Lesson Note on Business Studies JSS 1 Second Term
Business Studies Lesson Notes for JSS1 Second Term – Edudelight.com Lesson
SCHEME OF WORK BUSINESS STUDIES JS 1 (BASIC 7)
WEEK TOPIC
1. Production – Meaning of Production, Types of production: industry – Extractive manufacturing and constructive industry. Commerce- Trade, Aids to Trade, Services. Effects of Production on the Environment/Society
2. Factors of production: land, labour, capital, entrepreneur and importance of each.
3. Forms of business organization: Types of business organization – Sole Trade/sole proprietorship, partnership, limited liability companies, cooperative society, advantages and disadvantages of each forms of business organization
4. Relationship between producers and consumers.
5.Insurance: advantages and disadvantages of insurance
6. Methods of Buying: sample method, inspection method, description method, auction method.
7. Trade: Meaning, Home and foreign trade, visible import and export, invisible import and export.
8. Double entry bookkeeping: meaning of double entry, double entry treatment of asset, double entry treatment of liability, double entry treatment of expenses, meaning of journals, types of journals, meaning of ledgers, classes of ledger, classification of accounts: real, personal and impersonal
9 Revision
10. Revision
11 – 12 Examination
WEEK 1
Topic: PRODUCTION
CONTENT: 1. Meaning and Forms of Production
2. Factors of Production
Sub-Topic 1: Meaning and Forms of Production
Production could be defined as any human activity that involves the making of physical goods and provision of services for the satisfaction of human wants. It is also seen as creation of utilities, utility means the ability of goods and services to satisfy human wants.
Forms of Production
There are three forms of production namely primary (extractive industry), secondary production (manufacturing and constructive industry) and tertiary production (commercial and personal or professional services).
Primary Production (Extractive Industry)
This type of production involves the extraction of raw materials or tapping and harnessing of natural resources from the land, sea and atmosphere. It includes farming, fishing, hunting, mining, quarrying, oil drilling etc. This form of production is referred to as primary production.
Secondary Production (Manufacturing and Constructive Industry)
This is the process of converting of raw materials or primary products from the extractive industry into finished or semi-finished goods. This class of production includes furniture making, road construction, bridges, paper milling, food processing, car production, chemical, textile etc.
Tertiary Production (Commercial and Professional Services)
It is made up of those who render commercial and professional services to satisfy other people. The help commercial services help to bring the raw materials, finished or semi-finished goods to those who need them (the users). Such services include, trading, banking, advertising, warehousing, insurance, transportation and communication. The professional services which are equally known as direct or personal are services provided or rendered directly or indirectly by people to give satisfaction to those who want them. These are services like teaching, catering, tailoring, hair dressing etc.
Evaluation:
1. What is Production?
2. State the three forms of production.
WEEK 2
Date:……………………
Topic: Factors of Production
The term factor of production is defined as all the visible and invisible resources
that are combined together for the purpose of production of goods and services. There are four factors of production.
(a) Land: Land refers to gift of nature or all the natural resources available, applied and used for production without the help of a man. It includes the fixed natural land and other natural resources such as water, forest, mineral deposits etc. The reward for land is rent.
(b) Labour: Labour means all human efforts physical or mental, skilled or unskilled directed toward the production of economic goods and services. The reward of labour is wages and salaries.
(c) Capital: These are wealth used for the production of further wealth. Capital consists of machinery and equipment, buildings, motor vehicles, tools, raw materials and money. The reward for capital is interest.
(d) Entrepreneur: This is a factor that organizes and coordinates the human and material resources in the production of goods and services. The entrepreneur is the initiator, innovator, risk-bearer, and decision-maker. These functions distinguish entrepreneurship from routine managerial activities. The entrepreneur gets profit as a reward for his services.
Evaluation:
1. Explain the term factors of production
2. Explain the four factors of production.
Reading Assignment:
Business Studies for Junior Secondary School Book 1 produced by Cross River State Government Chapter 5 pages 26-27
Weekend Assignment:
Objectives:
1. The first form of production usually referred to as primary production consists of
(a) manufacturing industry (b) extractive industry (c) commercial services
2. There are ——- forms of production (a) 2 (b) 5 (c) 3
3. ———- as a factor of production is a free gift of nature.
(a) land (b) capital (c) labour
4. The reward for capital is (a) rent (b) interest (c) profit
5. The factor of production that organizes or coordinates other factors is
(a) Entrepreneur (b) capital (c) labour
Theory:
1. What is production?
2. Explain the factors of production.
WEEK 3
Date: ………………………….
FORMS OF BUSINESS ORGANIZATION – LESSON NOTE
CONTENT: 1. Types of Business Organisations
2. Advantages and Disadvantages of each of the Business Organisation
Sub-Topic 1: Meaning of Sole Trade
Meaning: Sole Trade is a business owned by one person. The size of the business may be large or small but it is important to note that it is owned by one man. Examples are restaurants supermarkets, Filing Station, Schools etc. The owner of the business is called a sole trader or a sole proprietor. Another name for sole trade is sole proprietorship.
Advantages and Disadvantages of Sole Trade
Advantages of Sole Trade:
1. It is easy to start.
2. The sole proprietor has a close contact with his customers and attends to them personally.
3. He takes all decisions affecting his business alone.
Disadvantages of Sole Trade:
1. The provision of capital and ability is limited.
2. The business ends when a sole trader dies.
3. He suffers and bears risks alone
4. If business fails, he may have to sell his personal property to pay the debt.
Evaluation:
1. State at least three advantages of Sole Trade
2. Identify at least three disadvantages of Sole Trade.
Reading Assignment:
Business Studies for Junior Secondary School Book 1 produced by Cross River State Chapter 7 pages 38-39
Partnership – Lesson Note
CONTENT: 1. Meaning of Partnership
2. Advantages and Disadvantage of Partnership
Sub-Topic 1: Meaning of Partnership
Meaning of Partnership: A Partnership is a business owned and managed by two or more persons who become partners by written agreement. The partnership act of 1890 and the companies Act of 1958 state that the maximum number of people who can form a Partnership is restricted to 20 persons while the minimum should be 2 persons. These partners share the profit or losses and the responsibilities of their business.
Types of Partnership: There are various types of partnerships as stated below:
(a) Ordinary Partnership: This is a partnership in which all members are held liable for the debts of the business. Partnership may be dissolved if one partner dies.
(b) Limited Partnership: This is a partnership with limited liability in that members will not be asked to contribute more money that the one used to start the business in case the business fails. For Partnership to become limited, it must be registered with the Registrar of Companies otherwise it will be treated as ordinary partnership.
(c) Active and Sleeping Partners: Partners who take part in running the business are active partners while those who do not take part in the running of the business are sleeping partners.
(d) Quasi or Nominal Partners: A quasi partner is not really a partner but may conduct himself in such a way as to make himself liable for the debts of the firm, even though he does not take part in sharing the profit of the business.
Advantages of Partnership:
(i) It has more capital than sole trading
ii Partners have different ability and talents therefore, each partner specializes in an aspect of business which he is best suited.
(iii) Partners meet to discuss matters relating to the firm
Disadvantages of Partnership:
(i0 Partners have unlimited liability for debts in case of business failure.
(ii) If one partner takes a wrong decision, it affects other partners.
(iii) Disagreement among partners causes confusion in the business.
(iv) Partnership comes to an end with the death or resignation of a partner.
Evaluation
Objectives:
1. Another name for Sole Trade is ——– (a) Sole Proprietorship (b) Partnership (c) Restaurant
2. Sole Trade is the business of ———- (a) two people (b) two men (c) one person
3. The simplest and most common form of business organization is (a) Partnership (b) Sole trade (c) Filing station
4. One of the disadvantages of Sole trade is ———- (a) He takes all decisions affecting his business (b) He bears and suffers risk alone (c) he enjoys his profits alone
5. One of the source of capital to a sole trader is (a) easy to start (b) personal savings (c) members’ contribution
6. The minimum number of Partners in Partnership is (a) 5 (b) 2 (c) 4
7. The type of partnership in which all the members are held liable for debts of the business is —— (a) quasi partnership (b) Ordinary partnership (c) limited partnership
8. One of the sources of capital for partnership is —— (a) contribution of capital by members (b) personal saving (c) limited partners
9. The disadvantage of partnership is ———- (a) Wrong decision of one partners affect others (b) Losses are shared among partners (c) it has more capital than sole trading
10. All are advantages of Partnership except (a) Death of one partner may end the business (b) Responsibilities are shared among partners (c) It has more capital than sole trading.
Essay
1. What is Sole Proprietorship?
2. Mention all the sources of capital of sole trade.
3. What is Partnership?
4. Outline two advantages and two disadvantages of Partnership
5. Define Partnership.
6. Explain the following types of partnership: (a) ordinary Partnership (b) Quasi Partnership
Reading Assignment:
Business Studies for Junior Secondary School Book 1 produced by Cross River State Government Chapter 7 pages 39-41
Cooperative Societies
Meaning of Cooperative Societies
A cooperative Society exists when groups of workers, individuals, organizations, farmers or
Communities pull their resources together towards a common goal. The main purpose of the cooperative society is to:
(i) Sell goods and services to members at a cheap rate.
(ii) to do business together for profit purpose and share the profits among the members.
Types of Cooperative Society:
The common types of cooperative societies are:
(a) Producers Cooperative
(b) Consumers Cooperative
(a) Producers Cooperative:
Producers form a common association in order to sell their products in a uniform price instead of selling individually, e.g. producers of yam, garri, cocoa etc may form a cooperative society for the selling of their products.
(b) Consumers Cooperative:
In consumers’ cooperative, the members are consumers who contribute funds and buy goods in large quantities from the producers and sell in retail prices to members at a reduced and cheaper rate.
Advantages of Cooperative Society:
1. Members have equal rights and votes.
2. Prices are lower as they buy in bulk.
3. Benefits of repayment of capital to any member who withdraws.
Disadvantages of Cooperative Society:
1. Election of committee members may not lead to efficient business.
2. Calculation of dividends to members is always a problem.
3. Non-members may be reluctant to engage in marketing activities with the cooperative.
Evaluation:
1. What do you understand by the term Cooperative Society?
2. Mention three advantages of Cooperative society.
Reading Assignment:
Business Studies for Junior Secondary School Book 1 produced by Cross River State Chapter 7 pages 42-43.
Weekend Assignment:
Objectives:
1. What is the maximum of number of persons that can be admitted into the society? (a) No maximum (b) 20 (c) 30
2. Cooperative Society is managed by (a) Board of Directors (b) Committee of management (c) shareholders
3. The common types of cooperative societies are
(a) Sole Proprietorship and partnership (b) Young and old cooperative (c) Producer and Consumer Cooperative
4. In cooperative Society every members have equal rights and votes. True/False
5. The main purpose of cooperative society is to (a)buy goods for everybody (b) provide essentials services at cheaper rate (c) sell goods and services to members at a cheap rate
Limited Liability Company (Public Limited Liability Company)
Limited Liability Company:
A Limited Liability Company is a company in which the responsibility or liability of members for debts of the company is limited to the capital they have contributed or agreed to contribute. The private property of members are excluded, and all that members lose if the company fails is the money they have contributed. It is formed and registered under the law known as the Company Act. When a company is formed and registered with the Registrar of Companies, it is said to be incorporated.
There are two types of Limited Liability Company namely, Private and Public Companies.
Public Limited Liability Company:
A Public Limited Liability Company is a business unit that carries on business to make profit
for its owners. Examples are Nigerian bottling company Ltd., Total Nigeria Limited, First Bank of
Nigeria Plc. It is owned by Shareholders and managed and control by Board of management.
Advantages of Public Limited Liability Company
- It can raise money from the public through issuing of shares and debentures. This
enhances the company expansion.
2. It is a legal entity because it can sue and can be sued.
3. The company’s properties are different from that of its owners.
4. It enjoys continuity because it has perpetual life. The company can only be wounded voluntarily or on the order of a law court.
5. Share holders cannot lose more than the value of their shares. This is because the company enjoys limited liability.
Disadvantages of Public Limited Liability Company:
1. Shareholders have little say in the running of the company
2. It does not enjoy privacy. It annual account must be published in the Newspaper for the public to see.
3. It suffers from double taxation. The net profit of the company is taxed and the dividends of the shareholders are also taxed.
EVALUATION
1. What is a limited liability company?
2. State 3 advantages of public limited liability company
READING ASSIGNMENT
Business studies for junior secondary schools, new edition book 1 by O. A. Lawal Chapter 5 pages 23-24
Limited Liability Company (Private Limited Liability Company)
CONTENT
1. Private Limited Liability Company (Meaning)
2. Advantages, Disadvantages and Comparison between Public and Private companies
Meaning of Private Limited Liability Company:
A private limited liability company is a profitable making business with few shareholders and no open market for its shares. Examples of private limited liability company are Newswatch Communication Ltd., Ekene Dili Chukwu Transport service Ltd., JIMBAZ Construction Company Ltd. etc.
Advantages of Private Limited Liability Company
(i) They enjoy privacy.
(ii) Their annual report and accounts are not required by law to be published, except for
Taxation.
(iii) Management and control is less complex than in public limited company. Its
management structure is simple.
Disadvantages of Private Limited Liability Company
(i) Shares cannot be issued to the public.
(ii) Capacity to raise external finance to expand business is limited.
(iii) Transfer of shares to others is made difficult.
- Comparison between the Private and Public Limited Liability Companies.
| S/N | PUBLIC LIMITED COMPANY | PRIVATE LIMITED COMPANY |
| 1. | Minimum number of members is seven and has no maximum | Minimum number of members is two while the maximum is fifty. |
| 2. | Shares are offered to the public. | Shares may not be offered to the public. |
| 3. | Shares are easily transferable. | Shares are not transferable. |
| 4. | Account is publish to the public | Account is publish for the information of Registrar of companies. |
EVALUATION
1. Define Private Limited Liability Company
2. State the comparison between the public and private companies.
3. Outline the 4 advantages and the 4 disadvantages of Private companies.
READING ASSIGNMENT
Business studies for junior secondary schools, new edition book 1 by O. A. Lawal chapter 5 pages 24-25
WEEKEND ASSIGNMENT
1. The maximum number of members in a private limited liability company (a) 50 (b) 100 (c) 10
2. Private liability company enjoys. (a ) enough capital (b) privacy (c) non-Payment of tax (d) transfer of shares to others.
3. The following are disadvantages of private limited liability company except (a) not listed in the stock exchange (b) cannot sell shares (c) management structure is simple.
4. The minimum number of owners needed toform a public limited company
Is (a) seven ( b)two (c) fifty (d) eight
5. Which of this can sell shares to the public (a) Sole proprietor (b) Private
Limited company (c) Public limited company
6. The maximum number of owners a public Limited liability company is (a) twenty (b) two (c) no maximum.
7. Public Limited Liability Company is owned by —————— (a) government (b) politicians (c) Shareholders
8. The major source of capital for Public Limited Liability Company is
(a) selling of shares (b) personal savings (c) partnership contribution
THEORY
1. State 3 advantages of private limited liability company
2. Enumerate 3 disadvantages of private limited liability company
WEEK 4
TOPIC: RELATIONSHIP BETWEEN PRODUCERS AND CONSUMERS
Producers produce something and consumers consume something.
Using food for instance, a producer produces food. A consumer consumes food produced by the producer.
Relationship between the producers and the consumer is achievable through distribution.
Meaning of distribution
Distribution is the process of moving a product that has been manufactured from the manufacturer to the final consumer. This process is achievable using various channels knows as channels of distribution.
Channels of distribution
Channels of distribution is a chain of movement made, starting from the manufacturer to the wholesaler, down to the retailer before getting to the final consumer.
The following makes up the channels of distribution:
- The producer or manufacture
- The wholesalers
- Retailers
- consumers
The producer or manufacturer
The producer is someone or company who manufactures something.
The Wholesaler
The wholesaler is a trader who buys goods in large quantities or in bulk from the manufacturers and sell them in small quantities to the resellers.
Wholesalers can also be called merchants, dealers or distributors.
The Retailer trade
The Retailer trade involves a person. A retailer is a person who buys goods from the wholesaler and sell them to the final consumers.
The consumer
The consumers are the people who uses goods or products of the manufacturer.
The consumers are you and I.
Evaluation
Objectives
- Wholesaler sell goods to the consumers through the ______ (a) Retailer (b) wholesaler (c) sale person.
- Manufacturer relate with the consumer through _________ a) Retailer (b) wholesaler (c) channels of distribution.
- One of the following is not a channel of distribution a) Retailer (b) wholesaler (c) Sale representative.
- Who among the following is a consumer a) only Retailer (b) only wholesaler (c) everybody.
- One of the following is not a name called by the wholesaler a) Distributor (b) merchant (c) sale person.
Theory
- Who is a Producer?
- List the channel of distribution
WEEK 5
TOPIC: INSURANCE
Insurance can be defined as the transfer of risk of life or property(called the insured) from one person that insures himself to another person. i.e the insurance company (called the insurer) in return for a fixed advance payment (called premium) which the insured has made to the insurer.
Insurance helps individual or business enterprises in cases such as fire incidents, vehicle accidents, loss or damage of properties, theft, flood.
A person can insure himself, family, properties, business organization.
If any of the person property is lost or damaged, the insurer will pay the insured an agreed sum of money called Indemnity. If life is lost, an agreed sum of money will be paid to the insured’s next of kin in as much the insurer pays his premium regurlary. The insurer is bound under the law to pay the required indemnity if there any problem with the insurer.
Insurance is an agreement or contract between the insured and the insurer. The agreement between the insured and the insurer is called the insurance policy.
Insurance companies in Nigeria
Insurance companies are divided into two. They are life and non-life insurance companies.
Life insurance contract are called life assurance policies. Life assurance is a contract between the person who takes out the policy called the assured and the assurance company (called assured). Life assurance companies are now about twenty –six (26). The capital base of life assurance companies is about two billion naira (N2b).
Examples of life assurance companies are ALLCO assurance PlC, GNI life Assurance Ltd, IGI life Insurance Company Ltd. Union Life Assurance, mutual Benefits Life assurance company etc.
The non lif insurance companies carry out other forms of insurance functions. There are about fourty –three(43) non – life insurance company in Nigeria. A non –life insurance company has a capital base of three billion naira (N3b). Examples are Cornerstone Insurance plc, Crusader Insurance Plc. Some Insurance companies perform both life and non life assurance function.
PROCEDURE FOR TAKING AN INSURANCE COVER
A person or organization will complete a proposal form, the information in the form will be used by the insurance company to determine the amount of money or premium that will be paid.
Premium is the money paid monthly, quarterly or yearly to the insurance company.
Policy Agreement: it is a document that defines the risks covered and the period which protection is given. Policy agreement can also be used as collateral for taking loan from a commercial bank.
Differences between what can be insured and what cannot be insured
Any losses as a result of flood, storm, theft, fire, burglary or accident can be insured while the losses which occur due to no fault of the person concerned are called insurable losses. Example if thieves breaks into a warehouse of a manufacturing company and remove a large quantity of finish goods, the losses suffered in that case are not due to the fault of the company and so, the risks are insurable.
Risk that can be insured are
- Fire or flood accident
- Robbery, theft and Burglary
- Factory or inductrial accidents
- Motor, train or plane accidents
- Other types of accidents
Risks that cannot be insured
The following are uninsurable risks:
- Losses due to war damages
- Losses of too small items
- Losses due to gambling
- Change in taste and fashion
- Loss of profit due to bad management and competition
TYPES OF INSURANCE POLICIES
The following are different common types of insurance policies in Nigeria:
- Fire insurance
- Burglary/ theft insurance
- Marine insurance
- Motor vehicle insurance
- Agricultural insurance
- life assurance
Fire insurance
This deals with the protection against fire hazards. If there is fire incidents, the insurance companies concerned will compensate the owner of such properties. People are advice to insure their properties against fire hazards in order to minimize their own losses.
Burglary or theft insurance
It provides protection against loss or damage to property (goods in shops or warehouse, home furniture, office equipment) of the insured as a result of burglary or theft.
Marine Insurance
It is one of the oldest form of insurance. It covers loss or damage to goods carried by the ships and boats and also the ships and boats. Marine insurance deals with insurance of the ship and Cargo (goods) insurance.
Motor Vehicle Insurance
It is compulsory for a vehicle owner to take an insurance policy for his vehicle in Nigeria. Vehicle insurance policy can be a comprehensive insurance policy or a third party policy. This type of insurance is the most popular and commonest type of insurance in Nigeria.
Comprehensive insurance policy: it is concerned with all damages, losses as a result from fire, accident, injury to the owner or third party of the insured vehicle.
Third party insurance policy
It provides protection for the third person in respect of any injury or damages done to him by the insured vehicle.
Agriculture insurance policy
It covers loss of or damage to crops, livestock, etc., in the event of fire, flood, pest invasion, drought and epidemic. This is the newest insurance policy introduced by the Fedaral government.
Some of the Things that can be insured includes beans, rice, cassava, livestock and poultry items.
Life assurance
Life assurance policy protect against loss caused by death of the assures. It reduces the financial hardship which the death of the family may cause to the family.
The two type of life assurance are Whole life policy and Endowment assurance policy
Whole life assurance policy: it is a provision made to alleviate the financial burden caused by death of the assured on his wife, children and relation.
Endowment assurance policy
This policy provides that the assured at the expiration of the agreed period can claim the sum assured. Also the family of the assured can claim the sum assured if the assured dies before the end of the agreed period.
This assurance policy help to Provide income for the family of the assured after his death and it is also a means of saving part of one’s income while alive.
Distinction between insurance and assurance
Insurance deals with an event that may or may not happen. For example and insured car may or may not be stolen.
Assurance deals with event that must happen; such as death.
Advantages of taking insurance cover
- Life assurance policy provides an income or economic security for the dependents of the assured after his death.
- Accumulated funds by insurance companies are made available to the capital market for long term investment.
- Insurance policy can be used as security for loan in the bank.
- It provide protection for business assets and personal property against the risk of flood, fire, accident, theft, etc.
- Insurance transfer risks and entitles the insured to compensation in the event of loss or damage.
Disadvantages of taking an insurance cover
- Some insurance company usually dodge payment of compensation to the insured when it is necessary to do so.
- Some insured persons occasionally withhold some important facts when taking an insurance cover.
- Some insurance brokers usually creates a job between the insured and the insurance company in remitting to the company.
EVALUATION
Objectives
- The following risks are insurance except (a) fire disaster (b). sudden death (c) robbery (d) loss of profit due to intense competition
- The major importance of insurance to an individual or a business is (a) To facilitate bank loan (b) To avoid fraudsters (c)to promote the sale of new products (d) to provide relief for an unexpected loss.
- Which one of this is not a principle for which insurance is based? (a). insurance interest (b) subrogation (c) utmost good faith (d) peaceful resolution.
- Only one of these can be insured with two insurance companies (a) cars (b) Life (c) Bank business (d) house furniture.
- One of the following is not an insurance policy (a) vehicle insurance (b) fire insurance (c) clock insurance (d) theft insurance
Theory
- What is insurance
- Mention three advantages of insurance
WEEK 6
TOPIC: METHODS OF BUYING AND SELLING
Buying is the acquisition of goods and services by paying a certain amount of money as price.
Buyers and sellers meet in the market. The buyers exchange his money with goods from a seller who is ready to part with his goods at a price.
Sometimes the buyers negotiate the price of goods with the seller before buying the goods.
Methods of Buying and selling
There are four methods of buying goods. They include
- Buying by description
- Buying by sample
- Buying by inspection
- Buying by auction
Buying by Description
Some goods are sold by description because such goods are not allowed to be tested or open buy the consumer before buying.
The buyer have to look out for the description before buying such goods.
Example of such goods are soft –drinks, medicine, ice –cream etc. Buying by description can also be called buying by grade.
The seller has to give a good description and assurance of guarantee that the products will be taking back if it does not meet the consumer’s satisfaction.
Some sellers describe their goods in the following ways
- They state the quantity or weight of their products. E.g. a tin of milk, a kilogram of semovita.
- Some grade their products according to quantity or size. They can be graded alphabetically (A, B, C) or numerically (1, 2, 3). The prices of products depend on the grade.
Buying by sample
In This type of buying, the sellers allows the consumer to take the product before payment. This is called buying by sample.
Sometime the seller can allow the buyer to use the products some days or weeks before paying.
Examples of goods sold by samples are clothes, fruits, garri, rice, soap, detergent, biscuits etc.This is a common method of selling new products.
Buying By inspection
In this method, goods are displayed for inspection in the open-air markets, stalls and shops. A buyer see the goods he wants to buy and inspect them, in some cases the buyer can taste what he want to buy. Examples of goods sold are radios, watches, television, phones, books, building materials, shoes, vehicle, etc.A buyer is free to buy or not after testing
Most goods in Nigeria make use of this method, therefore it is the most popular method of buying in Nigeria.
Buying by Auction
In this method, there is usually a large number of bidders and the goods will be sold to the highest bidder; that is, the person who offers the highest price will buy the goods. The buyers can inspect the good before buying.
The public is informed of the place and the type of goods, the date and the name of the auctioneer and the mode of payment.
The auctioneer is the person who has the legal authority to sell the goods.
Examples of good sold by auction are excess raw materials of company, unclaimed goods at the ports or the property of a debtor to an individual bank.
EVALUATION
- ________ is the acquisition of goods and services by paying a certain amount of money as price (a)giving (b) selling (c) Buying
- The following are methods of buying and selling except one (a)Picking (b) sample (c) inspection
- _____ is a buying and selling method, where the highest bidder buy the goods (a)sample (b) auction (c) inspection
- Another name for description method of buying is called (a)giving (b) looking (c) grading
- We most popular buying and selling methods in Nigeria is (a)Discription (b) inspection (c) sample
Theory
- Explain buying and selling.
- Discuss any two buying and selling methods.
WEEK 7
TOPIC: TRADE
Meaning of trade
Trade is the act of buying and selling of goods and services, which involves the buyer and the seller of goods and services.
It is also the exchange of goods and service between the buyer and the seller at agreed price within a particular time.
The means of exchange is Money.
Goods being sold may include writing materials, electronic gadgets, agricultural materials, books etc. while services such as services of the accountant, the work of a banker.
Importance of trade
- It provide food, shelter, and clothing for the people.
- It help the society to grow.
- It improves one standard of living.
- It is a means of ease exchange of goods and services.
- It make a good transport system possible as this is needed for trading.
FORMS OF TRADE
We have two forms of trade; they are home and foreign trade
Home trade
Home trade is the buying and selling of goods and services within the country. It make use of our country’s currency. Home trade can also be called domestic trade. Home trade can be further classified into wholesale and retail trade.
The wholesale trade
The wholesale trade may involves a person or company called the wholesaler. A wholesaler is a trader who buys goods in large quantities or in bulk from the manufacturers and sell them in small quantities to the resellers.
Wholesalers can also be called merchants, dealers or distributors.
A wholesaler is the middle man that connect the retailer to the manufacturers or producers.
Functions of the wholesalers to the manufacturer
- The whole sellers buy in large quantities from the manufacturer and distributes the goods in small quantities to the retailers.
- They provides additional source of capital to the manufacturer by paying for goods ordered in advance.
- They market and advertise products for the manufacturers.
Functions of the wholesalers to the Retailer
- The wholesaler sell goods in small quantities to the retailer.
- He sometimes sell in credit to the retailer.
- He provides transport facilities for the retailer to convey goods from the wholesaler warehouse to the retailer shop.
- wholesaler may send hid salesmen and expert to assist the retailer in execution of business.
The Retailer trade
The Retailer trade involves a person. A retailer is a person who buys goods from the wholesaler and sell them to the final consumers.
Functions of the retailer to wholesaler
- The retailers buys in small quantities from the wholesalers and sell to the consumers.
- He forms the link between the wholesaler and consumers.
- He moves the goods from the wholesalers warehouse to his/her shop.
Functions of the retailer to the consumer
- The reseller survey the need of the consumer or customers before buying goods from the wholesalers.
- He make buying easy for consumers by having shop, close to the consumers.
- He allows the customers to buy on credits.
- He enables customers to buy goods any time of the day by opening his shop from morning till night.
Foreign trade
Foreign trade is the trade between two or more countries. It can be called international trade.
Two or more currencies can be used. It may require the use of two official languages like English and French.
Foreign trade division
Foreign trade has three basic divisions. They include import, export and entrepot trade
- Import: import involves the bringing in of goods made in one country into another country. For example, Nigeria brings in electronic gadgets from china. Nigeria imports some raw materials and manufactured goods from developed countries such as Britain, America, Japan.
- Export: it is selling raw materials or finish goods made in one country to other coutries.
For example, Nigeria sells cocoa, crude oil, and timber to U.S.A, Japan etc.
- Entrepot: this is the re –exporting of goods imported from one country to another without any value added to it. For example, Nigeria imports cars from china and export to Ghana.
VISIBLE AND INVISIBLE TRADE
Visible Trade: Visible trade involves trading of goods which can be touched and weighed.
The product being traded could be a raw material such as coal, oil or wood, or the finished product, such as food, clothes, car, smartphone, machinery etc. Visible trade refers to the exchange of physical goods in every stage of production. They are also known as international merchandise transactions.
Visible Trade consists of
- Visible exports: Selling of tangible goods which can be touched and weighed to other countries.
- Visible imports: Buying of tangible goods which can be touched and weighed from other countries.
The difference between visible exports and visible imports is known as Balance of Trade (BOT).
Invisible trade: is the trade which involves trading internationally with intangible or abstract items – things you cannot touch, usually referred to as services.
Invisible trade involves the import and export of services rather than goods. All types of services like services of shipping, banking, tourism, investment services, education, unilateral transfers etc.
Illustration of invisible trade:
If a Ghanian student comes to Nigeria to study, it would be invisible export for Nigeria as it is earning foreign exchange by providing educational services.
If a Nigerian citizen travels to Ghana for a holiday. It will be invisible import for Nigeria and invisible export for Ghana.
The difference between invisible exports and invisible imports is known as Balance of Invisible Trade (BIT)
Aids to trade
Aids to trade are the services that make trade easy to carry out.
Examples are Banking, insurance, advertising, warehousing, transportation.
MAIL ORDER BUSINESS
Mail-order business is a non-store retailing in which goods are sold through mail. Customers send written order to sellers asking to send goods as demanded. Then the seller sends the goods to the customers through mail or post offices. The customers cannot see the goods until they reach at their shops or homes. The customers get information, message and knowledge about goods through advertisements, booklets, catalogs , newspapers, posters, leaflets etc. Then they send order through mail for the goods they need or want. The sellers also send the goods to the customers through mail.
The sellers and customers cannot have apparent personal talks or contact between them. The sellers contact with their customers through mail. In this way, necessity of middlemen is eliminated. So, mail order business institutions can sell goods to customers at cheaper price through mail. The goods sold out through mail order business are generally newspapers, books, small equipment, miscellaneous goods, cloths, foods etc. including other lightweight goods.
FEATURES OF MAIL ORDER BUSINESS
features of mail order business can be described as follows:
1. Sale by post:In mail order business, purchase order is received through mail/post and goods are sent through mail/post. Payment of price for the goods is also is made by mail/post. It is said Value Payable Post (V.V.P).
2. Elimination Of Middlemen: This automatically eliminates middlemen. The producers themselves directly send goods, as ordered, to consumers.
3. Non-store retailing: Shop is not needed to operate this type of business. It does not need to keep stock of goods.
4. Effective advertisement: effective advertisement should be done to draw customers’ attention in this business. Catalog, price list and other information about goods should be sent to customers at different times in this business.
5. Selected goods: Only durable, standard and lightweight goods become suitable to sell or purchase through mail/post.
6. No personal contact: In this business, the seller or producer and buyer cannot have personal or apparent contact with each other. Contact and business is done only by mail/post.
Advantages of Mail order Business
Mail order system offers the following advantages. They are
- Less capital Requirement : Customers place orders by post. Goods are either received by value payable post (VPP) or by registered parcel. So, it is a direct method of selling products to ultimate buyers.
- A wide market : Modern mail order house finds no limit to the market range. It can establish branches at different places. The improvement in postal services has widened the market coverage.
- Unusual buying power: Large mail order houses buy in bulk.
- No risks of bad debts : a vast majority of the goods is sold for cash. Absence of credit system simplifies accounting records. The organization is relieved from the botheration of maintaining receivables.
- Efficient use of capital: After the orders are received, goods are mailed directly to the buyers. middlemen are avoided.
- Managerial specialization Routine matters are entrusted to subordinates. Matters of crucial importance alone are considered by the top management.
- Consumer convenience: Consumers get their products without going out for shopping.
Disadvantages of mail order business
Mail order business suffers from the following limitations:
1. lack of personal contact between the seller and the buyer.
2. There is scope for fraud, inconvenience due to delay, misunderstanding of customers, etc.
3. Mail order houses are confronted with the problems of numerous correspondence, customer complaints, damage in transit, return of articles, excessive operating cost, credit policies, etc.
4. In mail order business, wide distribution of catalogues is essential. Colorful catalogues are expensive and are to be printed in advance. Supplementary catalogues will have to be issued to announce price changes and new offers.
5. Buyers have to rely wholly upon catalogues to know about the goods. They cannot inspect the goods before buying them.
6. After sale service is not extended to customers.
7. Sometimes, the mail order houses charge high prices for the articles sold.
8. Articles requiring demonstration cannot be sold by mail.
EVALUATION
- The general means of exchange is _______ (a)Money (b) Naira (c) Dollar
- ______ is the act of buying and selling of goods and services, which involves the buyer and the seller of goods and services (a trade (b) shop (c) mall.
- Trade do not improve our economy(a)false (b) true (c) I don’t know.
- home and foreign trade are ______ (a)buying (b) selling (c) forms of trade.
- ______ trade involves trading of goods which can be touched and weighed. (a) Visible trade (b) invisible trade(c) import trade.
Theory
- Differentiate between visible and invisible trade.
- Mention three functions of the wholesaler.
WEEK 9
Double Entry book-Keeping
PREVIEW
- Meaning of double entry,
- Double entry treatment of asset
- Double treatment of liability,
- Double entry treatment of expenses,
- Meaning of Journal
- Meaning of Ledger
- Classes of ledger
- Classification of accounts: real, personal and impersonal
Meaning of Double Entry
The fundamental concept of accounting is that every business transaction in money or money-worth has two effects: the receipts of a benefit by one account and the giving of a like benefit by another account. Thus, if a value is given, it is also received. The meaning of this is that where there is a giver, there is also a receiver who is called a debtor. The first Golden Rule of bookkeeping therefore states that, you debit the receiver and credit the giver.
In the process of debiting the account receiving the value and crediting the account surrendering the value, you end up recording every transaction twice, once as a debit entry and again as a credit entry. In effect, every credit entry must have a corresponding debit entry, and every debit must have a corresponding credit entry.
| DR | CR |
THE DOUBLE ENTRY SYSTEM
The double entry system divides the page into two halves as shown above. Every business that is established must have assets, liabilities, and capital
An Asset is anything of value that is owned by a business. A liability is an amount owed by a business to others, while Capital is the total investment in a business.
Therefore, an account is opened for every asset owned by a business and every liability owed by the business. Each account has a separate title and page given to it
DOUBLE ENTRY TREATMENT OF ASSET
Examples: Olundi, a wood seller, started business on January 1 with N5000 in cash. He purchased the following to enable him run the business.
Jan 9. He bought furniture from Londa & Co. Ltd. For N2000 in cash
Jan 12. He bought office equipment from Banuna & Co. Ltd. For N1000.
SOLUTION:
Jan 1. B. Olundi started business with N5000 cash as capital. With this introduction of N5000 into the business, two accounts should be opened. The capital account gave the money and should be credited, while the cash account received the money and should be debited.
Jan 9. On the purchase of furniture from Londa & Co. Ltd. For cash, the cash account will be credited because the account gave out the money, while the furniture Account will be debited for receiving the value of N2000.
Jan 12. He purchased office equipment from Banuna & Co. Ltd. The office account will be debited for receiving the value of N1000 while the cash account will be credited for giving the money.
CASH ACCOUNT
| DR CR | |
| Jan 1. To capital a/c 5000.00 | Jan 9.Furniture 2000.00 |
| Jan 10.Office equipment a/c 1000.00 | |
| 31 Balance c/d 2000.00 | |
| 5000.00 | 5000.00 |
| Feb 1 2000.00 |
CAPITAL ACCOUNT
Dr Cr
| N | |
| Jan1. To cash a/c 5000 |
FURNITURE ACCOUNT
Dr Cr
| N | |
| Jan 1. To cash a/c 2000.00 |
OFFICE EQUIPMENT ACCOUNT
Dr Cr
| Jan12 to cash a/c 1000.00 | |
DOUBLE ENTRY TREATMENT OF LIABILITIES
Liabilities are debts owed by a business to others. For example, if Mr. Akinola sells good to Mr. Adewale worth N10,000 on credit. Mr. Akinola must keep a record to show that there is some money due from Mr. Adewale. Credit transactions involve the opening of Personal Account. A personal account is an account which bears the name of the a customer or a supplier.
Example:
January 10 Bought on credit from Amadu Electronics Company, an electric Cooker worth N10,000
January 24 Sold on credit goods worth N25,000 to B. Solape
The two accounts will be opened for the credit transactions as follows
Dr Amadu Electronics Company Account Cr
| N Jan 10 Purchases 10,000 |
Dr Purchases Account Cr
| N | N Jan 31 Balance c/d 10,000 |
Dr B. Solape Account Cr
| N |
Dr Sales Account Cr
| N | N Jan 24 B. Solape 25,000 |
DOUBLE ENTRY TREATMENT OF EXPENSES
Expenses mean spending money belonging to a business to gain more money. It is recorded on the debit side of the books.
Example:
June 12 Vehicle expenses of N2000 paid by cheque.
Solution: Credit Bank account, and debit Vehicle expenses account
Dr Bank Cr
| N Jan 10 Vehicle expenses 2,000 |
Dr Vehicle Expenses Cr
| N |
Meaning of Ledger
A ledger is book used to record the weekly and monthly transactions from the journal entries. It is therefore called a book of second entry because transactions are transferred from the journal entries to it.
Ledgers are classified into:
- Real Account
- Personal Account
- Impersonal Account
CLASSIFICATION OF AN ACCOUNT
Accounts can be classified into two as stated below: Personal accounts and Impersonal accounts.
(a) Personal Accounts: These accounts refer to particular persons while accounts that are not personal are known as impersonal accounts. Examples of personal accounts are debtors and creditors accounts in any business.
(b) Impersonal Accounts: The accounts relate to intangible and material things. It is sub-divided into real accounts and nominal accounts.
(i) Real Accounts: This refers to things you can see physically such as the assets of a business which may be motor cars, furniture, buildings, lands, machinery etc.
(ii) Nominal Accounts: this deals with intangible things which may be revenue, losses, expenses, goodwill, profits and discounts.
Evaluation:
1. Describe the two sides of Account
2. Explain the two ways in which account can be treated.
Reading Assignment:
Business Studies for Junior Secondary School Book 1 produced by Cross River State Government, Chapter 8 pages 46-49.
Weekend Assignment:
Objective Questions:
1. The two sides of Account are ———– and ———–
(a) Debit and Credit side (b) right and left side (c) credit and right side
2. The type of account that deals with intangible and materials things is ——-
(a) Real account (b) Nominal account (c) impersonal account
3. The Debit side of account records ——— (a) value given out (b) value received (c) value taken
4. The following parties are interested in book-keeping except (a) shareholders (b) Directors and Managers (c) Farmers
Essay
- What is Double Entry in Book-Keeping?
- Show the accounts to be debited and those to be credited in the following cases:
- Paid rent by cheque
- Paid wages by cash
- General expenses by cash
- Enter the following transactions in the appropriate accounts in double entry form and show the balance as of 10th June
June 1 Started business with N200,000.00 in cash
June 3 A. Amadi loaned the business N50,000.00 and remitted the money by cash
June 5 Bought goods for resale on credit for N150,000 from B. Balogun
June 7 Bought bicycle for the use of the company and paid by cash N15,000.00
June 8 Cash Sales N20,000.00
June 10. Paid wages in cash N25,000.00
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