Study notes and exam tips for business subjects, written by PY Education tutors — covering BAFS, Economics and more.
In economics we assume every consumer can make rational decisions — maximising the value of their resources. A rational consumer makes the most of their money, weighing its different uses and choosing the option that brings the greatest benefit.
In economics, benefit is the satisfaction gained from consumption. Benefit does not have to be measurable in numbers — we can compare options and rank the benefit each one brings.
We begin with the most fundamental concept in economics — scarcity. Before discussing scarcity, we first need to understand two ideas: wants and resources.
Having met some simple accounting transactions and learned about cash transactions, we can now record their effects in T-accounts.
Cash transactions are transactions settled purely with cash in hand or cash at bank — the type of transaction a company encounters most in its early days.
The double entry system applies the dual aspect concept, recording one transaction in two accounts to show its full effect on the company. In double entry, "Debit" is the left side of an account and "Credit" is the right side.
"Residual value of assets after deduction of liabilities." By definition, equity can increase because total assets rise or total liabilities fall — simple examples show how.
A liability is a present obligation of the enterprise arising from past events, whose settlement is expected to result in an outflow of resources embodying economic benefits. Equity is the residual value of assets after deducting liabilities.
An asset is a resource controlled by the entity as a result of past events, from which future economic benefits are expected to flow to the entity.
