Son in settlement of their account, R603
6 No. 644 to the municipality for water and electricity, R110
8 No. 645 to Situ and Co. in settlement of their account, R625
10 No. 646 to Boland Wholesalers for goods, R950
14 No. 647 cash for wages, R210
15 No. 648 cash for personal use of the owner, R500
18 No. 649 to Maxi Suppliers for the following:
Goods, R600
Cash register, R400
20 No. 650 to Prompt Printers for advertising posters, R235
30 No. 651 to the manager, M. Meintjies, for salary, Rl 250
CASH PAYMENTS JOURNAL OF MARAIS DEALERS - APRIL 2003 CPJ 3.4.1
Doc.
Day
Nam
of
ben-
efi-
ciarj
eFol.
Bank
Creditors
control
Trading
inven-
Stati
onery
Wag
es
Sundries ac-
counts
tory
AmountFol.
Details
Table 4.44
CREDITORS JOURNAL OF MARAIS DEALERS - MARCH 2003 CJ 3.4.1
87
In-
voice
Day
Cred
itfink
Creditors
control
Trading
inven-
Statio-
nery
Vechicle
costs
Packaging
material
Sundries ac-
counts
tory
AmountFol.
Details
Table 4.45
CREDITORS JOURNAL OF MARAIS DEALERS - APRIL 2003 CJ 3.4.2
In-
voice
Day
Cred:
tdfal.
Creditors
control
Trading
inventory
Stationery
Vehicle
costs
Sundries ac-
counts
Amoun; Fol.
Details
Table 4.46
ASSIGNMENT 2:
Enter the transactions below in the correct auxiliary journals,
column totals. (Use CRJ 3.4.1, CPJ 3.4.2, DJ 3.4.1 and CJ 3.4.3.)
Close by calculating the
November
1 A. Enslin, the owner, deposits a capital contribution of R20 000 - Receipt no. 001 is issued to him
Purchases equipment to the value of R2 630 from Pronto Ltd and receives credit invoice number 100
(renumber) together with the equipment
2 Cash sales of goods for R500 (cp. R400)
Cheque 001 to the value of R7 800 is issued to Highway Motors for the purchase of a vehicle
4 Cash sales of R625 are recorded (cp. R500)
5 Cheque 002 is paid to ZA Ltd
This is for cash purchases of trading stock, R490, and stationery, R200
6 Stationery to the value of R312 is purchased on credit from Malan and Co
88
CHAPTER 4. TERM 4
Credit sales of R360 (cp. R280) to R. du Toit
8 Quick Suppliers provides goods of R2 890 on credit
9 Credit sales of R660 (cp. R420) to W. Bennett
10 Cash sales, R750 (cp. R600)
Travalia Office Suppliers delivers equipment purchased on credit for Rl 310
The owner hands a cheque in the amount of RIO 000 to the business to increase his capital contribution
11 Packaging material to the value of R880 is purchased on credit from Malan and Co
12 The business draws a cash cheque of R150 for wages
Credit invoice no. 119 is issued for goods sold to G. Wilmans, R890 (cp. R720)
14 Credit sales to W. Bennett, R520 (cp. R360)
15 A cheque to the value of R135 is issued to the Postmaster as payment for the telephone account
16 Credit invoice 104 is received from Quick Suppliers for goods, R3 060, and packaging material, R860
20 Cash sales to the value of R875 (cp. R700)
Cheque no. 006 in the amount of R870 is issued to ZA Ltd - R140 is for stationery and R730 for goods
21 A cash cheque to the value of R250 is drawn - R150 is for wages and R100 for fuel for the owner's
private vehicle
Goods to the value of R320 (cp. R180) are sold on credit to R. du Toit
22 A computer belonging to the business is repaired on credit, R621
30 Cheque no. 008 is issued to AN Manufacturers for goods, R500, and equipment, R700
Cash sales of Rl 000 (cp. R800)
DEBTORS JOURNAL OF ENSLIN DEALERS - NOVEMBER 2003 DJ 3.4.1
In- voice
Day
Debtors
Fol.
Sales
Selling costs
Table 4.47
CASH RECEIPTS JOURNAL OF ENSLIN DEALERS - NOVEMBER 2003 CRJ 3.4.1
89
Doc.
Day
Deta
ilFol.
Analysis
Bank
Sales
Selling
costs
Sundries ac-
counts
AmountFol.
Details
Table 4.48
CREDITORS JOURNAL OF ENSLIN DEALERS - NOVEMBER 2003 CJ 3.4.3
In-
voice
Day
Cred
itBmk
Creditors
control
Trading
inven-
Stationery
Vechile
expendi-
Packaging
material
Sundries ac-
counts
tory
ture
AmountFol.
Details
Table 4.49
CASH PAYMENTS JOURNAL OF ENSLIN DEALERS - NOVEMBER 2003 CPJ 3.4.2
Doc
Day
NamleFol.
of
ben-
efi-
ciary
Bank
Trading
inven-
tory
Stationery
Wages
Sundries ac-
counts
AmountFol. Details:
continued on next page
90
CHAPTER 4. TERM 4
Table 4.50
Assessement
Learning Outcomes (LOs)
LO 3
MANAGERIAL, Consumer and Financial Knowledge and SkillsThe learner will be able to demonstrate
knowledge and the ability to apply responsibly a range of managerial, consumer and financial skills.
Assessment Standards (ASs)
We know this if the learner :
3.1 completes a basic income statement and balance sheet for a service and retail business;
3.2 investigates the public relations, social responsibility and environmental responsibility strategies and
actions of different businesses and organisations;
3.3 completes cash and credit transactions in the books of service and retail businesses;
3.4 uses keyboard skills and function keys in developing, storing, retrieving and editing business docu-
mentation;
3.5 analyses financial statements for decision-making at a basic level;
3.6 differentiates between the forms of credit purchases.
Table 4.51
91
4.6.6 Memorandum
ACTIVITYl
ASSIGNMENT 1
CASH PAYMENTS JOURNAL OF MARAIS DEALERS - APRIL 2003 CPJ 3.4.1
Doc
Day
Payc
eFol
Bank
Creditors
control
Wages
Trading
inven-
tory
Sundries
count
ac-
AmountFol
Details
i
642
2
Benj
Whc
salei
le-
3
2
340
2
340
643
3
Pent
and
Son
O
603
603
644
6
Mun
icipali
tyilO
110
N7
Wat.
and
Elec
tric-
ity
>r
645
8
Situ
and
Co.
625
625
646
10
Bola
Whc
salei
ad
le-
3
950
950
647
14
Casl
210
-
210
-
648
15
Casl
500
-
500
-
Bl
Witl
idrawals
649
18
Max
Sup-
pli-
ers
1
000
600
400
B2
Equi
pment
650
20
Flinl
Prin
ers
;-
235
235
N2
Adv<
irtisement
continued on next page
92
CHAPTER 4. TERM 4
651
30
M.
1
-
1
-
N3
Sala: - y
Meir
-
250
250
tjies
7
-
3
-
210
1
-
2
-
823
568
550
495
B5
B6
Nl
B4
Table 4.52
ACTIVITY 1
ASSIGNMENT 1
CREDITORS JOURNAL OF MARAIS DEALERS
MARCH 2003 CJ 3.4.1
In-
Day
Crec
ifflmfc
Creditors
Trading
Statio-
Vehicle
Packaging
Sundries ac-
voice
i
control
inven-
tory
nery
costs
material
count
AmountFol
Details
316
3
Benj
Whc
salei
le-
3
1
560
1
560
317
4
Situ
and
Co.
625
625
318
5
Banc
Ltd
la
380
-
380
-
319
6
Pent
and
Son
345
345
320
10
Pent
and
Son
258
258
N2
Adv(
321
20
Benj
Whc
salei
le-
3
780
780
3
-
2
-
345
-
380
-
625
-
258
-
948
340
B6
B4
N4
N5
N6
continued or
next page
93
Table 4.53
CREDITORS JOURNAL OF MARAIS DEALERS - APRIL 2003 CJ 3.4.2
In-
Day
Crec
ifflmfc
Creditors
Trading
Statio-
Vehicle
Packaging
Sundries ac-
voice
i
control
inven-
tory
nery
costs
material
count
AmountFol
Details
322
4
Situ
and
Co.
560
560
323
8
Berg
Mo-
tors
tuin
7
500
7
500
B3
Vehi
324
12
Banc
Ltd
la
330
-
330
-
425
16
Pent
and
Son
280
280
326
20
Benj
Whc
salei
le-
3
757
757
9
-
1
-
280
-
330
-
7
-
427
317
500
B6
B4
N4
N5
Table 4.54
ACTIVITY 1
ASSIGNMENT 2
CREDITORS JOURNAL OF ENSLIN DEALERS - NOVEMBER 2003 CJ 3.4.3
94
CHAPTER 4. TERM 4
In-
voice
Day
Cred:
ttffal
Creditors
Trading
Packaging
Sundries account
control
inventory
material
Amoun; Fol
Details
100
1
Prom
,0
2
-
2
-
B4
Equipment
Ltd.
630
630
101
6
Mala
i
312
-
312
-
N4
Stationery
and
Co.
102
8
Quid
Sup-
pli-
ers
2
890
2
890
103
11
Mala
and
Co.
i
880
880
104
16
Quid
Sup-
pli-
ers
3
920
3
060
860
105
22
Prom
,0
621
-
621
-
N7
Repa rs
Ltd.
11
-
5
-
1
-
3
-
253
950
740
563
B8
B5
N6
Table
4.55
ACTIVITY 3.4 ASSIGNMENT 2
CASH RECEIPTS JOURNAL OF ENSLIN DEALERS -NOVEMBER 2003 CRJ 3.4.1
Doc
Day
Deta
ilFol
Analysis
Bank
Sales
Cost
price
of
Sundries ac-
count
sales
Amoui
ltFol
Details
100
1
A.
En-
slin
20
000
20
000
20
000
Bl
Capi
CS1
2
Sales
500
-
500
-
500
-
400
-
CS3
4
Sales
625
-
625
-
625
-
500
-
continued or
next page
95
1CS
10
Sales
750
-
750
600
-
101
A.
En-
slin
10
000
10
750
10
000
Bl
Capi
CS4
20
Sales
875
-
875
-
875
-
700
-
CS5
30
Sales
1
000
-
1
000
-
1
000
-
800
33
750
-
3
750
-
3
000
-
30
000
-
B7
Nl
B5/N2
Table 4.56
ACTIVITY 1
ASSIGNMENT 2
CASH PAYMENTS JOURNAL OF ENSLIN DEALERS - NOVEMBER 2003 CPJ 3.4.2
Doc
Day
Nam
of
paye
eFol
3
Bank
Wages
Stationery
Trading
inven-
tory
Sundries ac-
count
AmountFol
Details
001
2
High
Mo-
tors
way
7
800
7
800
B3
Vehi
002
5
ZA
Ltd.
690
-
200
-
490
-
003
10
Trav
Of-
fice
Sup-
pli-
ers
alia
1
310
1
310
B4
Equi
004
12
Casl
150
-
150
-
005
15
Post
naste
• 135
-
135
-
N5
Tele]
006
20
ZA
Ltd.
870
-
140
-
730
-
continued or
next page
96
CHAPTER 4. TERM 4
007
21
Casl
250
-
150
-
100
-
B2
Wit!
008
30
AN
Man
u-
fac-
tur-
ers
1
200
500
700
B4
Equi
12
-
300
-
340
-
1
-
10
-
405
720
045
B7
N3
N4
B5
Table 4.57
ACTIVITY 1
ASSIGNMENT 2
Debtors journal of Enslin dealers - November 2003 DJ 3.4.1
Doc
Day
Debtors
Fol
Sales
Selling costs
117
6
R. du Toit
Dl
360-
280-
118
9
W. Bennett
D2
660-
420-
119
12
G. Wilmans
D3
890-
720-
120
14
W. Bennett
D2
520-
360-
121
21
R. du Toit
Dl
320
180-
2 750
1 960
B6/N1
B5/N2
Table 4.58
4.7 Ledger entries 7
4.7.1 ECONOMIC AND MANAGEMENT SCIENCES
4.7.2 Grade 9
4.7.3 BUSINESS, CONSUMER AND FINANCIAL KNOWLEDGE AND
SKILLS
4.7.4 Module 21
4.7.5 LEDGER ENTRIES
section 2: ledger accounts
ACTIVITY1:
To do ledger entries
[LO 3.3]
An account is a separate record in which all transactions for a particular item are entered.
An account takes the form of a T and comprises three sections, namely:
7 This content is available online at <http://cnx.Org/content/m31774/l.l/>.
97
• the name of the item, for example, bank account;
• the left-hand side, called the debit side, and
• the right-hand side, called the credit side.
For example:
Bank Account
2:.
Figure 4.7
Debiting an account means to do an entry on the debit side. Crediting an account means to do an entry on
the credit side.
Every transaction affects at least two accounts. The one account is debited and the other account is
credited. This is known as the double-entry system. In the details column of the ledger account the name
of the other account involved in the transaction appears, for example:
Sales
Jul. 2 Bank R1 000
Figure 4.8
This means that cash sales to the value of Rl 000 were made. The two accounts are therefore bank and
sales. The double entry will be as follows:
Bank
Jul. 2 Salss Rl ODD
Figure 4.9
The following rules must be taken into account in the case of entries in ledger accounts:
98
CHAPTER 4. TERM 4
• When an asset is increased, the bank account is debited
• When an asset is reduced, the bank account is credited
• When a liability is increased, the liabilities account is credited
• When a liability is reduced, the liabilities account is debited
• When capital is increased, the capital account is credited
• When capital is reduced, the capital account is debited
• When income is increased, the income account is credited
• When income is reduced, the income account is debited
• When expenditure is increased, the expenditure account is debited
• The opening balance of accounts that increase on the credit side, appears on the credit side
• The opening balance of accounts that increase on the debit side, appears on the debit side
ASSIGNMENT 1:
• Determine the effect of Ledger Accounts on A
table.
O + L by analysing the transactions in the
Owner deposits some of his personal funds as capital in the bank account of the business.
2. Equipment is purchased and paid by cheque.
3. A vehicle is purchased on credit.
4. Cash is received for services provided.
5. Salaries are paid by cheque.
6. The amounts owed to creditors are paid.
7. Money is received from debtors.
Table for assignment 1
GENERAL LEDGER
NO.
ACCOUNT DEBITED
ACCOUNT CREDITED
A
L
Table 4.59
ASSIGNMENT 2:
• Answer the following questions according to the columns in the table:
99
Current income
Consumer goods
Fuel
Withdrawals
Change
Salaries
Water and Electricity
Land and Buildings
Debitors control
Rental income
Advertisements
Equipment
Telephone
Selling costs
Cost of materials
Trading inventory
Trade licence
Stationery
Packaging material
Wages
Repairs
Sales
Bank
Rental expenditure
Vehicles
Creditors control
Capital
Table 4.60
(a) Arrange the accounts in the columns in the table.
(b) Indicate by means of +, - or next to the account whether an increase in it will increase or reduce
the ownership interest or leave it unchanged.
(c) Indicate by means of dt. or cr. next to the account whether the account will have a debit or credit
opening balance.
table for assignment 2
100
CHAPTER 4. TERM 4
*l
lb!
Assets {-a)
ib:
*H0
Liabilities Is!
:=:
ib:
Acco u nts that affect
ownership interest (a)
Id
Figure 4.10
ASSIGNMENT 3:
• Do the following debit and credit entries on the ledger sheet (below):
1 The owner invests R12 000 as capital in the business
2 A vehicle is purchased on credit from TP Motors
3 Fuel is purchased and paid by cheque
4 Cash for service provided is received
5 Salaries are paid by cheque
6 Goods on credit to J. van Schalkwyk are supllied
7 Rent by cheque to A and B Lessors is paid
8 The owner takes cash for his personal use
9 Materials are purchased on credit from AB Suppliers
10 Equipment from Model Suppliers and pays by cheque is purchased
11 Receives the amount owing from J. van Schalkwyk
12 Part of the debt to TP Motors is paid
13 Goods are sold for cash
Table for assignment 3
101
GENERAL LEDGER
NO.
ACCOUNT DEBITED
ACCOUNT CREDITED
A
L
1
2
3
4
5
6a
6b
7
8
9
10
11
12
13a
13b
Table 4.61
4,7.6 Assessment
Learning Outcomes (LOs)
LO 3
MANAGERIAL, Consumer and Financial Knowledge and SkillsThe learner will be able to demonstrate
knowledge and the ability to apply responsibly a range of managerial, consumer and financial skills.
Assessment Standards (ASs)
We know this if the learner :
3.1 completes a basic income statement and balance sheet for a service and retail business;
continued on next page
102
CHAPTER 4. TERM 4
3.2 investigates the public relations, social responsibility and environmental responsibility strategies and
actions of different businesses and organisations;
3.3 completes cash and credit transactions in the books of service and retail businesses;
3.4 uses keyboard skills and function keys in developing, storing, retrieving and editing business docu-
mentation;
3.5 analyses financial statements for decision-making at a basic level;
3.6 differentiates between the forms of credit purchases.
Table 4.62
4.7.7
4.7.8 Memorandum
ACTIVITYl
ASSIGNMENT 1
GENERAL LEDGER
NO.
ACCOUNT DEBITED
ACCOUNT CREDITED
A
O
L
1
Bark account
Caphal
+
+
2
Equipment
Bark
�
3
Vehicle
Creations control
+
+
4
Bank
Current income
+
+
5
Salaries
Bank
-
-
6
J red hors control
Bank
-
-
7
Bank
Debtors control
�
Figure 4.11
ACTIVITY 1
ASSIGNMENT 2
103
m
■>wo
-.'SitS
Liabilities.
Accounts that
influence Owners-hip
Interest
Tra:irg inventory
Si
Creditors com rol
W
4-
Capital
m
C'=-:=
*
+
CurreM income
S.r
Land and Buildings
*
-
Whriirawars
&
Bant
*
-
W + E
*
Venules
*
*■
Renal income
cr
Debtors control
*
-
Telephone
*
:
Equipment
*
+
Packagirg malerial
Bales
Consumer gooes
Advertisements
Selling costs;
Trace licence
Wages
Fuel
Salaries
Cosi of malerials
Stationery
Repairs
Renal espercitLre
Figure 4.12
ACTIVITY1
ASSIGNMENT 3
104
CHAPTER 4. TERM 4
NO.
4
5
:?
zz
1
1
E-
■:
••
•2
1 =
GENERAL LEDGER
ACCOUNT DEBTED
Vehfcte
-_s
Bark
Salaries
Debtors control
Cost price of sales
RanalexpersilLre
WH I" z\ rawals
Cosi of malerials
Equipment
Bank
Creditors control
Bank
Cos1 price of sates
ACCOUNT CREDITED
Capital
Creuhors accoLrl
E~<
C urrent income
Bank
Sales
~'=z '2 r vs r ::- r :
Bank
Bark
Creditors control
Bank
Debtors control
Bank
Sales
_r =: r : r ve r :: r ?
Figure 4.13
4.8 Transferring the auxiliary journals to the ledger 8
4.8.1 ECONOMIC AND MANAGEMENT SCIENCES
4.8.2 Grade 9
4.8.3 BUSINESS, CONSUMER AND FINANCIAL KNOWLEDGE AND
SKILLS
4.8.4 Module 22
4.8.5 TRANSFERRING THE AUXILLIARY JOURNALS TO THE LEDGER
ACTIVITY 1:
To transfer the auxiliary journals to the ledger
[LO 3.3]
Once the entries in the auxiliary journals have been completed, all the information is transferred to the
ledger.
The column totals of the CRJ are transferred on the last day of the month and the entries in the sundries
column are transferred individually on the date of the entry.
Cash received by a service enterprise is transferred as follows to the CRJ:
1. Bank account - debit with the total cash received (Asset increases on the debit side).
2. Current Income account - credit with the total for the month (Ownership interest increases on the
credit side).
B This content is available online at <http://cnx.Org/content/m31775/l.l/>.
105
3. Capital account - credit with the capital amount deposited (Ownership interest increases on the credit
side).
The names of the other accounts involved appear in the "details" column of the ledger.
In the case of the bank account - capital and current income (total receipts)In the case of the capital
account - bankln the case of the current income account - bank
ASSIGNMENT 1: Transfer of the CRJ in a Service Enterprise
• Use the completed CRJ of Mzondi Plumbers (Activity 3.1 Assignment 1) and transfer
the CRJ to the ledger. (Supply your own ledger paper to complete the activity.)
ASSIGNMENT 2: Transfer of the CRJ in a Commercial Enterprise
• Use the completed CRJ of Levubu Dealers (Activity 3.1 Assignment 2) and transfer the CRJ. (Supply
your own ledger paper to complete the activity.)
• The same principles apply. The transfer is done as follows:
1. Bank account - debit with the total receipts for the month (Asset increases on the debit side.)
2. Capital account - credit with all capital deposited during the month(Ownership interest increases on
the credit side.)
3. Sales account - credit with the sales for the month(Ownership interest increases on the credit side.)
4. Selling costs - debit with the amount for the month(Ownership interest decreases on the debit side.)
5. Trading inventory - credit with cost price of the sales amount(Asset decreases on the credit side.)
Bank account - Double entry is total receipts
Capital - Double entry is bank accountSales - Double entry is bank account
Selling costs - Double entry is trading inventory
ASSIGNMENT 3: transfer of the CPJ
• Use the completed journals of Levubu Dealers (Activity 3.1 Assignment 2) and transfer the CPJ.
(Supply your own ledger paper.)
• The total of the bank column and all the other columns is transferred on the last day of the month.
The entries in the sundries column are transferred as individual amounts to the specific account on the
date of the entry.
• The transfer is done as follows:
1. Bank account - credit with the total payments for the month(Asset decreases on the credit side.)
2. Assets purchased for cash - debit every asset separately with the relevant amount (Assets increase on
the debit side.)
3. Expenditure paid by cheque - debit each expenditure separately with the relevant amount (Ownership
interest decreases on the debit side.)
Bank account - Double entry is total payments
Assets - Double entry is bank accountExpenditure - Double entry is bank account
ASSIGNMENT 4 : transfer of CRJ with cost price of sales
• Use the completed CRJ of Lubbe Dealers (Activity 3.1 Assignment 3) and transfer. (Supply own ledger
paper.)
ASSIGNMENT 5 : transfer of the debtors journal
• Use the complete DJ of Gesina Dealers (Activity 3.2 Assignment 1) and transfer it to the ledger.
106 CHAPTER 4. TERM 4
• The total of the sales column, as well as the total of the selling costs column, is transferred to two
accounts as follows:
sales column
1. Debtors control account - debit with the total of credits sales for the month(Asset increases on the
debit side.)
2. Sales account - credit with the total of the credit sales for the month(Ownership interest increases on
the credit side.)
The double entry for sales is debtors control and the double entry for debtors control is sales,
selling costs column
1. Selling costs account - debit with the total selling costs for the month (Ownership interest decreases
on the debit side.)
2. Trading inventory account - credit with the total of the credit sales for the month(Asset decreases on
the credit side.)
Double entry for selling costs is trading inventory and double entry for trading inventory is selling costs.
ASSIGNMENT 6 : transfer of the creditors journal
• Use the completed CJ of Toledo Dealers (Activity 3.2 Assignment 2) and transfer it to the ledger.
• Column totals are transferred on the last day of the month. Entries in the sundries column are
individually transferred to the specific account on the date of the entry.
• The transfer is done as follows:
1. Creditors control - credit with all the credit purchases for the month (Liability increases on the credit
side.)
2. All assets purchased are debited separately with the amount of purchases (Asset increases on the debit
side.)
3 All expenditure incurred on credit is debited with the specific amount (Ownership interest decreases on
the debit side.)
The double entry for creditors control is sundry purchases. The double entry for every asset purchased
or expenditure incurred on credit, is creditors control.
ASSIGNMENT 7 : receipts from debtors: transfer of the D J and CRJ
• Use the completed DJ and CRJ of Highway Dealers (Activity 3.3) and complete the transfer.
• When a debtor pays his account, it is recorded in the CRJ and then transferred to the ledger as follows:
1. Bank - debit with the cash received (Asset increases on the debit side.)
2. Debtors control - credit with the amount paid by debtors(Asset decreases on the credit side.)
The double entry in the case of bank is debtors control, and in the case of debtors control it is bank.
ASSIGNMENT 8 : payments to creditors: transfer of the CJ and CPJ
• Use the completed CJ and CPJ of Marais Dealers (Activity 3.4 Assignment 1) and complete the
transfer.
• When payments are made to creditors, they are recorded in the CPJ and then transferred to the ledger.
• This is done as follows:
1. Creditors control - debit with all payments to creditors for the month(Liability that decreases is debited.)
1. Bank - credit with cash payments (Asset that decreases is credited.)
ASSIGNMENT 9 : Transfer of all the auxiliary journals - CRJ, CPJ, DJ and CJ
• Use the completed journals of Enslin Dealers (ctivity 3.4 Assignment 2) and transfer them.
107
4.8.6 Assessment
108
CHAPTER 4. TERM 4
Learning Outcomes (LOs)
LO 3
MANAGERIAL, Consumer and Financial Knowledge and SkillsThe learner will be able to demonstrate
knowledge and the ability to apply responsibly a range of managerial, consumer and financial skills.
Assessment Standards (ASs)
We know this if the learner :
3.1 completes a basic income statement and balance sheet for a service and retail business;
3.2 investigates the public relations, social responsibility and environmental responsibility strategies and
actions of different businesses and organisations;
3.3 completes cash and credit transactions in the books of service and retail businesses;
3.4 uses keyboard skills and function keys in developing, storing, retrieving and editing business docu-
mentation;
3.5 analyses financial statements for decision-making at a basic level;
3.6 differentiates between the forms of credit purchases.
Table 4.63
4.8.7 Memorandum
ACTIVITY 1
ASSIGNMENT 1
General Ledger of Mzondi Plumbers
Balance Sheet Section
Date
Details
Fol
Amount
Date
Details
Fol
Amount
Capital
Bl
Sept.
1
Bank
CRJ3.1.1
50 000
-
Bank
B2
Sept.
30
Total receipts
CRJ3.1.1
56 286
Nominal Accounts Section
Current Income
Nl
Sept.
30
Bank
CRJ3.1.1
6 286
-
Table 4.64
ACTIVITY 1
ASSIGNMENT 2
General Ledger of Levubu Dealers
109
Balance Sheet Section
Date
Details
Fol
Amoun;
Date
Details
Fol
Amoun;
Capital
Bl
Jul.
1
Bank
CRJ3.1
2130
000
-
Trading Inventory
B2
Jul.
31
Cost
price
of
sales
CRJ3.1
28 720
Bank
B3
Jul.
31
Total
re-
ceipts
CRJ3.1
2140
900
Nominal Accounts Section
Sales
Nl
Jul.
31
Bank
CRJ3.1
210
900
-
Selling Costs
N2
Jul.
31
Trading
In-
ven-
tory
CRJ3.1
.28 720
Table 4.65
ACTIVITY 1
ASSIGNMENTS 3
General Ledger of Levubu Dealers
110
CHAPTER 4. TERM 4
Balance Sheet Section
Date
Details
Fol
Amount
Date
Details
Fol
Amount
Equipment
Bl
Jul.
6
Bank
CPJ3.1.2
6 000
-
Vehicle
B2
Jul.
15
Bank
CPJ3.1.2
23 300
-
Trading Inventory
B3
Jul.
31
Bank
CPJ3.1.2
14 500
-
Bank
B4
Jul.
31
Total Payments
CPJ3.1.2
49 809
-
Nominal Accounts Section
Stationery
Nl
Jul.
31
Bank
CPJ3.1.2
220
-
Rental Expenditure
N2
Jul.
2
Bank
CPJ3.1.2
1 400
-
Trade Licence
N3
Jul.
8
Bank
CPJ3.1.2
150
-
Telephone
N4
Jul.
18
Bank
CPJ3.1.2
125
-
Salary
N5
Jul.
26
Bank
CPJ3.1.2
2 650
-
Fuel
N6
Jul.
28
Bank
CPJ3.1.2
78
-
Water and Electricity
N7
Jul.
30
Bank
CPJ3.1.2
56
-
Wages
N8
Jul.
31
Bank
CPJ3.1.2
1 330
-
Table 4.66
ACTIVITY 1
ASSIGNMENT 4
General Ledger of Lubbe Dealers
Balance Sheet Section
continued on next page
Ill
Date
Details
Fol
Amoun;
Date
Details
Fol
Amoun;
Capital
Bl
May
1
Bank
CRJ3.1
380
000
-
Trading Inventory
B2
May
31
Selling
costs
CRJ3.1
32 220
-
Bank
B3
May
31
Total
Re-
ceipts
CRJ3.1
382
960
Nominal Accounts Section
Verkope
Nl
May
31
Bank
CRJ3.1
32 960
-
Selling Costs
N2
May
31
Trading
In-
ven-
tory
CRJ3.1
32 220
Table 4.67
ACTIVITY 1
ASSIGNMENT 5
General Ledger of Gesina Dealers
Balance Sheet Section
Date
Details
Fol
Amoun
;
Date
Details
Fol
Amoun
;
Trading Inventory
Bl
Apr.
30
Selling
costs
DJ3.2.1
1 641
-
Debtors Control
B2
Apr.
30
Sales
DJ3.2.1
2 188
-
Nominal Accounts Section
Sales
Nl
continued on next page
112
CHAPTER 4. TERM 4
Apr.
30
Debtors
con-
trol
DJ3.2.1
2 188
Cost Price of Sales
N2
Apr.
30
Trading
In-
ven-
tory
DJ3.2.1
1 641
ACTIVITY 1
ASSIGNMENT 6
General Ledger of Toledo Dealers
Table 4.68
Balance Sheet Section
Date
Details
Fol
Amoun
;
Date
Details
Fol
Amoun
;
Equipment
Bl
May
1
Credito
Con-
trol
rsCJ3.2.1
380
Trading Inventory
B2
May
31
Credito
Con-
trol
rsCJ3.2.1
2 783
Creditors Control
B3
May
31
Sundry
Pur-
chases
CJ3.2.1
4 958
Nominal Accounts Section
Stationery
Nl
May
31
Credito
Con-
trol
rsCJ3.2.1
405
continued on next page
113
Packaging Material
N2
May
31
CreditorsCJ3.2.1
Con-
trol
605
Repairs
N3
May
12
CreditorsCJ3.2.1
Con-
trol
500
Advertisement
N4
May
25
Credito
Con-
trol
rsCJ3.2.1
285
ACTIVITY 1
ASSIGNMENT 7
General Ledger of Highway Dealers
Table 4.69
Balance Sheet Section
Date
Details
Fol
Amoun
;
Date
Details
Fol
Amoun
;
Trading Inventory
Bl
May
31
Selling
costs
DJ3.3.1
896
-
Jun
30
Selling
costs
DJ3.3.2
192
-
Jun
30
Selling
costs
CRJ3.3
19 280
-
Debtors Control
B2
May
31
Sales
DJ3.3.1
1 120
-
Jun.
30
Bank
CRJ13
760
-
Jun.
30
Sales
DJ3.3.2
240
-
Bank
B3
Jun.
30
Total
re-
ceipts
CRJ3.3
.112
360
continued on next page
114
CHAPTER 4. TERM 4
Nominal Accounts Section
Sales
Nl
May
31
Debtors
con-
trol
DJ3.3.1
1 120
Jun.
30
Debtors
con-
trol
DJ3.3.2
240
Jun.
30
Bank
CRJ3.3
111
600
-
Selling Costs
N2
May
31
Trading
In-
ven-
tory
DJ3.3.1
896
Jun.
30
Trading
In-
ven-
tory
DJ3.3.2
192
30
Trading
In-
ven-
tory
CRJ3.3
.19 280
Table 4.70
ACTIVITY 1
ASSIGNMENT 8
General Ledger of Marais Dealers
Balance Sheet Section
Date
Details
Fol
Amoun
;
Date
Details
Fol
Amoun
;
Withdrawals
Bl
Apr.
15
Bank
CPJ3.4
1500
-
Furniture and Equipment
B2
Apr.
18
Bank
CPJ3.4
1400
-
Vehicles
B3
continued on next page
115
Apr.
8
CreditorsCJ3.4.2
con-
trol
7 500
Trading Inventory
B4
March
31
Credito
con-
trol
rsCJ3.4.1
2 340
Apr.
30
Credito
con-
trol
rsCJ3.4.2
1 317
Apr.
30
Bank
CPJ3.4
11 550
-
Bank
B5
Apr.
30
Total
Pay-
ments
CPJ3.4
17 823
Creditors Control
B6
Apr.
30
Bank
CPJ14
3 568
March
31
Sundry
pur-
chases
CJ3.4.1
3 948
Apr.
30
Sundry
pur-
chases
CJ3.4.2
9 427
Nominal Accounts Section
Wages
Nl
Apr.
30
Bank
CPJ3.4
1210
-
Advertisements
N2
March
10
Credito
con-
trol
rsCJ3.4.1
258
Apr.
20
Bank
CPJ3.4
1235
-
Salary
N3
Apr.
30
Bank
CPJ3.4
11 250
-
Stationery
N4
continued on next page
116
CHAPTER 4. TERM 4
March
31
CreditorsCJ3.4.1
con-
trol
345
Apr.
30
CreditorsCJ3.4.2
con-
trol
280
Vehicle Expenses
N5
March
31
Credito
con-
trol
rsCJ3.4.1
380
Apr.
30
Credito
con-
trol
rsCJ3.4.2
330
Packaging Material
N6
March
31
Credito
con-
trol
rsCJ3.4.1
625
Water and Electricity
N7
Apr.
6
Bank
CPJ3.4
1110
-
ACTIVITY 1
ASSIGNMENT 9
General Ledger of Enslin Dealers
Table 4.71
Balance Sheet Section
Date
Details
Fol
Amoun
;
Date
Details
Fol
Amoun
;
Capital
Bl
Nov.
1
Bank
CRJ3.4
120
000
-
10
Bank
CRJ3.4
110
000
-
30
000
-
Withdrawals
B2
Nov.
21
Bank
CPJ3.4
2100
-
continued on next page
117
Vehicles
B3
Nov.
2
Bank
CPJ3.4 27 800
-
Equipment
B4
Nov.
1
Credito
con-
trol
rsCJ3.4.3
2 630
10
Bank
CPJ3.4
21 310
-
30
Bank
CPJ3.4
2700
-
4 640
-
Trading Inventory
B5
Nov.
30
Bank
CPJ3.4
21 720
-
Nov.
30
Selling
costs
DJ3.4.1
1 960
-
30
Credito
con-
trol
rsCJ3.4.3
5 950
30
Selling
costs
CRJ3.4
13 000
30
Balance
b/f
2 710
-
7 670
-
7 670
-
Dec.
1
Balance
c/f
2 710
-
Debtors Control
B6
Nov.
30
Sales
DJ3.4.1
2 750
-
Bank
B7
Nov.
30
Total
Re-
ceipts
CRJ3.4
133
750
Nov.
30
Total
Pay-
ments
CPJ3.4
212
405
30
Balance
b/f
21
345
-
33
750
-
33
750
Dec.
1
Balance
c/f
21
345
-
-
Creditors Control
B8
Nov.
30
Sundry
Pur-
chases
CJ3.4.3
11
253
continued on next page
118
CHAPTER 4. TERM 4
Nominal Accounts Section
Sales
Nl
Nov.
30
Bank
CRJ3.4
13 750
-
30
Debtors
con-
trol
DJ3.4.1
2 750
6 500
Cost Price of Sales
N2
Nov.
30
Trading
inven-
tory
CRJ3.4
13 000
30
Trading
inven-
tory
DJ3.4.1
1 960
4 960
-
Wages
N3
Nov.
30
Bank
CPJ3.4
2300
-
Table 4.72
Stationery
N4
Nov.
30
Bank
CPJ3.4.2
340
-
6
Creditors control
CJ3.4.3
312
-
652
-
Telephone
N5
Nov.
15
Bank
CPJ3.4.2
135
-
Packaging Material
N6
Nov.
30
Creditors control
CJ3.4.3
1 740
-
Repairs
N7
Nov.
22
Creditors control
CJ3.4.3
621
-
Table 4.73
119
4.9 Drawing up a trial balance 9
4.9.1 ECONOMIC AND MANAGEMENT SCIENCES
4.9.2 Grade 9
4.9.3 BUSINESS, CONSUMER AND FINANCIAL KNOWLEDGE AND
SKILLS
4.9.4 Module 23
4.9.5 DRAWING UP A TRIAL BALANCE
Section 3: Trial balance
ACTIVITY1:
To draw up a trial balance
[LO 3.3]
Once the ledger accounts have been completed, the accounts are closed and transferred to a Trial Balance.
Accounts that have entries only on the debit or credit side, are simply added up to obtain a total.
In the case of accounts that have entries on the debit as well as the credit side, the balance is calculated.
This means a balance that is the difference between the two sides is calculated. For example:
Bank Account
2003
2003
Nov.
30
Total received
CRJ
20 698
00
Nov.
30
Total payments
CPJ
15 633
00
30
Balance
b/f
5 065
00
20 698
00
20 698
00
Des.
1
Balance
c/f
5 065
00
Table 4.74
The balances carried forward and the totals are transferred to the Trial Balance.
• A Trial Balance is a list of balances and totals compiled to determine whether the debit side and
credit side are equal and by so doing to check whether the double-entry principle was applied to every
transaction.
Although the Trial Balance indicates that a credit entry was done for every debit entry, certain errors will
not be shown up by the Trial Balance. Thererfore a Trial Balance that balances cannot always be accepted
as proof of correctness.
• Below is an example of a Trial Balance.
TRIAL BALANCE OF RANDOM STORES AS AT 30 JUNE 2003
9 This content is available online at <http://cnx.Org/content/m31776/l.l/>.
120
CHAPTER 4. TERM 4
Dt.
Cr.
Balance sheet section
Capital
Bl
199 322
Withdrawals
B2
15 000
Land and Buildings
B3
105 000
Vehicles
B4
28 000
Equipment
B5
32 125
Trading inventory
B6
45 310
Debtors control
B7
12 180
Bank
B8
11 754
Change
B9
600
Petty cash
BIO
250
Creditors control
Bll
15 994
Nominal Account section
Sales
Nl
350 000
Selling costs
N2
250 000
Rates and Taxes
N3
4 210
Insurance
N4
3 850
Water and Electricity
N5
4 952
Telephone
N6
4 810
Stationery
N7
2 750
Repairs
N8
5 325
Wages
N9
18 000
Salaries
N10
26 000
Rental income
Nil
4 800
Totals
570 116
570 116
Table 4.75
ASSIGNMENT 1: Trial Balance
Use the completed ledger accounts of Enslin Dealers (Activity 3.6 Assignment 9).
• Calculate the balances on the accounts, calculate totals and draw up a Trial Balance.
ASSIGNMENT 2 : Auxiliary Journals, Ledger and Trial Balance
• P. Hatting starts his own business, Hatting Dealers, on 1 April 2003 with a capital contribution of
R105 000.
121
1. Record the transactions for April in the following auxiliary journals: CRJ 3.7.1, CPJ 3.7.1, DJ 3.7.1 and
CJ 3.7.1
2. Close the journals at the end of the month
3. Transfer to the ledger accounts and indicate folio numbers
4. Calculate the balances, or totals where necessary
5. Draw up a trial balance at the end of April
• Transactions: April 2003
• Duplicates of receipts issued
DATE
TO WHOM ISSUED, FOR
AMOUNT
2003
April 1
P. Hatting, for capital contribution
R105 000
7
V. Jansen, to pay his debt
R660
Blommie Bloemiste, for rental income
R 500
14
D. Coetzee, payment on account
R300
21
G. Ferreira, payment on account
R 200
28
V. Jansen, to pay the amount of the invoice issued on 17 April
R 246
Table 4.76
Cash sales of goods as per cash-register roll
DATE
SALES
SELLING COSTS
2003
April 7
R5 800
R4 600
17
R3 820
R2 440
21
R7 620
R5 740
28
Rl 944
Rl 406
Table 4.77
Cash received for services provided
DATE
AMOUNT
2003
April 5
R2 160
17
R3 220
25
Rl 736
Table 4.78
122
CHAPTER 4. TERM 4
• Duplicates of bank deposit slips
DATE
AMOUNT
2003
April 1
R105 000
5
R2 160
7
R6 960
14
R300
17
R7 040
21
R7 820
25
R 1 736
28
R2 190
Table 4.79
Cheque counterfoils
DATE
PAYEE
REASON FOR PAYMENT
AMOUNT
2003
April 2
Perfectum Builders
Building purchased
R80 000
3
Stylish Equipment
Equipment purchased
R4 500
4
Cash
For change
R 180
Caro Ltd.
For materials purchased
R 2 675
7
Cash
For wages
R 560
10
Trust Brokers
For insurance premium
R600
14
Cash
For wages
R 560
Zy Wholesalers
Goods purchased for cash
R 5 950
Stationery purchased for cash
R 180
16
Larnie Furnishers
Paid amount owing
R3 760
17
Caro Ltd.
Materials purchased
R 2 896
Cash
For wages
R 560
Wesco Distributors
For goods purchased
R3 875
28
Cash
For wages
R 560
30
J Henning
Manager's salary
R 2 110
Bengo Wholesalers
Amount owing to date
Table 4.80
Original invoices received from providers
123
DATE
PURCHASED FROM
ITEMS/SERVICES
AMOUNT
2003
April 3
Larnie Furnishers
Equipment
R3 760
5
Bengo Wholesalers
Goods
R8 844
6
Willow Suppliers
Materials
R2 500
7
Pen and Paper
Stationery
R228
9
Bengo Wholesalers
Goods
R4 750
15
Toledo Motors
Delivery vehicle
R28 660
17
Willow Suppliers
Materials
R420
Goods
R3 000
19
Pen and Paper
Stationery
R 106
26
Bengo Wholesalers
Trading stock
R 1 400
Table 4.81
• Duplicates of invoices issued for goods sold on credit
DATE
SOLD TO
AMOUNT
COST PRICE
2003
April 4
V Jansen
R660
R495
10
D Coetzee
R890
R712
13
G Ferreira
R260
R128
16
D Coetzee
R106
R84
17
V Jansen
R246
R184
26
G Ferreira
R340
R272
Table 4.82
DEBTORS JOURNAL OF HATTING DEALERS - APRIL 2003 DJ 3.7.1
In- voice
Day
Debtors
Fol.
Sales
Selling costs
Table 4.83
124 CHAPTER 4. TERM 4
CASH RECEIPTS JOURNAL OF HATTING DEALERS - APRIL 2003 CRJ 3.7.1
125
Doc
• Day
Det
liBol.
Analysis
Bank
Sales
Selling
costs
Current
income
Debtors
Control
Sundries ac-
counts
AmounFol.
Detai
Table 4.84
CREDITORS JOURNAL OF HATTING DEALERS - APRIL 2003 CJ 3.7.1
In-
voice
Day
Cred
.tfihsditors
control
Trading
inventory
Stationery
Cost of
materials
Sundries ac-
counts
Amoun
tFol.
Details
continued on next page
126
CHAPTER 4. TERM 4
Table 4.85
CASH PAYMENTS JOURNAL OF HATTING DEALERS - APRIL 2003 CPJ 3.7.1
Doc.
Day
Nam
of
ben-
efi-
ciarj
eFol.
Bank
Trading
inven-
Cost of
materi-
Wag
es
Creditors
control
Sundries ac-
counts
tory
als
AmountFol.
Details
Table 4.86
4.9.6 Asessment
127
Learning Outcomes (LOs)
LO 3
MANAGERIAL, Consumer and Financial Knowledge and SkillsThe learner will be able to demonstrate
knowledge and the ability to apply responsibly a range of managerial, consumer and financial skills.
Assessment Standards (ASs)
We know this if the learner :
3.1 completes a basic income statement and balance sheet for a service and retail business;
3.2 investigates the public relations, social responsibility and environmental responsibility strategies and
actions of different businesses and organisations;
3.3 completes cash and credit transactions in the books of service and retail businesses;
3.4 uses keyboard skills and function keys in developing, storing, retrieving and editing business docu-
mentation;
3.5 analyses financial statements for decision-making at a basic level;
3.6 differentiates between the forms of credit purchases.
Table 4.87
4.9.7 Memorandum
ACTIVITY 1
ASSIGNMENT 1
TRIAL BALANCE OF ENSLIN DEALERS AS AT 30 NOVEMBER 2003
128
CHAPTER 4. TERM 4
Dt.
Cr.
Balance Sheet section
Capital
Bl
30 000
Withdrawals
B2
100
Vehicles
B3
7 800
Equipment
B4
4 640
Trading inventory
B5
2 710
Debtors control
B6
2 750
Bank
B7
21 345
Creditors control
B8
11 253
Nominal Accounts section
Sales
Nl
6 500
Cost price of sales
N2
4 960
Wages
N3
300
Stationery
N4
652
Telephone
N5
135
Packaging material
N6
1 740
Repairs
N7
621
Totals
47 753
47 753
Table 4.88
ACTIVITY1
ASSIGNMENT 2
CASH PAYMENTS JOURNAL OF HATTING DEALERS - APRIL 2003 CPJ 3.7.1
Doc
Day
Nam
of
paye
eFol
3
Bank
Trading
inven-
tory
Cost of
materi-
als
Wages
Creditors
control
Sundries Ac-
count
Amoui
ltFol
Details
continued on next page
129
200
Perfectum
Builders
80
000
80
000
B2
Land
and
Build-
ings
201
Stylish
Equip-
ment
4
500
4
500
B3
Equi
pment
202
Casl
180
180
B8
Change
203
Care
Ltd
2
675
2
675
204
Casl
560
560
205
10
Trust
Bro-
kers
600
600
No
Insurance
206
14
Casl
560
560
207
ZY
Whole-
salers
6
130
5
950
180
N6
Stat: onery
208
16
Larn
Fur-
nish-
ers
10
3
760
3
760
209
17
Care
Ltd
2
896
2
896
210
Casl
560
560
211
Wescpo
Dis-
trib-
u-
tors
3
875
3
875
212
28
Casl
560
560
213
30
J
Hen-
ning
2
110
2
110
N7
Sala: - y
continued on next page
130
CHAPTER 4. TERM 4
214
Benj
Whc
salei
le-
3
14
994
14
994
123
960
-
9
825
-
5
571
-
2
240
-
18
754
-
87
570
-
B7
B5
N8
N9
B9
Table 4.89
ACTIVITY1
ASSIGNMENT 2
CASH RECEIPTS JOURNAL OF HATTING DEALERS
APRIL 2003 CRJ 3.7.1
Doc Day DetaiBol
Analysis
Bank
Sales
Selling
costs
Current
income
Debtors
control
Sundries Ac-
count
Amou nFol Detai
01
P.
Hat
ting
105
000
105
000
105
000
Bl
Capital
KR
Services
pro-
vided
2
160
2
160
2
160
02
V.
Jan&en
660
660
Blommie
Florists
500
500
N4
Rental
in-
comle
KP
Sales
5
800
6
960
5
800
4
600
03
14
D.
Co-
ct-
zee
300
300
300
KR
17
Sales
3
820
3
820
2
440
KR
Services
pro-
vided
3
220
7
040
3
220
continued on next page
131
04
21
G.
Fer-
reir<
i
200
200
KR
Sale
s
7
620
-
7
820
-
7
620
-
5
740
-
KR
25
Ser^
pro-
vide
ices
d
1
736
1
736
1
736
05
28
V.
Jan
ien
246
-
246
-
KR
Sale
s
1
944
-
2
190
-
1
944
-
1
406
-
133
-
19
-
14
-
7
-
1
-
105
-
206
184
186
116
406
500
B7
Nl
N3/
B5
N2
B6
Table 4.90
ACTIVITY1
ASSIGNMENT 2
CREDITORS JOURNAL OF HATTING DEALERS FOR APRIL 2003 CJ 3.7.1
Invoi
leDay
Credi
tdfal
Creditors
Trading
Cost
of
Stationery
Sundries Account
control
inventory
materials
Amoun; Fol
Details
100
3
Larni
Fur-
nish-
ers
e
3
760
3
760
B3
Equij
101
5
Beng
Whol
salers
e-
8
844
8
844
102
6
Willo
Sup-
pli-
ers
w
2
500
2
500
continued on
next page
132
CHAPTER 4. TERM 4
103
7
Pen
and
Pa-
per
228
228
104
9
Beng
Whol
salers
e-
4
750
4
750
105
15
Toled
Mo-
tors
28
660
28
660
B4
Vehic
106
17
Willo
Sup-
pli-
ers
w
3
420
3
000
420
107
19
Pen
and
Pa-
per
106
106
108
26
Beng
Whol
salers
e-
1
400
1
400
53
-
17
-
2
-
334
-
32
-
668
994
920
420
B8
B5
N8
N6
Table 4.91
ACTIVITY 1
ASSIGNMENT 2
Debtors Journal of Hatting Dealers DJ 3.7.1
Inv.
Day
Debtors
Fol
Sales
Selling costs
4
V Jansen
660
495
10
D Coetzee
890
712
13
G Ferreira
260
128
16
D Coetzee
106
84
17
V Jansen
246
184
26
G Ferreira
340
272
2 502
1 875
B6/N1
B5/N3
Table 4.92
ACTIVITY
ASSIGNMENT 2
General Ledger of Hatting Dealers
133
Balance Sheet Section
Date
Details
Fol
Amoun;
Date
Details
Fol
Amoun
;
Capital 2003
Bl
Apr.
1
Bank
CRJ3.7
1105
000
-
Land and Buildings
B2
Apr.
2
Bank
CPJ3.7
180
000
Equipment
B3
Apr.
3
Bank
CPJ3.7
14 500
3
Credito
con-
trol
rsCJ3.7.1
3 760
8 260
Vehicles
B4
Apr.
15
Credito
con-
trol
rsCJ3.7.1
28
660
Trading Inventory
B5
Apr.
30
Bank
CPJ3.7
19 825
Apr.
30
Trading
In-
ven-
tory
CRJ3.7
114
186
30
Credito
con-
trol
rsCJ3.7.1
17
994
30
Trading
In-
ven-
tory
DJ3.7.1
1 875
Balance
b/f
11
758
27
819
27
819
Mei
1
Balance
a/b
11
758
continued on next page
134
CHAPTER 4. TERM 4
Debtors Control
B6
Apr.
30
Sales
DJ3.7.1
2 502
Apr.
30
Bank
CRJ3.7
11 406
Balance
b/f
1 096
2 502
2 502
Mei
1
Balance
c/f
1 096
Table 4.93
Bank
B7
Apr.
30
Total
Re-
ceipts
CRJ3.7
1133
206
Apr.
30
Total
Pay-
ments
CPJ3.7
1123
960
Balance
b/f
9 246
133
206
133
206
May
1
Balance
c/f
9 246
Change
B8
Apr.
4
Bank
CPJ3.7
1180
Creditors Control
B9
Apr.
30
Bank
CPJ3.7
118
754
Apr.
30
Sundry
pur-
chases
CJ3.7.1
53
668
Balance
c/f
34
914
53
668
53
668
May
1
Balance
b/f
34
914
Nominal Accounts Section
Sales
Nl
Apr.
30
Bank
CRJ3.7
119
184
continued on next page
135
30
Debtors
con-
trol
DJ3.7.1
2 502
21
686
Current Income
N2
Apr.
30
Bank
CRJ3.7
17 116
-
Selling Costs
N3
Apr.
30
Trading
inven-
tory
CRJ3.7
114
186
Trading
inven-
tory
DJ3.7.1
1 875
16
061
Rental Income
N4
Apr.
7
Bank
CRJ3.7
1500
Insurance
N5
Apr.
10
Bank
CPJ3.7
1600
Stationery
N6
Apr.
14
Bank
CPJ3.7
1180
30
Credito
con-
trol
rsCJ3.7.1
334
514
Salary
N7
Apr.
30
Bank
CPJ3.7
12 110
Cost of Materials
N8
Apr.
30
Bank
CPJ3.7
15 571
30
Credito
con-
trol
rsCJ3.7.1
2 920
continued on next page
136
CHAPTER 4. TERM 4
8 491
Wages
N9
Apr.
30
Bank
CPJ3.7 12 240
Table 4.94
ACTIVITY 1
ASSIGNMENT 2
TRIAL BALANCE OF HATTING DEALERS AS AT 30 APRIL 2003
Dt.
Cr.
Balance Sheet section
Capital
Bl
105 000
Land and Buildings
B2
80 000
Equipment
B3
8 260
Vehicles
B4
28 660
Trading inventory
B5
11 758
Debtors control
B6
1 096
Bank
B7
9 246
Change
B8
180
Creditors control
B9
34 914
Nominal Accounts section
Sales
Nl
21 686
Current income
N2
7 116
Cost price of sales
N3
16 061
Rental income
N4
500
Insurance
N5
600
Stationery
N6
514
Salary
N7
2 110
Cost of materials
N8
8 491
Wages
N9
2 240
169 216
169 216
Table 4.95
137
4.10 Analysing financial statements 10
4.10.1 ECONOMIC AND MANAGEMENT SCIENCES
4.10.2 Grade 9
4.10.3 BUSINESS, CONSUMER AND FINANCIAL KNOWLEDGE AND
SKILLS
4.10.4 Module 24
4.10.5 ANALYSING FINANCIAL STATEMENTS
Financial Statements: Analysis and Use for Decision Making
ACTIVITY 1:
To analyse financial statement[LO 3.5]
Financial statements are used as a way of discovering the financial position and financial results of a
business.
Financial figures, contained in the financial statements, usually do not tell outsiders very much. In order
for the figure to be of any value, they must be compared with the results of previous years or with the results
of other businesses in the same industry.
Financial statements are also used to determine ratios and trends.
The following ratios can be used in decision making:
1. Liquidity:
This is the ability of the business to honour its obligations (pay its bills) and is expressed in the ratio
current assets to current liabilities.
Current assets : Current liabilities
40 000 : 16 000
2,5 : 1
This indicates good liquidity, as the norm for businesses is 2:1.
2. Profitability:
This indicates the profitability of the funds invested in the business and is calculated as follows:
Net profit 100 20000 100 _ ln t/
Capital A 1 200000 A 1 ~ lu/0
If the percentage is significantly higher than the current bank rate of �15%, the profitability is good.
3. Solvency:
This indicates by how much the total assets of the business exceed the total liabilities. It is calculated
as follows:
Total Assets : Total Liabilities
50 000 : 20 000
2,5 : 1
The solvency is good as the norm is 2:1.
ASSIGNMENT:
• Use the information below to determine the following:
(a) Profitability
(b) Solvency
(c) Liquidity
Comment on the answer to each and give reasons why it is good or bad.
• The net profit of the company is R35 000
• The capital is R100 000
�This content is available online at <http://cnx.Org/content/m31777/l.l/>.
138 CHAPTER 4. TERM 4
• Fixed assets are R90 000
• Current assets are R30 000
• Current liabilities are RIO 000
4,10.6 Assessment
Learning Outcomes (LOs)
LO 3
MANAGERIAL, Consumer and Financial Knowledge and SkillsThe learner will be able to demonstrate
knowledge and the ability to apply responsibly a range of managerial, consumer and financial skills.
Assessment Standards (ASs)
We know this if the learner :
3.1 completes a basic income statement and balance sheet for a service and retail business;
3.2 investigates the public relations, social responsibility and environmental responsibility strategies and
actions of different businesses and organisations;
3.3 completes cash and credit transactions in the books of service and retail businesses;
3.4 uses keyboard skills and function keys in developing, storing, retrieving and editing business docu-
mentation;
3.5 analyses financial statements for decision-making at a basic level;
3.6 differentiates between the forms of credit purchases.
Table 4.96
4.10.7 Memorandum
ACTIVITY 1
(a) Profitability:
nv x 100
Capital 1
35000 x 100
100000 1
= 35%
Very good profitability measured against a bank rate of 15%.
(b) Solvability:
Total Assets : Total Liabilities
120 000 : 10 000
12 : 1
A good solvability ratio, as the liabilities are covered 12 times by the assets.
(c) Liquidity:
Current assets : Current liabilities
30 000 : 10 000
3 : 1
A good liquidity ratio measured against the norm of 2:1.
139
4.11 Forms of credit purchases and methods of payment 11
4.11.1 ECONOMIC AND MANAGEMENT SCIENCES
4.11.2 Grade 9
4.11.3 BUSINESS, CONSUMER AND FINANCIAL KNOWLEDGE AND
SKILLS
4.11.4 Module 25
4.11.5 FORMS OF CREDIT PURCHASE AND METHODS OF PAYMENT
ACTIVITY 1:
To investigate forms of credit purchases and methods of payment and to be able to make recommendations
[LO 3.6]
As the consumer does not always have sufficient cash to make purchases, various forms of credit business
have been developed. This means that purchases are made now, but payment is only made at a later stage.
Credit purchases can be made in a number of ways - a very common way is to buy on account.
The consumer opens an account at a particular shop and makes his purchases. At the end of the month
he receives an account and pays a monthly amount.
Hire-purchase transactions are another form of credit used for buying expensive items such as a car, for
example. A fixed instalment is paid every month until the entire purchase price, plus interest, has been paid.
Today, credit cards are a very popular method of credit. Various purchases can be made during the
month and a copy of all the client's purchases is sent to his bank. At the end of the month the amount owing
is deducted from the client's bank account.
A consumer may pay for his purchases in a number of ways. The most common way of making payments
is by means of cash, but it is not safe to carry large amounts of cash. For this reason increasing use is being
made of electronic modes of payment where money is not handled physically at all.
A popular way of paying is by cheque. The holder of a cheque account instructs his bank, by means of
the cheque, to pay a specific amount of money to a certain person. The instruction is carried out when the
cheque is presented for payment at a bank.
Payments may also be made through the Post Office by means of postal orders. These payments can
safely be sent to any place in the country. The amount of money you want to pay, plus commission, is paid
in at a post office and the postal order is sent to the person concerned. On receipt of the postal order, it
can be exchanged for cash at the post office.
Debit cards may also be used for payments. The money is deducted electronically from ones bank account.
This is a safe method of payment, as one need not carry cash with one. One can also not spend more money
than one had in ones bank account. The bank balance can be checked at any time at an automatic teller
machine.
Traveller's cheques are useful when travelling abroad. The money is paid in at a bank and in exchange for
it one receives traveller's cheques that one can use to make payments in other countries. Traveller's cheques
are provided in American, Canadian or Australian dollar, Euro, British pound, Swiss franc, Japanese yen
and Saudi rial.
Although an increasing number of people are buying on credit, it is still better to pay cash for ones
purchases.
Cash purchases can be made at any shop. Some businesses are prepared to give a discount for cash.
Credit is expensive, because interest and administrative costs have to be added.
Paying cash means that one will not purchase more than one can afford. Easy credit can result in ones
spending money that one does not actually have. When the money has to be repaid, financial problems can
occur.
lr This content is available online at <http://cnx.Org/content/m31778/l.l/>.
140 CHAPTER 4. TERM 4
In a world of credit and electronic payments there is still a place for cash payments.
RESEARCH ASSIGNMENT:
• Collect information from financial institutions and shops about different methods of payment.
• Determine which methods will be the best for the following people and give reasons for your answers:
(a) a professional person
(b) a student
(c) a farmer
(d) a pensioner
4,11,6 Assessment
Learning Outcomes (LOs)
LO 3
MANAGERIAL, Consumer and Financial Knowledge and SkillsThe learner will be able to demonstrate
knowledge and the ability to apply responsibly a range of managerial, consumer and financial skills.
Assessment Standards (ASs)
We know this if the learner :
3.1 completes a basic income statement and balance sheet for a service and retail business;
3.2 investigates the public relations, social responsibility and environmental responsibility strategies and
actions of different businesses and organisations;
3.3 completes cash and credit transactions in the books of service and retail businesses;
3.4 uses keyboard skills and function keys in developing, storing, retrieving and editing business docu-
mentation;
3.5 analyses financial statements for decision-making at a basic level;
3.6 differentiates between the forms of credit purchases.
Table 4.97
4.11.7 Memorandum
ACTIVITY 1
(a) A professional person - By virtue of his professional status such a person can enjoy certain benefits at
banks, such as a special cheque account and other facilities. As professional people do not have much time
to spend on their personal financial affairs, a cheque account and credit cards as well as electronic modes of
payment are useful. Traveller's cheques are handy on overseas trips.
(b) Student - As students do not earn a full-time income they often have special needs for which most
banks cater by means of special packages. Credit cards are handy if self-discipline is exercised so that not
too much is purchased on credit. Debit cards are handy because the student cannot spend more money than
he has in his account.
(c) Farmer - As farmers annually have the proceeds of crops and must make payments regularly, a cheque
account with overdraft facilities are suitable. A monthly bank statement and copies of cheques, or cheque
141
counterfoils assist in checking payments and in planning. Distance is usually a limiting factor and in this
case cheque payments and electronic payments are advantageous.
(d) Pensioner - It is dangerous for older people to carry cash. They should rather make use of credit
cards or debit cards to make their payments.
142 ATTRIBUTIONS
Attributions
Collection: Economic and Management Sciences Grade 9
Edited by: Siyavula Uploaders
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License: http://creativecommons.Org/licenses/by/3.0/
Module: "The flow of money, production factors and goods (revised)"
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URL: http://cnx.org/content/m21445/Ll/
Pages: 1-3
Copyright: Siyavula Uploaders
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Module: "Explaining business enterprises"
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URL: http://cnx.org/content/m21444/Ll/
Pages: 3-4
Copyright: Siyavula Uploaders
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Pages: 5-7
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Pages: 12-16
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Pages: 16-19
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ATTRIBUTIONS 143
Module: "The national budget, growth and economical equalities"
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URL: http://cnx.org/content/m21498/l-l/
Pages: 19-22
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Pages: 23-27
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Pages: 27-29
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Module: "Savings and investment"
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URL: http://cnx.org/content/m21504/l-l/
Pages: 30-31
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Module: "Productivity"
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Pages: 31-33
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Module: "An idea for an enterprise"
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URL: http://cnx.org/content/m21509/l-l/
Pages: 35-40
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Pages: 43-45
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144 ATTRIBUTIONS
Module: "Difference between an income statement and a balance sheet"
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Pages: 47-60
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Module: "Social and environmental responsibilities of businesses"
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Pages: 60-62
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Module: "Recording cash transactions of service and commercial enterprises"
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Pages: 62-76
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Pages: 77-82
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Pages: 98-106
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ATTRIBUTIONS 145
Module: "Drawing up a trial balance"
By: Siyavula Uploaders
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Pages: 121-138
Copyright: Siyavula Uploaders
License: http://creativecommons.Org/licenses/by/3.0/
Module: "Analysing financial statements"
By: Siyavula Uploaders
URL: http://cnx.org/content/m31777/Ll/
Pages: 139-140
Copyright: Siyavula Uploaders
License: http://creativecommons.org/licenses/by/3-0/
Module: "Forms of credit purchases and methods of payment"
By: Siyavula Uploaders
URL: http://cnx.org/content/m31778/Ll/
Pages: 141-143
Copyright: Siyavula Uploaders
License: http://creativecommons.org/licenses/by/3-0/
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