Basic economics

 

demanders ——–>   M A R K E T <——– supplier

 

The main principle of economy is the search for ways and means of the supplier to meet the needs of the demanders.

 

If the supplier is willing to identify the needs of the buyers, the demander must offer something to the seller.

 

In the Middle Ages, it was often paid in kind, or in the products produced and offered to the consumers themselves. A currency as we know it today, did not yet exist in this form.

 

The money that we pay today, was previously linked to a specific equivalent of gold or silver. Today, the money is also a commodity, no longer be written in gold or silver and is owned by the central bank of the State, which also has the only money monopoly.

 

In order to satisfy the providers with appropriate consideration, buyers need a means of payment that is the money or the Customary national currency, which is edited by the Central Bank of the corresponding state.

 

The money is not only cash but also a measure of value and store of value, because the value of a good or service can rise any time when

demand increases and supply decreases,

or decrease when demand decreases and supply increases
 

If there is in a state or territory only one provider of a product or service we are talking about a monopoly. However, there are many providers we have perfect competition. The reality is usually that we find only a few suppliers. Then it’s spoken of a oligopol.
 

The economy is divided in the business administration and the economics.
 

The Business Administration (BA), also called microeconomics, deals with the households of the individual to the family, the private firm that partnerships (KG, KMG), the Companies (Ltd) to the large corporations that are organized as a holding company and have several global corporations among themselves. BA includes also state-owned enterprises such as the armaments factory, public transportation or hospitals and can be attributed as per operating unit. This entails accounting, double-entry accounting (see below), operating cost estimate and budget, operating organization and marketing.

 

 

The Economics deals with the economy of the entire State. All the income, the goods produced and all the investments of private and public households are being registered. Also, exports and imports of goods, services, capital and capital gains all private and public households are counted. Here the financing of the whole state plays an important role. For the money supply or monetary policy, the central bank is responsible, although this bank like any other financial institutes are considered as units. See business administration (BA)

 

 

the accounting

 

In business administration accounting is an important financial management tool for the above mentioned operating units and companies. We compare between a simple and a double-entry bookkeeping. The former just consists of a cash book in which inputs and outputs are recorded. While with the double-entry bookkeeping, a balance sheet and a profit and loss statement is performed at the end of a period.

 

 

Let’s have a look at a very easy example:

 

Mr. Yügül owns a little kebab store. He prepares these meals in a rented mobile home. For this camper and its place he pays monthly fees and rental of 500Euro. In one month he has sold 500 kebabs to euro 10 each. Sales revenue, 500*10 = € 5000. The cost of meat, pita bread, onion and spices etc are 1000 euros. In addition, this month following costs will be charged: for water and electric power 100Euro, shipping fees 50 €, other costs 100 euros.

 

Mr. Yügül performs a simple accounting, his cash book shows for the corresponding month following entries: It is also assumed for simplicity that his cashbox is emptied every night, which is common for security reasons. Mr. Yügül usually contributes the money in his safe at home or directly to the bank.

 

 

Simple accounting, cash book

Text	receipts	expenses
kebab sales	5000
cost of goods sold		1000
rent, fees		500
electricity, water		100
delivery charges		50
other expenses		100
Total	5000	1750
Net profit	3250

 

 

double-entry bookkeeping

	balance		Operating statement
	receipts	expenses	cost	profit
kebab sales	5000			5000
cost of goods sold		1000	1000
rent, fees		500	500
electricity, water		100	100
delivery charges		50	50
other expenses		100	100
Total	5000	1750	1750	5000
Balance end of month cash 3250 capital resources 3250 Total balance sheet 3250 3250     Well, now you are already an accounting professional, because you can see that in the double-entry bookkeeping the result of the two bills, balance sheet and profit and loss account, must match. In practice, of course, there are some additional supplements. Mr. Yügül has some outstanding supplier invoices or pay a portion of his income in retirement or other private pay bills such as taxes, health insurance, etc. Also, in this example it is ignored, that the investments, ie, the equipment in Yügül’s camper, funded by himself, are missing on this account. They represent assets and would have to be listed. Also, here is bypassed, that Mr. Yügül has no warehouse, neither of finished products nor of sheep meat, bread etc for its preparation.     Inflation Monetary overhang, rising prices   Defaltion Surplus goods, prices fall   Stagflation Stagnation and inflation, prices continue to rise while the economy shrinks   Unemployment Percentage of the unemployed to the active population   Balance of payments       Values ​​of all economic transactions between domestic and foreign   Balance of trade                Export and import of all goods, including energy. The balance of trade is one of the 7 Subaccounts, which are summarized in the balance of payments   Money supply                    Banknotes in circulation + sight deposits of domestic banks + demand deposits = M1 + domestic time deposits + demand deposits in foreign currency at banks = M2 + domestic savings = M3   Giro money Booked money, money on the bankaccount, deposits, savings etc   Unit labor costs     Total wages / GDP or total wages / turnover   Open market policy          To influence the money supply, the central bank buys or sells securities   Factors of production     Labor, land and capital   Gross domestic product (GDP)            Total goods produced and services rendered   National income Total remuneration of the producers to the consumers for provision of factors of production   Depreciation                       Annual depreciation (decrease of value) of plant, machinery, vehicles, computer and other equipments etc   Net profit                  Turnover (sales) minus expenses   Cash-Flow Net income plus depreciation   Variable costs                    Costs are proportional to sales (turnover)   Fixed costs The costs incurred regardless of sales   Contribution                       Sales (turnover) minus variable costs   Cost price    Variable costs plus fixed costs   Break even Turnover (sales) = cost price, or total costs (total variable and fixed costs) = turnover (Sales) Calculation: Fixed costs divided by contribution margin per unit   Borrowed capital              Short-and long-term debt, these include, creditors, accrued liabilities, loans and provisions. The latter two are among the long-term owe.   Assets Total company assets: Cash, deposits, savings, accounts receivable, estates, machines and other equipments etc   Liabilities Borrowed capital plus own recources   Own resources, equity Assets minus liabilities, in corporations, own resources or equity consists of share capital, reserves and retained earnings   Cost Accounting               Cost type, cost center and cost unit accounting

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