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EMS Grade 7 Term 2 Income and Expenses

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26 Questions

What is the definition of income?

Money earned by an individual who has a job and receives a salary or wage.

What type of income is subject to tax?

All personal income

What determines the total amount of wages?

The number of hours or days worked

What is the frequency of salary payment?

Monthly

What is a characteristic of a salary?

It is a fixed amount that increases only if an increase is granted

What is personal income?

The total amount of money that a person earns and uses in his/her daily life

What is John Mosia's net worth?

R 28 000

What is the main source of income for a service business?

Providing a service

What is trading business?

Buying and selling stock

What is current income?

Income from providing a service

What is cost of sales?

Cost of the stock being sold

What is gross profit?

Selling price - cost price

What is net profit?

Gross profit - expenses

What is the purpose of an income and expenditure statement?

To show the business's income and expenditure

What is rental income?

Income from leasing a building

What happens when a business's expenses are more than its income?

The business makes a loss

What is commission calculated on the basis of?

The person's performance in terms of sales

What is the purpose of government grants?

To help individuals financially

What is the difference between income and expenses?

Income is received and expenses are paid

Why do people save?

To take precautions against unforeseen events

What is a positive balance on a current bank account?

An income for the saver

What is the difference between a savings account and a fixed deposit?

A fixed deposit has a higher interest rate

What is net worth?

Your financial worth at any given point

What happens to your net worth when you increase your income?

It increases

What is the formula to calculate net worth?

NET WORTH = TOTAL ASSETS - TOTAL LIABILITIES

What is the purpose of a personal statement of net worth?

To determine financial worth at any given point

Study Notes

Personal Income and Expenses

  • Personal income is the total amount of money earned by an individual, which increases their wealth.
  • Examples of personal income include:
    • Salaries
    • Wages
    • Commission
    • Government grants
    • Rent income
    • Interest income
    • Gratuities
    • Income from informal businesses
  • Personal expenses are the daily costs paid by an individual, which should not exceed their income.
  • Examples of personal expenses include:
    • Accommodation
    • Water and electricity
    • Travel expenses
    • Medical expenses
    • Clothing
    • Food
    • Insurance premiums
    • Entertainment

Savings and Investments

  • Savings are a part of a person's income that is not spent, used for precautions, future purchases, or to increase income.
  • Savings options include:
    • Current bank accounts
    • Savings accounts
    • Fixed deposits
  • Benefits of savings include:
    • Interest earnings
    • Emergency funds
    • Increase in income

Personal Statement of Net Worth

  • Net worth is a person's financial worth at a given point, calculated by subtracting total liabilities from total assets.
  • A positive net worth means assets are more than liabilities, and a negative net worth means liabilities are more than assets.
  • Steps to compile a personal statement of net worth include:
    • List all assets and liabilities
    • Calculate total assets and total liabilities
    • Subtract total liabilities from total assets

Business Income and Expenses

  • Business income includes:
    • Sales of goods and services
    • Interest received from investments
    • Rental income from land or buildings
    • Service delivery income
  • Business expenses include:
    • Cost of sales (direct costs of producing goods)
    • Running costs (salaries, telephone expenses, etc.)
    • Other expenses (interest on loans, etc.)

Profit and Loss

  • Profit occurs when business income is more than expenses.
  • Gross profit is calculated by subtracting cost price from selling price.
  • Net profit is calculated by subtracting total operating expenses from gross profit.
  • Loss occurs when business expenses are more than income.

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