Financial transaction and record keeping
The survival and well-being of a business will ultimately depend upon:
*making a profit, that is, selling the goods or service for more than they cost to the produce.
*having enough cash when it is needed.
Production and the creation of added value
Whether they provide goods, such as cars, or service such as window cleaning, laundry, all business are involved in production. A business exits to supply people’s needed and wants; it survives where there is an effective demand for the product it sells.
In providing something for which people are prepared to pay the producer creates wealth in the form of added value. This means that the revenue received from business output exceeds the cost of production, so that the business is profitable. A business will continue in production where the profit gained by entrepreneur represent a worthwhile return on capital invested.
The following are example of the creation of added value in different sectors of production:
*manufacturers increase the value of raw materials or components by converting them into semi-finished or finished goods. Perhaps they turn iron or into steel, or steel panels into car bodies.
It is important to note the following distinction:
Finished goods are the final products by the consumer, for example a car.
Semi-finished goods are intermediate products used as components in the production of other goods and service, for example sheet steel.
*wholesalers and retailers provide commercial service. They act as intermediaries in the supply chain between the manufacturer and the customer. They are able to buy goods, add a mark-up resell them for higher price. We are prepared to pay them because they supply service such as transporting goods, storing them, breaking bulk and