Friday, June 6, 2014

The Language of Business Part 2

The elementary banking problems concern deposits and withdrawals; these require the operations of addition and subtraction. A person may arrange with the bank to have either a savings account or a checking account. Banks have different specific rules regarding the opening of accounts. 
The bank statement refers to a monthly report or statement which the bank prepares for every depositor having a checking account. The items normally included in this statement are: deposits, withdrawals and service charges. Deposits consist of money placed in the bank mainly for safekeeping and possibly for interest earning. Deposits are usually in cash amounts; however, the bank also honors deposits in the form of negotiable instruments.
The adjectives “Net” and “Gross” have to be noted. Gross means whole, total, without deductions; net means remaining, clear of extraneous items, free from all deductions. Therefore, Net Sales = Gross Sales – Refunds andallowances and Net Profit = Gross Profit – Operating expenses.
The main reason why a person is primarily engages in business is for profits. Profits represent the difference between what a man puts into the business and what he gets in return. In the normal run of business, the businessman expects to hit back a satisfactory increase over what he has put in the business; thus, the simplified buy and sell set-up is summarized by the formula as: Net Sales – Cost of Goods Sold = Gross Profit.

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