2025
L Mashonja
Diamond Academy
1/1/2025
COMMERCE SUMMARY NOTES FOR BGCSE
🟦 Module 1: Introduction to Commerce
🔹 1. Meaning and Scope of Commerce
Commerce is the study of trade and aids to trade.
It covers all activities involved in the distribution of goods and services from producers to consumers.
Two main branches:
Trade – Buying and selling of goods and services.
Aids to trade – Activities that support trade (e.g., banking, insurance, transport).
🔹 2. Occupations
Occupations are grouped into three sectors:
a) Primary Sector
Involves extraction of natural resources.
Examples: farming, mining, fishing.
b) Secondary Sector
Involves manufacturing or processing raw materials.
Examples: construction, factory work.
L Mashonja| Diamond Academy
c) Tertiary Sector
Involves providing services.
Examples: teaching, banking, transport, retail.
Commercial occupations: Jobs that support trade, e.g., bankers, retailers, marketers.
🔹 3. Division of Labour and Specialisation
Division of Labour: Breaking down production into smaller tasks performed by different people.
Specialisation: Each worker focuses on one task to improve efficiency and quality.
Advantages:
Increased productivity
Faster production
Better use of skills
Disadvantages:
Boredom
Overdependence on others
Reduced flexibility
L Mashonja| Diamond Academy
🔹 4. Production
Production: The process of creating goods and services to satisfy human wants.
Types of Production:
1. Primary – Using natural resources (e.g., farming, mining).
2. Secondary – Converting raw materials into finished goods (e.g., factories).
3. Tertiary – Providing services (e.g., shops, hospitals).
🔹 5. Chain of Distribution
Describes the path goods follow from producer to consumer.
Example:
Producer → Wholesaler → Retailer → Consumer
Each stage adds value and brings the product closer to the final user.
🔹 6. Factors of Production
Resources needed for production:
1. Land – Natural resources (e.g., land, minerals, water).
L Mashonja| Diamond Academy
2. Labour – Human effort and skill.
3. Capital – Man-made tools, machines, and buildings.
4. Enterprise – Risk-taking and decision-making by entrepreneurs.
Reward for each factor:
Land → Rent
Labour → Wages
Capital → Interest
Enterprise → Profit
🔹 7. Business Organisations (Sectors of the Economy)
a) Private Sector
Owned and controlled by individuals or companies.
Objective: Profit.
Examples: Shops, factories, banks.
L Mashonja| Diamond Academy
b) Public Sector
Owned and controlled by the government.
Objective: Provide essential services.
Examples: Police, public hospitals, water supply.
c) Voluntary/Third Sector
Non-profit organisations (e.g., NGOs, charities).
Aim: Serve a cause or community.
🟦 Module 2: Trade
🔹 1. Home Trade
Trade that takes place within a country.
a) Retail Trade
Buying goods from wholesalers and selling to final consumers.
Types of retailers:
L Mashonja| Diamond Academy
Hawkers – Street sellers.
Tied shops – Sell goods from a particular supplier.
Speciality shops – Focus on one type of product (e.g., shoes).
Chain stores – Same brand shops in different locations.
Supermarkets – Large-scale self-service shops.
Department stores – Many product sections under one roof.
b) Wholesale Trade
Buying goods in bulk from manufacturers and selling to retailers.
Functions of wholesalers:
Breaking bulk.
Storage.
Providing credit.
Transport.
Market information.
L Mashonja| Diamond Academy
🔹 2. International Trade
Trade between countries. It includes import, export, and entrepot (re-exporting goods).
a) Types of Trade
Import – Buying goods from other countries.
Export – Selling goods to other countries.
Entrepot – Importing and then exporting again.
b) Terms in International Trade
Balance of trade: Difference between export and import of goods.
Balance of payments: All financial transactions with other countries.
Surplus – More exports than imports.
Deficit – More imports than exports.
🔹 3. Documents Used in Trade
Documents are essential for record keeping and transactions.
Common documents:
1. Quotation – States price and terms.
2. Order form – Request for goods.
3. Invoice – Bill for goods supplied.
L Mashonja| Diamond Academy
4. Delivery note – Lists delivered goods.
5. Credit note – Reduces invoice value.
6. Debit note – Increases invoice value.
7. Statement of account – Summary of all transactions.
🔹 4. Terms of Sale and Trade Discount
Cash discount – Reduction for early payment.
Trade discount – Reduction given to encourage bulk purchases.
Terms of sale – Conditions under which goods are sold.
🔹 5. Methods of Payment in Trade
Used in both home and international trade.
a) Cash Payment
Immediate payment using coins, notes, or mobile money.
b) Credit Payment
Buyer pays later.
Open credit
Hire purchase
Deferred payment
c) Bank Payment Methods
Cheque
Debit/credit cards
L Mashonja| Diamond Academy
Bank transfer
Standing order
Mobile banking
d) International Payment Methods
Letter of credit – Bank guarantees payment.
Bill of exchange – Written order to pay.
Telegraphic transfer – Electronic international money transfer.
Traveller’s cheques – Prepaid cheques for foreign use.
🔹 6. Free Trade vs Protectionism
a) Free Trade
Trade without tariffs or quotas.
Advantages:
Access to wider markets
Lower prices
Disadvantages:
Local industries may suffer.
b) Protectionism
Government policies to protect local industries.
Tariffs – Taxes on imports.
Quotas – Limits on imported goods.
Subsidies – Government support to local producers.
L Mashonja| Diamond Academy
🟦 Module 3: Aids to Trade
Aids to trade are services or activities that support the buying and selling of goods and services. They
make trade more efficient and effective.
🔹 1. Banking
Banks provide financial services that help in trade.
Types of banks:
Central Bank – Controls money supply and currency (e.g., Bank of Botswana).
Commercial Banks – Offer services to businesses and individuals (e.g., FNB, Standard Chartered).
Development Banks – Support industrial and agricultural development.
Services offered:
Accepting deposits
Providing loans and overdrafts
Facilitating payments (cheques, debit cards)
Foreign exchange services
Safe custody of valuables
🔹 2. Insurance
Insurance provides protection against risks and losses.
L Mashonja| Diamond Academy
Types of insurance:
Fire insurance – Covers fire damage.
Theft/burglary insurance
Goods in transit insurance
Motor vehicle insurance
Life insurance
Public liability insurance
Key terms:
Premium – Regular payment to the insurer.
Claim – Request for compensation.
Policy – Contract between insurer and insured.
Indemnity – Compensation without profit.
🔹 3. Transport
Transport moves goods from producers to consumers.
Types of transport:
Land – Road and rail
Air
Water – Sea and inland waterways
Pipeline – For liquids like oil
Importance:
Widens markets
Enables mass production
L Mashonja| Diamond Academy
Reduces regional inequalities
🔹 4. Communication
Communication spreads information quickly between buyers, sellers, and others involved in trade.
Traditional methods:
Postal services
Telephones
Modern methods:
Email
Mobile phones
Internet (websites, online orders)
Social media platforms (e.g., WhatsApp Business, Facebook)
Importance:
Faster decision-making
Better customer service
Advertisement and marketing
🔹 5. Advertising and Sales Promotion
Helps increase sales and public awareness of products or services.
Types of advertising:
Informative – Provides product details.
L Mashonja| Diamond Academy
Persuasive – Convince customers to choose a product.
Reminder – Keeps product in customer’s mind.
Advertising media:
Newspapers, radio, TV
Internet ads, social media
Billboards, posters
Sales promotion techniques:
Discounts
Free samples
Buy-one-get-one-free (BOGOF)
Contests and giveaways
🔹 6. Warehousing
Storage of goods until they are needed.
Types of warehouses:
L Mashonja| Diamond Academy
Private warehouse – Owned by businesses for their own use.
Public warehouse – Rented out to anyone.
Bonded warehouse – For imported goods waiting for duty clearance.
Functions:
Storing goods safely
Protecting against damage and theft
Ensuring constant supply of goods
🔹 7. Business Finance
Finance supports the day-to-day running and expansion of trade activities.
Sources of finance:
Internal: retained profits, owner’s capital
External: loans, overdrafts, investors
Importance:
Buying stock
L Mashonja| Diamond Academy
Paying wages
Expanding operations
🔹 8. E-commerce and ICT in Trade
Use of computers and the internet to conduct business.
Examples:
Online stores (e.g., Amazon)
Mobile banking and payments (e.g., Orange Money)
Business websites
Social media marketing
Benefits:
Global market access
Reduced costs
24/7 availability
🟦 Module 4: Production and Manufacturing
L Mashonja| Diamond Academy
🔹 1. Types of Production
Production is the process of creating goods and services to satisfy human wants.
a) Primary Production
Involves using natural resources directly.
Examples: farming, fishing, mining.
b) Secondary Production
Involves converting raw materials into finished or semi-finished goods.
Examples: construction, manufacturing, baking.
c) Tertiary Production
Involves providing services to consumers or businesses.
Examples: banking, transport, teaching.
🔹 2. Manufacturing Industries
Industries involved in secondary production. They use raw materials to make finished goods.
Examples:
L Mashonja| Diamond Academy
Food processing (e.g., milling maize)
Textile manufacturing (e.g., making clothes)
Furniture making
Manufacturing contributes to:
Job creation
Export earnings
Industrial development
🔹 3. The Production Process
Stages goods go through from raw material to finished product.
Stages:
1. Input – Raw materials, labour, capital.
2. Process – Activities that transform inputs.
3. Output – Finished goods or services.
L Mashonja| Diamond Academy
Importance:
Efficient production increases productivity.
Technology improves the speed and quality of output.
🔹 4. Location of Industry
Choosing the best place to set up a business or factory.
Factors affecting location:
Availability of raw materials
Proximity to market
Labour supply
Transport and infrastructure
Power and water supply
Government policies/incentives
🔹 5. Cost of Production
Costs are the expenses a business incurs in producing goods or services.
L Mashonja| Diamond Academy
Types of Costs:
Fixed costs – Do not change with output (e.g., rent).
Variable costs – Change with output (e.g., raw materials).
Total cost = Fixed + Variable costs.
Average cost = Total cost ÷ Units produced.
Understanding costs helps in:
Pricing goods
Reducing waste
Improving profits
🔹 6. Productivity and Efficiency
Productivity:
Output per unit of input (e.g., output per worker).
Higher productivity = more goods produced using same resources.
Efficiency:
L Mashonja| Diamond Academy
Using resources with minimal waste or cost.
Achieved through:
Specialisation
Technology
Skilled labour
Good management
🔹 7. Industrial Relations
The relationship between employers and employees in the workplace.
Key elements:
Contracts of employment
Working conditions
Wages and benefits
Worker rights and responsibilities
Trade Unions:
L Mashonja| Diamond Academy
Organisations that represent workers’ interests.
Help negotiate:
Fair wages
Safe working conditions
Dispute resolutions
Industrial actions:
Strike – Workers stop working.
Go-slow – Workers reduce output deliberately.
Good industrial relations lead to:
Higher morale
Productivity
Fewer conflicts
🟦 Module 5: Transport and Communication
L Mashonja| Diamond Academy
🔹 1. Importance of Transport in Commerce
Transport is the movement of goods and people from one place to another.
Importance:
Connects producers with consumers.
Facilitates trade (local and international).
Enables mass production and distribution.
Reduces regional inequalities by linking remote areas.
Creates employment (e.g., drivers, logistics companies).
🔹 2. Modes of Transport
a) Land Transport
Road: Buses, trucks, cars, motorbikes.
Flexible, door-to-door delivery.
Suitable for short and medium distances.
Rail: Trains.
L Mashonja| Diamond Academy
Suitable for bulky goods over long distances.
Lower cost per unit.
b) Air Transport
Fastest mode; used for light, high-value, or perishable goods.
Expensive and affected by weather.
c) Water Transport
Sea: For international trade.
Inland waterways: Rivers and canals.
Suitable for heavy, bulky goods.
Slow but cost-effective.
d) Pipeline Transport
Used for liquids and gases (e.g., oil, water).
Low operating cost once installed.
Limited to certain types of goods.
🔹 3. Factors Affecting Choice of Transport
Nature of goods: Bulky, fragile, perishable?
L Mashonja| Diamond Academy
Distance to be covered
Speed required
Cost
Availability of infrastructure
Destination (local or international)
🔹 4. Communication in Commerce
Communication is the exchange of information between individuals or businesses.
Importance:
Helps businesses make informed decisions.
Facilitates advertising and customer service.
Supports documentation and negotiation.
Reduces delays in business operations.
🔹 5. Modern Trends in Communication
a) Traditional Methods
L Mashonja| Diamond Academy
Postal services
Landline telephones
Fax
b) Modern Methods
Mobile phones – Quick, convenient.
Email – Formal, fast, supports attachments.
Social media – Marketing and customer interaction.
Websites – Online presence, e-commerce.
Video conferencing – Zoom, Teams for meetings.
Benefits:
Faster communication
Real-time feedback
Wider reach (local and global)
Reduced costs in the long term
L Mashonja| Diamond Academy
🟦 Module 6: Business Units
This module focuses on the types of business organisations, how they are formed, and how they operate
within the economy.
🔹 1. Types of Business Organisations
a) Sole Trader
Owned and run by one person.
Easy to set up.
Owner keeps all profits but has unlimited liability (responsible for all debts).
b) Partnership
2 to 20 people own the business.
Share profits and responsibilities.
Regulated by a partnership agreement.
Still has unlimited liability (unless a limited partnership is formed).
c) Private Limited Company (Ltd)
L Mashonja| Diamond Academy
Owned by shareholders (usually family and friends).
Has limited liability – personal assets are protected.
Cannot sell shares to the public.
Must be registered and follow legal formalities.
d) Public Limited Company (PLC)
Can sell shares to the public through the stock exchange.
Suitable for large businesses.
Must publish accounts and meet strict regulations.
e) Co-operative Societies
Owned and controlled by members (e.g., farmers, consumers).
Profits are shared equally or based on contribution.
One-member-one-vote system.
f) Public Corporations (State-owned Enterprises)
L Mashonja| Diamond Academy
Owned and operated by the government.
Provide essential services (e.g., water, electricity).
Not profit-driven, but aim to serve public interest.
🔹 2. Formation of Companies
Steps to set up a company:
1. Choose a business name.
2. Prepare key documents:
Memorandum of Association (external information)
Articles of Association (internal rules)
3. Register with the Registrar of Companies.
4. Receive a Certificate of Incorporation (official existence).
5. (For PLCs) Obtain a Trading Certificate to begin operations.
L Mashonja| Diamond Academy
🔹 3. Franchising
A franchise is a business agreement where one party (franchisee) uses the brand, products, and business
model of another (franchisor).
Advantages to the franchisee:
Use of an established brand.
Training and support.
Easier access to finance.
Disadvantages:
Limited control.
Must pay royalties or fees.
Strict rules from franchisor.
Examples: Chicken Licken, KFC, Debonairs.
🔹 4. Multinational Companies (MNCs)
Large businesses that operate in multiple countries.
Characteristics:
L Mashonja| Diamond Academy
Large capital base.
Global markets and production.
Influence over local economies.
Benefits:
Job creation
Technology transfer
Foreign exchange earnings
Drawbacks:
Can exploit resources
May send profits overseas
Influence on local culture and policies
🔹 5. Public Corporations
Owned and managed by the government.
L Mashonja| Diamond Academy
Features:
Funded by taxpayers.
Provide essential and strategic services.
Not mainly profit-driven.
Examples: Water Utilities Corporation (WUC), Botswana Power Corporation (BPC)
🔹 6. Mergers and Takeovers
Merger: Two or more businesses combine to form one.
Takeover: One company buys another.
Reasons:
Increase market share.
Reduce competition.
Benefit from economies of scale.
Risks:
Job losses
Culture clash
Monopoly concerns
🟦 Module 7: Finance in Business
L Mashonja| Diamond Academy
🔹 1. Sources of Business Finance
Finance is the money needed to start, run, and expand a business.
a) Internal Sources
Owner’s capital: Money invested by the business owner.
Retained profits: Profits kept in the business instead of distributed.
b) External Sources
Loans: Money borrowed from banks or individuals to be paid back with interest.
Overdrafts: Temporary borrowing from a bank allowing spending more than the account balance.
Mortgage: Long-term loan secured on property.
Trade credit: Delay in payment to suppliers.
Investors/shareholders: Provide capital in exchange for shares.
🔹 2. Purpose of Finance in Business
To buy stock and raw materials.
To purchase fixed assets (e.g., machinery, buildings).
To pay wages and salaries.
L Mashonja| Diamond Academy
To finance daily operations (utilities, rent).
To expand the business or invest in new projects.
🔹 3. Short-, Medium-, and Long-term Finance
Term Duration Examples
Short-term Less than 1 year Overdrafts, trade credit
Medium-term 1 to 5 years Bank loans, leasing
Long-term More than 5 years Mortgage, issuing shares
Source Description Advantage Disadvantage
InternalOwner’s capital, retained profits No interest; control retained Limited funds
External Loans, overdrafts, investors Large amounts available Interest costs; loss of
control
🔹 5. Factors Influencing Choice of Finance
Amount needed.
Purpose of finance.
Cost (interest rates, fees).
Repayment terms and flexibility.
L Mashonja| Diamond Academy
Control and ownership implications.
Risk involved.
Time period for finance.
🟦 Module 8: Business Calculations
🔹 1. Simple Interest and Percentage
Simple Interest (SI): Interest charged on the original principal only.
SI= (P *R*T)\100
Where:
P = Principal (amount borrowed or invested)
R = Rate of interest per year (%)
T = Time (years)
Percentage: Used to express ratios or proportions out of 100.
🔹 2. Profit and Loss
Cost Price (CP): Price at which goods are bought.
Selling Price (SP): Price at which goods are sold.
Profit: When SP > CP
Profit =SP-CP
L Mashonja| Diamond Academy
Percentage is calculated on CP
🔹 3. Discounts
Trade Discount: Reduction in list price given by sellers to buyers, usually for bulk purchases.
Cash Discount: Reduction given for prompt payment.
🔹 4. Cost, Revenue, and Break-even Analysis
Cost: Total expenses incurred to produce goods.
Revenue: Income from sales.
Break-even Point (BEP): The sales level where total revenue equals total costs (no profit or loss).
BEP =fixed costs /(SP-Variable costs)
🔹 5. Exchange Rates
The value of one currency expressed in terms of another.
Important for international trade and converting foreign prices/payments.
Exchange rate fluctuations affect import/export costs and profits.
🔹 6. Budgets and Cash Flow Forecasting
Budget: Financial plan showing expected income and expenditure over a period.
L Mashonja| Diamond Academy
Cash Flow Forecast: Prediction of cash inflows and outflows to ensure the business can meet its
obligations.
L Mashonja| Diamond Academy
