Indigenous Book-Keeping Systems

Gardens Commercial High School
Accounting Grade 10
Written Report
Topic: Indigenous Bookkeeping Systems
Maxine February & Mikayla Jansen

Contents
Cover Page Page 1
Contents Page Page 2
Introduction Page 3
Body Page 3
Continuation of body Page 4
Interview (Blank copy) Page 5
Informal business interview Page 6
Formal business interview Page 7
Conclusion Page 8
Planning Page 9

Introduction
An informal business is a business that is not a registered business and doesn’t pay tax.
A formal business is a business this is registered and pays tax.

The difference between a formal business sector and an informal business is best explained by first describing the formal business sector. A formal business sector is the sector of an economy that encompasses all jobs with normal hours and regular wages. In other words, a formal business economy is comprised of the recognized income sources on which income taxes must be paid.

An informal business sector is the opposite of a formal business sector. An informal business sector is the part of an economy that is not taxed, not included in any gross national product, and not monitored by any form of government. In developing countries, the majority of the working population capable of holding jobs earn their income through self-employment in the informal business sector.

Sources: http://www.ngoleader.org/articles/formal-vs-informal-business.html http://www.urbandictionary.com/define.php?term=business%20formal

Body
The informal and formal business that was chosen by us is businesses that trade with fruit and vegetables.
Informal Business

●The informal business is a business that is not a registered business and doesn’t pay tax.
●The informal business that was interviewed was a fruit and vegetable stall.
●This business doesn’t pay rent for an apartment to sell their products but, instead they stand along the road to sell their products and attract people’s attention by ranging their different products.
●These people do this for an income to provide their family with daily needs.
●These businesses hire people to work for them so they can earn a huge profit at the end of the day.
●At the end of the month the business purchase stock at a market and sell these products at a certain period of time.
●They also have a mark-up price on their stock.

Formal Business
●The formal business is a business that is registered and pays tax
●The formal business that was interviewed is called Greenfield’s Fruit & Veg.
●It is located in the Northern Suburbs in Milnerton.
●The business pays rent to sell their products.
●The manager of the business hires people who need an income to cater for their families and themselves
●The business gets their stock from markets and farms
●Like every other business they work towards making a profit

Differences between the informal and formal business
Informal
Formal
Is not registered
Is registered
Doesn’t pay taxes
Pays taxes
Doesn’t rent room space to sell
Rents to sell products
Does not record financial data
Records financial data
Has an owner
Requires a manager

Similarities between the informal and formal business
Informal
Formal
Hires people
Hires workers
Buys sticks from markets
Buys stock from markets and farms
Mark-up price
Mark-up price
Competition with other stalls on the road
Competition with other formal businesses in the area as well as competition with informal businesses

The informal business does not really have a budget system and buys stock whenever they need. They are not registered for VAT. The formal business depends on the buying and the vegetables doesn’t keep very long, they buy as they need and take chances and that is included if they are registered for VAT which they are.
The informal business controls their stock by buying stock as they need it. They buy their stock from Epping- flea market. Some of the products they buy come from cold rooms and when it gets placed on the stands, the products go down and there is no taste. The formal business controls their stock by the amount they get out, is the amount they buy in. They buy their stock from markets and farms. If the stock is too ripe then it goes off very quickly and they have to dump it.
The main expense for the informal business is the buying of potatoes. The main overhead costs incurred by the formal business are the rent and salaries.
The way the informal business is run on a day-to-day basis is to just sell their goods. The formal business manages itself because everything is in place.
The informal business does not record any financial data. The manager of the formal business is not qualified to record the financial data.
In the informal business, the owner’s son is responsible for the stock. In the formal business the manager is responsible for the stock.

Interviews (Blank copy)
How do you budget and control finances?
Does that include if you are registered for VAT?
How do you control your stock?
Where do you buy your stock from?
What type of problems do you experience with the stock?
What are the main overhead costs incurred by the business?
How do you manage to run the business on a day-to-day basis?
How do you manage recording the financial data and the adherence to laws of the country?
Who is responsible for stock?
Is there competition in the area?
How does the competition in the area affect the business?
How many people do you hire to work for you?
Informal business (Done by Mikayla Jansen)
How do you control your stock?
We buy stock and we sell stock. The less the stock gets the more stock we buy.

Where do you buy your stock from?
We buy our stock in Epping flea-market.

What type of problems do you experience with the stock?
Some of the products we buy come from cold rooms and when we place it on the stands, the products go down and there is no taste.

How do you manage to run the business on a day-to-day basis?
We sell our goods on a daily basis.

Who is responsible for stock?
My son is responsible for buying stock.

Is there competition in the area? If so, how does it affect the business?
Yes there is, there can be a stall that sells potatoes for R9 and my stall I sell potatoes for R12 and that’s how I lose customers.

What is the main expense that occurs in the business?
Potatoes are the main expense.

How do you manage recording the financial data?
We do not record financial data.

How many people do you hire to work for you?
My business is a family business so every weekend our family gets together and we sit together and sell our products.

Formal business (Done by Maxine February)
How do you budget and control finances?
It’s very difficult to budget, it all depends on the buying and the perishables doesn’t keep very long, you buy as you need and you take chances

Does that include if you are registered for VAT?
Yes

How do you control your stock?
By the amount that gets out, is the amount I buy in

Where do you buy your stock from?
From the markets and the farms

What type of problems do you experience with the stock?
If the stock is too ripe then it goes off very quickly and they have to dump it.

What are the main overhead costs incurred by the business?
Your rent and salaries

How do you manage to run the business on a day-to-day basis?
It manages itself because everything is in place.

How do you manage recording the financial data and the adherence to laws of the country?
I am not qualified to do that

Who is responsible for stock?
Me

Is there competition in the area?
All the time

Conclusion
In this report and throughout findings, it is clear that although an informal and formal business trades the same goods. That there are many differences between the business and does not require the same methods. In our opinion, we think that the informal business should make records of the stock, finances and budgets. Therefore they would have more of a success. Even if the informal business does record it is still not as complex as the formal business, but is still important. In both the informal and form business it is clear that an owner/ manager to take charge of everything are required.

Planning