Grade 7 Economic and Management Sciences (EMS) Term 2 (Study & Master) – Summaries

The document provides a structured summary of Grade 7 Term 2 Economic and Management Sciences (EMS) topics, focusing on Financial Literacy. The content covers Accounting Concepts, Income and Expenses, and Budgets.

Topic 6: Accounting Concepts

• Capital: Money the owner invests in the business, treated as a liability. Owner’s equity is the owner’s interest in the business.
• Assets: Valuable possessions owned by the business.
  • Fixed assets have a lifespan of more than one year and are not easily sold for cash (e.g., land, vehicles, equipment).
  • Current assets have a short lifespan and are easily converted into cash (e.g., stock, debtors, cash).
• Liabilities: Money the business owes.
  • Long-term liabilities are repaid over more than a year (e.g., mortgage bonds).
  • Current liabilities are repaid within a year (e.g., creditors, bank overdraft).
• Income: Money earned from selling goods or services, which increases owner’s equity.
• Expenses: Payments for goods or services to run the business, which decrease owner’s equity.
• Profit: Income minus expenses; the business’s goal is to make a profit (profit motive).
• Losses: Occur when expenses exceed income (net loss) or when assets are sold for less than their value.
• Other Concepts: The topic also covers Budgets, Savings, Banking, Financial Records, and Transactions.

Topic 7: Income and Expenses

• Personal Income: Total annual earnings from all sources like wages, investments, and rentals.
• Personal Expenses: All the costs incurred in daily life (e.g., rent, food, utilities).
• Statement of Net Worth: A statement of financial value at a specific time (Total Assets – Total Liabilities). A positive result is a surplus, and a negative result is a deficit.
• Business Income and Expenses: Sources include sales, royalties, dividends, and interest. Expenses are costs needed to keep the business running.
• Savings and Investments: Businesses need savings for emergencies and investments to earn future income.

Topic 8: Budgets

• A budget is a plan showing expected income and expenses for a specific period.
• It helps manage money wisely and balance spending and saving.
• Personal Budget: Tracks individual income and expenses to control spending and increase savings.
• Business Budget: Tracks expected income and expenses to manage costs and ensure financial stability.
• The difference between the actual and budgeted amounts is called the Variance.
• Net Profit is calculated as Total Income minus Total Expenditure.