POB Notes
Test topics:
Barter System ( Everything)
Instrument of exchange
Privatisation VS. Nationalisation
Characteristics of money
Functions of money
Private sector VS. Public Sector
Everything on Sole Trader ( including
Advantages &Disadvantages)
Everything on Partnership ( including
Advantages &Disadvantages)
Franchisor &Franchisee( Advantages
&Disadvantages)
Barter System
Barter is the act of exchanging objects/ items
without the use of currency / money .
OR
The concept of Barter is the exchange of goods
and services without the use of money .
Advantages of Barter
Allow for greater variety in diet as
they could exchange food items with one
another .
Provide a means to avoid losing any
surplus produced .
Disadvantages of Barter
Double Coincidents of wants
*This is when two parties wants what
each other has .
A lack of double coincidents of
wants
*This means that a person has something
but the other person doesn’t have what you
want .
Indivisibility of Goods
*some commodities may have been
difficult to trade as it was hard to divide
them into smaller parts . For example ,
dividing up animals would be hard if the
item being traded was a live animal .
Inability to store wealth
*Goods exchanged could not be stored
for future use as much as commodities
were highly perishable or easily spoiled.
An agreement rate
*Even if an individual could be found
who was willing to engage in barter,
early man still faced the problem of how
to decide on an appropriate value and
common exchange rate for items to be
bartered.
Characteristics &Functions of Money
What is money ?
Any medium of exchange used
purchase goods and services or needs
and wants .
There are six (6) characteristics of money .
They are: Durability, Homogeneous, Scarcity,
Portability , Acceptability and Divisibility .
Durability – Money can last for a long time.
Homogeneous -Each unit is recognizably the
same.
Scarcity-Money is valued because it is hard to
acquire .
Portability – People can easily carry it around .
Acceptability- People are willing to accept
money as a payment .
Divisibility- The item needs to consist of units
so large sums can be broken down into smaller
units .
Functions of Money
There are four (4) functions of money .
They are : A medium of Exchange , As a
store of value , As a store for deferred
and As a unit of Account .
A medium of exchange- Generally
accepted as a means of payment.
As a store of Value- It can be saved
because it keeps it value .
As a store of deferred-Payments is
contracted at some future date(hire
Purchase)
As a unit of Account-Price of items
is measured based on its worth.
Instrument of Exchange
An instrument of exchange is anyhting
that enables a transaction to take place . It
allows money (or goods) to move from the
buyer to the seller . For example, A
shopkeeper may buy supplies from a
manufacturer (maker of goods) using cash ,
a bank card , Credit card ( within agreement
to pay later) , or one means outlined below .
The ten 10 Instruments OF Exchange are:
1. Coins
2. Bill of Exchange
3. Electronic Transfer
4. Telebanking
5. Cheque
6. Bank transfer
7. Mobile Wallets
8. Debit Card
9. Credit Card
10. 10.Bank noted
Definitions
Coin-A usually flat piece of
metal issued by governmental
authority as money.
Bill of Exchange-a signed,
unconditional, written order binding
one party to pay a fixed sum of
money to another party on demand
or at a predetermined date
Electronic Transfer-a digital
movement of money from one bank
account to another.
Telebanking-A facility enabling
customers to make use of banking
services, such as oral payment
instructions, account movements,
raising loans, etc, over the telephone
rather than by personal visit.
Cheque-a written document
whereby a person (the drawer) with
available funds in a bank (the drawee
bank) orders the latter to pay a
specific sum to a designated person
(the payee).
Bank Draft –A cheque drawn by
a bank on its own funds
Mobile Wallets-A mobile wallet
is a digital wallet that stores payment
card information on a mobile device.
Mobile wallets are a convenient way
for a user to make in-store payments
and can be used at merchants listed
with the mobile wallet service
provider.
Debit card-a payment card that
allows you to access funds from your
business bank account to make
purchases and withdraw cash
Credit Card-card that can be used
to make purchases, pay bills or
depending on the card, withdraw
cash.
NB:
E-commerce- commercial transactions
conducted electronically on the internet.
Drawer- The maker as a Bill of
Exchange
Or change is called , “Drawer”.
Drawee- The person thereby directed to
pay is called the “Drawee”.
Drawer=Cheque
Drawee=Bank
Payee=Money (Person who receives the money)
3 Types Of cheque
1. Open Cheque
2. Crossed Cheque
3. A/C Payee only Cheque
Open Cheque
*There is no crossing on the Cheque, and the
recipient ( who may not be the Payee) simply
needs to present the Cheque for payment at their
bank .
Crossed Cheque
*Two vertical lines are drawn on the Cheque
cannot be exchanged for cash and instead must
be deposited into an account.
A/C Payee only Cheque
1. The Cheque can only be paid into the
bank account of the person identified as the
Payee on the Cheque. This involves setting
out two Vertical Lines on the Cheque with
words A/C Payee only Cheque written
between them . This is the safest way of
making a cheque payment and provides
some protection if the Cheque stolen.
Private and Public Sector
Private Sector
The private sector consists of
small-medium and a large scale
businesses. The owners of these
businesses are individuals who have
set their own(sole trader), those who
have formed partnerships, and
shareholders who are the owners of
companies .
Public Sector
The public Sector deals with
/consist of enterprises owned and run
by the government. In many
countries, the government owns and
run key utilities such as rail and bus
companies; Oil, Gas and electricity
industries; the central bank; and water
companies such as National Water
Comission in Jamaica. Government
departments directly run by
government officials, such as tax
department, are also part of the
public sector.
Difference Private Public Sector
Sector
Owner Businesses Government
Aim *To earn a *To provide
profit. goods
&services to
the needy
&the
economy.
Source of 1.Parents 1.Government
finance 2.Friends
3.Bank 2.Taxes
Types of Chicken Education
products Candies Electricity
Vegetables Oil
Gas
Water
Land
Jobs
Sole Trader/Sole Proprietorship
Sole Trader
A Sole Trader is a person who runs
a business / their business alone.
Privatisation
Movement from a Public Sector to
a private sector .
Nationalisation
Movement from a Private Sector to
a Public Sector .
Types/Examples of Sole Trader.
Small Personal
Service businesses Hairdressers/
Barber Shops
Advantages Disadvantages
Easy to set up;little Mistakes are possible
Fruits,
paper work
Landscaping GroceryifShops/
there are no Vendors/
servicesrequired. colleagues to consult
Convince Food Service
Stores for advice . business
Personal attention Finance can be
given to business difficult to raise.
affairs.
Special services Only one owner may
can be offered to Mean a narrow range
customers. of skills.
Business affairs Prices are often
can be kept higher than those of
private. large organizations.
Partnership Business
A Partnership Business is a
business organization where two or
more individuals runs a business and
shares the money equally among
themselves with the aim of
maximizing profits .
Character of Partnership Business
1. Assets
2. Decision-making process
3. Liability
4. Operations
5. Capital
6. Ownership
7. Size
Ownership Size
Small
Owned by 2 to 20 persons
Partnership
Operations Decision Making
Operated by all partners All partners are involved
involved
Partnership
Unlimited
Limited
Liability
Liability
Limited Liability: The business and
individual’s aren’t seen as one.
Unlimited Liability: The entire business
is seen as one .
Partnership Deed
This is a legal document where all
necessary terms and conditions are
written. It is a written declaration of
agreement between or among the
partners.
What should be on a Partnership
Deed?
1. Name of Partnership Business
2. Type of business to be done.
3. Location of business.
4. Expected life of partners.
5. Amount of investments by each
partners .
6. Provision of taking loan
7. Amount of salary to be
provided to the active partners.
8. Banking information
9. Procedures on how to distribute
the profit .
10. Procedures are withdrawal of
funds.
11. Duties of each member .
12. Procedures to operate the
business.
13. Provision has to how to change
the Partnership Deed.
14. Provision on dissolving the
partners.
Types of Partnership
General Partnership:(The active partner
is responsible for everything)
Limited Partnership/Dormant: ( This
partner is less actively involved in the
operation of the business).
Advantages of Partnership Business
Advantages Disadvantages
Less work for one person. Delay in decision making
Save times Unlimited Liability
Easy formation Risk of joint responsibility.
More capital
Joint Effect
Collective decision
Sharing risk
Effective Administration
Reduce Automacy
Ways to devolve Partnership
1. Dissolution of Partnership by
agreement
2. Dissolution by notice
3. Termination of Partnership
expiration death.
4. Dissolution of a Partnership by
court.
5. Bankruptcy
Franchise
Franchisor:is the individual or business
that sells or grants a franchise for the
sales of goods or operation of a service .
This is the person grants a license to the
Franchisee.
Franchisee: A Franchises business is an
agreement between the Franchisor and
the Franchisees. It grants a license to the
Franchisee so that it can sell the
Franchisor’s products /services , and pay
for the rights to use the name,logo and
marketing etc .
Example of franchise business: KFC , Burger
King, Starbucks, Subway , Payless, Costco etc.
Advantages Disadvantages
The Franchisor only has to The Franchisee loses control over
invest a limited amount of branding and image of the business.
capital in each Franchisee, but
takes profits all for themselves.
The franchise will work hard to There is a reduction in profit that the
make a success of the business Franchisee earns having to pay
in turn , the Franchisee benefits royalties to the Franchisor, and
from working with proven having to adhere to regulations
business ideas , trading under a established by the Franchisor.
well-known name, and receiving
support and materials from the
Franchisor.
The Franchisee has broader
access to the international
market,and greater access to the
technical managerial and
financial support provided by
the Franchisor.
