POB UNIT I

• Barter


  The direct exchange of goods or services for other goods or services
• Activities in early barter economies

  • Hunting and fishing
  • Gathering herbs and wild fruit for food
  • Using animal skins to make clothing
  • Exchanging shells & beads
  • Collecting straw and leaves for clothing and shelter
• Subsistence economy


  Direct production occurred when human beings provided for themselves and their families
• Precious metals used as currency

  • Copper
  • Silver
  • Gold
• Money


  A commodity that can be used as a medium of exchange, a unit of account, a store of value and as a measure of value
• Instruments of exchange

  • Money order
  • Bank draft
  • Telegraphic money order
  • Credit card
  • Cheques
  • Letters of credit
  • Bills of exchange
  • Ecommerce
• Bill of Exchange


  An unconditional order in writing issued by a person or a business organization instructing the person in whose name it is drawn to pay a fixed amount of money to the drawer or a third party at a future date
• Electronic Money Transfer (EMT)


  The movement of funds from one account to another electronically using a computer, telephone or a magnetic tape
• Tele-Banking


  A system of banking which allows a customer to carry out banking transactions via a telecommunication network
• 1. Commerce


  The sale of electronic business (obtaining goods and services online)
• Features of a cheque

  • Date
  • Amount to be paid
  • Signature
  • Cheque number
  • Branch code number
  • Customer's account number
• Types of cheques

  • Open cheque
  • Certified or Managers cheque
  • Crossed cheque
  • Stale-dated cheque
  • Post-dated cheque
• Debit card

  A plastic card that can be used as an alternative payment instead of using cash or bank notes
• Money order


  A printed order for payment of a specified sum issued by a bank or post office
• Bank draft


  A cheque which you can buy from the bank to pay for goods or services instead of using cash or personal cheque
• Electronic Transactions/money transfer/bank transfer


  The electronic exchange of money from one account to another through a computer based system
• Advantages of electronic transactions

  • Saves time
  • Reduces chance of cheque being lost
  • Easy way of paying employees or handling large transactions
  • No need for cheque verification
• Telegraphic money transfer


  An electronic means of transferring funds from one bank account to another
• Mobile Money


  Use of a mobile phone to transfer funds between accounts or banks, withdraw or deposit funds or pay bills
• Mobile Wallet/digital wallet/e-wallet


  Making transactions using a mobile device
• Credit Card


  A financial instrument of payment issued by financial institutions to customers who meet their criteria
• Letter of Credit


  Issued by a bank when an importer makes special arrangements with his/her banker to pay an exporter for goods when they are dispatched
• Promissory note


  A promise made in writing that the borrower of money will pay the lender the amount borrowed at a later date
• Documentary credit


  A facility for paying debts arising from international trade that allows the exporter to receive 'immediate payment' from the importer's bank as long as documentary evidence of the transaction is presented
• Private Sector


  That part of the economy that is owned and controlled by private individuals and firms
• Public Sector


  The section of the economy that is owned and controlled by government or the state
• Sole Trader/Sole Proprietorship


  A business that is owned and operated by one person where the business is not legally separate from its owner
• Advantages of sole trader

  • Easy to establish and manage
  • Decision making is speedy
  • Customers receive special attention
  • Profits obtained are not shared
• Disadvantages of sole trader

  • Unlimited liability
  • Problem in raising capital
  • Limited managerial skills
  • Lack of competitiveness
  • Lack of continuity if owner dies
  • Long working hours
• Partnership


  A business that is jointly owned by two to twenty individuals
• Partnership Deed


  A document that is completed and submitted to the Registrar of Companies after paying the required fee
• Contents of Partnership Deed

  • Name of the business
  • Type of business
  • Location of the business
  • The start-up-date
  • Personal details of each partner
  • The amount of capital
  • Guidelines for profit sharing
  • Responsibility of each partner
  • Procedures for, and limits on withdrawals
  • Procedures for the admission of new partners
• Advantages of Partnership

  • Easy to form and manage
  • Easier to obtain financing
  • Liability does not rest with one person
  • More informed decision can be achieved
  • Better distribution of workload
  • No corporate tax
  • Enhances marketability
  • Easier to attract talented persons
• Disadvantages of Partnership

  • Each partner responsible for acts of others
  • Slower and difficult decision making
  • High operating costs
  • Limited life
  • Unlimited liability
• Types of Partnerships

  • General/Ordinary partnership with unlimited liability
  • Limited Liability
• General Partnership


  All partners responsible for general running of business and have unlimited liability
• Limited Liability Partnership


  Incorporates features of limited companies and partnership, at least one partner must have unlimited liability
• Cooperatives


  Organizations formed by groups with similar objectives or interests who pool their resources
• Types of Cooperatives

  • Producers cooperatives
  • Buyer's cooperatives
  • Financial cooperatives/Credit unions
• Financing a Cooperative

  Members finance through purchase of shares, each member has one vote regardless of shares