Unit 1 Trade and Supporting services

What is a business and show how it can be classified?

A business is an economic activity which manufacturers or provides different goods
and services in order to satisfy human needs and wants.

classification.(flow chart)

Define trade and show how it can be classified on a flowchart?

Buying and selling goods and services for money is known as trade. It is an
important activity carried out by businesses. Ownership is transferred from one
person to another with the exchange of money.

classification.(flow chart)

What are supporting services?

These are services which are used to make trade easier and efficient. Eg-:
communication,transport,banking and insurance.

Explain the relationship between trade and supporting services.

Supporting services facilitate the growth of trade and trade facilitates the growth of
support services.
Define domestic trade and name the two types of domestic trade.
domestic trade are the trading activities that occur among different parties within a
country.in domestic trade payments are made in the currency used in that country.
The two types are:

Whole sale trade

Retail trade

What is whole sale trade?

Selling and purchase of goods for the purpose of reselling or for use for other
commercial activity is known as whole sale trade.
Eg-: selling 50kg of sugar to a retailer
selling 5000 bricks to a building contractor

Write the characteristics of whole sale trade.

Purchase of goods for the purpose of reselling

Selling a large quantity of goods often at once
Selling few selected items only
Unit selling price is relatively low
They provide trade discounts

Write the importance of whole sale trade.

They provide goods to the retailers for reselling or to be used for commercial
activities.
They help to continue distribution by storing goods
They help to maintain the suitable price of the goods

What is retail trade?

Selling and purchase of goods and services for final consumption of the consumer is
known as retail trade.
eg-: A consumer buying a tshirt for the festival.

Write the characterists of retail trade.

Selling goods and services for final consumption

Supplying required goods in required quantities at the required time to
consmers
Located close to cosumer homes
Providing a variety of goods
Write the importance of retail trade.

Providing goods and services to consumers to fulfill their daily needs and
wants.
Introducing new display of goods
Providing goods on credit at certain times
Supporting to improve the quality of goods by informing consumer feed backs
to produces.

The types of retail trade

Fixed large scale retailers Eg-: super markets. (Arpico,keels super)

Fixed small scale reatailers Eg-: Grocery
Small scale mobile retailers Eg-: Mobile retail stores built on vehicles

The differences between wholesale trade and retail trade.

Retail trade Wholesale trade

1. Selling goods for final
consumption.
2. Selling different kinds (variety) of
goods.
3. Selling goods for comparatively
higher prices.
4. Goods are often sold at the listed
price.
5. Retailers contact directly with
consumers very often.
1. Selling goods for reselling
purposes.
2. Selling limited types of goods.
3. Selling goods for relatively lower
price.
4. Trade discounts are given.
5. Do not have direct contact with
consumers.

Explain international trade

International trade is the trade carried out between two or more countries, in order
to fulfill the needs of a country. It is divided into import trade and export trade.

Import trade-: Import trade is bringing goods from a foreign country or countries
to this country.
eg-:purchasing motor vehicles from japan.

Export trade-: export trade is selling domestic goods to a foreign country or

countries by this country.
eg-: selling srilankan tea to European countries.
 Banking services.
What are banking services?
The services offered by banks to businessmen to conduct their business activities
successfully are known as banking services.

Explain a commercial bank.

Commercial banks are institutes providing various banking services while maintaining
current accounts and other accounts. Commercial banks are known as licensed commercial
banks. They have to obtain the license from The Central Bank of Sri Lanka.

Write the types of accounts maintained by commercial banks.

Savings account.
Fixed deposit (Term deposits)
Current accounts. (Demand deposits)

Write the services rendered by a commercial banks.

Services related to deposits.

Services related to electronic cash.
Services related to foreign exchange.
Services related to lending loans.
Other services.

Note-: here the first two services will be discussed.

Savings account-: A deposit maintained by the customers to deposit money and with draw
the deposited money at any time.

Write the process of opening a savings account?

Required to submit a duly completed savings account mandate of the bank.

Deposit slip
KYC form(know your customer)
Submit the tax declaration form along with the NIC

And then a passbook is obtained.

Examples for savings account-:

Senior citizen savings account

Savings account for women
 Dhanayojana savings account
Children savings account

Fixed deposit-: The deposits that are maintained for a certain time period at certain interest
rate are known as fixed deposit.

Write the characterists of a fixed deposit.

Maintaining deposits for a certain period of time.

Varying interest rates depending on the amount and the deposit period.
Receiving a relatively higher interest rate compared to normal savings account.
A certain percentage of the fixed deposit can be obtained as a loan by providing the
fixed deposit as a guarantee.
Interest will be accumulated (collected/added) monthly or at maturity or as per the
agreed terms.

Write the process of opening a fixed deposit.

Duly completed fixed deposit mandate.

Deposit slip.
Know your customer form (KYC).
Tax declaration form along with the NIC to the bank.

And then obtain a fixed deposit certificate.

Differences between fixed deposit and savings account-:

Fixed deposit Savings account

1.Higher interest rate
2.A percentage of the fixed
deposit can be obtained as a
loan by keeping the fixed
deposit certificate as a
guarantee.
3.Cannot withdraw the money
at any time under normal
conditions at any time.
1. Comparatively low interest.
2. Cannot obtain bank loans by
keeping the pass book as a
guarantee.
3. Can deposit and withdraw
money at any time.

Similar characteristics between savings account and fixed deposit.

1. Receiving security for money.
2. Obtains an interest income.
Current account-: is an account which allows transactions via cheques.Current accounts can
only be maintained in commercial banks.

The process of opening a current account.

Obtain an application from the manager of the bank.

Introduction from an active customer of the bank.
Current account mandate and a deposit slip need to be completed.
National Identity card (NIC)

Characteristics of a current account-:

Only can be maintained in commercial banks.

Can do transactions by cheque.
No interest income.
Introduction needed from an active customer of the bank when opening a current
account.

Write the advantages of maintaining a current account.

Ability to make payments via cheques

Ability to obtain overdraft facilities
Can collect remittances.
Can activate standing order facilities.
Receiving a bank statement.

Differences between current account and the other accounts maintained by the
commercial banks.

Current accounts Other accounts

1.No interest income
2.Ability to make payments via cheques
3.Only can be maintained In commercial
banks.
4.Can receive bank statements
5.Can obtain overdraft facility
1.Can earn an interest income
2.Cannot make payments via cheques.
3.Can be maintained in saving and
development banks.
4.Cannot receive bank statements
5.Cannot obtain overdraft facility
Cheques-:A cheque is a written order issued to the bank by the current account holder in order to pay a certain
amount of money to the individual whose name is written on the cheque or to the bearer.

(The law applicable for cheque transactions is The bill of exchange ordinance)

Write the basic features of cheque and explain them briefly-:

1. Date-: This is the date of drawing of the cheque.It should be in the date/month/year order.A cheque
would be treated as a stale cheque after six months from the date of issue.
2. Amount-: The payable value of the cheque should be written in words and in figures.
3. Signature-: The signature of the current account holder.
4. Counter foil-: This is the remaining part of the cheque in the book after issuing cheque.This will be used as
a source document for the payment made by cheques.
5. Crossing of a cheque-: Crossing is the drawing of two parallel lines across the cheque.This gives more
safety to the cheque,and money cannot be obtained over the counter,for a crossed cheque.

Write the parties involved in the transactions related to cheques-:

Drawer (The current account holder)

Drawee (The commercial bank of the drawee)
Payee (The person whose name is written on the cheque)

Write the factors that should be considered when writing a cheque-:

Writing the date accurately

Writing name of the payee clearly and accurately
Writing the value accurately both in figures and in letters.
Signing the cheque accurately by the drawer.
Writing the relevant information on the cheque counterfoil.
Not writing anything on the MICR space.
Crossing appropriately.
Show the features of the following cheque.

Explain the crossing of a cheque

crossing of a cheque is when two parallel lines are drawn across thecheque.

What Is the effect of crossing the cheques.

1) more safety
2) Only can be cashed by depositing the cheque in an account(cannot be enchased through the counter)