SIMPLE BOOKKEEPING AND BUSINESS MANAGEMENT SKILLS Book

SIMPLE BOOKKEEPING AND BUSINESS MANAGEMENT SKILLS Book
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    RAFR/WID/002/94SIMPLE BOOKKEEPING ANDBUSINESS MANAGEMENT SKILLS Facilitator’s Guide Ria Meijerink November 1994

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    RAFR/WID/002/94SIMPLE BOOKKEEPING ANDBUSINESS MANAGEMENT SKILLS for small scale entrepreneurs Facilitator’s Guide Ria Meijerink November 1994

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    The designations employed and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations concerning the legal status of any country, territory, city or area or of its authorities...

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    FOREWORDFor many years FAO has undertaken activities which aim at assisting rural folk engaged in small scale enterprises. FAO's Regional Office for Africa aims at supporting field level actions by developing practical training materials. The Women in Development Unit of this office has started a...

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    ACKNOWLEDGEMENTSThis training document 'Simple Bookkeeping and Business Management Skills' is one of a series prepared by the Women in Development Unit of FAO's Regional Office for Africa as part of its programme on training in leadership and management of small scale income-generating projects. ...

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    _________________________________________________________________SIMPLE BOOKKEEPING AND BUSINESS MANAGEMENT SKILLS _________________________________________________________________CONTENTS Page: Introduction 1 1. The importance of bookkeeping 9 2. The use o...

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    1________________________________________________________________INTRODUCTION________________________________________________________________PURPOSE OF THIS TRAINING MATERIALThe present document is a guide for facilitators who want to train semi-literate1people in simple bookkeeping and business ...

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    2Literacy courses can be held as a complement to the course on 'Simple Bookkeeping and Business Management Skills', but this is not absolutely necessary. The course is meant to provide people with basic bookkeeping and business management skills, at a level appropriate and useful for their day to...

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    3GUIDELINES FOR USING THIS TRAINING MATERIALContents of the lessonsEach lesson begins with a revision of the previous lesson and a short introduction to the subject. Revision of the previous lesson will remind the participants of what was discussed before and will help you to introduce the follow...

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    4understood the lesson. If you find out that the participants have problems with some of the issues, you may have to do more exercises, and try to explain it in a different way. You may also ask some of the fast learners to spend some time helping the slow learners.Step 6: Home-workThe objecti...

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    5TimeThe material provides guidelines for eleven lessons. If a group meets twice a week for one and a half hour, the eleven lessons can be covered in about five months. Discuss with the participants how many times in a week they want to meet, and which time is most suitable for them. Lessons shou...

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    6FACILITATORS OUTLOOKThis paragraph will illustrate what is expected from you and what you can expect from the participants. First what you should remember about the participants:1. The participants are adults and not children, therefore treat them with respect, as you would do with your elders; ...

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    76. Not all participants will understand the lessons with the same speed. Take time to explain all topics thoroughly and repeat examples and exercises regularly. On the other hand, be aware that extreme slowness of some of the participants may create an uneasy atmosphere in the group. It may hind...

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    8EVALUATIONEvaluation is used as a tool to find out how the training course is progressing. It will help you to know what your participants like and what they do not like about the course, what they have learned and understood, and what they find difficult. By doing regular evaluation you will kn...

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    9________________________________________________________________LESSON 1 THE IMPORTANCE OF BOOKKEEPING ________________________________________________________________Background information for the facilitator Most small scale entrepreneurs do not write down how much money comes in and go...

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    10 (answer) Bookkeeping means writing down all the money that comes in and goes out of your business. * How do you think bookkeeping could help your business? (answer) It will help you to take better decisions about your business, so that you can earn more money. * What do you expect to l...

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    11STEP 3: EXAMPLE: ROLE-PLAYS Tell the participants that you would like them to perform a role-play, as it will help them to understand what this lesson is about. Divide the class into three groups. Read the themes to each group. Theme for group 1: A woman has a business (choose a business ...

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    12 Theme for group 3: A group of women in your village has a bakery. They have divided the tasks as following:- one person always buys the ingredients for the bread and the firewood;- one person is responsible for selling the bread; - all the other members of the group assist in kneading the do...

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    13STEP 4: PRACTISE Ask the participants to prepare an additional role-play on a business that is common in the local situation, including the issues that were discussed in the previous role-plays. STEP 5: CONCLUSION At the end of this lesson, ask the following questions to find outwhether t...

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    14________________________________________________________________LESSON 2 THE USE OF SYMBOLS IN BOOKKEEPING ________________________________________________________________Revision Ask participants the following questions: * What did you learn in the previous lesson? * What is bookkeeping...

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    15STEP 2 EXPLANATION Drawing of symbols Draw examples of symbols on the chalkboard as shown below. Ask the participants what they see in the pictures. Explain that they can use any symbol that they find easy to draw as long as they know that they will remember it ('this resembles a fish for me...

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    16 Symbols for 'money in' and 'money out' Bookkeeping means that you write down all the money that comes in and the money that goes out. The following symbols will be used: * Money in = money becomes moreso we use the addition sign * Money out = money becomes less so we use the subtraction ...

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    17STEP 3: EXAMPLE Draw a 'cash book' on the chalkboard. Ask the following questions and invite participants to illustrate the answers by drawing a symbol on the correct side of the 'cash book'. (Note: the symbols in this example are meant to give you an idea. Do not just copy them, but use the...

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    18 At the end of this example your chalkboard may look like this:

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    19STEP 4: PRACTISE: INDIVIDUAL EXERCISE This is an individual exercise for all participants. All participants are to take their exercise books and do the following exercises: * Draw the symbol for 'money in' on the left side, and the symbol for 'money out' on the right side. * Think about th...

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    20_________________________________________________________________LESSON 3 INCOME AND EXPENDITURE _________________________________________________________________Revision Draw a cash book on the chalkboard and ask the participants to come and draw symbols of 'money in' and 'money out' in the...

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    21STEP 2: EXPLANATION Money in to your business = income * How does money come in to your business? - by producing and selling goods; - by buying and selling goods; - by giving a service (like a taxi driver who provides transport); - by receiving gifts from friends or family members...

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    22STEP 3: EXAMPLES Example 1 Read the following example to the group. A women's group is running a poultry project. They buy chicks and feed them until they are mature. The chicken food can easily be bought in the village. Sometimes chickens get sick and they have to buy medicines. The chick...

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    23 Example 2 Brainstorm with the participants on the following questions, or choose other examples of businesses that are more familiar to your participants: * What is the income and the expenditure concerned with operating a bakery? * What is the income and the expenditure involved in buying ...

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    24STEP 5: PRACTISE; EXERCISE IN PAIRS The participants should sit together in pairs of two and do an exercise. They should take their exercise books and write the symbol for 'money in' on the left page and the symbol for 'money out' on the right page. Each pair should choose a business that ...

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    25TEST: INCOME AND EXPENDITURE * Think of a business that you know well: - List all the items that bring in money (income) (draw symbols); - List all the items that you spend your money on (expenditure) (draw symbols).

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    26________________________________________________________________LESSON 4 THE USE OF THE CASH BOOK ________________________________________________________________Revision Ask the group the following questions: * How does money come in to your business (your income)? * How does money go out...

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    27Explain the following: Left page = 'Money in' (or income)1st Column = Date: the day that you receive money 2nd Column = Source of income (symbol) 3rd Column = How much money Right page = 'Money out' (or expenditure)1st Column = Date: the day that you pay money2nd Column = What the...

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    28 NOTE: stress that participants should write the figures properly under each other (the units, tens, hundreds and thousands in the right column) so that they do not make mistakes in their addition of the total income and total expenditure. Example 1 Elizabeth sells tomatoes, onions and okra i...

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    29 The money Elizabeth has left cash in hand should be the same as the balance in her book. Elizabeth first writes the balance under 'money out'. She then writes the balance in the 'money in' column on the next page, as this is the cash money with which she will start the new page. The next pa...

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    30 Example 2 John is a carpenter. o On 5-7-1993 he starts his business with ¢ 10,000. o On the same day a customer asks him to make a table. John buys the following materials: - 3 pieces of wood at ¢1000 each; 3 x ¢ 1000 = ¢ 3000 - 1 box of nails at ¢ 500 o On 7-7-1993 he sells the...

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    31STEP 4: EXPLANATION Give the following tips for cash control: * Write all money that comes in and goes out immediately in your cash book; * Count your cash when the day begins and again when the day ends; * When you take money for the household or yourself from the business money, write it...

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    32STEP 5: PRACTISE Before starting the exercises ask all participants to draw the lines in the exercise book. Make sure 'money in' is on the left side and 'money out' on the right side, and that each page is correctly divided into the three columns. At least four pages. Exercise 1: plenary di...

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    33 Each pair is to answer the following questions, and write the details in an exercise book: * Write all the money that Amina spent, and all the money that she received in a cash book. * How much money did she spend in total, how much did she receive in total, and how much money has she left? ...

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    34STEP 6: CONCLUSION At the end of this lesson ask the following questions to find out whether the participants have understood the lesson: * What do you write in a cash book? * What is balance? STEP 7: HOME WORK From now on the participants should try to write down all their income and exp...

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    35TEST: THE USE OF THE CASH BOOK * Think of a business that you know well; * Draw the correct columns in the cash book below; * List the income and expenditure of two days' business in the cash book.

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    36________________________________________________________________LESSON 5 PROFIT AND LOSS ________________________________________________________________Revision * How will writing your income and expenditure in a cash book help you in your business? * What did you find difficult about writi...

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    37 LOSS means that you spend more money on producing or buying your goods than you receive by selling the goods. How to calculate profit or loss To find out whether you are making a profit or a loss, we will go through the process as was discussed in lesson 3: * What is the money that goes out ...

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    38STEP 3: EXAMPLES Give the following examples of profit and loss. Ask the participants to assist in writing the income and expenditure on the chalkboard and calculating the profit or loss. Example 1 Beatrice buys and sells oranges. o On 25-10-1994 she buys 3 baskets of 100 oranges at ¢ 50...

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    39 * If 200 oranges get rotten and Beatrice can only sell 100 oranges at ¢ 20 each, what will be her income? * Does she make a profit or a loss? Explain the following: Because the money out is more than the money in, we take the subtraction sign (-) and put it before the amount. This means tha...

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    40 Example 2 (Note: the following examples of profit and loss are familiar to people who smoke and sell fish. However, the facilitator could use another example of a business that is more common in his/her community.) Mary is a fishmonger. She buys fish on the beach, smokes it and sells it in th...

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    41 * Mary sells one basket of smoked fish for ¢ 6000. What is the money that comes in? * How much profit does Mary make when she sells the fish for ¢ 6000? * If Mary, at the end of the day, had decided to reduce the price and sell her fish for only ¢ 5000, would she have made a profit or a lo...

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    42 Example 3 This time Mary buys and smokes 5 baskets of fresh fish. She sells the smoked fish in the market on 3-1-1994. o She buys 5 baskets of fish at the beach at ¢3500 each (5 x ¢3500 = ¢17,500); o She pays a porter ¢200 for each basket of fish (5 x ¢200 =¢1000); o She buys 2 loads...

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    43 * If Mary sells her 5 baskets of fish for ¢ 6000 each (5 x ¢6000 = ¢30,000), how much profit does she make on the 5 baskets of fish? * How much profit is that for one basket of fish? Remember: when Mary smoked one basket of fish her profit was only ¢900 per basket! * If Mary stores t...

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    44STEP 5: PRACTISE: GROUP EXERCISES Divide the participants in small groups of three persons. Read the exercises to the participants and write the details on the chalkboard as shown below. The participants should copy the details in their exercise books and do the exercises in their small group...

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    45 Exercise 2 Joyce sells doughnuts. She buys the following ingredients: o flour ¢ 600 o sugar ¢ 350 o yeast ¢ 100 o oil ¢ 1500 o she pays ¢100 for transport o she also buys charcoal for ¢200 On 25-3-1994 she bakes 80 doughnuts. She sells 60 doughnuts at ¢50 each (60 x ...

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    46 Exercise 3: plenary discussion Do a profit and loss calculation of a business that is familiar to the participants. * Discuss all the money that goes out to produce your goods (expenditure) and write it on the chalkboard: - what materials do you usually buy (take an average amount of materia...

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    47TEST: PROFIT AND LOSS* Think of a business that you know well; * Decide on an amount of goods that you are going to sell; * Write down all the money you have to spend before you can sell your goods (expenditure); * Write down how much money you receive for selling your goods (inco...

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    48_________________________________________________________________LESSON 6 HOW TO USE THE PROFIT _________________________________________________________________Revision Ask participants the following questions: * What is profit? * What is loss? * How do you know whether you are making a...

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    49STEP 2: EXPLANATION * Why saving? 1. To replace or repair old or damaged equipment and utensils; 2. To expand your business; Examples are: - The doughnut seller is saving to buy a bigger cast iron pot, so that she can fry more doughnuts at a time and thus sell more. In futu...

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    50* How to save the money? 1. At home: * Advantages: - you do not have to travel. * Disadvantages: - you are tempted to use the money; - it may not be safe. 2. At the bank: * Advantages: - the money is safe; - you will get interest on the money. * Dis...

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    51STEP 4: PRACTISE: ROLE - PLAYS Divide the participants in groups of 5 persons. Give each group the following questions to answer: * Choose a business that is familiar to you. What do you want to use your profit for? * What are the things you would want to save money for? * How would you s...

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    52________________________________________________________________LESSON 7 BUYING AND SELLING ON CREDIT ________________________________________________________________Revision Have a discussion on: * What will you do with the profit of your business? Background information for the facilitato...

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    53STEP 2: EXPLANATION Selling on credit The main advantage of selling on credit is that it is a service to your customers, and will attract some customers. But there are more disadvantages than advantages to selling on credit: - your customers may delay in repaying, or may not repay yo...

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    54 Buying goods on credit for yourself or your household could put you in trouble. Will your business make enough profit to pay for the goods that you have bought on credit for your household? Planning for selling on credit As long as you have not received the money that people have to repay ...

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    55 * In which of the following cases will you buy on credit? - You have seen a beautiful pair of shoes in the shop, but you do not have money. (answer: no) - There has been a bumper catch of fish, which is being sold cheaply. You are sure that you will be able to smoke and sell a lot...

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    56________________________________________________________________LESSON 8 THE CREDIT BOOK ________________________________________________________________Revision Have a discussion with the group on the following questions: * When do sell on credit to a customer? * When do you buy on credit...

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    57 1. 'Sold on credit' Draw the book for 'sold on credit' as shown below on the chalkboard. The customer is the person who buys from you. Use one page in your credit book for each customer, and begin by writing a symbol to represent the name of the customer on the top of the page. For example, i...

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    58 2. 'Bought on credit' Draw the book for 'bought on credit' on the chalkboard as shown below. The supplier is the shop or the person from whom you have bought on credit. Use one page for each supplier, and begin by writing a symbol to represent the name of the supplier on the top of the page. ...

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    59 One page for each customer/supplier Keep one page in the credit book for each person buying regularly on credit. Every time that person buys something on credit or repays part of the debt you write this on his/her page and calculate the new balance. This way you can always see whether this per...

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    60STEP 3: EXAMPLES Example 1 Show the following example to the participants. Use the book for 'sold on credit' on the chalkboard. Use the appropriate symbols. Mary has a regular customer in the market to whom she sells her smoked fish. Her name is Akosua. o On 14-12-1993 Mary sells two baske...

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    61 Example 2 Mary usually buys her fresh fish from the same fisherman on credit. Only after selling the smoked fish, she pays the fisherman for the fish. Every time she buys a load of fish she writes it in her 'bought on credit' book, so that she will not forget the amount that she has to pay th...

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    62STEP 4: PRACTISE Exercise 1 Draw a 'sold on credit' book on the chalkboard. Read the following story and write the details as shown below in the credit book. Ask participants to come to the chalkboard and write the amounts in the correct columns. Aba is a farmer. She sells tomatoes and onion...

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    63 Exercise 2 Draw a 'bought on credit' book on the chalk board. Read the following story and let the participants write the details in the credit book on the chalkboard. Amina is a baker. She often buys bags of flour on credit from the wholesale shop. The name of the shop is 'Okay store'. She a...

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    64 Exercise 3 Choose a business that is familiar to the participants, whereby it is common to buy and sell on credit. * Draw a book for 'sold on credit' on the chalkboard and invite participants to come to the chalkboard and write the details of some credit sales and payments. * Do the same exer...

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    65TEST: THE CREDIT BOOK * Think of a business whereby it is common to sell on credit; * Draw the correct columns of a 'sold on credit' book; * Write the details of a customer to whom you regularly sell on credit in the 'sold on credit' book.

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    66_________________________________________________________________LESSON 9 COSTING AND PRICING _________________________________________________________________Revision Have a discussion with the group on the following questions: * What do you write in a book for 'bought on credit'? * What ...

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    67 Factors determining the price: When you decide on your price you will have to think of the following factors: - the costs of each product (= your expenditure); - the profit you would like to make; - the price other people are selling the same product for; - the maximum price people are pr...

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    68 Materials and services o 3 yards of material (3 x ¢1500) ¢ 4500 o 1 zip ¢50 ¢ 50 o 5 buttons (5 x ¢20) ¢ 100 o sewing thread ¢150 ¢ 150 o lining ¢650 ¢ 650 o needles and oil ¢150 ...

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    69 Materials and services: Wages: Replacement and repair:

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    70STEP 4: PRACTISE Take an example that is familiar to the participants (for example a carpenter who makes a cupboard, somebody who sells cooked food or someone who processes and sells palm oil). Let the participants tell you the process and write all the costs involved with their appropriate...

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    71TEST: COSTING AND PRICING * Think of a business that you know well; * Calculate the expenditure; * Decide on your profit; * Determine your price.

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    72________________________________________________________________LESSON 10 BUSINESS PLANNING ________________________________________________________________Revision Have a discussion with the group on the following questions: * What did you learn from the previous lesson? * How will you de...

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    73STEP 2: EXPLANATION Many people take decisions about their businesses on a day-to-day basis as it occurs. However, good planning of your business will help you to reduce your costs and therefore increase your profit. Good planning will also help you to prepare for the future. Draw the foll...

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    74STEP 3: EXAMPLES Example 1 Read the following story to the group. The participants should listen carefully, because you will ask them how the women in the story can reduce their costs. A group of women has a small bakery in a village. They bake sugar bread, tea bread and buns. The group m...

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    75 Ask the following questions about the pictures: * What do you observe from the two pictures? (answer) Reduce waste * Can you give examples of waste in other businesses that you know? STEP 4: PRACTISE: GROUP-DISCUSSIONS Divide the participants in three groups and ask them to draw up a ...

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    76________________________________________________________________LESSON 11 BUSINESS MANAGEMENT ________________________________________________________________Revision Ask the participants the following question: * Mention five points of planning your business which will reduce costs. Backgro...

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    77 The four P's of a good business Show the picture of the chair with 4 legs. Explain that a business contains four elements:- Product: choose a product that people want and need and make sure it is good quality; - Place: decide on a place where there will be many customers and few other sellers ...

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    78 To make your business successful you have to consider the following questions: 1. ProductWhat is your product? Is it what the people in your village need and will buy?Is somebody else already selling a similar product? Will people still be interested in your product? What makes your product di...

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    79 * What do you have to find out before starting a business?Choose a business that suits your ability and experience; Find out whether it is profitable by observing people who are already in the business and by finding out about the costs of production and the selling price; Make a calculation o...

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    80STEP 4: PRACTISE: ROLE-PLAYS Divide the participants in two groups. Each group is to perform a role-play. Each role-play should highlight some of the issues that they have learned in the previous lessons. Group 1 Choose a business that is familiar to you. Prepare a role play on a ver...

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    81APPENDIX 1: SYMBOLS

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    82

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    83LIST OF REFRENCES Basic Skills Unit, Number Themes and Skills, published by Careers and Occupational Information Centre, Sheffield, U.K„ 1984 Bureau of Ghana Languages and Department of Community Development, Facilitator's Handbook to the Primer and Reader on Improving Health through Functio...