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Questions and Answers
What is passive income?
What is passive income?
- Income earned solely from salaries
- Income earned from active work
- Income that requires effort or time to earn
- Income earned without much effort (correct)
Disposable income is the income available after taxes have been deducted.
Disposable income is the income available after taxes have been deducted.
True (A)
What are two sources of personal income?
What are two sources of personal income?
Salary/Wages and Investments
A salary is usually a __________ amount of money paid monthly to skilled workers.
A salary is usually a __________ amount of money paid monthly to skilled workers.
Which option describes a factor that can affect the interest rate on a bank account?
Which option describes a factor that can affect the interest rate on a bank account?
Define net worth in the context of personal finance.
Define net worth in the context of personal finance.
Match the following types of income with their descriptions:
Match the following types of income with their descriptions:
If a person's salary is R8000 and they pay R400 in tax, their disposable income is __________.
If a person's salary is R8000 and they pay R400 in tax, their disposable income is __________.
Which of the following is considered a type of passive income?
Which of the following is considered a type of passive income?
A personal statement of net worth shows the calculation that reflects a person's total liabilities only.
A personal statement of net worth shows the calculation that reflects a person's total liabilities only.
What is the profit or loss in a business?
What is the profit or loss in a business?
_____ income is earned through investments and is considered passive income.
_____ income is earned through investments and is considered passive income.
Which of the following statements about business expenses is true?
Which of the following statements about business expenses is true?
Match the types of income with their definitions:
Match the types of income with their definitions:
Gross profit is calculated by deducting total expenses from the selling price.
Gross profit is calculated by deducting total expenses from the selling price.
What does a bank typically require when considering a loan application?
What does a bank typically require when considering a loan application?
What is the main source of passive income for Mr. Singh?
What is the main source of passive income for Mr. Singh?
A personal budget can help individuals manage their expenses effectively.
A personal budget can help individuals manage their expenses effectively.
What is the monthly shortfall in expenses faced by Mr. and Mrs. Marsden?
What is the monthly shortfall in expenses faced by Mr. and Mrs. Marsden?
Mr. Singh's rental income is calculated by subtracting his __________ from the rental he charges.
Mr. Singh's rental income is calculated by subtracting his __________ from the rental he charges.
Match the following personal expenses with their descriptions:
Match the following personal expenses with their descriptions:
Which of the following is NOT considered a personal expense?
Which of the following is NOT considered a personal expense?
An individual’s net worth is calculated by subtracting liabilities from assets.
An individual’s net worth is calculated by subtracting liabilities from assets.
List two items that contribute to personal expenses.
List two items that contribute to personal expenses.
Study Notes
Personal Income
- Personal income includes earnings from salary/wages and investment income.
- Disposable income is remaining earnings after tax is deducted, calculated by subtracting tax from total income.
- Example: A salary of R8000 minus R400 tax results in a disposable income of R7600.
Types of Personal Income
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Salary/Wages:
- Salary is a fixed monthly amount for skilled workers.
- Wages are typically hourly pay for part-time, semi-skilled, or casual workers.
- Earnings vary based on job type and market demand.
-
Investment Income:
- Known as passive income; requires little to no effort to earn.
- Interest from savings accounts (e.g., 10% p.a.) depends on investment amount, duration, and account type (e.g., notice accounts).
- Property investment involves buying for rental income, with the landlord leasing to tenants.
-
Personal Statement of Net Worth:
- Displays an individual’s assets and liabilities, indicating overall wealth.
- Banks may request this for loan applications, breaking it down into current and fixed assets, and liabilities.
Business Income
- Essential for business survival and profit generation.
- Sources of business income include:
- Sales: Revenue from goods/services sold.
- Investments: Passive income from savings or shares.
- Rental Income: Earnings from leasing business properties.
- Commission Income: Earnings based on a percentage of sales, common in real estate.
Business Expenses
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Costs incurred running a business, key in determining profit or loss.
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Cost of Sales: Direct costs related to production, e.g., material and labor costs.
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Gross Profit: Revenue from sales minus cost of sales, indicating profit before other expenses.
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Example: Producing shirts with costs of R25 each, sold for R75 results in a gross profit of R25.
Personal Expenses
- Living costs differ among individuals based on lifestyle but generally include:
- Housing (rent or bond)
- Food and schooling
- Utilities (water, electricity, phone)
- Transportation and clothing
- Medical fees and insurance
- Entertainment costs
Financial Management
- A deficit occurs when personal expenses exceed income, leading to debt.
- Example: Mr. and Mrs. Marsden earn R16,000 but spend R18,500 monthly, leading to a shortfall of R2,500.
- Excessive reliance on credit can lead to financial instability; managing income and expenses is crucial.
- Creating a budget is a key strategy for financial control.
Personal Statement of Net Worth
- Functions like a business balance sheet, showing what individuals own (assets) versus what they owe (liabilities).
- Provides a clear picture of an individual's financial health and aids in decision-making related to spending and savings.
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Description
Explore the concept of personal income, its sources, and types in this quiz. Understand the distinction between gross income and disposable income and learn how taxes affect individual earnings. Test your knowledge on salaries, wages, and investment income.
