revision

1. _________________ are the things what men cannot do without e.g. Clothing and _________________are the things what men desires to have like Video games


2. The exchange of one type of goods for another is called ________________________

3. Commerce can be divided into ____________________ and ___________________

4. _________________________________ are trade between others countries

5. Buying and selling goods inside the country is called _______________________

6. _____________________________ are the people who involved in helping to distribute goods from the producer to the consumer

7. The _____________________ production generally involves with manufacturing and construction where they create a finished or usable product

8. _______________ is the buying of goods from foreign countries and sale it locally

test your knowledge

1. Name THREE sources of capital for a sole trader


2. List out THREE function of a commercial bank


3. Dyg. Aishah is a sole trade who deals in sundry goods in her village

    a. State one feature or characteristic of her business

    b. List one advantage of the business

    c. List one disadvantage of the business


4. List out THREE features of Saving account


5. Explain THREE reasons why a cheque may be dishonoured by the bank


6. Define the following:-12. With the help of a diagram, explain the differences between a general crossing and special crossing of a cheque

     a. Unlimited Liability

     b. Partnership

     c. Limited Capital


7..Normally a businessman operates a current account in commercial banks. Give THREE reasons for this


8.Write down any THREE services provided by a commercial bank other than deposit and withdrawal of money


9. Name the service a bank might offer to:


a. Adam who needs to deposit money after the bank hours

b  Julie who wish to earn a high interest on her spare money

c. Danny who wish to send some money from Brunei to John in UK


10. List down THREE disadvantages of Partnerships


11.    List down THREE characteristics of Partnership
 

12. Explain the following terms related to cheque
a. Drawers
b. Drawee
c. Payee

test your knowledge

1. Regular payments made by a bank on behalf of a customer are called


A. Standing orders

B. Credit clearings

C. Deferred payments

D. Monthly statements



2. Consumers in Brunei Darussalam generally use credit cards to purchase goods. The credit card allows the card holder to

A. Have a free after-sale service

B. A discount on good purchased

C. Purchase goods on credit without limit

D. Purchase goods on credit with limit



3. A sole proprietorship is owned by ___________ owner(s)

A. One

B. Two

C. Fifty

D. Twenty



4. The institution which provides many valuable financial services for people engaged in business is

A. Central bank

B. Commercial Bank

C. Brunei Investment Agency

D. Department of Telecommunications



5. A cheque will be considered stale after _________ from the date of issuance

A. One week

B. One month

C. Six months

D. Twelve months



6. Which one of the following is NOT an example of sole proprietorship

A. Food stall

B. Sundry shop

C. Beauty saloon

D. Architects’ firm



7. A place where a person can put important items such jewellery, shares and gold is called a/an ______________ box

A. Night Safe

B. Safe Deposit

C. Fixed Deposit

D. Automatic Safe



8. All of the following are functions of Central Bank except,

A. Print Money

B. Accepts and keeps money safely for the public

C. Regulate the activities of the commercial banks

D. Banker and Financial advisor to the government



9. The person who signs a cheque is called ___________ of the cheque

A. Payee

B. Owner

C. Drawer

D. Drawee



10. Hafiz owns a motorcar repair workshop. He has three other mechanics who are working for him. His business is classified under

A. Partnership

B. Sole proprietorship

C. Public limited company

D. Private limited company



11. A cheque which is date in the future is called

A. Antedated

B. Pre - date

C. Post – date

D. Future date



12. In partnership, the profit and losses are divided among the partners depending on the partnership agreement. But if there no agreement is made, the profit and losses are

A. Equally divided among the partner

B. Equally divided among the Broad of Directors

C. Given only to the founder of the business

D. Given to the Bank since no agreement was made



13. The form of cheque which is the least safe is a

A. Order cheque

B. Bearer cheque

C. Special Crossing cheque

D. General Crossing cheque



14. Which one of the following is a real account?

A. Sales

B. Salaries

C. Furniture

D. Ahmad (debtors)



15. When cash is received, cash account will be

A. Closed

B. Debited

C. Credited

D. Balanced



16. Which one of the following is an example of Central Bank

A. HSBC

B. Baiduri

C. Bank Negara

D. Islamic Bank of Brunei



17. Debtors, Creditors, Capital and Drawing account are example of ______________ account

A. Real

B. Goods

C. Personal

D. Impersonal



18. The owners of a limited liability company are know as

A. Partners

B. Directors

C. Proprietors

D. Shareholders



19. In Cash book, “Paid into bank from office cash” we will

A. Debit Cash account and Debit Bank account

B. Debit Bank account and Credit Cash account

C. Credit Bank account and Debit Office account

D. Credit Office account and Debit Bank account



20. When $500 cash is received, the amount should be _________ in the __________ in the Cash Book

A. Debit, Cash column

B. Debit, Bank column

C. Credit, Cash column

D. Credit, Bank column



21. Account referring to a person are called ____________ account

A. Real

B. Goods

C. Personal

D. Nominal



22. The double entry for “withdrew of goods for personal use” are

A. Debit - Drawing account, Credit - Sales account

B. Debit - Drawing account, Credit - Purchase account

C. Debit - Withdrawal account, Credit - Sales account

D. Debit - Withdrawal account, Credit - Sales account



23. A limited company is managed by

A. Partners

B. Creditors

C. Shareholders

D. Board of directors



24. When goods are purchase, the accounts that needs to be debited is ___________ account

A. Cash

B. Goods

C. Capital

D. Purchases



25. The most serious disadvantages a sole trader may encounter is ________________

A. Difficulties in locating his business

B. Expenses incurred in purchasing stocks

C. Cost of keeping accounts all by himself

D. Personal liability for debts incurred by his business



26. The distribution of the profits of a limited company to its shareholder is known as ___________

A. Profit

B. Capital

C. Interest

D. Dividend



27. The maximum number of partners in a partnership are

A. Two

B. Fifty

C. Seven

D. Twenty



28. Examples of goods account are purchases and _____________ account

A. Sales

B. Fixed

C. Nominal

D. Personal



29. What ATM stand for

A. Auto Teller Machine

B. Auto Talker Machine

C. Audi Teller Machine

D. Audi Talker Machine



30. Only ___________ account holder can withdraw their money by using cheque

A. Saving

B. Current

C. Fixed Deposit

D. Saving and Current

Channels of Distribution

1. Manufacturer to Consumer


(When a manufacturer sells direct to the consumer)


 This occurs when customers post orders for books or magazines direct to the publishers who then send them their orders direct. This ensures the publisher of selling to as many people as possible and can increase sale. Customers will also benefit since they’re assured of getting the latest issue or publication


 It also occurs when something is made especially for a customer e.g. a suit, made-to-order furniture. An individuality in design normally demand us to pay more than what we have to pay for the same type of good which is mass produced. Example:- tailoring, saloons and interior furnishing


 It also occurs in expensive and highly and specialized goods which are purchased only occasionally by the government or big private companies. Examples:- aeroplanes, ships, railway rolling stock



2. Manufacturer Cooperative to wholesaler [Rebate price Retail price]


Members Public

 When a manufacturer sells to a cooperative wholesaler who in turn supplies the cooperative retail in his district


 Members of the public, including the members of such cooperative retail shop then buy the goods from them

 Cooperative members are able to buy the goods at a rebate

3. Manufacturer to Retailers {Retail price (with a discount)}



Public

(When a manufacturer sells to the retailers who in turn sell to the consumers)



 Most large retailers like supermarket, department store have the financial resources to buy in bulk direct from the manufacturers. The main advantage of bulk buying is the large discounts so that they can offer a greater variety of goods at competitive price

 In many cases, the retail shop is owned by the manufacturers, for example, selling footwear and medicine. These manufactures have large resources to open their own retail outlets

 Sometime, the retailers may be “tied” to the manufacture. Example petrol stations selling only one brand of petrol



4. Manufacturer to Wholesaler Retailers

(When a manufacturer sells to a wholesaler who then sells to the retailers in smaller quantities. Then the retailers who in turn sell to the customers)

 It occurs when the producers themselves are unable to market the excess goods themselves because of financial constraints or the lack of access to widely markets due to lack of contacts, commercial know-how

 For example, the rural producers who produce like fish, paid, vegetables and so on, they are lack in packing specialty therefore they sent their product to the wholesaler who can pack them properly and transport them quickly to the big cities or town (in the same countries or overseas), where they sold to various retailer who in turn sell them to the consumers


 Locally manufactured goods like ordinary household essentials which are stocked by small retailers are often distributed in this way since the retailers buy in too small a quantity to make it viable for the manufacturer to sell direct to them


 Goods which sold this way become more expensive because of the cost of distribution and profit margins required by the wholesaler and retailer. However, consumers can be benefit from the wide variety of goods produced by many producer


 The producer is free to devote all his attention and resource in producing better quality of goods since the marketing has been done by the wholesaler

 The retailer needs little capital as he needs to maintain only a small stock. This is because it is easy for him to get new and hence fresher stocks from the supplier (wholesaler) once his stock is depleted



5. Manufacturer to Sole Agent

 When an overseas manufacturer appoints a sole agent in the home market to manage the sale and distribution of his goods as well as to provide after-sale services

 The sole agent is responsible for getting reliable retailers to market the goods throughout the country. Example: Sell imported cars, cosmetics and electrical goods



AGENTS and THEIR WORK


 An agent is a person who deals with goods on the behalf of another person is called the principal

 There are two type of agents

i) Factor

ii) Broker

Differences between Factor and Broker

1.

factor:-
Has possession of goods

broker:-
No possession of goods therefore have to bring buyer and seller together

2.

factor:=
Can sell the goods in his own name

broker:-
Does not sell goods in his own name


3.

factor:-
Receive payment and issue valid receipt

broker:-
Not allowed to receive payment or issue receipt

4.

factors:-
Keep whatever profit he made

broker:-
Receive commission
 5.
 
factor:-
Has legal claim
 
broker;-
No legal claim of goods
 
 
 
Factors that influence the choice of the type of channel of distribution




1. Nature of goods to be marketed

 Goods that is perishable, e.g. cakes and bread, it must be sold quickly as possible. Normally it sold directly to the consumers through the producer’s own retail outlets or channelled it nearby retail outlet as soon as it produced

 Goods that can last longer can be handled by more intermediaries in order to ensure a larger market



2. Size of market

 Producers who wanted their goods marketed as widely as possible, they did not want to saddle themselves with problems of managing their own retail outlets and normally they sold their goods to wholesalers. Therefore, the bigger the market, the larger will be the number of intermediaries needed

 Producers who desired to a small exclusive clientele may opened their own retail outlets e.g. boutiques which sell expensive, exclusively designed ready made garments



3. Quantity of goods bought

 Most producers are normally willing to accept larger retailers or wholesalers than the small retailer. This is largely due to the orders from the small retailers which is normally in small quantity and involved a lot of paperwork


4. Size of the firm producing the goods

 A very big firm which had the financial and human resources normally not only produce the goods but also set up their own retail outlets

 Small – sized producer may prefer to concentrate the technical aspects of producing and leave the marketing of goods to others

test your knowledge

Advertising


Underline the correct answer


1. The most effective way to advertise at night is through the use of

a. Posters

b. Hoardings

c. Neon lights

d. Sky-writing by an airplane



2. The most effective way for a large supermarket in Brunei to advertise special offers, the name of the products and their prices for the week is to advertise

a. In the cinema

b. In the newspaper

c. Over the radio

d. Over the television



3. The best way for a manufactures of toys to advertise is to insert its advertisement in

a. Story book

b. Newspapers

c. Women’s magazines

d. Children magazines and comics



4. All of the following are the functions of advertisement except

a. Consumers come to know about the new product

b. Advertising is can be successful thus brings more profit to the manufacturer

c. Advertising brings employment to thousands of artists, models, photographers, etc

d. It encourages the manufacturers to improve and maintain the high quality of their products to keep up the competition



5. Which one of the followings are the dangers of advertising to the consumers:

a. Wider choice

b. Necessary purchases

c. Misled by false claims

d. Rational in their buying




Short Answer Questions

1. State THREE advantages and TWO disadvantages of advertising to consumers

2. Distinguish between informative advertising and persuasive advertising

3. State THREE advantages and  TWO disadvantages of advertising goods in the newspaper

4. List down FIVE types of advertising media

5. For each of the following items, state the devices commonly used by advertisers to promote the sale of their products:


a. Cosmetics

b. Baby milk powder

c. Household detergent

d. Agricultural machine

e. Perfume

Considerations governing the choice of media

Considerations governing the choice of media



1. Nature of the product or service

 The medium of chosen must fit the product or message to be advertised

 Goods (especially new ones) that require explanations and demonstrations are best advertised at trade fair

 Alternatively travelling salesperson can visit homes to demonstrate the use of household appliances

 Women dresses are best shown in colour magazines



2. Target

 This is the group of consumers the advertisement is aimed at, for example, teenagers, housewives, young men and women or other professionals

 For example, women’s magazine have advertisements of cosmetics, jewellery, household items and other products which women needs

 The radio and television are the most effective media for reaching children



3. Extent of market: local, national, international

 If wide coverage is needed for a certain advertisement, the national newspapers will be a more popular media than the local newspapers

 However, the local newspapers will be useful for tapping the local market

 Television is the most popular medium for broadcasting any advertising message to the mass market which includes both the literate and the illiterate



4. Cost

 The cost of the advertising medium should be considered in relation to the amount of funds available and the circulation of the medium

 Example, the amount of funds available could rule out TV but the advertiser can put small advertisement in the newspapers instead

 However, the advertiser should consider the costs when making a choice

 Although advertising on television may be expensive, the size of the audience is will reach is great, resulting in lower cost per exposure



Advertising Agencies

 Advertising agencies are the specialists or experts who undertake the task of advertising for the producers


 An advertising agency has 3 main functions:

1. Creating the advertisement

2. Producing the advertisement

3. Placing the advertisement



 They also give additional services like:

1. Market research – they provide information on who are they aiming at

2. Advice – Best medium of advertising use for the product



 Advertising agency has 4 departments

1. Account Services department

 “Account” in advertising terminology means clients’ business or customers

 The account director heads this division

 He is assisted by a number of account executives who communicate with the clients and handle all the work on the clients’ behalf

 The account executive is responsible for taking “briefs” (information pertaining to the clients’ business – competitors, marketing strategies, sales target, etc) from the clients and discussing problems with the departments concerned

 An advertising plan is then prepared and this is sown to the client for approval

 The executive has to supervise and see to that working of the plan by checking on the progress of the various department



2. Creative department

 This department is controlled by a creative director and it comprises two sections

i) Copy section – the copywriters in this section transform campaign ideas and creative themes into writing

ii) Art Studio – the art director and his artists will be responsible for presenting the visual ideas for the advertising campaign



3. Media department

 Media plans that are appropriate to the advertising campaign are prepared in this department

 The media planners ensure that each advertiser’s budget is spent in such a way that his message reaches the required market as effectively and economically as possible

 It is the responsibility of this department to represent the agency in buying space and time from the media owners e.g. independent television and radio contractors and owners of outdoor media like bulletin boards, painted wall signs, hoardings or painted advertisement on delivery van or buses



4. Production department

 When the layout comprising the right words and pictures has been prepared, the finished artwork (photographs, drawings and sometimes lettering) must be produce

 This may be done in the agency’s studio in the above department or undertaken outside

Test your knowledge

1. List out THREE function of a commercial bank


2. a) What is barter trade?


b) Give TWO difficulty faced by the barter trade system?


3. Sheila has just started a small retail business. She opened a current account with HSBC. State three advantages of opening a current account with HSBC


4. Britney and Jennifer decide to start a business. Advice them on THREE differences between a partnership and a private limited companies


5. List THREE features of department stores


6. Explain the following terms related to cheque

a. Drawer

b. Drawee

c. Payee


7. List down THREE main functions of money


8. Differentiate between extraction occupation and the direct service occupation


9. List THREE advantages of using television as a medium of advertising for promoting a new brand shampoo


10. Commerce is the study of business activities. It is mainly into aids to trade. Name and explain THREE aids to trade

Installment Trading

Installment Trading

 Installment trading means that payment for something over a certain periods in a number of installments.

 The initial payments made by the buyer is called down payment

Advantages and disadvantages of installment trading

Traders
 
Advantages
 
 Increase sales


 More profits

 Earn additional profit due to interest charged

 Able to sell expensive goods

 Can repossess the goods if sold under hire purchase

Disadvantages
 
 Difficulty in collecting installments


 Large capital to finance

 Incur more expensive cost

 Repossess article may be in poor conditions

 Compelled to sell second hand goods


Customers
 
Advantages
 
 Enjoy the use of goods while paying for them


 Forced to save to pay installment

 Can get better quality and more expensive goods

 Guarantee after sale service

 Doesn’t have to save full amount in order to get the goods

Disadvantages
 
 Tempted to over buy


 Buy things which he cannot really afford

 High rate of interest

 If the goods are repossessing, he will face big loss

 Bound by the agreement signed


Type of installment trading
 
 The two main types of installment trading are


1. Hire purchase       2. Deferred Payment

Payment

 
Hire purchase:- The buyer is require to make down payment and pay the balance in small installments
 
Deferred Payment:- The buyer is require to make down payment and pay the balance in small installments
 

Ownership

 

Hire purchase:-  The buyer is ONLY considered as hire not a legal owner

 Seller can reclaim the goods sold if the buyer fails to pay installment

 Buyer is allowed to use the goods while paying



Deferred Payment:- The buyer considered as legal owner of good bought


 If the buyer fails to pay installment, the seller has no right to reclaim the goods but they can sue the buyer

Interest

Hire purchase:- The buyer is required to pay more than the cost price of goods where the extra amount is called interest
 
Deferred Payment:-The buyer is required to pay more than the cost price of goods where the extra amount is called interest
 

Type of goods

Hire purchase:-Expensive and durable goods

E.g. Leisure Boat ,Machine, Car



Deferred Payment:-Expensive and durable goods but no second hand value


E.g. Gowns, Toys, Electrical Appliances


Differences between Hire Purchase and Deferred Payment

1. Hire Purchases allows the buyer to choose whether to buy the goods or not depending on his paying the final installment

where as

Deferred Payment is an actual sale


2. In hire purchases where the buyer doesn’t own the goods immediately. Therefore, ownership of the goods cannot be transferred until the final installment has been paid

where as


In Deferred Payment where the buyer owns the goods immediately. Therefore, he can dispose of the goods whenever he wishes



3.In hire purchases where if the buyer fails to pay the installments, the seller can take possession of the goods

where as

In Deferred Payment where if the buyer fails to pay the installments, the seller cannot reclaim the goods but can sue the buyer for the debts



4. Hire purchase is suitable for goods with good resale value

where as

In Deferred Payment where it is suitable for goods with low resale value


How to calculate?


Example 1:

The cash price of a computer is $2,000. Sale terms are $500 cash deposit and 12 monthly payments of $150. Calculate the credit charge?

Working:

Step 1: 12 X $150 = $1,800

Step 2: $500 + $1,800 = $2,300

Step 3: $2,300 - $2,000 = $300



Example 2;

Heliza wishes to buy a brand new car. The cash price of the new car is $20,000. She can only afford to buy the car on hire purchase with down payment of 10% of the cash price and 48 monthly installment of $500. Calculate

a) the down payment

b) total monthly installment

c) total hire purchase cost

d) the interest charge

Working:

a) $20,000 X 10% = $2,000

b) 48 X $500 = $24,000

c) $2,000 + $24,000 = $26,000

d) $26,000 - $20,000 = $6,000

Share Capital and Classes of Shares

Share Capital and Classes of Shares

The share capital of a limited company is the money subscribed by the shareholders of the company. The different kinds of share capital are


1. Registered capital
 
- Also known as nominal or authorised capital


- Represents the maximum value of shares a company is allowed to issue


2. Issued capital
 
- Actual value of shares that has been issued to the Public


- Can be equal to but not more than the authorised capital
 
 
3.Called – up Capital
 
- The actual amount of money that has been asked to be paid by the shareholders
 
 
4. Paid – up Capital
 
- The actual amount the shareholders have paid on the called up capital
 
 
There are three common classes of shares issued by companies. There are:-

 
1.Preference shares
 
- This forms the preference share capital of the company


- They are the first to receive dividends

- Can be cumulative preference shares who are eligible for arrears of dividends if no dividend is given for one or more years or non-cumulative preference shares who are not eligible for arrears of dividends



2.Ordinary shares
 
- This forms that ordinary share capital of the company which is usually the largest form of capital


- They are entitled to receive dividend only after the preference shareholders are paid

- They are eligible to vote when electing board of directors


 
3.Deferred Share
 
- These are shares taken up by the founders or promoters of the company
 
- They are only entitled for dividends after all the other shareholders are paid
 
 

Share Dividends

 
 The distribution of the profits of a limited company is called the payment of dividends



 The amount of dividend to be paid depends on


1. The number of shares held


2. The nominal value of each shares


3. The type of shares


 Preference shareholders are entitled to a fixed rate of dividend


 The rate of dividend for ordinary shares depends on profits made by the company. If there is no or insufficient profits, therefore there won’t be any dividend


 Dividends when paid during the year before the annual final accounts are prepared are called Interim Dividends while those paid at the end of the year are called Final Dividends

The Stock Exchange

 It is a place where shares, stocks and securities are bought and sold


 People are interested in buying shares of public companies because


1. They can earn dividend


2. Shares are a form of investment


3. They can sell them freely through the stock exchange



 Share – brokers are members of the stock exchange through whom the public can buy and sell shares


 He is paid commission for these services


 The speculators in a stock exchange can be


1. A bull who can make profits if price of shares rise before the settlement day


2. A bear who can make profits if share price fall before the settlement day


3. A stag who buys shares that are going cheap in bulk and sells them when prices increase

Types of Business Organization

Types of Business Organization

There are few types of Business Organization but in this lesson, we only focus on the main four and there are

1. Sole proprietorship/sole trader

2. Partnership

3. Private limited company

4. Public limited company



Sole proprietorship/sole trader

Characteristics:



 This business is owed and control by only one person where he/she can employed worker for their assistant

 All profits and losses go to the owner of the business (sole proprietor)

 He can obtain the capital from personal saving, loans from relatives, friends or the bank

 Example of sole proprietorship: Food stall, sundry shop, beauty saloon



Advantages:


 It is easy to set up the business - Not paperwork are required to set up the business, the owner just need to register the business name under the Registration of Business Act

 All profit belong to the owner, so the owner has a greater interest in the success of the business

 The owner has can make decisions quickly

 The owner can give personal attention to the customers

 No income tax - only in Brunei but in other countries, they only have to pay a low income tax



Disadvantages:


 Limited capital – The owner has to provide the money to start or expand the business by using his/her own saving or by borrowing from the banks or friends

 Unlimited Liability – The owner is personally liable for all debts incurred by the business in the event of a business failure

 No one will carry out the business if the owner is ill or on holiday

 The firm ends when the owner dies or goes bankrupt



Partnership

Characteristics



 This business is owned by two or more (but not more then 20) people where they combine to carry on a business with the aim of making profit

 The profit and losses are divided among the partners depending on the partnership agreement. But if there no agreement is made, the profit and losses are divided equally among themselves

 Capital is obtained from the partners’ contributions and loans

 Example of a partnership: Clinics, accountants or architects’ firm



Advantages

 It is easy to set up the business - Not paperwork are required to set up the business, the owner just need to register the business name under the Registration of Business Act

 Pooling of expertise – This ensures a greater of specialization, resulting in more efficient management of the business

 If one of the partners is sick or on holiday, there is still someone to carry on the business

 More capital is available because of the partners’ contributions and loans

 Losses is divided among the partners

 No income tax - only in Brunei but in other countries, they only have to pay a low income tax



Disadvantages

 Decisions may be delayed by disagreements because a number of people are involved

 All partners have unlimited liability expected for limited partnership

 Death, bankruptcy, insanity or retirement of a partner may end a partnership

 All actions or decision by a partner have to be agree by the other partners

 Limited capital – Expansion of the business is limited to the amount of the capital contributed by the partners



* Limited partnership – a partnership where the limited partner’s limited is restricted to the amount of capital invested in the business, but at least one of the partner must bear with unlimited liability*

 
 
Limited Company




Characteristics:

1. Companies must be registered with the Registrar of Companies where the companies must submit a Memorandum of Association and an Articles of Association
2. Memorandum of Association includes all the “External” rules of the company such as

i. Its name

ii. Its Address

iii. Its Objective

iv. The amount of capital to be registered

v. Statement stating that shareholders have limited liability


3. Articles of Association includes all the “Internal” rules of the company such as

i. The number of directors

ii. The voting rights of shareholders

iii. Method of electing board of directors

iv. Procedures for calling meetings of shareholders



4. The Registrar will issues a Certificate of Incorporation once he is satisfied with the documents which confirms the legal existence of the company
5. Shareholders are the owners and risk-takers of the company
6. All shareholders have limited liability up to the value of shares they have brought

7. The board of directors are elected by voting shareholders and they will manage the company
8. Capital is raised by issuing shares to the shareholders

9. Profits are distribute in the form of dividends




Private Limited Company

Characteristics:



 This business is owned by two to fifty shareholders who must be family member

 There may have one or more directors

 The company must use “limited” or “LTD” after the company name

 The shares cannot not be offered to the general public therefore it can’t be quoted in the stock exchange



Advantages


 Shareholders have limited liability - The shareholders does not liable for all debts incurred by the business in the event of a business failure

 More capita is available for expansion by issuing more shares to existing or new shareholders

 Greater continuity as it has separate legal existence

 Specialization is possible as company is managed by elected board of directors



Disadvantages:


 Capital is limited as maximum of only 50 shareholders

 The company needs to follow rules and regulations set up by the Companies Act

 There will be less care shown by shareholders as they are not involved in the management of the firm



Public Limited Company

Characteristics:


 This business is owned by any member of the public since share are freely transferable and sold

 There must have a minimum of two directors

 The company must use “Public Limited Company” or “plc” after the company name

 They can raise more money by issuing loan certificates to the public called debentures where these debenture holders are eligible for interest at a fixed rate



Advantages:



 Large capital is available as the number of shareholders is unlimited

 Shareholders have limited liability

 Greater continuity as it has separate legal existence

 Specialization is possible as company is managed by elected board of directors



Disadvantages:


 Formation is time consuming and expensive

 The decision making can be slow

 Interests of shareholders may not be same as the board of directors

 Annual accounts need to be published and submitted to the Registrar of Companies

Insurance

Insurance

 Insurance is a form of agreement between an insurance company and private individuals and/or organizations.

 In exchange for a payment of a sum of money (premium), the private individuals and/or organizations are guaranteed compensation for losses to them resulting from certain risks like fire, burglary, flood, accident, etc



Purpose of Insurance

 Every business will faced some risks like fire, burglary, flood, accident, etc therefore by having insurance, the business can protect themselves from these kind of risks



Insurance principles:


Indemnity
 
 Its means that someone seeking to take out insurance should not be able to gain profit from a loss incurred
 
Insurable interest
 
 This principle stops private individuals and organizations from trying to gain from insurance and other people’s misfortune


 E.g. A business man who insures his shop against fire, where he believe that if his shop catches fire, he’ll suffer losses therefore a person who don’t have their own property cannot take out insurance to cover that property

Utmost good faith
 
 This means that both parties in the contract must act with utmost good faith (honesty) towards one another during the negotiations before an insurance contract is agreed and in the handling of claims afterwards


 Therefore the person who taking the insurance have to give correct and up to date information

Insurable risk
 
 Some risks can be measured based on statistical records


 Therefore insurance companies can offer such an insurance as they can calculate the cost of the risk

 Examples: fire, personal accident, motor accident, theft and burglary

Non – insurable risk
 
 Certain risk cannot be insured against because they cannot be measured based on past experiences


 Examples: Poor management or war

Test your knowledge

1. Television is a very popular and important advertising because it reaches on audience of thousands at any one time, in sounds and


a. Smell

b. Touch

c. Visual

d. Feeling



2. The main aim of advertising is to


a. Make the advertiser famous

b. Make the film stars more fame

c. Show how a certain product made

d. Bring publicity to a certain product



3. The most effective way to advertise the use of a new model of computer is to advertise

a. In the newspaper

b. In the children’s magazines

c. At the trade exhibition

d. At the stadium’s scoreboard



4. The most effective way to advertise at night is through the use of


a. Posters

b. Hoardings

c. Neon lights

d. Sky-writing by an airplane



5. All of the following are the functions of advertisement except

a. Consumers come to know about the new product

b. Advertising is can be successful thus brings more profit to the manufacturer

c. Advertising brings employment to thousands of artists, models, photographers, etc

d. It encourages the manufacturers to improve and maintain the high quality of their products to keep up the competition


6. Which one of the followings are the dangers of advertising to the consumers:


a. Wider choice

b. Necessary purchases

c. Misled by false claims

d. Rational in their buying

COMMUNICATIONS

COMMUNICATIONS

DEFINITION OF COMMUNICATION

It is the process by which information is sent and received between

individuals or groups by written messages or by word of mouth.



THE IMPORTANCE OF COMMUNICATION

-It helps traders to keep in touch with each other quickly.

-It helps traders to order and receive goods from their supplier without delay.

-It helps traders to send out and receive important documents without delay.

-It helps traders to find new markets for their products.

=It helps traders to be informed regarding market conditions and needs.

-It helps create an efficient international banking and financial system.



SERVICES PROVIDED BY THE POST OFFICE



1. AS A MEANS OF COMMUNICATION

[a] Ordinary Post.

The Post Office provides services for the delivery of different types of mail.

Local mail are letters delivered within the country.

Foreign mail are letters sent to other countries.

First class mail are letters and postcards.

Second class mail are printed papers, newspaper and sample packets.

First class mail and Second class mail can be sent inland or abroad by ordinary letter post at a relatively low cost.

Postal codes are used for inland mail to make sorting and delivery quicker.

[b] Airmail.

The Post Office provides the posting of the first class mail (letters)

and the second class mail (printed materials).

The first class airmail is more expensive and faster then

the second class airmail.

The air letter or aerogramme is becoming popular nowadays

as it speed of delivery and is fairly cheap. It is charge the same rate to any part of the world. However, the writing space is limited and the letter cannot contain enclosures.

[c] Express Delivery Services.

The Post office provides express delivery by local urgent mail and by speed post services.

By local urgent mail, the Post Office offers express delivery of letters at the sender’s request and express delivery of letters at addresee’s request.

By speed post services, the Post Office offers express delivery for urgent documents, packet, samples and other materials overseas.

Urgent letters, documents and parcels can be sent out quickly by a special messenger through Express Mail Service (EMS) or the Speed post (Pos Laju) services.

[d] Registered Post.

All first-class mail can be registered through registered

post to ensure safe delivery, together with compensation for loss.

It is used for sending valuable items like cash as well as documents.



[e] Recorded Delivery.

Recorded delivery gives proof of posting and delivery because

the person named on the envelope (addressee) has to sign for it.

If any loss occurs, the compensation is low.

It is useful for posting legal documents and certificates.


[f] Business Reply Service.

This services uses special envelopes of standard size.

It allows the customers to write to the firm without paying any postage.

The mail order firms who are advertising for their products often use this service.



[h] Parcel Post.

The Post Office offers the delivery of packages or parcels up

to a certain size or weight at home or abroad.

Parcel can be sent by registered post and the contents can

be insured against any damage or loss.

Mail order business depends greatly on this service.


[j] Private Boxes.

This service is provided by the Post Office.

The annual rental fee in Brunei is $40.

Each private box user holds the key to the box.

This enables firms or individuals to collect their mails or letters at any time.




2. POST OFFICE AS A MEANS OF PAYMENT

Post office also acts as a ‘paying agent’.

There are three methods by which money can be sent through the post office:-

[i] Money orders

[ii] Postal orders

[iii] Telegraph money orders

The above orders are issued by one post office to another post office for the payment of a certain sum of money to a specified person.



[i] Money Orders.

Money orders are used for sending a large amount of money through the Post Office..

Money order is valid for a period of six months from the last day of the month of issue.

The person who sends money is called the remitter.

The person who receives the money is called the payee.

A money order application form will be filled by the remitter. The remitter has to write the following details on the form:-

[a] the name of the payee

[b] the name of the remitter

[c] the amount both in words and figure

[d] the name of the post office where the payee will collect the money.

Once the money order application form is completed, the post office will give a copy of the form known as ‘counterfoil’ to be kept by the remitter.

It is safe to send money by using money order because:-

[a] the payee has to give the name of the remitter,

[b] the payee has to show his identification card.

The advantages of using money order are:-

[a] it is cheap

[b] it is convenient and easy

[c] it is safe



[ii] Postal Orders.

Postal orders are used for sending small amount payments through the Post Office.

Postal orders are sold in fixed denomination.

The rate of commission will vary with the denomination of postal order.

For example, if a person wants to send a small amount of money to United Kingdom, he/she can use British Postal Orders.

The remitter has to fill in a Postal Order form with the name of the payee and the post office of payment.



[iii] Telegraph Money Order.

A telegraphic money orders are used when a person wishes to sent money urgently through the Post Office.

The post office sends the telegram to the paying office instructing it to pay the amount to the payee and at the same time the payee is informed by telegram to collect the money at the paying office.



3. THE POST OFFICE AS A COLLECTING AGENT.

The Post Office may also acts as an agent for collecting some payment from the public in the following ways:-

[a] Collect payment of Telephone bill.

[b] Collect payment of Electricity.

[c] Collect payment of Water Bill.

[d] Issues and renewal of Road Tax.

[e] Renewal of Driving License Class I and III.



TELECOMMUNICATION.

The telecommunication services in Brunei Darussalam is provided mostly by Telbru.

Another private company that provides telecommunication services in Brunei is the DST.



SOME OF THE SERVICES PROVIDE BY THE TELBRU

[a] Telephone.

Telephone is a fast method of direct personal communication which allows firms to contact quickly with other firms at home or abroad.

A person who rents a telephone is called a subscriber.

The place where the all the telephone lines in an area are connected is called the Telephone Exchange.

A telephone call between two persons whose line are connected to the same exchange is called a Local Call.

A telephone call between two persons whose line are connected to a different exchange is called a Trunk Call or IDD Call.



Trunk call is charged according to:-

[i] Distance.

[ii] Time taken by the call.

[iii] Types of call.

[iv] Time of the day

Subscriber Trunk Dialing (STD) allows telephone calls

to be made to home numbers without using the service of operator.

International Direct Dialing (IDD) allows telephone calls to be made to foreign numbers without using the service of operator.

A freefone number requires a firm to pay for any freefone calls it receives which are made through the operator.

A big company especially a hotel have many extension telephone lines which are connected to a switchboard.

A subscriber who is given one line for his own use is said to have a private line.

A subscriber who has to share a line with another subscriber is said to have a party line.

To find out the telephone number of a subscriber, we can refer to the telephone directory.

To find out the list of different types of businesses in alphabetical order for e.g. the Bakery Shop, Travel Agent or Saloon, we can refer to the Yellow Pages in the telephone directory.

To find out the list of all government and quasi-government departments, we can refer to the Blue Pages in the telephone directory.



Advantages of using a telephone

[i] Immediate responses is received from the receiver.

[ii] Communication is direct and personal.

[iii] It is fast and cheap.


Disadvantages of using a telephone

[i] There is no record of the call.

[ii] There is no or limited non-verbal cues as feedback.

[iii] The receiver has to take the call.


[b] Telefax Service (Facsimile Service)

Telefax is the latest development in the field of communication.

Telefax service enables for the sending and receiving of pictures,

drawings, documents, graphics and forms to both local and overseas destinations.


[c] Confravision or Video Conference.

1- The confravision service can link or connect individuals or groups of people in different cities by sound and vision.
2- A face-to-face discussion can take place without the need for the participants to travel long distances.

[d] Television and Radio.

Television and radio help to provide information by broadcasting.

Residents can watch or listen to football match for example through radio and television by using these services.


[g] Electronic mail/ e-mail/ internet service

Electronic mail or e-mail is a system of text messages and their attached files sent through computer networks that are connected to the Internet.



Advantages of Electronic mail

1. It cost of sending messages is cheap.

2. It is fast because messages can be sent instantaneously.

3. It is convenient because files, sound clips and illustrations can be attached to e-mail messages.

4. A single message can be sent to several destinations at the same time.

5. The computer need not be switched on to receive messages.



FACTORS INFLUENCING THE CHOICE OF METHOD OF


COMMUNICATION



[a] The nature of the communication.

[b] The number of people that need to be communicated with.

[c] The speed of delivery.

[d] The cost of the method chosen.

[e] The accuracy of the message.

[f] The recording of information.

[g] The safety and security of the message to be delivered.

[h] The confidentiality of the method chosen.

[i] The distance in which the message is to be delivered.

[j] The time of the day.


SERVICES PROVIDED BY THE BRUNEI POSTAL DEPARTMENT


Post offices are not only for selling stamps and posting letters, but as a business centre to provide convenience to public.



Traditional Postal Services

• Sale of Stamp • Registered Mail

• Internation Reply Coupon • Locked Bag

• Insured Mail • Deferred Mail

• Air & Sea Parcel • Air & Sea Mail

• Cash on Delivery • Small Packet

• Parcel • Mail

• Private Boxes • Poste Restente

• Post Fax • Philatelic Products

• Registered Letter • Registered Envelope

• Express Mail



Premium Services

• EMS / Speedpost • Poslaju

• Bulk Posting • Business Reply Service (Local & International )

• Unaddressed Mail Drop Services • Corporate Mail

• Franking Machine • Expedite Mail Services

• Recorded Delivery • Pos Gagas



Agency Services

• Telephone Bill • Sale of Telephone Cards

• Payment of Electricity Bill • Payment of Water Bill

• Driving License Renewal Class I and

Class III



Financial Services

• Money Order • Telegram Money Order

• Postal Order



Other Services

• Seasonal Cards • Post Shop

• Information Counter • Literature for the Blind



Post Offices around the country

• Pusat Memproses Mel (MPC)

Berakas • Anggerek Desa

• Muara • Bandar Seri Begawan

• Salambigar • Seri Komplek

• Lumapas • Gadong

• Mata-Mata • Lapangan Terbang Antarabangsa

• Sengkurong • Tutong

• Limau Manis • Lamunin

• Telisai • Labi

• Sungai Liang • Kuala Belait

• Seria • Bangar

Danger of Advertising

Danger of Advertising

To Consumer


1. He may be misled by false claims

A consumer may be misled into buying a product or service because of its false claims



2. He may have difficulty in choosing the brand

A consumer may have difficulty in choosing the right product because of the claims that been made by different type of brands



3. He may make unnecessary purchases

A consumer may be persuaded into buying something which he did not intend to buy as a result of successful sales publicity stunt employed by advertisers like giving special offers and gifts for purchases



4. He may be irrational in his buying

A consumer may base his choice on the appeal in the advertisement which has nothing to do with the quality of the goods



However, the dangers of advertising to consumers are minimized through consumer protection afforded by the Consumer Association and the government (See the topic on Consumer Protection)



To Producer



1. His production cost increases

A producer’s cost of production increase because of the additional cost of advertising



2. His expenditure may not be justifiable

A producer may spend more on advertising that the return in terms of increasing the sales



3. He may incur financial losses

a. His advertisements have to be continuously improved upon and this means increasing costs

b. A price war (by undercutting his competitors) may be resorted to or to achieve his aims. Due to this, it may lead to financial losses



Devices Used in Advertising


 These are tools used by the advertiser in his promotion campaign to appeal to the certain group of consumers

 The advertiser influences the consumers into believing that they will realize these needs and desires upon the purchases of certain products

 These are some of devices used in advertisements to influence consumers purchases



1. Sex appeal – e.g. Cosmetic

2. Romance appeal – e.g. Perfume

3. Economy appeal – e.g. Fuel savings and second – hand car

4. Appeal for manliness – e.g. Cars

5. Appeal for motherly love – e.g. Cute babies promoting a certain milk product

6. Appeal for cleanliness – e.g. The effective using a certain detergent to wash soiled cloths

7. Appeal to safety – e.g. The safety features of an machine

8. Appeal to prestige or status – The advertisement may relate well known person with the use of a certain product or service like credit card, shampoo

Advertising Media



The main types of media used by advertisers to carry the advertising message are as follow:



1. Newspapers

2. Magazines

3. Radio

4. Television

5. Films

6. Direct Mail

7. Outdoor hoardings and signs

8. Pamphlets and samples

9. Travelling salesmen

10. Window displays and exhibitions