Theory Cards - Year 10 Yearly Exam

What is income?

Money received in exchange for work or investment.

What is a wage?

A fixed rate of income for a period of time, for example $30/hour.

What are penalty rates?

Higher rates of pay given for working overtime, on weekends, or on public holidays.

Time-and-a-half means

1.5 × standard wage.

Double time means

2 × standard wage.

What is a salary?

A fixed income paid on a regular basis.

When calculating weekly or fortnightly salaries, how many weeks and fortnights are assumed to be in a year?

52 weeks and 26 fortnights.

How should monthly income be calculated from an annual salary?

By dividing the annual salary by 12.

What is a bonus?

A payment given as an incentive or to reward good performance, typically given as a percentage of an employee's salary.

What is piece work?

Income which is paid for each item (or group of items) produced or action performed.

What is a commission?

A proportion of the value of an employee's sales that is paid to them.

What is a royalty?

A payment made to a person or company for the use of their assets.

What is leave loading?

An extra payment on top of annual leave pay.

Leave loading is usually calculated at

17.5% of normal pay for the period of annual leave.

How do you calculate leave loading?

Find 17.5% of the normal pay for the period of annual leave.

What are tax deductions?

Expenses that can be subtracted from an individual's total income to determine their taxable income.

What is taxable income?

Total income minus tax deductions.

How do you calculate taxable income?

Subtract tax deductions from total income.

What is income tax?

Tax which is paid on an individual's taxable income.

What is the Medicare levy?

A 2% tax on taxable income.

How do you calculate the Medicare levy?

Multiply the taxable income by 2%.

What is the formula for net income?

net income = taxable income − income tax − Medicare levy

How do you calculate net income?

Subtract the income tax and the Medicare levy from the taxable income.

For the 2023–2024 tax table, the tax payable on taxable income of $0–$18 200 is

Nil.

For the 2023–2024 tax table, the tax payable on taxable income of $18 201–$45 000 is

19 cents for each $1 over $18 200.

For the 2023–2024 tax table, the tax payable on taxable income of $45 001–$120 000 is

$5092 plus 32.5 cents for each $1 over $45 000.

For the 2023–2024 tax table, the tax payable on taxable income of $120 001–$180 000 is

$29 467 plus 37 cents for each $1 over $120 000.

For the 2023–2024 tax table, the tax payable on taxable income of $180 001 and over is

$51 667 plus 45 cents for each $1 over $180 000.

What is interest?

A sum of money added to an initial amount that was either borrowed or invested.

If money is borrowed and interest is charged on it, what is this arrangement called?

A loan.

If money is invested and interest is earned on it, what is this arrangement called?

An investment.

What is the simple interest formula?

I = Prn

In the formula I = Prn, what does I represent?

Interest.

In the formula I = Prn, what does P represent?

Principal — the initial amount of money borrowed or invested.

In the formula I = Prn, what does r represent?

Interest rate — the amount of interest due per time period, as a proportion of the principal.

In the formula I = Prn, what does n represent?

The number of time periods.

In the simple interest formula, what must be true about the units of r and n?

The length of the time period for the interest rate (r) and the number of time periods (n) must be the same.

How do you find the total amount to be repaid at the end of a simple interest loan?

Add the interest (I) to the principal (P).

How do you calculate the amount of each regular repayment on a loan with equal instalments?

Divide the total amount to be repaid by the number of instalments.

On a graph of a simple interest investment's value over time, what shape is the line?

A straight line.

On a graph of a simple interest investment's value over time, what does the y-intercept represent?

The principal (initial value of the investment).

On a graph of a simple interest investment's value over time, what does the gradient represent?

The amount of interest earned per time period.

How can the annual interest rate be found from a simple interest graph?

From the gradient (interest earned per time period), converted to a rate per annum relative to the principal.

What is compound interest?

Interest generated when simple interest is added to the present value (PV) at regular intervals, so the amount used for calculating interest keeps increasing.

What is the future value (FV) of an investment or loan?

The final total after a given number of compounding periods have elapsed.

What is a time period (n) in the context of compound interest?

The regular interval of time at which interest is calculated and added to the present value.

When interest rates are equal, which increases faster over time: compound interest or simple interest?

Compound interest increases faster than simple interest.

What is the compound interest formula?

FV = PV(1 + r)^n

In the formula FV = PV(1 + r)^n, what does FV represent?

The future value of the investment or loan.

In the formula FV = PV(1 + r)^n, what does PV represent?

The present value of the investment or loan.

In the formula FV = PV(1 + r)^n, what does r represent?

The interest rate per time period, written as a decimal.

In the formula FV = PV(1 + r)^n, what does n represent?

The number of time periods.

How can you calculate the interest rate per time period from an annual interest rate?

Divide the interest rate per annum by the number of time periods in a year.

What does the index (exponent) in the compound interest formula represent?

A repeated multiplication of (1 + r).

What is the formula for the amount of compound interest earned?

I = FV − PV

How do you calculate the amount of compound interest earned?

Subtract the present value from the future value.

What is a depreciating asset?

An asset with a limited life expectancy that is expected to decline in value over the time it is used.

What is depreciation?

The decline in the value of a depreciating asset over time.

What is the salvage value of an asset?

The value of an asset after it has been depreciated."

What is straight-line depreciation?

A method that reduces the value of a depreciating asset uniformly over its effective life.

What is another name for straight-line depreciation?

Prime cost depreciation.

What is the straight-line depreciation formula?

S = V₀ − Dn

In the formula S = V₀ − Dn, what does S represent?

The salvage value.

In the formula S = V₀ − Dn, what does V₀ represent?

The initial value of the asset.

In the formula S = V₀ − Dn, what does D represent?

The depreciation amount per time period.

In the formula S = V₀ − Dn, what does n represent?

The number of time periods.

What is diminishing-value depreciation?

A method that reduces the value of a depreciating asset by a constant percentage each time period.

What is another name for diminishing-value depreciation?

Declining-balance depreciation.

What is the diminishing-value depreciation formula?

S = V₀(1 − r)^n

In the formula S = V₀(1 − r)^n, what does S represent?

The salvage value.

In the formula S = V₀(1 − r)^n, what does V₀ represent?

The initial value of the asset.

In the formula S = V₀(1 − r)^n, what does r represent?

The depreciation rate per time period.

In the formula S = V₀(1 − r)^n, what does n represent?

The number of time periods.

How do you calculate the depreciation amount for a year using diminishing-value depreciation?

Multiply the value at the start of the year by the depreciation rate.

For diminishing-value depreciation, how does the yearly depreciation amount change over time?

It decreases each year — always less than in the previous year.

Compared to straight-line depreciation, when does diminishing-value depreciation reduce an asset's value by more?

In the early years (it reduces value by less in later years).