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Economic and management sciences

Grade 8

Business, consumer and financial knowledge and skills

Module 14

The net value of the business and the accounting equation

Activity 1:

To calculate the ownership interest of the business [lo 3.5]

If the owner of a business decides to sell the business, the price he wants for it will probably be equal to the net value. The net value is linked to the owners interest in the bussiness.

The assets of the business represent value. The owner of the business can claim whatever remains once the creditors have been paid. This can be expressed in the basic accounting equation, namely Assets = Ownership interest + Liabilities.

The firm, AJAX Dealers, owned the following assets:

Cash in bank - R 580

Land and buildings - R130 000

Furniture - R 6 785

Office equipment - R7 800

Debtors - R5 000

Delivery vehicle - R50 000

The firm owes the following amounts:

Cumpen Bookshop - R8 400

CD Equipment - R2 900

ELFI Furniture - R1 765

Activity 2:

To calculate the effect of transactions on the accounting equation

[lo 3.5]

Every day transactions are concluded in the business world. These are events that can be measured in terms of money. These transactions, are the transfer of value from one party to another and always have an effect on the accounting equation.

1 Capital contribution by the owner 1 Assets + Cash in bank increases Ownership interest + Capital increases
2 Withdrawal of capital by the owner (taking the money of the business for own use) 2 Assets – Cash in bank decreases Ownership interest – Withdrawals increase, reducing the capital
3 Purchase of assets for cash
  1. Assets + Assets purchased, e.g. equipment, vehicles etc., increase
Assets –Cash in bank decreases
4 Payment of expenditure such as telephone, licence, water and electricity 4 Assets – Cash in bank decreases Ownership interest – Expenditure such as telephone, rental, licence, etc. increase, reducing the owner’s profit
5 Receipt of money for services provided 5 Assets+ Cash in bank increases Ownership interest + Income increases. Current income increases, increasing the owner’s profit

Assignment 1:

Indicate the effect of the following transactions in the table:

1 The owner deposits R5 000 in the bank account of the business.

2 The business purchases equipment to the value of R2 000 for cash.

3 The business receives R2 500 for services provided.

4 Pays office rental of R1 000 for the month.

5 The owner draws a business cheque for his own use, R200.

Show that the accounting equation still balances..

No. Assets:Influence Assets:Reason Owner’s equity: Influence Owner’s equity:Reason

Assignment 2

Analyse the following transactions of Situ Dealers using the columns in the table below:

1 A building is purchased from Kalahari Ltd. and R17 000 is paid by cheque.

2 Caledon Suppliers are paid R163 by cheque for cleaning materials.

3 The owner, W. Wilmans, deposits additional capital of R5 000.

4 W. Wilmans draws a business cheque of R250 to pay for repairs to his house.

5 R1 000 rental for offices is paid.

6 He pays R500 to Eskom for electricity.

7 R850 is received for services provided.

No. Assets:Influence Assets:Reason Owner’s equity: Influence Owner’s equity:Reason


Learning Outcomes(LOs)
LO 3
Management, Consumer and Financial Knowledge and SkillsThe learner will be able to demonstrate knowledge and the ability to apply responsibly a range of managerial, consumer and financial skills.
Assessment Standards(ASs)
We know this when the learner:
3.1 differentiates between financial concepts used in business (e.g. fixed assets, current assets, liabilities, owner’s equity);
3.2 develops leadership and management strategies that will ensure a return on investments;
3.3 completes source documents (e.g. receipts, deposit slips, cheques) and records elementary cash transactions in a statement of receipts and payments;
3.4 uses keyboard skills and function keys in developing, storing and retrieving basic information;
3.5 explains the concept and analyses a statement of net worth;
3.6 investments the various methods of savings and investments (e.g. savings accounts, fixed deposits, shares, unit trusts), and calculates on a variety of investments.



Ownership interest = A – L

O = 200 165 – 13 065

O = 187 100

187 100 = 200 165 – 13 065



No. Assets:Influence Assets:Reason Owner’s equity: Influence Owner’s equity:Reason
1. +5 000 Cash in bank increases +5 000 Ownership interest increases as a result of increase in capital
2. +2 000 Equipment increases
-2 000 Cash in bank decreases
3. +2 500 Cash in bank increases +2 500 Profit increases as a result of increase in current income
4. -1 000 Cash in bank decreases -1 000 Profit decreases as a result of increase in expenditure
5. -200 Cash in bank decreases -200 Ownership interest decreases as a result of decrease in capital
Assets = Ownership interest 6 300 = 6 300


No. Assets:Influence Assets:Reason Owner’s equity: Influence Owner’s equity:Reason
1. +17 000 Buildings increase
-17 000 Cash in bank decreases
2. -163 Cash in bank decreases -163 Expenditure increases, profit decreases
3. +5 000 Cash in bank increases +5 000 Capital increases, ownership interest increases
4. -250 Cash in bank decreases -250 Capital decreases, ownership interest decreases
5. -1 000 Cash in bank decreases -1 000 Expenditure increases, profit decreases
6. -500 Cash in bank decreases -500 Expenditure increases, profit decreases
7. +850 Cash in bank increases +850 Income increases, profit increases
Assets = Ownership interest
3 937 = 3 937

Questions & Answers

what is Nano technology ?
Bob Reply
write examples of Nano molecule?
The nanotechnology is as new science, to scale nanometric
nanotechnology is the study, desing, synthesis, manipulation and application of materials and functional systems through control of matter at nanoscale
Is there any normative that regulates the use of silver nanoparticles?
Damian Reply
what king of growth are you checking .?
What fields keep nano created devices from performing or assimulating ? Magnetic fields ? Are do they assimilate ?
Stoney Reply
why we need to study biomolecules, molecular biology in nanotechnology?
Adin Reply
yes I'm doing my masters in nanotechnology, we are being studying all these domains as well..
what school?
biomolecules are e building blocks of every organics and inorganic materials.
anyone know any internet site where one can find nanotechnology papers?
Damian Reply
sciencedirect big data base
Introduction about quantum dots in nanotechnology
Praveena Reply
what does nano mean?
Anassong Reply
nano basically means 10^(-9). nanometer is a unit to measure length.
do you think it's worthwhile in the long term to study the effects and possibilities of nanotechnology on viral treatment?
Damian Reply
absolutely yes
how to know photocatalytic properties of tio2 nanoparticles...what to do now
Akash Reply
it is a goid question and i want to know the answer as well
characteristics of micro business
for teaching engĺish at school how nano technology help us
Do somebody tell me a best nano engineering book for beginners?
s. Reply
there is no specific books for beginners but there is book called principle of nanotechnology
what is fullerene does it is used to make bukky balls
Devang Reply
are you nano engineer ?
fullerene is a bucky ball aka Carbon 60 molecule. It was name by the architect Fuller. He design the geodesic dome. it resembles a soccer ball.
what is the actual application of fullerenes nowadays?
That is a great question Damian. best way to answer that question is to Google it. there are hundreds of applications for buck minister fullerenes, from medical to aerospace. you can also find plenty of research papers that will give you great detail on the potential applications of fullerenes.
what is the Synthesis, properties,and applications of carbon nano chemistry
Abhijith Reply
Mostly, they use nano carbon for electronics and for materials to be strengthened.
is Bucky paper clear?
carbon nanotubes has various application in fuel cells membrane, current research on cancer drug,and in electronics MEMS and NEMS etc
so some one know about replacing silicon atom with phosphorous in semiconductors device?
s. Reply
Yeah, it is a pain to say the least. You basically have to heat the substarte up to around 1000 degrees celcius then pass phosphene gas over top of it, which is explosive and toxic by the way, under very low pressure.
Do you know which machine is used to that process?
how to fabricate graphene ink ?
for screen printed electrodes ?
What is lattice structure?
s. Reply
of graphene you mean?
or in general
in general
Graphene has a hexagonal structure
On having this app for quite a bit time, Haven't realised there's a chat room in it.
how did you get the value of 2000N.What calculations are needed to arrive at it
Smarajit Reply
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Source:  OpenStax, Economic and management sciences grade 8. OpenStax CNX. Sep 11, 2009 Download for free at http://cnx.org/content/col11040/1.1
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