Web Reprint Bee g9

GRADE 9
Business and
Entrepreneurship
Education
(BEE)
n
Professor Vassen Naëck - Head, Curriculum Implementation,Textbook Development and Evaluation
BUSINESS AND ENTREPRENEURSHIP EDUCATION (BEE) PANEL
Dr Nazeerah Sheik Abbass - Coordinator, Senior Lecturer, MIE

Dr Vandana Tulsidas-Veeraragoo - Senior Lecturer, MIE
Dr Roodradeo Beefun - Senior Lecturer, MIE
Vikram Mootooree - Educator
Ravimun Gohee - Educator
Bibi Husna Noor Oozeer-Boodhoo - Educator
Nayaz M Emamaullee - Educator
Chandreeka Dreepaul - Educator
Jeetendra Dutt Narain - Educator
Marie Ingrid Allet - Educator
Marie Jocelyne Colin - Educator
Design
Nishi Manic - Graphic Designer, MIE
© Mauritius Institute of Education (2021)
ISBN: 978-99949-53-83-7
Acknowledgement
- Rajendra Korlapu-Bungaree (Senior Lecturer, MIE) for proof reading.
Consent from copyright owners has been sought. However, we extend our apologies to those we might have overlooked.
All materials should be used strictly for educational purposes.
ii
Foreword
With the Grade 9 textbooks, we now complete textbook production for Grades 1-9 in the context of
the Nine Year Continuous Basic Education (NYCBE) project of the Ministry of Education and Human
Resources, Tertiary Education and Scientific Research. The textbooks are designed in line with the
National Curriculum Framework (NCF) and the syllabi for Grades 7, 8 and 9 which are accessible on the
MIE website, www.mie.ac.mu.
These textbooks build upon the competencies learners have developed in Grades 7 and 8, based on the
philosophy of the NCF for the NYCBE. The content and pedagogical approaches allow for incremental
and continuous improvement of the learners’ cognitive skills using contextualised materials which
should be highly appealing to the learners.
The writing of the textbooks involved several key contributors, namely academics from the MIE and
educators from Mauritius and Rodrigues, as well as other stakeholders. We are especially appreciative
of comments and suggestions made by educators who were part of our validation panels, and whose
opinions emanated from long-standing experience and practice in the field.
The development of textbooks has been a very challenging exercise for the writers and the MIE. We
had to ensure that the learning experiences of our students are enriched through approaches which
appeal to them, without compromising on quality. I would, therefore, wish to thank all the writers and
contributors who have produced content of high standard thereby ensuring that the objectives of the
National Curriculum Framework are skilfully translated through the textbooks.
Every endeavour involves several dedicated, hardworking and able staff whose contribution needs to be
acknowledged. Professor Vassen Naëck, Head, Curriculum Implementation and Textbook Development
and Evaluation provided guidance with respect to the objectives of the NCF, while ascertaining
that the instruction designs are appropriate for the age group targeted. I also acknowledge the efforts
of the graphic artists who put in much hard work to maintain the quality of the MIE publications. My
thanks also go to the support staff who ensured that everyone receives the necessary support and work
environment conducive to a creative endeavour.
I am equally thankful to the Ministry of Education, Human Resources, Tertiary Education and Scientific
Research for actively engaging the MIE in the development of textbooks for the reform project.
I wish enriching and enjoyable experiences to all users of the new set of Grade 9 textbooks.
Dr O Nath Varma
Director
Mauritius Institute of Education
iii
Preface
Our children and young people are the backbone of the socio-economic development of our country.
To progress towards a balanced, active and productive lifestyle, young people must make sense of
the importance of their economic wellbeing and recognise that the aim of the BEE Curriculum is to
develop their knowledge and understanding of the dynamic business and economic environment in
which they live. The youth must also appreciate that being exposed to Business and Entrepreneurship
Education not only allows them to develop the knowledge, skills and values but also gives them the
right to shape their future economic wellbeing responsibly.
In line with the educational reform in 2016, we have the pleasure to present the Grade 9 Business
and Entrepreneurship Education textbook to the educators and our learners. This BEE textbook is
multidisciplinary and integrates three distinct key academic subjects of 21st Century Learning, namely,
Business & Entrepreneurship Education, Economics, and Accounting. Using the Framework for 21st
Century Learning, we have strived towards the holistic development of the learner by developing
teaching and learning materials that would create dynamic and exciting moments of teaching and
learning.
Though the textbook consists of fourteen units, it is purposely brief. Thus, essential concepts have
been covered without burdening students and educators with unnecessary detail at Grade 9 level.
Most importantly, it prepares learners for the National examinations at the end of the year.
Whether the learner is assisted by the teacher in the classroom or opts for independent learning, both
ways can be highly interesting. The concepts are presented in simple and straightforward manner
and are all followed by easy to more challenging activities. In every unit, the learners’ competency
is assessed through MCQs, true/false statements, short-answer questions, matching exercises, fill-in-
the-blanks exercises, and short case studies. Additional practice questions are included at the end of
each unit.
The array of units in the Grade 9 textbook has been mindfully chosen to ensure that learners are
exposed to important concepts before they move to upper secondary classes, either in the same field
of study, or any other. At this level, BEE expose learners to knowledge and understanding of business,
economics and accounting, and facilitates the development of decision-making and critical thinking
skills.
A sound knowledge of BEE fundamentals is needed for success. We are confident that the BEE
textbook will enable young learners to acquire and enhance their business skills and develop an
entrepreneurial spirit.
Educators are encouraged to use active methods of engaging students to enhance their creativity
and innovative skills. We wish both teachers and learners success.
The Authors
iv
Table of contents
Unit 1 Business organisations 1
1.1 Forms of business organisations 2
1.2 Company 3
1.2.1 How to set up a company 3
1.2.2 Features of a company 6
1.2.3 Advantages of a company 7
1.2.4 Disadvantages of a company 7
1.3 Cooperatives 9
1.3.1 How to set up a cooperative 9
1.3.2 Features of a cooperative 9
1.3.3 Advantages of a cooperative 10
1.3.4 Disadvantages of a cooperative 10
1.4 Franchise 11
1.4.1 How to set up a franchise 12
1.4.2 Features of a franchise 13
1.4.3 Advantages of a franchise 13
1.4.4 Disadvantages of a franchise 13
1.5 Selecting the right business organisation for my enterprise 16
Unit 2 The entrepreneur as a leader 19

2.1 The entrepreneur 20
2.1.1 Functions of an entrepreneur 20
2.1.2 Responsibilities of an entrepreneur 21
2.1.3 Qualities of a leader entrepreneur 22
2.2 Stakeholders 23
2.2.1 Roles and objectives of stakeholders 23
2.3 Managing risks in my enterprise 24
2.3.1 Types of risk 24
2.3.2 Dealing with risks 26
Unit 3 Entrepreneurial skills 29

3.1 Communication 30
3.1.1 Communication process 30
3.1.2 Effective communication 32
3.2 Importance of effective communication in an enterprise 33
3.3 Forms of communication in an enterprise 34
3.4 Internal and external communication 36
3.5 Conflicts in an enterprise 37
3.5.1 Resolving conflicts in an enterprise 37
Unit 4 Marketing 41
4.1 Marketing 42
4.1.1 Selling vs marketing 42
v
4.2 Knowing your market 43
4.2.1 Market research 44
4.3 Elements of Marketing 45
4.3.1 Product 45
4.3.2 Price 47
4.3.3 Promotion 48
4.3.4 Place 50
4.4 Entrepreneurs and E-marketing 52
4.4.1 Methods of E-marketing 52
4.4.2 Importance of E-marketing 52
Unit 5 Business plan 57

5.1 Business plan 58
5.2 Uses of a business plan 58
5.3 Components of a business plan 60
Unit 6 Demand & Supply 65

6.1 The market 66
6.2 Demand 67
6.2.1 Law of demand 68
6.2.2 The demand curve 69
6.2.3 Factors affecting demand 71
6.2.4 Movement along the demand curve 72
6.2.5 Shift of the demand curve 73
6.3 Supply 75
6.3.1 Law of supply 75
6.3.2 The supply curve 76
6.3.3 Factors affecting supply 78
6.3.4 Movement along the supply curve 79
6.3.5 Shift of the supply curve 80
6.4 Equilibrium point 82
Unit 7 Money & Banking 87

7.1 Money 87
7.1.1 Forms of money 88
7.1.2 Characteristics of money 90
7.1.3 Functions of money 91
7.2 Banks 93
7.2.1 Commercial Banks 93
7.2.1.1 Functions of commercial banks 93
7.3 Central Banks 94
7.3.1 Functions of Central Banks 95
vi
Unit 8 Spending, Savings and Borrowing 97
8.1 Spending 98
8.1.1 Factors affecting spending 100
8.2 Savings 102
8.2.1 Factors affecting savings 102
8.3 Borrowing 103
8.3.1 Factors affecting borrowing 104
Unit 9 International trade 107

9.1 Trade 108
9.2 Home trade and International trade 109
9.2.1 Home trade 109
9.2.2 International trade 110
9.3 Exports and Imports 110
9.3.1 Exports 110
9.3.2 Imports 111
9.4 Importance of trade 111
Unit 10 Recording business transactions in the ledger 113

10.1 Recording business transactions 114
10.2 Recording cash transactions 115
10.3 Recording bank transactions 118
10.4 Recording credit transactions 123
Unit 11 Balancing of accounts in the ledger 133

11.1 Steps to balance ledger accounts 134
Unit 12 Trial Balance 141

12.1 Trial Balance 142
12.2 Format of Trial Balance 143
12.3 Preparing the Trial Balance 144
Unit 13 Income Statement 155

13.1 The Income Statement 156
13.2 Format of Income Statement 156
13.2.1 Trading Account 157
13.2.2 Profit and Loss Account 160
13.3 Preparing the Income Statement 163
Unit 14 Statement of Financial Position 169

14.1 Statement of Financial Position 170
14.2 Assets and Liabilities 170
14.3 Format of Statement of Financial Position 175
14.4 Preparing a Statement of Financial Position 176
vii
Learner's Goal Checklist
Educators may print this Learner's Goal Checklist for their student to evaluate the different
levels of learning.
Student's name: _____________________________ Class: _________________________
Topic ________________________________________________________________________
What I know and understand about the above topic?

1
2. I can describe or apply the above topic giving examples as follows:

2
I learnt that...
3
I evaluate my learning by putting a ( ) in the appropriate box below:
viii
Business Organisations
Unit 1
Business
Organisations
Learning Objectives:
On completing this unit, you will be able to:
• identify the features of various types of business organisations,

namely, company, cooperative and franchise
• explain advantages and disadvantages of each type of organisation
• discuss the type of organisation entrepreneurs may set up
In this unit, you will learn about various forms of business organisations
which are usually set up by entrepreneurs as well as their advantages and
disadvantages. You will, then, discuss about selecting a particular form of
business organisation to set up an enterprise.
1
Unit 1
1.1 Forms of business organisations
Setting up one’s own enterprise requires selecting an appropriate form of business organisation.
A business organisation is an enterprise which provides goods and/or services to consumers,
usually with the aim of making profits. There are different forms of business organisations and
the common ones are sole trading, partnership, company, cooperative and franchise. Each type
of business organisation differs from each other because they have different features in terms
of ownership, raising of capital, risks and sharing of profits or losses.
Business organisations
Sole trading Partnership Company Cooperative Franchise
Figure 1: Forms of business organisations
Read the story below.
Les Hibiscus Pastry Shop
Natasha is a talented confectioner. She set up a small

pastry shop, Les Hibiscus, and was the only one to manage
her enterprise. Later, she asked her friend Fanny to join
her business as a partner. The shop was then known as
Hibiscus Partners. A few years later, the business was
converted into a company, Les Hibiscus Company.
Les Hibiscus Les Hibiscus Les Hibiscus

(Sole trading) Partners Company
Figure 2: Sole trading, Partnership and Company
2
1.2 Company
A company is an incorporated business organisation which is owned by its shareholders.

It is a form of business organisation which is set up by raising
capital through issue of shares. Companies are incorporated, i.e, A company is an incorporated
they must be registered at the Registrar of Companies. There are business organisation which is
a set of legal rules to follow when setting up a company which owned by its shareholders.
are found in the Companies Act.
1.2.1 How to set up a company
Read the following story about setting up a company.
Laura and her business partner, Ben, own and manage a

souvenir shop, Le Tresor des Cannoniers, in one of the busiest
coastal areas of Mauritius. With an increase in tourist arrivals in
the country, their business required more capital to expand.
Friends advised them to consider converting their business
into a company to enjoy further advantages. Therefore, they
planned to set up their company.
Setting up a company involves a number of steps to follow. Entrepreneurs usually ask some
basic questions before setting up a company.
What is the legal procedure in setting up a

company?
Note: Companies are easily

Who would be the owners of a company?
recognised as the name
of the enterprise must be
Who would manage and control the company? followed by “Company
Limited”. Often, it is
shortened by ‘Co Ltd’.
What are the risks involved in setting up a company?
How to register a company?
Which documents are required to register a company?
Figure 3: Basic questions before setting up a company

3
Unit 1
Laura and Ben had to understand the following terms before setting up a company.
Terms Explanation of terms

The Companies Act is a legal document that outlines
1 Companies Act
the laws and regulations to set up a company.
Share A share is a voucher that represents a unit of capital.
A shareholder is the one who invest in a company by

Shareholder
2 buying its shares.
A share certificate is an official document stating the

Share certificate number of shares that the shareholders have in the
company.
Dividend is the part of company’s profits that is

3 Dividend
distributed to shareholders.
Board of Directors are those who have been elected by

4 Board of Directors
shareholders to manage the company.
Limited liability means that shareholders will lose only

5 Limited liability the initial amount invested in case the company goes
bankrupt.
Registrar of Companies is the authority that registers

6 Registrar of Companies companies and issues the certificate of incorporation to
allow the business to start its operation.
Memorandum of Association is a legal document

Memorandum of which provides details such as company’s name,
7
Association physical address of registered office, names of
shareholders and the distribution of shares.
Articles of Association is a document that specifies the

8 Articles of Association
internal rules of a company.
Certificate of Certificate of Incorporation is a legal document

9
Incorporation showing the official date a company can start operating.
Annual General Meeting (AGM) is a yearly meeting

where shareholders elect the directors of a company
10 Annual General Meeting
and the annual report about the performance of
business is presented and approved.
Table 1: Terms used in company
4
There are two types of companies, as shown below.
Types of company
Private
1 A business that raises capital from a small number of
Limited
shareholders such friends and/or relatives.
Company
Public A business that raises capital by issuing shares to members

2 Limited of the general public. It is usually larger than a private limited
Company company.
Figure 4: Types of company
The following steps should be followed when setting up a company.
Application
to the Certificate of
Registration
Registrar of Incorporation
Companies
Figure 5: Steps for registration of a company
Steps Requirements
Application To set up a company, owners must fill up application forms which
1
forms are available at the Registrar of Companies.
Two important documents, namely Memorandum of Association

and Articles of Association must be submitted to the Registrar of
Companies.
Memorandum of Association Articles of Association
• Name of the company • Rules and regulations in
2 Registration • Office address the company
• Names of shareholders • Names of the directors
and the number of shares • Procedures to be followed at
held by each of them meetings
• Share capital • Rights, duties and
• Objectives of the company responsibilities of the
directors
Certificate of The Registrar of Companies issues a Certificate of Incorporation. The

3
Incorporation business can, then, start its activities.
Table 2: Steps to set up a company

5
Unit 1
Activity 1
State two documents that should be prepared by a company for its registration. Use the
table below to present your answer.
Registration of a company
Documents required
Document 1
Document 2
1.2.2 Features of a company
The features of a company are explained below.
Features of a company
A company must be incorporated at the Registrar of
1 Registration Companies. It, then, gets a separate legal identity from the
owners’ identity.
Shareholders are the owners of a company. They buy shares of a

2 Ownership
company. Each share has one voting right.
A company is managed by a Board of Directors. They are

3 Control appointed to make decisions and control the business. The
accounts are presented to the shareholders in an AGM.
4 Risk Shareholders have limited liability.
5 Profits The company’s profit is distributed to shareholders as dividend.
Table 3 : Features of a company
6
1.2.3 Advantages of a company
There are several advantages that entrepreneurs may enjoy by setting up companies. They are
explained in the table below.
Advantages of a company
In case of bankruptcy, shareholders lose only the amount

1 Limited liability
invested as capital.
2 Separate legal identity Companies have a distinct identity from the shareholders.
A company continues to exist even if shareholders leave the

3 Continuity
company. The shares must be sold to someone else.
4 Capital More capital can be raised through issue of shares.
The company is managed by a Board of Directors, who

5 Management are usually experts, to take effective decisions to run and
control the company.
Table 4 : Advantages of a company
1.2.4 Disadvantages of a company
Setting up companies may have certain disadvantages. They are explained below.
Disadvantages of a company
1 Registration Registration of a company can take a lot of time.
Companies must disclose details of its accounts to the

Disclosure of
2 Registrar of Companies and shareholders. Business privacy is
accounts
no longer maintained.
Table 5: Disadvantages of a company
7
Unit 1
Activity 2
Tico works as a fisherman since he was a teenager. Along

with other fishermen in his locality, he decided to open a fish
shop, known as Fishies Foods. After few years of trading, they
incorporated the enterprise as Fishies Co Ltd.
State whether the following statements are True or False.
(a) Fishies Co Ltd is a sole trading business.
Fishies Co Ltd may raise a larger amount of capital when incorpo-

(b)
rated as a company.
(c) Shareholders of Fishies Co Ltd have unlimited liability.
Fishies Co Ltd would enjoy continuity even if one of the share-

(d)
holders leaves the business.
Activity 3
Match each term in column A with the corresponding definition in column B.
Write your answers in the table which follows.
Column A Column B
Memorandum of
A 1 A voucher that represents a unit of capital.
Association
A legal document which provides details such as
B Board of Directors 2
the names of a company and its shareholders.
They are elected by shareholders to manage the

C Share 3
company.
The authority that registers companies and
D Dividend 4 issues the certificate of incorporation to allow the
business to start its activities.
Registrar of Part of company’s profits that is distributed to

E 5
Companies shareholders.
Column A A B C D E
Column B
8
1.3 Cooperatives
Cooperatives are a popular form of organisation for small Cooperative is a business

businesses. A cooperative is a business organisation which is organisation which is
owned and run jointly by its members, who share the profits or owned and run jointly by
its members, who share the
benefits. Each member contributes capital by buying a share. He/
profits or benefits.
she is allowed one vote when taking business decisions.
A number of cooperatives exist in Mauritius, for example, in the agricultural sector. It has
helped several small entrepreneurs to improve their business activities.
1.3.1 How to set up a cooperative
A number of steps should be followed when setting up a cooperative.
Application
to the Certificate of
Registration
Cooperatives Registration
Division
Figure 6: Setting up a cooperative
1.3.2 Features of cooperatives
A cooperative has the following features. They are explained in the table below.
Features of a cooperative
The cooperative must be registered at the Cooperatives
1 Registration
Division.
Owners of a cooperative are known as members. Shares are

2 Ownership
bought to raise capital required in the business.
Each member has one voting right to participate in decision

3 Control
making.
4 Risk Members have limited liability.
The gains are termed as surplus and members share it

5 Profit
among themselves as dividend.
Table 6: Features of a cooperative
9
Unit 1
Read the story below about advantages and disadvantages of setting up a

cooperative.
Cooperative de L’Ouest
Jacques, a potato cultivator, decides to form a local cooperative,

Cooperative de L’Ouest. He convinced other farmers to join the
cooperative. They pooled up resources and bought modern farming
equipment which increased productivity and helped them out of
poverty. Unfortunately, they are sometimes discouraged by the
slow decision-making process.
1.3.3 Advantages of a cooperative

The advantages of setting up cooperatives are explained below.
Members of a cooperative create their own jobs and provide

1 Employment
employment to others.
Ownership and Members join together to share ideas and help each other to
2
control manage the cooperative.
The gains are termed as surplus and members share it among

3 Profits
themselves as dividends.
The Government offers grants, loans and financial assistance

4 Government support
to support cooperatives.
Table 7: Advantages of a cooperative
1.3.4 Disadvantages of a cooperative

Joining cooperatives may have certain disadvantages. They are described below.
Members must necessarily consult each other before a final

1 Consultation
decision is taken. It slows down decision making.
2 Low profits Profits are usually low because prices charged are usually low.
Table 8: Disadvantages of a cooperative
10
Activity 4
(a) Members in a cooperative have unlimited liability.

(b) Cooperatives group many small producers to benefit from
larger amount of capital.
(c) Profits earned in a cooperative are distributed to members as dividend.
Activity 5
The small farmers of La Savanne decided to join in together to grow their small enterprises.
Identify and explain two advantages of setting up a cooperative.
Advantage 1
Advantage 2
1.4 Franchise
A franchise business is usually a well-established and famous enterprise. They are found in
different parts of the world and are known worldwide.
Franchisor
Franchisees Franchisees Franchisees Franchisees Franchisees

in Country A in Country B in Country C in Country D in Country E
Figure 7: Franchise business in different countries
There are a number of franchise businesses in different sectors in Mauritius. For example, KFC
is a franchise business.
11
Unit 1
1.4.1 How to set up a franchise
A franchise is a type of enterprise that bought a license from a

A franchise is an enterprise
franchisor to sell its products and services. A franchisee is the that has a license from a
enterprise that buys the license from a franchisor. The franchisor franchisor to sell its products
sells a license of operation before the latter can start to operate. or services.
Franchisor Sells to Franchisee
Owner A license Buyer

Figure 8: Setting up a franchise
Read the story below about advantages and disadvantages of setting up a

franchise.
Two friends, June and Koy, who had some capital were discussing about setting up an
enterprise. On one hand, they wanted to start up a clothing boutique and create their
own strong brand. On the other hand, they thought of starting up an enterprise that
sells world-renowned branded fashion clothing store that would be run as a franchise
business.
Activity 6
In the space provided, write down one example of a franchise business that exists in
Mauritius in the following sectors.
Food retail business
Clothing and fashion
12
1.4.2 Features of a franchise

A franchise has the following features. They are explained below.
Features of a franchise
1 Ownership The franchisee buys a license of operation from the franchisor.
2 Control The franchisee runs and controls the enterprise.
Table 9: Features of a franchise
1.4.3 Advantages of a franchise

Franchise businesses offer several advantages. They are explained below.
Advantages of franchise businesses
Fewer chances of new business failing as an established

1 Strong reputation
brand and product are being used.
Advice, management support and training to personnel are

2 Support and training
offered by franchisor.
3 Existing product Most supplies are purchased directly from the franchisor.
Table 10: Advantages of a franchise
1.4.4 Disadvantages of a franchise

Franchise businesses may also have some disadvantages. They are explained below.
Disadvantages of franchise businesses
1 Huge investment The franchise license fee can be expensive.
Strict rules over pricing and layout of outlet reduce owner’s

2 Control by franchisor
control over one’s own business.
3 Profits to franchisor Part of the profits has to be paid to the franchisor each year.
Table 11: Disadvantages of a franchise
13
Unit 1
Activity 7
Read the case study below and answer the following questions.
Aryaan Pizza Shop or a Pizza Franchise
For five years, Aryaan worked in a restaurant as a manager, selling pizzas. He developed an
interest to set up his own pizza shop with his own brand name but he was also aware that
he could set up a franchise. He thought about the capital
that he would require, the risks involved and the benefits
of an already existing renowned brand name. Aryaan
searched for more information on existing franchise
businesses around the world. He was attracted by the
benefits of a franchise business but was held back by the
investment required and the interference of the franchisor
in his business matters.
Identify two reasons for setting up a franchise rather than one’s own enterprise.
Reason
1
Reason
2
Activity 8
State two advantages and two disadvantages of setting up the following types of business
organisations.
Company
Advantages
1. ______________________________________________________________________
2. ______________________________________________________________________
Disadvantages
1. ______________________________________________________________________
2. ______________________________________________________________________
14
Franchise
Advantages
1. ______________________________________________________________________
2. ______________________________________________________________________
Disadvantages
1. ______________________________________________________________________
2. ______________________________________________________________________
DID YOU KNOW
Multinationals
Multinationals (MNCs) have grown very popular in

recent years as it is easier to move from one place in
the world to another country. Thus, products which
were, once produced in a foreign country can now be
produced anywhere in the world.
Enterprise based in USA (Headquarters)
Country Country Country Country Country Country

A B C D E F
There are a number of multinational businesses in different sectors in Mauritius.
A multinational company (MNC) is an enterprise that produces

goods or provides services in foreign countries. Thus, MNCs Multinational company
usually carry their business operations in several countries. is an enterprise that has
production or service facilities
However, the main office (headquarters) is usually located in the
outside the country in which
country of origin, usually known as the home country. MNCs are it is based.
enterprises that manufacture products with same features, logo
or product names in different parts of the world.
15
Unit 1
1.5 Selecting the right business organisation for my enterprise
Choosing the right business organisation is one of the most important decisions an
entrepreneur has to make before setting up an enterprise. The factors that influence
entrepreneurs' decisions are found in the diagram below.
Ownership
and
control
Continuity Risks
Right business
organisation
for my
enterprise
Registration
and Expansion
procedures
Figure 9: Factors affecting decisions to set up an enterprise
Entrepreneurs are usually influenced by a number of factors in selecting the appropriate type
of business organisation. The entrepreneur should ask the following questions before taking a
decision.
Who will own and run the enterprise?
Will I have control over my enterprise?
What are the risks I might have to take?
What are the formalities involved in setting up the enterprise?
Who will be responsible of my enterprise when I am not available?
Figure 10: Questions to consider before setting up an enterprise
Some entrepreneurs enjoy taking risks but others may be unwilling to do so. Some entrepreneurs
change their type of organisation because they must raise more capital to grow their enterprise.
Others might be discouraged because registration is complicated and registration fees are
expensive.
16
End of Unit Activity
Question 1
Multiple Choice Questions

Choose the correct answer for each of the questions below and write it in the space provided.
1. Shareholders in a company are the ……………………… of the business organisation.

A customers
B owners
C leaders
D suppliers Answer ________
2. Documents required to register a company at the Registrar of Companies are

A Partnership Deed and Article of Association
B Share certificate and Article of Association
C Memorandum of Association and Article of Association
D Memorandum of Association and Partnership Deed Answer ________
3. A ……………………………….. issues shares to members of the general public.

A cooperative
B public limited company
C franchisee
D government Answer ________
4. A …………………………………is where a group of individuals join together to achieve

a common purpose.
A public limited company

B cooperative
C private limited company
D stock exchange Answer ________
5. A franchisee is an individual or business that
A buys a patent to operate a franchise business

B sells a patent to operate a franchise business
C borrows a patent to operate a franchise business
D lends a patent to operate a franchise business Answer ________
17
Unit 1
Question 2
Read the case study below and carry out the activity that follows in the space provided.
The Story of HS Co. Ltd
Harris and Saaran set up a private company limited, H & S Co Ltd, to launch
a line of fashion clothes. Supported by a strong team of employees, the
enterprise grew successful. One of its best T-shirts, branded as “San Smith”,
became very popular in several foreign countries. The company received
several proposals to franchise the popular designer clothes.
(a) Explain the following terms:
Private limited company
Franchise
(b) State one difference between a private limited company and a public limited company.
….…………………………………………………………………………………………
….…………………………………………………………………………………………
(c) Some entrepreneurs have showed interest in setting up a franchise to sell “San Smith”
T-shirts produced by H & S Co Ltd. Identify and explain two reasons an entrepreneur
would prefer a franchise business rather setting up his own enterprise.
Reason 1
Reason 2
KEY TERMS
Company is an incorporated business organisation which is owned by its shareholders.
Cooperative is a business organisation which is owned and managed jointly by its members
who share the profits or benefits.
Franchise is an enterprise that has a license from a franchisor to sell its products or services.
18
The entrepreneur as a leader
Unit 2
The
entrepreneur
as a leader
• outline functions of an entrepreneur

• recognise the responsibilities of an entrepreneur
• explain the qualities of a leader entrepreneur
• explain the role of stakeholders in the enterprise
• describe how to manage risks in an enterprise
In this unit, you will learn the functions, responsibilities and qualities
of an entrepreneur. You will also discover the role of stakeholders in an
enterprise and how entrepreneurs manage risks in an organisation.
19
Unit 2
2.1 The entrepreneur
An entrepreneur is an individual who sets up an enterprise by An entrepreneur is an

taking risks and who aims at making profit. The entrepreneur has a individual who sets up an
business idea and works towards making the enterprise successful. enterprise by taking risks and
who aims at making profit.
2.1.1 Functions of an entrepreneur
Entrepreneurs, as managers of enterprises, undertake several tasks to run their businesses

effectively. Being an entrepreneur is challenging as he is the leader of the enterprise
and he fulfills a number of functions.The main functions of someone who manages an
enterprise are illustrated below.
Planning
Controlling Organising
Functions of an
entrepreneur
Leading Staffing
Figure 1: Functions of an entrepreneur
Functions Explanation
The process of choosing a business idea,setting objectives and anticipating
Planning
risks.
Bringing in resources into the organisation to meet the objectives set by the
Organising
entrepreneur.
Staffing Hiring people to work in the enterprise.
Leading Directing employees towards the objectives of the enterprise.
Ensuring that tasks are being done according to the expectations of the
Controlling
entrepreneur.
Table 1: Functions of an entrepreneur

20
Activity 1
Fill in the blanks with the appropriate words given below.
motivates resources controlling planning objectives manager
Fanny is the owner of Sunrise Enterprise. She is also the ………………… of the
business. She sets the ………………………….. of the business . ……………………….
and ………………… are two functions that Fanny undertakes in the enterprise. She
organises the ……………………………. so that production can take place on time. She
leads the employees and …………………… them to work harder.
2.1.2 Responsibilities of an entrepreneur
Below are the main responsibilities of an entrepreneur.
1
Keep
accounting
6 records 2
Handle Recruit and
customers train workers
The
entrepreneur
is responsible
5 to
Look after the
3
Promote the
finance of the
products
enterprise 4
Order raw
materials or
goods for
resale
Figure 2: Responsibilities of an entrepreneur
21
Unit 2
Activity 2
Read the case study below and answer the questions which follow.
Jasveen is the owner of a successful textile factory. He shoulders a number of

responsibilities daily. Below is an extract of his diary.
A day in Jasveen’s life

08.00 Meeting with factory supervisors
08.30 Visit factory
10.30 Call suppliers to order raw materials
11.30 Discuss with the marketing department to
advertise the products
12.00 Attend meetings with customers
14.00 Conduct interviews with applicants
15.45 Discuss with finance managers
18.00 Solve issues related to machinery
19.00 Plan for tomorrow
(a) List three responsibilities of Jasveen as the entrepreneur.
Responsibility 1 ___________________________________________________________
Responsibility 2 ___________________________________________________________
Responsibility 3 ___________________________________________________________
2.1.3 Qualities of a leader entrepreneur
Successful entrepreneurs have a number of qualities. One distinct quality is the ability to lead
the enterprise. The following are the qualities that make the entrepreneur successful.
1 Innovative – The entrepreneur comes up with new ways of doing things.

2 Skilful - The entrepreneur develops a number of abilities to operate.
3 Intelligent - The entrepreneur is able to take right decisions.

4 Risk taker - The entrepreneur takes calculated risks when operating the business.
5 Self-confident - The entrepreneur believes in his abilities to achieve the goals of the enterprise.
6 Passionate - The entrepreneur is motivated and has a strong drive to make the business successful.
Figure 3: Qualities of a leader entrepreneur

22
2.2 Stakeholders
Stakeholders are people, groups or

Stakeholders are people, groups or organisations that
organisations that take interest in activities
take interest in activities and decisions taken by a business. and decisions taken by a business.
2.2.1 Roles and objectives of stakeholders
The table below describes stakeholders, their roles and their objectives.
Objectives of
Stakeholders Role of stakeholders
stakeholders
• To maximise profits
1 Owners Owners set up enterprise.
• To expand the business
• To drive the enterprise to

Managers organise and run the success
2 Managers
business. • To earn high salaries
• To have a secured job
Employees are the workers and • To earn a fair pay (wages

and salaries)
3 Employees they spend significant time in the
• To ensure their jobs are
organisation. secured
Suppliers provide raw materials and • To have a timely payment

4 Suppliers for goods supplied to the
other input to the enterprise. enterprise
Consumers are the buyers of the

• To ensure safe, reliable and
5 Consumers goods and services that the enterprise
value for money products
provides on the market.
• To ensure that jobs are

Government regulates and monitors created
6 Government
the running of businesses. • To ensure that the
enterprise abides by laws
The society includes people or groups • To ensure that the

Community/
7 who are directly or indirectly influenced activities of the enterprises
Society do not harm the society
by the activities of the enterprise.
Table 2: Roles and objectives of stakeholders
23
Unit 2
Activity 3
Match each term in column A with the corresponding explanation in column B.

Column A Column B
A Society 1 People who work in an enterprise and are interested in earning high wages.
B Owners 2 People who manage and organise the activities of an enterprise.
Authority and institutions that regulate the operations of an
C Employees 3
enterprise through legislations.
Pressure groups and members of the public who are interested in
D Stakeholders 4
the operations of the business and its impact on the community.
People or firms who provide materials, components and
E Managers 5
services to the business.
F Government 6 People who have put their money as capital in the enterprise.
G Suppliers 7 Buyer of goods and services provided by enterprise on the market.
Individuals or groups that have an interest in the success and
H Consumers 8
progress of a company.
Column A A B C D E F G H
Column B
2.3 Managing risks in an enterprise
Businesses are usually exposed to risks. Any factor that Business risk refers to any factor that
threatens an enterprise’s ability to achieve its goals is called represents a threat to an enterprise’s
business risk. ability to achieve its goals.
2.3.1 Types of risk
There are many types of risks that a business might face. These can be grouped into four types
as explained below:
Types of risk Explanation

Chances of business failure due to poor business objectives, causing heavy
Strategic risks
losses.
Operational risks Chances of business failure due to the poor running of the daily activities.
Financial risks Chances of business failure due to poorly managed finance.
Compliance risks Chances of business failure as enterprises fail to follow laws and regulations.
Table 3: Types of risks
24
Activity 4
For each of the following situations, match Column A with the Types of risks faced by
Trois Soleils pastry shop.
Trois Soleils Enterprise

Column A Type of risks
Trois Soleils was selling its products at lower

1 A Operational risk
prices and earning low profits.
Trois Soleils wasted its resources due to its

2 B Strategic risk
poorly managed day-to-day activities.
Trois Soleils set the wrong business objectives

3 C Compliance risk
for the year ahead.
Trois Soleils did not follow the laws that apply to

4 D Financial risk
hygiene in food production.
Column A 1 2 3 4
Type of risks
Managing risks is an important task to every entrepreneur. Five steps of risks management are:
STEP 1 Identify potential risk(s)
STEP 2 Assess the impact of loss
STEP 3 Develop a plan to mitigate the risk(s)
STEP 4 Implement the plan
STEP 5 Review and evaluate the plan
Figure 4: Steps of risk management
25
Unit 2
2.3.2 Dealing with risks
Business risks can occur at any time. It can be at the start of a business or even when launching
a new product on the market. Entrepreneurs who have the ability to bear any kind of risk and
who react positively to risky situations are better prepared entrepreneurs.
The table below analyses how to deal with some business risks.
Situation Decision taken Negative effects Mistake Right decision

An entrepreneur has To choose a
The location is in • Few customers Wrong choice
1 to decide about the better location
an isolated area • Low sales of location
location of his shop in a busy area.
To record
Time consuming To use a
financial
Preparation of exercise and Poor record computerised
2 information
financial records difficult to collect keeping recording of
manually from
all information data
piles of papers
Laboratory To use quality

Product was
To improve quality of Add new tests were ingredients and
3 found with more
the product ingredients not carried carry laboratory
harmful additives
out tests
Setting high
To make prior
Price of the price without
Sales fell and so calculation
4 To increase revenue product anticipating
revenue fell before setting
increased customer
price
behaviour
Table 4: Dealing with risks
Activity 5
Complete the table below using the given statements.
Decrease price Locate factory in a remote area Pollution level not measured
Further fall in sales Buy cheap raw materials Control cost
Situation Decision taken Negative effects Mistake Right decision
Choosing a site Close to a Protests by

1 ............................. .............................
for a factory residential area pressure groups
2 Fall in sales Increase price ............................. Wrong pricing .............................
Increase in costs Poor quality of Inferior raw

3 ............................. .............................
of production products materials
26
1. Multiple Choice Questions

1.
The function of an entrepreneur when setting objectives is
A planning B organising C leading D controlling

Answer ________
2. A person who organises, manages and assumes the risks of starting and operating a
business to make a profit is called a(n)
A entrepreneur B investor C trader D shareholder
Answer ________
3.
Ensuring that tasks are done according to the expectations of the entrepreneur is
known as
A planning B controlling C organising D staffing

Answer ________
Which of the following is not considered as an essential quality of an entrepreneur?

4.
A passion B creativity C luck D perseverance

Answer ________
5. Which one of the following statements about stakeholder groups is accurate?

A Stakeholders are people who are not interested in the business
B Stakeholder groups have direct interest in the business
C Shareholders of a company do not form part of a stakeholder group
D Stakeholders are people who are only interested in profits of the enterprise
Answer ________
27
Unit 2
6.
The community, as a stakeholder, is concerned about
A Wage levels, costs and prices
B Profit levels, dividend payments and share price
C Job creation, job security and level of pollution
D Level of pollution, tax payment and profit
Answer ________
7. Risks related to the safety of employees in the workplace are associated with
A strategic risks
B operational risks
C compliance risks
D financial risks Answer ________
8. Which of the following stakeholder is most interested in profit?

A Staff
B Customers
C Owners
D Society Answer ________

9. Employees are mostly interested in
A safe products and good conditions of work
B good conditions of work and reasonable pay
C profit and reasonable pay
D poor conditions of work and low pay Answer ________
KEY TERMS
Business risks refer to any factor that represent a threat to an enterprise’s ability to
achieve its goals.
Entrepreneur is an individual who sets up an enterprise by taking risks and aims at

making profit.
Stakeholders are people, groups or organisations that take interest in activities and
decisions taken by a business.
28
Entrepreneurial skills
Unit 3
Entrepreneurial
skills
• understand the terms 'communication' and 'communication process'

• explain the importance of effective communication in an enterprise
• describe the forms of communication in an enterprise
• explain how to resolve conflicts in an enterprise
In this unit, you will learn about communication, effective communication

and the importance of communication in an enterprise. You will explore
different forms of effective communication and understand that
communication is a key entrepreneurial skill. You will also discover how to
resolve conflicts in an enterprise.
29
Unit 3
3.1 Communication
Communication is the exchange and flow of information,

Communication is the exchange
ideas, thoughts and feelings from one person to another. and flow of information, ideas,
Entrepreneurs communicate with various stakeholders in thoughts and feelings from one
order to convey messages during their business activities. person to another.
3.1.1 Communication process
The communication process shows the flow of information from the sender (the transmitter)
to the receiver (the recipient). It is illustrated below.
Message
Channel
Sender Receiver
Feedback
Figure 1: The communication process
There are five important features in the communication process.
Message: The information being passed on. 3

Medium of communication
2 Message
is a means used to send a
message for examples, letters,
emails, phone calls or meetings.
Medium of
1 communication 4
Sender: the person who passes Receiver: the person to whom
on information to others. the message is sent.
5 Feedback
Feedback: the reply from the receiver to confirm receipt and understanding of the message.
Figure 2: Features of the communication process

30
Activity 1
Read the short case study below and answer the questions which follow.
New Stationery Ltd is a manufacturer of stationery products. Ali,

the marketing manager phoned Aryan, his sales manager, to
discuss and seek his support about the launching of a new multi-
coloured pen. The latter gave a positive reply on Ali’s views on the
launch and agreed to extend his support to Ali.
(a) What do you understand by the term 'communication'?
________________________________________________________________
________________________________________________________________
(b) Identify the sender and the receiver.
Sender: _________________________________________________________
Receiver: ________________________________________________________
(c) What is the medium of communication used?
________________________________________________________________
(d) What is the importance of feedback when people communicate with each other?
________________________________________________________________
________________________________________________________________
31
Unit 3
3.1.2 Effective communication
An entrepreneur needs to communicate effectively with Effective communication is a two-

employees, customers, suppliers and other organisations way process between the sender and the
for the smooth running of an enterprise. receiver, where a feedback is provided.
Effective communication is a two-way process between the sender and the receiver, where a
feedback is provided.
No Yes No
Yes Yes
Figure 3: Effective communication
However, there are different circumstances where communication tends to be ineffective. This
occurs when there are disruptions or failures in the communication process.
No No No
No No
Figure 4: Ineffective communication
Ineffective communication can have serious consequences for enterprises. Below are some
common causes of ineffective communication.
Language: a sender speaks in a language which the receiver does not

understand
Medium: writing a message to a person who has difficulties to read
Technical problems: computer failure can prevent a message from

being sent
Distractions: noise or bad reception causing the message to be

poorly exchanged
Figure 5: Causes of ineffective communication
32
Activity 2
For each of the following, tick ( ) the appropriate column to indicate whether it is an
example of effective or ineffective communication.
Effective Ineffective
communication communication
Chan, the entrepreneur, while
1 discussing about a new product in a
meeting, receives immediate feedback.
Eric has sent an email to a supplier but
2
receives no reply.
A good listener usually hears, understands

3
and responds to a message.
Sandra, the owner, is using technical

4 terms in her conversation which the
employees cannot understand.
Writing a message on the noticeboard
5 which is difficult to read by the
employees.
3.2 Importance of effective communication in an enterprise
Effective communication is vital for an enterprise for the following reasons.
Effective communication leads to orders placed on time
Employees know about job expectations
The enterprise is able to meet customers’ orders on time
It leads to quicker decisions taken by the entrepreneur
Figure 6: Importance of effective communication

33
Unit 3
3.3 Forms of communication in an enterprise
Entrepreneurs use different forms of communication to pass on information effectively. These

are outlined below.
Forms of communication
Non-verbal
Verbal (Body language) Written Visual
Figure 7: Forms of communication
Verbal communication Examples
Verbal communication is the oral exchange

of information through spoken words.
A telephone conversation Meeting
Non-verbal communication
Non-verbal communication is the exchange

of information through body language
without using any spoken or written word.
A handshake Facial expressions
Written communication
Written communication is the exchange of

information through the use of written words.
A business letter A business plan
Visual communication
Visual communication is done through

visual aids to represent information.
A chart A logo
Table 1: Common forms of communication
In choosing an appropriate communication method, factors such as speed, cost, the target
audience, importance of a written record, importance of feedback are taken into consideration.
34
Activity 3
Write down each of the following forms of communication under the correct heading
in the table below.
Face-to-face conversation Noticeboard Logo

Letter Social media Newsletter
Email Diagram Telephone conversation
Reports Meeting Fax
Chart Graph Text message
Written including
Verbal communication Visual communication
electronic communication
Group discussion
In groups of 4, discuss the importance of effective communication

to both the entrepreneur and his employees when an important
order has been placed by a customer.
35
Unit 3
3.4 Internal and external communication
Entrepreneurs communicate with stakeholders both inside and outside the business. Therefore,
communication can be classified as internal and external.
Communication
Internal communication takes place External communication takes place

among people within the enterprise when enterprises communicate with
itself. stakeholders outside the business.
Stakeholders involved: Stakeholders involved:

1. The entrepreneur 1. Suppliers
2. Managers 2. Customers
3. Employees 3. Banks
4. Government
Figure 8: Internal and external communication
Examples of internal communication Examples of external communication

Manager gives instructions to employees The entrepreneur communicates with the
about tasks to perform. bank while applying for a loan.
Employees send emails to their colleagues The sales manager communicates with
about teamwork. suppliers.
Table 2: Examples of internal and external communication
Activity 4
For each of the following, tick ( ) the appropriate column to indicate whether
internal or external communication is taking place.
Internal External
communication communication
Ria, the owner is holding a conversation with the
(a)
machine operator.
(b) Advertisement for a new product in the newspaper.
(c) An entrepreneur sends a quotation to a customer.
(d) Meeting employees to discuss safety issues at work.
Informing customers about a promotional offer on
(e)
the website of the enterprise.
Asking an employee to pass on a message to his
(f )
colleague.
36
3.5 Conflicts in an enterprise
People working in an enterprise may have different opinions and perceptions leading to
conflicts.
Conflict is a situation in which there is a disagreement or

Conflict is a situation in
disapproval with another person, or within a group.
which there is a disagreement

or disapproval with another
If conflict is not settled, it can lead to inappropriate behaviour of
person, or within a group.
employees that prevent them from working towards a common
goal.
Entrepreneurs should be aware of types of conflicts that may arise during business activities.
Reasons conflicts may arise
> due to disagreements on the goals and objectives of the enterprise
> on the attitudes and behaviours of people working together
> over the process of getting tasks done
Table 3: Reasons of conflicts in an enterprise
Some common examples of conflicts are stated below.
> Disagreement on allocation of work and responsibilities
> Ineffective communication between the owner and employees
> Rivalry among staff members
Table 4: Examples of conflicts in an enterprise
3.5.1 Resolving conflicts in an enterprise

Agree
Conflicts allow to identify problems that on the
problem
need to be solved and help to strengthen the Show
Learn to
enterprise. There is no one solution which fits willingness
manage
to resolve
everyone. Each conflict has different causes emotions
the issue
Ways of
and they can be resolved in different ways as
resolving
shown in Figure 9. conflicts Turn
Reach a win- problems into
win situation opportunities
Improve on
communication
skills
Figure 9: Ways of resolving conflicts
37
Unit 3
Activity 5
(a) When discussing an issue, communication should be effective.
The entrepreneur should try to solve a problem only when he

(b)
is angry.
The entrepreneur should listen to the views of employees
(c)
when making decisions.
The goal of resolving conflict is to work towards a solution

(d)
where all parties are satisfied with the solution.
Activity 6
Mira is the owner of a florist shop. She has been operating her small enterprise for three
years and has loyal customers. Mira decided to form a partnership with her friend Jenny in
order to expand the enterprise.
Later on, disagreements started to arise on the following issues.

• Jenny complained that her responsibilities were too bulky.
• Mira complained that Jenny was taking extra holidays.
• Mira felt like Jenny started to exert more power and influence.
(a) Define the term 'conflict'.

________________________________________________________________
________________________________________________________________
(b) Identify two conflicts that Mira is feeling concerned about.

________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
(c) State three ways Mira could use to reduce the conflicts in her enterprise.
(1) ________________________________________________________________
(2) ________________________________________________________________
(3) ________________________________________________________________
38
Question 1
Identify which form of communication (verbal, written or visual) is being used in the table below.
Form of
communication
(a) Two employees are talking about a lost order.
(b) A report about last month sales figures.
(c) A poster displaying a health warning.
An email sent to employees informing them about a fun day to be

(d)
organised by the business.
(e) The owner receiving an application letter for a job.
(f ) A business advertises a price cut of 10% on all products in the newspaper.
Question 2
Match each term in column A with the corresponding definition in column B.

Column A Column B
When enterprises communicate with stakeholders
A Communication 1
outside the business.
A situation in which there is a disagreement or
B Effective communication 2
disapproval with another person or within a group.
The exchange and flow of information, ideas,
C Internal communication 3
thoughts and feelings from one person to another.
Exchange of information takes place among people
D External communication 4
within the enterprise itself.
A two-way process between the sender and the
E Conflict 5
receiver, where a feedback is provided.
Column A A B C D E
Column B
39
Unit 3
Question 3
Jeremy Car Garage
Jeremy, the owner of a small car garage, needs additional

spare parts for cars. On Monday, he called the supplier to
place an order and was told that, after three days, he would
receive the delivery. However, the correct items were not
delivered and Jeremy was worried about having inadequate
and wrong spare parts in his stock.
(a) Identify the communication method used by Jeremy.

________________________________________________________________
________________________________________________________________
(b) What went wrong with the delivery of spare parts?

________________________________________________________________
________________________________________________________________
(c) Did Jeremy choose the right communication method to place the order from
the supplier? Explain your answer.
________________________________________________________________
________________________________________________________________
________________________________________________________________
(d) Suggest a more effective communication method that Jeremy could have used in this case.
Give reasons for your answer.
________________________________________________________________
________________________________________________________________
________________________________________________________________
KEY TERMS
Communication is the exchange and flow of information, ideas, thoughts and

feelings from one person to another.
Conflict is a situation in which there is a disagreement or disapproval with another

person or within a group.
Effective communication is a two-way process between the sender and the receiver
where a feedback is provided.
40
Marketing
Unit 4
Marketing
• differentiate between selling and marketing

• explain market research
• describe the key elements of marketing
• understand methods of e-marketing and its importance
In this unit, you will learn about marketing and the difference between
selling and marketing. You will be exposed to the importance of market and
market research. You will, also, discover the key elements of marketing. The
opportunities offered by e-marketing are also addressed in this unit.
41
Unit 4
4.1 Marketing
Marketing is the process of identifying the needs of customers Marketing is the process of
and attempting to satisfy them. Businesses carry out marketing identifying the needs of customers
in one form or another as it is an important business activity. and attempting to satisfy them.
The role of marketing is to ensure that the product of a business meets customers’ needs and
wants. Effective marketing is essential to the success of an enterprise.
4.1.1 Selling versus marketing
Kate is an entrepreneur who makes pickles. Her friend, Davis, comes to visit her and they have
the following conversation.
Hello Kate. What are you doing?
Hello Davis, I am preparing some

pickles which I am going to sell to
customers.
Why don’t you do some

marketing for your products?
I usually do the selling of my products,

but what do you mean by marketing?
Selling is concerned with exchanging a product for cash

whereas marketing is the process of identifying the needs
of customers and attempting to satisfy them.
Selling is concerned with

exchanging a product for cash.
42
Marketing
The figure below illustrates some of the main differences between selling and marketing.
Selling
• Emphasis is on the product.
• Product first, then customer - first, the business
makes the product and then tries to sell it.
Marketing
• Emphasis is on the customer's needs.
• Customer first, then the product - first the business identifies
the customer's needs and wants and then produces them.
Figure 1: Differences between selling and marketing
4.2 Knowing your market

Entrepreneurs usually ask several questions before launching a product on the market. Below
are some common questions.
Target market:
To which group of customers will the product be sold?
Example: teenagers, youngsters, adults.
Customers’ tastes and preferences:

What are customers’ expectations regarding design and quality?
Pricing of the products:

At what price should the product be sold?
Competitors:
Who are my competitors and what should I do to compete with them?
Channel of distribution:
How will the products be sold?
Example, through sales agents, in shops or the internet.
Advertising media:
How will the products be advertised?
Example, in newspapers, billboards or social media.
Figure 2 : Key questions to consider when launching a product

43
Unit 4
Activity 1
Joshua has set up an enterprise to manufacture paper bags.
(a) Marketing involves identifying and satisfying needs and wants of

customers.
(b) Joshua does not need to identify a target market before starting to
produce paper bags.
(c) Joshua believes that marketing is only about selling products to
customers.
(d) Through proper marketing activities, Joshua’s enterprise is more
likely to be successful.
4.2.1 Market research
Customers' needs and wants are identified and anticipated through

Market research is the
market research. Market research is the process of collecting process of collecting and
and analysing data about customers and the market. Thereafter, analysing data about
an entrepreneur can decide about the product design, pricing, customers and the market.
advertising and how to make the product available to customers.
Market research is important for the following reasons.
Market research helps to identify the needs and wants of customers
It allows an enterprise to respond quickly to changes in customers' preferences
Market research helps a business to plan its marketing activities
It helps an entrepreneur to launch new products with greater confidence
Figure 3: Importance of market research
44
Marketing
Activity 2
Answer the following questions.
1. Define the term 'market research'.
_____________________________________________________________________
_____________________________________________________________________
2. Explain three reasons why market research is important.
Reason 1 ___________________________________________________________
Reason 2 ___________________________________________________________
Reason 3 ___________________________________________________________
4.3 Elements of marketing

When an entrepreneur starts an enterprise, the following elements of marketing must be
considered. They are also known as the 4 Ps. These are as follows.
THE 4 Ps OF MARKETING
Figure 4: Elements of marketing - 4 Ps
4.3.1 Product
Product refers to the goods and services produced by Product refers to the goods and
services produced by an enterprise
an enterprise to satisfy customers' needs or wants. The
to satisfy customers' needs or wants.
entrepreneur should make his product marketable.
A marketable product is a product
A marketable product is a product which consumers which consumers need and will be
need and will be ready to buy. ready to buy.
45
Unit 4
The diagram below shows some important characteristics of a marketable product.
Attractive
packaging
Good Convenient
labelling to use
practices What makes and user
friendly
a product
marketable?
Provides
customer Affordable
satisfaction
Figure 5: Characteristics of a marketable product
Activity 3
1. Identify four elements of marketing.

Element 1: ___________________________________________________________
Element 2: ___________________________________________________________
Element 3: ___________________________________________________________
Element 4: ___________________________________________________________
2. Distinguish between a product and a marketable product.

A product is ___________________________________________________________
whereas a marketable product is __________________________________________
_____________________________________________________________________
3. Hema makes party snacks which she sells to her neighbours and nearby shops.
State three characteristics that you consider will make the party snacks a marketable product.
Characteristic 1: ___________________________________________________________
Characteristic 2: ___________________________________________________________
Characteristic 3: ___________________________________________________________
46
Marketing
4.3.2 Price
Entrepreneurs should sell their products at convenient prices. Price refers to the amount
of money paid by the
Price refers to the amount of money paid by the customer when customer when buying a
buying a good or service. good or service.
The entrepreneur should consider some factors when setting the price.
1 Cost of production - Prices of commodities are usually set to

cover the cost of production.
2 Ability to pay - Low prices are charged for low income groups and
higher prices to high income groups.
3 Price competition - Prices are lowered to attract more customers

from the existing competitors.
Figure 6: Factors to consider when setting the price
There are a range of pricing methods. Below are some common pricing methods an entrepreneur
can adopt.
Setting a low price to attract customers to buy a new product. This is known
as penetration pricing.
Setting a high price for a high quality product that is unique on the market.
This is known as premium pricing.
Setting the price by adding up cost per unit to % of profits. This is known
as cost plus pricing.
Reducing the price of a product or service for a short period of time. This is
known as promotional pricing.
Setting the price to similar products in the market. This is known as

competitive pricing.
Figure 7: Common pricing methods

47
Unit 4
Activity 4
Match each pricing method in column A with the corresponding situation in column B.
Column A Column B
Miguel has recently opened a stall selling fresh

A Cost-plus pricing 1
juice. He set a low price to attract customers.
The owner of ‘Celo Bags’ adds a 50% profit to the

B Penetration pricing 2
cost of a bag to set the selling price.
A hairdresser improved his services by using high

C Competitive pricing 3 quality products for hair treatment. He, now,
charges a very high price for a haircut.
‘Future Fashion’ is offering the sale of pullovers at

D Premium pricing 4 a lower price because the winter season is coming
to an end.
‘Good furniture’ has set the price of furniture to be

E Promotional pricing 5
similar to other furniture shops.
Column A A B C D E
Column B
4.3.3 Promotion
Promotion is about communicating with customers so as to

Promotion is about communicating
encourage them to buy the products of an enterprise.
with customers so as to encourage
them to buy the products of an
Promotion helps to raise awareness of the product, increases enterprise.
sales and improves the image of the business.
48
Marketing
There are several ways to promote a product. The entrepreneur needs to decide about effective
ways to do so. They are explained in the table below.
PROMOTION EXAMPLES EXPLANATION
Advertising is about informing

or persuading consumers of
Advertising
products by using media such as
newspapers or radio.
Sales promotion is reducing price

Sales promotion or giving gifts to achieve short-
term increases in sales.
Personal selling is about the

entrepreneur making face-to-face
selling with a consumer with the
Personal selling
aim of convincing him to buy
the product. It usually helps to
establish long-term relationship.
Public relations is the use of free

publicity through newspapers,
Public relations
TV and other media to improve
image of the enterprise.
Direct marketing involves

making direct contact with
Direct marketing consumers, for example, through
telephone selling to present the
products of the enterprise.
Table 1: Types of promotion
Activity 5

public relations personal selling direct marketing
advertising sales promotion
(a) _______________ is used to inform and persuade consumers to buy the products of
an enterprise.
(b) A short term measure used to increase sales is known as ____________________.
(c) By using press releases, ______________________ is used to improve the image
of the enterprise.
(d) To obtain quick response, ______________________ is used to make direct
contact with consumers.
49
Unit 4
4.3.4 Place
An entrepreneur needs to find ways to distribute his/her products Place is about selecting
to customers. This is known as place. Place, as an element of an appropriate channel of
distribution for products to
marketing, is about selecting an appropriate channel of distribution
reach customers.
for products to reach customers.
A channel of distribution refers to the link a product passes through before it reaches the
consumer.
Entrepreneurs need to deliver products to consumers at the right time and in the right place.
This will make products available to customers convieniently, that is, whenever and wherever
it is suitable to them.
Below are some common distribution channels that enterprises usually adopt.
1. The producer (Enterprise) sells directly to the consumer.
Producer Consumer
2. The producer (Enterprise) sells to the retailer who sells to the consumer.
Producer Retailer Consumer
3. The producer (Enterprise) sells to the wholesaler who supplies to the retailer who sells
to the consumer.
Producer Wholesaler Retailer Consumer

Figure 8: Distribution channels
50
Marketing
In choosing a channel of distribution, entrepreneurs might consider the following factors.
Nature of product - Some type of commodities such as consumer

1 goods are usually bought in bulk from the wholesaler or directly
from the factory.
2 The market - Some consumers/firms may buy directly from

producers or through the wholesaler or retailer.
3 Competition - Some businesses try to sell their commodities to

the customers quicker than their competitors.
Figure 9: Factors influencing choice of a distribution channel
Activity 6
For each of the following, identify the missing term in the distribution channel that could
be used by the enterprise.
A small local bakery Producer
A shoe making
Producer Consumer
enterprise
A large juice factory Producer Retailer
51
Unit 4
4.4 Entrepreneurs and E-marketing
With the advent of technology, entrepreneurs are making use of E-marketing refers to the
process of marketing a
internet as a tool to market their products and services. This is known
product using internet.
as electronic marketing (e-marketing) or online marketing.
4.4.1 Methods of E-Marketing
The following are methods of e-marketing usually used by enterprises to promote their products.
Web marketing refers to promoting products or

enterprises on the internet through websites.
Email marketing refers to promoting products

through the use of email to customers.
Social media marketing involves the use of social

network like Facebook and Twitter to market products.
Figure 10: Methods of e-marketing
4.4.2 Importance of E-marketing

E-marketing is important to enterprises for the following reasons.
E-marketing is less costly because a large number of customers can

be reached through electronic means.
It allows buying and selling at odd hours, for instance, even when
shops are closed.
With the use of technology, businesses can communicate more

frequently with customers and provide the latest information.
Entrepreneurs can gather information about how well their products

are doing on the market through mini online feedback forms.
52 Figure 11: Importance of e-marketing

Marketing
Activity 7
(a) Marketing done via the internet is called online marketing or

web marketing.
(b) Email marketing allows subscribers to have specialised
discounts and personalised offers.
(c) Social media platforms can be accessed only during business hours.
(d) E-marketing is not a quick method to reach customers.
Activity 8
NewPaint
NewPaint is a business that sells paint products through

its website. In order to keep up with customers, Albert,
the owner of NewPaint, shares information through
various social media such as Facebook and YouTube. The
enterprise also provides discount coupons on its website.
NewPaint has a Facebook account which allow comments
to show up on its wall. Albert considers e-marketing to be
important for the growth of his enterprise.
(a) Explain the term 'e-marketing'.

_____________________________________________________________________
_____________________________________________________________________
(b) Identify two benefits to NewPaint of having a website.

Benefit 1 _______________________________________________________________
Benefit 2 _______________________________________________________________
(c) Explain two ways e-marketing is important to Albert.

Importance 1 ___________________________________________________________
_______________________________________________________________________
Importance 2 ___________________________________________________________
_______________________________________________________________________
53
Unit 4
Question 1

1. Marketing is a process which aims at ____________.

A delivery of goods to customers C satisfaction of customers' needs/wants
B selling products only D production
Answer:______
2. In marketing, the term 'product' refers to

A intangible items only
B goods and services produced by an enterprise to satisfy a customers' needs/wants
C goods, services and ideas only
D advertising and promotions used
Answer:______
3. Newsletters, catalogues and leaflets are most closely associated with ____________.
A pricing C market research
B distribution D promotion
Answer:______
4. Direct marketing refers to a communication between

A enterprise and employees directly
B price and services directly
C enterprise and customers directly
D government and society directly
Answer:______
5. Rohan is a chef in a local restaurant. He has given a press release to the local media and
has also invited press reporters for a lunch in his restaurant.
Rohan is engaging in ______________.
A public relations C personal selling
B advertising D sales promotion
Answer:_______
6. Price is important because
A it is a cost to business C it brings revenue to the business
B it is a method of advertising D it is easy to calculate
Answer:________
7. Place as an element of marketing is about

A pricing decisions C offering discounts on products
B packaging D choosing a channel of distribution
Answer:_________
54
Marketing
Question 2
Mike’s business
After working for several years in a prestigious hotel, Mike decided to start his own business. He
made sauces and vinaigrettes that he sold at the local market.
Originally selling just a few flavours, Mike now offers a range of new products. He has developed
a brand name for his products known as MSV sauces and has
set a low price to attract more customers. Posters are found in
shops where Mike’s products are sold. His products are mostly
sold through local shops, market fairs and online. He does not
use any artificial ingredients. Mike buys his ingredients, such as
chili peppers, locally. He believes in supporting local farmers to
help the economy.
(a) Identify the product that Mike is offering for sale.

_____________________________________________________________________
_____________________________________________________________________
(b) What are the unique features about Mike’s products?

_____________________________________________________________________
_____________________________________________________________________
(c) Explain why Mike has set a low price for his products.
_____________________________________________________________________
_____________________________________________________________________
(d) According to you, what other two methods of promotion Mike could have used to
increase sales?
Method 1: ____________________________________________________________
Method 2: ____________________________________________________________
(e) Identify and explain two factors that might have influenced the choice of the
distribution channel used to sell MSV products.
Factor 1: ____________________________________________________________
Factor 2: ____________________________________________________________
55
Unit 4
Question 3
Match each term in column A with the corresponding definition in column B. Write
your answers in the table which follows.
Column A Column B
Communicating with customers to encourage them buy the
A Marketing 1
products of an enterprise.
B Market research 2 The process of marketing a product using internet.
C Product 3 The amount of money paid by the customer for a good or service.
The process of identifying needs of customers and attempting to
D Price 4
satisfy them.
The goods and services produced by an enterprise to satisfy
E Promotion 5
customers' needs or wants.
The process of collecting and analysing data about customers
F Place 6
and the market.
Selecting an appropriate channel of distribution for products to
G E- marketing 7
reach customers.
Column A A B C D E F G
Column B
KEY TERMS
E- marketing refers to the process of marketing a product using internet.
Marketable product is a product which consumers need and will be ready to buy.
Marketing is the process of identifying needs of customers and attempting to

satisfy them.
Market research is the process of collecting and analysing data about customers
and the market.
Place is about selecting an appropriate channel of distribution for products to

reach customers.
Price refers to the amount of money paid by the customer when buying a good
or service.
Product refers to the goods and services produced by an enterprise to satisfy a

customers' needs or wants.
Promotion is about communicating with customers so as to encourage them to

buy the products of an enterprise.
Selling is concerned with exchanging a product for cash.

56
Business Plan
Unit 5
Business
Plan
• describe the term business plan

• outline the reasons for preparing a business plan
• write up a simple business plan
In this unit, you will learn about the importance of a business plan to
entrepreneurs and the different components of the document. You will
also be involved in writing a simple business plan for an enterprise.
57
Unit 5
5.1 Business plan
Kevin’s friend, Ruben, strongly advised him to prepare a business plan if he was to start up
his enterprise. Ruben explained to him that a well-prepared business plan was the key to the
success of an enterprise. The latter wanted to own and manage a supermarket that would sell
a variety of farm and home-made products. Kevin wanted to know about the importance of a
business plan.
A business plan is a document that contains a detailed plan to set up

A business plan is a
and develop an enterprise. The exercise of preparing a business plan document that contains a
encourages entrepreneurs to think through their business idea. While detailed plan to set up and
doing so, entrepreneurs will have to present maximum information develop an enterprise.
about the enterprise.
There are likely to be several users of the business plan.
Entrepreneurs themselves
Users of
Other Potential
business
stakeholders investors
plans
Banks
Figure 1: Users of business plan
58
Business Plan
5.2 Uses of business plan
A business plan has several uses.
A business plan can be used as a guide, as well as a decision-making tool for the entrepreneur. The
business ideas of the entrepreneur can be written down in detail. The reasons are explained in the
table below.
Reasons entrepreneurs prepare business plan
Business ideas are presented clearly. Having clear ideas will

avoid mistakes and reduce risks of failure. The estimates of
costs and revenues can be calculated and profits or losses
A guide could be forecasted. Losses could be avoided.
To measure progress made by the business.
To attract potential investors to the enterprise.

A decision-making
tool
To apply for a bank loan.
Table1 : Uses of business plan
Activity 1
Read the following mini story and state whether the following
statements are True or False.
Bella is planning to open a shop to sell honey and home-made jam.
A friend advised her to write a business plan.
A business plan provides information about the name of

(a)
the enterprise and its location only.
Bella should prepare a business plan only if she applied

(b)
for a bank loan.
Bella could use a business plan to measure the progress

(c)
of her enterprise.
(d) Small businesses do not need to prepare business plans.
59
Unit 5
5.3 Components of a business plan
The business plan consists of different components. They are shown below.
1. Information about the enterprise
Components
5. Finance of a business 2. Human resources
plan
4. Marketing 3. Operations
Figure 2: Components of a business plan
Benny was quite hesitant to write down his business plan as he did not know how to start
doing it. He was advised by his friend, Mita, an experienced businesswoman, to ask a set of key
questions. The questions are always related to the content of the business plan. The questions
are found below.
Questions that should be considered before preparing a business plan
What are the business aim and objectives of the enterprise ?
Who will be the customers?
What are customers' taste and preferences ?
What prices should be charged for the products ?
Who are the competitors?
Where should the products be sold?
Which resources would be required to start up the enterprise?
What are the expected profits?
What type of enterprise should be set up?
Figure 3: Questions before preparing a business plan

60
Business Plan
The table below shows the type of information that is usually found in different components of
the business plan.
Name of the enterprise

Location of the business
Contact details
Information about the Type of business enterprise
1
enterprise Incorporation date of the enterprise
Start-up capital required
Business idea
Description of the product or service
2 Human resources The number of workers required (if any)
3 Operations Units of goods to be produced by the enterprise

Strengths of the products
Prices to be charged
4 Marketing
Advertising to be done
Channels of distribution
Start-up capital required

5 Finances Expected expenses/revenue
Profits or losses to be made
Table 2 : Details of business plan

Activity 2
Tick ( ) the appropriate column in which the details of the business plan should be found.
Information about Human

Details Operations Marketing Finances
the enterprise resources
(a) Advertising
Business aim
(b)
and objectives
Channels of
(c)
distribution
Description of
(d)
the product
Expected
(e) expenses/
revenue
Name of the
(f )
enterprise
61
Unit 5
Activity 3
For each of the information in column 1, write down the component in which it
should be explained in detail.
Column 1 Component of business plan
(a) Prices to be charged
(b) Profits or losses to be made
(c) Start-up capital required
(d) Strengths of the products
The number of workers required

(e)
(if any)
(f ) Type of business enterprise
Units of goods to be produced by

(g)
the enterprise
Turn and Talk Activity
Why would a bank refuse to give a loan despite having the business
plan of an enterprise?
62
Business Plan
Presentation of a simple business plan
Below is a business plan of an entrepreneur, Zaha, who started a Fashion boutique. Zaha prepared
this business plan to apply for bank loan. The information in a business plan was presented in an
orderly manner and for two consecutive years to show her progress.
Zaha Business Plan
Details Year 1 Year 2
Name of the enterprise Zaha Fashion Boutique
Location of the business Ville des fleurs
Contact details zaha@enterprise.mu
Type of business enterprise Partnership

Incorporation date of the
13 May 2018
enterprise
Start-up capital required Rs 2 million
To provide a high-class To provide a high-class

clothing for working men clothing for working men and
Business aim and objectives and women. women.
To make a 10 % profit by To make a 15 % profit by the
the end of the year. end of the year.
High quality fabrics for High quality fabrics for formal

Description of the products
formal wear. wear.
Number of workers 2 machinists 4 machinists

Unique designs and high
Strengths of the products Unique designs
quality
Prices to be charged 10 % cost plus pricing 12 % cost plus pricing
Advertising Use of social media Use of social media
Production 6 000 outfits 9 000 outfits
Expected expenses Rs 500 000 per year Rs 700 000 per year
Expected revenue Rs 1 200 000 per year Rs 1 800 000 per year
Profits or losses to be made Rs 700 000 Rs 1 100 000 per year
Table 3 : Example of business plan

63
Unit 5
Question 1
In March 2020, Jean Ping is planning to set up a company, North West Company Ltd, to produce
and sell hand-made miniature ships. Below are some details provided by Jean Ping about the
enterprise.
Details Year 1
Name of the enterprise North West Company Ltd
Contact details bato@intnet.mu
Incorporation date of the enterprise 01 March 2020
Description of the products Hand made miniature ships
Start-up capital required Rs 3 million
Expected expenses Rs 1 million per year
Expected revenue Rs 3 million per year
You have been requested to assist Jean Ping to prepare a business plan.
(a) Identify five pieces of information that you would find important to include in a business plan.
Information to
be included in
the business
plan
KEY TERMS
Business plan is a document that contains a detailed plan to set up and develop
an enterprise.
64
Demand and Supply
Unit 6
Demand
and Supply
• define the terms 'demand' and 'supply'

• analyse factors affecting demand and supply
• draw demand curve and supply curves
• show an understanding of movement and shift in demand and supply
curves
• show and interpret equilibrium position
In this unit you will learn about demand and supply as well as the factors
affecting them. You will also read demand and supply diagrams and identify
the equilibrium position.
65
Unit 6
6.1 The market
People usually satisfy their needs and wants by buying goods and
A market is a where
services found in markets. A market is where buyers and sellers buyers and sellers meet
meet to exchange goods and services against a payment. Some to exchange goods and
examples of markets are shopping malls, vegetable market fairs, services against a payment.
supermarkets as well as shopping websites like Ebay, AliExpress
and Amazon.
A buyer is one who purchases

goods and services.
A seller (or supplier) is

one who offers goods
and services, usually to
make profits.
Figure 1: A market
There are markets for all types of goods and services. A few examples are given below.
Market
Goods Services
Shopping
Shops Supermarkets Clinic Cinema
websites
Table 1: Examples of markets for goods and services

66
Demand and Supply
Activity 1
A market is where buyers and sellers meet to exchange goods

(a)
and services against a payment.
(b) A buyer purchases goods and services to satisfy his needs only.
(c) A seller usually aims at making profits.
(d) A market can only exist in a physical location.
6.2 Demand
Effective demand is the
When people express their willingness to buy commodities, it
willingness and ability to
represents a demand for a commodity. For example, if people want buy a commodity at a given
to buy coconut water, there will be a demand for it. price over a given period of
time.
However, effective demand takes place only when buyers have
both the willingness and ability to buy a commodity at a given
price over a given period of time. If buyers are willing but not Note: Commodities,
able to purchase coconut water, there will be no demand for the also known as
commodity. products, consist of
goods and services.
Activity 2
Tick ( ) the appropriate columns and state whether demand is effective or not.
Effective /
Willingness Ability
No Demand
Sara has Rs 20. She is willing to
(a)
buy a pair of dholl-puri at Rs 12.
Jeremie has Rs 200. T-shirts are
(b) being sold for Rs 150. He does not
want to buy any.
Ricardo is willing to buy a plot of
(c)
land but he is short of Rs 150 000.
Julia has Rs 400. She is willing to
(d)
buy a dress costing Rs 375.
67
Unit 6
6.2.1 Law of demand
When prices fall, consumers usually increase their demand and The law of demand states that
when prices rise, the demand is reduced. This is known as the law of more is bought at a lower price
than higher price and vice-versa.
demand which states that more is bought when prices are low and
vice versa. Thus, there is an inverse relationship between price and
the quantity demanded. Law of demand
P Qd
P Qd
Table 2: Law of demand
Activity 3
(a) Use arrows ( ) or ( ) to illustrate the law of demand in the table below.
Price (P) Quantity demanded (Qd)
P Qd ……………………
P …………………… Qd
(b) Hence, the law of demand states that there is ……………………. (a direct / an inverse)
relationship between price and quantity demanded.
Group discussion
Turn to a partner in the classroom. One student should act as a seller and
the other as a buyer (with limited income). Discuss about situations where
price increases and decreases and how does the buyer reacts in each
situation.
68
Demand and Supply
6.2.2 The demand curve
The demand curve is drawn from the demand schedule. The A demand schedule is a table
demand schedule is a table which shows the quantity demanded which shows the quantity
demanded of commodities at
of commodities at given prices.
given prices.
Below is a demand schedule and its demand curve.
Price (Rs) Quantity demanded (units)

10 4
15 3
20 2
25 1
Table 3: Demand schedule
The demand curve is a diagram that shows the quantity demanded

The demand curve is a
of a commodity at each price. The demand curve slopes downwards diagram that shows the quantity
from left to right as illustrated below. demanded of a commodity at
each price.
Price (Rs)
D
D
0 Quantity demanded (units)
Figure 2: A demand curve
Labelling the DEMAND curve diagram

The diagram is labelled as follows:
• 0 – the point of origin
• X-axis as Quantity demanded (units)
• Y- axis as Price (Rs)
• The demand curve as DD
69
Unit 6
Activity 4
Below is the demand schedule of ‘Maxim Mervei’, a business selling a mauritian snack.
The quantity demanded of ‘Maxim Mervei’ at different prices are presented in a demand
schedule as follows.
Price per unit (Rs) Quantity demanded of ‘Maxim Mervei’ per day (units)
5 80
10 60
15 40
20 20
Draw and label the demand curve of ‘Maxim Mervei’ on the graph below.
70
Demand and Supply
6.2.3 Factors affecting demand
Demand for a commodity can be affected by a set of factors, namely, price of the product itself and
other factors (income of the consumer, population, tastes and preferences, as well as climate). These
are summarised below.
Factors affecting demand of a product
Price of the Other factors

product itself
* Income of consumer
* Population
* Tastes and preferences
* Climate
Figure 3: Factors affecting demand
Each factor is explained below.
Factors affecting demand Explanation
A fall in price of the product will increase the

1 Price of the product itself
quantity demanded, and vice versa.
2 Income of consumer More is bought when income increases.
An increase in population would cause an

3 Population increase in the demand for commodities, for
e.g, food, education and healthcare.
Fashionable items are trendy and usually high

4 Tastes and preferences
in demand, for example, slim fit jeans.
People buy some specific commodities in

5 Climate particular climate, for example, demand of
warm clothes will increase in winter.
Table 4: Description of factors affecting demand
71
Unit 6
Activity 5
State two factors that affect the demand of the following commodities.
Factors affecting demand

Commodities
(1) (2)
(a) Fast food
(b) Ice cream
(c) Cars
6.2.4 Movement along the demand curve
A change in price of a commodity causes a movement along its demand curve. The table below
illustrates movements along a demand curve.
Price increase Price decrease

A rise in price causes an upward A fall in price causes a downward
movement along the demand curve. movement along the demand curve.
Price (Rs) Price (Rs)
B D
15
A
10 A 10
5 C
D
D
0 40 60 Quantity 0 Quantity
60 80
(units) (units)
Quantity Quantity
demanded (units) demanded (units)
10 60 10 80
15 40 5 60
A rise in price from Rs 10 to Rs 15 causes A fall in price from Rs 10 to Rs 5 causes a

an upward movement along the demand downward movement along the demand
curve from points A to B. The quantity curve from points A to C. The quantity
demanded falls from 60 units to 40 units. demanded rises from 60 units to 80 units.
72 Table 5: Movements along the demand curve

Demand and Supply
Activity 6
(a) A change in price affects the quantity demanded of a commodity.
An upward movement along the demand curve is due to a fall in

(b)
price.
A downward movement along the demand curve is due to a fall in
(c)
price.
A movement along the demand curve does not affect the quantity
(d)
demanded.
6.2.5 Shift of the demand curve
A change in 'other factors' affect demand and causes shifts of the demand curve either to its
right or to its left. (Shifts are not caused by changes in price of the commodity). Below are
examples of shifts in demand curve.
Shift of the
Example Diagram
demand curve
Price(Rs)
An increase in income
of the consumer may D1 Note that price
1
encourage people to D
does not change.
buy more clothes
The demand curve
shifts to its right. A B
10
Climate
More fans are D1
2 D
demanded in
o
summer 40 60 Quantity (Units)
People’s tastes and Price (Rs)

preferences change
from fast foods to
3 Note that price
healthy foods. This D
would decrease D1
does not change.
demand of fast foods. The demand curve
shifts to its left. B A
10
A fall in population
D
4 would decrease the D1
demand for housing o
40 60 Quantity (Units)
Table 6: Shifts of the demand curve

73
Unit 6
Activity 7
The diagrams below show shifts of the demand curve. Tick ( ) the column
that represents the shift of the demand curve for each change in demand.
Price (Rs)
D1
D
Diagram A:
Rightward shift of the
demand curve
A B
10
D1
D
O
40 60
Quantity (Units)
Price (Rs)
D
D1
Diagram B:
Leftward shift of the
B A demand curve
10
D
D1
O
40 60
Quantity (Units)
Factor influencing demand Diagram A Diagram B
A fall in income of the consumer reducing demand

(a)
for cars.
A rise in population causing an increase in demand
(b)
for food.
An advertising campaign attracts more people to
(c)
consume fruits and vegetables.
(d) Severe winter on the demand of ice creams.
74
Demand and Supply
6.3 Supply
Supply is the quantity of a commodity offered

Supply is the quantity of a commodity
for sale by sellers on the market at a given price offered for sale by sellers on the market at a
and time. given price and time.
6.3.1 Law of Supply
Sellers are motivated to earn profits. Therefore, more The law of supply states that a rise in the
commodities are offered for sale when prices are high and price of a commodity will raise quantity
supplied, and vice versa.
less are offered when prices are low. This is known as the law
of supply.
The table below summarises the law of supply. It shows a direct relationship between price and
quantity supplied.
Law of supply
P Qs
P Qs
Table 7: Law of Supply
Activity 8

(a) Use arrows ( ) or ( ) to illustrate the law of supply in the table below.
Price (P) Quantity Supplied (Qs)
P Qs ……………………
P …………………… Qs
(b) Hence, the law of supply states that there is ……………………. (a direct / an inverse)
relationship between price and quantity supplied.
75
Unit 6
6.3.2 The supply curve
The supply curve is drawn from the supply schedule. The supply A supply schedule is a table
schedule is a table which shows the quantity supplied of which shows the quantity supplied
commodities at given prices. of commodities at each price.
Below is a supply schedule and its supply curve.
Price (Rs) Quantity supplied (units)

5 20
10 40
15 60
20 80
Table 8: Supply schedule
The supply curve is a diagram that shows the quantity supplied The supply curve is a diagram
at each price. The supply curve slopes upward from the left to the that shows the quantity supplied
right as illustrated below. at each price.
Price (Rs)
S
S
O
Quantity supplied (units)
Figure 4 : A supply curve
Labelling the SUPPLY diagram

• X-axis as Quantity supplied (units)
• Y- axis as Price (Rs)
• The supply curve as SS
76
Demand and Supply
Activity 9
The quantity supplied of T-shirts at different prices are presented in a supply schedule
as follows:
Quantity supplied of Zumi T-shirts

Price per unit (Rs)
(units)
5 20
10 40
15 60
20 80
Draw and label the supply curve of ‘Zumi T-shirts’.
77
Unit 6
6.3.3 Factors affecting supply
The supply of commodities is also affected by factors other than price, such as costs of
production, technology, climate as well as tax.
Below is a classification of some factors affecting supply.
Factors affecting supply
Price of the product itself Other factors
* Cost of production
* Technology
* Climate
* Taxes
Figure 5: Factors affecting supply
Each factor is explained below.
Some factors
Explanation
affecting supply
Price of the product A rise in price of the product will raise the quantity supplied and
1
itself (main factor) vice versa.
A rise in costs of production due to expensive raw materials or

2 Cost of production higher labour costs will discourage suppliers to supply more at
the same price.
Use of advanced technology makes production more efficient.

3 Technology
Therefore, more can be supplied on the market.
4 Climate During winter, more cardigans will be supplied.
A rise in tax such as Value Added Tax (VAT) will discourage more
5 Taxes
production.
Table 9: Description of factors affecting supply
Activity 10
Pritish grows cauliflowers, which he offers for sale. Due to heavy rains, half of his crops was destroyed.
Tick ( ) the factor(s) that affect the supply of cauliflowers.
Price of the cauliflowers were too high
Bad weather conditions
The cauliflowers were not yet ready for sale

78
Demand and Supply
6.4.4 Movement along the supply curve
A change in price of a commodity causes a movement along its supply curve. The table below
illustrates movements along a supply curve.
Price increase Price decrease

A rise in price causes an upward A fall in price causes a downward
movement along the supply curve movement along the supply curve
S S
B C
15 10
10 A 5 D
S S
0 40 60 Quantity 0 20 40 Quantity
(units) (units)
Quantity supplied Quantity supplied

(units) (units)
10 40 10 40
15 60 5 20
A rise in price from Rs 10 to Rs 15 causes A fall in price from Rs 10 to Rs 5 causes a

an upward movement along the supply downward movement along the supply
curve from points A to B. Quantity supplied curve from points C to D. Quantity supplied
rises from 40 units to 60 units. falls from 40 units to 20 units.
Table 10: Movements along the supply curve
79
Unit 6
6.3.4 Shift of the supply curve
A shift of the supply curve is caused by changes in 'other factors' affecting supply. The supply
curve can either shift to its right or to its left. (Shifts are not caused by changes in price of the
commodity). Examples are given below.
Shift of the supply
Example Diagram
curve
Cost of production
Note that price
A fall in cost of Price (Rs) does not change.
production would
1
encourage suppliers S
to produce more. S1
Therefore, supply will
increase. The supply curve A B
10
Technology shifts to its right
S
Use of better S1
technology to produce O 40 60
2 Quantity (Units)
cars would facilitate
the production process.
This would increase
supply.
Note that price

Climate Price (Rs)
does not change.
3 Supply of litchis falls in S1
winter, because it is a S
seasonal fruit.
The supply curve
shifts to its left D C
10
Taxes
S1
S
4 A rise in taxes on O 40 60
furniture would Quantity (Units)
decrease supply.
Group discussion
Think-Pair-Share
If there is a high supply and low demand for a certain good, will the
price likely be high or low?
If there is a low supply and high demand for a certain good, will the
price likely be high or low? Justify your answer(s).
80
Demand and Supply
Activity 11
The diagrams below show shifts of the supply curve. Tick ( ) the column that
represents the shift of the supply curve for each change in supply.
Price (Rs)
S
S1
Diagram A:
Rightward shift of the
A B supply curve
10
S S1
o
Price (Rs)
S1
S
Diagram B:
Leftward shift of the
D C supply curve
10
S1
S
o
Factor influencing supply Diagram A Diagram B
A rise in cost of production reducing supply of

(a)
coffee beans.
Use of modern production techniques in car
(b)
manufacturing.
(c) Drought causing a poor harvest of crops.
(d) A fall in Value Added Tax on electronic products.
81
Unit 6
6.4 Equilibrium point
The demand and supply curves can be drawn on the same diagram. They are drawn from the
following demand and supply schedules.
Price (Rs) Quantity demanded (units) Quantity supplied (units)
5 90 10
25 50 50
30 40 60
50 20 85
The demand and supply diagrams have been drawn from the above demand and supply
schedules.
Price (Rs)
D S
Labelling the DEMAND and
E SUPPLY diagram
25 Equilibrium point
• X-axis as Quantity traded (units)
S D • Y- axis as Price (Rs)
O • The demand curve as DD
50 Quantity traded (units)
• The supply curve as SS
Figure 6: Demand and supply curves
Equilibrium is a state of balance. At this point, quantity

demanded and quantity supplied are equal.
Equilibrium point is
where the demand and
The equlibrium price is Rs 25 and the quantity traded is 50 units. supply curves meet each
The equilibrium point (E) shows other.
the equilibrium price also known as market price
quantity traded of commodities on the market
82
Demand and Supply
Activity 12
(a) Using the given demand and supply schedules, draw a demand and supply diagram
on the graph below.
(b) Identify the equilibrium point and label it as E.
Price (Rs) Quantity demanded (units) Quantity supplied (units)
10 160 20
45 100 100
70 60 160
80 40 180
(c) Explain what is meant by market equilibrium.

______________________________________________________________________
______________________________________________________________________
83
Unit 6
Question 1

1.
The law of demand states that there is …………………..relationship between price and
quantity demanded.
A direct B inverse
C any D few
Answer…………
2.
The demand curve is drawn from the………………….
A demand schedule B supply schedule
C equilibrium point D market
Answer…………
3.
An increase in the level of income will
A shift the demand curve to the right
B shift the supply curve to the right
C cause an upward movement along the demand curve
D cause a downward movement along the demand curve
Answer…………
4.
Which of the following factor influences supply of a commodity?
A Level of income
B Advanced methods of production
C Population
D Tastes and preferences
Answer…………
5.
Equilibrium occurs when
A demand is greater than supply
B demand is equal to supply
C supply is greater demand
D supply is less than demand
Answer…………
84
Demand and Supply
Question 2
Kiriko Enterprise manufactures boxing shoes. The demand and supply schedules are below.
Price (Rs) Quantity demanded (pairs) Quantity supplied (pairs)

1 000 60 20
1 500 40 25
2 000 30 30
2 500 20 40
3 000 10 50
(a) Draw and label the demand and the supply curves.
(b) Identify
(i) the equilibrium price: _________ (ii) the equilibrium quantity: ___________
(c) State one factor that might influence

(i) the demand for boxing shoes
__________________________________________________________________
(ii) the supply of boxing shoes

___________________________________________________________________
85
Unit 6
KEY TERMS
Buyer is one who purchases goods and services.
Demand curve is a diagram that shows the quantity demanded of commodity at each
price.
Demand schedule is a table which shows the quantity demanded of commodities at

given prices.
Effective demand is the willingness and ability to buy a commodity at a given price
over a given time period.
Equilibrium point is where the demand and supply curves meet each other.
Law of demand states that more is bought at lower prices than at higher prices and
vice versa.
Law of supply states that a rise in price of a product will raise quantity supplied and
vice versa.
Market is where buyers and sellers meet to exchange goods and services against a
payment.
Seller (or supplier) is one who offers goods and services, usually, to make profits.
Supply curve is a diagram that shows the quantity supplied an entrepreneur is willing
to sell at each price.
Supply is the quantity of a commodity offered for sale by sellers on the market at a
given price and time.
Supply schedule is a table which shows the quantity supplied of commodities at each
price.
86
Money and Banking
Unit 7
Money
and Banking
• explain the term ‘money’

• outline the characteristics and functions of money
• distinguish between the functions of central and commercial banks
In this unit, you will learn about money and its characteristics as well as
functions. You will also be introduced to commercial banks and central banks
as well as learn their functions.
87
Unit 7
7.1 Money
Money is anything which is generally acceptable as a medium of Money is anything which

exchange against goods and services. It is highly important for is generally acceptable as
enterprises as it is involved in every business activity. All expenses a medium of exchange
against goods and services.
and incomes of a business are measured in terms of money.
7.1.1 Forms of money
The forms of money that have been used in trade have changed tremendously over time. In
ancient civilisations, trade took place through the barter system.
This involves direct exchange of commodities without using The barter system involves
the direct exchange of
money. For barter to take place there should be double coincidence
commodities where there
of wants. This involves two individuals who should agree to sell is double coincidence of
and buy each other’s commodity i.e. what a person desires to sell wants.
should be exactly what the other person wishes to buy.
BARTER
Figure 1: Example of barter system
Gradually, money evolved into commodity money, metallic money, notes and coins, and
eventually into a plastic to cashless society.
The different forms of money are as follows:
Barter System Towards

Commodity Metallic Notes and
“Moneyless a cashless
money money coins
society” society
Direct exchange Gold Gold and silver coins Paper money Cheques
of products Cattle Metal coins Payment cards
Wheat Electronic transfers
Cowrie shells
Precious stones
Figure 2: Forms of money

88
Money and Banking
Activity 1
(a) Money is a commodity which is generally accepted by everyone.
The expenses and incomes in a business are not necessarily

(b)
measured in terms of money.
(c) Gold and silver coins are the only forms of commodity money.
(d) The direct exchange of products refers to the barter system.
Activity 2
Shrina and Yeshu wish to trade fresh fruits against manure. Shrina has three tons of fresh
fruits and Yeshu has one ton of manure. However, they did not agree about the quantities
to be exchanged.
(a) Identify one reason why the barter system could not take place.
_______________________________________________________________
(b) Tick ( ) the medium that would help to trade the exact quantities of fruits and
manure.
(i) Use cattle as money
(ii) Use of notes and coins
89
Unit 7
7.1.2 Characteristics of money
The forms of money used in the past had several inconveniences. Every commodity which was
used as money had its limitations. Therefore, for anything to be used as money, it must have
the following characteristics.
Acceptable
Money must be generally acceptable and / or recognised by
those who use it.
Durable Money must be able to last for a period of time to enable

people to use it again and again.
Divisible
Money should be made available in smaller units for smaller
transactions. For example, a Rs 100 note can be divided
into four Rs 25 notes, as well as ten Rs10 coins.
Scarce
Money must be limited in supply to retain its value.
Uniform The items used as money should be standardised in size

and weight.
Portable Money must be light and easy to be conveniently carried

around.
Figure 3: Characteristics of money
90
Money and Banking
7.1.3 Functions of money
Commodities used as money should fulfill four distinct functions.
Read the case below about the functions of money.
Kelly has saved Rs 50 000 over two years to buy a laptop.

Recently, she visited a local store to buy one.
90
448
Rs
Options for mode of payment:
1. Cash
2. Hire purchase: Monthly installment of Rs 1 800 (36 months)
The functions of money are explained below:
Functions
Explanation Example from the case
of money
• Money is paid to obtain goods

Medium of and services. If Kelly chose to pay for the laptop
• It enables trade to take place in cash, money would be used as a
exchange easily and quickly. medium of exchange.
• Money is used to measure and

Kelly compared the price of laptops
Unit of assign a monetary value to
with her budget. She then paid the
products.
account exact amount of Rs 44 890 using notes
• It allows to plan for expenses from
and coins for the one she purchased.
available money.
Store of • Money can be saved and invested

Kelly used her savings to buy the
at a later date as it retains its value
value laptop.
over time.
Standard • Money allows people to buy on If Kelly chose to buy the laptop on hire
of deferred credit, that is, buying now and purchase, she would have paid the
payment paying later. total amount over 36 months.
Table 1: Functions of money
91
Unit 7
Activity 3
From the list below, identify the function of money for each example given below.
Examples Function of money
Buy food at the

school canteen
Save at the
bank for further
studies
Compare the value of

goods in a shop
Buy a mobile phone

on credit and pay
after 2 months
Keep records
of income and
expenses
Repay a loan
at the bank
Buy accessories on
the internet and pay
with credit card
92
Money and Banking
7.2 Banks
Banks assist people and enterprises to carry out their financial transactions. A bank is an
institution which accepts deposits, provides loans and offers other financial services. There are
two main types of banks, namely commercial bank and central bank.
7.2.1 Commercial banks
Commercial banks play a very important role in helping enterprises A commercial bank
in Mauritius to carry out their business transactions. A commercial accepts deposits, give
bank accepts deposits, give loans and provides other financial loans and provides other
services to private individuals and firms. financial services to private
individuals and firms.
Examples of some commercial banks in Mauritius are:
The Mauritius Commercial Bank Ltd. State Bank of Mauritius (SBM)

Figure 4: Examples of commercial banks
7.2.1.1 Functions of the commercial banks
Commercial banks carry out several functions and offer a wide range of services to its customers.
Their functions are outlined below.
Give Accept
loans deposits
Functions of
commercial banks
Provide Assist
advice to customers
customers in making
payments
Figure 5: Functions of commercial banks

93
Unit 7
Activity 4
(a) Banks help enterprises to carry out financial transactions.
(b) The only function of a commercial bank is to accept deposits.
(c) Commercial banks provide their services to businesses only.
(d) Commercial banks offer loans to private individuals.
7.2.2 Central Bank
The central bank is an institution established by

the government to control financial activities of a
country. Every country has only one central bank
which supervises and regulates the banking system
of the country.
The central bank of Mauritius is called The Bank of

Mauritius. It is situated in Port Louis.
Figure 5: Bank of Mauritius
The central bank is an institution established by the

government to control financial activities of a country.
Activity 5
issue country controls policies commercial system
The central bank _______________ the financial institutions of a _______________

including _______________ banks. It has the responsibility to _______________
notes and coins and it also implements _______________ set by the government.
94
Money and Banking
7.2.2.1 Functions of Central Bank
The central bank carries out numerous functions, some of which are explained below.
Functions of central bank Explanation
Setting rules and The central bank sets rules and regulations that banks
1
regulations should strictly follow.
Monitoring the banking The central bank ensures that government decisions and/or
2
system policies about financial activities are being implemented.
Acting as Government’s
3 The central bank manages the funds of the government.
banker
The central bank issues and controls notes and coins that
4 Issuing notes and coins
circulate in a country.
Commercial banks usually seek help and advice from

5 Acting as a bankers’ bank
central bank.
Keeping gold and Central bank safeguards and controls the gold and currency
6
currency reserves reserves of a country.
Table 2: Functions of a central bank
Activity 6
(a) Central bank accepts deposits from individuals.
(b) A central bank is owned by private enterprises.
(c) Central banks issue and control the supply of notes and coins.
(d) The Bank of Mauritius is owned by the government.
95
Unit 7
1. To each of the functions below, draw arrows to match the respective functions that
central and commercial banks undertake.
Functions of bank
Acting as Government’s banker
Giving loans to the public
Commercial Controlling gold and currency reserves Central

bank bank
Accepting deposits from the public
Issuing of notes and coins
Accepting deposits from the government
Offering safekeeping vault services
KEY TERMS
Barter system involves the direct exchange of commodities where there is double
coincidence of wants.
Central bank is an institution established by the government to control the financial

activities of a country.
Commercial bank accepts deposits, give loans and provides other financial services to
private individuals and firms.
Money is anything which is generally acceptable as a medium of exchange against goods

and services.
96
Spending, Savings and Borrowing
Unit 8
Spending,
Savings and
Borrowing
• define the terms 'spending', 'savings' and 'borrowing'

• identify the factors that influence an individual to spend, save or
borrow
In this unit, you will learn about how people use their income either on
spending and/or savings. People also borrow money to satisfy their needs
and wants. The unit also presents the factors that influence an individual’s
spending, savings or borrowing.
97
Unit 8
8.1 Spending
Read the story of ‘Madhav the architect’ to understand the nature of spending, saving
and borrowing.
Madhav runs his own business as an architect. His household

consists of his wife, two children and retired parents. His monthly
income is quite high but a large amount is spent on food, rent, fuel
costs and other household expenses. He also tries to save part of
his income, in case some unexpected expenses arise. From those
savings, he also planned to buy a family car. To make this happen,
Madhav intends to take a bank loan.
People work to earn the means to spend on goods and services.

Disposable income is
Money earned is known as income. Usually, people have to pay amount of income available
taxes from their incomes to the government. Income after payment for spending after taxes are
of tax is known as disposable income which is the amount left for paid.
spending. Some people also save part of their income.
Income of individuals or households
Spending Savings
Figure 1: Income, spending and savings
Income
- Tax
= Disposable
Income
Figure 2: Disposable income
98
Spending refers to paying out money to buy goods and hire

Spending refers to paying
services. People with high income are usually able to spend more. out money to buy goods or
Incomes are usually spent on the following: hire services.
Housing
Food
Education Utility bills
Clothes
Leisure activities
Figure 3: Spending
Spending
+ Savings
= Income
Figure 4: Income
Activity 1
Assume Ying earns Rs 15 000 monthly. The table below shows the spending and saving
for the months of May to September.
Complete the table below by finding the savings of Ying for each month.
Income (Rs) Spending (Rs) Saving (Rs)
May 15 000 15 000 ..................................
June 15 000 14 000 ..................................
July 15 000 13 000 ..................................
August 15 000 12 000 ..................................
September 15 000 15 100 ..................................
99
Unit 8
When people’s earnings and/or past savings are not enough to meet their expenses, they have
the options of either borrowing money to spend in the present or postponing their expenses
for the future.
8.1.1 Factors affecting spending
The amount of money that a consumer spends depends on several factors. These are explained
below.
Factors affecting spending Explanation
Spending will increase if prices of goods and

Prices of goods
1 services rise. On the other hand, spending will
and services
decrease if prices of goods and services fall.
When banks offer higher interest rate on

2 Rate of interest savings, people would usually save more
rather than spend. Thus, spending would fall.
Spending by rich people tends to be higher

3 Wealth
than poor people because they are wealthier.
People tend to increase their current spending

if they expect prices to rise in the future. On
4 Expectations
the other hand, if prices are expected to fall,
current spending will be reduced.
Table 1: Factors affecting consumer spending
100
Tax Information
The Mauritius Revenue Authority (MRA) charges 15% (as at

Income tax is a compulsory
2019) tax on incomes of householders. It usually charges payment charged by the
government on income.
tax on those whose income is above Rs 305 000 per annum.
The table below shows four individuals with different incomes and the tax paid by them.
Income per Tax exempt Taxable Income tax per annum (Rs)
year (Rs) (Rs) income (Rs) 15% tax on income
Mr D’souza 130 000 Rs 305 000 Nil Nil
Ms Bina 195 000 Rs 305 000 Nil Nil
Mrs Grace 390 000 Rs 305 000 85 000 12 750
Mr Bhurtun 500 000 Rs 305 000 195 000 29 250
Table 2: Income and tax payment
Mr D’Souza and Ms Bina did not pay any tax for the year. Mrs Grace and Mr Bhurtun paid taxes
on their taxable income.
Activity 2
(a) People spend to satisfy their needs and wants.
(b) People with low income tend to spend more.
(c) Possessing gold is an example of wealth.
(d) People with high income tend to save more.
(e) A banker will retire soon. He can spend more now than in the future.
(f ) People save more when banks offer a low rate of interest.
101
Unit 8
8.2 Savings
Savings occur when people keep money aside by sacrificing the

Savings refers to part of
purchase or consumption of certain goods and services. Therefore, income that is kept for
savings is that part of income that is kept to be spent in the future. future use.
People usually save their income for different purposes. They are
explained below.
Purpose of savings
Future purchase Retirement Unexpected expenses To maximise income
To fund a To have To pay for Financial

particular project enough unforeseen institutions
like buying money to live expenses, like illness, reward savers
a home or a comfortable unemployment or with interest
educating their life after good bargains
children retirement
Figure 5: Purpose of savings
8.1.2 Factors affecting savings
The amount of money that a consumer saves depends on several factors. These are:
Factors affecting savings Explanation
People with higher disposable income usually save

1 Disposable income
more.
High interest rates offered by banks encourage

2 Rate of interest people to save more of their incomes rather than
spend.
Youngsters and the elderly tend to save less than the

3 Age groups
middle aged people.
If people expect prices of goods and services to

increase in the future, they will tend to save more
4 Expectations now for their purchases in the future. For example, an
individual who fears unemployment ahead will save
more today.
Table 3: Factors affecting savings

102
Activity 3
less unexpected consumption retirement future income
(a) Savings refer to money kept for ___________ use.
(b) To save money, current __________________ has to be sacrificed.
(c) People save money for different reasons like future projects, _________________,
to meet __________________ expenses or to maximise _____________.
(d) A fall in the rate of interest will cause people to save _____________.
8.3 Borrowing
Borrowing money is one way for individuals to spend more than

Borrowing refers to taking
their current disposable income. Borrowing refers to taking money money from a person or
from a person or financial institution which must be repaid in the financial institution which
future. The money borrowed is usually called a loan. It is usually must be repaid in the future.
charged with an interest which is a payment over and above the
initial amount borrowed. Interest is a payment over
and above the initial amount
borrowed.
Pedro wants to buy his first car which costs Rs 750,000. He has
Rs 200,000 from his savings. A friend will lend him Rs 200 000 but
A loan is money borrowed
he has yet to find the remaining Rs 350 000. He decides to take a which has to be repaid with
car loan from a bank. He will, then, have to repay back the loan interest over a given period
with interest to the bank. of time.
Relatives Financial
and Borrowing institutions:
friends banks
Figure 6: Forms of borrowings
103
Unit 8
8.3.1 Factors affecting borrowing
Individuals are motivated to borrow money for several reasons. These are explained below.
Availability of Rate of Interest Expectations Social attitudes

loans
The cost of Individuals Countries or
Banks offer borrowing who are societies which
different loan money is known optimistic are more debt-
schemes that as the rate of about their averse will tend
attract more interest. The future earnings to borrow less.
people to higher the will tend to
borrow from interest rate on borrow more.
them. loans, the lesser
people will
borrow.
Figure 7: Factors influencing borrowing
TAX INFORMATION
An individual is exempt of paying taxes when taking a loan to
purchase or build a first house.
Activity 4
Tick ( ) the factors which will cause an individual to borrow more.
(a) Banks offer loans at low interest rates.
(b) An individual earns a high income and has high savings.
(c) An individual has a low income and intends to construct a house.
An individual wants to go for a world tour soon and expects to get a

(d)
promotion a year later.
104
Question 1
(a) Distinguish between spending and savings.

_______________________________________________________________________
_______________________________________________________________________
(b) Identify two common factors which influence both spending and saving.
Factor 1: ______________________________________________________________
Factor 2: ______________________________________________________________
(c) Define the term 'borrowing'.

_______________________________________________________________________
_______________________________________________________________________
An entrepreneur is planning to borrow a bank loan. Describe two factors which

(b)
could influence his decision.
Factor 1: ________________________________________________________________
_______________________________________________________________
Factor 2: ________________________________________________________________
_________________________________________________________________
Question 2
Mr Ming has the following spending patterns, saving and borrowing in the table below.
Complete the table below to find Mr Ming's savings for months November and December.
Monthly income is Rs 50 000.

Spending Savings
Rs Rs
October 30 000 20 000
November 50 000
December 55 000
(a) Give two reasons an individual would save his/her income.
Reason 1 __________________________________________________________
Reason 2 ___________________________________________________________
105
Unit 8
(c) Give two reasons an individual would borrow from friends or a bank.
Reason 1 ___________________________________________________________
Reason 2 __________________________________________________________
Question 3
Encircle the words given below in the crossword.
expectations earnings spending savings borrowing loans
KEY TERMS
Borrowing refers to taking money from a person or financial institution which must be
repaid in the future.
Disposable income is amount of income available for spending after taxes are paid.
Interest is a payment over and above the initial amount borrowed.
Income tax is a compulsory payment charged by the government on income.
Spending refers to paying out money to buy goods or hire services.
Savings refers to part of income that is kept for future use.
106
International Trade
Unit 9
International
Trade
• explain the importance of trade

• distinguish between home trade and international trade
• explain the importance of trading with other countries
In this unit, you will learn the basis of trade while discovering about home
and international trade. You will also learn about the importance of trading
with other countries.
107
Unit 9
9.1 Trade
Trade is the exchange of goods and services between buyers and

Trade is the buying and
sellers involving money. Buyers, known as consumers usually trade to selling of products.
satisfy their needs and wants. The buyers could be also be firms that
engage in trade with the aim of making profits.
MONEY
CONSUMER
AIM: Satisfy needs FIRMS
& wants AIM: make profits
FIRM Buyer Seller

AIM: Produce other
goods and services
PRODUCTS
Figure 1: The basis of trade
Activity 1
sellers wants selling profits buying buyers satisfying money
(a) Trade refers to the ______________ and ______________ of goods and services.
(b) Sellers trade in products with the aim of making ________________.
(c) Firms can be both _______________ and ________________ of goods and
services.
(d) Consumers buy products with the aim of _________________ needs and
_____________.
(e) Trade usually occurs in exchange of ______________ .
108
International Trade
9.2 Home trade and international trade
Entrepreneurs often aim to have a maximum of customers. Some of them target not only local
customers, but also foreign ones. Thus, trade can take two forms: home trade and international
trade.
Li Wang runs a factory selling biodegradable takeaways, cutlery and

straws made from sugarcane pulp. He buys raw materials from local
suppliers. However, all the machinery and equipment used in the
production process have been imported from Germany.
9.2.1 Home trade
Home trade takes place when goods and services are bought
Home trade is the buying and
and sold within the country itself. It is also known as local trade.
selling of goods and services
For instance, Li Wang carries out home trade when he buys raw within the country itself.
materials from local suppliers and sells the finished products to
local customers.
Buyer Seller
Home Trade
Figure 2 : Home trade
Other examples of home trade in a country are:

A supermarket A beauty salon A hawker selling fruits
Figure 3: Examples of home trade
109
Unit 9
9.2.2 International trade
International trade takes place when two or more countries buy

International trade takes
and sell products with each other. Trade with foreign countries place when two or more
is usually classified as imports and exports. When Li Wang buys countries buy and sell
machinery and equipment from Germany, international trade products with each other.
takes place.
Figure 4: International trade
9.3 Exports and Imports
Enterprises are usually actively involved in business activities such as exports and imports of
goods and services.
9.3.1 Exports
Export refers to the sale of goods and services to foreign countries. Export refers to the sale of
Exports are usually highly desirable for enterprises and the goods and services to foreign
government because it brings money inflows into the country. countries.
For instance, Mauritius (seller) exports ready-made clothes to France (buyer).
EXPORTS (CLOTHING)
Seller Buyer
MONEY INFLOWS
Figure 5: Exports from Mauritius
110
International Trade
9.3.2 Imports
The purchase of goods and services from foreign countries is

termed as import. Enterprises usually import what is required Import refers to the purchase
as raw materials or any other goods to carry out their business of goods and services from
activities. Imports represent expenses to enterprises as they cause foreign countries.
money to flow out of the country. For instance, Mauritius (buyer)

imports cars from Japan (seller).
IMPORTS (CARS)
Buyer Seller
MONEY OUTFLOWS
Figure 6: Mauritian imports
Activity 2
State whether the following statement is True or False.
(a) Home trade is the buying and selling of goods and services locally.
(b) Businesses can only sell their products locally.
International trade is the buying and selling of goods and services from
(c)
foreign countries.
(d) Exports lead to an outflow of money from the country.
(e) Goods and services bought from another country are known as imports.
9.4 Importance of international trade
International trade is an important economic activity in a country for the following reasons:
Trade is important to countries because
Money generated promotes economic development

Jobs are created
Consumers enjoy a variety of products
Quality of life is enhanced
It allows sharing of technology and ideas
Figure 7: Importance of trade to countries

111
Unit 9
Question 1
(a) Tick ( ) to indicate which of the following is an export and an import for Mauritius.
Export Import
(a) Tourists visite Mauritius for holidays
(b) Purchase of oil from Nigeria
(c) Selling sugar to Europe
(d) Purchase of vehicles from Germany
(e) Mauritians travelling to Switzerland as tourists
(b) Mauritius decides to increase the selling of ready-made clothes to France.

Explain one effect when a country increases its trade with another country.
_______________________________________________________________________
_______________________________________________________________________
Question 2
Group discussion
Japan decides to limit the selling of cars to Mauritius.
Discuss the effects of Japan’s decision on the economy of Mauritius.
KEY TERMS
Export refers to the sale of goods and services to foreign countries.

Home trade is the buying and selling of goods and services within the country itself.
International trade takes place when two or more countries buy and sell products with each other.
Import refers to the purchase of goods and services from foreign countries.
Export refers to the sale of goods and services to foreign countries.
Trade is the buying and selling of products.
112
Unit 10
Recording
transactions
in the ledger
• explain the double entry principle

• record cash, bank and credit transactions in the ledger
In this unit, you will record business transactions (cash, bank and credit) in
the ledger while following the double entry principle.
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Unit 10
10.1 Recording business transactions
Business transactions can be in the form of cash, bank and credit. These transactions are
recorded using the double entry system.
Double entry system implies that each transaction affects two accounts: one account has a
debit entry and the other account has a credit entry. This is also known as the dual aspect
principle.
All accounts are kept in a book called the ledger. It is a book which A ledger is a book which
consist of different accounts. consists of different accounts.
An account in the ledger is drawn below.
Dr ................ Account Cr
Date Details Amount Date Details Amount
Rs Rs
Figure 1: An account in the ledger
10.2 Recording cash transactions
A cash transaction is a transaction that occurs when money is A cash transaction is a

transaction that occurs when
received or paid in cash immediately.
money is received or paid in
cash immediately.
114
Recording transactions in the ledger
To record cash transactions, the following steps must be followed:
Identify whether the cash transaction is a receipt of cash into the business or a
Step 1
payment in cash by the business.
Step 2 Identify the account to be debited and the account to be credited.
Step 3 Posting in the ledger accounts.
Worked Example
Step 1 Step 2
(a) Year Receipt Payment Account Account

Transaction
20X8 of cash in cash debited credited
Started business with cash
Jan 01 Cash Capital
Rs 30 000
Dr Cash Account Cr
20X8 Rs 20X8 Rs Step 3

Jan 01 Capital 30 000 Posting in
the ledger
Dr Capital Account Cr
accounts.
20X8 Rs 20X8 Rs
Jan 01 Cash 30 000
(b) Year Receipt Payment Account Account

Transaction
Bought goods for cash
Jan 09 Purchases Cash
Rs 10 000
Dr Cash Account Cr
20X8 Rs 20X8 Rs
Jan 09 Purchases 10 000
Dr Purchases Account Cr
20X8 Rs 20X8 Rs
Jan 09 Cash 10 000
115
Unit 10
(c) Year Receipt Payment Account Account

Transaction
Paid electricity bills
Jan 20 Electricity Cash
Rs 1 500 cash
Dr Cash Account Cr
20X8 Rs 20X8 Rs
Jan 20 Electricity 1 500
Dr Electricity Account Cr
20X8 Rs 20X8 Rs
Jan 20 Cash 1 500
(d) Year Receipt Payment Account Account

Transaction
Bought furniture for cash
Jan 24 Furniture Cash
Rs 10 000
Dr Cash Account Cr
20X8 Rs 20X8 Rs
Jan 24 Furniture 10 000
Dr Furniture Account Cr
20X8 Rs 20X8 Rs
Jan 24 Cash 10 000
Dr Cash Account Cr
Date Details Amount Date Details Amount Note: All transactions
20X8 Rs 20X8 Rs that include cash
Jan 01 Capital 30 000 Jan 09 Purchases 10 000 should be recorded in
one same cash
Jan 20 Electricity 1 500
account.
Jan 24 Furniture 10 000
116
Activity 1
Record each of the following transactions using the double entry system.

Transaction
Mar Started business with cash
Cash Capital
01 Rs 50 000
Dr Cash Account Cr
20X8 Rs 20X8 Rs
20X8 Rs 20X8 Rs

Transaction
Mar Sold goods for cash
Cash Sales
08 Rs 20 000
Dr Cash Account Cr
20X8 Rs 20X8 Rs
Dr Sales Account Cr
20X8 Rs 20X8 Rs
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Unit 10

Transaction
Paid wages in cash
Mar 12
Rs 15 000
Dr ........................... Account Cr
20X8 Rs 20X8 Rs
Dr ........................... Account Cr
20X8 Rs 20X8 Rs

Transaction
Bought equipment for cash
Jan 09
Rs 16 000
Dr ........................... Account Cr
20X8 Rs 20X8 Rs
Dr ........................... Account Cr
20X8 Rs 20X8 Rs
10.3 Recording bank transactions
A bank transaction is a transaction that occurs when money A bank transaction is a transaction
is received or paid by cheque. that occurs when money is received or
paid by cheque.
118
To record bank transactions, the following steps must be followed:
Identify whether the bank transaction is a receipt into the business or a payment
Step 1
by the business.
Step 2 Identify the account to be debited and the account to be credited.
Step 3 Posting in the ledger accounts.
Worked Example
Step 1 Step 2

Transaction
20X8 of cheque by cheque debited credited
Feb 01 Bank Capital
at bank Rs 50 000
Dr Bank Account Cr
20X8 Rs 20X8 Rs
Step 3
Feb 01 Capital 50 000
Posting in
the ledger
accounts.
20X8 Rs 20X8 Rs
Feb 01 Bank 50 000
(b)
Year Receipt Payment Account Account
Transaction
Bought goods paying by
Feb 13 Purchases Bank
cheque Rs 25 000
Dr Bank Account Cr
20X8 Rs 20X8 Rs
Feb 13 Purchases 25 000
20X8 Rs 20X8 Rs
Feb 13 Bank 25 000

119
Unit 10

Transaction
Bought furniture
Feb 17 Furniture Bank
Rs 20 000 by cheque
Dr Bank Account Cr
20X8 Rs 20X8 Rs
Feb 17 Furniture 20 000
20X8 Rs 20X8 Rs
Feb 17 Bank 20 000
(d)
Year Receipt Payment Account Account
Transaction
Paid insurance Rs 12 000
Feb 24 Insurance Bank
by cheque
Dr Bank Account Cr
20X8 Rs 20X8 Rs
Feb 24 Insurance 12 000
Dr Insurance Account Cr
20X8 Rs 20X8 Rs
Feb 24 Bank 12 000
Dr Bank Account Cr
Date Details Amount Date Details Amount Note: All transactions
that are done through
20X8 Rs 20X8 Rs
the bank should be
Feb 01 Capital 50 000 Feb 13 Purchases 25 000 recorded in one same
Feb 17 Furniture 20 000 bank account.
120
Activity 2
Record each of the following transactions using the double entry system.

Transaction
May 01 Bank Capital
at bank Rs 45 000
Dr Bank Account Cr
20X8 Rs 20X8 Rs
20X8 Rs 20X8 Rs

Transaction
Paid advertising Rs 7 000
May 07 Advertising Bank
by cheque
Dr Bank Account Cr
20X8 Rs 20X8 Rs
Dr Advertising Account Cr
20X8 Rs 20X8 Rs
121
Unit 10

Transaction
Sold goods and received
May 12 ................. .................
cheque of Rs 5 000
Dr .................... Account Cr
20X8 Rs 20X8 Rs
Dr .................... Account Cr
20X8 Rs 20X8 Rs

Transaction
Bought Motor Vehicles for
May 18 ................. .................
Rs 75 000 by cheque
Dr .................... Account Cr
20X8 Rs 20X8 Rs
Dr .................... Account Cr
20X8 Rs 20X8 Rs
122
10.4 Recording credit transactions

Some business transactions do not involve an immediate change in Credit transaction is a
cash in hand or cash at bank. They are known as credit transactions. business transaction that is
A credit transaction is a business transaction that is paid at later paid at later date.
date. Businesses usually have credit purchases as well as credit sales.
Credit purchases are goods bought by a business but for which Credit purchases are goods
bought by a business but for
payment is done later to the supplier. The amount owed to the
which payment is done later.
supplier is known as trade payable.
Credit sales are goods sold by a business, but receipts are obtained Credit sales are the sale
later from the customer. The amount the customer owes the of goods by a business but
business is known as trade receivable. receipts are obtained later.
Credit purchases will affect two accounts: One is the purchases account and the other
account goes by the name of the credit supplier.
Credit sales will affect two accounts: One is the sales account and the other account goes by
the name of the credit customer.
I Recording of credit purchases
Credit purchases will affect two accounts: one is Purchases Account and the other is known
by the name of the credit supplier (trade payable).
Purchases Account 1st Account to be debited
[Name of the credit supplier] Account

2nd Account to be credited
(trade payable)
Example 1
On 02 June, goods were bought on credit for Rs 50 000 from a supplier, Paul et Virginie Store.
Credit purchases will affect two accounts:
Purchases Account 1st Account (Rs 50 000) to be debited
[Paul et Virginie Store] Account

2nd Account (Rs 50 000) to be credited
(trade payable)
123
Unit 10
Postings in the ledger accounts.
Purchases Account is debited (left side)
20X8 Rs 20X8 Rs
Jun 02 Paul et Virginie 50 000
Paul et Virginie Account (Trade payable) is credited (right side)
Dr Paul et Virginie Account Cr

20X8 Rs 20X8 Rs
Jun 02 Purchases 50 000
Activity 3
On 08 June, goods were bought on credit for Rs 60 000 from a supplier, ‘Kari Mélanz’.
Record the transaction in the account provided below.
[‘Kari Mélanz’] Account

(trade payable)
20X8 Rs 20X8 Rs
'Kari Mélanz' Account (Trade payable) is credited (right side)
Dr Kari Mélanz Account Cr

20X8 Rs 20X8 Rs
124
Activity 4
On 11 June, goods were bought on credit for Rs 35 000 from a supplier, Kitchen Planet
Company Ltd.
[Kitchen Planet Company Ltd] Account

(trade payable)
20X8 Rs 20X8 Rs
Kitchen Planet Company Ltd Account (Trade payable) is credited (right side)
Dr ......................... Account Cr
20X8 Rs 20X8 Rs
Activity 5
Fill in the blanks with the appropriate words.
cash transaction business transaction bank transaction credit transaction
(a) A ……………………………. is an activity or an event that takes place in an enterprise

and that involves money.
(b) A ……………………………… transaction occurs when money is received or paid in
cash immediately.
(c) A ………………………….. transaction occurs when money is received or paid by
cheque or cards.
125
Unit 10
II Recording of credit sales
Credit sales will affect two accounts: one is Sales Account and the other is known by the
name of the credit customer who owes the business (trade receivable).
Credit sales will affect two accounts:
[Name of the credit customer] Account

1st Account to be debited
(trade receivable)
Sales Account 2nd Account to be credited
Example 1
On 03 September, business sold goods on credit to a customer, Neel, for Rs 75 000.

Credit sales will affect two accounts:
[Neel] Account
1st Account (Rs 75 000) to be debited
(trade receivable)
Sales Account 2nd Account (Rs 75 000) to be credited
Neel Account (Trade receivable) is debited (left side)
Dr Neel Account Cr
20X8 Rs 20X8 Rs
Sept 03 Sales 75 000
Dr Sales Account Cr
20X8 Rs 20X8 Rs
Sept 03 Neel 75 000
126
Activity 6
On 12 September 20X8, goods were sold on credit for Rs 25 000 to a customer, Kiran.
[Kiran] Account
(trade receivable)
Dr Kiran Account Cr
20X8 Rs 20X8 Rs
Dr Sales Account Cr
20X8 Rs 20X8 Rs
Activity 7
On 02 February 20X8, goods were sold on credit for Rs 58 000 to a customer, Kesto
Company Ltd.
[Kesto Company Ltd] Account

(trade receivable)
Dr Kesto Company Ltd Account Cr

20X8 Rs 20X8 Rs
Dr Sales Account Cr
20X8 Rs 20X8 Rs
127
Unit 10
Activity 8
Record the following transactions in the ledger accounts of Kim for the month of April 20X9.
(a) April 01 - Started business with cash in hand Rs 40 000.
Dr ................. Account Cr
20X8 Rs 20X8 Rs
Dr ................. Account Cr
20X8 Rs 20X8 Rs
(b) April 03 –Bought goods Rs 5 000 by cash.
Dr ................. Account Cr
20X8 Rs 20X8 Rs
Dr ................. Account Cr
20X8 Rs 20X8 Rs
(c) April 05 – Sold goods on credit to Jessica Rs 8 000.
Dr ................. Account Cr
20X8 Rs 20X8 Rs
Dr ................. Account Cr
20X8 Rs 20X8 Rs
128
(d) April 08 – Purchased Motor Vehicles Rs 20 000 by cash.
Dr ................. Account Cr
20X8 Rs 20X8 Rs
Dr ................. Account Cr
20X8 Rs 20X8 Rs
(e) April 12 – Paid stationery in cash Rs 1 000.
Dr ................. Account Cr
20X8 Rs 20X8 Rs
Dr ................. Account Cr
20X8 Rs 20X8 Rs
(f ) April 13 – Bought goods on credit from Eric Rs 24 000.
Dr ................. Account Cr
20X8 Rs 20X8 Rs
Dr ................. Account Cr
20X8 Rs 20X8 Rs
129
Unit 10
Question 1

1. A transaction can be in the form of ………………………………...
1. Cash 2. Bank 3. Credit
A 1 Only B 1 and 2 C 2 and 3 D 1, 2 and 3
Answer ________
2. ‘There is a debit entry in one account (left side) and a corresponding credit entry in
another account (right side)’. Which one best describe the above statement?
A Ledger B Account C Double entry system D Transaction
Answer ________
3. The enterprise gets credit facilities from its suppliers. It buys goods now and pays later.
This is known as …………..
A Capital B Drawings C Credit Sales D Credit Purchases
Answer ________
4. Nazira sold goods for cash Rs 10 000.

How is this transaction recorded in the books of Nazira?
A Debit Cash Credit Sales
B Debit Sales Credit Cash
C Debit Purchases Credit Cash
D Debit Cash Credit Purchases
Answer ________
5. Money needed to start up a business is called …………….
A Cash transaction B Credit transaction C Capital D Drawings
Answer ________
130
Question 2
Record the following transactions in the ledger accounts below.
(a) April 01 - Started business with cash at bank Rs 90 000.
Dr ................. Account Cr
Rs Rs
Dr ................. Account Cr
Rs Rs
(b) April 03 - Purchased goods on credit from a supplier, Hema, Rs 15 000.
Dr ................. Account Cr
Rs Rs
Dr ................. Account Cr
Rs Rs
(c) April 05 - Credit sales Rs 75 000 to customer, Melina.
Dr ................. Account Cr
Rs Rs
Dr ................. Account Cr
Rs Rs
131
Unit 10
Question 3
For each of the transaction below, state which of the accounts are to be
debited or credited.
Account to Account to
be debited be credited
(a) Started business with cash Rs 40 000
(b) Paid rent by cheque Rs 7 000
(c) Bought a motor vehicle Rs 50 000
(d) Sold goods on credit to Aishah Rs 30 000
(e) Purchased goods for cash Rs 20 000
(f ) Bought goods on credit from Plaza Bros Rs 50 000
(g) Bought goods Rs 10 000 from Kamla, a supplier
(h) Purchased furniture Rs 8 000 in cash
(i) Cash Sales Rs 46 000
KEY TERMS
Bank transaction is a transaction that occurs when money is received or paid by

cheque.
Cash transaction is a transaction that occurs when money is received or paid in

cash immediately.
Credit transaction is a transaction where payment is not made immediately but

at a later date.
Credit purchases are goods bought by a business but for which payment is done
later.
Credit sales are the sale of goods by a business but receipts are obtained later.
Ledger is a book which consists of different accounts.
132
Balancing of accounts
Unit 11
Balancing of
accounts in
the ledger
• balance individual accounts

• identify balance carried down and balance brought down
In this unit, you will calculate the balances of ledger accounts.
133
Unit 11
11.1 Steps to balance ledger accounts
After the bookkeeper records all business transactions in ledger accounts, each of the accounts
must be balanced. The exercise of balancing an account consists of several steps.
To balance an account, the following steps must be followed:
Step 1 Calculate the totals of both sides, namely, Dr and Cr.
Step 2 The difference between both is known as balance c/d.
Step 3 Record the same amount as balance b/d on the opposite side below the total.
An example has been done below.

Worked example 1. Follow the steps.
Dr Cash Account Cr
Date Details Rs Date Details Rs
Mar 01 Capital 25 000 Mar 02 Furniture 10 000
Mar 09 Sales 14 000 Mar 05 Purchases 7 000
Mar 12 Rent 2 000
Mar 31 Balance c/d 20 000
39 000 39 000
Apr 01 Balance b/d 20 000

The balance brought down (b/d) of the above cash account is on the debit side.
This means the above cash account has a debit balance.
Mar 01 Cash 30 000
Jan 31 Balance c/d 80 000 Mar 28 Bank 50 000
80 000 80 000
Feb 01 Balance b/d 80 000
134
Jun 04 Cash 25 600
Jun 20 Reena 5 400
Jun 23 Sarah 2 000 Jun 30 Balance c/d 33 000
33 000 33 000
Jul 01 Balance b/d 33 000
Dr Sales Account Cr
Sep 05 Bank 28 000
Sep 17 Roland 20 000
Sep 30 Balance c/d 53 000 Sep 24 Catherine 5 000
53 000 53 000
Oct 01 Balance b/d 53 000
Activity 1
Work out the balances (balance c/d and balance b/d) of the following accounts for the
month of January.
Dr Reena Account Cr
Jan 10 Cash 100 Jan 03 Purchases 2 000
Jan 15 Cash 900 Jan 21 Purchases 3 300
Jan 30 Bank 1 300
Dr Sarah Account Cr
Jan 06 Sales 5 400 Jan 10 Cash 250
Jan 19 Sales 1 200 Jan 15 Bank 2 650
Jan 30 Bank 3 100
135
Unit 11
Activity 2
Work out the balances of the following accounts for the month of February 20X8.
Dr Cash Account Cr
Feb 01 Capital 15 000 Feb 05 Purchases 9 500
Feb 12 Sales 2 600 Feb 17 Rent 2 000
Feb 28 Drawings 1 000
Dr Bank Account Cr
Feb 01 Capital 25 000 Feb 04 Fixtures and fittings 11 000

Feb 28 Girish 750
Activity 3
Work out the balances of the following accounts for the month of February 20X8.
Feb 01 Cash 15 000
Feb 02 Bank 25 000
Dr Fixtures and Fittings Account Cr

Feb 04 Bank 11 000
136
Feb 05 Cash 9 500
Dr Sales Account Cr
Feb 12 Cash 2 600
Feb 19 Girish 1 500
Dr Rent Account Cr
Feb 17 Cash 2 000
Note: Have you noticed that

some accounts have their
balance b/d on the debit
side while others have their
balance b/d on the credit
side?
Accounts having debit balances
When balance b/d of an account is on the credit side, it is said that the account has a
credit balance. (e.g, loan, sales, interest received and capital)
When balance b/d of an account is on the debit side, it is said that the account has a
debit balance. (e.g, land and building, furniture, vehicles, cash)
137
Unit 11
Question 1

1.
The balance of an account is calculated as
A the total of the debit side
B the total of the credit side
C the difference between the totals of the debit and credit sides
D the sum of all entries
Answer ________
2.
The total on the debit side of an account is greater than its total on the credit side.
What does this mean?
A the account has a debit balance
B the account has a credit balance
C the account cannot be balanced
D the account has no balance
Answer ________
3.
A credit balance occurs in a ledger account when
A the total on its debit side is greater than the total on its credit side
B the total on its debit side is less than the total on its credit side
C the total on its debit side is equal to the total on its credit side
D the total is zero in the ledger account
Answer ________
Question 2
Fill in the blanks using the words given below.
balance c/d greater less
(a) The _________________________ of account is the difference between the total of debit
entries and the total of credit entries.
(b) An account is said to have a debit balance when the total of debit entries is
_________________________ than total of credit entries.
(c) An account is said to have a credit balance when the total of debit entries is
_________________________ than total of credit entries.
138
Question 3
Balance the following ledger accounts.

1.
Jan 07 Cash 2 500
Jan 17 Ming 3 000
Jan 28 Bank 3 400
2.
Jan 01 Cash 10 000
3.
Dr Meera Account Cr
Jan 15 Cash 1 000
4. Dr Bank Account Cr
Jan 03 Ali 2 000 Jan 04 Equipment 4 000
Jan 06 Sales 3 000
139
Unit 11
Question 4
An inexperienced bookkeeper prepared the following bank account. It contains several errors.
You are required to rework it in the blank bank account given below.
Dr Bank Account Cr
20X8 Rs 20X8 Rs
Feb 07 Sales 30 000 Feb 20 Furniture 20 000
Balance c/d 75 000
100 000 100 000
Balance b/d 85 000
Dr Bank Account Cr
20X8 Rs 20X8 Rs
140
Unit 12
Trial
Balance
- Identify debit and credit items

- Draw the trial balance
- Prepare a trial balance from ledger balances
- Prepare a trial balance from independent figures
In this unit, you will identify debit and credit items in the ledger. Using
these items, you will then learn and practise how to prepare a trial balance.
141
Unit 12
12.1 Trial Balance

Read the following conversation between Anil, the entrepreneur, and Rita, the bookkeeper.
Hello Anil.
It is nice to see that you have recorded your
transactions and balanced your ledger accounts.
Thank you, Rita.

Did I do it correctly?
Precisely, this is what you need to

check. For that you need to prepare
a Trial Balance.
A trial balance is list of ledger accounts and their respective

A trial balance is list of ledger
balances at a particular date. They are usually prepared at the end accounts and their respective
of each month or year. balances at a particular date.
When transactions have been correctly recorded in the ledger

The trial balance should
using the double entry system and accounts correctly balanced,
always balance.
the trial balance should always agree. That is, the total of debit
balances should always be equal to the total of credit balances.
Total of debit balances = Total of credit balances
142
Trial Balance
Purpose of preparing the trial balance
The trial balance is prepared for the following reasons:

To check the mathematical accuracy of the double entry recording of business
transactions.
It also helps in the preparation of financial statements (the income statement and
the statement of financial position).
12.2 Format of trial balance
The format of a trial balance is presented below. It consists of the debit and credit
transactions recorded in the appropriate column.
Mobicom Enterprise
Trial Balance as at 30 September 20X9
Debit Credit
Title of Account
(Rs) (Rs)
Capital 50 000
Cash 6 300 Cr Balances
Bank 13 500
List of ledger accounts
Equipment 20 000
Purchases 25 600
Sales Dr Balances 35 800
Jane (Supplier) 1 100
Chong (Customer) 3 700
Wages 5 500
Rent 4 500
General expenses 7 800
86 900 86 900

Total of debit balances = Total of credit balances

143
Unit 12
12.3 Preparing the Trial Balance
Preparing Trial Balance from Ledger Balances
The trial balance can be extracted from a list of ledger balances. It can be obtained by following
the steps below.
Step 1 Identify the ledger balances (balance b/d) of each account.
Record them as debit item or credit item in their respective columns in the trial
Step 2
balance.
Step 3 Add each column and check if the debit side agrees with the credit side.
1
1 What does debit balances represent?
Debit balances are recorded in the debit column of the trial balance. The balance b/d is
found on their debit side of the ledger account.
An expense and an asset have a debit balance.

Examples of accounts with a debit balance are as follows:
Expenses: Purchases, Rent, Drawings, Inventory, Salaries, Electricity, etc...
Assets: Furniture, Trade receivables, Cash, Bank, etc...
2
2 What does credit balances represent?
Credit balances are recorded in the credit column of the trial balance. The balance b/d is
found on their credit side of the ledger account.
An income and a liability have a credit balance.

Examples of accounts with a credit balance are as follows:
Income: Interest received, Commission received, etc...
Liability: Loan, Trade payables, bank overdraft, etc...
144
Trial Balance
The trial balance below has been extracted from the ledger accounts found below numbered 1 to 6.
Trial Balance
Debit Credit
Title of Account
(Rs) (Rs)
1 Cash 5 100
2 Capital 15 000
3 Purchases 9 500
4 Sales 2 600
5 Rent 2 000
6 Drawings 1 000
17 600 17 600

Ledger accounts
Dr Cash Account
1 Cr
Feb 12 Sales 2 600 Feb 17 Sales 2 000
Dr Capital Account
2 Cr
Feb 17 Drawings 1 000
Feb 28 Balance c/d 5 100
Feb 28 Balance c/d 15 000 Feb 01 Cash 15 000
17 600 17 600
15 000 15 000
Feb 28 Balance b/d 5 100
Mar 01 Balance b/d 15 000

Dr Purchase Account
3 Cr

Dr Sales Account
4 Cr
Feb 05 Cash 9 500 Feb 28 Balance c/d 9 500
9 500 9 500 Date Details Rs Date Details Rs
Mar 01 Balance b/d 9 500 Feb 28 Balance c/d 2 600 Feb 12 Cash 2 600
2 600 2 600

Dr Rent Account
5 Cr

Dr Drawings Account
6 Cr
Feb 17 Cash 2 000 Feb 28 Balance c/d 2 000
2 000 2 000 Date Details Rs Date Details Rs
Mar 01 Balance b/d 2 000 Feb 28 Cash 1 000 Feb 28 Balance c/d 1 000
1 000 1 000

145
Unit 12
Activity 1
A list of ledger accounts is given in the following table. State whether each of the
account has a debit or a credit balance. Write your answer in the second column.
The first item has been done for you as an example.
Account Debit or Credit
Capital Credit
Cash
Bank
Purchases
Sales
John (supplier)
Rajen (Customer)
Advertising
Interest received
Rent and rates
Drawings
146
Trial Balance
Worked example
The following balances are available from the ledger of Surya, an entrepreneur who
buys and sells potted plants, as at 30 June 20X9.
Surya’s trial balance is prepared as follows:
Account Balance (Rs)

Cash 2 750
Capital 20 000
Vehicles 15 000
Purchases 9 300
Rent 5 100
Ravi (Trade payable) 7 800
Sales 10 450
Raj (Trade receivable) 1 500
Utilities 750
Wages 2 300
Interest received 250
Drawings 1 800
Surya Enterprise
Trial Balance as at 30 June 20X9
Account Debit (Rs) Credit (Rs)
Cash 2 750
Capital 20 000
Vehicles 15 000
Purchases 9 300
Rent 5 100
Ravi (Trade payable) 7 800
Sales 10 450
Raj (Trade receivable) 1 500
Utilities 750
Wages 2 300
Drawings 1 800
38 500 38 500
147
Unit 12
Activity 2
From the following list of balances, prepare the trial balance of Jerry’s enterprise,
dealing in craft products, as at 31 August 20X9.
Jerry Enterprise
Trial Balance as at 31 August 20X9
Account Balance (Rs) Title of Account Debit (Rs) Credit (Rs)
Bank overdraft 1 600

Capital 25 000
Sales 38 700
Purchases 32 400
Jim (Trade payable) 3 500
Salaries and wages 12 800
Rent 8 500
Drawings 2 100
Vehicle 13 000
Activity 3
From the following list of balances taken from the books of Milka, an entrepreneur
dealing in dairy products, prepare the trial balance as at 30 September 20X9.
Milka Enterprise
Bank overdraft 800

Capital 22 200
Furniture and fittings 16 400
Sales 61 000
Purchases 42 600
Jim (Trade receivable) 1 600
Sam (Trade payable) 1 100
Rent and rates 6 900
Salaries 8 200
Drawings 9 400
148
Trial Balance
Activity 4
From the following list of balances taken from the books of Eddie, an entrepreneur
dealing in cosmetics, prepare the trial balance as at 30 September 20X9.
Eddie Enterprise
Capital 40 000
Cash 11 700
Vehicle 27 000
Sales 82 200
Purchases 51 600
Trade receivables 4 300
Trade payables 1 900
Wages 6 500
Insurance 1 700
Motor expenses 8 900
Drawings 12 400
Both the debit and the credit sides of the trial balance should always be
equal to each other. Do you agree?
149
Unit 12
Question 1

1.
A trial balance is
A a list of ledger accounts having debit balances
B a list of ledger accounts having credit balances
C a list of ledger accounts and their respective balances
D a list of ledger accounts having no balances
Answer ________
2.
A trial balance is prepared to
A verify the accuracy of the double entry recording in the ledger
B calculate the total of assets and liabilities
C count the number of ledger accounts
D balance the ledger accounts
Answer ________
3.
Where are debit balances entered in the trial balance?
A in the debit column
B in the credit column
C outside the trial balance
D not entered at all
Answer ________
3.
Where are credit balances entered in the trial balance?
A in the debit column
B in the credit column
C outside the trial balance
D not entered at all
Answer ________
5.
If ledger accounts are correctly prepared using the double entry system, what
should be the result of the trial balance?
A total of debit balances should exceed the total of credit balances
B total of debit balances should be less than the total of credit balances
C total of debit balances should be equal to the total of credit balances
D trial balance should not agree
Answer ________
150
Trial Balance
Question 2
Fill in the blanks with the words given below.
debit agree accounts bank credit
(a) The trial balance is a list of ledger _________________________ and their respective
balances at a given date.
(b) At the end, the trial balance should _________________________.
(c) Balances of assets are entered in the _________________________ column of the trial
balance.
(d) Balances of income are entered in the _________________________ column of the
trial balance.
(e) The _________________________ account may have either a debit balance or a credit
balance.
Question 3
From the following ledger accounts of Sammy is an entrepreneur buying and selling
garden furniture made from recycled plastic, extract a trial balance as at 31 July 20X9.
Dr Cash Account Cr
July 01 Capital 100 000 July 02 Furniture 32 000
July 17 Chan 14 000 July12 Purchases 41 000
July 31 Balance c/d 41 000
114 000 114 000
Aug 01 Balance b/d 41 000
July 31 Balance c/d 100 000 July 01 Cash 100 000
100 000 100 000
July 02 Cash 32 000 July 31 Balance c/d 32 000
32 000 32 000
151
Unit 12
Dr (In) Purchases Account Cr (Out)

July 12 Cash 41 000 July 31 Balance c/d 41 000
41 000 41 000
Dr (In) Sales Account Cr (Out)

July 18 Balance c/d 28 000 July 18 Chan 28 000
28 000 28 000
Dr (In) Chan Account Cr (Out)

July 18 Sales 28 000 July 28 Cash 14 000
July 31 Balance c/d 14 000
28 000 28 000
Sammy Furniture
Trial Balance as at 31 July 20X9
Title of Account Debit (Rs) Credit (Rs)
152
Trial Balance
Question 4
Avi, an entrepreneur, prepared the following trial balance as at 30 September 20X9 for his
paper recycling business. The trial balance did not agree. You are required to rewrite the
trial balance correctly.
Avi
Cash 800
Capital 10 000
Purchases 5 800
Sales 8 000
Carlos (Customer) 900
Salaries and wages 4 500
Drawings 6 000
21 100 14 900
Avi
153
Unit 12
Question 5
Rico, an entrepreneur, prepared the following trial balance as at 30 November

20X9 for his organic fertilisers business. The trial balance did not agree. You are
required to rewrite the trial balance correctly.
Rico
Trial Balance as at 30 November 20X9
Title of Account Debit Rs Credit Rs
Bank overdraft 1 200
Capital 75 000
Equipment 90 000
Purchases 54 600
Cleanne (Supplier) 12 900
Sales 76 400
Rent 11 200
Drawings 9 700
88 800 242 400
Rico
Trial Balance as at 30 November 20X9
154
Income Statement
Unit 13
Income
Statement
• outline the different parts of an income statement

• distinguish items of trading account and profit and loss account
• draw the format of an income statement
• prepare an income statement
In this unit, you will learn about the meaning of an income statement and
its different parts. You will then have the opportunity to practise recording
in the income statement to find whether the enterprise has made profits
or incurred losses.
155
Unit 13
13.1 The Income Statement
At the end of every year, entrepreneurs would be interested to An income statement is a

know whether their business has made profits. For this purpose, classification of income and
the bookkeeper prepares an income statement. The income expenses from which profits
statement is a classification of income and expenses from which or losses are calculated at the
end of the accounting year.
profits or losses are calculated at the end of the accounting year
expenses.
The time line below shows an accounting year usually consisting Note: An accounting
year is any period of
of 12 months for which an income statement is prepared.
12 months for which
records are kept and
profit is calculated.
Accounting Year: A period of 12 months
1 October 2018 Dec 2018 Feb 2019 Apr 2019 June 2019 Aug 2019
Nov 2018 Jan 2019 Mar 2019 May 2019 July 2019 30 September 2019
Figure 1: Accounting year
13.2 Format of income statement

The income statement is divided into two parts namely the trading account and the profit and
loss account.
Income Statement
Trading account Profit and loss account
Figure 2: The two parts of the income statement

156
Income Statement
13.2.1 Trading Account

The trading account records items which deal with the trading The trading account
records items which deal
activities of an enterprise. It is prepared to find out whether the
with the trading activities
enterprise is making a gross profit or a gross loss. of an enterprise.
In preparing this part of the income statement, you will use the following important terms:
Revenue
(Sales)
Purchases Opening Inventory

Gross
Profit/
Loss
Closing Inventory Cost of sales
Figure 3: Items in trading account
I Gross Profit/Loss
Note: If revenue is greater
Gross profit is the difference between revenue and costs of sales. than cost of sales, gross
profit is obtained.
If cost of sales is greater
Gross Profit/Loss = Revenue – Cost of sales than revenue, gross loss is
obtained.
Worked example 1
The following information is extracted from the books of Jemma, an entrepreneur. An income
statement (trading account section) is prepared for the year ended 30 September 20X9.
Revenue Rs 10 000
Cost of sales Rs 7 500
Income Statement (trading account section) for the year ending 30 September 20X9
Rs
Revenue 10 000 Cost of sales Rs 7 500 is deducted
from revenue Rs 10 000 to obtain a
Less Cost of sales* (7 500) gross profit of Rs 2 500.
Gross Profit 2 500
*Figures within brackets denote that they must be deducted from the above amount.
157
Unit 13
Activity 1
The following information is extracted from the books of Jemila, an entrepreneur making
eco-friendly bags. Prepare the income statement (trading account section) for the year
ended 28 February 20X0:
Jemila
Revenue Rs 143 000 Income Statement for the year ending 28 February 20X0
Cost of sales Rs 101 000
Rs
Revenue
Less Cost of sales
II Cost of sales
Cost of sales refers to the amount spent to obtain the goods that have been sold during the
accounting year.
Cost of sales is calculated as follows:
Cost of sales = Opening inventory + Purchases – Closing inventory

for resale
Figure 4: Cost of sales

III Inventory
Bookkeepers usually consider inventory on two specific dates,

namely, at the beginning and the end of the accounting year.
Opening inventory is the amount of goods that enterprises

usually hold at the start of the accounting year. It is added in
the calculation of cost of sales.
Closing inventory is the amount of goods that enterprises usually hold at the end of the
accounting year. It is deducted from the calculation of cost of sales.
Inventory
Opening inventory Closing inventory
Figure 5: Inventory
158
Income Statement
Worked example 2
Below is a calculation of cost of sales involving inventory. Carla had the following information:
Rs
Purchases 4 000
Opening inventory 1 000
Closing inventory 2 000
Carla’s cost of sales would be:

Cost of sales: Rs
Add Purchases 4 000
5 000
Less Closing inventory (2 000)
3 000
Below is the format of the income statement (trading account section), including inventories:
Income Statement for the year ending 31 January 20X1
Rs Rs
Revenue 9 500
Less Cost of sales:
Add Purchases 4 000
5 000
Less Closing inventory (2 000) (3 000)
Gross profit 6 500
Activity 2
Suzy Chu
From the information Income Statement for the year ending 30 April 20X2
provided, find the missing Rs Rs
figures the of income Revenue 10 000
statement of Suzy Chu for the
year ended 30 April 20X2. Less Cost of sales:
Opening inventory (i) ................

Rs
Revenue 10 000 Add Purchases 7 200
Purchases 7 200
Less Closing inventory (6 000) (ii) (..............)
Gross ........................... (iii) .................
159
Unit 13
Activity 3
Rose
From the information provided,
Income Statement for the year ending
prepare the income statement of 31 May 20X3
Rose, an entrepreneur selling solar
panels, for the year ended 31 May Rs Rs
20X3:
Less Cost of sales:

Rs
Revenue 56 200
Purchases 44 600
13.2.2 The Profit and Loss Account

The profit and loss account part of the income statement calculates Profit and loss account
the profit for the year or the loss for the year that an enterprise part of income statement
makes. It takes into account income and expenses of the business. calculates profit for the year.
Profit or loss for the year is calculated as:
Profit/loss = [ Gross profit/Gross loss + Other Income ] – Less Expenses
Figure 6: Profit/loss of the year
160
Income Statement
i. Other income and expenses
Other income and expenses are explained below.
Other Income Expenses
Other than sales, there are

Expenses are payments made by a business
items which are income into
for the day to day running of the business.
the business.
Items as 'other income': Items as expenses:

interest received Rent, salaries & wages, repairs & maintenance,
commission received stationery, electricity, water, telephone, motor
vehicle expenses, fuel and insurance.
Other income is added to
Gross profit/loss Expenses are deducted from gross profit
Figure 7: Incomes and expenses
A simple format of the income statement (profit and loss section) is as follows:
Claudio
Income Statement for the year ending 31 January 20X4
Rs Rs
Gross profit 60 000
Add Other income:
Commission received 1 200
Interest received 300 1 500
61 500
Less Expenses:
Rent and insurance 11 000
Salaries 16 000
Fuel 7 600
Stationery 1 400
Electricity and water 4 100 (40 100)
Profit for the year 21 400
161
Unit 13
Activity 4
From the information provided, prepare the income statement (profit and loss section)
of Jean, an entrepreneur, for the year ended 31 May 20X5:
Jean
Rs Income Statement for the year ending 31 May 20X5
Rs Rs
Gross Profit 19 600
Gross Profit
Commission
Add Other income
received 1 200
Wages 3 500
Rent 4 000 Less Expenses
Insurance 1 600
Motor expenses 2 100
.......................... for the year
Activity 5
From the information provided, prepare the income statement (profit and loss section)
for Pierre, an entrepreneur, for the year ended 30 June 20X6:
Pierre
Rs Income Statement for the year ending 30 June 20X6
Gross Profit 21 700 Rs Rs
Interest received 100 Gross Profit
Commission received 900 Add Other income
Salaries & wages 6 000
Rent 8 500
Insurance 2 400
Fuel 2 100
Less Expenses
Stationery 900
.......................... for the year
162
Income Statement
13.3 Preparing the Income Statement

Below is the format of a complete income statement.
Observe the two different parts: Trading Account and Profit and Loss Account.
Hema
Income Statement for the year ended 31 January 20X9
Rs Rs
Revenue 42 200
Trading Account
Less Cost of sales
Add Purchases 22 640
28 330
Gross Profit 18 860
Add Other Income

Profit and Loss Account
19 000
Less Expenses
Rent 3 000
Stationery 200
Telephone, water & electricity 300
Repairs & maintenance 500
Motor vehicles expenses 1 000 (10 500)
Figure 1: Income statement
The above income statement shows that Hema has earned Rs 8 500 as net profit for the year.
163
Unit 13
Worked Example 3
Marie's trial balance of, a trader, as at 30 June 20X9 is provided below.

Marie
Debit Credit
Rs Rs
Capital 38 000
Equipment 25 000
Cash in hand 2 300
Inventory at 1 July 20X8 2 600
Revenue 68 900
Purchases 31 800
Commission received 3 600 Note: Inventory at 30
Rent 9 300 June 20X9 was valued
Salaries & wages 14 200 at Rs 3 200.
113 200 113 200
Appropriate items have been selected from the above trial balance and the income statement
of Marie has been prepared for the year ended 30 June 20X9.
Marie
Income Statement for the year ending 30 June 20X9
Rs Rs
Revenue 68 900
Less Cost of sales
Add Purchases 31 800
34 400
Gross Profit 37 700
Note: Assets
Add Other income (equipment, trade
Commission received 3 600 receivables and
cash in hand),
41 300 liabilities (trade
Less Expenses payables), capital
and drawings are
Rent 9 300
not entered in the
Salaries & wages 14 200 (23 500) income statement.
164
Income Statement
Activity 6
Sam is in the business of buying and selling shoes for school kids. The trial balance as at
30 April 20X9 is provided as follows.
Sam
Trial Balance as at 30 April 20X9
Debit Credit
Rs Rs
Capital 30 000
Vehicles 16 000
Cash in hand 1 900
Inventory at 01 May 20X8 3 100
Revenue 37 800
Note: Inventory at
Purchases 22 100 30 April 20X9 was
Interest received 200 valued at Rs 2 100.
Salaries 9 000
Fuel 3 500
70 100 70 100
Prepare the Sam's income statement for the year ended 30 April 20X9.
Sam
Income Statement for the year ending 30 April 20X9
Rs Rs
Revenue 37 800
Less Cost of sales
Gross Profit
Add Other income
Less Expenses
.......................... for the year
165
Unit 13
Question 1

1.
An income statement is
A a statement that shows financial position
B a classification of receipts and payments to calculate profits or losses
C a list of ledger accounts and their respective balances
D a statement of liabilities at a given date
Answer ________
2.
Gross profit is earned when
A assets exceed liabilities
B revenue exceed total expenses
C revenue exceed cost of sales
D capital exceed assets
Answer ________
3.
Which of the following occurs when gross profit falls less than total expenses?
A loss for the year
B profit for the year
C gross loss
D income statement balances
Answer ________
4.
In the calculation of gross profit, closing inventory is
A added to revenue
B entered as an expense
C deducted in the calculation of cost of sales
D added to profit for the year
Answer ________
Question 2
Fill in the blanks using the words given below.
income statement revenue gross profit expenses
(a) Gross profit is the difference between _________________________ and cost of sales.
(b) Expenses are deducted from _________________________ to obtain profit/loss for the year.
(c) Rent, salaries and insurance are _________________________ to the business.
(d) The _________________________ is prepared to calculate the profit or loss for the year.
166
Income Statement
Question 3
Mary Jane is an entrepreneur. She buys and sells compost and other organic gardening
materials. She provided the following information for the year ended 31 August 20X9:
Mary Jane
Trial Balance as at 31 August 20X9
Debit Credit
Rs Rs
Capital 100 000
Motor vehicles 35 000
Cash in hand 11 500
Revenue 119 000
Purchases 89 200
Commission received 2 800
Rent & insurance 4 300
Note: Mary Jane’s
inventory at 31 August
Motor expenses 2 300 20X9 was valued at
Drawings 16 000 Rs 11 300.
224 900 224 900
Prepare the income statement of Mary Jane for the year ended 31 August 20X9.
Mary Jane
Income Statement for the year ending 31 August 20X9
Rs Rs
Revenue
Less Cost of sales
Gross Profit
Add Other income
Comission received
Less Expenses
.......................... for the year
167
Unit 13
Question4
Ashok holds a canteen in a secondary school. His trial balance as at 30 June 20X8 is provided as follows.
Ashok
Debit Credit
Rs Rs
Capital 10 000
Furniture and fittings 11 000
Trade receivables 3200
Revenue 63 800
Purchases 42 000
Electricity and water 2 600
Rent 7 800
Note: Inventory at 30
Advertising 5 000
June 20X8 was valued
Drawings 2 300 at Rs 1 300.
75 800 75 800
Prepare the income statement of Ashok for the year ended 30 June 20X8.
Ashok
Income Statement for the year ending 30 June 20X8
Rs Rs
Revenue
Less Cost of sales KEY TERMS
Income statement is a
classification of income and
expenses from which profits
or losses are calculated at
the end of the accounting
Gross Profit
year.
Add Other income
Interest received Trading account records
items which deal with the
trading activities of an
Less Expenses enterprise.
Profit and loss account

part of income statement
calculates profit for the
year.
.......................... for the year
168
Statement of Financial Position
Unit 14
Statement
of Financial
Position
• classify items as assets and liabilities

• prepare simple statement of financial position
In this unit, you will discover the statement of financial position in which
enterprises record their assets, liabilities and capital. Then, you will use a
list of assets and liabilities to prepare the statement of financial position.
169
Unit 14
14.1 Statement of Financial Position
The Statement of financial position presents all the assets, The statement of financial position
liabilities and owner’s capital in an enterprise at a particular presents all the assets, liabilities and
date. owner’s capital in an enterprise at a
particular date.
Below is a simple layout of a statement of financial position.
Anil enterprise
Statement of Financial Position as at 31 December 20X0
Rs Rs
1 Assets 200 000
200 000
2 Capital 120 000
3 Liabilities 80 000
200 000
Note: Assets = Capital + Liabilities
14.2 Assets and Liabilities
I Assets
Assets are items owned by an enterprise. These items are important Assets are items owned
because they allow enterprises to carry out their activities effectively. by an enterprise.
An asset always has a debit balance.
Assets are classified as follows.
Assets
Non-Current Assets Current Assets
Figure 1: Assets
170
Non-current assets and current assets are explained below.
Non-current assets Examples:
Non-current assets • Land

are items owned • Buildings
and used by the • Machinery
enterprise for more • Furniture
than a year. • Motor vehicles
• Equipment
Assets
Current assets Examples:
Current assets are • Inventory

items held by the • Trade receivables
business for the • Cash at bank
day-to-day • Cash in hand
activities.
Activity 1
For each of the following item, tick ( ) to indicate which of the following is a non-
current or current asset for a school canteen.
Non-Current Assets Current Assets
a Delivery van √
b Furniture
c Inventory
d Cash in the drawer
e Cash at Bank
f Trade receivables
g Premises
171
Unit 14
Assets are presented in the Statement of Financial Position, as follows.

Kari Mélanz enterprise
Kari Mélanz enterprise as at 31 December 20X0 (Extract)
Rs Non-Current Assets Rs Rs
Furniture 35 000 Furniture 35 000

Motor Vehicles 80 000
Motor vehicles 80 000
Total Non-Current Assets 115 000
Inventory 31 Dec 20X0 15 000 Current Assets
Trade receivables 35 000 Inventory 15 000

Cash at bank 30 000
Cash at bank 30 000
Cash in hand 5 000 Cash in hand 5 000
Total Current Assets 85 000
Assets are presented as
Total assets = Non-current assets + Current assets Total Assets 200 000
Activity 2
Sophie, an entrepreneur, deals in hydroponic vegetables. Present her assets in the statement
of financial position as at 31 December 20X0.
Sophie enterprise (Extract)
Rs
Non-Current Assets Rs Rs
Furniture 50 000
..................................... ..............
Property 180 000 ..................................... ..............
Equipment 46 000 ..................................... ..............
Inventory 31 Dec Total Non-Current Assets ..............

25 000
20X0 Current Assets
Trade receivables 75 000 ..................................... ..............
Cash at bank 23 250 ..................................... ..............

..................................... ..............
Cash in hand 750
.....................................
..............
Total Current Assets ..............
Total Assets ..............
172
II Liabilities
Liabilities are amounts owed by the enterprise to others outside A liability is an item
the business. These amounts consist of borrowings and credit that represents what the
enterprise owes.
facilities. A liability always has a credit balance.
Liabilities are classified as follows.
Liabilities
Non-Current Liabilities Current Liabilities
Usually allowed to be repaid after Expected to be repaid within

more than a year. one year.
For example, a loan from the bank. For example, trade payables.
Table 2: Non-Current Liabilities and Current Liabilities
Liabilities are presented in the Statement of Financial Position as follows.
Non-Current Liability Rs Rs
Bank loan 50 000
Current Liability
Hans, a carpenter, buys timber from a supplier. The supplier has a good
relationship with Hans and allows him to buy on credit. The supplier
gives, Hans, an invoice that he must pay within 45 days.
Discuss with your friend what does this transaction is represented in the
accounts of Hans.
173
Unit 14
III Capital
Capital is an amount of money invested by an entrepreneur to Capital is an amount of

money invested by an
start his enterprise. It is also referred to as owner’s equity. These
entrepreneur to start his
funds are used to purchase assets and finance business activities. enterprise.
Capital is presented in the Statement of Financial Position, as follows.

Statement of Financial Position (Extract)
Capital Rs
Capital at start 110 000 Drawings are cash or goods
that the owner takes from
Profit for the year 25 000 his enterprise for his private
Less Drawings (15 000) use.
Owner's equity 120 000
The entrepreneur does business to earn profit which belongs to him. It, therefore,
increases his capital. On the other hand, a loss decreases capital.
When the entrepreneur takes part of his profit from the business for his personal
use, it is known as drawings and it decreases his capital.
Activity 3
Present Sophie’s capital and liabilities in the statement of financial position as at

31 December 20X0. Sophie enterprise
Rs Capital and Liabilities Rs Rs

Capital at 01 Jan ..................................... ..............
200 000
20X0
..................................... ..............
Drawings 25 000
Less .............................. ..............
Profit for the year 55 000 Owner’s Equity ..............
Bank loan 40 000 Non-Current Liabilities

..................................... ..............
Current Liabilities
..................................... ..............
Total Capital and Liabilities ..............
174
14.3 Format of Statement of Financial Position
The format of a complete statement of financial position is presented below.
Statement of financial position as at .........................
Furniture
Motor Vehicles
Total Non-Current Assets
Current Assets
Inventory
Assets
Trade receivables
Cash at bank
Cash in hand
Total Current Assets
Total Assets
Capital and Liabilities
Capital
Profit for the year
Less Drawings
Capital Owner’s Equity
and Non-Current Liabilities
Liabilities Bank Loan
Current Liabilities
Trade payables
Total Capital and Liabilities
Note the following formulas in the Statement of Financial Position.
Total Assets = Total Non-Current Assets + Total Current Assets
Owner's Equity = Capital at start + Profit for the year – Drawings
Total Capital & Liabilities = Owner's Equity + Non-Current Liabilities
+ Current Liabilities
175
Unit 14
14.4 Preparing a Statement of Financial Position
Anil, a trader's statement of financial position for the year ended 31 December 20X0 has been
prepared from the given balances.
Rs
Trade payables 30 000 L
Furniture 35 000 A
Motor vehicles 80 000 A
Trade receivables 35 000 A
Inventory 31 December 20X0 15 000 A
Cash at bank 30 000 A
Cash in hand 5 000 A
Profit for the year 25 000 C
Drawings 15 000 C A - is recorded as an asset
Capital 110 000 C L - is recorded as a liability
Bank loan 50 000 L C - is recorded as a Owners' equity
Anil
Statement of Financial position as at 31 December 20X0
Furniture 35 000
Motor Vehicles 80 000
Total Non-Current Assets 115 000
Current Assets
Assets Inventory 15 000
Cash at bank 30 000
Cash in hand 5 000
Total Current Assets 85 000
Total Assets 200 000
Capital at 01 Jan 20X0 110 000
Capital Less Drawings (15 000)
and Owner’s Equity 120 000
Liabilities Non-Current Liabilities
Bank Loan 50 000
Current Liabilities
Total Capital and Liabilities 200 000
176
Activity 4
Rs
Karim, is an entrepreneur selling
Equipment 50 000
‘Briyani’. Prepare the statement
Premises 250 000
of financial position for the year
Inventory as at 31 Dec 20X0 58 000
ended 31 December 20X0.
Trade receivable 22 200
Cash at bank 19 000
Cash in hand 800
Drawings 95 000
Bank loan 30 000
Karim enterprise
Statement of Financial Position for the year ended 31 December 20X0
..................................... .....................................
..................................... .....................................
..................................... .....................................
Total Non-Current Assets .....................................
Current Assets
…………………….. .....................................
……………………. .....................................
…………………….. .....................................
Total Current Assets .....................................
Total Assets .....................................
…………………….. .....................................
…………………….. .....................................
Less ………………….. (.....................................)
…………………….. .....................................
Non-Current Liabilities
……………………. .....................................
Current Liabilities
…………………… .....................................
…………………… .....................................
Total Liabilities .....................................
177
Unit 14
Activity 5
Sandra, an entrepreneur, Rs
prepares and sells pickles. Profit for the year 38 000
Prepare her statement of
financial position from the
given balances for the year Trade payables 60 500
ended 31 December 20X0. Equipment 180 000
Land and buildings 230 000
Inventory 31 December 20X0 38 000
Cash in hand 4 500
Drawings 18 500
Bank loan 60 000
Sandra Pickles
..................................... .....................................
..................................... .....................................
..................................... .....................................
Current Assets
…………………….. .....................................
……………………. .....................................
…………………….. .....................................
Total Assets .....................................
…………………….. .....................................
…………………….. .....................................
Less ………………….. (.....................................)
…………………….. .....................................
……………………. .....................................
Current Liabilities
…………………… .....................................
…………………… .....................................
178
Activity 6
Nina is an entrepreneur, Rs
who makes bags. Prepare Machinery 350 000
her statement of financial Fixtures and fittings 200 000
position for the year ended Inventory 31 Dec 20X0 27 000
31 December 20X0.
Cash at bank 13 100
Drawings 20 000
Bank loan 50 000
Nina enterprise
..................................... .....................................
..................................... .....................................
..................................... .....................................
Current Assets
…………………….. .....................................
……………………. .....................................
…………………….. .....................................
Total Assets .....................................
…………………….. .....................................
…………………….. .....................................
Less ………………….. (.....................................)
…………………….. .....................................
……………………. .....................................
Current Liabilities
…………………… .....................................
…………………… .....................................
179
Unit 14
Question 1

1. Which of the following is a non-current asset?

A Inventory B Furniture C Cash at bank D Bank loan
Answer ________

2. A statement of financial position is prepared to
A show trade receivables and trade payables at a given date.
B show the ledger balances b/d at a given date.
C show the profit for the year.
D show the financial position of the enterprise at a given date.
Answer ________

3. Which of the following is a current liability?
A Motor vehicles B Trade payables C Cash in hand D Capital
Answer ________
4.
Which of the following formula is correct?
A Non-Current Assets – Current Assets = Total Assets
B Non-Current Liabilities + Current Liabilities = Total Liabilities
C Current Assets – Current Liabilities = Total Assets
D Capital at start – Profit for the year + Drawings = Owner’s equity
Answer ________
Question 2
Classify the items in the table below.

Motor vehicles Bank loan Inventory Trade receivables
Cash in hand Furniture Trade payables
Non-Current Assets Current Assets Non-Current Liabilities Current Liabilities
180
Question 3

drawings non-current asset liabilities debit
credit equity current asset
(a) An asset always has a …………… balance whereas a liability always has a
……………. balance.
(b) Capital is also known as ………………………..
(c) 'Motor vehicles' is an example of ………………………while inventory is an
example of ……………….
(d) Amounts that an enterprise owes are known as ……………………….
(e) ………………… are cash or goods that the owner takes from his enterprise for
his private use.
Question 4
Simon is an entrepreneur selling a variety of seafoods. The following balances were extracted
from the books on 31 December 20X0.
Prepare Simon’s statement of financial position as at 31 December 20X0.
Rs
Property 165 000
Furniture 49 000
Drawings 8 200
Net profit for the year 14 000
Bank 25 800
Bank loan 35 000
Inventory 31 December 20X0 26 000
181
Unit 14
Simon enterprise
..................................... .....................................
..................................... .....................................
Current Assets ..................................... .....................................
…………………….. .....................................
……………………. ..................................... .....................................
……………………..
Total Assets .....................................
…………………….. .....................................
…………………….. .....................................
Less ………………….. (......................................)
Owner’s Equity .....................................
……………………. .....................................
Current Liabilities
…………………… .....................................
Total Capital and Liabilities .....................................
182
KEY TERMS
An asset is an item owned by an enterprise.
Capital is an amount of money invested by an entrepreneur to start his enterprise.
Drawings are cash or goods that the owner draws from his enterprise for his private
use.
A liability is an item that represents what the enterprise owes.
The statement of financial position presents all the assets, liabilities and owner’s
capital in an enterprise at a particular date.
The diagram below summarises the steps in the preparation of the Statement
of Financial position.
Business Balancing of
Ledger
transactions accounts
• Cash
• Debit/Credit • Balance c/d
• Bank
• Double-entry system • Balance b/d
• Credit
Statement of
Income Financial position
Statement
Trial Balance • Revenue • Non-Current Assets

• Cost of sales • Current Assets
• A list of ledger balances • Gross profit • Capital
• Total Debits = Total Credits • Incomes • Non-Current Liabilities
• Expenses • Current Liabilities
• Profit for the year
183
Additional Notes
184

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GRADE 9

BUSINESS AND ENTREPRENEURSHIP EDUCATION (BEE) PANEL

Dr Nazeerah Sheik Abbass - Coordinator, Senior Lecturer, MIE

© Mauritius Institute of Education (2021)

Unit 2 The entrepreneur as a leader 19

Unit 3 Entrepreneurial skills 29

Unit 5 Business plan 57

Unit 6 Demand & Supply 65

Unit 7 Money & Banking 87

Unit 9 International trade 107

Unit 10 Recording business transactions in the ledger 113

Unit 11 Balancing of accounts in the ledger 133

Unit 12 Trial Balance 141

Unit 13 Income Statement 155

Unit 14 Statement of Financial Position 169

Student's name: _____________________________ Class: _________________________

What I know and understand about the above topic?

2. I can describe or apply the above topic giving examples as follows:

I evaluate my learning by putting a ( ) in the appropriate box below:

• identify the features of various types of business organisations,

1.1 Forms of business organisations

Sole trading Partnership Company Cooperative Franchise

Figure 1: Forms of business organisations

Read the story below.

Les Hibiscus Pastry Shop

Natasha is a talented confectioner. She set up a small

Les Hibiscus Les Hibiscus Les Hibiscus

Figure 2: Sole trading, Partnership and Company

A company is an incorporated business organisation which is owned by its shareholders.

1.2.1 How to set up a company

Read the following story about setting up a company.

Laura and her business partner, Ben, own and manage a

What is the legal procedure in setting up a

Note: Companies are easily

How to register a company?

Which documents are required to register a company?

Figure 3: Basic questions before setting up a company

Terms Explanation of terms

Share A share is a voucher that represents a unit of capital.

A shareholder is the one who invest in a company by

A share certificate is an official document stating the

Dividend is the part of company’s profits that is

Board of Directors are those who have been elected by

Limited liability means that shareholders will lose only

Registrar of Companies is the authority that registers

Memorandum of Association is a legal document

Articles of Association is a document that specifies the

Certificate of Certificate of Incorporation is a legal document

Annual General Meeting (AGM) is a yearly meeting

Table 1: Terms used in company

There are two types of companies, as shown below.

Public A business that raises capital by issuing shares to members

Figure 4: Types of company

The following steps should be followed when setting up a company.

Figure 5: Steps for registration of a company

Two important documents, namely Memorandum of Association

Certificate of The Registrar of Companies issues a Certificate of Incorporation. The

Table 2: Steps to set up a company

1.2.2 Features of a company

The features of a company are explained below.

Shareholders are the owners of a company. They buy shares of a

A company is managed by a Board of Directors. They are

4 Risk Shareholders have limited liability.

5 Profits The company’s profit is distributed to shareholders as dividend.

Student's name: _____ Class: _