accounting

Economics

is the study of scarcity and its implications for the use of resources, production of goods and services,

Microeconomics

studies the implications of individual human action, and is key to a person's financial health.

The study of individual decision-making units, such as firms and households.

Macroeconomics

studies how the economy behaves as a whole, including inflation, price levels, rate of growth, national income, gross domestic product and changes in employment rates

•The study of economy-wide aggregates, such as inflation, unemployment, economic growth, and international trade.

Scarcity

 = Unlimited wants and needs, together with fixed resources.

Model

 = A theoretical construct, or representation of a system using symbols, such as a flow chart, schematic, or equation.

Scientific Method

 = A body of techniques for investigating phenomena, acquiring new knowledge, or correcting and integrating previous knowledge.

Positive Economics

 = Statements that include only factual information, with no value judgments. “What is.”

Normative Economics

 = Statements that include value judgments, or opinions. “What ought to be.”

Supply

 = The relationship between the price of a good and quantity supplied, ceteris paribus.

Ceteris Paribu

s = Holding all else constant/ All else being equal (Latin).

Law of Supply

 = It states that, all other factors being equal, as the price of a good or service increases, the quantity of that good or service that suppliers offer will increase, and vice versa.

Demand

 = The relationship between the price of a good and quantity demanded, ceteris paribus.

Law of Demand

 = states that quantity purchased varies inversely with price. In other words, the higher the price, the lower the quantity demanded.

Equilibrium

 = a point from which there is no tendency to change.

Interest

The amount of money paid for the use of borrowed capital. For the lender,

Principal

•The amount of money used on which interest is charge.

Rate of Interest

The amount earned by one unit of principal during a unit of time.

Simple interest

interest to be paid which is proportional to the length of time the principal sum has been borrowed.

Ordinary simple interest

is computed on the basis of one banker’s year which is

Exact simple interest

is based on the exact number of days, 365 days for an ordinary year.

cash-flow diagram

is simply a graphical representation of cash flows drawn on a time scale.

Compound Interest

the interest for an interest period is calculated on the principal plus total amount of interest accumulated in previous periods

Nominal rate of interest

- The nominal rate of interest specifies the rate of interest and a number of interest periods in one year

Effective rate of interest

the actual or exact rate of interest on the principal during one year. If P1.00 is invested at a nominal rate of 15% compounded quarterly, after one year this will become,

Discount

It is the difference between the future worth and its present worth. Discount is interest paid in advance.

𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡 = 𝐹𝑢𝑡𝑢𝑟𝑒 𝑤𝑜𝑟𝑡ℎ − 𝑃𝑟𝑒𝑠𝑒𝑛𝑡 𝑊𝑜𝑟𝑡ℎ

Rate of Discount

It is the discount on one unit of principal for one unit of time or it is defined as the ratio of the discount to the future worth

ANNUITIES

Series of equal payments made at equal intervals of time. Instances where annuities occur:

•Payment of a debt by a series of equal payments at equal intervals of time.

•Accumulation of certain amount by setting equal amoun periodically.

•Substitution of a series of equal amounts periodically in lieu of a lump sum.

Simple annuity

– payment period is the same as the interest period. If the payment is made monthly then the conversion of money also occurs monthly.

General Annuity

– Payment period is not the same as the interest period however it can be converted to simple annuity by making the payment period the same as the compounding period by concept of effective rates.

•Ordinary annuity

– one where the equal paymentd are made at the end of each payment period starting from the first period.

•Deferred Annuity

– is one where the payment of the first amount is deferred a certain number of periods after the first.

•Annuity Due

– one where the payments are made at the start of each period, beginning from the first period.

Perpetuity

– annuity where the payment periods extend to forever or in which the periodic payments continue indefinitely.