Economic & Management Sciences - EZ Learn EMS Grade 9 - sample.pdf · 3. Planning a business ... or...

Fun

Economic & Management Sciences

Grade 9

2012 edition for CAPS

Name: __________________________________

Written by Barbara Williamson

EZ Learn Books CC

www.ezlearn.co.za 1

Contents

Part 1: Introduction to business studies

1. Sectors of the economy ........................................................................... 3

2. Functions of a business ........................................................................... 17

3. Planning a business ................................................................................ 23

Part 2: Introduction to accounting

4. Recording cash transactions of a trader ........................................... 35

5. Recording credit transactions ............................................................ 61

6. Subsidiary ledgers .................................................................................. 96

7. Financial reporting1 .............................................................................. 125

Part 3: Introduction to economics

8. Economic systems .............................................................................. 147

9. The economic cycle ............................................................................ 150

10. Price theory ............................................................................................ 157

11. Trade unions ......................................................................................... 163

1 For extension

2

Part 1:

Introduction to business studies

It is important to understand how your business fits into the economy, what activities

are carried out in a business and how to create a unique business. Innovative ideas,

and careful planning are needed here!

Part 1: Introduction to Business Studies

www.ezlearn.co.za 3

1. Sectors of the economy

1.1. Case study

Part A

Watch the following Youtube clips:

Part 1: http://www.youtube.com/watch?v=nfczfI0G_30&feature=related (6 minutes)

Part 2: http://www.youtube.com/watch?v=NmeqgOiWFv4&feature=related (4 minutes)

Part 3: http://www.youtube.com/watch?v=bBAeZySgPYE&feature=related (3 minutes)

OR

Read the following article:

How chocolate is made It’s funny to think that a bar of chocolate starts out using the fruit

from a tree that might grow in your garden…if you live in the tropics!

Here you can discover where cocoa trees grow, what they produce and how you end up with the cocoa, dark and milk chocolate we all know and love.

From Trees to Beans Cocoa beans come from cocoa pods that grow on cocoa trees – simple! The cocoa tree, (real name Theobroma Cacao), grows in warm, humid places near the Equator. There’s got to be guaranteed rainfall and fertile soil for it to thrive, and Ghana, the Ivory Coast, Brazil, and Nigeria are all perfect – production’s increasing in Malaysia too.

A cocoa tree looks a bit like an apple tree but has broader, rich green leaves. It flowers and fruits all year round, and produces large cocoa pods that sprout from tree trunks and main branches. There’s not that many of them though – each tree only has 20-30 pods a year. Take a look inside the pods and you’d see 30-40 seeds sitting in a sweet white pulp rather like cotton wool – these are the cocoa beans. And no wonder cocoa is precious; it takes a whole year’s crop from one tree to make 454 grammes (1lb) of cocoa.

Different trees, different cocoa There are three main types of cocoa: Forastero, Criollo and Trinitario – this last one is a cross between the first two. Forastero is widely grown – it’s a hardy tree producing the strongest flavour beans. And within Forastero, a variety called Amelonado is most popular, largely grown in West Africa and Brazil. Criollo trees aren’t as tough as Forastero. Its beans have a milder chocolate flavour and a unique aroma. They’re grown in Central and South American and Indonesia.

Trinitario isn’t found in the wild, but is grown in the Caribbean as well as in Cameroon and Papua New Guinea. Cadbury get their cocoa from Ghana in West Africa, where the main harvesting period is October to December. When they’re ripe, the cocoa pods turn a rich golden colour. They’re cut down from the trees and split open, and the pulp and beans are removed from the outside husk.

To get a good chocolate flavour, the beans then have to be fermented. There are two main

http://www.youtube.com/watch?v=nfczfI0G_30&feature=related

http://www.youtube.com/watch?v=NmeqgOiWFv4&feature=related

http://www.youtube.com/watch?v=bBAeZySgPYE&feature=related

Fun Economic & Management Sciences Grade 9

4 Play to Learn!

methods: Heap and Box. In West Africa the Heap method is used. The cocoa beans are piled up on a layer of banana tree leaves, with more leaves on top to cover them. Then they’re left for five or six days to ferment – this when much of the chocolate flavour develops. The pulp around the beans becomes liquid and drains away.

Next the wet beans are dried in the sun and turned frequently so they dry evenly – this is crucial because if any beans are still wet, they’ll go mouldy when they’re stored. Once the farmers are happy that the beans are dry, they’re taken to buying stations, where the beans are weighed and packed into sacks.

The Box method is used in the West Indies, Latin America and in Malaysia, and you tend to find it in large plantations. Over a tonne of beans is put in to a wooden box which has gaps in the base for air to get in and liquid to drain out. The boxes are covered in banana leaves and stored in a building for 6-8 days. They’re mixed a couple of times during this process, and then special equipment is used to dry them.

Processing the Beans Once Cadbury have bought their cocoa beans, they arrive in the United Kingdom and are transported to one of the world’s most modern processing factories, at Chirk in North Wales.

The sacks of beans are emptied out on to a conveyor belt and before anything else happens they’re cleaned to get rid of any dust and stones they’ve picked up along the way. Next the beans roasted in a big revolving drum called a continuous roaster. Hot air goes into it as the beans pass along it, and it’s during this process that you’ll really begin to smell chocolate!

The roasted beans are ‘kibbled’ (broken in to small pieces), then ‘winnowed’ – the brittle shells are blown away, leaving just the ‘nibs’, the centres of the beans. The nibs are ground between steel rollers until they become a chocolate-coloured liquid, rather like thick cream, over half of which is cocoa butter. The liquid is called ‘mass’ or ‘cocoa liquor’ and this is the basic ingredient for all cocoa and chocolate products.

Mass contains ‘cocoa butter’ and about half of is pressed out. You’re left with a solid block that can then be ground into cocoa powder.

How Dark Chocolate is Made To make dark chocolate, cocoa mass is sent from Chirk to Cadbury’s chocolate making factories. It’s mixed with extra cocoa butter and sugar, then ground and ‘conched’. Conching is a crucial process: it means the chocolate is rolled and kneaded, transforming itself from a gritty substance to a very smooth one. Chocolate also needs to be ‘tempered’. This involves cooling it to a particular temperature, to make it stable. It means you get a nice glossy finish, and you don’t get the problem of cocoa butter rising to the surface – which is harmless, but spoils the look of the chocolate.

Now the dark chocolate is ready to use and can be poured into moulds or over chocolate centres. The finished chocolate bars or individual chocolates sail on down the production line to be wrapped and packed into boxes ready for distribution.

How Milk Chocolate is Made The cocoa mass is sent to the Cadbury milk factory near Hereford. Here it is mixed with sugar and fresh full cream milk, which has already been condensed into a thick liquid. The mixture is dried in vacuum ovens to become milk chocolate ‘crumb’. The milk chocolate crumb is taken to Cadbury chocolate factories and finely ground between enormous rollers before extra cocoa butter and special flavourings are added.


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The amount of cocoa butter added depends on what the chocolate is for – bar chocolate needs to be thick, but if it’s to cover assortments and bars with different centres, thinner chocolate is used. In the UK up to 5% vegetable fat is added too – this stabilises the chocolate and gives the ideal texture to ensure that the melting properties of the chocolate are precise and preserve the taste and ideal texture of the chocolate.

Next, milk chocolate needs to be conched (rolled and kneaded so that it becomes silky smooth), and tempered (cooled to a particular temperature to make it more stable) – just like for dark chocolate. Now the chocolate’s ready for its final destination – maybe it’ll be poured over a Crunchie, become a Classic Dark, or end up as a lovely bar of Dairy Milk.

Moulded chocolate, countlines and enrobing So once we’ve made dark chocolate and milk chocolate, what happens to it? That depends on what we’re making. Bars of chocolate, like Cadbury Dairy Milk, are called ‘moulded’ products – because chocolate is poured into a mould to make them. Liquid chocolate is poured in, it’s shaken (to make sure it fits the mould perfectly), and then cooled, before being wrapped at high speed.

‘Countline’ products are things like Crunchie, with a chocolate covering around a different centre. The centres of the bars are laid out on a conveyer belt, and they pass under an ‘enrobing’ machine, which covers each bar in a layer of liquid chocolate. Chocolate assortments like Milk Tray are made the same way.

http://www.cadbury.co.za/about/how-chocolate-is-made/

Accessed 10 November 2011

http://www.cadbury.co.za/about/how-chocolate-is-made/


6 Play to Learn!

Part B

Discuss the following in your group or as a class. Make notes of the discussion in the space provided.

1. The article and Youtube clips illustrate how chocolate is made from cacao beans.

1.1. Briefly describe this process.

1.2. How does the chocolate then end up in the hands of you, the hungry consumer?

2. Consider the entire transformation and movement of chocolate as discussed in question 1.

2.1. How do you think you could you split this up into three main parts, each part being made up

of similar activities?


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2.2. How is value added to the beans and chocolate along the way as they move through these

sectors?

2.3. What other activities need to take place to physically move the beans and chocolate

through these sectors? Which sector do you think these would form part of?

2.4. What types of skills do you think are needed in each sector?

3. As we become more concerned about looking after our fragile environment, we need to think

about how to use our limited resources more carefully and in ways that ensure any resources

used are regenerated wherever possible i.e. in a sustainable manner.

3.1. Can you think of any ways in which resources could be used in a sustainable manner in each

of the three main parts you showed above?

3.2. All processes usually have an element of waste e.g. the outside husk of the cacao bean

might be thrown away. How do you think the waste products in the chocolate making

process might be better utilised, either in this process, or elsewhere?


8 Play to Learn!

The sectors of the economy

Businesses make products to satisfy people’s needs and wants. Consumer goods are consumed by

the end-user, whereas production goods are needed to make consumer goods and capital goods

(machinery etc. used in manufacturing). These products move through the following sectors of the

economy so as to be extracted from the earth, manufactured and then made available to the end

user (consumer).

Primary sector industries

involve extracting raw

materials from the earth

e.g. agriculture, fishing,

mining and forestry. These

activities involve mostly

unskilled labour.

Secondary sector industries

convert these raw materials

into a form we can use. A

product may move through a

number of processes or

factories in the secondary

sector before it takes the form

of a product required by the

consumer. Manufacturing

activities involved skilled

labour, managed by

professionals.

Tertiary sector businesses

transfer goods to the

consumer e.g. wholesalers,

retailers, transport, banks

etc. These include

commercial and personal

services provided by

professionals, supported

by some skilled labour.

Adding value in the supply chain The string of activities through which a product or service moves from its extraction to being made

available to the consumer is known as the supply chain. As products move along the supply chain,

value is added at each step. Raw materials that have been extracted are worth more than those

still in the earth, as they are available for use. Products that have been manufactured are worth

more than the unprocessed raw materials as they are in a form that can be used by the consumer.

Products that are available in shops are worth more than those still in a factory, as they are

accessible to the consumer. A variety of distributions channels exist to move different types of

products in different ways, to suit the needs of different consumers.

Primary sector

Secondary sector

Tertiary sector


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1.2. Artistic activity

1. Think of any THREE different products.

2. Using the spaces on the following pull out page, draw pictures to show how each product

moved through the different sectors to become available to the consumer.

3. Cut out your cards, shuffle them and pass them on to a classmate.

4. Take the shuffled set given to you, and arrange them to determine what products have been

illustrated, and how each moves through the different sectors of the economy. Paste them

below:

Primary sector Secondary sector Tertiary sector


10 Play to Learn!

1.3. Group activity

In preparation

Raid your recycling bin at home, and bring some (or all) of these items to school.

Lesson 1

You will need a large piece of paper (at least A3) and coloured pens

1. Brainstorm ideas for products you can make with the materials you brought from home.

2. Develop your brainstormed ideas, keeping in mind that it should be useful and functional,

satisfying some real need. It should also be a feasible business idea that will be sustainable over

time, replacing the need for non-environmentally products or processes. Your idea should also

be unique, being differentiated from other similar products in some way so as to create a

competitive advantage.

3. In order to help you evaluate each idea, conduct a SWOT analysis for each. This involves

carefully analysing the strengths and weaknesses of the product idea itself, as well as the

relevant opportunities and threats in the external business environment for this idea.

Idea No. 1:

Inte

rna

l

Strengths Weaknesses

Ex

tern

al

Opportunities Threats


www.ezlearn.co.za 11

Primary sector Secondary sector Tertiary sector

Product 1

Product 2

Product 3


12 Play to Learn!

(Pull out page)



Idea No. 2:

Inte

rna

l


Exte

rna

l


Idea No. 3:

Inte

rna

l


Ex

tern

al


4. Based on your SWOT analyses, select the best idea and explain your choice.


14 Play to Learn!

Lesson 2

5. Build your product.

Lesson 3

6. Present your product to the class, describing the need that it fulfils and how it will be used.

7. Consider how the products move through the sectors of the economy now that recycling is

being used. Show this movement diagrammatically.

Rating scale

Waste products used 2 1 0

Product is useful 2 1 0

Idea is creative 2 1 0

Business idea is sustainable 1 0 0

Idea replaces a “non-green” product or process 2 1 0

Diagram shows recycling’s role in sectors of economy 1 0 0

Total out of 10



Sustainable use of resources As our population grows, we put more and more pressure on the environment in which we live. We

are only now starting to realise the huge impact of carbon emissions, waste being dumped, the

destruction of our rain forests etc. Individuals and businesses are starting to relook at how we use

the limited resources available to us, and how we get rid of our waste. Recycling is playing a much

greater role now than ever before, and people are constantly researching new energy sources

and fuels to reduce the effects on global warming and the earth on which we live. In order for

businesses to succeed, innovation and creativity are vital in solving these problems. With a little

creativity, recycling and innovative use of resources can take place in all sectors of the economy.

Sustainable use of primary sector resources The primary sector deals with extraction of resources from the earth. Since these resources are

limited, if not carefully managed, they will run dry. Preference should be given to using renewable

resources. For example, bamboo can be used instead of wood, as it grows faster. Fish should be

carefully managed and bred rather than simply fished from the sea, to avoid extinction of species.

Recycling in the secondary sector Raw materials used for manufacturing can often be replaced by recycled

materials. This solves two problems – the use of original materials is replaced by

recycled materials, and it avoids non-biodegradable waste products being

dumped. Although it is often costly to remanufacture recycled products, this

cost can be offset against the cost of new materials, and the value of looking

after our environment is priceless.

A “green” tertiary sector Even though the products moving through the tertiary sector have already been produced, further

materials and fuels are required to transport and manage these goods. Tertiary sector businesses

can look at using more energy-efficient transport options, and looking for environmentally friendly

alternatives for the warehouses and offices e.g. solar power for lighting and heating, paperless

administration etc.


16 Play to Learn!

1.4. Business report

Select any product of your choice. Write a report to the CEO of a company in one of the sectors it

passes through in which you

Analyse the way in which the product moves through the sectors of the economy.

Consider the value added at each step of the process through all three sectors.

Explain the importance of sustainability and suggest how the company chosen could utilise

resources more sustainably in its part of the process.

Your report should take the format of a business report, in other words it should clearly indicate who

it is prepared for, the subject of the report, and it should be signed and dated at the end. In order to

fully understand the processes involved, you might like to conduct some research into the

production of your chosen product and company.

30

My notes

17

Part 2:

Introduction to accounting

It is very important for any business to keep track of where its money is at any time

and to use that money to make the best possible profits. Many good businesses fail

because of poor financial management!


18 Play to Learn!

My notes



4. Recording cash transactions of a trader

4.1. Treasure hunt (20 marks, 15 minutes)

Carefully study the accounting records shown below to find the treasure of information requested by

the questions that follow.

Cash receipts journal of Salon Emma – February 2010 CRJ7

Doc Day Details Fol Analysis

of

receipts Bank

Current

income

Sundry accounts

Amount Details F

EFT 1 Emma Williams 20 000 20 000 Capital B1

CRR 10 Cash 2 000 2 000 2 000

CRR 28 Cash 7 000 7 000

016 28 P Williamson 4 000 11 000 4 000 Rent income N2

33 000 9 000 24 000

B5 N1

Cash payments journal of Salon Emma – February 2010 CPJ7

Doc Day Name of payee Fol Bank Material

costs

Admin

costs

Sundry accounts

Amount Details F

130 2 Stuart Stationers 1 000 1 000

131 8 Trish’s Supplies 3 000 3 000

132 15 EC Equippers 15 000 15 000 Equipment B4

133 22 Emma Williams 10 000 10 000 Drawings B2

134 27 Trish’s Supplies 6 000 2 000

21 000 5 000 1 000 15 000

B5 N3 N4

Dr General ledger of Salon Emma Cr

Statement of Financial Position section

Capital B1 2010

Feb

1 Balance b/d 250 000

Bank CRJ7 20 000 270 000

Drawings B2 2010

Feb


22 Bank CPJ7 10 000 70 000

Land and buildings B3 2010

Feb


Equipment B4 2010

Feb


15 Bank CPJ7 15 000 65 000

Bank B5 2010

Feb

1 Balance b/d 12 000 2010

Feb

28 Sundry accounts CPJ7 21 000

28 Sundry accounts CRJ7 33 000 Balance c/d 24 000 45 000 45 000

Mar 1 Balance b/d 24 000


20 Play to Learn!

Nominal accounts section

Current income N1 2010

Feb


28 Bank CRJ7 9 000 72 000

Rent income N2 2010

Feb


28 Bank CRJ7 4 000 16 000

Material costs N3 2010

Feb


28 Bank CPJ7 5 000 40 000

Administration costs N4 2010

Feb

1 Balance b/d 8 000

28 Bank CPJ7 1 000 9 000

Salon Emma

Trial balance as at 28 February 2010

Fol Debit Credit

Statement of Financial Position section

Capital B1 270 000

Drawings B2 70 000

Land and buildings B3 150 000

Equipment B4 65 000

Bank B5 24 000

Nominal accounts section

Current income N1 72 000

Rent income N2 16 000

Material costs N3 40 000

Administration costs N4 9 000

358 000 358 000

1. What business are these accounting records for? (1)

2. For what period were these transactions recorded i.e. when? (1)

3. What amount was deposited directly into the business bank account by EFT, and why? (2)

4. What receipt number was issued to P Williamson and why was it issued? (2)



5. What amount did the business deposit into the bank account on the 28th? (1)

6. Who supplied the business with equipment? (1)

7. When did Emma draw cash for her own use? (1)

8. What cheque number was used to pay Trish’s Supplies on the 27th? (1)

9. What was the cost of the Land and Buildings owned by this business? (1)

10. How much money was available to the business on 1 February 2010? (1)

11. What account number has been allocated to Material Costs? (1)

Now think carefully …

12. Why do you think Emma contributed an extra R20 000 this month? (2)

13. If rent income is a fixed monthly amount, when was the extra office space first let out to the

tenant? (2)

14. Do you think the drawings taken out by Emma is reasonable, given the profits made by the

business? Show any calculations. (3)

4.2. Discovery activity

You will need: scissors, Prestik, a pencil and an eraser

You would like to start a business with a few friends, making and selling boerewors rolls.

1. Carefully cut out all the icons on the next page and attach a small piece of Prestik to the back

of each. Note: each money icon represents R50. For the others, you will need to enter the

relevant amounts.

2. Turn over this page to see the accounting equation template that you will use to understand

the new concepts you are about to learn.

3. For each transaction given, move the icons about on the accounting equation to show the

financial effect. For items other than cash, write the value on each icon. Remember that each

transaction will affect two different things!

20


22 Play to Learn!

WHAT I HAVE WHO OWNS IT

ASSETS EQUITY

+ -

LIABILITIES

R R



Partners’ investment in the business:

R

Loan from Mom:

R

Breadrolls:

R20

Boerewors:

R

Paper serviettes:

R10


24 Play to Learn!

(pull out page)



Transactions:

1. Fortunately you have all decided to save your tuckshop money to invest in this new venture,

and together have R50 to start. You place this money into an old Tupperware dish marked

“Boerie Stand”. Show this in your table, and check that it balances.

2. You realise that there is not a lot you can buy with R50 these days, and convince your mom to

invest in your brilliant business idea. She agrees to lend you R100, on condition that you pay her

back with interest of R5 at the end of the month. Show this in your table, and check that it

balances.

3. It’s time to go shopping! You spend R120 on tasty boerewors from your local butcher, R20 on

fresh rolls from the bakery and R10 on paper serviettes to serve the boerie rolls to your

customers. Show this in your table, and check that it balances.

4. Now it’s time to make your boerie rolls.

4.1. Cut out the roll, boerewors and serviette.

4.2. Fold the roll in half and wrap it around the boerewors.

4.3. Fold the serviette over the roll.

4.4. Place your prepared boerie roll back on your table.

5. Time to sell! You pack your prepared boerie rolls into a clean box and head off to sell them to

hungry neighbours for R15 each. Luckily there is an important rugby match on, and it’s nearly

lunch time. You sell all 20 rolls you and your friends have made. Show this in your table, using

your “prepared” boerie roll to represent the rolls you sold. You will have to allocate a value to it.

Check that the table balances.

4. What happened to your stock of rolls and sausages – how did you end up classifying them after

they were sold?

5. What happened to your totals when you sold your rolls?

6. How can you account for the extra money you received – how did you allocate it on the “Who

owns it” side?

7. Calculate your total cost of production i.e. to make all 20 rolls.

8. Calculate the cost per roll.

9. What profit did you make on the sale of the rolls?


26 Play to Learn!

Taking cost of sales into account When goods are sold by a business, the selling price cannot be considered to be all profit – the

cost to the business of those goods must be taken into account.

SALES – COST OF SALES = GROSS PROFIT

To account for this, the selling price is recorded as income, but the trading stock sold is converted

from an asset to an expense: “cost of sales”.

Mark-up calculations Businesses often choose to determine the selling price by calculating the cost price and then

adding a set percentage to this amount. The mark-up added is to cover other operating

expenses and allow for a profit to be made.

COST PRICE X (100% + MARK-UP%) = SELLING PRICE

The calculated price may then be adjusted slightly to arrive at a sensible price to label the item

with. Odd numbers confuse customers, and prices set just below a round rand seem cheaper.

When recording a sales transaction you might only know the selling price and the mark-up

percentage that was used. To calculate the cost price you use the same calculation as above

and work backwards i.e.

COST PRICE = SELLING PRICE

(100% + MARK-UP%)

The effect of sales on the accounting equation When stock is bought, it is recorded as an asset, as it will generate a future income.

1. The sales amount is recorded in the same way as income from services provided was

recorded last year.

2. The cost of sales now needs to be taken into account. Since the stock that was bought is no

longer available to sell, this asset needs to be removed and turned into an expense i.e.

Trading Stock becomes Cost of Sales.

ASSETS EQUITY LIABILITIES

Effect Reason Effect Reason Effect Reason

1. + Trading stock increases

- Bank decreases

2. + Bank increases + Sales income

- Trading stock decreases - Cost of sales expense



Accounts in the equation

ASSETS These are the items owned by the

business, that have some monetary

value.

Non-current assets Land and buildings

Vehicles

Equipment

Current assets Stock

Bank

OWNER’S EQUITY This is the value of the business that

belongs to the owner, including capital

and any profits made.

Capital Drawings

Net profit

Income Sales

Current income

Rent income

Expenses Cost of sales

Stationery

Telephone

Wages

Etc.

LIABILITIES This is the money owed by the business.

Non-current liabilities Mortgage bond

Current liabilities Bank overdraft

“Non-current” means that it will

not be turned into cash (or

paid back) within the next

year. Obviously then “current”

means cash will be received

for this asset (or the liability

paid back) within the next

year.


28 Play to Learn!

4.3. Formative assessment (30 marks, 20 minutes)

1. Complete the table by filling in the missing amounts to determine gross profit, sales or cost of

sales. (6)

Sales - Cost of sales = Gross profit

1.1. R6 000 R4 000

1.2. R3 400 R1 700

1.3. R1 900 R3 800

1.4. R3 200 R2 300

1.5. R8 500 R3 500

1.6. R13 500 R4 000

2. If the cost price is R300 and you want to add a 50% mark-up, what will your selling price be? (2)

3. If the cost price is R346 and you wish to add a mark-up of approximately 75%, what selling price

would you suggest? Think carefully after completing your calculation, and explain your answer.

(4)

4. If the selling price is R500 and a 150% mark-up was used, what was the cost price? (2)

5. Show the effect on the accounting equation of the following transactions.

5.1. Goods costing R5 000 were bought for cash.

5.2. Goods costing R2 500 were sold for R6 000.

5.3. Goods costing R2 000 were sold at a mark-up of 50%.

5.4. Goods that had been marked up by 100% were sold for R9 000. (16)

ASSETS EQUITY LIABIITIES

Effect Reason Effect Reason Effect Reason

5.1.

5.2.

5.3.

5.4.

30



Cash journals of a trading business The cash journals of a trading business look very similar to that of a service business (as you learnt in

Grade 8). The only difference is that instead of Current Income and Material Costs (or Consumable

Stores), you now have to account for Sales, Cost of Sales and Trading Stock instead.

The Cash Receipts Journal will have a column for Sales (where Current Income was used before),

as well as a new column for Cost of Sales. This is to remind us to account for the cost of the goods

that were sold, and transfer this amount from the asset Trading Stock to the expense Cost of Sales.

When entering sales into the CRJ, the selling price received is entered into both Bank and Sales

(similar to entering current income for a service business), but then the cost price of the goods sold

is also entered in the Cost of Sales column, the total of which will be posted to both Trading Stock

and Cost of Sales at the end of the month.

Cash receipts journal of XXX – date CRJX

Doc Day Details Fol

Analysis

of

receipts

Bank Sales

Cost

of

sales

Sundry accounts

Amount Details F

XXX 1 Cash sales Selling

price

Selling

price

Cost

price

The Cash Payments Journal will have a column for Trading Stock (where Material Costs was used

before), to account for the goods that have been bought for resale.

Cash payments journal of XXX – date CPJX

Doc Day Name of

payee Fol Bank

Trading

stock Stationery Wages

Sundry accounts

Amount Details F

XXX 2 XXX Cost

price

Cost

price


30 Play to Learn!

4.4. Example

Required

Record the following transactions in the cash journals of Paddy Traders for March 2011. Total the

journals at the end of the month.

1. Bought goods costing R2 500 from WW Wholesalers and paid with cheque number 221.

2. Cash sales R7 000 (cost price R3 500).

3. Bought and paid for stationery (R1 000) and stock (R5 000) from Super Sellers.

4. Banked R10 000 for cash sales (R8 000 – mark-up 100%) and rent income received from B Smith

(R2 000 – receipt 109 issued).

5. Bought and paid for equipment from TT Traders, R20 000.

6. Paid for merchandise bought from TT Traders, R3 000.

Solution Cash receipts journal of Paddy Traders – March 2011 CRJ5

Doc Day Details Fol

Analysis

of

receipts

Bank Sales

Cost

of

sales

Sundry accounts

Amount Details F

CRR 2 Cash sales 7 000 7 000 7 000 3 500

CRR 4 Cash sales 8 000 8 000 4 000

109 B Smith 2 000 10 000 2 000 Rent income

17 000 15 000 7 500 2 000

Cash payments journal of Paddy Traders – March 2011 CPJ5

Doc Day Name of payee Fol Bank Trading

stock Stationery

Sundry accounts

Amount Details F

221 1 WW Wholesalers 2 500 2 500

222 3 Super Sellers 6 000 5 000 1 000

223 5 TT Traders 20 000 20 000 Equipment

224 6 TT Traders 3 000 3 000

31 500 10 500 1 000 20 000

In the CRJ, the “Cost of sales” column is used to

remind us that we need to record the cost of

goods sold, but the bank is not affected by this

amount (see posting instructions below).



4.5. Exercise

Using the transactions given below, record the relevant information in the cash journals of Cronje

Traders for June 2011. Close off the journals at the end of the month.

Note: The business uses a mark-up percentage of 75%.

June 2011

2. Received R75 000 from the owner, T. Cronje, to increase his investment in the business.

Receipt 101 issued.

3. Paid municipality for water and electricity with cheque 201, R200.

7. Purchased trading stock from Croall Suppliers, R4 500, and paid by cheque.

10. Cash sales according to cash register roll R3 500.

14. Cashed cheque to pay wages, R700.

15. Purchased stationery, R370. Cheque made out to Croall Suppliers.

18. Bought computer from Dlamini Suppliers for R5 000, paid by cheque.

20. Bought merchandise from DC Wholesalers and paid by cheque, R5 600.

25. Cash sales R5 250.

27. Bought stationery from Super Stationers, R760.

28. Cashed cheque to pay wages, R750.

30. Paid telephone account, R400.

Cash receipts journal of Cronje Traders – June 2011 CRJ3

Doc Day Details Fol

Analysis

of

receipts

Bank Sales

Cost

of

sales

Sundry accounts

Amount Details F

Cash payments journal of Cronje Traders – June 2011 CPJ3

Doc Day Name of

payee Fol Bank

Trading

stock Wages Stationery

Sundry accounts

Amount Details F

Fun Economic & Management Science Grade 9

32 Play to Learn!

4.6. Formative assessment (20 marks, 20 minutes)

Use the following information to draw up the books of first entry for Aitchison Art Supplies for

March 2011.

NB: Mark up is 50% on cost.

March 2011

2. C. Aitchison increased her capital contribution from R75 000 to R100 000 by EFT.

5. Purchased goods from Altona Wholesalers, R4 500, and paid by cheque 335.

7. Wrote out cash cheque to pay wages, R800.

11. Purchased new shelves and filing cabinets from Andrist Furnishers, R2 200 paid by cheque.

14. Cash sales of merchandise, R7 950.

17. Goods sold for cash, R5 250.

23. Paid Brass Motors for repairs to a vehicle, R350.

27. Received a cheque for R1 800 from K. Browne as rent for the month. Issued receipt 112.

28. Purchased goods from Cassim Suppliers, R6 700 paid by cheque.

Cash receipts journal of Aitchison Art Supplies – March 2011 CRJ4

Doc Day Details Fol

Analysis

of

receipts

Bank Sales

Cost

of

sales

Sundry accounts

Amount Details F

Cash payments journal of Aitchison Art Supplies – March 2011 CPJ4

Doc Day Name of payee Fol Bank Trading

stock Wages

Sundry accounts

Amount Details F

20



Part 3:

Introduction to economics

Economics is basically choice. People have many wants and needs, but there exist

only limited resources (ingredients to make the products to fulfil those needs).

Economics looks at how these choices are made. An understanding of basic

economics and the South African economy will help you to understand why

businesses exist and how they fit into the economic environment.


34 Play to Learn!

My notes



9. The economic cycle

9.1. Group activity

Each group will need: a bank note, pencils, large poster-sized piece of paper or card and marker

pens.

1. Form a group of about 4 learners.

2. Take out a bank note and put it on the table in front of the group (only one is needed for the

group).

3. Where did the note come from before you received it?

4. Where will it probably go when it leaves the classroom?

5. Think about and discuss this bank notes’ movements for the next week.

6. Show the life cycle of this bank note diagrammatically on your large page. Plan how you will

draw it here:


36 Play to Learn!

7. Present the life cycle of your bank note to the rest of the class.

8. As a class, discuss how money moves through the economy, based on all your ideas. Make

rough notes of the discussion.

Individual 1 2 3 4

Group skills

Does not

communicate with

others, makes no

real contribution

Makes a

contribution, but

does not work

well with rest of

group

Makes a contribution

and communicates with

group members

Makes a valuable

contribution and is able to

bring out the best in other

group members

Group 1 2 3 4

Ability to

identify

movements of

money in the

economy

No real movements

identified

Some basic flow

of money

identified

between

consumers and

business

Basic flows of money,

goods and services,

with factors of

production identified

Basic flows of money, as well

as financial and foreign

sector involvement identified

Creativity of

ideas and story

No creativity of

ideas

A basic story line

achieved, but

boring

A good story created

Story goes beyond basic

expectations and holds

interest of other learners

Presentation

skills Poor skills Basic vocal skills

Some eye contact,

good reference to

drawings as a visual aid

Excellent skills keep learners

interested throughout

presentation

TOTAL OUT OF 16



A basic economic cycle

in a closed economy

Although at first it may seem that money can only be used once, in fact it is used over and

over again, having a much larger effect on the economy than simply buying one item. This

“snowball” effect is why a small action by, for example, a consumer buying a bar of

chocolate, affects the whole economy. The money paid for the chocolate will be used to pay

the suppliers of cocoa, sugar etc., who in turn will pay their workers and so on.

The following diagram illustrates this flow of money, goods and services, as well as the factors

of production (raw materials, labour, capital and entrepreneurship) in the economic cycle:

BANKS

LOANS INVESTMENTS

SAVINGS LOANS

BUSINESS

CONSUMER

LABOUR

Savings and investment

Money that is saved at financial institutions by a number of individuals (in return for interest)

can be invested in large businesses. These businesses provide goods and services needed, as

well as providing jobs for people. This then stimulates trade, as people have money to spend

and there are products on which money can be spent.

GOODS

AND SERVICES


38 Play to Learn!

9.2. Class activity2

Your educator will need to prepare your resources before this lesson according to the guie in the

solution book.

1. Form a group of between 4 and 6 learners. You will represent a new country – choose a name

for your country.

2. Choose one person to be the entrepreneur and one to be the banker. Other group members

will be salaried employees. Each group member will start with 2 units of money.

Banker: You will receive additional money from the reserve bank (your teacher). Use this to lend

to your group members as they need it, but charge interest (you choose the rate). When they

deposit money with you, give them interest (you choose the rate). You may buy goods with

your own money, but keep in mind at all times the amount owed to the reserve bank – this is

not yours to spend!

Entrepreneur: You may buy goods from your supplier (your teacher) for 1 unit each, then sell

them to your other group members. You choose the price at which you sell. You may borrow

additional funds from the bank in order to buy more stock, but remember that you will be

charged interest. You may also buy your own stock with profits you make, but remember to

keep track of how much you still owe to the bank!

Salaried employees: You will receive a salary of 2 units every 5 minutes. You may choose what

you do with this – you may buy goods, save your money (earning interest), or even borrow

additional funds to buy more at one time (and be charged interest).

3. Start trading!

After playing the game

4. How many goods were you able to buy throughout the game?

5. Did you use the banks services, whether to invest or to borrow?

6. How did the interest affect how much you could have bought if you had not invested or

borrowed?

7. How did the bank make a profit?

8. How did the entrepreneur make a profit?

9. How did you solve the problem of wanting to buy goods from another country?

10. How did you decide on a fair price for each currency swapped?

2 For extension only – introduces foreign sector in open economy



The economic cycle in an open economy3

The foreign sector

Countries usually have different resources, resulting in the production of different products.

Because people naturally like variety, these products are traded between countries. Money

must be used to pay for these goods, but each country has a different currency. These

currencies are then swapped, so that countries can trade with each other. The currencies of

countries with goods that are either more valuable or more desirable, end up costing more

than the currencies of countries with less to offer.

When goods are exported, foreign exchange flows into the country, allowing the purchase of

foreign goods with that currency. When goods are imported, money flows out. More exports

than imports will result in a country’s wealth increasing, but too many imports and not enough

exports will mean that there is a negative cash flow. We then say that the country has a

deficit. We can now add the effects of the foreign sector into the economic cycle to show

the flow of money in an open economy:

BANKS

LOANS INVESTMENTS

SAVINGS LOANS

BUSINESS

CONSUMER

LABOUR

3 For extension only

FOREIGN

COUNTRIES

GOODS

GOODS

GOODS

AND SERVICES


40 Play to Learn!

9.3. Formative assessment4 (20 marks, 15 minutes)

1. Complete the crossword from the clues given below. (10)

Across:

2. A … economy involves only consumers, businesses and financial institutions within a country.

3. An open economy includes the … sector.

6. Countries have limited … available to produce goods and services to satisfy people’s needs.

9. The cost of one currency expressed in terms of another is known as the … rate.

10. Currency used in Japan.

Down:

1. This is both a measure of value and a means of exchange.

4. The … cost is the cost of choosing to make one product at the expense of another.

5. This refers to how efficiently available resources are used to produce products and services.

7. As South Africa becomes more competitive, we will be able to … more products to other

countries.

8. A good indication of economic growth is the gross … product of a country.

1.

2.

3. 4.

5.

6.

7.

8.

9.

10.

4 For extension only



2. A slab of Swiss chocolate costs CHF2,50 (Swiss francs) in Switzerland, but South Africans are

willing to pay R22 for the same slab (excluding transport and import duties).

2.1. What is the current exchange rate of Rands to Swiss francs? (2)

2.2. Which is the stronger currency? (1)

2.3. Suggest TWO ways in which Nestle’s South African factory could improve its productivity in

order to become more competitive. (4)

2.4. Explain why it is in South Africa’s interests to export rather than import chocolate. (3)

20

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