Consumer Choices - Payment Choices

Stage 5 Commerce

Students learn about: Methods of payment.

◦ Cash, credit, cheque, direct debit, lay-by, electronic funds transfer, book up.

Methods of keeping records. Changes over time and the impact of

technology.

Payment choices

Students learn to: Identify the criteria that should be considered when

determining methods of payment for different suppliers. Research the criteria to determine the most appropriate

methods of payment in a range of contexts. Identify the advantages and disadvantages of book up. Propose options that could be taken to improve financial

services available to Aboriginal and Torres Strait Islander peoples and remote communities.

Develop and use spreadsheets and databases to maintain effective records and monitor monthly transactions including running totals of cash, direct debit and credit purchases.

Identify how technology has impacted on the payment process of businesses and consumers.

Payment choices

Cash – money in coins and notes

Credit – money loaned at a point in time to complete a purchase with the intention it is paid back with interest or extra fees.

Direct debit –A prescribed amount of money taken directly from your bank account on a regular schedule to pay another company or bank account

Lay-by – a service that allows you to purchase goods when you do not have the money to buy them upfront.

Electronic funds transfer – (EFPTOS) all types of financial transactions that are carried out electronically.

Methods of payment

Cash

Credit

Advantages and disadvantages of cash and credit

Advantages Disadvantages

Immediate payment is possible

A bulky way to pay for expensive things

All shops accept Not very secure

Advantages DisadvantagesMoney stays in the bank earning interest until you pay your bill.

Easy to overspend and get caught in a ‘debt trap’

Safer. Can be cancelled if lost.

Can have high interest so should be used with caution

Cheques

Direct debits

Advantages and disadvantages of cheques and direct debits

Advantages Disadvantages

Convenient and easy to use.

Some retailers do not accept.

Added security – can be stopped when lost.

When deposited into an account you need to wait for it to be cleared.

Advantages DisadvantagesA convenient way to pay for household services.

You need to have sufficient funds in your account to cover.

Can be paid regularly automatically.

Amounts paid may not always be the same.

Lay-by

Electronic funds transfer

Advantages and disadvantages of lay-by and electronics funds transfer

Advantages DisadvantagesNo interest charges. Buy goods not needed.

Protects you against future increases in the price of the product.

Good must stay in the store until full payment has been made.

Advantages DisadvantagesCash free so minimises security concerns.

Significant increases in fraud cases recently.

Widely accepted. Allows personal information to be passed onto others.

Use the ASIC booklet on book up or go to www.fido.asic.gov.au . Click on ‘Financial Tips’, then ‘Loans and Credit’.

Research to what “book up” is and where it is practiced

Discuss its ethical and legal implications.

Book – up activity

Buying a newspaper Paying for a haircut Paying the monthly electricity bill Purchasing a formal dress Paying for a car Buying groceries Paying your bus fare Paying off a mortgage (housing loan) or personal loan.

Determine the most appropriate payment method for each situation

Services for indigenous Australians and remote communities

Read the yellow box.

Brainstorm and develop a mind map showing measures that could be used by industry, government and indigenous organisations to improve the banking services available to these people in remote areas.

Compare the amounts on withdrawals, cheques and deposits with the amounts on your receipts or cheque butts. Check off all canceled cheques and deposits.

Insert the last balance shown on your bank statement Add deposits. Deduct all cheques and withdrawals. Your adjusted balance should agree with the balance in your record

book. If it doesn’t check your addition and subtraction, then check to be sure you have entered all the numbers correctly.

How To Check A Bank Statement And Balance Your Bank Account

Sample Bank

Statement

Activity – Complete the Bank ReconciliationDate Detai

lsDeposits

Wdls Balance

28/09/04 O/Bal 405.9301/10/04 590.9303/10/04 298.6407/10/04 100.0012/10/04 154.0015/10/04 58.9017/10/04 230.0021/10/04 127.8023/10/04 450.0026/10/04 240.0027/10/04 127.8028/10/04 45.7529/10/04 24.3030/10/04 C/Bal

There are several financial statements that are normally prepared by businesses. The most common ones are:◦ The profit and loss statement◦ The balance sheet.◦ The cash flow statement

Financial Statements

The profit and loss statement tells owners the differencebetween revenue (income) and expenses for a periodof time and whether they have made a profit or loss.

The Profit and Loss Statement

The balance sheet is like a set of scales that weighs the assets on one side and liabilities and owner’s equity on the other. Owner’s equity is basically what the business owes its owners.

The Balance Sheet

A cash flow statement summarise the details contained in a cash book.It summarises the inflows (income or deposits) and outflows (cheques or withdrawals) during a period of time. This whenadded to the bank balanceat the start of the periodenables the bank balanceat the end of the period to be determined.

The Cash Flow Statement

Cash ReceiptsLess Cash Payments = Cash surplus (deficit)Add Bank Balance (start of period) = Bank Balance (end of period)

Date Item Amount $April 1 Received cash from Joe Blow 40

April 3 Paid electricity bill 200

April 4 Received cash from Y Xeric 20

April 5 Received cash from L Montague 80

Paid wages to G Jones 250

April 6 Received donation from A Smith 100

April 7 Paid Telstra (phone bill) 350

April 8 Received payment from A Sims 450

April 9 Received cash from L Hewitt 400

April 10 Paid Energy Australia (Electricity bill) 50

April 13 Received cash from M Forces 200

April 14 Paid Telstra (phone bill) 80

April 25 Received donation from J Walker 100

April 26 Paid wages to G Jones 250

Activity - use this information to complete a cash flow statement

Definition – an estimate of income and expenses for a set period of time.

Reasons for making a budget◦ To track money when you are working to a plan.◦ To work out how to best use the money you earn.◦ To plan for your changing needs and wants.

Budgets

Go to https://www.moneysmart.gov.au/managing-your-money/budgeting/how-to-do-a-budget

Use the budget-planner document on SIMB to help plan out a budget for your household

You can start in class and finish for homework

How To Create A Budget

Using the steps below and other relevant internet sites, develop a brochure for teenagers on the steps in budgeting.

1. Determine money coming in (income).

2. Work out your fixed and variable expenses.

3. Write down your weekly cash flow.

4. Work out how much you can save.

5. Identify how to cut back.

6. Develop a cost benefit analysis to work out how to save for new wants.

7. Shop around to find the best deal for the goods and services you need and want.

8. Choose a suitable bank account.

9. Learn how to record your pay slip.

10. Decide how to keep records.

11. Develop a weekly, monthly and annual budget.

12. Monitor and change your budget at least once a month.

Activity

Self-checkout Supermarkets

ActivityDescribe how a self-

checkout works.Outline the advantages

and disadvantages of self-checkout supermarkets.

Technology in retailing and payment options is continually developing and changing. Recent developments include:◦ Online and internet shopping◦ EFTPOS and debit and credit cards◦ Smart cards◦ Self-checkout supermarkets

Activities1. Develop a collage in word of recent technological

developments in retailing.2. Use Microsoft publisher or word to create a newspaper article

titled ‘Shopping in 2050’. Include words and illustrations.

Changes over time and the impact of technology