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EMS - Term 1 + 2 - Notes for Revision for Grade 8
Accounting (Germiston High School)
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THE ECONOMY : GOVERNMENT
GOVERNMENT
A Group of people who have the power to make and enforce laws
for a country.
DIFFERENT LEVELS IN THE SOUTH AFRICAN GOVERNMENT
1.
2.
3.
National Government
Local Government
Provincial Government
ROLES OF THE DIFFERENT LEVELS OF GOVERNMENT
1. Each Department is responsible for:
2. Implementing the laws and policies
3. Own Budget
4. President co-ordinates the work of the government and
provides direction and strategic support
Some Departments are so important they are situated at
National level.
 Defence
 Foreign affairs
 Trade and Industry
CONSITUTION – Sets the laws of the country
ROLES OF THE DIFFERENT LEVELS OF GOVERNMENT
NATIONAL GOVERNMENT
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 Consists of different parties that rule the country
 Make policies and laws about the rights and responsibilities of
the citizens of the country.
 Collect revenue from taxes and uses this money to provide
services and infrastructure.
NATIONAL GOVERNMENT IS MADE UP OF 3 DIVISIONS
1. National assembly
 Members of Parliament that represent the people
 Approve policies and laws and to monitor the work of
the executive and other departments.
2. Executive committee
 Co-ordinate the making of policies and laws
 Ensure proper management
3. Public Departments
 Departments that do the work for the government
PROVINCIAL GOVERNMENT
 9 Provinces, all have provincial governments
 Part of the government that is responsible for running their
province
 prepare their own Budget
 Responsible for the following
1. Finance
2. Tourism
3. Housing
4. Education
5. Health
6. Transport
THE NATIONAL BUDGET
Budget
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 A Plan for the future
National Budget
 Plans for money what will come in and what money will go out
for the country
NATIONAL / GOVERNMENT BUDGET
 National financial year 1 March – 28 February every year
 Called a Fiscal year
GOVERNMENT BUDGET DIFFERS FROM HOUSEHOLD
BUDGET
1. Approved by parliament, once there has been a vote on it, it
becomes law
2. Can spend more than it receives as it borrows money from the
world bank, Gap is known as budget deficit.
DIRECT TAXES
 Consist of personal taxes that each individual who earns
above a set amount has to pay income tax. Tax is collected in
two ways
1. Percentage of your income goes to the government as
PAYE (PAY AS YOU EARN)
2. People who earn commission, rent, interest pay
Provisional tax which is paid twice a year.
INDIRECT TAXES
 Taxes that are included in the price of goods that you buy.
1. VAT ( 15% Currently )
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2. Fuel Levies
3. Customs and Import Duties
4. Excise Duties ( Sin Tax)
HOW DOES THE BUDGET AFFECT ME ?
 How much the government spends on services and upgrading
the services in the country affects the quality and quantity of
services around me.
 Higher interest rates and taxes means there is less money for
our household to have for food etc.
RDP – Reconstruction and Development Programme
 Was created to distribute wealth and right the wrongs of the
past
 By building houses, communities and schools
FACTORS THAT DETERMINE LIFESTYLE




Amount of money earned
Level of education
Upbringing and decisions
Community in which you live
MODERN SOCIETY
 High standard of living
 Good infrastructure
SELF-SUFFICIENT SOCIETIES
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 Being able to provide for your own needs without needs from
other countries
 Focus on agriculture
 Not wealthy
IMPACT OF DEVELOPMENT ON THE ENVIRONMENT
 Over use of our natural resources
 Deplete Natural resources
 Water, Air and Noise pollution
SCARCE RESOURCES
 Means that you don’t have enough of something
 One example is Oil, south Africa is dependant on the oil prices
and ROE and that why the petrol and diesel price fluctuates.
SUSTAINABLE LIVING
 Lifestyle that can be sustained without exhausting our natural
resources.
ELECTRICITY
 Increase in greenhouse gas which effects the environment,
but society cannot grow and function without it.
SUSTAINABLE ECONOMIC DEVELOPMENT
 Capable of being maintained at a steady level without
exhausting natural resources or causing ecological damage
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CLIMATE CHANGE AND THE EFFECT ON THE ECONOMIC
DEVELOPMENT
Changes can be caused by
 Natural (Volcanic eruptions, tsunami)
 Man – release of green-house gases
Climate Change
 Long term shift in the climate of a specific location
UNEMPLOYMENT
 Refers to a number of people who would like to work but
cannot find work
 South African unemployment rate is very high, big drive by
the government to reduce unemployment rate.
FINANCIAL LITERACY
ASSETS
 Assets - Possessions or belongings they are items of value
and owned by a person
 You can sell these items
 Included in the calculation of a person wealth
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IMPORTANT: Expenses are not included in the calculation of
person wealth.
HISTORICAL COST RULE:
 Assets are always reflected at their original cost price
STATEMENT OF NET WORTH
 Deducting debt from the assets to get your true net worth.
DEBTS OR LIABILITIES
 Amounts owed by a person to other people,
 They are deducted when calculating a person wealth
NET WORTH
 Wealth of a person reflected by his assets less his liabilities
ASSESTS = LIABILITIES + NET WORTH
ACCOUNTING EQUATIONS
 BELONGINGS – DEBT = NET WORTH
 ASSETS – LIABILITIES = NET WORTH
IMPORTANT : Combine same items together on the statements
under one category example CD’s, Furniture
EXPENSES
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 Items that have no lasting value
 They have negative effect on a person net worth ( - )
 They are liabilities
INCOME
 Positive effect on a person net worth by increase in assets or
a decrease in liabilities.
EXAMPLE OF STATEMENT OF NET WORTH
MARK MHKIZE
STATEMENT OF NET WORTH ON 14 FEBRUARY 20.1
ASSETS
Cash on hand
Bank account
Clothes
Home theatre system
TOTAL ASSETS
90
735
1180
450
2455
NET WORTH
1655
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LIABILITIES
Loan from Father
Accounts payable
800
300
500
TOTAL NET WORTH &
LIABILITIES
2455
ACCOUNTING CONCEPT / RULE
THE DOUBLE ENTRY PRINCIPLE
 Every financial transaction will have a double-sided effect.
Clothes bought will change the Clothes ( + ) and the Bank will
change. (-)
 Always a + and – transaction to keep in balance
BUSINESS ENTITY RULE
 The financial affairs of a business are kept entirely separate
from that of the owner.
 The business has an identity separate from that of the owner.
IMPORTANT – In business Net worth is known as Owners Equity.
OWNERS EQUITY
 Owners investment in the business
 If the business would close down the owner would be paid
back his investment of the business.
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ASSETS – LIABILITIES = OWNERS EQUITY (NET WORTH) ( A-L=OE )
CAPITAL AND DRAWINGS
 Assets that are provided by the owner in starting up the
business is referred to as Capital
PROFIT
 This is calculated by taking all the income less the expenses.
DRAWINGS
 These are amounts withdrawn by the owner of a business,
which lead to a reduction in the Owners’ Equity.
SOURCE DOCUMENT
 Record of purchases made and sales made
DIFFERENT TYPES OF SOURCE DOCUMENTS
1. Receipt
2. Cash Register Tape ( Till Slip)
3. Cash Invoice ( Cash Slip)
4. Deposit Slips
5. Withdrawal slips ( cash, cheque, card)
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1. RECEIPT
 Printed in duplicate
 Proof of payment or purchase
 Must incl the following details
1. Name of person who paid the account
2. The date
3. Amount paid in words and figures
4. Signature of the person who received the
money
2. TILL SLIP
 Produced when goods are bought from a shop
 Copy is given to the customer and duplicate is kept
for the business
3. CASH INVOICE ( CASH SLIP)
 Business that do not have a till will issue a cash slip.
 Cash slips are prepared in duplicate
4. DEPOSIT SLIPS
 Used for when you deposit money into a bank
account
 Prepared in duplicate
5. WITHDRAWAL OF CASH FROM A BANK
 Withdrawing money from a bank
 Prepared in duplicate
 Bank keeps the original.
6. WITHDRAWAL OF FUNDS FROM BANK ACCOUNT BY CHEQUE
 Bank will issue its customer with a cheque book
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 Contains curtain number of cheques, numbered in
sequence
 He writes it out when he wants to withdraw money
 Cheque counter foil ( stub) on the left hand side is
record that stays in the book
 To withdraw cash under the pay you put cash
 If you paying somebody you put their name under
pay
 Valid for 6 months
 Restrictive crossing makes the cheque only valid for
that person
WITHDRAWAL OF FUNDS FROM A BANK ACCOUNT BY CASH
CARD
 Withdrawing money from an ATM
BANK STATEMENT
 Details of transactions for that bank account list
listed on the statement, money deposited and money
withdrawn as an entry
Bank Statement contains the following







Name and address of business
Account number
Opening balance
Deposits
Withdrawals
Bank charges
Closing balance
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BANK CHARGES
 Banks earn and income from the fees they charge
their clients
INTERNET BANKING
 Making payments electronically
 A receipt can be emailed or downloaded ( Proof of
payment)
BOOKKEEPING CYCLE
 Recording of all the financial information so that its available
to be used in the accounting cycle
ACCOUNTING CYCLE
 Study the information, use it to find results of how successful
we have been and to make decisions on how to go forward.
SUMMARY OF THE FLOW OF ENTRY IN THE
ACCOUNTING CYCLE
Transaction takes place
Document is printed to record the transaction
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These documents are summarzied into journals
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The Journals are totalled and transferred to the ledger
Trial balance
Financial Statements
1. TRANSACTION
 Buy goods
 Sell goods
 Borrow money from bank
 Pay back money
 Each transaction is entered on a document as proof that the
transaction has taken place
2. JOURNALS
 Journal is another name for a book
 Function of a journal is to summarize and keep a record of all
the documents for a month.
 Two types of journals
1. Cash receipt journal ( money received)
2. Cash Payments journal ( money paid)
GENERAL LEDGER
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 Bookkeeper will transfer the totals of the journals to a General
Ledger
 Each month the totals from the journals are entered in the
general ledger
TRIAL BALANCE
 Businesses make use of trial balance to check their accuracy
of the entries
INCOME STATEMENT
 Is the document that we use to show the profit
 List all incomes and expenses that a business has over a
period of time and work out the profit
BALANCE SHEET
 Document that businesses draw up to see what they are
worth
JOURNALS/SPREADSHEETS
 Journal is a system introduced to assist with the official record
keeping process.
 Journal often referred to as subsidiary journals
GAAP – General Accepted Accounting Practices.
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CASH JOURNALS
Two types of cash journals in grade 8
1. Cash Receipts Journal
2. Cash payments Journal
CASH RECEIPTS JOURNAL ( CRJ)
 All cash received is recorded in the CRJ ,
 examples where he can received cash – Services
Fees, Cash Sales
CASH PAYMENTS JOURNAL (cpJ)
 All payments are recorded in the cash payments journal,
examples of entries below
 Trading stock
 Cash paid to suppliers
 Cash payments to pay operating expenses
 Sundry charges (bank charges)
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Four Factors of production
1. Entrepreneur
2. Capital
3. Resources ( raw materials)
4. Labour
Capital
 Money needed or used to start a business
Capital can be divided into two main groups
1. Fixed – Do not change for at least a year
2. Working – Mainly stock of semi-finished goods and finished
goods that will be sold, Also money used to purchase any
factors of production.
Own Capital
 Own capital is money invested in the business by the
entrepreneur or owner that comes from personal savings
Borrowed Capital
 Money borrowed by an entrepreneur or business owner to
establish and run a business.
Labour
 Labour is the mental and physical efforts of people that is
used to produce goods and services.
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Labour divided into 3 categories.
1. Skilled Labour – These are people that have obtained a
qualification in a particular field and would be regarded as
skilled
2. Semi-Skilled Labour – refers to workers who have more
training and skill than unskilled labour but less than skilled
labour.
3. Skilled Labour – skilled worker is a worker who has some
special skill, knowledge or training. They may have attended
a college or university or technical school.
Fair employment Practices
 Workers can expect to be treated fairly at work.
Laws that have been passed to protect workers




Basic conditions of employment Act
Employment Equity Act
Skills Development Act
Unemployment insurance Act
Natural Resources
 Natural resources are naturally occurring materials that are
used for the production of goods and services.
Entrepreneurship
 Entrepreneurship refers to the person who takes the risk to
set up a business
Remuneration of the factors of production
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Labour – Wages
Capital – Interest
Land - Rent
Entrepreneurship – Profit
Productivity
Productivity refers to how much is produced, the greater the
production in comparison to the costs the greater the productivity.
The Economy Markets
Market – Market is a place where sellers offer goods and services
for sale.
Different types of markets
1.Physical Markets
Physical Market where goods are sold
2.Non-physical Markets
Online platform where goods are sold
3.Auction Market
One Seller and Several buyers who bid against each other
4.Market for intermediate use
Markets sell raw materials
5.Black Market
Illegal Market
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6.Knowledge Market
Deals in the exchange of information and knowledge.
7.Financial Market
Deals with the exchange of money to purchase financial products.
Financial Market
The different types of Financial Markets
 Bond Market
Seller sells a bond in exchange for money but enters into a
contract.
 Foreign Exchange Market
Market involved in buying and selling of foreign currency
 Predictive ( Future ) Market
Buyers and sellers are entering into an agreement today for
an exchange of goods and services in the future
Factor Markets
 Marketplaces where the factors of production are bought and
sold
Labour Market
 Labour market is where workers find work and employers find
workers
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