Background To Business Flashcards
Economic activity
Activities that are aimed at satisfying our needs. Usually food, clothing and shelter
Direct production
Meeting ones need without the aid of others or the facility of money
Subsistence economy
Proving just enough to survive but not to improve their way of life. These men were often referred to as hunter gatherers
Surplus
an amount of something left over when requirements have been met; an excess of production or supply.
Trade
The exchange of surplus goods for the surplus of others
Barter
The exchange of one thing for another without the use of money
Token money
Items such as shells, teeth’s and grains that were used in the earlier day as a role of money.
The characteristics of money
Homogenous
Divisible
Portable
Scarcity
Acceptable
Exchangeable
Durable
Money has four functions
A medium of exchange- easier to exchange
A measure of value- can be used to star prices for goods
A store of value- can be saved for later retrieval
A standard for postponed payment- it can be earned at one time and spent at another
Bill of exchange
It is made out by a creditor of goods whom requires the debtor to pay a sum of money on demand or at a future date (usually three months). The importer can obtain credit on the transaction and instead of waiting for the payment, the creditor can sell the billl at a discount or use it as collateral. The creditor makes a careful sale and is assured of payment and the buyer gets time to pay the debt.
Documentary credit
Also known as letters is the most secure method for international trade. This enables the exporter to obtain payment before the documents of ownership are released to the importer. The importer arranges for their bank to guarantee that the payment will be made when documents of title are handed over. In this way, both the exporter and importer are safeguarded and encouraged to trade.
Electronics funds transfer
The electrical method of exchanging money without any paper money changing hands. It can take place within a single institution or across multiple institutions such as banks and other financial services providers through computer based systems
There examples are credit cards, standing orders and debit cards
Credit cards
These are issued to the cardholder by a bank or credit card company. They enable the holder to buy things without any cash and pay at a later date with interest or pay full interest with no charges made. During this procedure, the card holder shows their their card to the point of sale terminals and verified the card with a pin. They are issued with a credit card receipt for the cost of the purchase
Debit card
These are offered to members at a bank so that they can make trade abroad and directly with their account to make instant payment to a trader without a Cheque or cash.
Standing order
Also known as a bankers order. It is convenient when a regular amount of money has to be paid for example a monthly installment. It cancels the need to write a Cheque and post it every month. The bank transfers the money from the person making the order to the person relying on the order. This cancels out the worry of a Cheque getting delayed in the mail. Therefore the money is transferred to the account on time.
Direct debit
This occurs when the holder of an account gives someone permission to withdraw amounts of money from their accounts at regular intervals. The amount may be varied by the account holder. adjusted charges can be made without the interference of the account holder since they have permission to draw from the account.
Direct deposits
This is normally used by employers to pay the wages of many employees. Payments are deposited into the account of the employees via EFT. This saves the employers time of counting money and writing Cheques and the employee does not have to worry about walking home with a substantial amount of money on pay day
E- commerce
This term is given to the buying and selling of products and services through an electronic medium such as the internet. Payments of transactions are immediately effected by the facilities of tele-banking. This encourages the use of e commerce
Tele-banking
Short for telephone banking, this refers to a facility provided by banks that enables bank customers to use an appropriate type of telephone to access some services such as account balances, transfer of funds to another account, payment of bills and making some enquires about their accounts. It is useful because it is run for 24 hours but is slowly getting replaced by electronic banking.
Cheques
A slip of paper that is filled out and signed by a bank customer to instruct to their bank what is to be done to the money in their account, for example pay money to another person. Despite the e transferring method Cheques are still useful.
Money order
This is similar to a Cheque and is used to make payments. These printed order of payment of a specified sum is facilitated by a bank or post office. They are how ever pre paid and is only actioned after a buyer has paid for the money order. Because the issuer has already been paid, money orders are guaranteed to be paid.
Bank drafts
These are a form of Cheques drawn on the issuing bank itself rather than the bank customers bank account. This makes the bank draft as good as cash because the bank guaranteed it for their customers who has paid the value of the draft into the bank in advance. Bank drafts are commonly used by banks when they deal with each other or when a creditor is seller is unwilling to accept an ordinary Cheque from a debtor or buyer in another city or country. In local transactions a certified managers Cheque or cashiers Cheque serves the same purpose
Telegraphic money transfer (TT)
Telegraphic money transfers are used when the sender needs to send money typically to an overseas destination where someone at the destination is demanding a cash payment or Somone who needs cash urgently. Today it is normally used through EFT but companies such as western union and money gram still uses it
M-money
Often referred to mobile wallet, m-money is essentially an app running on a mobile device such as a smart phone, tablet or smartwatch that lets users store send and receive money. The user can pay safely pay using their mobile device
