TOPIC AREA : Entrepreneurial culture
Sub-topic area Concept of entrepreneurship
Unit 1 Roles, benefits and challenges of an entrepreneur Sub-topic area Personal development
Key unit competence: To be able to analyse the role, benefits and challenges of being an entrepreneur
Welcome to Entrepreneurship in Senior 2! This year, you will build on the skills that you gained in Senior 1. This is where entrepreneurial attitudes and skills will help you make valuable choices for your future.
Entrepreneurs have an interest in the future of their communities. They often play a role in keeping the environment clean, improving education or reducing crime. There are still many poor people in Rwanda. Entrepreneurship can provide job opportunities and is therefore important for improving the future for many Rwandans.
Entrepreneurs fill an important role in their communities. Can you imagine what your community would be like without them?
1. Discuss the role of entrepreneurs in your community.
2. What goods or services do they produce?
3. What would happen if they were not there?
1.3 Summary of the roles of the entrepreneur
Entrepreneurs find solutions to problems or new ideas for products and services to develop enterprises. The Enterprises provide goods and services to households. In turn, households provide labour. Entrepreneurs therefore have an important role in social economic development. Entrepreneurs also participate in government communal activities such a Umuganda and contribute to Mutual Health Insurance (Mituelle de sante).
1.4 Entrepreneurs and socio-economic development
Entrepreneurs contribute to socio-economic development by providing jobs and growing the economy in a community. When an entrepreneur develops a business from a new idea, they ensure that Rwanda’s economy is growing. Businesses pay taxes to the government. These taxes are used to provide a better life for all Rwandans as the government builds roads and schools. Entrepreneurs therefore have a very important role in the socio-economic development in a country.
1.5 Benefits and challenges of being an entrepreneur
An entrepreneur is a person who starts a new business. The entrepreneur aims to make a profit and grow the business. The entrepreneur is also responsible for the risks involved with running the business.
1.5.1 Benefits of being an entrepreneur
Many entrepreneurs are successful people. They make a difference in their communities by employing people and growing their businesses. They also help support and grow the economy. Some of the benefits of being an entrepreneur include:
• increased income – the more work you put into your business, the more money you receive
• self-reliance – relies on one’s own judgement and capabilities
• independent decision making – making a sound/decision on your own
• improved status – improved social or professional standing.
Successful entrepreneurs make a good living. They can earn more money than an employee in a business.
This means that they can buy a better home, provide better education for their children and have more savings for retirement. An entrepreneur makes their own decisions. As the entrepreneur grows the business, they grant a reputation as a successful business person. The improved status of being a successful entrepreneur also increases your self-esteem.
1.5.2 Challenges of being an entrepreneur Entrepreneurs
often work very hard to become successful. Sometimes, even though they work hard, their new business can fail. Some of the challenges of being an entrepreneur include:
• long and irregular working-hours when you work outside normal daytime hours on weekdays
• high risk –high level of uncertainty or danger
• uncertain income – you are unable to predict your future business profits
• no fringe benefits – benefits like pension, leave pay and medical insurance.
Compare the risks and benefits of entrepreneurs and employees
A Venn diagram shows the relationship between two different groups of things. This diagram is useful when you want to contrast and compare items. To create a Venn diagram, draw two overlapping circles.
Let us say that you want to compare living creatures. Add creatures with two legs in the one circle and creatures that can fly in the other. Some creatures have two legs and can fly (for example, birds). Add these in the overlap.
1. Use a Venn diagram to compare challenges faced by entrepreneurs and employees. Add the challenges of entrepreneurs to one circle and the challenges of employees to the other. Write common challenges in the overlap.
2. Draw a second Venn diagram to compare the benefits of entrepreneurs and employees.
3. Present your findings to the class.
1. Arrange an interview with a local entrepreneur. Discuss how he or she overcomes challenges faced by the business. Ask what his or her future plans and goals are.
2. Prepare a presentation to your class about your chosen entrepreneur.
3. Invite the entrepreneur to the presentation and remember to say thank you after the presentation.
Your community ‘before and after’
Many fashion magazines invite people to apply for a makeover. In a makeover, stylists and makeup artists use their skills and knowledge to transform a person. The ‘new look’ often includes new fashionable clothes, makeup and a new hairstyle. The article will include a ‘before’ and ‘after’ picture to show the difference that the makeover made.
1. Look around in your community. How can you give it a makeover?
2. Identify entrepreneurial activities that you can start in your community.
3. Describe the impact that your entrepreneurial activities will have on yourself and your community.
4. Draw a picture that shows the ‘before’ and ‘after’ of your community makeover.
The role of an entrepreneur
• Entrepreneurs create jobs within their communities.
• Jobs can be direct where an entrepreneur employs a person or indirect where the entrepreneur’s business brings customers to a community and this will in turn create other jobs.
• The main aim of an entrepreneur is to create a business and then to make a profit.
• Households provide their labour to businesses.
• Entrepreneurs play an important role in the economy.
The benefits and challenges of being an entrepreneur
• The benefits of being an entrepreneur include self-reliance, increased income, independent decision making, and improved status.
• The challenges of an entrepreneur include long and irregular working hours, uncertainty of income, no fringe benefits and high risks.
• Households give their labour to businesses.
• Businesses provide services and products to households.
Read the article and answer the questions that follow. A passion for art translates into positive change Haute Baso is a Rwandan success story. The business is one of the youngest companies chosen to exhibit its handmade items at the annual meeting of the African Development Bank. The two young founders, Linda Mukangoga and Candy Basomingera, believe that it is Rwanda’s unique designs that are the strength of their company. Haute Baso works with locally trained artisans at cooperatives. Here they produce handmade items using raw materials sourced from within Africa. Design businesses in Rwanda face many different problems. Two such problems are finding reliable tailors and sourcing raw materials. When the founders met to discuss solutions they realised that ‘two heads are better than one’. The result was a successful partnership that allows both women to realise their dreams. Source:
1. Describe how the two entrepreneurs addressed challenges faced by the business.
2. What are the benefits of starting Haute Baso for the two entrepreneurs?
3. Haute Baso employs many female artisans. Research has shown that women spend most of their income on their children’s education, health and nutrition. Explain how employing women can make a long-term positive change to Rwanda.
4. Haute Baso was featured in the East African Weekly for their participation in the biannual Kigali Pop Up. How do you think that an invitation to exhibit and feature in a magazine affects the status of entrepreneurs in their community?
5. What are the likely challenges faced by Haute Baso?Files: 2URLs: 3
Sub-topic area: Personal development
Key unit competence: To be able to create SMART goals and plan to achieve them
3. Translate the goals in the table below into SMART goals.
Reflecting on unit 2 in Senior 1, discuss the following questions.
1. What personal qualities do you have?
2. How could your personal qualities help you become an entrepreneur?
Imagine that you are dreaming of standing at the top of Mount Karisimbi, Rwanda’s highest mountain. Do you think that this dream could become a reality one day? How should you go about achieving this dream?
Answer the following with the class.
1. What is a goal?
2. What does it mean to set a goal?
3. Why are goals important?
2.1 Setting goals
You have goals and dreams of things that you would like to do, places that you would like to visit and jobs that you would like to do.
• What qualities do you think help you to achieve your goals?
• Which person, or persons, can assist you to reach your goals?
Compare your own growth and development to that of a tree. A tree needs roots, a trunk, major branches, leaves, flowers and thorns. Draw the tree in the image below. Compare each part of the tree to values, people and places that help with your growth and development.
Prepare and present a poster to the class. Include the following in your presentation:
1. Explain how you can relate the growth and development of a person to the different parts of the tree.
2. Which people and places give you strength like the trunk of a tree?
3. Which people or places give you protection like the thorns?
4. How can you use this analogy to work towards your goals?
2.2 SMART goals
Sometimes a goal feels like it is just a dream. You may wish to do something one day, but it never seems to happen. A useful tool for setting goals that you can reach is a SMART goal. When we set a SMART goal, we can direct our actions into achieving the goal.
1. Can all goals be achieved? Explain your answer.
2. What do you think the acronym SMART means.
1. Study the table below and make the goals SMART.
2 Study the cartoon. Then answer the questions that follow.
1. Does the entrepreneur have a SMART goal?
2. Fill in the goal in the table.
4. Write your own personal SMART goals.
2.3 Long-term and short-term goals
Some goals take a long time to reach. For example, completing an education or starting a new business.
2.3.1 Long-term goals and milestones
When long-term goals are far in the future you should set milestones. A milestone marks the completion of an event. For example, completing Entrepreneurship Senior 2 is a milestone towards completing your education. You should always celebrate reaching a milestone.
2.3.2 Short-term goals
A short-term goal is a goal that you can reach within a short time. Often short-term goals can lead to long-term goals. For example, selling your first product is a shortterm goal towards the long-term goal of being a business owner. You can compare short-term goals to low-hanging fruit. When the fruit on a tree ripens, it is easy to pick the fruit at the bottom. By picking the low-hanging fruit, you will not harvest all the fruit on the tree. However, it is a good step on the way.
How to draw up an action plan
Create a list of the tasks that need to be done. Start each task with a verb (doing word) because a task is something that you can do.
Break down the tasks into short-term and long-term actions. To identify short-term actions, ask yourself ‘What can I do right now that will bring me closer to my goal?’
Write a to-do list of actions and include guidelines (describe how to do each task).
Create a timeline for your actions and include milestones.
2.4 Creating a timeline
A timeline is a tool that shows the progress of a task. It shows how much time a project will take and how each task fits into the overall project. The most common type of timeline is the bar chart or Gannt chart. The chart shows the activities that need to be done. The chart also shows the start and finish date of each activity. It shows how the activities relate to each other. For example, if you build a house, you cannot fit the roof before you build the walls.
Learning activity 1
Design an action plan for the goals set on the previous page.
Learning activity 2
Create a timeline for the action plan created above.
How to create a timeline
Draw a graph where the X-axis (horizontal line) represents the time period for your project. You can use days, weeks or months as the time units. The Y-axis (vertical line) represents activities or tasks. The activities can be practical such as designing, constructing or installing. They can also include periods where there are no tasks, such as holidays or waiting for approval for your plans. Waiting time also influences how long it will take you to complete the project.
Add tasks to your graph. If the first task (A) will take two weeks, then fill in a bar across two weeks on the X-axis. The next task (B) will take one week and can only start when task A is complete.
Did you know?
H.L. Gannt was an American engineer. He used his charts on important projects like the Hoover Dam. This dam was constructed during the Great Depression in the1930s to help reduce unemployment.
Identify start and end points for your project. Write the date that you can start the project. When you have added all the tasks, you can also see the date when your project will be complete.
To reach your goals you also need resources. These can be:
The resources must also be included in an action plan.
Learning activity 3
Identify the resources needed to achieve the goal set on page 18
Peace and values education: Celebrating Umuganura is a great way to promote Rwandan cultural values that we can use to build, unite and reconcile Rwanda as a nation.
Your class has been appointed as festival coordinators for the annual Umuganura celebrations. Every year the harvest is celebrated as a day to give thanks. The event occurs on the first day of August. This year, you have been asked to plan a festival with decorated trucks and musical processions. You are given the following list of responsibilities:
• Create a route for the procession through your community.
• Ask the cell council for permission if you need to close roads.
• Arrange a theme for your truck to celebrate the harvest and the importance of agriculture for Rwanda.
• Arrange bands and musicians and other forms of entertainment.
• Allocate spaces for stalls that offer food and drinks.
• Advertise the event to attract as many visitors as possible. To plan the festival you need to:
• Draw up an action plan where you identify the tasks and resources needed.
• Develop a timeline that shows start and end points. Discuss the following:
1. What are the obstacles (things in the way) that you need to overcome to plan the festival?
2. Which skills do you need to run the festival?
3. Which opportunities do this festival give your community?
Make suggestions for SMART goals that the farmer can set to reach his goals of growing his farm.
Case study 2.1 Read the case study.
Then answer the questions that follow
The future is bright for Haguminshuti’s chicken empire
Dieudonne Haguminshuti discovered farming opportunities in 2003, while working on a project in Kanombe. Here he developed poultry farming projects for people living with HIV. The work gave him an idea to start a business in agriculture. However, it would take him several years to make his dream a reality.
After learning about poultry farming in the United States, Dieudonne Haguminshuti returned to Rwanda. His first application for a bank loan was rejected. He did not have collateral (property or other wealth) for the loan. Dieudonne also faced other difficulties such as an irregular supply of birds. He also had problems with the quality of the birds. However, he did not give up on his dream. He continued applying for funds and eventually the Rwanda Development Bank agreed to fund the project. There were many conditions for the loan. Dieudonne had to invest all his savings to get the project going. Today, he runs a successful poultry farm in the Bugesera district in the Eastern Province. The farm contains four chicken houses that each house 25 000 birds. Haguminshuti’s customers include supermarkets such as Nakumatt and Simba. Dieudonne is an ambitious business man and he has further plans (goals) for his chicken empire. He is currently looking for investors who can assist him with his plans to increase production. He estimates that he can increase meat production to 70 000 kilograms in nine months. Then he will spend the next six months increasing production at the chicken hatchery from 60 000 to 300 000 chicks per week.
Sources: www.newtimes.co.rw/section/article/2014-10-12/181864/ and www.cndpoultryfarm.blogspot. co.za/2013/07/c-n-d-ltd-poultry-form.html
1. What was the goal that Dieudonne Haguminshuti had in 2003?
2. Describe some of the obstacles that he had to overcome to reach his goal.
3. The chicken business is still growing. List his goals for growth as SMART goals.
4. Create a timeline to assist Haguminshuti with planning
The concept of a SMART goal
•The S M A R T tool will help you to reach and attain your goals.
•Goals must be: Specific, Measureable, Achievable, Relevant, Timebound.
Achieving SMART goals
• An action plan is a tool that you can use to break up a large goal into smaller actions.
• The action plan uses the four Ws (What, When, Who and Whenever) to reach the goal.
• A timeline is a tool that shows the chronological progress of a task.
• It has a start date, end date, all the activities that must be completed and how activities relate to one another.
• To reach a goal, you need to allocate the correct resources.
Setting long and short term goals
• Goals can be long-term of short-term, depending on how long it will take to achieve.
Traffic congestion in Kigali during rush hour is not as severe as in other East African capitals. However, an increase in private vehicles has seen an increase in traffic jams during recent years. Improving public transport is key to reducing traffic jams. In addition, public transport is better for the environment. Kigali City Council has approached you to help them develop a solution. They need you to do the following:
1. Develop SMART goals for reducing traffic jams in Kigali.
2. Draw up an action plan with short-term and long-term goals.
3. Write a timeline for the tasks that you need to complete.
Sub-topic area: Work in socio-economic development
Key unit competence: To be able to evaluate the role of work in socio-economic development
Do you recall learning about work in Senior 1? Discuss the following:
1. What is work?
2. Describe the type of work that people do in your community.
3. Discuss myth and beliefs about work that exist in your community.
4. How does work ensure human dignity?
Let us investigate your lunch. Discuss the following:
1. What work did it take to produce your lunch?
2. How many different jobs are involved in making baked cake or amandazi?
3. How are these jobs related to each other?
Case study 3.1
Read the case study and answer the questions that follow.
Farming coffee in Rwanda
The first cup of coffee was brewed in the Arabian peninsula as early as the 10th century. This popular bean found its way to Europe in the 16th century and since then its popularity has risen all around the world. Today, people around the world drink more than 2 billion cups of coffee per day! Rwanda has an ideal climate for growing excellent coffee beans. Farmers grow and harvest beans for export. Many beans are rated ‘speciality’ and some even win international awards. Cooperatives have recently set up washing stations where farmers can wash and dry the beans. These washing stations have created many new jobs.
Environment and sustainability: We are responsible for ensuring that our economic activities are sustainable and environmentally friendly.
To manufacture means to make something on a large scale using machinery. When we manufacture, we therefore transform raw materials into goods. For example, we use steel to make cars, timber to make furniture or textiles to make clothes. Workers in this sector include for example, carpenters, builders and dressmakers.
Rwanda’s manufacturing sector
Manufacture in Rwanda includes making agricultural products, beer, furniture, textiles and farming tools. Many small businesses make crafts from metals, wood and fabric.
Trading means buying and selling goods and services. Shopkeepers and sales assistants work in this sector. Trading can be wholesale (selling in large quantities from a manufacturer to a shop). It can be retail (selling products from shops to customers). It can also be online (selling products through websites on the Internet).
3.1.4 Service provision
We can import products from other countries and sell these in Rwanda. We can also sell products made in Rwanda to other countries. This is called export. Service provision means selling services such as transport, banking, teaching, repairs and health care to customers or other businesses. Accountants, mechanics, computer service technicians and tour guides work in this sector.
Look at the pictures in Figure 3.5. What type of work do these pictures represent?
Give an example of the relationship between different types of work.
3.1.5 The relationship between the different types of work
In many cases, the types of work we do is interdependent. This means that they depend on each other. The raw materials that are produced in agriculture are used in the manufacturing to make goods. Traders sells the goods and service providers support all sectors.
Classify the different activities shown in Figure 3.6 that it takes to make a loaf of bread according to the type of work.
Research and identify the different types of work done in your community. Prepare a presentation where you classify the work as agriculture, manufacture, trading or service businesses.
3.2 How work contributes to socio-economic development
Work in the different sectors contributes to socio-economic development in many different ways. The following activity and case studies illustrate examples of how different types of work creates jobs and develops society.
A farmer that harvests coffee beans provides many different employment opportunities. The coffee beans are transported from the farm. Next they are roasted, dried and packaged. Ground beans are sold in shops and served in restaurants.
1. Identify the different jobs involved in getting a coffee bean from the farm to the end consumer.
2. Explain how coffee farms improve the standard of living for many different people in Rwanda.
3. How does coffee farming contribute to the socio-economic development of Rwanda?
Case study 3.2
Read the case study and answer the questions that follow.
A thousand grey hills of granite
The discovery of natural granite changed the life of a little village in Nyagatare district in the Eastern Province. Today, East African Granite Industries operates a modern granite-processing factory in the region. This provides work for many local people. The products include granite tops for kitchen tables, tiles for walls and floors, and cobble stones for road production. The granite mined, called ‘a thousand grey hills’, is very hardy. It is polished to make it into a very desirable stone for both the local and the export market. It is sold through the company’s sales department in a showroom in Kigali.
1. Explain how East African Granite Industries changed the life of the village.
2. What type of work does the company do in Nyagatare district?
3. What type of work does the company do in Kigali?
4. East African Granite Industries also invest in a power line, road network and water treatment plant. Explain the benefits of this investment to the company and to the community in the Nyagatare district.
Case study 3.3
Read the case study and answer the questions that follow.
A passion for entertainment in Rubavu
Gisenyi Acrobats is a professional acrobat group from Rubavu district. The young people involved in the group all have a love for the performing arts. The artists perform in Rwanda and abroad. They also run youth programmes for children who are vulnerable (at risk of abuse or neglect). Acrobatics is used as a tool to teach trust and how to overcome fears.
1. Describe the work that Gisenyi Acrobats do.
2. Do you think that Gisenyi Acrobats is in the service industry?
3. How could teaching vulnerable children performing arts create trust and overcome fear?
4. The artists perform abroad. Does this mean that Gisenyi Acrobats export their services? Explain your answer.
Take part in work that contributes to socio-economic development. Then prepare a presentation to show how the work that you took part in contributes to the life of the person doing it and also to those around him or her.
Discuss the following questions:
• Does work contribute to an increased standard of living for all Rwandans?
• Does socio-economic development always create employment opportunities?
3.3 Activities that hinder socio-economic development
Not all activities benefit socio-economic development. Some activities harm or prevent development.
3.3.1 Poor construction of infrastructure
Infrastructure are structures and facilities such as schools, hospitals, internet facilities and airports. We need infrastructure to transport goods, to communicate with each other and for our society to function properly. When infrastructure is constructed poorly, socio-economic development is therefore prevented. For example, we can only drive slowly on poorly constructed roads. Schools that do not have the correct facilities are not useful for learning and if we do not have telephone lines of Internet access then it is hard to communicate with others.
3.3.2 Over-exploitation of natural sources
Natural resources are things in nature that we use, such as wood, land and water. We use many natural resources every day. There are two types of natural resources, namely renewable and nonrenewable. A non-renewable resource, for example coal, does not grow or come back. Renewable resources, such as trees, grow and come back. However, if we cut down too many trees, we can also use up (deplete) a renewable resource. When we overexploit our natural resources, they may run out in the future. An example of exploiting resources is overfishing. If fishermen catch too many fish in Lake Kivu, then there are not enough adult fish left to breed. The next generation of fish will be smaller. If we continue to fish, then we will soon deplete all the fish. When you want to assess if you are using a resource responsibly, ask yourself ‘can I do this forever?’
Identify and describe activities that hinder socio-economic development in your community.
Types of work
Work is classified into four types:
• Agriculture: farmers grow and sell cash crops and products for export
• Manufacture: making products on a large scale using machines
• Trading: buying and selling goods and services. It can be wholesale, retail and online
• Service provision: selling services such as transport, banking, health care, teaching and repairs
Work and socio-economic development
• Work can contribute to socio-economic development by providing work and increasing the standard of living in a community.
• Some activities prevent socio-economic development, e.g. depleting natural resources, poor farming methods, deforestation, overgrazing.
Topic area: Summative assessment (Units 1–3)
Read the article. Then answer the questions that follow.
New fashion talent in Rwanda Rwanda’s fashion scene has an increasing number of new talent. Two new designers, determined to put Rwanda on the fashion map, are Matthew Rugamba and Sonia Mugabo. Rugamba came up with his brand, House of Tayo, while he was travelling abroad. He felt that he often had to explain what life was like growing up in Africa. He decided that he wanted to share his appreciation of Rwandan culture and history through his clothing. Mugabo has a similar story. She returned to Rwanda in 2013 and saw that Rwanda’s rich culture meant an opportunity for the Rwandan fashion scene to grow. Her brand ‘Sonia Mugabo’, or SM, offers a mix of African trends and contemporary fashion. She hopes that her brand will inspire others to share their stories with the world. Source:
Read the text. Then answer the questions that follow.
The story of a T-shirt
This is the journey from a cotton plant to a T-shirt. First, the farmer plants and waters his cotton plants. The plants also need fertilisers and pesticides (poison for pests) that can pollute our soil and water sources. Next, the farmer harvests and transports the cotton to a factory where machines spin and weave the cotton into cloth. The machines use electricity. We use dyes to make different colours. Dyeing uses many chemicals that pollute our water. The cloth is sewn into T-shirts with machines that use electricity. Lastly, the T-shirts are transported to shops with trucks that use fuel. They pollute the air with car
Topic Area:Business activity
Sub-topic area Concept of business activities
Unit 4 The market
Key unit competence: To be able to analyse the impact of the different types of markets
Do you recall learning about needs and wants in Senior 1?
1. What is the difference between primary and secondary needs?
2. List three different types of goods needed in society.
3. Identify the factors that influence the consumption of goods and services.
4. Where do you get the goods and services to satisfy your needs and wants?
Yolande Kagire makes and sells Peace Baskets (Agaseke k’ Amahoro) at a market. Her customers are mainly foreign tourists. Discuss the following:
1. What is a market? Write a definition using your own words.
2. What do you call Yolande’s baskets in entrepreneurship?
3. When do you think Yolande sells most baskets? Explain your answer.
4. Yolande’s baskets are popular so Gakuru decides to open another basket stall at the same market. How do you think that this will affect Yolande’s business? Explain your answer.
4.1 What is a market?
In entrepreneurship, we often talk about markets. You also know about markets from buying goods and services for your family.
When we study markets in economics, the word market has a specific meaning. A market is any environment that exists when buyers and sellers come together to exchange goods and services. You will therefore find a market in a shop. However, a market can also be on the Internet, where buyers buy goods online.
In economics, a product can be an object like a banana or a book. It can also refer to a service such as a carwash, a haircut or a lesson by an entrepreneurship teacher. When we talk about products in economics we mean both goods and services that consumers want or need.
4.2 What is demand and supply?
Have you ever wondered why products in the shop cost a certain amount? In economics, we explain the costs of products by using a model called supply and demand.
When Yolande sells her baskets at 1 000 Frw she has many customers. When she sells her baskets for 2 000 Frw, she only sells 10 baskets.
1. In Mathematics, when two variables are related so that as one becomes larger the other becomes smaller, we say that they are inversely proportional. Consult your Mathematics teacher and write a definition for this term using your own words.
4.2.4 A supply curve
In economics, we make use of a graph called a supply curve to show the relationship between the price of a product and how many products producers are willing to sell. This curve shows the price on the vertical axis (Y-axis) and the quantity supplied on the horizontal axis (X-axis).
Let us look at an example: If the price is low, then only a few suppliers will sell bananas. As the price increases, more producers will want to grow and sell bananas. The table below shows how many bananas sellers are willing to sell at a certain price. The minimum price that a supplier is willing to sell bananas for is 100 Frw.
1. Explain the following terms: market, products, demand, supply.
2. Explain the relationship between price and quantity demanded by consumers. Why is this relationship an inverse relationship?
3. Explain the relationship between price and quantity supplied by producers. Why is this relationship a direct relationship?
4. 100 Frw is the minimum price at which producers will supply a product. Why do you think that no one will sell units below this price? (Use your knowledge of accounting and costs and profit in your explanation.)
4.3 The relationship between demand and supply
Let us say that you want to buy a product. As a consumer you want to pay as low a price as possible. The producer, on the other hand, wants the price to be as high as possible. So which price will you end up paying for the product?
4.5.1 Advantages of domestic market
A business owner who provides goods and services to a domestic market:
• understands the local culture and language when communicating with customers
• knows customers’ tastes and preferences
• knows if the local economy is growing
• does not pay import costs and can therefore provide inexpensive goods and services to customers.
Investigate goods in your local store. How many of these are made in your local community? Where do the other products come from? Advantages of making goods in your local community and selling them at your local store are:
• the money goes to the local business, which helps the local market to grow
• it creates employment because local businesses employ people from the local community
• the products do not need to be transported for long distances and pollution is therefore reduced
• food grown locally is fresher than food that has been transported from somewhere else.
Advantages and disadvantages of economic integration
Some advantages of economic integration are:
• Increased trade: More goods and services are sold between countries. This creates new business opportunities.
• Increased employment: When businesses sell more and grow, they also employ more people.
• Political cooperation: Countries that trade with each other have less political conflict.
• Increased foreign investment: More foreign currency enters the country
There are also disadvantages to economic integration. If a country does not have a trade agreements with other countries, it can be difficult to sell goods and services in those countries. It leads to the creation of trade barriers to non-members, a decrease in foreign currency entering the country, and movement of skilled workforce out the country.
4.9.3 Economic Community of the Great Lakes Countries (CPEGL)
The Economic Community of the Great Lakes Countries is a regional organisation. The abbreviation CEPGL comes from its French name: Communauté Économique des Pays des Grand Lacs. It was founded in 1976 and has headquarters in Rwanda. The organisation has three members: Burundi, Democratic Republic of the Congo and Rwanda. Its purpose is to promote trade and economic cooperation in the region. The CEPGL controls several institutions including the Bank of Development of the States of the Great Lakes (BDEGL) and the Economic Community of the Great Lakes Countries Organization for Energy (EGL).
Exercise 4.5 1.
List the members for the EAC, COMESA and CPEGL in a table.
2. How does Rwanda benefit from joining economic trade blocs like EAC, CPEGI and COMESA?
3. What are the disadvantages for Rwanda as an affect of joining economic unions?
4. Debate the role of economic integration to socio-economic development in Rwanda.
What is a market?
• A market can be the physical place you buy goods and services.
• When referring to markets within the economic sense, it means any environment that exists when buyers and sellers come together to exchange goods and services.
• Demand means the amount of products or services that customers can and want to buy at a given time for a specific price.
• Law of Demand states that the price of the product increases, consumers will demand less of that product (quantity decreases). As the price of the product decreases, consumers will demand more of that product (quantity increases).
• A Demand Curve is a graph used to show the relationship between a product’s price and how many product units consumers are prepared to buy.
• Price is indicated on the y-axis and product unit indicated on the x-axis.
• The Demand Curve slopes downwards (top left to bottom right), has a negative slope and shows the inverse relationship between price and quantity demanded.
• Supply means the amount of products that producers will sell at a specific price at a given time.
• Law of Supply states that when consumers are prepared to pay high prices, there are lots of producers wanting to sell the same product. When consumers are not prepared to pay high prices, there are few producers who want to sell that product.
• The slope curves upwards from bottom left to top right and illustrates the direct relationship between price and quantity supplied.
• Price is shown on the y-axis and quantity products on the x-axis.
• The Supply Curve is a graph that shows the relationship between the price of a product and how many of a product producers are willing to sell.
• The equilibrium of a product is the price where the product supply and the product demand meet.
• When the Supply Curve and Demand Curve are drawn on the same graph the market price is where the two curves cross.
Types of markets
• Markets can be local, domestic, regional or international.
Advantages of domestic market
• A business owner
• understands the local culture and language when communicating with customers
• knows customers’ tastes and preferences • knows if the local economy is growing
• does not pay import costs and can provide inexpensive goods and services to customers
• creates job opportunities for local communities in local markets.
Disadvantages of a local market
• Difficult for business to expand because local market is small.
• If local economy is not going well customers may not buy many products.
• Imported products and services may be offered at cheaper prices.
• A regional market is a market in a specific region. People from different countries in that region trade.
• A regional market is a market in a specific region.
• People from different countries within that specific region trade with one another.
Advantages of a regional market:
• The market is larger as there are many more people than in a domestic market.
• When a business grows it benefits the country.
• A Rwandan business that exports products earns foreign currency (money from another country).
• Rwanda may enter into agreements with governments from other countries to make trade easier.
Disadvantages of a regional market:
• There is more competition in a regional market than in a domestic market.
• If a business from another country grows, then it does not provide jobs in Rwanda.
• When a business trades in a regional market, goods must be transported to other countries.
• Economic integration is when different countries agree to lower tariffs, making it easier to allow trade between these countries.
• Different types of economic integration are: Preferential trade agreement, Free-trade area, Customs union, Economic union.
• Advantages of economic integration:
• Increased trade
• Increased employment
• Political cooperation
• Increased foreign investment
• A disadvantage of economic integration is that it is difficult to trade with another country if there is no trade agreement between the two countries.
Disadvantage of economic integration
• Difficult to trade with another country if there is no trade agreement
Regional trading blocs
• A trade bloc is an agreement that involves the removal of import tariffs.
• East African Community (EAC) is a large regional trade agreement between Burundi, Kenya, Rwanda, Tanzania and Uganda.
• Common Market for Eastern and Southern Africa (COMESA) is a trade-free area between 20 African countries.
• Economic Community of the Great Lakes Countries (CPEGL) is a regional organisation established in 1976 with headquarters in Rwanda.
Sub-topic area: Taxation
Key unit competence: To be able to analyse the roles of taxes in Rwanda
A tax is a levy that is obligatory (required by law). In Rwanda, taxes are collected by the Rwanda Revenue Authority (RRA). Tax can also be imposed by administrative divisions such as districts, sectors or cells. Taxation is the largest source of revenue for the government. The state uses the money raised from taxes to build and maintain roads, schools and hospitals. A person that earns an income must pay income tax. We also pay tax when we buy certain goods. If there was no income from tax, the government would not be able to provide public goods and services. Instead, the private sector would provide services to those who could afford it. The poor would not be able to afford services and would have to go without.
In Rwanda we pay a certain percentage of our income in tax. The amount of tax increases the more a person earns – this is called progressive tax system. Businesses pay tax on their profits. Do you recall that profit is income minus expenses?
5.2 Taxes in Rwanda
Taxation is the largest source of revenue for the government. The state uses the money raised from taxes to build and maintain roads, schools and hospitals. Taxes consist of direct or indirect taxes. A tax system should be simple, easy to understand and administer.
Read the scenario on the previous page.Then answer the questions.
1. Do you agree with Mr Karimunda’s suggestions for reducing his tax bill? Explain your answer.
2. Explain the difference between tax avoidance and tax evasion.
3. Do you think Mr Karimunda is avoiding or evading tax? Explain your answer
Sometimes people can avoid paying taxes because they find ways to reduce the amount of taxes that they must pay. This is called tax avoidance. A person or a business can avoid paying taxes in different ways. For example, if you support a charity, the money that you pay may be deducted from your tax bill. Tax avoidance is legal. Some people try hard to avoid paying taxes. If a tax system is not clear, people can find loopholes that allow them to avoid paying tax.
5.2.1 Tax evasion
You are allowed to avoid paying tax if you follow legal rules. However, tax evasion is illegal. Evasion means hiding your income so that you pay no tax or less tax than you owe. If you state that your income is lower than it is or do not declare it at all, you are committing a criminal offence. An example of tax evasion is when you claim that you have expenses that are fake. A business can evade paying taxes by stating that expenses are higher than they really are or by claiming that it sells less goods or services than it really does. Tax evasion is punished by penalties and fines, or even prison.
Tax offences include:
• keeping more than one set of records and preparing two sets of final accounts
• using false names or false documents
• not filing tax returns
• not paying tax.
5.2.3 Paying government workers
People who work for a government are called civil servants. They do important work. Civil servants include: • teachers who educate children
• doctors and nurses who care for sick people
• policemen and women who ensure that we adhere to the laws of Rwanda
• prison wardens who ensure that prisons are well run
• judges who preside (are in charge) over trials
• district workers who work on roads and power stations. Civil servants do important jobs. They are paid with the tax revenue that the government collects from businesses.
1. Explain what is meant by public expenditure.
2. Discuss the importance of paying taxes in a country. Make a presentation of your findings to the class. In your presentation, you can use the Rwanda Revenue Authority statement: ‘Without taxes there is no peace, no roads, no hospitals, and no schools.
1. An employee earns 4 000 000 Frw in one year. Calculate the tax that the employee must pay.
2. An employer pays 74 000 Frw in tax for the above employee. Work out the balance that the employer must still pay
5.3.2 Corporate income tax
Businesses pay tax on their profits. This tax is called corporate income tax (or company tax). In Rwanda, a business generally pays 30% of its profit in tax. As the government wants to encourage business growth, many businesses receive tax discounts. For example, a business that exports goods and services receives a discount on their tax bill. A small enterprise that sells goods and services to the value of up to 50 Frw million per year pays a flat tax. This tax is a percentage of the turnover (total sales) of the business. The business can also choose to be registered to pay regular company tax.
5.3.3 Personal and business property tax
An individual or a business that owns property must pay property tax. This tax is collected by Rwanda Revenue Authority on behalf of the district. The amount of tax payable depends on the value of the property.
5.3.4 Business sales
You pay a sales tax called Value-added Tax (VAT) when you buy goods and services. You do not pay this tax on all goods and services. Basic nonprocessed food items and some equipment are exempt from VAT. This makes it easier for poor people to afford buying necessary items. In Rwanda, we pay 18% in VAT. The businesses that charge VAT on goods are also responsible for collecting the money using electronic billing machines (EBM). They pay the VAT to the Rwanda Revenue Authority every month.
5.4 Rights of taxpayers
As a taxpayer you have many rights when paying tax. The Rwandan government states that it is the right of each taxpayer to always be treated fairly and to be informed of taxpayer services and obligations (duties). Taxpayers also have several other important rights.
5.4.1 Right to confidentiality
The information that you send to the Rwanda Revenue Authority is confidential (private and kept secret). The information can only be used if the information must be used to investigate criminal activities such as tax offences.
5.4.2 Right to legal representation
You can declare taxes yourself, but you also have the right to ask a legal representative, such as an accountant, to help with declaring taxes.
5.4.3 Right to tax refund
If you have paid more tax than you should, the Rwanda Revenue Authority will issue a tax refund. This means that they will pay back the excess money. Sometimes the excess tax paid is simply offset against the next tax payment.
Discuss the following questions.
1. Why are taxpayers’ rights important?
2. Why is it in the government’s best interests to uphold these rights?
5.5 Obligations of taxpayers
As a taxpayer you have many obligations.
5.5.1 Register with Rwanda Revenue Authority
Each taxpayer must apply for a unique Tax Identification Number (TIN). This number identifies the taxpayer. When you start a business you also need to register the business with Rwanda Revenue Authority within 7 days.
5.5.2 Filing tax returns
Nowadays you fill out a tax return electronically, you indicate how much money you have made in a tax year and the system calculates how much money you must pay in tax. This is a legal document that must be an accurate and truthful statement.
5.5.3 Provide all the information and documents
When you submit a tax return, you must also add additional information called supporting documents where it is required. For example:
• medical expenses (not covered by the medical aid)
• proof of payments to a retirement fund
• proof of purchase or sale of assets.
You must state the following:
• Tax identification number (TIN)
• period of employment or activity
• amount earned
• type of tax
• correct postal address.
1. Why do taxpayers have certain obligations? What are they?
2. What information must taxpayers give to the tax authority when filling in tax forms?
If you rent out machinery, land, house or livestock the rental amount is an income. You must pay tax on this income, but can deduct your expenses such as interest paid on loans. Rental tax is therefore also a direct tax. Property tax is also a direct tax. This tax is levied on the value of property such as land or buildings. When a person dies, the relatives inherit his/her assets. To inherit means to receive money as an heir. In some countries, the heir pays inheritance tax. This tax is a percentage of the value of the money and properties that he or she received. Inheritance tax is a direct tax.
5.6.2 Indirect taxes
An indirect tax is a tax that is collected by an intermediary, for example a retail store, from the person who pays the tax. The intermediary then files a tax declaration and forwards the tax to the government. Valueadded Tax (VAT) is an example of an indirect tax. A business must register for VAT if its turnover is more than 20 Frw million in one year. This means that the business will charge VAT to its customers and pay over the amount to the RRA. We do not pay VAT on all goods. Some goods are classified as exempt or zero-rated supplies. We pay a standard rate of 18% on all other goods. Some items are considered luxuries. The government adds an additional tax called consumption tax to these goods. This tax is also known as excise tax. This tax is paid by those that can best afford it. The tax is also a deliberate attempt to encourage people to buy and use less of certain goods. In Rwanda, we pay consumption tax on locally produced or imported beers, lemonades, mineral water, juices, liquors, wines, fuel, vehicles and powdered milk. It is also levied on cigarettes and telephone communication. When we buy a product that is imported into Rwanda we pay customs duties. This duty is paid when the products enter the country. As the products arrive in Rwanda, the importer pays taxes and duties like VAT and consumption tax.
Case study 5.1
Read the case study. Then discuss the questions.
Duties and taxes for import into Rwanda
Some goods are not made in Rwanda. We must import them from other countries. Different stakeholders are involved in importing goods. First, there is the producer of the goods in the foreign country. Then we must insure the goods. The goods are then transported to Rwanda by road, boat or air. Here, the Rwanda Revenue Customs Service calculates duties and taxes on the value of the products. If the import consists of goods produced in the East African Community (EAC) countries, then the Customs Services applies the duties and tariffs that have been agreed in the trading bloc. Imports from members of the COMESA trade bloc have preferential tarrifs compared to imports from other countries. Importers pay different levies depending on the product that is imported. For raw materials, there is no duty (0%). The duty for finished goods is 25%. The importer must also add 18% VAT to the value of the goods. In addition, the importer must pay consumption tax if the import is an alcoholic beverage or tobacco. This tax ranges from 3% to 150% of the value of the products.
In each scenario described below, discuss which stakeholders are involved in the process. List the different types of taxes the entrepreneur must pay for the imports.
1. Marie Louise wants to start a business that provides fertilisers to farmers. She wants to import fertilisers from a factory in Kenya.
2. Theoneste travels to Germany. He wants to import kitchen utensils that he plans to sell to restaurants. 3. Cherise has just returned from visiting a supplier of beauty products in Namibia. She wants to open beauty salons all around Rwanda.
Legal form of a business
A business can have many legal forms. Below are a few examples:
• Sole proprietorship – this business is owned and managed by one person, the owner.
• Partnership – this business is owned and managed by two or more partners.
• Company – some companies are owned by a few people who hold shares (shareholders) in the company. Other companies sell their shares to the pubic on a stock exchange. These are public companies.
Some organisations are called non-profit. This type of organisation has a specific purpose other than making a profit. This purpose can be a social cause, such as caring for the elderly. Non-Profit Organisations do not pay income tax. When you register your business with the Rwanda Revenue Authority, you need to ensure that you register the correct form of business.
5.8 Documents used for taxation
You need to register a new business with the Rwanda Revenue Authority and fill in the required documents within a period of seven days from starting the business. Before you can open your door for business you also need to ensure that you have the correct permits and licenses to operate the business. A business can be registered as an individual business, local or foreign company. A business needs to be registered with the Rwanda Development Board (RBD). When you register your business, you receive a certificate of company registration (see Figure 5.7). This certificate must be displayed in the business.
To register for a Taxpayer Identification Number (TIN), you need to bring the completed application to the RRA. You also need to bring the following identification documents:
• your national identity card
• a passport photo.
1. What are the steps and procedures one must follow to subscribe to the Rwanda tax system?
2. Explain why the subscribing or registering with the tax system is important.
5.9 Advantages of being part of the tax system
There are many good reasons for being part of a tax system.
Taking part in business
• When you apply for small business loans, you need to prove that you own a business. Lenders and investors will ask to see your business registration before approving a loan. You also need to show your business registration to apply for a credit card.
• Your customers will also feel more confident about buying from a legal business than from one that is not registered.
• Many export businesses receive tax discounts from the government. This is done to encourage the growth of Rwanda’s export sector.
• When a business subscribes to the tax system, the business also protects its employees. The business deducts funds for a national pension scheme. This money is used to pay pensions to people that have retired.
• Paying taxes help the government to build and fund different public activities such as building and maintaining roads, schools and hospitals.
• When you become part of the tax system, you are entitled to a tax certificate. This allows you to be an official operator in a business sector.
Case study 5.2
Read the case study. Then answer the questions that follow.
Register your business – it is the law
Government has threatened to close all unregistered businesses as it steps up efforts to make all business operations in the country formal and to increase its tax revenue base. The move is also aimed at enforcing the Company Act, which was passed in April 2009. This requires all companies to register with the Registrar of Companies at the Rwanda Development Board (RDB). The government introduced a two-year grace period to allow all unregistered businesses to register. Businesses that had registered using the old law also needed to re-register. The law was passed as government wants to encourage small businesses to grow. To implement the law, the Ministry of Trade and Industry embarked on a sensitisation (learning) process where the relevance of this law was explained to the business community.
1. Why is it important to grow the country’s tax base?
2. Explain the advantages of subscribing to the tax system.
Cancellation of the registration certificate
The Rwanda Development Board will issue the cancellation certificate when the business stops operating and has paid all taxes owed.
Taxation and taxes
• Taxation is a source of income for the government.
• The government uses the taxes collected to build roads, provide state pensions, state funded education and healthcare.
• Taxes are collected in different ways: businesses pay tax on profits, employees pay tax on their income earned and consumers pay a general tax (VAT at 18%) when they buy goods.
• Rwanda uses a progressive tax system (the more you earn, the more tax you pay).
• Taxes are collected by Rwanda Revenue Authority (RRA).
Tax avoidance and tax evasion
• Tax avoidance is when people legally reduce their income according to current tax legislation to pay less tax.
• Tax evasion is when people illegally reduce their income to pay less tax.
The importance of paying taxes
• People working for the government are called civil servants are paid from the taxes that the government collect.
• A shortfall of tax collection will result in the government being required to borrow money from other countries to pay for certain essential services.
• It is expensive to borrow money from other countries therefore the Rwandan government would prefer that more people earn an income so more people can pay taxes.
• Taxpayers have certain rights.
• Right to confidentiality. • Right to legal representation.
• Right to tax refund.
• Taxpayers have obligations.
• Register with the RRA.
• Signing tax returns.
• Supply supporting documentation when submitting tax returns.
Types of taxes
• Direct tax is tax paid on profit, income, or property tax.
• Indirect tax is paid on goods and services.
• Advantages of being part of the tax system include:
• Customers will know that the business is a legal entity.
• A business must be registered to qualify for a bank loan or to apply for a business credit card.
• A registered business that export goods can receive refunds from the government.
• A registered business protects its employees. • A registered business contributes to the well- being of Rwanda’s economy.
Sanctions and penalties
• If a taxpayer does not comply with the law, he must pay penalties.
• A business that decides to stop conducting.
1. Draw up a table where you list direct and indirect taxes paid in Rwanda.
2. Explain the purpose of adding consumption tax to certain products.
3. Imagine that you have just completed your education and are working for a business. Describe your obligations as a taxpayer.
Topic Area:Financial information and decision making
Sub-topic area: Managing finances: Budgeting
Key unit competence: To be able to prepare a personal budget
Do you recall working with budgets in Senior 1? Why is it important to manage your money well?
Ngoga is a young man. Last month he found a good job in Kigali. Now he has moved from his family home to the city. On the weekends, Ngoga likes to go out with a friend to the cinema. He also goes to concerts where local bands play. He dreams of buying a car. When Ngoga lived with his family, he did not need to pay rent. Now he is renting an apartment in the city
Discuss the following:
1. List Ngoga’s wants and needs.
2. Make suggestions to Ngoga on how he can manage his money to satisfy his wants and needs.
3. Do you think it is important to prepare a budget?
6.1 What is a budget?
You can plan how to spend the money that you make. This spending plan is called a budget. A budget shows how much money you are likely to earn. It also shows how you plan to spend the money. It is a useful tool that can help you decide how to manage your money.
The importance of a budget
With a budget, you know ahead of time if you will have enough money to buy the things you need. Also, if you have enough money to do the things you want to do. If you do not have enough money to do everything that you would like to do, then a budget can help you to decide which things are the most important. A budget can also help you to see which expenses you should cut down on. A budget can show you how much money you can spend. When you follow a budget, you can keep out of debt.
Case study 6.1
Budgeting and our future As a young woman, Mukundwa dreamt of running her own tour company. After checking the cost of the van she wanted and looking at her salary, she drew up a budget. Then she started saving. After 3 years, with her savings and a small loan from the bank, her dream came true. Mukundwa bought her first 12 seater safari vehicle. Today Amahoro Tours transports tourists throughout Rwanda.
1. What are the elements of a budget? Explain how to draw up a budget.
2. Why do you think that it was important for Mukundwa to draw up a budget?
3. What should Mukundwa do if she found that her expenses were greater than his income?
4. While Mukundwa was saving up to start her business, she still needed to pay for daily expenses such as food and rent. She therefore drew up a personal budget. What is the difference between a personal budget and a budget for a business?
Case study 6.2
Read the case study and answer the questions that follow.
Presenting the national budget
There are many different kinds of budgets. Every year, the Rwandan Minister for Finance and Economic Planning makes a presentation at a session in parliament in Kigali. In this speech, the Minister announces the amount of taxes the government expects to raise. The Minister also explains what the Rwandan government plans to spend the money on. The government’s budget is called the national budget. It is published on the finance ministry website.
1. How does the Rwandan government announce the national budget?
2. The income for the national budget comes from taxes that are paid by people in a country. How do you think the Rwandan government knows how much tax will be raised next year?
3. One of the government’s priorities in 2015 was rural development. Expenses for improving land use and reducing poverty was 252 Frw billion. This was 14% of the budget.
a) Explain how a budget can help the government decide what to spend money on.
b) Rural development, promoting export, youth development and other programmes were allocated 52% of the budget. How do you know that these were priority programmes?
1. Why is it important to have a personal budget?
2. Discuss the similarities and difference between a personal budget, a business budget and a national budget.
The role of a personal budget A personal budget is a tool that can help you:
• use your personal resources effectively
• to make personal decisions
• to minimise financial risks
• understand your spending habits
• to build a savings account
• to maintain a good credit rating.
Budgeting and decision
making Budgeting can help you to use your resources effectively. When you see how much things cost, then you can make important decisions. For example, if you spend too much money on food, you can save by buying less soft drinks. You could also eat out less. If transport is too expensive, you could perhaps use a bicycle to get to work.
A full circle has 360 degrees. To find the number of degrees for each sector, multiply the percentage by 360.
List the monthly expenses in your household. Draw up a pie chart of your expenses.
Write a mind map on the board where you list the importance of budgeting in daily life.
6.3 Elements of a budget
A budget includes a list of income and expenses for a time period.
Income can be a salary or wages. A salary is income that is paid every month. Wages are paid weekly. You can also earn income from interest on money in a savings account at the bank. If you rent out part of your home, you earn rent. Students may receive a stipend or bursary at a university or your parents may give you a monthly allowance. Add all your income in a column. This is your total monthly income. List your income for the following months. Your budget can be for six months or a year.
In a personal budget, expenses can include:
• rent or home loan repayments
• utilities (gas, electricity and water)
• rates and taxes
• home maintenance and repairs
• food • laundry
• school uniforms, school books
• school fees for senior secondary
• medical insurance
• debt repayments.
List the income and expenses for your family in a budget. When listing the expenses, first write a list of needs and wants. Then select from this list which expenses are essential (needed) and which are expenses that you can add if you have sufficient (enough) income.
6.4 Steps in preparing a budget
Follow these steps to prepare a budget:
Step 1: Record all sources of income in a given time period.
Step 2: Create a list of expenses for a given time period.
Step 3: Subtract expenses from income.
Step 4: Review the budget.
Step 5: Make adjustments.
When you subtract the expenses from the income, you will see if there is enough money to pay for all the expenses. If the expenses are higher than your income, you need to make an adjustment. You can try to find another way to earn an income. You can also try to reduce expenses.
Draw up the following budgets. 1. Write a list of sources of income for yourself for a given time period. Then list the expenses. Draw up a personal budget.
2. Find an idea for a business. Then compile a budget for the business. Show the sources of income and expenses.
Prepare a presentation where you advocate for budget preparation in your community.
Case study 6.4
Read the case study and answer these questions.
Drawing up a personal budget
Ngoga draws up a personal budget. There is no money left over at the end of each month for savings. So he decides to rent out a room to a student at 5 000 Frw per month. He wants to save up to buy a car, so he places the savings in a bank account. The bank pays 10% interest per year. Ngoga fills in the income and expenses in the adjusted budget.
1. a) List the steps in compiling a budget.
b) How did Ngoga adjust his budget?
c) Ngoga wants to save 100 000 Frw. How long will it take him to save?
2. List your own income and expenses. Then prepare a personal budget. Review and make adjustments to the budget if needed.
What is a budget
• A budget is the plan you draw up to say how you intend to spend your future income.
• A budget is important, it shows how much money you can save and will help you reach your financial goals.
• A personal budget is a guess of how much income you will have and how much money you can spend for a specific time period.
The role of a personal budget
• The role of a personal budget is to use personal resources effectively, to minimise personal financial risk and to make personal decisions relating to your finances.
• The government’s budget is an estimate of how much taxes they will collect and how much money the government can spend in the country.
Elements of a budget
• A budget has two elements: potential income and expected expenses.
• Income is any regular amounts received.
• Expenses are any amounts that should be paid
Steps in preparing a budget
• There are five steps to follow when compiling a budget.
• A budget is a projection thus income and expenses can be adjusted to suite changes in circumstances.
Importances of a budget
• Ensures that you will always have money for things that you need
• Will keep you out of debt
Sub-topic area: Basic Accounting
Key unit competence: To be able to record initial Accounting entries for a business
In Senior 1, you were introduced to Accounting.
1. Explain the meaning of Accounting and bookkeeping.
2. Explain the importance of Accounting. 3 Who are the users of Accounting information?
4. Name the different business transactions. 5. Name the methods of payment.
Mrs Nikuze has just moved to Karumuna in the Eastern Province and plants to start a business. Currently everyone in the region buys their daily bread from Kigali. Mrs Nikuze loves to bake, so she decides to prepare and sell pastries and different bakery products. However, setting up a business also means that she needs to keep track of all of her earnings and expenses. Her brother suggests that she draws up a checklist of financial information that she will need to keep track of in her business. Draw up a checklist of financial information to assist Mrs Nikuze.
7.1 What is Accounting?
In Entrepreneurship Senior 1 you learnt that financial management is managing the resources of a family or a business in an effective way. Accounting is a system that assists us with good financial management. An accountant keeps, manages and inspects the financial accounts. An Accounting system gives us important information. For example, a business can determine if it is making a profit. A business owner can also use the information to decide if he or she should invest in new machines or a vehicle. An individual person can see if he or she is saving up enough money for retirement. Both businesses and individuals can check that they are following their budgets. Accounting is also important when paying taxes. When we add our financial transactions into an Accounting system, we can determine how much tax we need to pay. To add financial information into an Accounting system, we first need to gather source documents.
When you buy a product or service, you receive an invoice from the seller. An invoice lists the description and the quantity of the item sold or service provided. This document is a record of the sale for both the seller and the buyer. A buyer can pay straight away (known as Cash on Delivery or COD), but sometimes the buyer has a period of time to pay, for example 30 days or 60 days. This information is also on the invoice.
7.2.2 Deposit slips
We use a deposit slip when we want to deposit money into a bank account and a withdrawal slip when we want to take money out of a bank account. To deposit money, we fill out the form to show how much money we deposit. The teller at the bank keeps the deposit slip along with the cash deposit and provides a receipt. The receipt is proof that the money has been deposited.
7.2.6 Payment order
A payment order is an instruction to transfer funds from one bank account to another. This can be done manually (on paper) or electronically. A postal order is a type of payment order. Post offices can send (‘wire’) money between two points nationally or internationally. As with cheques, this form of payment has largely been replaced by the electronic transfer (EFT).
1. Visit a local business centre or Bursar and identify various source documents.
2. Design the following documents for Mrs Nikuze’s bakery:
• pay slips
• payment order.
Let us look at the Accounting Equation for your jeans. Jeans (Asset) = savings (Owner’s Equity) + loan from parents (Liability) 10 000 Frw = 8 000 Frw + 2 000 Frw The left-hand side of the Accounting Equation must equal the right-hand side.
Case study 7.1
A cup of tea
A cup of tea is a new business that sells quality teas from the Karongi region. Josephine, the owner, has invested in a delivery van and a laptop. She saved 1 100 000 Frw and lent 3 000 000 Frw from the bank.
1. Identify the possessions of Josephine’s business.
2. What are Josephine’s Liabilities?
3. What is Owner’s Equity?
4. Write the Accounting Equation
5. Draw up the Accounting Equation for Josephine’s business.
Mrs Nikuze is shopping for a new oven for her business. She wants to buy an oven for 200 000 Frw. She has 120 000 Frw in savings. Her brother has agreed to lend her the remaining amount.
1. Explain what is meant by the Accounting Equation.
2. Use the Accounting Equation to determine how much money Mrs Nikuze must borrow.
Do you recall using the Accounting Equation for buying jeans? Your asset – 10 000 Frw for a pair of jeans increased. This leads to a debit. Your savings 8 000 Frw decreased. Money is also an asset. This leads to a credit. Your liabilities of 2 000 Frw have now increased. This leads to a credit.
The Accounting Equation must always balance! A debit is a transaction that occurs when the business increases assets or decreases liabilities and Owner’s Equity. A credit is a transaction that occurs when the business decreases assets or increases liabilities and Owner’s Equity.
When we record transactions in the double entry bookkeeping system we use a record called an account. To draw up an account we use a T-shape. The left-hand side is used for debits and the right-hand side to record credits. We use different accounts to record the Assets, Equities and Liabilities of a business. An account is the first step to drawing up financial records for the business.
An asset is an item of value. We differentiate between fixed assets and current assets. Fixed assets are items which will stay for a long period of time, normally more than 12 months. A fixed asset is something that the business buys that is used to produce products and services. A delivery vehicle and a manufacturing machine are examples of fixed assets. Current assets are items which will stay for a short period of time, normally less than 12 months. A current asset is an asset such as raw materials, fixed products or cash. It includes items that the business sells or anything that can easily be converted to cash.
Liabilities are amounts owing to lenders, investors or other creditors. A liability is debt that the business owes. When we buy expensive things, such as a car or a home, we usually borrow money that we must pay back over a long period of time. This is called a long-term liability. A business pays back a long-term liability over a long period of time, usually more than a year. A short-term liability is a debt that the business must pay back in the near future. If the business buys raw materials on credit, the supplier usually wants payment within one month. A telephone bill must also be paid within a short period of time, so this is also a short-term liability
Every business is owned by somebody. The money that the owner invests in his or her business is called Equity. The Equity accounts track how the owner invests in a business. These accounts include:
• The Capital account: To start a business, the owner typically invests his or her savings. This money is used to buy equipment, to advertise the business and pay other costs for the new business.
• Retained Earnings: This account tracks the profit or losses of the business from its starting date. At the end of each year, the profit or loss is added to this account.
1. Write down a definition for the following terms: account, Asset, Liability, Owner’s Equity.
2. Write down the Accounting Equation and explain why this equation always balances.
3. Explain how the double entry bookkeeping system works.
When the information has been captured in the prime books, it is then transferred to the Ledgers. The Ledger accounts are used to prepare the financial statements for the business.
7.5 Debit and credit entries
It is sometimes difficult to identify the debit and the credit entries in each transaction. Use the guidelines below to decide which entry is the debit and which is the credit.
Debit side increases:
• Drawings (owner withdraws money from the business)
Credit side increases:
• Capital (owner invests money in the business)
• Liabilities (debts)
Mrs Nikuze invests 100 000 Frw in her business. She buys equipment for her bakery for 150 000 Frw. She asks her brother to lend her the remaining amount.
1. Identify the transaction that affects the Assets, Liabilities and Equity accounts of Mrs Nikuze.
2. Complete the Accounting Equation for Mrs Nikuze’s transactions.
7.5.1 The General Journal
The General Journal is a master journal used to keep a chronological record of all financial transactions of a company. It is also called a master journal. A typical General Journal has columns that lists the date of the transaction, a description of the account, a posting reference (PR) and the debit (Dr) and credit (Cr) amounts. Below are the General Journal entries that Mrs Nikuze entered when she bought equipment for her bakery business. (See Exercise 7.3)
The date and description of each transaction are included in the General Journal. Each transaction is also listed as a debit or credit entry. As you can see, the debits and the credits must add up to the same amount. At the end of each year (or reporting period), the transactions are taken from the General Journal and posted to ledgers. A ledger records the information from the journals.
7.5.2 The Sales Journal
The General Journal is divided up into smaller journals. The Sales Journal records the credit sales of a business (when the goods are sold and payment is collected at a later date).
7.5.3 Purchases Journal
The Purchases Journal is a record of all the items that a business buys on credit (where the goods are paid at a later date).
7.5.4 Sales Returns Journal
A Sales Returns Journal records when a customer returns a product. This happens when goods are damaged or when a customer receives an incorrect order.
The Cash Journal or cashbooks are journals where cash transactions are recorded. There are two types of cash journals, a Cash Receipts Journal (CRJ) and a Cash Payments Journal (CPJ).
Cash Receipts Journal (CRJ)
Whenever a business receives cash, the information is entered into the Cash Receipt Journal (CRJ). A business receives cash for different reasons. The simplest transaction is a cash sale. This happens when a customer pays cash for a good or service.
7.6 Summary of the prime books
7.7 The General Ledger
The General Ledger is a record of all the accounts that the company uses. When all the transactions have been added into their respective journals, the information is posted to the General Ledger. A General Ledger is a record that the business uses to keep track of financial transactions. The General Ledger contains all the accounts for the Assets, Liabilities, Owner’s Equity, Income and Expenses. The General Ledger is used to draw up the Trial Balance. A Trial Balance is a list of all the General Ledger accounts. This list shows the name of each ledger and the amount. The Trial Balance shows either a debit or a credit amount. The debit amounts are then added and the credit amounts are added. The total credit amount must be equal to the total debit amount. If the amounts are not equal, the accountant must identify and correct mistakes in the ledgers. When the Trial Balance is correct, the accountant draws up the financial statements. These statements show how well the business did during the year. The financial statements includes an Income Statement that shows how much profit a business made and a balance sheet that shows the Assets and Liabilities of a business. The cycle now starts anew. The source documents are again recorded for a new year. Note The Journal entries on the previous pages are examples of some of the information that is posted to the General Ledger
7.8 Recording transactions using the double entry Accounting principle
Let us investigate how to record transactions using the double entry Accounting principle.
Recording transactions at Colourful Trading
The following transactions took place during one week in July 2017 at Colourful Trading, a retailer that sells paints in Kigali.
2/7 The owner invests 50 000 Frw in her business. The amount is deposited in the bank.
3/7 Cash sales of paint for 20 000 Frw. The amount is deposited in the bank.
3/7 Cash payment of wages for 8 000 Frw.
3/7 Buy inventory from Musanze Traders for 20 000 Frw on credit.
5/7 Buy office supplies from ABC stores for 2 000 Frw on credit.
5/7 Credit sales to J Ishimwe for 2 000 Frw. Invoice number 103 issued.
Mutoni grows and sells dried pyrethrum. The following transactions took place during one week in August 2017.
1/8 The owner invests 20 000 Frw in her business. The amount is deposited in the bank.
3/8 Credit sales to Pyrethrum Coop for 50 000 Frw. Invoice 555 issued.
4/8 Cash payment of wages for 6 000 Frw.
4/8 Buy fertiliser from Musanze Farm stores for 10 000 Frw on credit.
5/8 Buy seeds from Rwanda Seed Supply for 5 000 Frw on credit.
5/8 Cash sales for 10 000 Frw. The amount is deposited in the bank.
Use the example from page 99 to draw up your own Journals and Ledgers in your workbook. Use these to record Mutoni’s transactions.
a) Enter the above transactions in their General Journal.
b) Post the transactions in their respective ledger accounts.
What is Accounting
• Accounting is a system that assists a business with good financial management and this information assists various stakeholders to make an informed business decision.
• The Accounting process starts when source documents are processed in the Accounting system.
• A source document is the original document used in a financial transaction and is proof that the transaction took place.
• Source documents could be: cheque, invoice, receipt, voucher
• A receipt is proof that a payment was received.
• A voucher is a document to proof that payment was made for a specific service. The holder of the voucher gives the voucher to receive the goods or services.
• An invoice is a document issued detailing the goods or services, date of the transaction and the quantity of goods purchased. An invoice can be paid cash or after a predetermined time period e.g. after 30 days, 60 days or 90 days.
• A cheque is issued to pay for goods or services and this amount is guaranteed by the bank. It is a safe way to pay large sums of money
• A payment order is a written instruction made from one bank to another bank to transfer funds.
• A bookkeeper is the person who captures all the source documents into the Accounting system and prepares certain financial statements.
• Internal and external users use Accounting information for various different reasons.
The Accounting Equation
• All business owners should know the difference between Assets, Equity and Liabilities. These are stated as the Accounting Equation.
The double entry bookkeeping system
• The double entry bookkeeping system is the Accounting method used in a business to manage finances. Assets = Owner’s Equity + Liabilities
• In this system there are two components to every transaction. One entry is called a credit and one is called a debit.
Different books of prime entry
• Prime books, also known as Accounting records, is the first place where source documents are recorded.
Steps in the Accounting Cycle are:
• Source documents: a receipt, a voucher, a pay slip, an invoice, a cheque, a payment order
• Capture in various applicable Journals
• Post to the Ledger or T-accounts
• Draw up Trial Balance
• Compile Financial Statements
1. Give three examples of source documents.
2. Explain the following:
a) Accounting Equation
b) Double entry method of bookkeeping
3. List the entries that you will do in the following prime books:
a) Sales Returns Journal
b) General Journal
4. Explain the difference between long-term and short-term liabilities.
Topic area: Summative assessment (Units 6 and 7)
Read the text. Then answer the questions that follow.
Music to my ears
Music, dance and poetry play an important role in Rwandan society. Suzanna has started a new business called ‘Music to my ears’. In this business, she will produce and sell double-skin drums made from hardwood, cattle skin and lacing. She has rented a space at a retail market in Kigali where she can make and sell her drums.
1. Explain what is meant by a budget. (2)
2. Describe how Suzanna can develop a personal budget. (4)
3. Suzanna estimates that she can earn 40 000 Frw per month from selling her drums. Below is a list of her monthly costs.
a) Calculate Suzanna’s total monthly costs. (2)
b) Draw up a budget that shows Suzanna’s income and expenses for the next year. (10)
c) How much money can Suzanna save every month? (2)
Peter maintains the gardens at hotels and other businesses. Here are some transactions in Peter’s Garden Service business.
1. Explain what is meant by double entry bookkeeping. (4)
2. What is a source document? (2)
3. List two types of source documents. (2)
4. Draw up a record of the transactions for Peter’s Garden Service. (12)
1. Suzanna sells a drum to a customer. Draw up a suitable source document that shows this transaction(4)
2. Suzanna finds it difficult to start a new business. Suggest ways that Suzanna can increase her income for her business ‘Music to my ears’. (6)
Total marks: 50
- Topic Area:Business growth and ethics
Sub-topic area: Standardisation
Key unit competence: To be able to apply basic concepts of metrology and quality testing
In Senior 1, you were introduced to standardisation.
1. Give a definition of the following terms: standards, standardisation, standards body, standards harmonisation?
2. Why is standardisation important?
3. Name different types of standards.
Study a bottle of water. Discuss the following:
1. How much water is in the bottle?
2. At what temperature was the water kept at the shop?
3. What does the ‘sell by date’ on the bottle mean?
4. Milk sold in Rwanda should be safe for our consumption. Use the pictures below to explain how milk is kept safe at every stage. What do you think this is? Use the pictures below to make suggestions for quality testing the production of milk.
8.1 Metrology in entrepreneurshipMetrology is the study of measurements. In entrepreneurship, we learn metrology so that we can manage the production of goods and services. Metrology is used to control the quality of goods and services.
Study the quotation below. Discuss how accurate measurements are linked to good standards in a business.
“ We use many different types of measurements. For example, to make food products we need to know how many litres or kilograms to use. We also need to know at what temperature to store fresh produce. To make clothes, you need to know how many metres of fabric you need. To make furniture, you need to know what length of wood to cut. ”
8.1.2 Accurate measurementsIt is important to use accurate measurements. Imagine what would happen if one bicycle tyre was larger than the other. Imagine if the fridge at the store was not cold enough to keep milk or cheese. Accurate measurements ensure that we can control the quality of products.
Look at Figure 8.2. Identify the accurate measurements that were used to produce the items in the picture.
Keza wants to sell pancakes at the school fair. She uses the recipe below. She has two cups to use for measuring flour and milk. She needs to calibrate the cups so that they measure the correct quantities.
You will need:
• 100 g flour
• 2 eggs
• 300 ml milk
• 1 tbsp vegetable oil
• pinch of salt
1. Mix the flour and salt in a mixing bowl.
2. Crack the eggs and pour in the milk and oil.
3. Whisk the mixture until the batter is smooth.
4. Heat oil in the pan and ladle some batter into the pan. Cook for about ½ minute and then use a spatula to gently flip the pancake. Cook for another ½ minute. Serve with cinnamon, sugar and lemon.
You will need:
• graduated cylinder
• two cups
1. Use a scale to measure 100 g of flour. Add the flour to the cup and mark the level on the cup.
2. Use a graduated cylinder to measure 100 ml of water. Add the water to the second cup and mark the level. You now have two calibrated cups.
Your class is planning a hiking trip to the canopy walk at Nyungwe Forest National Park. Develop a checklist of the kit that you will need for your hiking trip.
Arrange a field visit where you can investigate measurements in a business.
1. Ask the person responsible for applying measurements and quality testing to share his or her knowledge.
2. Do a presentation after the visit where you explain how the business used the measurements.
8.4 Quality and safety controls in a laboratoryQuality control is important in a laboratory. We also need to ensure that we work safely, so all laboratories have rules and safety controls.
Case study 8.2Read the case study and answer the questions that follow.
Testing for quality and safety
The Rwanda Standards Board conducts tests at the National Quality Testing Laboratories (NQTL) in Kigali. Here, technicians measure the mass and volume of different products. The food laboratory tests the quality of products, including tea, coffee, animal feeds, meat and cereal. The laboratory measures fat content, carbohydrates (sugar content) and protein in the different food products. The laboratory also conducts tests to ensure that there are no diseases in the food. Aside from food, the laboratory also conducts tests on the content of fertilisers. These tests ensure that the fertiliser contains the correct plant nutrients, such as nitrogen, phosphorous and potassium. The laboratory tests ensure that the food sold in the stores is safe to eat.
1. List some of the measurements that NQTL technicians do.
2. What unit of measurement do you think the laboratories use to test plant nutrients?
3. What would happen if a fertiliser did not contain the correct plant nutrients?
4. Why do you think that it is important to know the fat content of a food product?
5. Why is quality testing important for:
6. Explain the relationship between metrology, quality testing and accurate measurement.
The Rwanda Coffee Company is a new company that exports ground coffee to many countries in Europe. The company has asked your class to design a new logo and paper packaging. The bag must contain 250 g of ground coffee.
1. Design a logo for the Rwanda Coffee Company.
2. Draw your design on paper.
3. Make paper packaging by following the instructions below.
4. Conduct quality control on your bags. Measure the size of each bag and ensure that it can contain 250 grams of coffee.
5. Display your paper bags in the class.
How to make paper packaging
You will need:
• a ruler
• a few books
• coloured pencils
Dimensions for packaging
What is metrology
• Metrology is the study of measurements.
• Metrology is used to control the quality of goods and services
Base units used in accurate measurement
• The International System of Units (SI) is a standard system with seven base units.
• Accurate measurements ensure the production of high quality products.
• When measuring tools are checked to see if they still work correctly, it is called calibration.
• Verification of products can be done by completing checklists or conducting inspections.
The quality testing process
• Products are quality tested against a predetermined set of standards by using a sample of the products.
• Once the tests are completed a report is written to state the findings of the tested sample.
• When sample testing takes place in a laboratory, safety rules and controls must be adhered to.
Muteteli is a tourist guide. She takes tourists to see Volcanoes National Park. Muteteli has asked you to develop a quality testing process where she can check the quality of her tours.
1. What is a sample and what type of sample can Muteteli use?
2. Suggest a test method that she can use to evaluate her tours.
3. Develop a checklist for quality testing.
4. Explain why quality testing is important for businesses that offer services.
Topic area: Summative assessment (Unit 8)
Read the text. Then answer the questions that follow.
Road safety and entrepreneurial opportunities
Rwanda is located just south of the equator, so night falls quickly here all year around. The roads are mountainous and often poorly lit. It is often hard for motorists to see pedestrians and cyclists. An effective way to improve road safety is to wear a safety reflector. A safety reflector reflects the light from headlights of vehicles. The motorist can now see the pedestrian.
1. What is metrology? (2)
2. List five base units and their symbols. (5)
3. Which problem does the text above discuss? (4)
4. How will a reflector band help to solve this problem? (2)
5. What is a sample and what type of sample can you use to test the reflector band? (5)
6. Suggest another solution for improving road safety in Rwanda. (2)
When we test safety measures in a car we can use a crashtest dummy.
1. Explain why we use a dummy and not a real person to test safety measures in cars. (4)
2. Suggest a test method that you can use to evaluate safety using crashtest dummies. (6)
3. How would you ensure that the test method for evaluating safety, using crashtest dummies, is effective? (4)
4. Explain the relationship between metrology, quality testing and accurate measurements. (4)
Design a product that is aimed at improving road safety. Set standards for your product and draw up a quality testing process that you will use to ensure that your product follows the standards. (10)
Total marks: 50
account – a record of spending and receipts relating to a particular period or purpose
accountant – a person who keeps and inspects financial records
Accounting – the process of keeping financial records
Accounting Equation – the formula that shows the relationship between a firm’s Assets and its Owners’ Equity and Liabilities
adjustment – make change to get a better result
advocate – publicly support or recommend a particular cause or idea
ambitious – have a strong desire and determination to succeed
analogy – a comparison between one thing and another, typically used to explain or clarify
Assets – item of value owned by a person or business
base unit – one of the seven fundamental SI units
bookkeeper – a person who records financial transactions in a business
budget – summary of your likely income and expenses for a time period
bursary – a grant awarded to a student to pay for university
calibrate – match with a standard scale
capital account – general ledger account that shows the money invested by the owner
cash crop – crops that are planted and sold for cash
cash payment journal – journal to keep track of payments of goods or services when cash is paid
cash receipt journal – journal to keep track of sales of goods or services when cash is received chronological – record of events in the order that they occurred
circular flow model – a diagram that represents the flow of money and goods and service in an economy
collateral – something offered as security for repayment of a loan, to be forfeited if the loan is not paid commemoration – a ceremony in which an event is remembered
consumables – components used in a testing process
contracting – enter into a formal agreement
consumption tax – a tax on spending on good or service
corporate tax – tax on the income or capital of corporations
credit – accounting entry that either increases a liability or equity account or decreases an asset or expense account
current asset – cash and other assets that can easily be converted to cash
debate – formal discussion on a topic where opposing arguments are put forward
debit – accounting entry that shows an expense resulting in the increase of an asset or a decrease in liability or owner’s equity
debt – money that is owed to others
debt repayment – paying money back according to a schedule
declares –state something in an official way
demand – need or want for a product
demand curve – a graph showing how the demand for a product or service varies with changes in its price.
direct tax – tax, such as income tax, which is levied on the income of a person or profit of a business
dividend – sum of money paid annually (every year) by a company to its shareholders
double entry bookkeeping system – system of Accounting where every entry is recorded in two different accounts
economics – a social science studying how people choose to use resources
economist – a person who studies economics
equilibrium – a state where opposing forces or influences are balanced
equity – money invested by the owner of a business
evidence – facts
excise tax – indirect tax charged on the sale of a good
expenses – unbold on p74 extend – make longer
failure rate – how often something fails
financial risk – the possibility of losing money
fixed asset – assets which are purchased for longterm use such as land, buildings or equipment fraudulent – definition: dishonest and illegal please unbold cheque in lb
fringe benefit – extra benefit supplementing a salary such as a company car or health care
genocide – the deliberate killing of a large group of people, such as those of a particular nation or ethnic group households – an economic unit of everyone living under one roof
indirect – not directly caused by something
indirect tax – a tax levied on goods and services rather than on income and profit
innovative – original and creative thinking
insure – arrange for compensation in the event of loss of or damage to property
interdependent – two or more things depending on each other
interest – money paid or received at a regular rate for the use of money borrowed or repayment of debt inverse – opposite
irregular – not fixed
laboratory – room for scientific experiment and research
ledgers – book of financial accounts
levy – money that you have to pay to a government or organisation
Liabilities – money owed
livestock – farm animals
long-term liability – debt that must be paid over a long period of time
market – any environment that exists when buyers and sellers come together to exchange goods and services
maternity leave – period during pregnancy and shortly after childbirth
metrology – study of measurements
negotiation – discussion aimed at reaching an agreement
overexploit – make use of excessively or in an unfair way
overfishing – to catch too many fish so that the fish are depleted
peat – decomposed vegetable matter that is dried and used as fuel
personal tax – tax paid by individuals that varies with the income of the taxpayer
prime books – a record of a business transaction arranged according to the type of transaction
priority – more important
property tax –annual tax paid on the value of a property
raw materials – basic material from which a product is made, for example, wood or iron
reagent – substance used for chemical reactions
rental tax – a tax on income from renting property, livestock or machinery
retail trade – selling products directly to the consumers
retained earnings – money not paid out to shareholders but reinvested in the company
reputation – the estimation in which a person is held in the community or the opinion that is held about someone or something
review – assess and change if necessary
sample – a small part or quantity that represents the whole
self-reliance – reliance on one’s own abilities and resources rather than those of others
short-term liability – debt that must be paid within one year
social makeup – the relationships between social groups
socio-economic – the interaction of social and economic factors
source documents – slip, invoice or other document that is evidence of a business transaction
stipend – fixed regular sum paid as a salary
strategy – a plan of action designed to achieve a long-term or overall aim
supply – the amount of products that producers will sell at a certain price
supply curve – graph showing how the supply of a product or service varies with changes in its price
tariff – tax or duty paid on imported goods
tax – a compulsory contribution to state revenue
trading – buying and selling goods and services
wholesale trade – market where goods are bought and sold in large quantities