Entrepreneurship S6 SB

ENTREPRENEURSHIP
STUDENT’S BOOK FOR

SENIOR SIX
Kigali, January 2019

Copyright
© 2019 Rwanda Education Board
All rights reserved.
This textbook is the property of Rwanda Education Board.
Credit should be given to REB when the source is quoted
ii Entrepreneurship Senior Six Student Book

FOREWORD
Dear student,
Rwanda Education Board is honoured to present to you this Entrepreneurship book

for Senior Six which serves as a guide to competence-based teaching and learning
to ensure consistency and coherence in the learning of entrepreneurship subject.
The Rwandan educational philosophy is to ensure that you achieve full potential at
every level of education which will prepare you to be well integrated in society and
exploit employment opportunities.
The government of Rwanda emphasizes the importance of aligning teaching and

learning materials with the syllabus to facilitate your learning process. Many factors
influence what you learn, how well you learn and the competences you acquire.
Those factors include the instructional materials available among others. Special
attention was paid special attention to the activities that facilitate the learning
process in which you can develop your ideas and make new discoveries during
concrete activities carried out individually or with peers.
In competence-based curriculum, learning is considered as a process of active

building and developing knowledge and meanings by the learner where concepts
are mainly introduced by an activity, a situation or a scenario that helps the learner
to construct knowledge, develop skills and acquire positive attitudes and values. For
effective use of this textbook, your role is to:
• Work on given activities which lead to the development of skills

• Share relevant information with other learners through presentations,
discussions, group work and other active learning techniques such as role
play, case studies, investigation and research in the library, from the internet
or from your community;
• Participate and take responsibility for your own learning;
• Draw conclusions based on the findings from the learning activities.
Entrepreneurship Senior Six Student Book iii

I wish to sincerely extend my appreciation to the people who contributed towards
the development of this book, particularly REB staff who organized the whole
process from its inception. Special gratitude goes to the University of Rwanda
which provided experts in design and layout services, illustrations and image anti-
plagiarism, lecturers and teachers who diligently worked to successful completion
of this book. Any comment or contribution would be welcome for the improvement
of this textbook for the next edition.
Dr. NDAYAMBAJE Irénée
Director General, REB
iv Entrepreneurship Senior Six Student Book

ACKNOWLEDGEMENT
I wish to express my appreciation to all the people who played a major role in
development of this entrepreneurship Teachers guide for senior six. It would not have
been successful without active participation of different education stakeholders.
I owe gratitude to different Universities and schools in Rwanda that allowed their
staff to work with REB in the in-house textbooks production project. I wish to extend
my sincere gratitude to lecturers, teachers and all other individuals whose efforts in
one way or the other contributed to the success of writing of this textbook.
Special acknowledgement goes to the University of Rwanda which provided experts

in design and layout services, illustrations and image anti-plagiarism..
Finally, my word of gratitude goes to the Rwanda Education Board staff particularly
those from Curriculum, Teaching and Learning Resources Department who were
involved in the whole process of in-house textbook writing.
Joan Murungi,
Head of CTLRD
Entrepreneurship Senior Six Student Book v

TABLE OF CONTENTS
FOREWORD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i i i
ACKNOWLEDGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
Unit 1: SOCIO-ECONOMIC DEVELOPMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Meaning of Social Econo mic Developmenty 1.1.1 ivity 1.1 . . . . . . . . . . 5
1.2 Factors and indicators of socio-economic development . . . . . . . . . . . . . . . 7
1.3 Role of entrepreneurship in socio-economic development . . . . . . . . . . . . 1 2
1.4. Meaning of environment and society, their types and components . . . . . . 1 8
1.4.1 Meaning of environment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 8
1.5. Possible negative effects of business activities on different types of environment
and their components. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 5
1.6. Managing and preventing the negative effects of a business on different types
of environment and their components . . . . . . . . . . . . . . . . . . . . . . . . . . 2 8
1.7. Entrepreneurs and social responsibility/Proactive social responsibility . . . . . 3 1

Unit 2: Environment Impact Assessment (EIA) . . . . . . . . . . . . . . . . . . . . 3 6
2.1 Meaning of Environmental Impact Assessment (EIA). . . . . . . . . . . . . . . . . . . . . . . . . 3 8
2.2. Environmental Impact Assessment (EIA) Process . . . . . . . . . . . . . . . . . . 4 4
2.3 Roles of Stakeholders in EIA Process. . . . . . . . . . . . . . . . . . . . . . . . . . . 4 7
2.4 EIA PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 9
2.5 Practical Activity on designing EIA reports of projects . . . . . . . . . . . . . . . . 5 0
End of unit assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 3
Unit 3: CUSTOMS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 8

3.1 Meaning of Customs and Customs declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 8
3.2. Objectives of the Customs Services Department . . . . . . . . . . . . . . . . . . . 6 1
3.3. Customs Offices in Rwanda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1
3.4 Types of customs declaration and goods that may be exported and imported
in Rwanda. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3
3.5. Customs exempt goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3
3.6 Partners in the process of customs declaration. . . . . . . . . . . . . . . . . . . . 7 4
3.7. Documents used in customs declaration . . . . . . . . . . . . . . . . . . . . . . . . 7 6
3.8 Declaration forms in customs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 7
3.9 Verification and payment of customs duties. . . . . . . . . . . . . . . . . . . . . . 7 9
3.10 Administrative practices for taking goods out of customs . . . . . . . . . . . . 8 1
End of Unit 3 Assessment:. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2
vi Entrepreneurship Senior Six Student Book
Unit 4: FINANCIAL MARKETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4
4.1 Meaning and functions of financial Market . . . . . . . . . . . . . . . . . . . . . . . 8 6
4.2 Types of financial markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 7
4.3 Capital market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 9
4.4 Stock exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 2
4.5 Rwanda Capital Market Authority- CMA . . . . . . . . . . . . . . . . . . . . . . . . 9 5
4.6 Capital market participants, benefits of investing through capital markets and
how investors are protected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 8
4.7 How to invest in capital market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 1
4.8. Procedures to join Rwanda stock exchange. . . . . . . . . . . . . . . . . . . . . 1 0 3
End of Unit 4 Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 6
Unit 5: FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 8

5.1 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 0
5.2 Income Statement....................................................................................................................113
5.3 Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 4
5.4 Interpreting Financial Statements/ financial statements analysis. . . . . . . . 1 3 4
5.5 Cash Flow Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4 0
5.6. Statement of Owners Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 3
End of unit assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 9
Unit 6: STOCK CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 4

6.1 Meaning of stock, stock management and inventory. . . . . . . . . . . . . . . 1 6 5
6.2 Necessary documents for stock management. . . . . . . . . . . . . . . . . . . . 1 6 8
6.3 Procurement procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 7 5
6.4 Perpetual and periodical inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 7 7
6.5 Valuation methods on supplied stock. . . . . . . . . . . . . . . . . . . . . . . . . 1 8 0
Unit 7: BUSINESS PLAN OF AN ENTERPRISE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 8 8

7.1 Meaning of a business plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 8 9
7.2 Users of a business plan and how they use it.. . . . . . . . . . . . . . . . . . . . 1 9 2
7.3 The structure of a business plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9 6
7.4 Business description. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9 8
7.5 Marketing Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9 9
7.6 Organisational plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 0 3
Entrepreneurship Senior Six Student Book vii
Unit 8: OPERATIONAL BUSINESS PLAN FOR AN ENTERPRISE . . . . . . . . . . . . . . 2 0 6

8.1 Production plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 0 7
8.2 Business operation and costs plan. . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1 2
8.3 Financial plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1 6
8.4. Risk Assessment and Contingency Plan . . . . . . . . . . . . . . . . . . . . . . . . 2 3 1
8.5 Action plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3 5
End of Unit Assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 5 0
Unit 9: QUALITY ASSURANCE AND QUALITY COMPLIANCE IN BUSINESS. . . 2 5 2

9.1 Meaning and background of metrology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 5 5
9.2. Metrology and its Types, Its Application in Business activities and Importance of
accurate Measurements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 5 7
9.3. Quality Management, Assurance and Compliance . . . . . . . . . . . . . . . . . 2 6 1
9.4. Accreditation and its Role in cross Border Business . . . . . . . . . . . . . . . . 2 6 6
9.5. Practical Activity on Quality assurance . . . . . . . . . . . . . . . . . . . . . . . . 2 7 0
Unit 10: WORK HABITS AND BEHAVIOUR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 7 4

10.1 Finding a job. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 7 6
10.2 Interviews Process and Techniques. . . . . . . . . . . . . . . . . . . . . . . . . . 2 8 3
10.3 Appropriate Workplace Behaviors and Attitudes . . . . . . . . . . . . . . . . . 2 8 7
10.4 Time Management skills. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 8 9
10.5 Personal qualities that help one to manage time . . . . . . . . . . . . . . . . . 2 9 2
10.6 Developing a career plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 9 5
End of Unit 10 Assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 9 9
Unit 11: WORK SAFETY AND HEALTH. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 0 4

11.1.Safety an d health at workiv........... . . . . . . . . . . . . . . . . . . . . . . . . . . 3 0 7
11.2. Healthy hygiene and sanitation practices . . . . . . . . . . . . . . . . . . . . . 3 1 1
11.3. Hazards in the Workplace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 5
11.4. Ways to make work safer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 9
11.5. Emergencies at work. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2 1
End Unit Assessment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 3 3
Bibliography. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..335
viii Entrepreneurship Senior Six Student Book

UNIT 1
SOCIO-ECONOMIC
DEVELOPMENT
Unit 1: SOCIO-ECONOMIC DEVELOPMENT
Key Unit Competency: Evaluate the contribution of entrepreneurship towards

socio-economic development
2 Entrepreneurship Senior Six Student Book

Introduction
In Rwanda and the world over, there are a lot of talks about the future of work. Much
of the time, these conversations are fuelled by the concern many people share as
they try to understand the impact the new technologies will have on our industries.
They tend to reduce these discussions to twofold arguments; how smart machines
will do extraordinary things to improve our lives, or how this or that innovation will
make human labor obsolete, creating a jobless dystopia. Both conclusions strike as
somewhat specious. It’s not that these concerns aren’t valid, but they oversimplify a
more complex phenomenon.
But why and how does entrepreneurship fuel economic growth? On the surface,
the answer seems intuitive: entrepreneurs create businesses and new businesses
create jobs, strengthen market competition and increase productivity. In Rwanda,
entrepreneurism is becoming part of our identity and self-image. It’s non-limited,
too; both sides of social economic aspect, business development and the political
spectrum celebrate entrepreneurial activities as a source of economic growth and
development. Entrepreneurism is seen as a route to upward mobility a way for
people to build wealth.
However, it’s important to understand that for entrepreneurs to bring new ideas to
life, they need access to education and a level-playing field on which to compete.
Economic growth suffers when entrepreneurial activity is unevenly spread socio-
economically. Under the right conditions, entrepreneurs have an incredible power:
they help people prosper economically, and they also serve society as they help
engineer innovative solutions to problems and challenges related to unemployment
and low standards of living.
Entrepreneurship Senior Six Student Book 3

Introductory activity:
Observe and analyze the pictures below and answer the following questions;
Figure 1. 1(a) Kigali’s aerial view of 1968 b) Kigali the city of hope
Rwanda is a fast developing country in terms of social, economic infrastructural

and technological advancement as well as in other aspects of life. Referring to the
above two pictures {Figure 1.1 (a) and (b)}.
Questions
a. How do you compare the two pictures in terms of development?
b. Describe the factors which might have caused the differences in the two
pictures regarding the wellbeing of people?
c. What do you think could be the contribution of entrepreneurs in the
differences depicted in the two pictures above in terms of people`s
welfare?
d. What changes have you observed in your locality over the past five
years and the potential negative effects of entrepreneurs towards those
changes?
e. Referring to your community, what do you understand by social economic
development?

1.1 The Meaning of Social Econo mic Developmenty 1.1.1 ivity
1.1
Activity 1.1
In senior 2, unit 1 you described the role of an entrepreneur in socio-economic
development and Senior 2 unit 3 you also analyzed the contribution of the
various types of work to socioeconomic development while in senior 3 in unit 4
you analyzed different forms of enterprises. Referring to your prior knowledge:
a. What do you understand by “Socio-economic Development”?
b. What are the factors that may have affected the socio-economic
development of your locality?
c. What are the indicators of the socio-economic development you have
seen over the past five years in your locality?
Social-economic development: it is a process of social economic transformation

in a society. Development is a gradual process through which there is a persistent
increase both in quality and quantity of goods and services that are enjoyed by the
people in a community or a country. E.g. having schools in a community may not be
sufficient, but the quality of teachers who teach in such schools is also very vital. The
scholastic materials available in schools are also important.
Eating food is essential but eating food with required body building nutrients is
more vital etc. If an occurrence in a community leads to negative effects, then that
occurrence is said to bring about underdevelopment. E.g. the cutting down of forests
may help some people to get money in the short run but may lead the community
to suffering in long as a result of drought.
The changes could be both positive and negative. Positive changes lead to the
advancement of the society and the negative ones lead to stagnation or decline of
the society’s social and economic wellbeing.

Application Activity 1.1
Analyse the photo and the case sstudy below and answer the questions that
follow;
Figure1.2 Ese URWIBUTSO/SINA GERARD Company
Ese RWIBUTSO/SINA GERARD Company certified since 2007 is currently supporting

more than 3,000 local farmers to grow crops and fruits. As a result, the farmers get
seeds, technical advice and assistance as well as a secure market of their products
from the company. It is also committed to strong community training, with clear
practical training programs for farmers that include demonstration fields.
The company has different activities which include:

• Fruits and vegetables processing
• Agriculture and animal husbandry
• Restaurants
• Shops
• Construction
• Carpentry
• Schools
• Eco-tourism

Ese URWIBUTSO / SINA GERARD Company undertakes special projects which are
critical to the economic and social development of local communities.
That is why it takes pride in the promotion and development of the community
of RULINDO District and its surrounding. This is done by creating various socio-
economic actions like the agribusiness activities, provision of employment,
construction of schools, etc. Those who study veterinary have livestock which
helps them in doing their experiment and on which they practice surgery which
helps them in knowing what are animals sick of practically not only in theory.
Those who study agronomy also have modern gardens which they use in their
studies by cultivating them and controlling what they saw until the harvest and
production. Enterprise URWIBUTSO/SINA GERARD Company is committed to
corporate social responsibility, promoting local development, distribution of
cows to the local population with the system of mass redistribution of calves and
heifers, creating job opportunities and training for farmers, and environmental
protection.
1. Describe some of the changes in terms of development that you have

observed in order to make your community a better place than it is now.
2. Explain how some ways of conducting entrepreneurship may holdback
development rather than promoting it.
1.2 Factors and indicators of socio-economic development

Economic development is not possible without growth, but growth is possible
without development because growth is the increase in the Gross National Product
(GNP).
1.2.1 Factors for socio-economic development

Different societies have undergone socio-economic transformation while others
have not. The presence of different factors of socio-economic development in an area
shows that such an area is developed or is developing and also determines a pace
at which it can develop. The factors that determine socio-economic development
may include:
i. Level of technology. It is a determinant because better technology
means better goods and services at lower prices. Technology also enables
people to get better shelter, medical facilities, education, transportation
and generally better standard of living. Communities with better level of
technology experience fast socio-economic development.

ii. Level of entrepreneurship. Communities with high level of entrepreneurship
tend to experience faster socio-economic development than those without
entrepreneurship. This is because entrepreneurs create employment
opportunities which increase people’s income. Entrepreneurs produce
goods and services, establish medical facilities and other products which
improve people’s standard of living. Entrepreneurs also pay taxes to the
government which increases the government revenue. The government
uses such revenue to provide education, security, medical care, infrastructure
and other public expenditures.
iii. Investment climate. It refers to the conditions under which investors
in a particular country operate. A good investment climate means that
the conditions in the country favor investors. These conditions include
favourable taxes, proper laws, economic and political stability. When the
investment climate is stable, entrepreneurs create more goods and services,
give job opportunities, and generally the socio-economic development will
be obviously seen.
iv. Education system. Education is a key determinant of socio-economic
development. Education eliminates unproductive beliefs, and myths, give
people skills to produce goods and services and others earn money/income,
live hygienic, disease free life, etc.
v. Availability and use of resources. The resources that lead to the socio-
economic development may be human, natural or financial. The human
resources in form of skilled people provide labor to produce goods, start
businesses, provide services like education, medical care etc. Natural
resources like fertile soil, timbers, fish and minerals generate income,
promote industries and earn government foreign exchange.
vi. Financial resources. This is in terms of access to finance which help to start
and expand existing enterprises develop infrastructures, and buy goods
and services. Availability of these resources determines the socio-economic
development of a community or a country.
vii. Level of savings. Savings refer to the financial resources set aside in
the present time to use them in the future. When money is saved and
accumulated can then be invested which lead to the socio economic
development.
viii. Population growth rate. Population growth refers to the increase in the
number of people in a given area at a time. When the population is growing
rapidly, it means there are more people per unit area. A rapidly growing
population incresaes demand for goods, services and shelter and making it
an opportunity for enterprises to produce goods and services to satisfy this
growing population other infrastructures. The combination of these factors
may lead to socio-economic development.

ix. Customs and traditions. Some customs and traditions promote the socio-
economic development. This is because some of them encourage education
and more effective medical care and generally keep people more modern.
Such positive customs and traditions promote people’s socio-economic
development.
x. Social and physical infrastructure Good roads, schools, hospitals, telephone
systems and other infrastructures significantly determine the rate of
socio-economic development in an economy. Such social and physical
infrastructure makes business easy; improve health services, education,
distribution of goods and services and general wellbeing.
xi. Political climate. Political climate is a key determinant of socio-economic
development. A society that is characterized by political stability and social
harmony can achieve socio-economic development. Political stability
makes people secure to organize their business enterprises; produce more
commodities and hence socio-economic development.
1.2.2 Indicators of Socio-economic development

Social- economic development involves increased goods and services, better
health, education, security, shelter, better distribution of resources and generally
better standard of living. Some indicators of socio-economic development are the
following:
i. High GDP per capita: GDP is Gross Domestic Product. It is the total value
in money terms of all goods and services produced within a country in a
given year. If the GDP is increasing, it implies that there are more goods
and services being produced and available to the people which in return
signifies a better standard of living.
ii. High real Gross National Product (GNP) per capita is one of the indicators
of social economic development in terms of an increase in the economic
real national income over a long period of time. Real national income refers
to the country’s total output of final goods and services in real rather than
monetary terms thus a country with high GNP per capita signifies a better
standards of living.
iii. High level of literacy: Literacy is the ability to read and write. Literacy rate is
a crucial measure of a country’s human capital. It shows the country’s ability
to use human being in the production of goods and services, understand
government programs and communicate.
iv. Life expectancy: Life expectancy refers to expected number of years
someone expects to live at birth. Socio-economic development enables
people to enjoy good health, nutrition, work and generally wellbeing.
The higher life expectancy is therefore an indicator of socio-economic
development.

v. High level of employment (Occupation structure of labor force) Employment
level is another indicator of socio-economic development. The higher level
of employment shows more income for people and more income means
better standard of living.
vi. Availability of goods and services: when more goods and services are
available, people are able to enjoy a variety of items at a reasonable price;
this improves the standard of living.
vii. Developed infrastructure: Better and accessible infrastructure such as
roads, networks, schools, communication, hospitals, electricity and water
etc. all indicate the socio-economic development
viii. Improved security (Political stability): Security is important for people
since they can move freely carrying out different business activities. This in
turn lead to improved standard of living among people. If there is insecurity,
then socio-economic status is low.
vii. Improved health facility: Health facilities in form of clinics, hospitals and
other medical services are indicators of socio-economic development. A
society with better health facilities enjoys a higher level of socio-economic
development in the country.
viii. Improved shelter: Good and decent shelter indicate socio-economic
development of a given area. When more people have access to shelter,
then there is socio-economic development in the country.
ix. Access to clean water: Clean water is important for life since people get free
from diseases. Healthy people tend to get involved in different productive
activities which contribute much to socio economic development of a
given community.
xii. Consumption per capita: This is the average amount of money consumed
in a country. If it is low, then there is low development in the country; and
when it is high the development is also high. The consumption rate is a
major determinant of standards of living. If the population consumption
per capita is high, it means they have a vision to consume a variety of goods
and services thus an indication of socio economic development.

With examples in your community; briefly discuss the social economic changes
that took place over the past five years.
1. Reflect on your community and describe at least 2 people or enterprises
and how they have contributed to social economic development.
2. Every last Saturday of the month, all Rwandans participate in

“umuganda” (community work day). Imagine in your sector
the Umuganda was organised and hosted by your Cell and as
entrepreneurship student you have been invited to address the
congregation after Umuganda. The theme is “Promoting social
economic development in our Sector”
a. Briefly share with the congragation a presentation about the

contribution of “umuganda” towards the social economic development
of your area.
b. Discuss the different challenges to social economic development of

your community.
c. Suggest and briefly explain possible

1.3 Role of entrepreneurship in socio-economic development
Activity 1.3
Analyse the case study below and answer the questions that follow;
Fig 1.3: Poultry farm belonging to the progressive farmer leads to the socioeconomic development
MIZERO is the poultry farm owner located in rural area which has transformed the
village in the following ways:
• Improvement of the social and economic life for his family.
• Creates employment opportunities to local citizens and so helping them
to change their standard of living.
• Supplies eggs to the local communities which are an important source of
nutrients with high quality protein.
• Reduces malnutrition in the village as a result of cheap supplied eggs.
• Villagers can use the farm manure in their field in order to increase the
local production then increase the farmer’s revenue.
• The business and employees pay taxes which increase the government
revenue.
• He becomes a role model for the population surrounding his farm.
Questions;
a. From the case study, describe briefly how MIZERO has contributed to
the socio-economic development of his region.
b. Explain briefly the impact of creating agri-business
Entrepreneurship has an important role to play in the development of the country.

It is one of the most important engines to economic development. The number
and the competence of entrepreneurs largely affect the economic growth of the
country since through entrepreneurship, different jobs are created; communities
are developed to mention but a few.
Standards of
living
Wealth creation
and sharing
Create Job
Entrepreneurship
Community
Balanced regional
development
development
GDP and per capita Exports
income
Figure 1.4: Role of entrepreneurship in an economy
Entrepreneurship helps in the process of socio-economic development in the

following ways:
Creates employment opportunities. Entrepreneurship creates employment
directly (own job) and indirectly (for other persons). Directly, by self-employment
as an entrepreneur, and indirectly by starting many industrial units that offer jobs
to people; thus entrepreneurship is the best way to fight against unemployment.
Entrepreneurship has a vital role to play in creating small firms which are important
sources of new jobs.
Enterprises that start at a small scale end up employing hundreds and thousands of
people directly. This means that people earn salaries and wages from the enterprise.
Indirectly, employment is created when people employed also employ others or
people who are providing goods and services employ their own workers to help
them produce goods and services.

Figure 1.5 Direct and indirect employment
Example: Mahoro opened a restaurant. He has employed a manager, an accountant,

cashier, waiters, waitresses and the cleaners. These are directly employed by Mahoro.
Kayijuka supplies food staffs to Mahoro’s INJIRUREBE Restaurant. For Kayijuka to do
this, he has employed a driver and more workers in his farm. These workers and the
drivers are not employed by Mahoro’s INJIRUREBE restaurant but they got their jobs
indirectly because of Mahoro’s INJIRUREBE restaurant.
Increases Government revenue (Business Taxes). Government imposes taxes as a

means of raising revenue to finance its expenditures. Government requires money
to pay government officials and civil servants, construct roads and the bridges, build
and equip schools and hospitals, and finance all other services that are provided by
government. Government gets this money from different ways which are fees, taxes,
dues and other revenues from different services. There would be no good roads,
schools, hospitals and civil servants like teachers, doctors and police would have no
salaries if there was no tax.
Such services therefore, are provided by the government from the tax revenues
collected from the entrepreneurship activities and hence lead to socio-economic
development.

1.3.1 Other contributions of entrepreneurship to socio-economic de-
velopment include the following:
Social responsibility
Entrepreneurs engage in corporate social responsibility programs and help the
communities. They sponsor sports activities, medical facilities, support schools and
other community programs. This promotes socio-economic development in those
communities within the country.
i. Provide variety of goods (products) and services. Enterprises produce

goods and services that are used on daily basis. Without entrepreneurship,
there would be scarcity which in turn would lead to high prices and
generally low standard of living. Clothing, medicines, sugar, textbooks and
many other goods and services are provided by entrepreneurs.
ii. Utilization of natural resources. Entrepreneurship makes possible
the use of natural resources and transforms them into usable products.
Without entrepreneurs, resources like minerals, sand, fish, timber, oil, and
others would stay unutilized. By effective utilization of such resources,
entrepreneurship contributes to socio-economic development.
iii. Environmental protection. Entrepreneurship is a source of environment
protection. Entrepreneurs come up with energy saving products like
solar energy, gas, etc. They produce and distribute environment friendly
packaging products, smoke free generators and many others.
iv. Research and development (Creativity and innovation). Entrepreneurs
engage in research and lead to the development of new products.
Entrepreneurs take risk to invest in research like in latest advances in
medicine, electronics, ICT and even security systems which have been
developed. Obviously, these developments are a big factor in socio-
economic development.
v. Infrastructure development. Entrepreneurs put up the infrastructure
to facilitate their enterprises but in the process lead to socio-economic
development. For example, when a road is built to transport raw materials,
other people use the same road to access schools and hospitals etc. This is
an indication that, entrepreneurship leads to socio-economic development
vi. National Income. National income consists of the total value of all final
goods and services produced in the country accruing to an economy in one
accounting year. Goods and services produced are for consumption within
the country as well as to meet the demand of exports. An increased number
of entrepreneurs is required to meet this increasing demand for goods and
services. Thus, entrepreneurship increases national income.

Figure 1.6: The National Income
vii. Wealth Creation and Sharing. Entrepreneurs establish the business

entity, where they invest their own resources and attract capital (in the
form of debt, equity, etc.) from investors, lenders and the public. This
mobilizes public wealth and allows people to benefit from the success of
entrepreneurs and growing businesses. This kind of pooled capital that
results in wealth creation and distribution is one of the basic imperatives
and goals of economic development.
viii. Balanced Regional Development. Entrepreneurs set up new businesses
and industrial units which help regional development by locating them in
less developed and backward areas. The growth of industries and business
in these areas leads to infrastructure improvements like better roads,
airports, stable electricity and water supply, schools, hospitals, shopping
malls and other public and private services that would not otherwise be
available.
ix. Standard of Living. Increase in the standard of living of people in
a community is yet another key goal of economic development.
Entrepreneurs do this not just by creating jobs, but also by developing

and adopting innovations that lead to improvements in the quality of life
of their employees, customers, and other stakeholders in the community.
For example, automation that reduces production costs and enables faster
production will make a business unit more productive, while also providing
its customers with the same goods at lower prices.
x. Exports. Any growing business will eventually want to get started with
exports to expand their business to foreign markets. This is an important
ingredient of economic development since it provides access to bigger
markets, and leads to currency inflows and access to the latest cutting-
edge technologies and processes being used in more developed foreign
markets. Another key benefit is that this expansion will lead to more stable
business revenue during economic downturns in the local economy.
1.3.2. How Entrepreneurship affects negatively/retard social economic

development.
Entrepreneurship is said to affect negatively to a society’s development if the
following happens:
i. Exploitation of workers through underpayment, delayed payment,
deductions in form of unjustified penalties etc.
ii. Exploitation of natural resources without considering the posterity; as
we exploit the resources for our survival today it is also important to think
about the generation to come. Some resources are limited in nature such
that when they are used without care for the future, the generation to come
may not have what to live on.
iii. Using defective weighing scales; some entrepreneurs use defective scales
and exploit their customers through under weighing of quantities.
iv. Breaching of contracts when we realize that we stand to benefit less.
v. Corruption: Entrepreneurs usually do businesses through improper
channels eg bribing leaders to do illegal activities.

1. Reflect on your community and discuss the visions of Socio-economic
development in your respective localities
2. Increasing youth employment is central to Rwanda`s employment

policy in the context of Rwanda vision 2020 and job strategy. Mention
at least 2 prominent entrepreneurs from your locality and discuss how
they have contributed to the community development.
3. Explain the problems the society would face if such entrepreneurs were
not operating in the community
4. Some entrepreneurial activities hinder socio-economic development.

By use of the entrepreneurial practices below, briefly explain how they
can hamper socio-economic development.
• Improper packaging.
• Out competing small scale entrepreneurs.
• Harmful products like expired products.
• Pollution from factories industries.
• Income inequality.
• Advanced technology that creates unemployment.
• Industrial accident.
5. Discuss the role of entrepreneurship in employment creation.
1.4. Meaning of environment and society, their types and com-

ponents
Activity 1.4
1. What do you think about the environment and the society?
2. In your own understanding, discuss the relationship between
environment and society.
1.4.1 Meaning of environment

“Environment”, this word has a great importance in our life. Environment means
everything that is around us (an individual or a business or an institution). It refers

to both abiotic (physical or non-living) and biotic (living) environment. Environment
mainly consists the following components: atmosphere, hydrosphere, lithosphere
and biosphere. The survival of an individual person or a business is largely influenced
by the environment. Anything that negatively affects the environment affects the
individual person, a business or institution as well.
The environment can be divided into the following different types:

Physical environment: This consists of all geographical features/topography such
as rocks, soil, mountains, hills, drainage systems, plateaus.
Biological environment: This consists of ecology that is to say plants and animals of
any kind both on land and in water.
Cultural environment: This consists of society, economy and politics. The most
important thing about the cultural environment is that it cannot be physically
represented, but it is there anyway. The study of this aspect environment is taken by
economists, socialogists, politicians and other such people.
Social environment: Reflects the traditions one grew, lives in, and the
community with whom the individual interacts. The economic environment
refers to the set of factors that surrounds the organism involving
monetary, natural, and human resources that influence the behavior of that
particular organism.
Political environment involves conflicting interactions between other organisms,
often resulting in the formation of alliances or coalitions and used to resolve the
conflict and achieve the goals of the allies or their influential members.
N.B: If a society’s activities are not well managed they may lead to environmental
degradation. Such activities may result into soil erosion, deforestation, air pollution
etc.
1.4.2 Business environment
Activity 1.4
1. What do you think about the environment and the society?
2. In your own understanding, discuss the relationship between

environment and society.
Business refers to an economic activity that involves production and selling of goods
and services covering risks with an aim/objective of making profit.

Business environment is the combination of internal and external factors that
influence a company’s operating situation. The business environment can include
factors such as: clients and suppliers, its competition and owners, improvements in
technology, laws and government activities, market, social and economic trends.
1.4.3. Types of Business environment and their components

The environment of a business enterprise falls under different categories namely,
the internal environment and external environment.
i. Internal environment: The internal business environment is made up of the
factors and resources within the business enterprise itself which affect the
way the enterprise operates. The internal environment can be controlled
by the management of the enterprise. The internal business environment
comprises of both tangible and intangible resources.
Intangible resources Tangible resources

• Distribution channels • Workers
• Marketing strategies • managers and equipment
• Management procedures • Financial facilities
• Financial systems • Communication equipment
• Public image reputation • Distribution trucks.
• Research and development
These factors can affect the business operations negatively or positively but they
can be controlled by the management of the enterprise.
ii. External Business Environment: The external environment of a business

is made up of those factors and the conditions outside the business which
affect the business operations. The business enterprise always has limit
control over the external environment. The external business environment
may be categorized into the following environment:
a. Economic Environment: Economic environment includes the type of
economic system that exists in the economy, the nature and structure of
the economy, the phase of the business cycle (e.g., the conditions of boom
or recession), the fiscal, monetary and financial policies of the Government,
foreign trade and foreign investment policies of the government. These
economic policies of the government present both the opportunities as

well as the threats (i.e. restrictions) for the business firms.
b. Social and Cultural Environment: Members of a society have important
influence over business firms. Activities of business firms may harm the
physical environment and impose heavy social costs. Besides, business
practices may violate cultural ethics of a society. For example, advertisement
by business firms may be nasty and hurt the ethical sentiments of the people.
Businesses should consider the social implications of their decisions. This
means that companies must seriously consider the impact of its actions
on the society. When a business firm in their decision making take care of
social interests, it is said to be socially responsible.
c. Political and Legal Environment: Businesses are closely related to the

government. The political philosophy of the government wields a great
influence over business policies. In the economic sphere, the public sector
plays a vital role in economic development. Besides, the private sector
should be controlled by a suitable government policy under various types of
regulatory policies which influence the directions in which private business
enterprises has to function.
d. Technological Environment: The nature of technology used for production

of goods and services is an important factor responsible for the success of
a business firm. Technology consists of the type of machines and processes
available for use by a firm and the way of doing things. The improvement
in technology raises total factor productivity of a firm and reduces unit cost
of output.
e. Demographic Environment: Demographic environment includes the

size and growth of population, life expectancy of the people, rural-urban
distribution of population and educational levels of labor force. All these
demographic features have an important bearing on the functioning
of business firms. Since new workers are recruited from outside the firm,
demographic factors are considered as parts of external environment. The
skills and ability of a firm’s workers determine to a large extent how well the
organization can achieve its mission. The demographic environment also
affects both the supply and demand sides of business organizations.
f. Natural Environment: Natural environment is the ultimate source of

many inputs such as raw materials, energy which business firms use in
their productive activity. Natural environment includes geographical
and ecological factors such as minerals and oil reserves, water and forest
resources, weather and climatic conditions, etc.
g. Ecological environment: Driven by the motive of profit maximization,

businesses can cause irreparable damage to the exhaustible natural

resources, especially minerals and forests and pollution of environment.
Countries including Rwanda have now become conscious of the adverse
effects of depletion of exhaustible natural resources and pollution of
environment by business activity. All these environments have a direct
bearing on how the business operates its strategies, polices and costs. A
change in any of these environments is likely to have far reaching impact on
the operations of the business enterprise.
1.4.4 Dependence of the business on the natural environment

Businesses greatly depend on the natural environment in many different ways, some
of which include the following:
i. Sources of raw materials: Most of the raw materials used in the manufacture
of goods and services are derived from the natural environment. Such raw
materials include: wood or timber, water for drinks, gas, coal, oil petroleum,
skins, hides, minerals such as lime stone, copper, iron, gold, silver etc.
ii. Provides transport: The natural environment provides the business with
transport networks such as road, water, and air transport which help to
transport raw materials to the business premises and finished products to
the market plus labour to and from the business premises
iii. Disposal grounds for waste from the business environment: the natural
environment serves as the disposal ground for waste products such as
smoke, rubbish, industrial fumes and oils etc.
iv. Home for business: Land provides ground on which business premises or
buildings (structure) are built as well as being a home to other businesses
that survive on land, like farming both for crops and animals.
1.4.5 Dependence of society on business

The society depends on the business in the following ways:
i. Provision of goods and services. Business provides goods and services
that satisfy the needs of people in society. Such needs include both basic
and secondary needs like food, shelter, medical care, and clothing. Such
needs are satisfied by different services which include: education, medical,
manufacturing, trading, agribusiness etc.
ii. Provision of employment opportunities: Business provides employment
opportunities to the society, both self and paid employment for example,
people who work in factories, hotels, restaurants, etc. This increases people’s
standards of living.
iii. Supporting community development programs/Corporate social
responsibility: Business usually contributes towards community
development programs by making donations and also directly getting

involved in these programs. Example: construction of schools, hospitals;
providing of clean and safe water etc.
iv. Payment of taxes: Businesses support the society through paying taxes
which are used to provide essential services such as health, education,
security, roads etc. Such services benefit the business community and the
society in general.
v. Cleaning and protecting the environment: Businesses protect the
environment through recycling used products and by-products back into
the production process and making useful products out of them. Businesses
also participate in environmental and cleaning programs schools, cleaning
public parks and streets as well as planting trees and protection of wetlands.
vi. Market produce: Businesses buy raw materials from the members of the
community enabling them to obtain market for their products and get
income.
vii. Some businesses provide a means of saving the human environment
from harmful products. For example, companies that process garbage into
manure help to make society enjoy a healthy environment.
viii. Some businesses provide social services such as Schools (provide
education), hospitals (health services).
1.4.6 Dependence of business on society or benefits from society

There is a direct relationship between business and the society in the following ways:
i. Provision of market: The products of businesses are bought and consumed
by members of society thereby providing demand and market for the
businesses.
ii. Provision of capital: Businesses need capitals for purchasing fixed assets
such as furniture, motors, vehicle, machines, and construction of business
premises and for running the day to day operations. This is provided by the
society through loans offered by financial institutions and individual money
lenders.
iii. Source of labor: Businesses acquire labor, both skilled and unskilled, for
running business operations and producing goods and services from the
society.
iv. Provision of security: For businesses to operate effectively, it requires
peace and stability to prevail in the area of operation which society provides
through the army and local defense forces. Society also offers acceptance
which is important for successful establishment and smooth operation of
the business.

v. Provisions of raw materials: Members of the community sell different raw
materials like agricultural raw materials to the businesses that are used to
produce goods and services.
vi. Land as a factor of production: Many businesses use land owned by
members of the society which they rent or occupy on leasehold.
1.4.7 Responsibility of the business towards the natural environment

It is the responsibility of the business to care for and protect the natural environment
by optimizing the use of energy, ensuring effective use of materials and creating
replacement for instance by planting trees, encouraging re-use and recycling of
products and by-products and also incorporating the principle of sustainable use
and development of natural environment. It is important therefore for entrepreneurs
to carry out regular environmental checks and inspection to identify those activities
that harm the environment such as constructing in wetland and lumbering, such that
they are avoided or taken carefully in a manner that will not harm the environment.
This will help to reduce negative environment effects of the business operations by:
• Recycling used products.
• Cleaning the environment and the reducing pollution.
• Cutting or reducing harmful emissions like carbon dioxide.
• Checking harmful influents and ensuring of proper usage and disposal.
• Developing technologies which demand less of natural resources and
produce better products.
• Educating consumers on usage and disposal on their products
• Using bio-gradable materials example packaging materials.
• Asking consumers if they need some of the packaging materials.
1.4.8 Responsibility of the business towards society

It is important that businesses exercise some responsibilities towards society to
enhance the positive effects or check the negative effects. Businesses can do the
following for the society:
• Production of goods and services.
• Payment of taxes.
• Contribution towards community development programs.
• Proper disposal of waste products.

1. Discuss various components of environment.
2. Explain briefly the effects of entrepreneurial activities on environment
and society.
3. Describe different types of the environment.
1.5. Possible negative effects of business activities on differ-

ent types of environment and their components
Figure 1.7: Pollution from a factory. The production processes of some enterprises
Activity 1.5
From your community identify some possible negative effects of the business
activities on the society and environment.
1.5.1 Effects of business on the natural environment

Businesses affect the natural environment through their requirements such as land,
raw materials and agrochemicals, products like sugar, cloth, medical care etc.and
by-products such as noise, rubbish, gases, effluents, industrial wasted oils, molasses
from sugar production.

1.5.2 Business requirements that affect the natural environment
The most common business requirements that affect the natural environments
negatively include the following:
i. Land is required for setting up businesses; construction of business
premises, and for installation of machinery for business operation and
extraction of raw materials. Many business operations require large piece
of land which lead to clearing of vegetation like forests, and wetland which
adversely affects the environment.
ii. Machinery and equipment for productive operations; these affect the
environment through their emissions causing air and water pollution
and also produce noise and vibrations. These affect workers and health of
people living within the business locality.
iii. Packaging materials: example: packaging products affect the drainage
system and soil texture.
iv. Disposal: Ground for waste products or rubbish created through
consumption and production operations which create and emit toxic
chemicals. These affect the environment negatively endangering both
aquatic and non-aquatic life.
v. Agro-chemical requirement: These are particularly for agribusiness and
include chemicals and artificial fertilizers used to control pests and diseases
and improve soil fertility. These affect human and animal life when dissolved
in the water or rainfall, finding way into the water table.
vi. Human resource requirements: These manage businesses which misuse
the environment in various harmful ways such as lumbering, mineral
extracting, and also create waste products.
1.5.3 Forms of negative effects of business on the natural environment

The business affects the natural environment through:
i. Pollution: Businesses emit a lot of carbon dioxide, smoke, ozone depleting
gases, dust, sulfur dioxide that pollute the air which is dangerous for
animal and plant respiration. Manufacturing businesses also pollute water
by releasing their effluents into water ways and drainage systems hence
endangering human and plant life. The noise produced by manufacturing
firms is also pollution.
ii. Deforestation: Some businesses use trees in their operations for production
of goods and services like carpentry workshops, agricultural businesses,
construction businesses and households clear large tracks of forests to make
farms, roads, and railways. Such activities destroy the forests thus causing
deforestation which in turn changes weather patterns, reduces rainfall and
fertility.

iii. Depletion of resources: Businesses use a lot of natural resources in their
operations for example fish processing businesses deplete fish resources,
and quarrying businesses also destroy and degrade land. Some of these
resources are self-renewable but the rate at which they are exploited
exceeds the rate of renewal yet man’s effort to replace them is also very
minimal.
iv. Vibration: This is a result of movement and running of heavy industrial
machines. These vibrations greatly triger land slides, leading to the collapse
infrastructure.
v. Land or soil degradation, this refers to spoiling of soil fertility, soil nutrients
composition (organic and inorganic) and the soil resulting from different
usage like overgrazing, over cultivation, deforestation, quarrying, and
contamination by disposal of harmful waste products (industrial wasted oil
and chemicals).
vi. Wet/land destruction: The creation of land for business sites and settlement,
construction of business structure and installation of machinery leads to
encroachment on wetlands hence destroying the natural water catchment
areas and the purification process.
vii. Displacement of people: The establishment of businesses displaces people
which affect the balance of the ecosystem causing population pressure in
some places and hence affecting the natural environment.
1.5.4 Other negative effects of business on people

Any good business must be guided by the three Ps of investment: Profits, People and
Planet. Most businesses only stop at profits and end up affecting people and the
planet. Besides the natural environment (planet) other negative effects of business
on people include the following:
i. Expired goods that are harmful to people’s health; this is common with
such goods as food, drink and medicine. This applies to animal’s health as
well.
ii. Poisonous products like narcotic drugs harm people’s mental and physical
health;
iii. Immoral behaviors like prostitution spring up in areas operating bars and
casinos;
iv. Drunkenness is one effect of business on people that is difficult to eradicate;
v. Unethical business practices may slowly become a norm and acceptable:
cheating in weights and measures, adulterated goods and other bad
practices;
vi. There may be over-exploitation of workers by businesses chasing profits;
vii. Businesses selling stolen goods encourage robbery in society;

viii. Spread of infectious diseases such as HIV/AIDS and other related diseases
is easy from such businesses and long distance transportation, bars, hotels
and lodges.

Referring to your respective localities, mention the entrepreneurial activities
that are causing or are likely to cause environmental degradation; in detail,
explain how each activity identified can or is affecting the environment.
1.6. Managing and preventing the negative effects of a business

on different types of environment and their components
Activity 1.6
Sometimes business activities negatively affect the environment and society:
what do you think could be the strategies that can be used to reduce the
negative effects of entrepreneurship on the environment.
The reducing of the negative effects of business on the natural environment

requires a joint effort by the entrepreneurs and the government or society
through taking some of the following measures :
i. Recycling used products and by-products: By-product of the production
process and used products should be recycled back into the production
process to be made useful by using them to produce goods and services
shredding papers can be recycled to get fragile product like trays. This will
help to reduce the rate of population caused by the careless disposal of
waste.
ii. Waste treatment and proper waste disposal: Entrepreneurs should always
treat waste materials to purify them and choose proper waste disposal
grounds that do not affect the environment negatively and also enlarge
animals and plant life.
iii. Environment friendly packaging materials: Entrepreneurs should also
choose proper packaging materials like paper bags or cloth in case of plastic
which affect the soil structure
iv. Reforestation: Refers to re-planting of trees to replace those that have
been cut so that the natural environment balance is not disturbed. This
should be encouraged to reduce the effect of deforestation on climate, soil
fertility and water catchment.
v. Covering soil: This may involve terracing, planting trees (afforestation) and

other ways that can be used to cover the soil to ensure that it is not left bare.
Organic manure may be used to replace the depleted soils.
vi. Use biological pest and disease control: Agribusiness entrepreneurs should
be encouraged to use biological disease control instead of chemical in their
farming process, farm yard manure and other natural fertilizers. Chemicals
pollute the land and affect human, plant and animals.
vii. Development of new raw material saving technologies: Entrepreneurs
should be encouraged to invest in research to develop new technologies
that save raw materials and have improved methods of production that do
not pollute the environment.
viii. Environmental education or protection sensitization campaigns: An
interdisciplinary approach should be used in and out of the school to
sensitize both the young and adults about the importance of living in a
protected natural environment and the consequences of living in the
degraded environment and also how they can protect the environment
ix. Compulsory environment impact assessment: The government should
undertake compulsory environmental impact assessment before licensing
businesses such that businesses with potential dangers of the environment
are known in advance and also majors to minimize such dangers are devised
in advance.
x. Setting environmental standards: The government should ensure that
environment standards are set by the environmental protection bodies such
as Rwanda Environment Management Authority (REMA), and also ensure
that effective supervision and monitoring is carried out to ensure that
the businesses respect the set environmental standards and regulations.
Businesses should be requested to contribute funds for environmental
protection and conservation programs such as cleaning of towns and
setting up the garbage collection centers and tree planting.
xi. Encouraging sustainable use of natural resources: The resource
exploitation rate needs to be checked to avoid over exploitation and resource
exhaustion especially for the natural resources such as forests, fish etc. Strict
laws should be put in place and implemented regulating the exploitation of
resources like about type and size on fish net, laws encouraging replanting
after cutting down trees etc.
xi. Optimizing energy use: Using of energy saving system in production
processes and homes should be encouraged together with use of other
alternative energy sources in place of wood fuel that do not degrade the
natural environment like solar electricity, biogas, hydro-electricity etc. this
calls for government involvement to reduce and stabilize prices of these
alternatives energy forms to make them affordable to the people and
business.

xii. Laws against pollution: Government should enforce laws to penalize
businesses that use machinery that pollute the environment. Even very old
vehicles that emit a lot of fumes should be banned.

Briefly, explain how the entrepreneurs and the government or the society
provide a joint effort to reduce the negative effects of business on the natural
environment

1.7. Entrepreneurs and social responsibility/Proactive social
responsibility
Activity 1.7
Observe the extract below and answer the questions that follow;
Figure 1.8 community health activities

Bank of Kigali sponsored Special Olympics sports competition, specially designed
for people with cognitive delays. We believe that with sports activities such as
these, the Special Olympians develop mental, physical, and social skills leading
to more independent living. More so, Special Olympian families get to recognize
that their children with intellectual disability are worthy human beings with a lot
to offer.
The Bank has for the past two years been one of main sponsors of Ulinzi walk
which aimed at creating public awareness against breast cancer and emphasizing
early detection as the best protection. The initiative also encourages solidarity in
facing cancer by demonstrating public ownership of the cancer burden in order
to stimulate intervention of the needed changes.
The Bank acknowledges the need for a healthy society in order for Rwanda to
achieve its vision 2020 goals. The Bank has supported Friends of Africa a campaign
focusing on increasing returns on investment in the fight against HIV/AIDS,
Tuberculosis and Malaria, diseases that have been among the leading causes of
death in Sub Saharan Africa.
1. Identify the enterprises which are involved in these different activities
2. Discuss different ways businesses have proactively contributed to the

social and environmental context.
3. What benefits can an enterprise achieve by supporting these activities?
4. What achievements will the participants gain in involving in these

different activities?
Pro-active socio-responsibility
Pro-active social responsibility is commonly called corporate social responsibility and
it refers to initiative taken by a business to give back to the community. It normally
takes various forms, depending on the community needs. The following are ways
through which businesses give back to the community
i. Promoting other local businesses through Cross networking espencialy
non-competing companies of similar markets.
ii. Participating in Holiday Food Drives. During the holidays, many businesses
encourage employees to bring in unopened non-perishable canned and
boxed foods that can be donated to local food banks to help hunger striken
areas.
iii. Sponsoring youth sport teams.

iv. Holding contests. Business can support the community while also
encouraging employees to have fun by holding a contest. Each employee
chooses a local charity and instead of prizes, money goes to the charities
chosen by the winners.
v. Sponsoring a participant(s) in a local marathon, especially if you can
support your own employees who are participating in such events.
vi. Building houses to disadvantaged residents.
vii. Offer Your Skills through teaching classes on entrepreneurship to local
residents or offering to teach a specialized skill that could be of value to
those who have been out of the workforce for a while.
viii.
Encouraging employees to volunteer by offering paid time off for
volunteering.

a. As a manager of the small enterprise, you have saved 1,000,000 Frw to
spend on social responsibility. Identify five urgent problems affecting
the community and explain how you can use that saving to come up
with solutions to the above problems.
b. Explain the importance of corporate social responsibility.
Skills Lab Activity1.8

Read and analyse the case study and answer the given questions
Amahoro Ltd a medium size enterprise deals in manufacturing of soap,
cooking oil and sweets. It employs many people from the community and also
pays taxes to the government as expected.
It has huge plants and machinery that make the manufacturing or processing
of named products above. The industry’s wastes and emissions are not well
always air. People in the neighbourhood complain of noise from the industry
during operations.

Questions;
1. How important is the above industry to the society?
2. What issues are observed in the above case study?
3. As students of entrepreneurship, how would you advise the industry to
solve the above issues?
4. As an aspiring entrepreneur who wants to start up a business or have
been running an active business club, what do you or would you put in
the place to make sure the environment is well protected?
End of Unit Assessment

1. Explain the positive and negative effect a cement factory to be located
in your sector is likely to have on the natural environment
2. Explain what you can do to reduce the negative effect of your business
activities on the natural environment.
3. Why is it necessary for an entrepreneur to take care of the natural
environment?
4. dentify and explain the responsibility of business to society and the
environment
5. Differentiate between the economic environment and the legal
environment of a business
6. Discuss the role of entrepreneurship in socio economic development
7. Briefly explain how the following external business environment factors
may negatively affect business activities
a. Economic environment
b. Legal environment
c. Natural environment
d. Society
8. Observing what is surrounding you in your community, explain the
changes that you have seen in regard to socio economic development
9. In your community, examine the major indicators of socioeconomic
development.

UNIT 2
Environment Impact
Assessment (EIA)
Unit 2: Environment Impact Assessment (EIA)
Key Unit Competency: To be able to analyze EIA as a tool for prevention and
control of the social economic development impacts on
the environment
Introduction
In the previous unit socio- economic (social and economic development), you were
able to assess the role of economic activities on the environment. You noted that
as a result of all economic activities such as building infrastructure (i.e., roads and
pipelines, mines, and tourism facilities etc.), the natural surrounding environment
can be affected in one way or the other. This is evident when we consider the results
of large-scale development like open-pit mines, hotels for thousands of people and
large hydroelectric dams that often have irreversible impacts on the environment
and the livelihoods of people because of large-scale deforestation, excessive water
use, habitat destruction and resettlement.
Because of the big relationship that exists between the natural and human
environments, it is very important to try to assess the environmental and social
impacts of economic activities, projects and planned developments that may affect
the quality of the environment and impact well-being. As the human population

continues to increase and natural resources become more limited, it is important
to have mitigation measures of solving environmental challenges arising from
economic activities and thus the need to have EIA.
This unit is therefore designed to help you be responsible and to ensure that all
environmental matters are taken into account quite early in the project planning
process while taking into consideration traditional aspects like impact on local
people, biodiversity, etc. It will equip you with knowledge and skills as well as
attitudes that will enable you come out with appropriate EIA reports for the projects
you intend to start. It will also help you predict the effects of proposed activity/
project on the environment and on social economic development.
Introductory activity 2.1

EIA Case Study:
The government of Rwanda through Rwanda Environment Management
Authority (REMA) and EIA guidelines expects entrepreneurs to be cautious
and careful with goods produced, the technology used, the materials used
for the production and their probable impact on the human health and the
environment. If the product/project does not meet the requirements of the
standard it is not permitted for further production and the owner will have to
change the technology and the structure of the product.
With the ever increasing rates of urbanization and population growth rates the
economic activities if not well addressed are bound to impact negatively on
the environmental attributes of the project areas and its surroundings. Kigali
being the capital city of the country, it continues to have the most economic
activities and population. With the above economic situation, the economy
and the environment are bound to be affected negatively and positively and
thus entrepreneurs intending to start any project have to prepare appropriate
Environmental Impact Assessment reports showing most sustainable and cost
effective way of mitigating any negative impact that may arise as a result of
the implementation of the proposed project.
Questions :
Referring to the above case study, answer the following questions.
a. What do the Environmental Impact Assessment guidelines expect
entrepreneurs to be observant of ?
b. In what ways can the projects started in Kigali affect the economy
positively?

c. What are likely negative effects of the business activities or projects to
the environment and Kigali community at large ?
d. What strategies would you propose to the entrepreneurs in Kigali to
mitigate the likely challenges as a result of the projects started ?
e. Write a simple Environmental Impact Assessment report of the business
idea you intend to start in your community.
2.1 Meaning of Environmental Impact Assessment (EIA)

In this section, you will learn about the most common definitions and objectives
of EIAs, together with a brief history and examples to illustrate why Environmental
Impact Assessments are important. This will help you to gain a basic understanding
and the purpose of EIA.
Activity 2.1
Analyzing the below picture and using the background knowledge from the
introductory activity above answer the questions that follow.
Figure 2.1: Radical terracing on steep slopes in Rwanda. Source: REMA, 2007

While entrepreneurs are undertaking economic activities or setting projects,
they have to be cautious to reduce adverse effects on the environment and
human beings. This can be done by replacing and/or modifying planned activities
to reduce negative impacts for example in the above picture where terraces are
used to reduce soil erosion and other environmental effects.
Questions,
a. What do you understand by Environmental Impact Assessment?
b. Explain the major purpose of Environmental Impact Assessment.
2.1.1 Meaning of EIA

An environmental impact assessment (EIA) is a systematic process for identifying,
predicting and evaluating the environmental effects of proposed actions and
projects. This process is applied prior to major decisions and commitments with
particular attention given to preventing, mitigating and offsetting the significant
adverse effects of proposed undertakings.
2.1.2 Historical background & Context of EIA in Rwanda.

Environmental challenges in Rwanda date back several decades. Recently, the
Government of Rwanda has undertaken strong commitment to understand its
current and future environmental challenges as a necessary step in the pursuit for
sustainable development. Today, to effectively manage environmental challenges,
EIA was adopted to effectively manage environmental challenges such as;
• Soil erosion,
• Deforestation,
• Wetland drainage,
• Water degradation,
• Climate change and the loss of biodiversity
The national environmental challenges are exacerbated by the;

• Low levels of environmental awareness
• Inadequate technical & human resources
• Low intra-sectoral coordination on environmental issues
Thus, these EIA guidelines should serve as a protocol for use by various stakeholders
involved in the conduct of environmental impact assessment.

2.1.3 National Policy on EIA
The Constitution of the Republic of Rwanda adopted in June 2003 ensures the
protection and sustainable management of environment and encourages rational
use of natural resources.
Various initiatives were taken by the Government of Rwanda (GoR) to address the
environmental issues; they include;
• Formulation of environmental policy (2003);
• Enactment of environmental Organic Law No. 04/2005 of 08/04/200 (2005);
• Establishment of Rwanda Environmental Management Authority (REMA),
under Organic Law No.04/2005 of 08/04/2005 Article 64, to coordinate
and oversee all aspects of environmental management for sustainable
development.
• Other various socio-economic development policies and strategies such as
“Rwanda Investment and Exports Strategic Action Plan, 2005-2007”.
Vision 2020” call for a well regulated environment management system that
takes into account principles of sustainable development while at the same time
contributing to poverty reduction.
2.1.4. International Context of EIA

EIA process operates within the global concept of sustainable development and
embrace commitment to international environmental conventions particularly:
• United Nations Conference on the Human Environment (Stockholm 1972);
• United Nations Conference on Environment and Development (UNCED
1992);
• The world Summit on Sustainable Development (WSSD 2002);
• African Ministerial meeting on Environment held in Durban, South Africa
(1995) to all of which, Rwanda is a party
EIA is an invaluable tool for environmental management in a trans-boundary context,

playing role in information dissemination between Rwanda and neighbouring
countries and widening the scope of understanding of environmental impacts
beyond its borders. EIA process in Rwanda provides a pretext and basis for future
international cooperation and conflict resolution concerning environmental impacts
at a regional level.

2.1.5 Objectives, Roles and Benefits of EIA in Rwanda
Figure 2.2: Environmental sustainability
The main objective of EIA is to promote sustainable development and ensure

that environmental issues are given proper priority. This is in line with that is
fully committed in its pursuit for sustainable development with the objectives of
enhancing living standards of people in a short period of time and obtaining true
benefits to sustainably balance human needs with nature for today’s and future
generations.
The objectives of EIA are four fold;

• To provide a national standardized process for development authorization,
• To protect Rwanda’s natural environment from potentially significant and
avoidable impacts caused by development projects,
• To invoke environmental consciousness and responsibility for all development
activities in Rwanda.
• To facilitate efficient and modern development activities whilst considering
the needs of present and future generations
The aims of EIA are divided into two categories of planning, namely;
• Immediate Aim: To inform the process of decision-making by identifying
potentially significant environmental effects and risks of development
proposals.
• Long-Term Aim: To promote sustainable development by ensuring that
development projects do not undermine critical resources and ecological

functions or the well-being, lifestyle and livelihood of communities and
people who depend on them.
To address these aims, the strategy of EIA process can be divided into two categories
of action:
• Short-Term Strategy: Assess project proposals by identifying environmental
risk, potential impacts and mitigation and monitoring measures.
• Long-Term Strategy: Assess the ongoing impacts of projects through
environmental monitoring after the project has been approved and
implemented.
Roles of EIA
Adaptation of EIA in Rwanda hinges on its importance as:
i. A key component of a more systematic and objective approach to
environmental issues;
ii. Provides a framework for promotion of efficient decision-making in project
approval;
iii. Enables implementation of environmental safeguards to mitigate significant
negative impacts;
iv. Avoid ecological damage and large-scale irreversible loss of natural
resource.
v. An invaluable tool for environmental management in a trans-boundary
context;
vi. Provides a basis for future international cooperation and conflict resolution
concerning environmental impacts at a regional level.
vii. Provides a basis for future international cooperation and conflict resolution
concerning environmental impacts at a regional level.
Benefits of EIA
i. Enabling incorporation of environmental considerations in design and site
selection for a project or development activities.
ii. Providing information beneficial to decision making.
iii. Enhancing responsibilities of relevant parties in the development process.
iv. Mitigating and minimizing environmental damage.
v. Avoiding costs and delays in implementation of projects that would arise
from un anticipated environmental problems.
vi. Making development projects more financially and economically efficient.
vii. Making an active contribution to sustainable development.

2.1.6 EIA Development Planning
The concept of sustainable development requires EIA to be expanded beyond
projects level. The detail of environmental information necessary depends on the
relevant needs of decision makers. For example, in policies and development plans,
one needs general and qualitative environmental information to identify major
environmental problems, without dealing with specific impacts.
When implementing project level Environmental Impact Assessment is necessary to

identify specific impacts and technical information of the project. Since it is important
that EIA must be carried out not only at project level, but also for masterplans for
development of regions, sectors, provinces, cities and industrial zones, Strategic
Environmental Assessment is a vital tool in such cases. For effective integration of
decision making with sustainable development criteria, SEA has proven an effective
tool in restraining environmental degradation at national and global level
2.1.7. Strategic Environmental Assessment (SEA)

SEA is the assessment of impacts of policies, plans, programmes which are higher
than the project level. It involves impacts identification and analysis of development
programs or policies in order to establish potential cumulative effects on environment
over the long-term.
SEA is undertaken much earlier in the decision-making process than EIA. It is

therefore seen as a key tool for sustainable development. Strategic Environmental
Assessment aims at incorporating environmental and sustainability considerations
into strategic decision making processes, such as the formulation of policies, plans
and programs.

Case study
Due to the different economic, political, social and environmental changes in
today’s economy, there’s need for proper planning for any economic activity to
be implemented. Entrepreneurs are expected to follow proper EIA guidelines
so as to avoid environmental, human and economic risks.
Rwanda’s government through REMA ensures the protection and sustainable

management of environment and encourages optimal use of natural resources.
Different stakeholders have different functions to perform in order to execute
proper EIA procedures.
As a student of entrepreneurship, you have been approached by MUTESI

Chantal who is planning to start a project of brick laying in her society. Advise
her on the following.
a. What measures should she take to mitigate the likely environmental
challenges caused by her project?
b. Why does she need to do EIA for her project?
2.2. Environmental Impact Assessment (EIA) Process
Activity 2.2
1. Think about the different natural resources in your community, how
have the people used them in a way that is not sustainable and
environmentally friendly?
2. If a big project is to be started in your community, what concerns would
you have? Given the above concerns, write a simple report to REMA at
your district summarizing and showing assessment of environment and
social impacts of the project once started with the proposed mitigation
measures.
Introduction
This section covers the steps of the EIA process. In this section you will learn the
different steps of EIA process that help decision makers to understand if their impacts
on the environment and well-being are severe enough or significant.
If the EIA process is successful, it identifies alternatives and mitigation measures to

reduce the environmental impact of a proposed project. The EIA process also serves

an important procedural role in the overall decision-making process by promoting
transparency and public involvement.
The EIA process aims to assesst and inform development decisions by mandating
a consideration of project alternatives and ways to prevent, mitigate, and control
potential negative environmental and social impacts. This generally involves
a number of steps, including project screening, scoping, assessment, impact
management, EIA report development, public participation, review, decision, and
monitoring.
a. Project Application and Registration

The first step of the EIA process is a developer submitting an application for EIA of
a proposed project to REMA in form of a project brief. REMA registers the project
brief as the developer’s formal application for an EIA. The purpose of a project
brief is to provide sufficient information on the project to enable the authority and
lead agencies establish whether or not the proposed activities are likely to have
significant environmental impacts, and also determine the level of EIA required
(screening). If adequate mitigation measures are identified in the Project Brief,
this may eliminate the need for a full EIA and the project may be approved with or
without implementation conditions.
At a minimum, a project brief submitted to the authority shall contain the following
information:
i. Name, title and address of the developer.
ii. Name, purpose, objectives and nature of project, including attributes such
as size of project, design, activities that shall be undertaken during and after
the establishment of the project, products and inputs, sources of inputs,
etc.
iii. Description of the proposed project site and its surroundings and alternative
sites, if any, where the project is to be located.
iv. Description of how the proposed project and its location conform to
existing laws, regulations and policies governing such project and the use
of the site/area proposed for its location.
v. Any likely environmental impacts that may arise due to implementing
various phases/stages of the project and proposed mitigation measures
thereto.
vi. Description of any other alternatives, which are being considered (e.g.
technology, construction and operation procedures, sources of raw
materials, handling of wastes etc, decommissioning/closure and site
restoration).
vii. Any other information that may be useful in determining the level of EIA
required.

b. Screening
Screening, carried out by the Authority is a process of determining impact level of a
proposed project, which then determines extent of the EIA study.
Screening enables early identification of environmental issues of major concern

and incorporation of appropriate mitigation measures. Screening also enables
identification of potential impacts on natural resources (whether the project would
result in direct or indirect negative or positive impacts to natural resources), excessive
resource consumption and waste generation.
c. EIA Study and Report

Environmental Impact Study phase is the investigative stage of the EIA process for
which a developer hires EIA experts. This phase begins by a developer selecting
expert(s) among a list of EIA experts provided by the Authority. If REMA disapproves
of the selected expert(s), because their expertise is not suited to the scope of the
proposed study, the developer will be required to choose again. If the developer’s
second choice is disapproved, then the Authority shall appoint EIA expert(s) it
considers best suited to undertake the study and develop an Environmental Impact
report, which is submitted to the developer. The developer and EIA experts shall
work together throughout the environmental impact study (EIS) phase to develop
adequate measures to mitigate negative impacts and enhance positive ones.
d. Project Decommissioning and Relocation
Upon project completion or when seeking relocation, a developer should prepare

a decommissioning plan and submit it to REMA for approval. The decommissioning
plan should include but not limited to assessment of existing environmental
48
conditions, all proposed engineering works, mitigation activities associated with the
removal of project facilities and proposed restoration measures.
Primary source: FigurePrimary source:

2.3 summary Figure
of EIA 2.3 summary of EIA process
process
46 Application activitySenior
Entrepreneurship 2.5 Six Student Book
1) Given the project you intend to start, write a project brief to be submitted to the authority?
2) What are the benefits of EIA process?
Application activity 2.2
1. Given the project you intend to start, write a project brief to be
submitted to the authority?
2. What are the benefits of EIA process?
2.3 Roles of Stakeholders in EIA Process
Activity 2.3
Referring to activity 2.3 about Mutesi Chantal,
1. What stakeholders will be involved in her project and why?
2. How can she involve her community in the project she intends to start?
2.3.1 Roles and Responsibilities of different Stakeholders in EIA

This section will help you understand the role of stakeholder participation in EIA
process. It shows the role of all those with a stake in the outcome of a project and
how their involvement helps in planning and management of EIA process. The
stakeholders share information and knowledge, and may contribute to the project,
so as to enhance the success of the project and hence ultimately their own interests.
a. REMA (Rwanda Environment Management Authority)

Mandated by law, REMA has a responsibility to organise the EIA procedure by
undertaking screening, guiding developers on assessment procedures, conducting
public hearings, reviewing EIA reports based on the terms of reference (TOR) and
taking decisions on approval or disapproval of proposed projects. The Authority
is also responsible for monitoring implementation of environmental protection
measures.
Roles of REMA
i. Receive and register EIA Applications (project briefs) submitted by
developers,
ii. Identify relevant Lead Agencies to review Project Briefs and provide
necessary input during screening,
iii. Review Project Briefs and determine project classification at screening

stage,
iv. Transmit Project Briefs to relevant Lead Agencies and concerned Local
Governments to provide input on Terms of Reference (TOR),
v. Publicise Project Briefs and collect public comments during development
of TOR,
vi. Approve EIA Experts to conduct EIA studies.
a. Developers
The developer has direct responsibility for the project and should provide necessary
information about the project at all stages of the EIA process. Developers hire
experts to undertake EIA studies on their behalf and answer questions about
potential impacts and proposed mitigation recommendations at public hearings.
Developers have the responsibility to implement the environmental management
plan including mitigation measures as proposed in the EIA report and carry out
subsequent environmental monitoring and auditing.
Roles of Developers
i. Prepare and submit EIA applications (in form of Project Briefs) to REMA,
ii. Hire experts to undertake EIA studies on their behalf,
iii. Prepare and append an addendum (Environmental Impact Report Addendum)
to the EIA report (if necessary),
iv. Submit the EIA report, Environmental Management Plan and the EIA Report
Addendum (if applicable) to the Authority,
v. Participate in public hearings and also implement terms and conditions (if
any) REMA attached to approval of their projects.
a. Lead Agencies/Line Ministries

Lead agencies such as government ministries or departments +Lead agencies have
the responsibility to take part in EIA of projects under their sectors. They provide
valuable technical information to EIA experts during EIA studies and are involved in
the review process.
Roles of Lead Agencies/ Line Ministries

i. Participate in screening at the request of REMA,
ii. At the request of REMA, review Project Briefs so as to advise on Terms of
Reference,
iii. Ensure that their own projects adhere to EIA requirements,
iv. Ensure that private-sector projects in fields over which they have jurisdiction

comply with EIA requirements,
v. At the request of REMA, they can serve on REMA’s Technical & executive
committee.

There has been a concern in your community about how entrepreneurs
involve the general community during planning and implementation of their
projects. Given the project you intend to start in your community, show how
you would involve the community to be part and parcel of EIA process.
2.4 EIA PROCEDURE
Activity 2.4
For EIA report to be finally submitted to the authorities (REMA offices of a
given district), there is a process that developers have to go through. Given
your knowledge and background about EIA so far, what process should one go
through while preparing the EIA report?
EIA Procedure
In this section, you will learn about the steps of EIA process and you will be able
to understand how it informs development decisions. You will also be able to
recognize that for sustainable development and optimal use of resources to occur,
entrepreneurs need to provide alternatives and ways of preventing, mitigating and
controlling potential negative environmental and social impacts of their projects.
EIA in Rwanda consists of the following procedures;

a. Project Brief Submission and Registration. As a first step in the EIA process,
a developer proposing to start a project shall notify REMA in writing by
submission of a Project Brief. The purpose of a Project Brief, which is to
provide information on the proposed activity so as to enable REMA and Lead
Agencies establish whether or not the activity is likely to have significant
impact on the environment, and thus determine the level of EIA necessary.
b. Scoping and consideration of alternatives. The responsibility for scoping is
done by developers (or their EIA experts) in consultation with Lead Agencies
and all relevant stakeholders. Scoping is intended to establish important
issues to be addressed in the environmental impact and eliminate the
irrelevant ones. After scoping, REMA approves the terms of reference that
would be used for carrying out the environmental impact study.

c. Baseline data collection and Analysis of Initial State. Baseline data
describes status of existing environment at a location before intervention of
the proposed project. Site-specific primary data on and around a proposed
site should be collected by experts conducting the environmental impact
study to form a basis for future environmental monitoring.
d. Impact prediction and analysis of alternatives. Impact prediction is a
way of forecasting the environmental consequences of a project and its
alternatives. This action is principally a responsibility of an EIA expert. For
every project, possible alternatives should be identified and environmental
attributes compared. Alternatives should cover both project location and
process technologies. Alternatives should then be ranked for selection
of the most optimum environmental and socio-economic benefits to
the community. Once alternatives have been analysed, a mitigation plan
should be drawn up for the selected option and is supplemented with
an Environmental Management Plan (EMP) to guide the developer in
environmental conservation.
e. Public hearing. After completion of EIA report, the public must be informed
and consulted on a proposed development. REMA may, if it deems necessary,
conduct a public hearing before EIA reports are appraised by its technical
committee. Any stakeholders likely to be affected by the proposed project
are entitled to have access to unclassified sections of the EIA report and
make oral or written comments to REMA. REMA shall consider public views
when deciding whether or not to approve a proposed project.
f. Decision-making. During the decision-making and authorization phase,
EIA documents submitted to the Authority are reviewed by two decision-
making committees: a technical committee and an executive committee
constituted by REMA. If the project is approved, the developer will be issued
with an EIA certificate of authorization, which permits implementation of
the project in accordance with the mitigation measures in the EIA report
and any additional approval conditions.
g. Environmental Monitoring. Monitoring should be done during both
construction and operation phases of a project. It is done not just to
ensure that approval conditions are complied with but also to observe
whether the predictions made in the EIA reports are correct or not. During
implementation and operation of a project, monitoring is a responsibility of
the developer and REMA.
2.5 Practical Activity on designing EIA reports of projects

According to REMA, the EIA report should entail the following;
i. Executive summary of the EIA report which should be brief and focus on
following matters:
• Name and location of the project;
• Name of the developer
• Name of the agency preparing EIA report;
• Main impacts identified;
• Mitigation recommendation
• Environmental monitoring plan
ii. Objectives of the project, including ideas, intentions and particular
objectives.
iii. Description of the proposal and its alternatives. In this part, it is necessary
to describe in detail the proposed project and its alternatives including
those not subjected to pre-feasibility study or feasibility study.
iv. Discussion on the proposal and its relation to relevant policies, laws and
programmes (sectoral and regional). In this section, the proposal must
be shown to be in line with policies, laws, institutional framework and
development strategy of Rwanda.
v. Impact assessment that includes assessment of all impacts to the local
population and measures to avoid and mitigate impacts.
vi. Evaluation and comparison of alternatives and selection of one that
is environmentally suitable that shows impacts with largest effects,
measures for avoiding, mitigating and managing them and environmental
improvement opportunities.
vii. Impact management and environmental monitoring plan (EMP).
This is a plan for monitoring and management of impacts during the
implementation and operation of the project, where the responsibilities
between the state and investor are differentiated.

Skills Lab Activity 2.5
The government is running a youth empowerment program aiming at making
youths start strong viable and sustainable projects in their communities. One
of the conditions is that for the youth to qualify for the program is to develop
EIA report of the project that will be supported. Using the above information
(about EIA report), write a simple EIA report for the project you would present
to the government to win the above support.

End of unit assessment
Part A (Multiple choice questions) choose the most appropriate answers
1. EIA is defined as (select one):
a. A process of identifying, predicting, and evaluating the likely impacts
of a proposed project or development to define mitigation actions to
reduce negative impacts and to provide positive contributions to the
natural environment and well-being.
b. A report written by government representatives on the planned
development impacts of environment, socio-economic issues and
culture.
c. Project life-cycle assessment.
2. What is essential in an EIA? (Select all that apply):

a. That it allows decision makers to assess a project’s impacts in all its phases.
b. That it allows the public and other stakeholders to present their views
and inputs on the planned development.
c. That it contributes to and improve the project design, so that
environmental as well as socioeconomic measures are core parts of it.
3. What is the purpose of the “screening” step of EIA? (Select all that apply);
a. To assess the quality of the project design.
b. To facilitate informed decision making by providing clear, well-structured,
factual analysis of the effects and consequences of proposed actions.
c. To determine whether a full EIA is needed.
4. Which type of project usually requires an EIA? (Select all that apply):
a. Small housing building.
b. Dams and reservoirs.
c. Industrial plants (large scale).
d. Community garden development.
e. Irrigation, drainage, and flood control (large scale).
f. Mining and mineral development (including oil and gas).
g. Port and harbour development.
h. Development of wells in the community.
i. Reclamation, resettlement and new land development;

j. Thermal and hydropower development.
k. Outdoor recreation.
5. EIA is usually required for a development project when (select all that
apply):
a. Large changes are expected in the environment.
b. Limited impacts are expected in the environment.
c. A small area is expected to be affected by the project
d. There are potentials for transboundary impact.
e. Many people are likely to be affected by the project.
f. No cumulative impacts are expected.
g. There are protected areas in the project area of influence
6. What specific aspects does a good EIA report and review include? (Select all
that apply);
a. Assessment, mitigation measures and related plans.
b. Terms of reference (TOR).
c. A generalized set of assumptions about the project benefits described in
highly technical terms.
d. A satisfactory prediction of the adverse effects of proposed actions and
their mitigation using conventional and customized techniques.
e. Information that is helpful and relevant to decision making.
7. What kind of monitoring is referred to when we speak of monitoring a

development project (select all that apply?)
a. Monitoring indicators that measure the impacts on the environment and
communities as a result of the development project.
b. Ensuring the fulfillment of all the commitments made in the approved
EIA.
c. Keeping track of changes that may happen in the environment and
communities because of the project and other local and/or global
changes, such as changes in livelihoods due to economic crisis or
migration, differences in water availability due to drought, etc.
d. Keeping track of the political context, to ensure that the project retains
its licence.

c. Part B (True/False questions)
1. Frequency of monitoring will be determined by the nature of the project.
True or false?
2. A good quality EIA might still lead to the planned development not being
permitted to go ahead based
3. on the identified impacts. True or false?
4. The EIA Report is compiled by the designated government agency. True or
false?

UNIT 3
CUSTOMS AND
PROCEDURES
Unit 3: CUSTOMS AND PROCEDURES
Source: A one Stop Border Pot (OABPS) by Hope Magazine Posted 28th April 2016
Key Unit Competency: Developing an ethical understanding of Rwandan Customs

system.
3.1 Meaning of Customs and Customs declaration
Activity 3.1
Referring to the photo below and using on your previous knowledge on
customs, answer the questions that follow;

Introductory activity.
The government of Rwanda has reinforced a policy of obligatory deductions
for imported and exported products; it is possible for the Government to
tax products which are not manufactured in the country. Based on your
previous knowledge about Rwandan customs, gained from S.3 unit 6 as well
as knowledge about taxes in the economy gained from S. 5 unit 3, answer the
following questions:
a. In your own understanding, what is meant by customs and customs
declaration.
b. Briefly explain the different types of customs declaration.
c. What are the objectives of the customs service department?
d. Identify partners involved in the process of customs declaration.
e. Give examples of exported and imported comodities in Rwanda.
f. Mention some customs exempted comodities in Rwanda.
g. Discuss the various documents/forms that are used in customs
declaration.
h. Explain the procedures followed in customs declaration.

Costoms offices.
Questions
a. Explain the term customs.
b. In your understanding, what do you think normally happens at the Customs?
c. “Goods to declare”. Based on this statement, what do you think customs
declaration means.
Customs: Is the government agency entrusted with enforcement of law and

regulations to collect, protect import-revenue, to regulate and document flow
of goods in and out of the country. Customs are also refered to as the official
organization or department responsible for collecting taxes on goods especially on
goods leaving or entering the country and preventing illegal trade.
Customs declaration Is a statement showing goods being imported and exported

on which duty will have to be paid. It is a necessary document to facilitate the
acceptance, verification and payment of taxes before the goods can be handed over
to the importer; or Customs declaration: is the practice used by customs officers
to clear goods into a country and levy tariff including clearance procedures such as
documentation and inspection, method of determination of goods clarification, and
method of assigning its value as the base for an Advalorem tariff.

3.2. Objectives of the Customs Services Department
Activity 3.2.
Do you think it is important for Rwanda to have a customs services department?
Give reasons for your response.
The primary function of customs services department is to assess, collect

and account for import duties and taxes due on imports. Apart from its fiscal
responsibilities, customs services department is responsible for the following:
a. Enforcement of customs legislation and other relevant laws;
b. Facilitation of legitimate trade;
c. Protection of society from illegal entry and exit of prohibited goods;
d. Compilation of trade statistics for economic planning
e. Take all actions necessary to identify and combat evasion of duties and to
combat fraud in its many forms;
f. Ensure efficiency and effectiveness of the customs services department
through enhanced management controls, training, increased accountability
and the expansion of computerization.

Discuss the objectives of customs service department
3.3. Customs Offices in Rwanda
Activity 3.3.
Based on your previous knowledge on customs and taxation in Rwanda and
referring to the map below, answer the following questions;

Border posts in Rwanda –RRA
Questions;
a. Mention the main customs offices in Rwanda located on the map above?
b. Mention any other customs offices in Rwanda you know that are not
mentioned above.
c. Why do think there are many customs offices in Rwanda?
Customs Offices
The history of taxes in Rwanda indicates that tax legislation was inherited from
colonial regimes. During the Second Republic, the administration and accountability
of taxes in Rwanda was initially under the Ministry of Finance and Economic Planning.
This was later on vested into Rwanda Revenue Authority (RRA) that was established
by law N0 15/15 of 8th November 1997.
The authority was established by the Government to restore, to improve its resource
mobilization capacity and strengthen the main economic institutions of the country
while providing the public with better quality and courteous services, In bid to
mobilize more resources, the authority is therefore required to assist taxpayer in
understanding and meeting their tax obligation.

3.4 Types of customs declaration and goods that may be ex-
ported and imported in Rwanda
Activity 3.4.
Basing on your knowledge acquired in previous classes, conduct research
from the library /internet and answer the following questions;
1. Explain the term export customs declaration?
2. Briefly explain on the following different types of customs declaration;
i. Export.
ii. Import.
iii. Temporary importation.
iv. Warehouse.
v. Transit.
3.4.1 Export customs declaration

This is an official document declaring designated goods or service produced in
one country to another which is called C17 form. Export of goods often requires
involvement of customs authorities. An export’s counterpart is an importer.
Goods that may be exported in Rwanda
Activity 3.4
1. What comodities may be exported and imported to and from Rwanda?
2. Explain the process of exporting and importing goods through customs
in Rwanda?
Export Procedures
Goods for exportation other than goods to which the provisions of regulations 132,
133, 134 and 135 apply shall be entered using form C17 Form.
• Policy statement: The Department shall endeavour to facilitate the
exportation of goods from Rwanda subject to such terms and relevant
authorities in respect of goods being exported may lay down conditions
as; Goods may only be exported or accepted for carriage for export after
such declaration or other acceptable documentation has been delivered to
customs by the exporter or agent, and duly processed.

• Prohibitions and Restrictions of exports: The goods specified in Part A of
the Third Schedule are prohibited goods and the exportation of the goods
is prohibited (Section70 (1)) of the East African Community (EAC), Capital
Market Authority (CMA). The goods specified in Part B of the Third Schedule
are restricted goods and the exportation of the goods, save in accordance
with any conditions regulating their exportation, is prohibited ((Section70
(2)) of the EAC, CMA. Customs Officers must therefore ensure that regulations
in force for the control of restrictions and prohibitions of exports of any
particular goods are observed.
• Required Custo3ms Procedure Codes.
a. Goods for Commercial Use: Goods for commercial use intended for export
must be entered on Customs declaration. The Customs procedure code to
be entered will depend on the nature of the goods to be exported as per
Customs Procedure Codes.
b. Travellers Samples and Temporary Exportations: Where goods are
being exported as samples or being exported for purposes of repair or
replacement due to faulty manufacture, a duly completed declaration must
be presented to Customs. Failure to do so may result into full duty being
collected on such goods upon return to Rwanda.
• Re-exportation of Goods
Prohibited and restricted exports generally: The office charged with the
responsibility of monitoring exports should scrutinize supporting documents
such as Invoice, Consignment Notes, Packing List, Certificate of Origin and
Certificate of Quality. Once satisfied with the way information has been
entered and that the goods are not being exported contrary to export control
regulations, the declaration should then be assessed, payment of processing
fees and any other fees processed in ASYCUDA++ system followed by issuance
of receipt and release order to the clearing agent.
3.4.2 Import customs declaration

Is a government document declaring designated goods or service produced
to be moved or sold into the country from other countries. In order to facilitate
trade, RRA customs services department adopted some special regimes.
Importers Procedures: In order to facilitate trade, RRA Customs Services Department
has adopted some special regimes. This includes, Direct Delivery, Clearance on Truck,
and Quick Release Regime offloads and Re-load of goods.

Quick Release (Q.R): There are two types of Q.R special regimes; namely:
a.Quick Release with Deposit. This is where goods can be granted quick release
after payment of the deposit, such goods include:
• Perishable goods.
• Factory machinery spare parts or other factory material that may stop the
functioning of the factory in case of shortage.
• Goods with doubtable origin in case investigations are being conducted on
the certificate of origin
• Fragile goods that can be damaged when offloaded e.g. glasses.
• Goods that are not off loaded in Kigali due to Contracts between the importer
and the transporter e.g. Malt for BRALIRWA offloaded at GISENYI.
Procedure for Quick Release with Deposit

• Clearing agent should fill the prescribed application form clearly specifying
reasons for request of this special regime.
• The application request should be addressed to the Commissioner for
Customs and Excise.
• The clearing agent submits the approved form to the special regime desk for
processing.
• If the application is approved, the Clearing agent prepares a provisional
declaration and submits a copy to Special Regime Team office to calculate
the correct amount to be deposited.
• After payment of the deposit, the Head of Special Regime Team allocates
special regime officer to accompany the consignment and conduct physical
examination at the importer’s premises.
b.Quick Release without Deposit
This is where the goods are granted Q.R special regime without payment of the
deposit. These goods include the following:
• Goods exempted from payment of duties and taxes.
• Goods that belong to the Government of Rwanda.
• Bank coins and notes.
Procedure for Quick Release without Deposit
• The Clearing agent fills the prescribed application form clearly specifying
reasons for request of this special regime.
• This application should be addressed to the Head of Central Operations
Division.

• If the application is approved, the Clearing agent prepares a provisional
declaration and submits a copy to Special Regime Team office.
• The Head of Special Regime Team allocates special regime officer to
accompany the consignment and conduct physical examination at the
importer’s premises.
Clearance of goods on truck (“Distinguished Service Cross D.S.C”)

Goods, which can be granted this regime, fall into:
• Identical goods that can be easily identified and verified when loaded on the
trucks e.g. sugar, rice, goods that are not allowed in the public warehouse
due to their nature e.g. Cement, Salt
• Heavy and bulky items that can be easily identified and examined when
loaded on the trucks e.g. Machines, rolls for making iron sheets…
Procedure for Clearing of goods on truck

• The clearing agent fills a prescribed form applying for “D.S.C” special regime.
This application form, accompanied by the manifest is submitted to cargo
control office.
• Cargo controller or warehouse team leader (depending on where the truck is
parked) verifies the goods and establishes whether “D.S.C” regime should be
granted or not, based on the nature of the goods. Submits a detailed report
to the commissioner for customs & excise
• The commissioner’s decision is returned to the cargo controller who notes
the granted regime. The clearing agent prepares the declaration, which is
submitted to the cargo controller for verification of goods and taxes and
duties due. When verification is done, the agent pays taxes and duties and
then goods are released.
3.4.3. Temporary importation.

Is the import of goods into another country or territory for a limited period of time;
such goods are generally not subject to tariffs or similar fees, though they must leave
the country within a certain period of time.
Temporary importation means that goods may be used in the country without
payment of duty or VAT under certain conditions and re-exported afterwards in the
same state as they were in at import.
Conditions that apply

• Temporary importation regime granted to International Organizations governed
by a specific convention ratified by the Republic of Rwanda;
• Temporary importation regime granted to Institutions or persons not governed
by any specific Convention with the Republic of Rwanda;
Required documents
• Arrival notice where applicable;
• Bill of lading or Airway Bill;
• Original invoices;
• Packing list of the imported goods;
• A letter of guarantee to cover the duty and taxes on the goods signed by the
organization and the line Ministry; the convention ratified by Republic of
Rwanda and any other document that may be required by the Customs.
Note: With exceptions to goods imported under specific conventions, goods under
the temporary admission procedure with partial relief shall be subject to payment of
duties and taxes, upon expiration of six (6) months within the Customs territory.
The following supplies are exempted from Value Added Tax;

1. Water supply services. The supply of main water and sewerage services
made for non-profit motive, excluding sewerage pump out services.
2. Health supplies.
• The supply of health and medical services.
• Articles designed for use by the disabled.
• The supply or importation by eligible persons, of equipment and drugs to
hospitals and health centres.
• Supply or importation of drugs and medical equipment made by persons
recognized by Rwandan laws, for medical use, by patients and disabled
persons.
3. Educational services.
• Educational services provided to pre-primary, primary or secondary students.

• Educational services provided by social organizations, to students and other
youths, meant for promoting the social, physical, educational or spiritual
development of the members otherwise than for profit.
• Educational services provided to vocational and to other tertiary institutions.
• Educational materials supplied directly to learning institutions.
• The eligible bodies for this exemption shall be those recognized by the laws
of Rwanda as public institutions, not for profit social organizations and any

other form of voluntary or charitable institution.
• Books, newspapers, journals, cassettes and diskettes used as educational
materials.
4. Transport Services.
• Transportation of persons by road in a bus or coach licensed under the roads

and road traffic law and having a seating capacity for fourteen or more adult
persons.
• Transportation of persons by air or any scheduled flight.
• Transportation by railway.
• Transportation of persons or vehicles by boat.
5. Transfer of property.
• The sale or lease of an interest in land.

• Sale or transfer of a building or part of a building, flat or tenement meant for
residential purposes.
• The renting of, or other grant of the right to use, accommodation in a building
used - predominantly as a place of residence of any person and his family, if
the period of accommodation for a continuous term exceeds 90 days.
3.4.4 Warehousing.
A warehouse is a commercial building for storage of goods. Warehouses are used
by manufacturers, importer, exporter, wholesalers, transport businesses, customs,
etc. Warehouses allow transport optimization along the supply chain, and allow
companies to work with an optimal inventory (economic order quantity) regarding
service quality.
Types of warehouses
1. Private Bonded Warehouses: A Bonded warehouse is a building,
installation or area approved by and under the supervision of customs
where goods may be stored under the conditions laid down by the
provisions in force. Private operators are allowed to operate bonded
warehouse. An aspirant has to apply to the Commissioner of Customs
clearly indicating the nature of the warehouse you want to operate.
Here are a few things you need to know about private bonded warehouse
• The Customs need to approve all goods that are to be warehoused
• The license to operate a bonded warehouse is valid for one-year renewable.
• Companies or individuals applying for the first time to operate a bonded

warehouse are not limited to a certain period of time to accomplish all the
formalities but those requesting for the contract renewal are allowed only
one-month period.
2. Public bonded Warehouses
The Public bonded warehouses are buildings and equipment therein, or area for
deposition of warehoused goods by any person and that are approved for that
purpose by customs. The manifest cargo/control system is designed to ensure that
all goods that arrive under the transit system at GIKONDO parking lot are correctly
accounted for.
The control of goods in all public warehouses is the responsibility of the Customs
Department of the Rwanda Revenue Authority (RRA). The physical handling of cargo
is the responsibility of cargo handling companies like MAGERWA, KOBIL, and TOTAL.
These companies have their own stock record systems.
Unwarehousable Goods
The following are examples of goods which are unwarehousable:
• Salt; • Chalk;
• Cement; • Fireworks;
• Match Box; • Dried fish;
• Acids for trade and business; • Perishable goods;
• Ammunition for trade and • Combustible or inflammable
business; goods except petroleum
• Any other goods which the products for storage in approved
Commissioner may gazette; Etc. places; Explosives;
Requirements in order to qualify to operate a Bonded warehouse

• Licensing Requirements
As a necessary condition you must fulfill the following conditions in order to qualify
to operate a Bonded warehouse:
i. You must be a Rwandan citizen or a permanent resident or an investor

registered under Rwanda Development Board (RDB);
ii. You need to possess a trade license issued in Rwanda;
iii. You need to possess a Tax Clearance Certificate

For the Commissioner of Customs to consider your request you need to;
• Complete an application form issued by Customs;
• Submit a plan of the premises as required by Customs;
• Meet the standards set by customs based on the nature of goods and
activities of the bonded warehouse;
• Execute a bond equal to duties and taxes due on goods to be warehoused
(Bank/ Insurance guarantee);
• Pay a license fee during one-year period.
Minimum Requirements for the Warehouses

To qualify for a License to operate a bonded warehouse you will need to ensure that
the following minimum requirements are available at bonded warehouse:
• Fence-structured premises should be at least 2 meters high;
• The premises should have concrete or cemented ground/floor;
• Should provide a suitable office with all facilities for Customs and other
stakeholders;
• Should have a computerized system in place capable of generating arrival
notice of goods and stock record of warehoused goods;
• Should have systematic procedure of entry and exit of goods in the warehouse;
• Possession of electronic weighing machines approved and certified by
competent authority; possession of elevating equipment’s, machines and
materials where applicable; Stack and arrange the goods in the bonded
warehouse in a proper way in order to ease verification by the customs officers;
Provide lock and key for securing the doors of the bonded warehouse;
• Provide all necessary labor and materials needed for treatment, sorting,
packing, examining, weighing and storing the goods; Ensure the insurance
of warehoused goods;
• Parking space for vehicles; Safety equipment for the security of workers and
warehoused goods; lights for security purposes;
• The premises should have a single entrance;
• In case the bonded warehouse is under rental contract, the contract should
at least be equivalent to the bond agreement period of one year.
Suspension and Cancellation of a License
The Commissioner General of Customs reserves the right to suspend or cancel a

license in case you fail to comply with the customs law and subsidiary legislations
that regulate operations of bonded warehouse;

• Failure to comply with the minimum requirements for setting up a warehouse.
• Act fraudulently in dealing with customs and clients or if there is no longer a
need for a bonded warehouse in the area in which it is located;
Note. Where the bonded warehouse is suspended, customs may lock and seal the
bonded warehouse during the period of suspension.
3.4.5 Customs transit

Transit refers to the movement of goods entering or leaving the country’s borders
under Customs control.
• Transit Documentation: Documentation is done by a clearing agency
on behalf of the importer/exporter. Clearing Agencies present transit
declarations (IM 8) to Customs through the Bureau or Remote DTI. Agencies
must be careful while filling the documentation form, especially on section
indicating the correct country of destination and the exit office. Here is an
example: if the country of destination is Democratic Republic of Congo then
the possible codes of offices of destination are 31GC, 41MU, 41CY, 41BU.
• Registered transit declarations with supporting documents are presented to
Customs through the Acceptance desk and follow the approved Declaration
Processing Path.
• Customs Operations: Customs examine the documentation to establish
the correct bond amount to be debited and generate a Transit document
(T1) from the declaration lodged by the Clearing Agent if it meets all the
requirements during entry examination. The transit document (T1) contains
summarized information from the IM8 declaration and constitutes the actual
transit transaction generated.
• At its generation, all appropriate blank fields are filled in and the T1 is then
registered and a T1 registration number is generated with serial D. At this
stage, Customs automatically debit the Transit bond account of the clearing
agency at registration of the Transit document (T1).
• Transit Guarantees: All types of transit are designed to ensure that any
charges due on goods are secured. This is achieved through a system of
guarantees and the key personnel in this regard are the principal and the
guarantor. A guarantor is an individual or firm or any other body that is eligible
to contract a legal third person (normally a bank or an Insurance company).
He/she is responsible for payment of duties and other charges to which the
principal has become liable as a result of any irregularity concerning the
transit declaration.
• The principle is responsible of goods from point of entry to destination office.
In transit the principle has to provide a guarantee in order to ensure payment
of any customs due or charges, which may be incurred in respect of the goods.

• Change of destination and Re-routing of T1: This is the customs procedure
under which goods in transit change the office of destination. It is granted
upon application on the customs approved form by the importer or his
clearing agent. If the reason is found appropriate, the office of destination is
rerouted electronically.
• In cases where a truck uses the wrong office of exit/clearance, the T1 can be
re-routed to the correct destination after all the necessary formalities have
been done.
• The re-routing of T1’s: It is done only for T1 that has not yet been validated
at the initial office of destination.
• Trans-shipment: This is the customs procedure under which goods are
transferred under customs supervision from the importing means of
transport (vehicle) to another means of transport.
• Goods may not be unloaded or transshipped from their means of transport
except with written authorization from customs and in the presence of
Customs officers. Unloading or transshipment must take place according
to the conditions determined by Customs and in accordance with the legal
provisions in force.
• On completion of Trans-shipment exercise, the new seal is endorsed on
documents and put on the truck by customs.

1. Describe the steps process related to customs procedures
2. Explain the documents fulfilled in temporary importation regime granted
to International Organizations governed by a specific convention ratified
by the Republic of Rwanda
3. Explain the differences between warehouse and warehousing customs
4. Give the documents used for goods which are in transit
5. Explain the term trans-shipment

3.5. Customs exempt goods
Activity 3.5
In Rwanda there are goods and services that are not charged customs duties.
1. Mention some of the goods and services you think should not be charged
duties in Rwanda
2. Why do you think some goods and services should not be charged duties
in Rwanda?
The exemptions on goods and services

The following categorizes exempt goods and services which includes;
• Fish, fresh vegetables, fertilizers used in agriculture health service and
supplies eg drugs, medicine and materials for the disabled.
• Education services and supply of education materials to learning institutions,
books, journals, cassettes, discs
• Machinery for industries;
• Raw materials for industries;
• Building and finishing materials imported by an investor fulfilling the
requirements determined by an order of the Minister in charge of finance;
• Refrigerating vehicles, tourist vehicles, ambulances, fire-extinguishing
vehicles, hearses;
• Vehicles and movable property and equipment for foreign and Rwanda’s
• Diaspora investors and their expatriate staff;
• Equipment for tourism and hotel industry and relaxation places appearing
on the list determined by an order of the Minister in charge of finance;
• Goods and services meant for free economic zone;
• Medical equipment, medicinal products, agricultural, livestock, fishing
equipment and agricultural inputs;
• Equipment in education field;
• Equipment’s information, communication and technology (VAT Law) etc.
The following goods and services are intended for persons of a special category:
• Goods and services intended for diplomats accredited to Rwanda that are
used in their missions;
• Goods and services intended for international organizations that have signed
agreements with the Government of Rwanda;

• Goods and services donated to local non- governmental organizations,
which have been acquired through funding by countries or international
organizations that have signed agreements with the Government of Rwanda
and for being used for agreed upon purposes;
• Goods and services intended for projects funded by partners that have
signed agreements with the Government of Rwanda.”
The following goods and services shall be exempted from value added tax:
• Transportation services by licensed persons:
• Transportation of persons by road in vehicles which have a seating capacity
of fourteen (14) persons or more;
• Transportation of persons by air;
• Transportation of persons or goods by boat;
• Transportation of goods by road;
• Lending, lease and sale :
• Sale or lease of land;
• Sale of a whole or part of a building for Residential use ; etc.

Explain the term “customs exempt goods”
1. What do you understand by customs exemption?
2. Name any five customs exempted goods in Rwanda
3.6 Partners in the process of customs declaration
Activity 3.6
From your prior knowledge, what are the partners and shareholders in customs
declaration?
The following are the main partners involved in customs declaration:

• International Civil Aviation Organization,
• International Maritime Organization
• Universal Postal Union,
• United Nations Conference for Trade and Development,

• The United Nations Educational,
• Scientific and Cultural Organization,
• United Nations / Economic Commission for Europe,
Inter Governmental Organizations

• Organization for Economic Co-operation and Development (OECD),
• Organization for Security and Co-operation in Europe (OSCE),
• The World Bank, International Trade Center (ITC)
International Cooperation
• The European Union (EU),
• European Free Trade Association (EFTA),
• International Standards Organization (ISO),
• International Air Transport Association (IATA),
• Global Facilitation Partnership for Transportation and Trade (GFP),
• The International Road Union (IRU).
• The Bureau International des Containers et du Transport Intermodal (B.I.C.),
Global Express
The following are main Stakeholders involved in customs declaration:

• Customs administration: It manages all the operations in collaboration with
the customs agent in charge.
• Warehouse: refers to a designed space to receive and records goods
• Customs warehouse: It is a warehouse where goods are stored waiting to be
cleared. e.g: MAGERWA
• Rwanda Standards Board RSB: It verifies and accredits the conformity of the
quality goods and services following the international norms/ standards
• Transport Companies: Include national and international transport
companies
• Customs Agent also called declarant: refers to an agent who is in charge of
customs declaration for importer’s account who pays him/her agreed fees.
• Rwanda National Police: It is a unit of national police in charge of protecting
rights of customs administration. It sues customs and fiscal infractions. e.g.
Rwanda Protective Department

Who are the customs partners regarding customs procedures?

3.7. Documents used in customs declaration
Activity 3.7
1. Explain what do you understand by documents as used in customs
declaration?
2. State at least three types of customs declaration documents you know
in Export and Import of goods.
Documents in customs Declaration: they are used to declare what goods have
been brought on to the nation, as some may have limit or customs excise tax or are
banned from entry. These may include:
1. Transaction Invoices: is a non-negotiable commercial document issued by
a seller to a buyer.
2. Transport documents: are documents which show information about

cargo that is being transported. Transport documents lie at the heart of
international trade transactions. These documents are issued by shipping
line, airline, international trucking companies, railroad, freight forwarder
all logistics company.
There is a type of transport document for each model of transport:

3. CMR: the CMR (Convention relative au Contrat de transport international
de Marchandise par Route) transport document is an international
consignment note used by drivers, operators and forwarders that govern
the responsibility and liabilities of the parties to a contract for the carriage
of goods by road internationally.
4. Air waybill: is a transport document used for air freight. An air waybill
(AWB) is a non-negotiable transport document covering transport of
cargo from airport. It indicates only acceptance of goods for carriage. This
document is prepared by IATA Transport Agent or the airline itself and is
addressed to the exporter, the airline and the importer.
5. Bill of Lading: is a transport document for sea freight. Bill of lading B/L is
used by the agent of a carrier to shipper, signed by the captain, agent, or
owner of vessel.
6. Import license: An import license is a document issued by a national
government authorizing the importation of certain goods into its territory.
7. Packing list: is a more detailed version of the commercial invoice but
without price information.

8. Certificate of origin: show that goods in particular shipment have been wholly
obtained, produced, manufactured or processed in a particular country.
9. Certificate of analysis: is a document which confirms that specific goods have
undergone specified testing with specified results and adhere to product
specification and standard of production.
10. Goods arrival notice: is a document sent by a carrier or agent to the consignee
to inform about the arrival of the shipment and number of packages, description
of goods, the weight, and collection charges (if any)
11. Assessment Notice: is a document issued by a taxing authority specifying the
assessed value of a property.
12. Certificate of Fumigation: is the proof that wooden packing materials issued in
international sea freight shipping e.g wooden pallets and crates, wood, wool etc.
Have been fumigated or sterilized prior the international shipment
13. Goods invoice: is a document sent by a seller to a buyer. It specifies the amount
and cost of goods that has been provided by a seller.
14. Payment receipt: is a simple document that shows that payment was received
for in exchange for goods or services.
15. Phytosanitary certificate: is a certificate stating that a specific crop was inspected
a predetermined number of times and a specified disease was not found or a
certificate based on an area surveillance stating that a specific disease, as far as
known, does not occur in the area of production.
16. Warehouse handling fees invoice: is a document given by a warehouseman for
items received for storage in his or her warehouse which services has evidence
of title to the stored goods.
17. Import Declaration Form (IDF). (from the Importer); Importer’s Tax Identification
Number (TIN) and Value Added Tax (VAT) numbers; Duties and Taxes Exemption
Certificates.
Describe different documents involved in customs declaration.
3.8 Declaration forms in customs

From your prior knowledge answer the following questions:
1. Explain the meaning declaration form?
2. Mention the different types of the declaration forms you know

3.8.1 Declaration form
Is a form that is required by most nation countries when a citizen or a visitor or
goods are entering that nation’s borders, called import. The purpose of the import
form is to declare what goods are being brought into the nation, as some countries
may have import quota (limits), customs excise taxes, or bans from entry on some
goods or quantities of goods. The form is also used to calculate any applicable tariffs
or duties
3.8.2 Types of declaration forms

There are two forms of declaration:
1. Customs arrival card or a lading card when traveling with your goods.
The traveler or family members are required to complete the form, sign it,
and then submit it to the custome and/or border protection official before
arriving into the nation. Most nations require declaration of alcoholic drinks,
tobacco product, animals, fresh food, plant material, seeds, soils, meats etc
2. Commercial invoice or a Pro-forma invoice, or an import declaration

form, or a re-export declaration. If not traveling with the goods, which
are shipped, one must use other customs declaration forms. Incoterm on
these forms define the shipment and customs declaration. Also, the forms
normally require the traveler to note the country of origin of the goods
and may sometimes require a certificate of origin. These forms can also be
used when hand carrying goods across a border. Errors on the forms can
cause delays or confiscation of the goods. For that reason, importers often
use a customs brokerage to clear goods through customs.

Case study
An International trade enterprise has imported the following products outside
Rwanda:
Oil from Tanzania, Sugar from Kenya, cement from Zambia; upon arrival at the
customs, he was told that the importer should pay customs duties in regard to
importation procedures.
In line with the case study above, describe the different documents which can
be used for the declaration of goods at the customs.

3.9 Verification and payment of customs duties
Activity 3.9
• Based on your research in the library/internet what do you think about the
document to be submitted to RRA in clearing and paying for the product
in the state warehousing?
The importer must submit the necessary documents at the nearest Customs branch
office; alternatively, the importer may appoint a clearing agent to do the clearance
on their behalf. Clearances can also be done electronically. Customs clearance
procedures can be found at the E-Regulations Rwanda website.
The importer must also be registered as importer and exporter. Before the payment
of customs duties, there is the declaration of commodities which has the following
process:
• Clearing through customs: Clearing through customs is the implementation
of necessary formalities so that commodities can be consumed, exported or
put under other customs regulations.
• Clearance of goods on truck (“D.S.C”): Goods, which can be granted this
regime, fall into:
i. Identical goods that can be easily identified and verified when loaded on
the trucks e.g. Sugar, Rice etc.
ii. Goods that are not allowed in the Public Warehouse due to their nature e.g.
Cement, Salt etc.
iii. Heavy and bulky items that can be easily identified and examined when
loaded on the trucks e.g. Machines, rolls for making iron sheets etc
Procedure
i. The clearing agent fills a prescribed form applying for “D.S.C” special regime.
This application form, accompanied by the manifest is submitted to Cargo
Control office.
ii. Cargo Controller or Warehouse Team Leader (depending on where the truck
is parked) verifies the goods and establishes whether “D.S.C” regime should
be granted or not, based on the nature of the goods.
iii. Submits a detailed report to the commissioner for Customs & Excise
iv. The Commissioner’s decision is returned to the Cargo Controller who notes
the granted regime.
v. The clearing agent prepares the declaration, which is submitted to the

cargo controller for verification of goods and taxes and duties due.
vi. When verification is done, the agent pays taxes and duties and then goods
are released.
The documents that are required in Clearance of goods on truck examination

are the following:
i. Arrival notice of a commodity;
ii. A commercial invoice;
iii. Transport invoice;
iv. Certificate of origin;
v. Certificate of quality;
vi. Waybill.
vii. Certificate of inspection for a car;
viii. Identification of the importer.
After the examination of all these documents, the customs officer makes his
declaration testifying that the commodity can be consumed and affixes a validation
stamp.
Verification of a stored commodity

This is about physical verification of a commodity put in a warehouse, its location,
etc.
It is the arrival notice that guides the controller in his/her work; In this step, the
declaring officer replaces the importer.
The purpose of the verification is to confirm not only the existence of the commodity,
but also its value and the respect of the customs legislation by the importer. At the
end of the verification, the controller signs on the verified documents.
This verification is carried out by technicians who verify the conformity of data at
their disposal and the customs law. These are the people who confirm the exact
value of a commodity, its state and tax together with customs duties to be paid.
Payment of the invoice

In reality, this invoice is settled at the beginning of clearing through customs
operations. In this step, the issue is to confirm the payment of the bill and the making
of the bill. This allows a delivery of the commodity to its owner.

1. Explain clearly the steps/process in clearing and paying customs duties
2. Mention the documents that are required in verification for customs duties
3.10 Administrative practices for taking goods out of customs

When the customs operations are finished and the payment of fees is completely
done, the customs give the authorization of withdrawing goods.
It is then the duty of the owner of the warehouse to proceed for operations of
balancing the documents and giving the authorization of goods to be loaded in a
vehicle supplied with the entering bill and formal withdrawal (Exit form).
There exist also related services like the Rwanda Board of Standards and the customs
police that carry out the inspection of documents to confirm the withdrawal
authorization.

Read the following scenario and answer questions that follow:
Umutoni is a major trader who exports her products to Uganda; she has to
clear her products at Katuna border with customs office.
a. Describe some of the departments she has to deal with during customs
declaration.
b. Describe some of the documents she is likely to use during declaration.

End of Unit 3 Assessment:
1. Identify a business project you can operate after school. For this project
identified, explain how the business will contribute to promote export
of the products to the foreign countries. List and explain what you can
do to encourage entrepreneurs to go for delivering their products out of
Rwanda.
2. Identify some of the measures to help people develop a positive attitude
towards customs declaration.
3. Identify some challenges encountered at customs department

UNIT 4
FINANCIAL MARKETS
Unit 4: FINANCIAL MARKETS
Key Unit Competency: To be able to evaluate the role of financial markets
Introduction
The financial market plays the key role in the economy by stimulating economic
growth, influencing economic performance of the actors, and affecting economic
welfare. A financial market brings buyers and sellers together to trade in financial
assets such as stocks, bonds, commodities, derivatives and currencies. The purpose
of a financial market is to set prices for global trade, raise capital, and transfer
liquidity and risk. Some examples of financial markets include the stock market, the
bond market and the real estate market. Financial markets can also be broken down
into capital markets, money markets, primary markets and secondary markets.
Financial markets and capital are often used interchangeably; although these
definitions of the terms overlap somewhat! Whilst often or not those two terms are
used synonymously, in reality a distinction also exits. «Financial Markets» pretty well
provides an umbrella term underneath which other, more specialised markets sit.

Basically, capital market is a part of financial market. Any overlap is generally sorted
out by local definitions made and hopefully enforced by the local regulator. For
most practical purposes the physical markets have evolved to specialise in certain
products (or ‘financial instruments’) to avoid confusion.
This unit aims at helping to explore more about financial markets operation as one
of the strategies of linking investors and lenders. It will explain more on capital
market instruments and how one is protected in capital markets, evaluates the role
of financial markets in general and in Rwanda. The unit highlights the following:
• Whether Rwanda has financial markets in her financial system.
• The roles of financial market in the mobilization of domestic resources for
investment.
• Discusses the challenges and constraints that impede the development of
an effective domestic financial market in general and Rwanda in particular.
• How the government of Rwanda regularly issues to the public, both Treasury
Bills and Treasury Bonds.
Introduction activity:
Refering to the picture and case study below answer the questions that
follow ;
Figure 4.1: The home of Manirafasha and his wife Akimana
Manirafasha and his wife Akimana are modern farmers in rural area. They own
different assets and have for long accumulated huge sums of money. Manirafasha’s
family is comprised of the father, the mother and their 2 children ; a daughter and
son who are completing their secondary school studies.

Manirafasha and his wife Akimana are planning to retire from their
farming activities and are also getting worried of their future when they will no
longer be able to perform their farming activities in a few years to come. When
their children came back from school where they also study entrepreneurship
subject, they advised their parents to think how they can sustain their income in
the near future and continue to meet their basic needs through investing their
money into more secured investment projects.
a. Referring to your own family, your community and Mr. and Mrs.
Manirafasha’s family, why do you think families should worry about
theirfuture financial capacities and well being ?
b. What changes in terms of productivity do you observe from farmers and
other workers in your community when they reach in seventies of age ?
c. Referring to the above scenario, describe different alternatives
investment projects that you would advise the family to invest their
money in.
d. Referring to the country’s saving policy, where would you advise the
family to invest and why ?
4.1 Meaning and functions of financial Market
Activity 4.1
Use the pictures below to answer the questions that follow 9.6
Figure 4.2: example of a financial markets
a. Describe what you think the people in both pictures are doing.
b. Do you find any relationship of their activities?
c. What do you understand by financial market?

A financial market is a market in which people and entities trade financial securities,
commodities, and other fungible items of value at low transaction costs and at
prices that reflect supply and demand. Securities include stocks and bonds, and
commodities include precious metals or agricultural goods.
Financial markets facilitate:

• The raising of capital (in the capital markets)
• The transfer of risk (in the derivatives markets)
• Price discovery
• Global transactions with integration of financial markets

• The transfer of liquidity (in the money markets)
• International trade (in the currency markets),
Financial Markets are used to match those who want capital to those who have
it. Typically, a borrower issues a receipt to the lender promising to pay back the
capital. These receipts are securities which may be freely bought or sold. In return
for lending money to the borrower, the lender will expect some compensation in
the form of interest or dividends. This return on investment is a necessary part of
markets to ensure that funds are supplied to them.
Application Activity 4,1

a. What do you understand by financial markets?
b. Explain the role of financial market
4.2 Types of financial markets
Figure 4.3: types of a financial markets

Activity 4,2
Identify different types of financial markets that you know
The types of financial markert are:
i. Physical asset markets versus financial assets markets: Physical

assets markets are for physical products such as wheat, autos, real estate,
computers, and machinery whereas financial asset markets, on the other
hand, deal with stocks, bonds, notes, and mortgages. Financial markets also
deal with derivative securities whose values are derived from changes in
the prices of other assets eg convertible bond.
ii. Spot markets versus futures markets: Spot markets are markets in which
assets are bought or sold for “on-the-spot” delivery (literally, within a few
days) whereas futures markets are markets in which participants agree
today to buy or sell an asset at some future date.
iii. Money markets versus capital markets: Money markets are the markets
for short-term, highly liquid debt securities whereas capital markets are
the markets for intermediate or long-term debt and corporate stocks.
iv. Primary markets versus secondary markets: Primary markets are
the markets in which corporations raise new capital whereas secondary
markets are markets in which existing, already outstanding securities are
traded among investors.

Kamana is a senior 4 student who inherited a very big house in Kacyiru Sector
and 50,000,000 Frw from his late grandmother with whom he was living. He
is planning to invest his money in a financial market and he is seeking your
advice on an alternative solution. Help him identify the ideal financial market
he will have to join and explain the reason you would advise him to join that
market.

4.3 Capital market
Activity 4,3
By use of the photo below answer the questions that follow Activity 9.6
Figure 4.4: Kigali Friends Supply Ltd’s industry
It was back in 2008 when Kigali Friends Supply Ltd were facing economic crisis as
it was unable to meet their growing need. Kigali Friends Supply Ltd Company was
a well established company with many employees and different branches across
the country and it was known by many people as it had built good reputation for
better service and quality products. Every person would appreciate to work with
the company. None would understand the reason behind the difficult time the
company was facing.
The truth was that the company invested much money in expansion to meet the
growing market need using all its reserves and money borrowed from the bank
expecting that the sales trend of the time will remain constant. It was a surprise
for the company to learn that the world was facing a serious economic crisis which
the company didn’t envision and the market demand for the company’s products
and services started declining increasingly. This time was the difficult time for
the company as it was unable to meet its contract obligations due to shortage in
working capital. Employees were worried of the future; suppliers also. There was
pressure from the bank to repay the loan

. Questions;
a. Explain the source of money used by the company to expand its business.
b. Identify the problems faced by the company.
c. Where else do you think the company could have borrowed money to
finance its investment that would have saved it from the world economic
crisis?
d. What do you understand by capital market? What are its functions?
4.3.1 Meaning of capital market

A capital market is a place in which financial securities are traded by individuals and
institutions/organizations. The capital market is further divided into primary and
secondary market. A capital market is a place in which financial securities are traded
by individuals and institutions/organizations. It can be a primary market where
initial public offers (IPOs) take place or a secondary market where IPOs are traded
subsequently.
Primary market: The primary market is the market for new issuers or where new
capital is raised. It is the market where securities are sold for the first time. At the
primary market sale proceeds of the securities offered flow directly from the buyers
or investors to the issuers of the securities.
Secondary market: The secondary market is the market for trading securities that
have been sold or issued in the primary market and already in the hands of the
public. Once securities have been successfully issued in the primary market, they
are subsequently traded in the secondary market.
4.3.2 Functions of Capital Market

Capital market is very important as it plays a significant role in the national economy.
A developed, dynamic and vibrant capital market can immensely contribute for
speedy economic growth and development.
Let us get acquainted with the important functions and role of the capital market.
i. Mobilization of Savings: Capital market is an important source for

mobilizing idle savings from the economy. It mobilizes funds from people
for further investments in the productive channels of an economy. In that
sense it activates the ideal monetary resources and puts them in proper
investments.

ii. Capital Formation: Capital market helps in capital formation. Capital
formation is net addition to the existing stock of capital in the economy.
Through mobilization of ideal resources, it generates savings; the mobilized
savings are made available to various segments such as agriculture, industry,
etc. This helps in increasing capital formation.
iii. Provision of Investment Avenue: Capital market raises resources for longer
periods of time. Thus it provides an investment avenue for people who wish
to invest resources for a long period of time. It provides suitable interest
rate returns also to investors. Instruments such as bonds, equities, units of
mutual funds, insurance policies, etc. definitely provides diverse investment
avenue for the public.
iv. Speed up Economic Growth and Development: Capital market enhances
production and productivity in the national economy. As it makes funds
available for long period of time, the financial requirements of business
houses are met by the capital market. It helps in research and development.
This helps in, increasing production and productivity in economy by
generation of employment and development of infrastructure.
v. Proper Regulation of Funds: Capital markets not only helps in fund
mobilization, but it also helps in proper allocation of these resources. It can
have regulation over the resources so that it can direct funds in a qualitative
manner.
vi. Service Provision: As an important financial set up capital market provides
various types of services. It includes long term and medium term loans to
industry, underwriting services, consultancy services, export finance, etc.
These services help the manufacturing sector in a large spectrum.
vii. Continuous Availability of Funds: Capital market is place where the
investment avenue is continuously available for long term investment.
This is a liquid market as it makes fund available on continues basis. Both
buyers and seller can easily buy and sell securities as they are continuously
available. Basically capital market transactions are related to the stock
exchanges. Thus marketability in the capital market becomes easy.

Government of Rwanda is supporting capital market operations.. With the
help of examples; explain the benefits of investing through capital market in
Rwanda.

Activity 4,4
Observe the picture below, and answer the question that follows;
Figure 4.5: People queuing to buy shares at Initial Public Offer (IPO)
Blarirwa and Bank of Kigali- BK are two among many companies that started to
trade their shares. On Initial Public Offer (IPO) of each company, Uwimana and her
husband Kalisa bought shares in both companies worth 10,000,000 Frw. Now the
family is in need of paying schools fees for their child who is studying at university
of Rwanda. Explain the procedure to get back their money?
4.4 Stock exchange

4.4.1 Meaning of stock exchange
The word “Stock Exchange” is made from two words ‘Stock’ and “Exchange”. Stock
means part or fraction of the capital of a company, and Exchange means a transferring
of the ownership; representing a market for purchasing and selling. Thus, we can
describe the stock exchange as a market or a place where different types of securities
are bought and sold. Securities traded on a stock exchange include shares issued by
companies, unit trusts, derivatives, pooled investment products and bonds. As the
stock exchange deals in all types of securities, it is known as ‘securities market’ or
‘securities exchange’ also.
A stock exchange is a secondary market of securities because the trading happens

only for the securities that have already been issued to the public and now being

allowed to be traded on the floor of a stock exchange after getting listed with the
stock exchange. The initial offering of stocks and bonds to investors is by definition
done in the primary market and subsequent trading is done in the secondary market.
4.4.2 Functions of stock exchange

Stock exchange is one of the most important financial intermediaries and plays a very
important role in the capital formation and economic development of the country.
Given below are some important functions of stock exchanges from economic point
of view:
i. Marketability of Securities: The stock exchange provides for easy
marketability of securities as securities can be bought and sold
conveniently on the floor of the stock exchange. The Stock Exchange
provide companies with the facility to raise capital for expansion through
selling shares to the investing public and on the other hand provides
investors with a platform to trade these shares.
ii. Price Determination and Continuity: Since transactions take place
regularly on a stock exchange there is continuity in the dealings. Supply
and demand in stock markets are driven by various factors and this
balance of supply and demand affects the price of stocks. These prices
gets duly recorded and reported in the newspapers for the benefit
of investing public. Besides, stock exchanges have defined rules and
regulations to moderate price fluctuations to ensure continuity in buying
and selling.
iii. Mobilizing Surplus Savings: Stock exchange is an integral part of the
capital market of a country. When people draw their savings and invest
in shares (through an IPO or the issuance of new company shares of
an already listed company), this leads mobilization of funds to help
companies finance their organizations. They facilitate the process by
which the savings from all parts of country gets channelized as investment
into industrial and commercial undertakings financing their capital
requirements. This promotes business activity resulting in stronger
economic growth and higher productivity levels of firms.
iv. Barometer of the Economy: The share prices fluctuate on stock exchanges
as a result of underlying market forces. The intensity of buying and selling of
securities and the corresponding rise or fall in the prices of securities reflects
the investors’ assessment of the economic and business conditions. Share
prices tend to rise or remain stable when companies and the economy show
signs of stability and growth whereas they might fall sharply at the time of
an economic recession, stagnation, depression, or financial crisis. Change
in security prices are known to be highly sensitive to changing economic,
social and political conditions and hence act as a barometer of economic
and business conditions.

v. Mobility of Capital: Investing in other businesses require huge capital
outlay whereas investing in shares is open to both the large and small stock
investors. Stock exchanges furnish an open and continuous market for small
investors and their savings that are invested in securities are converted into
cash for reinvestment in other securities. Thus, stock exchanges provide
mobility to capital and facilitate sound investment. Savings are encouraged
when people come to invest in stock exchange. 
vi. Profit Sharing and Resource Allocation: As a result of stock market
transactions, funds flow from the less profitable to more profitable
enterprises. All type of stock investors whether they are individuals,
professional stock investors, institutional investors earn capital gains
through dividends and stock price increases. This enables them to share
in the wealth of profitable businesses. Industries which have potentials
of growth are able to attract the savings of people towards their ventures
relatively more than those which have no such prospects. Thus, financial
resources of the economy are allocated on a reasonable basis. Unprofitable
and troubled businesses may result in capital losses for shareholders.
vii.Speculation: The stock exchanges are also fashionable places for speculation
and bring equilibrium in the prices of securities which are bought and sold by
speculators. In a financial context, the terms “speculation” and “investment”
are actually quite inter-related because “investment” means the act of
placing money in a financial vehicle with the intent of producing returns
over a period of time. Speculators generally buy securities in anticipation
of rise in the prices. As a result of their buying, prices do not decline as low
as might have been the case without their buying and vice versa hence
regulating excessive price fluctuations.
viii.Liquidity:This is the most important function provided by the stock
exchanges. The capital investments are generally long term and if
shareholder wants their investment back, in a physical scenario, it will result
in winding up the company and selling its assets to discharge the money.
Investors usually prefer liquidity of their investment. The stock markets
facilitate and provide that assurance to investors. These are markets which
facilitate buying and selling of securities assuring liquidity of investments
which goes to serve the investor’s need.
ix. Corporate Governance: As stock exchanges facilitate ownership of
companies to be help by a wide and varied scope of owners, companies
generally tend to improve management standards and efficiency to satisfy
the demands of these shareholders. To safeguard the interest of investors
more stringent rules are imposed by public stock exchanges and the
government on public corporations when compare to privately owned
enterprises. Every stock exchange defined its own rules and regulations for
the control of operations of the exchange. Only members are allowed to

deal in securities and make transactions. As the members have to transact
their business strictly according to the rules, the investors’ interests are
safeguarded against dishonesty or malpractices. Traded public companies
tend to have better management records than privately held companies.

1. What do you understand by the stock exchange?
2. Describe any four (4) functions of stock exchange.
4.5 Rwanda Capital Market Authority- CMA

4.5.1 Introduction
Capital Market Authority (CMA) is a public institution established by Law No.23 /2017
of 31/05/2017 responsible for developing and regulating the capital markets industry,
commodities exchange and related contracts, collective investment schemes and
warehouse receipts system. CMA was previously referred to as the Capital Market
Advisory Council (CMAC) which was a council established by Prime Minister’s Order
of 28 March 2007 to initially guide the development of a Capital Market in Rwanda.
CMA’s Vision: To be a key contributor to Rwanda becoming a competitive financial

center through mobilization of long term capital.
CMA’s Mission: To nurture wealth by facilitating the development of an orderly, fair,

transparent and efficient capital market.
CMA’s Core values: Good Governance, Knowledge, Creativity and Innovation.
4.5.2 Responsibilities of Rwanda Capital Market Authority

The Rwanda Capital Market Authority is responsible for:
i. Implementing the Government policy on Capital Market;

ii. Preparing draft policies on capital market;
iii. Advising Government on policy relating to the capital market;
iv. Promoting public awareness on the capital market and develop such
market;
v. Elaborating action plans and conducting studies in order for CMA to achieve
its mission;
vi. Formulating principles and regulations for the capital market;
vii. Making regulations governing capital market business in accordance with
the Law regulating capital market in Rwanda;

viii. Controlling and supervising all capital market activities with a view to
maintain proper code of conduct and acceptable practices on the capital
market;
ix. Registering capital market business and related instruments provided for
by the Law regulating capital market in Rwanda;
x. Issuing, suspending, and withdrawing licenses and approvals related to
capital market business;
xi. Seeking to achieve fairness, efficiency and transparency in the functioning
of the capital market;
xii. Protecting citizens and investors in capital market from unfair and unsound
practices or practices involving fraud, deceit, cheating or manipulation;
xiii. Monitoring, supervising, and take actions with regard to the compliance
with this Law and regulations thereto related as well as with the Law
regulating capital market in Rwanda and regulations thereto related;
xiv. Co-operating and collaborating with other regulatory bodies in accordance
with the provision of the Law regulating capital market in Rwanda;
xv. Consulting concerned organs prior to making any decision to modify
principles and regulations of the profession that may have impact on the
functioning of the capital market;
xvi. Keeping adequately and timely records of decisions made in the
accomplishment of CMA mission;
xvii. Accomplishing any other mission assigned by the Law regulating capital
market in Rwanda.
4.5.3 Capital market business

In CMA act, capital market business refers to all business activities specified below:
a. Dealing in capital market instruments;
b. Arranging deals in capital market instruments;
c. Safekeeping and administration of assets;
d. Managing capital market instrument;
e. Giving capital market advice;
f. Using electronic means for giving investment instructions
4.5.4 Capital market instruments

a. Shares: A share is a unit of ownership in a limited company and gives the
holder claim over any dividends that the corporation/company may pay on
it in future and on its face/ residual value in case the company is liquidated
or closed. Owners of shares are called shareholders and receive dividends

on their shares from the company’s profits usually at the end of financial
year.
b. Instruments creating or acknowledging indebtedness
i. Debentures: A debenture is a type of debt instrument that is not secured

by physical assets or collateral. Debentures are backed only by the general
creditworthiness and reputation of the issuer. Both corporations and
governments frequently issue this type of bond to secure capital.
ii. Debenture stock: Loan contract issued by a company or public body
specifying an obligation to return borrowed funds and pay interest, secured
by all or part of the company’s property. Certificates specifying the amount
of stock, with coupons for interest attached, are usually issued to the lenders
iii. Loan stock: Loan stock is shares of common or preferred stock that are used as
collateral to secure a loan from another party. The loan earns a fixed interest
rate, much like a standard loan, and can be secured or unsecured. A secured
loan stock may also be called a convertible loan stock if the loan stock can
be directly converted to common shares under specified conditions and
with a predetermined conversion rate, as with an irredeemable convertible
unsecured loan stock (ICULS).
iv. Bonds: Bond is a debt instrument created for the purpose of raising capital.
They are essentially loan agreements between the bond issuer and an
investor, in which the bond issuer is obligated to pay a specified amount of
money at specified future dates.
v. Certificate of deposit: A certificate of deposit is an agreement to deposit
money for a fixed period with a bank that will pay you interest. You can
choose to invest for three months, six months, one year or five years, etc.
You will receive a higher interest rate for the longer time commitment
c. Government- owned capital market instruments
i. Treasury Bills: Treasury Bills (T-bills) are short term debt securities (one
year or less) issued as a primary instrument for regulating money supply or
raising funds via open market operations to finance the budget gap. T-bills
are always issued through the country’s central bank, and commonly
pay no explicit interest but are sold at a discount, their yield being the
difference between price and the par-value also called redemption value.
ii. In Rwanda; T-Bills are issued by auction on weekly basis with maturity
dates of 28 days, 91 days, 182 days and 364 days. T-Bills market is
announced via BNR website, each Monday for auction on Thursday (T),
and settlements take place on Friday (T+1). The minimum purchase is
100,000 Frw. T-bills market is open for all investors (Banks, non Banks,

Insurance companies, Pension Fund, individuals, etc)
iii. Treasury Bonds: A Treasury Bond/Government bond is a debt instrument
issued by a national government through the Central Bank in its capacity
of Government agent, generally with a promise to pay periodic interest
payments and to repay the face value on the maturity date.
iv. The terms on which a Government can sell bonds depend on how
creditworthy the market considers it to be. Government bonds are usually
denominated in the country’s own currency. Bonds issued by national
governments in foreign currencies are normally referred to as sovereign
bonds, although the term “sovereign bond” may also refer to bonds issued
in a country’s own currency.

a. Capital Market Authority in Rwanda played an important role in financial
stability and the economic development of the country. Discuss the role
played by Capital Market Authority.
b. Describe the capital market instruments.
4.6 Capital market participants, benefits of investing through

capital markets and how investors are protected
Activity 4.6
Muhizi is a famous farmer known to be exemplary in Gakenke District. He
always receives visitors coming to learn from him how to invest in agriculture,
especially in coffee and banana farming. Muhizi is married and has 3 children.
It is now over 5 years when Muhizi started struggling searching for another
business in which he can invest and secure a brighter future and prepare the
good heritage for his children. Currently, he has been informed that there is a
capital market in Rwanda. Muhizi is very interested and would like to invest in
this new business.
1. Identify institutions and players who contribute in the good running of
capital market business.
2. Explain the contribution of each player in the process of investing in
capital market.
3. What will be the advantages for Muhizi to invest in capital market?

4.6.1 Capital market Participants
In capital market, there is a flow of funds from one group of parties (funds-surplus
units) known as investors to another group (funds-deficit units) which require funds.
However, often these groups do not have direct link. The link is provided by market
intermediaries such as brokers, mutual funds, leasing and finance companies, etc.
Players in capital markets can be divided into investors, issuers and intermediaries.
The market intermediaries in Rwanda include the Rwanda Stock Exchange Market,
licensed brokers, dealers, and sponsors. The regulator is the Capital Markets Authority.
i. Investor: An investor is a person or a legal entity that allocates capital with
the expectation of a future financial return.
ii. Issuer: The term issuer refers to a legal entity (government, corporation,
or investment trust) that develops; registers and sells securities to
the investing public in order to finance its own operations.
iii. Stock exchanges: Stock exchanges basically serve as:
a. Primary markets where corporations, government and other incorporated
bodies can raise capital by channeling savings of the investors into
productive ventures; and
b. Secondary markets where investors can sell their securities to other

investors for cash, thus reducing the risk of investment and maintaining
liquidity in the system. Stock exchanges impose stringent rules, listing
requirements, and statutory requirements that are binding on all listed and
trading parties.
iv .Stock brokers: A stock broker is an agent who represents clients to buy
or sell stocks and other securities. The term is applied to both companies
that deal in securities and their employees, who technically are registered
representatives working for the brokerage. A broker’s primary service is to
buy and sell stocks on an exchange for members of the investing public
who wish to own part of a company. When anyone decides to participate
in the stock market, a broker is usually the first place they go. An account
is set up for the client through which he/she trades stocks. The broker
accepts stock orders from the client and then executes these directly on
the exchange. A business that engages solely in broker services interacts
with the stock market for its clients only. Every transaction made affects a
client’s account. For this reason, a broker is often referred to as an “agent.”
v. Dealers and traders: A stock market dealer trades equities under its own
own. The business itself maintains stock holdings that are not in the name
of any client. The dealer may actually be a client of another broker, so as
to trade these stocks for its own account. However, unlike a “trader,” who

maintains his/her own account with a broker that affects no one else, a
“dealer” may use its portfolio to offer services to the public. “Market makers”
are dealer businesses that continuously buy or sell certain securities from
the public, using their own holdings for these transactions. Thus they are in
the business of dealing securities independent of an exchange.
vi. Sponsors: sponsors can be a range of providers and entities supporting
the goals and objectives of a capital market. Sponsors invest in private
companies, create demand for publicly traded securities, underwrite
mutual fund shares for public offerings, and issue exchange-traded funds,
offer platforms for benefits and more.
4.6.2 Benefits of Inves ting through capital markets

A capital market is a place in which financial securities are traded by individuals and
institutions or organizations. It can be a primary market where Initial Public Offers
(IPOs) take place or a secondary market where IPOs are traded subsequently. The
following benefits apply both to the primary and secondary markets:
a. Access capital: By issuing shares or debt directly to the public through the
RSE private sector businesses and government can raise funds for expansion
of existing business or new projects.
b. Discover the value of its business: By listing on the RSE issuers or owners
of business are able to discover the price of their securities and therefore
the value of their business. This enables them to realize the market worth
of their wealth.
c. Raise a company’s visibility and enhance its status with customers
and suppliers at home and overseas: A listing on the capital market
raises the profile of a company through continuous media coverage. This
is free publicity and enhances the product presence of the issuer among
its customers.
d. Have better bargaining position with financiers: Increased
capitalization of an issuer over time enables the issuer to raise capital at a
lower cost due to their improved rating in the market.
e. Enhance management practices: The capital market requires a minimum
level of disclosure and corporate governance and this encourages the
quality of management practices.
f. Foster employee motivation: Listed companies may easily employ
executive using stock option techniques.
g. Benefits from Capital Market incentives: New issuers take advantage of
incentives provided to listed companies. This comes in the form of low
costs and tax advantages to shareholders and owners of the business.
h. Use of shares as currency: Listed companies with known market value can
use their shares as currency instead of cash when taking over other.

4.6.3 How investors are protected
Investor protection in capital market is aimed at providing fair play to investors. But
it is not aimed at protecting an investor from his/her own errors of judgment or
ensuring that he/she gets profits all the time. The law protects investors who have
been victims of fraud, dishonesty and unfair practices. All investors face the normal
market risks. The regulator in capital market is CMA. Investors are protected in the
following ways:
• CMA ensures that only competent and credible professionals are licensed to
serve the market.
• CMA supervises all members of RSE to ensure compliance with regulatory
requirements.
• CMA ensures that prospectuses of issuers have adequate disclosure for
decision making.
• CMA ensures that there are periodic reports and all price sensitive information
are released once they are available.
• National public education and awareness campaigns create well informed
investors.
Application Activity 4. 6
1. Indicate the benefits of investing in Treasury Bonds.

2. Explain how investing through capital markets raises the visibility of the
company.
4.7 How to invest in capital market
Activity 4.7
1. Based on the illustration below, describe the process of investing in
Rwanda capital market.
2. Indicate 2 options of investing in capital market in Rwanda.
3. Identify 3 companies selling their shares in Rwanda Stock Exchange.

Activity 4.7 ion Activity 9.6
1) Based on the illustration below, describe the process of investing in Rwanda capital market.
2) Indicate 2 options of investing in capital market in Rwanda.
3) Identify 3 companies selling their shares in Rwanda Stock Exchange.
Figure 4.6: Capital market players and processes involved

Figure 4.6: Capital market players and processes which are involved
4.7.1. Primary
4.7.1. market
Primary marketand
andsecondary market
secondary market
TheTheinvestments in theincapital
investments market market
the capital may be either
may be in the bonds
either in or
thestocks.
bondsInvestments
or stocks. in the stocks
or bonds may be either investing in the new issues or in the existing securities. The or
Investments in the stocks or bonds may be either investing in the new issues Primary
in market
the existing securities. The Primary market is the market where securities are sold for
is the market where securities are sold for the first time, while Secondary Market is the market where
the first
already time,securities
existing while Secondary Market
are bought and issold
thethrough
market where already
licensed existing
brokers. securities
The primary capital market
are bought and sold through licensed brokers. The primary capital market handles
handles the trading and investments in the new issues while the secondary capital market takes care of
the trading and investments in the new issues while the secondary capital market
the trading of existing securities.
takes care of the trading of existing securities.
4.7.2.
4.7.2. Primary
Primary Market
Market TransactionProcess:
Transaction Process:
i) The issuer decides to raise capital through the Capital Market
i. The issuer decides to raise capital through the Capital Market
ii) Issuer appoints advisors, sponsors/co registrar/fiscal agents/sponsoring brokers
ii. Issuer appoints advisors, sponsors/co registrar/fiscal agents/sponsoring
iii) Issuer prepares
brokersdraft prospectus or information memorandum
iv) The issuer applies to CMA to list its securities on the market
iii. Issuer prepares draft prospectus or information memorandum
v) Issuer discusses the offer document with CMA and finalizes the prospectus or information
iv. The issuer applies to CMA to list its securities on the market
memorandum
v. Issuer discusses the offer document with CMA and finalizes the prospectus
vi) The issuer states the offer period and offers securities to the public
or information memorandum
vii) Public investors subscribe to securities during the offer period
vi. The issuer states the offer period and offers securities to the public
viii) Offer closes and publication of allotment results
vii. Public investors subscribe to securities during the offer period
viii.Offer closes and publication of allotment results
ix. Issuer is admitted to list on RSE

4.7.3 Secondary market transaction process
i. Buying client or selling client approaches stockbroker, opens an A/C and
pays for an order; either provides funds or gives securities to broker and
broker acknowledges
ii. If buying stockbroker has securities or sell order for securities sought or,
required at ordered price, broker sells directly to the client
iii. If buying broker has no selling orders for securities and or price given by
sellers, the broker contacts the other brokers seeking securities required.
iv. Buying stockbroker and selling stockbroker attends trading sessions at the
trading floor. All stockbrokers attend the session and all report:
v. traded securities –prices, volumes and securities
vi. Buying orders outstanding positions –price, volumes and securities
vii. Selling orders outstanding positions –price, volumes and securities
viii. RSE (Rwanda stock exchange) compiles market report and distributes to
the market and Public through the media.
ix. On settlement day, the CSD (Central Securities Depository) clears the
trades for settlement of securities against funds between stockbrokers and
the change of ownership takes place at T+2 (trade date plus two days). The
CSD is under the Central Bank of Rwanda.

Explain how a person can save and invest through the Treasury Bonds which
raises money to finance the Government of Rwanda‘s development projects.
4.8. Procedures to join Rwanda stock exchange
Activity 4.8
Suppose that you are Managing Director of MUDASOBWA COMPANY LTD,
manufacturing computers. As you want to expand your business in other
countries, you decide to raise money by joining the capital market: RSE.
a. Identify needed documents to register your company at RSE.
b. Indicate basic requirements to sell or buy shares of companies listed in
Rwanda Stock Exchange.

4.8.1. Requirements and process to join the Rwanda stock exchange
It is mandatory to open a Central Securities Depository (CSD) account in order to buy
or sell shares of companies listed in Rwanda Stock Exchange. The Central Exchange
Depository System can be compared to a bank where the records of all share holding
of listed companies are kept. It is database where investors can open accounts called
Central Exchange Depository or Central Securities Depository (CSD) and debit them
with shares/bonds for the purpose of trading.
The Process of Opening a CSD Account is the following :
• You will need to identify the stockbroker of choice
• Provide two (2) recent passport size photographs
• Provide your original national identity card or passport together with a
photocopy.
• If you are a company, you will need to provide an original certificate of
incorporation together with a photocopy.
• If you are an organization registered in any other way e.g. Society, you will
need to provide the original certificate of registration and photocopy.
• You will hand in sign the form in presence of your Stockbroker
• You will be left with the duplicate of account opening form your records.
• Your Stockbroker will provide you with your own CSD account number, to be
kept confidential.
• You are free to open several CSD account with different stockbrokers.
• You can migrate from one broker to another simply by completing and
signing the exchange transfer form. This form is available from your broker
and must be signed by your current stockbroker and your new stockbroker.
4.8.2. Trading Operations

Rwanda Stock Exchange secondary trading is conducted through a dual process.
Members trade in an open outcry trading session which is conducted at the RSE
Secretariat through and over the counter market the following business day,
where a member is allowed to buy or sell directly to clients in their offices. Equally,
members are allowed to transact with other members either face to face via any
other way of communication. During the designated trading floor sessions at the
RSE secretariat, all members must report all their transactions that they conducted
outsid e theofficial trading session.

1. What do you understand by CSD account?
2. Explain the role of Central Exchange Depository System in capital market.
3. Explain the process of opening a CSD account.

Read and analyze the Case Study below and answer the given questions
Mushanana is a business club operating in one of the schools in Rwamagana
district. The club is worth 350,000Rwf which is share capital contributed by all
the members of the club. The club consists of 100 members and is planning
to expand the number of members as well have more projects. The club
leadership has a challenge of raising more capital for the clubs well as making
sure shares of members are well managed.
Questions
1. How much did each member of the club contribute to raise the
business club capital?
2. What strategies can the club leadership put in place to raise more
capital?
3. As an aspiring entrepreneur, what can you do to save for your future?

End of Unit 4 Assessment
1. Discuss the role of capital market on the financial market on the country‘s
economy
2. Explain the role of stockbrokers in stock exchange process.
3. Summarize advantages of investing at the Rwanda Stock Exchange
market.
4. Discuss the difference between primary capital market and secondary
capital market.
5. Describe/explain the process of joining RSE.
6. Janet Wood, a U.S. Citizen, is considering making a $50,000 investment in
the bonds of the Bank of Kigali. The bonds are denominated in Frw.
If the Frw decline in value against the dollar after Janet buys the bonds,
a. What will happen to Janet‘s investment ?
b. What other risks does Janet bear with this investment ?
c. If Janet‘s bank decides to buy the bonds, how could it better withstand
the risks ?
7. Floruty, a company that went public in 2016, announced the sale of an
additional 50 million shares of its common stock on April 1, 2018. Before
deciding on the additional stock, Floruty analyzed how its stocks and
bonds were trading in the secondary markets. Why did Floruty study
the secondary markets if the additional shares of common stock were
considered new issues, thus being sold in the primary markets ?
8. Explain what might happen in the economy if there were no financial
institutions.

UNIT5
FINANCIAL
STATEMENTS
Unit 5: FINANCIAL STATEMENTS
Key Unit Competency: To be able to prepare financial statements

Introduction
Finance is a word that brings good or bad memories to people. The reason behind
such conception is that finance can be considered as the art of handling money.
As you might know most organizations if not all run on money. Be it a family, a
church, a school, a hospital, governments, none of them can operate without
money. Everything we do has to be connected to money either directly or indirectly.
We don’t normally see finance when there is a new house that is coming up in our
neighborhood. We neither see finance when our parents pay our school fees. But it
is there, and without it most of the things that we do see would not exist. In order
to solve most of the challenges that people or organizations face, money should be
there.
In today’s world, people in search of money are committed to being job creators
instead of being job hunters. In so doing, they are rushing to starting their own
business which requires them to use different financial management skills to
successfully run them. The financial management requires application of different
skills and tools to measure the business profitability. In order to assess the business
profitability, there is a need to provide a number of answers to many numbers of
questions that include the following:
i. How much do I earn in terms of profit?
ii. How worth is my business?
iii. What is the flow of cash in my business?
iv. How much did I invest in my business?
To find answers to the above questions, this unit will enhance your understanding of
the main financial statements namely Income statements, balance sheet, cash flow
statements’ and statement of owners’ equity and linkages between these financial
statements.

This information will be useful in analysing financial performance by way of ratio
analysis; the techniques used in analyzing the financial position of a company and,
having gained that knowledge then to assist in interpreting current and potential
future performance of the business.
Introductory activity:
The following are information obtained from the books of account of
UWINEZA’s business for the period ending June 30, 2010
She started the trading year with stock valued 1,000,000 Frw that she bought
using her own saving of 850,000 Frw, loan from her friend 100,000 Frw and
bank loan of 50,000Frw. During this year she sold goods on cash worth
7,000,000 Frw that she had purchased on 5,000,000 Frw; paid wages and
salaries of 500,000 Frw; rent and rates of 360,000 Frw; postage and telephone
120,000 Frw and received rental fees of 1,200,000 Frw. If at the end of the year
she had a stock valued at1,200,000 Frw ;
Questions
a. How much did she pay for purchase ?
b. What are total expenses for Uwineza during this trading period ?
c. How much did she earn from sales ?
d. What is the amount of other income ?
e. Did Uwineza make profit or loss during this trading period ?
f. Identify assets of Uwineza and demonstrate that the accounting equation
(Assets= Capital + liabilities) is justified.

5.1 Financial Statements
Activity 5.1
Analyse the JYAMBERE cooperative case study below and answer the questions
that follow ;
Figure: 5.1. JYAMBERE cooperative rice farmers
JYAMBERE cooperative is a cooperative of 3,000 rice farmers that was established

in 2010. The cooperative is collecting and selling the members’ produce at a
competitive price. Cooperative pay its member 250 Frw per 1 kg of paddy rice;
pay 10 Frw per 1 kg for packaging and 20 Frw per 1 kg for transport to the market.
Total monthly salaries of all cooperative staff are 300,000 Frw, monthly electricity
cost is 20,500 Frw and other monthly overheads cost the cooperative 41,254 Frw.
The last year cooperative has collected and sold 360 Tons of paddy rice at 315 Frw
per 1 kg.
a. How much money did the cooperative pay to its farmers?
b. How much did the cooperative earn from sales of its rice?
c. How much were total expenses?
d. Develop a report to be presented to members in their Annual General
Meeting
5.1.1 Meaning of Financial Statements

Financial statements are reports prepared by a company’s management to present
the financial performance and position at a point in time. Financial statements are
output of the accounting system and are prepared by businesses or organisations

normally at the end of the financial year or trading period to find out the profit or
loss made by the business and also to determine the financial position among other
reasons. They also summarize data into a form that is useful for decision making.
External users of accounting information like investors and creditors are more
interested in the financial statements or final accounts than the books of accounts.
5.1.2 Importance Financial Statements

Financial statements are useful for the following reasons:
• To determine the ability of a business to generate cash, and the sources and
uses of that cash.
• To determine whether a business has the capability to pay back its debts.
• To track financial results on a trend line to spot any looming profitability
issues.
• To derive financial ratios from the statements that can indicate the condition
of the business.
• To investigate the details of certain business transactions, as outlined in the
disclosures that accompany the statements.
5.1.3 Types of financial statements and their purpose

There are four main types of financial statements, which are as follows: Income
Statement, Balance Sheet, Cash Flow Statements and Statement of Owners Equity.
Generally, the financial statements can be prepared from the trial balance. A
balance sheet reports on a business financial position at a point in time. The income
statement, the statement of owner’s equity, and the statement of cash flows report
on financial performance over a period of time.
Preparers and users determine the length of the reporting period. A one year
reporting period is common. However, the semi-annual, quarterly, and monthly
periods are also used depending on the needs. The one-year reporting is known as
the accounting, or fiscal year.

Read the following scenario and answer the questions that follow:
Assume that during holidays you work in a supermarket within your community
as a cashier. Your manager wants you to write each sale and to issue EBM
receipt immediately when you collect cash.
Recently, because there were two consecutive public holidays, people rushed
during lunch time to buy goods that they would use during that period since
most shops will be closed. That event increased the number of customers to be
served at the same time and the assistant manager asked you to avoid delays
by taking customers’ cash and making change without recording the sales or
issuing a receipt. Because of the pressure, you accepted his suggestion.
At the end of the day, you are neither able to identify the sales nor able to tell
who bought what items from your shop.
a. By the end of two days, do you think that you will be able to determine
the sales of each item and why?
b. What do you think should be the financial information needed for you
to prepare a good report after the two days?
c. Who are the users of financial statements and why do they need them.

5.2 Income Statement
Activity 5.2.
Figure : 5.2. Tomato growing
Mr. DUSABE and his wife KEZA are in agribusiness where they grow Tomatoes
on small farm. They paid laborers 4,500,000 Frw, paid tomatoes’ transport to the
market 1,000,000 Frw; bought seeds at 200,000 Frw and leased land for 1,000,000
Frw. This season, the harvest was good with 45 Tons of tomatoes harvested.
a. How much did DUSABE and KEZA pay for their farming activities ?
b. How much did DUSABE and KEZA earn from sales of their Tomatoes, if
1kg of tomatoes was sold at 250 Frw ?
c. What is the difference between their income received and expenses
incurred from sales of tomatoes in their farming activities ?
d. What do you understand by an income statement ?
e. Why do you think it is important for a business to prepare an income
statement ?
Income statement is a financial statement that reports a company’s financial

performance over a specific accounting period. Financial performance is assessed
by giving a summary of how the business incurs its revenues and expenses through
both operating and non-operating activities.

After extracting a trial balance the next step is to determine the amount of profit
that the business has made during the trading period. This is done by preparing two
accounts namely :
• Trading account where the value of the gross profit or gross loss is determined
by deducting the cost of goods sold from net sales i.e Gross Profit = Net Sales
– Cost of Sales, or Gross Loss= Cost of Goods Sold - Net Sales
• Profit and loss account where the value of net profit or Net loss is calculated
by deducting total operating expenses from the gross profits i.e Gross profit
– total expenses.
a. Trading account
Trading account is an account which is prepared to determine the gross profit or
gross loss of the business concern. It shows the revenues from sales, the cost of
those sales or goods sold and the gross profit from for the specific period ended. It
is prepared after the preparation of the trial balance.
Items found in a trading account
a. Sales: Refer to the value of goods which were bought for resale and have
been sold by the business. It is revenue earned from goods sold. They are
entered in the trading account for the purpose of calculating gross profit or
loss.
b. Sales return: Value of goods that were previously sold but have been
returned to the business.
c. Net sales = Sales – Return inwards/ Sales Return
d. Opening stock: Unsold goods in the business available at the beginning of
the new trading period
e. Purchases: Goods bought by the business for resale
f. Purchases return: goods previously bought by the business for sale but
have been sent back to the suppliers. This value is treated in the trading
account and it is subtracted from the purchases to get the net purchases i.e.
net purchases = purchases – return outwards/purchase returns
g. Carriage in wards: refers to the cost of transporting the goods or bring the
goods up to the premises. It forms part of the goods bought hence added
to purchases the trading account.
h. Wages: These are payments made directily for purchases activity. Only
wages paid directly for purchases in trading account to determine the gross
profit r gross loss. Net purchases = Purchases + Carriage Inwards +Wages-
Purchases Return

i. Closing stock: Goods not sold by the business at the end of a trading
period. It’s included in the trading account and it is subtracted from the
goods available for sale to get cost of sales. Cost of Goods Sold (CoGS) =
Cost of Goods Available for Sale (CoGAS) - Purchase Return
j. Drawings of goods: Sometimes an entrepreneur may take physical items
out of the business for private use this must be subtracted from the goods
available for sale in the trading account. It should be noted that only
drawings in form of goods that must be treated in the trading account.
Net purchases = Purchases + Carriage Inwards +Wages- Purchases Return
- Drawing of Goods. Henee; Cost Goods Available for Sale (CoGAS)=
Opening Stock + Net Purchase
k. Gross profit: Excess of net sales over the cost of goods sold or cost of sales.
It also refers to the total profit obtained by an enterprise before paying off
the operating expenses. Thus Gross profit = net sales – cost of sales
l. Gross loss: This is excess of cost of sales over the net sales of the business.
Gross Loss = Cost of Goods Sold - Net Sales
Format of a trading account

There are basically two formats that are used to prepare a trading account. i.e
a. Horizontal
b. Vertical format
(Horizontal T- format)
Dr XYZ trading account for the year ending ....../.... /..... Cr

Particulars Frw Frw Details Frw Frw
Opening stock xxx Sales xx
Purchases xxx Less: Sales return xx
Add: Carriages xxx Net sales (A) xxx
xxx
Less: Return outwards xxx
Net purchases xxx
Cost of Goods available xxx
for sale
Less: closing stock xxx
Cost of Goods Sold (B) xxx
Gross profit c/d (A-B) Xxx
Xxxx xxxx
Gross profit b/d xxx

(Vertical format)
XYZ
Trading and profit and Loss accoount for the year ended ...../...../.....
Particulars Amount (Frw) Amount (Frw) Amount (Frw)
Sales xxxx
Less: Sales retuns xxxx
Net sales (A) xxxx
Less COS
Opening stock (B) xxx
Purchases xxx
Add: Carriage xxxx
inwards
Less: Returns xxxx
outwards
Net purchases (C) xxx
Cost of good xxxx
available for sale
(D=B+C)
Less: closing stock xxxx
Cost of goods Sold xxxx
(E)
Gross Profit = A-E xxx
Note: - Gross profit= Net sales – Cost of goods sold
Example 5.2 (a)

From the following Trial Balance of the company M&N Ltd prepare the company’s
trading account for the year ended 31 December 2017 using a horizontal format.

M&N Ltd Company Trial Balance as on 31.12.2017
Particulars Debit (Frw) Credit (Frw)
Capital 25,000
Loans 5,000
Sales 35,000
Accounts Payable 4,000
Bills Payable 5,000
Purchase Returns 2,000
Dividends Received 3,000
Plant and Machinery 13,000
Buildings 17,000
Receivables 9,650
Purchases 18,000
Discount allowed 1,200
Wages 7,000
Salaries 3,000
Traveling Expenses 750
Freight 200
Insurance 300
Commission paid 100
Cash on hand 100
Bank 1,600
Repairs 500
Interest on loans 600
Opening Inventory 6,000
Total 79,000 79,000
Additional Data:
1. Closing Inventory 8,000 Frw

2. Depreciation on Plant and Machinery at 15% and 10% on Buildings
3. Provision for doubtful receivables 500 Frw
4. Insurance prepaid 50 Frw
5. Outstanding rent 100 Frw

Solution:
(Horizontal format)
M&N TRADING ACCOUNT AS AT THE END OF YEAR 31ST DECENBER 2017
Dr Cr
Opening stock 6,000 Sales 35,000
Purchases 18,000
Add: Wages 7,000
Less: Return 2,000
outwards
Net purchases 23,000
C.O.G.A.S 29,000
Less: Closing stock 8,000
C.O.G.S (B) 21,000
Gross profit 14,000 35,000
c/d
35,000 Gross profit 14,000
c/d
(Horizontal format)
M&N TRADING ACCOUNT AS AT THE END OF YEAR 31ST DECENBER 2017
Particulars Frw Frw Frw

Sales
Less cost of goods sold
Opening stock 6,000
Purchases 18,000
Less: Returns outwards 2,000 16,000
Wages 7,000
Goods available for sale 29,000
Cost of goods sold (CoGS) 21,000
Gross Profit 14,000
Gross profit is fourteen thousands Frw (14,000 Frw)

b. Profit and Loss account.
This is the final account or statement prepared by the business at the end of the
trading period to determine the net profits or net loss of the business. It begins with
the gross profit or gross loss transferred or brought down from the trading account.
Elements of a profit and loss account

1. Gross profits/loss :This is transferred from the trading account as balance
b/f
2. Supplementary income : This refers to all income or revenue that business
earns from other sources other than sales of goods and services. A business
may earn income from; other sources apart from sales of goods and
services and these incomes are treated in the profit and loss account by
adding eceived them to gross profit. Example include discount received,
commission eceived, rent received, bad debts recovered; etc.
3. Operating expenses : These are the expenses incurred by the business on
services that help in the normal operation and running of the business. Such
expenses include ; transport, electricity, rent insurance/premium, carriage
outwards salaries water bills, postage discount allowed, advertising, and
communication. In the profit and loss account the total operating expenses
are subtracted from the total income or gross income to get net profit or
net loss.
4. Net profits: Excess of gross profits over the expenses of the business at a
given period of time thus
Net profit= Gross Profit +Supplementary Income – Total Expenses
Net Loss: Excess of operating expenses over the gross income at a given time
Net Loss = Operating expenses - Gross income, or
Net Loss = Gross loss + Operating expenses
There are two formats that can be used while preparing the Profit and Loss account
which are :
• The T - format
• The Vertical format

The following is a template of Profit and Loss (P&L) account in T (Horizontal)
format :
P&L Account for XYZ Ltd. Company for the period ending ........./....../.........
Dr Cr
Operating expenses: Gross profit b/d xxxx
Wages xxxx Add: Other Incomes
Salaries xxxx Rent received xxx
Postage and telephone xxxx Discount received xxx
Carriage outwards xxxx Interest received xxx
Stationeries and xxxx xxxx
printing
Discount allowed xxxx Gross income xxxx
Electricity xxxx
Insurance xxxx
Commission paid xxxx
Freight xxxx
E.t.c xxxx
Total O.E xxxx
Net profit c/d xxxx
xxxx xxxx
Net profit c/d xxx
In case the business has got a Net loss, it is recorded on credit side of the P&L account.
The following is a template of P&L account in (Vertical format) :
Particulars/Details
Gross profit b/d xxxx
Add: Miscellaneous Income
Rent received xxxx
Discount received xxxx
Interest received xxxx
Commission received xxxx
Gross income xxxx
Less: Expenses
Wages xxxx
Salaries xxxx

Postage and telephone xxxx
Carriage outwards xxxx
Stationeries and printing xxxx
Discount allowed xxxx
Electricity xxxx
Insurance xxxx
Commission paid xxxx
Freight xxxx
Interest paid xxxx
Total expenses xxxx
Net profit or Loss xxxxx
Example 5.2 (b) :

From the trial balance of M&N Ltd Company in example 5.2 (a) ;
Prepare the company‘s profit and Loss account for the year ended 31 December
2017.
(Horizantal)
M&N Ltd Profit and Loss Account for the year ending 31.12.2017
Dr Cr
Particulars Frw Particulars Frw
Discount allowed 1,200 Gross Profit b/d 1 4,000
Salaries 3,000 Dividends received 3 ,000
Traveling expenses 750
Freight 200
Insurance 300 250
Less: Prepaid ( 50)
Commission paid 100
Repairs 500
Interest on loan 600
Rent outstanding 100
Provision for 500
doubtful receivables
Depreciation
Plant & Machinery 1,950

Buildings 1,700
Net Profit c/d 6,150
17,000 1 7,000
Net Profit b/d 6 ,150
(Vertical)
M&N Ltd Profit and Loss Account for the year ending 31.12.2017
Particulars Frw Frw

Gross Profit b/d 1 4,000
Add: Other income
Dividends received 3 ,000 3 ,000
Total Income 1 7,000
Less: Expenses
Salaries 3,000
Traveling expenses 750
Freight 200
Insurance 300
Less: Prepaid ( 5 0) 250
Commission paid 100
Repairs 500
Interest on loan 100
Rent outstanding 500
Provision for doubtful receivables 1,950
Depreciation 1,700
Plant & Machinery
Buildings
Total expenses 10,850
Net Profit 6,150

Application Activity 5.2.1
1. From the following particulars relating to the firm of Raissa for year ending
31st December 2004, prepare her trading account.
Sales 155,000
Sales returns 8,000
Purchase 140,000
Purchase returns 18,500
Carriage inwards 12,000
Warehouse Wages 10,000
Opening stock 1Jan 2004 55,000
Closing stock 31 Dec 2004 85,000
2. From the following information relating to the business of Muzungu
Ismael, for the year ended 30 Sept 2004, prepared his profit and loss
account for the year ended.
Gross Profit 420,000

Salaries 14,000
Insurance 74,000
Rent and rates 27,000
General office expense 19,000
Carriage on sales 45,000
Printing and stationary 37,000
Electricity 12,000
Postage and telephone 8,000
Bank charges 120
Advertisement 42,000
Interest on bank Loan 2,500
Salesman’s commission 32,000
Discount received 5,000
Rent received 2,700

5.3 Balance sheet
Figure : 5.3 Assets, Liabilities and Capital
Activity 5.3
Nyirawimana’s business had the following transactions during the last month :
• Started business with cash 2,000,000 Frw.
• Purchase goods for cash 500,000 Frw and for credit from Uwineza 600,000
Frw.
• Purchased office equipment for cash 80,000 Frw.
• Paid office rent 10,000 Frw.
• Sold goods for cash 1,000,000 Frw
• Sold goods on credit to Kalisa for 160,000 Frw
• Bought insurance on cash for 50,000 Frw
• Salary due to her employee was 15,000 Frw
• The stock at the end of the month was 300,000 Frw

Questions
Using prior knowledge on prime books you acquired from Unit 10 in Senior 5,
a. Identify what the business owns as at the end of the month.
b. Identify what a business owes to outsiders as at the end of the month.

c. How do we call what a business owns?
d. How do we call what a business owes to outsiders?
e. What do you understand by a balance sheet?
f. What items/elements make up a balance sheet?
g. Why do you think it is important for a business to prepare a balance
sheet?
A balance sheet is a statement of assets and liabilities of a business organization

at a given period of time.. It is a statement that shows what you own, what you
owe, and what you are worth. At the end of each accounting period, every business
organization prepares a Balance Sheet to have a clear understanding of its assets
and liabilities, which indicate the financial position of the concern.
A balance sheet is also referred to as a financial statement which shows the financial
position of the business as at a given date. It is prepared after the trading profit and
loss account have been prepared. A balance sheet is not an account therefore, not
part of the double entry but it is prepared basing on the ACCOUNTING EQUATION,
which states that: Assets =capital + liabilities
5.3.1 Parts of a balance sheet.

There are three major parts of a balance sheet;
• Assets
• Liabilities
• Capital
Assets
These are possessions owned by the business and have got money value.
They are grouped into two;
• Fixed assets
• Current assets

a. Fixed assets: These are the possessions of the business which are of a
durable nature bought for use in the business for a long period of time
usually above one year. E.g land, equipment, machinery, fixtures and
fittings, motor vehicle etc
b. Current assets: Possessions or properties of the business which last for a
short time and usually changed into cash. Current assets keep on being
converted from one form to another e.g stock of goods, debtors, and cash
at hand. Cash at hand, prepaid expenses or expenses paid for in advance,
outstanding income etc.
Liabilities
These are debts or amount of money that the business owes the outsiders. They are
claims of outsiders on the business’ assets. Properties/possessions that are used by
the business and which must be paid back in future. There 2 types of liabilities:
• Long term liabilities
• Short term liabilities
a. Long term liabilities: These are debts of the business that are expected to
be paid after a long time usually after one-year e.g bank loans, debentures.
b. Short term liabilities/current liabilities: These are debts of the business
which are to be paid within a short time usually within a year. They are claims
by outsiders of the business that are repaid within one accounting year e.g
trade creditors, bank overdraft, outstanding expenses, prepaid income etc.
Capital
These are the resources invested by the owner or the entrepreneur in the business.
Capital is also known as owner’s equity. To start any business a person requires
capita; which can be in form of money or other physical resources.
Types of capital
a. Capital invested/initial capital: This is the actual amount of money or
other resources brought into the business by the owner when commencing
a business.
b. Owner’s equity/net worth/equity: This is the total amount of the resources
in business that belongs to the owner at a given date. Owner’s equity is
the amount that remain in business after adding new investments and net
profit and subtracting drawings or any loss made by the business therefore:
owner’s equity = initial capital + new investments + net profit- drawings
Total assets – Total liabilities
c. Loan/borrowed capital: This is total amount borrowed by the business in

form of long term liability i.e value of long term liability of the business
therefore borrowed is the same as long term liabilities.
d. Fixed capital: This refers to the value of fixed assets in the business and
given in the formula
Fixed capital = Total fixed assets.
e. Liquid capital: This refers to the total value of current assets inform of cash
and those that can easily be changed into cash e.g cash at hand debtors
Liquid capital = Total current assets – closing stock
f. Working capital: This is the excess of current assets over the current
liabilities of the business. It is the difference between current assets and
current liabilities
WC = CA - CL
g. Capital employed: This is the value of the assets that contributed to a

company’s ability to generate revenue. It is the sum of total fixed assets
and working capital of the business or sum of the owners’ equity (capital
owned and long term liabilities).
Capital employed = working capital + fixed assets/capital
Capital employed = capital owned + borrowed capital
Capital employed = total assets – current liabilities
h. Trading capital/gross capital employed: This is the total value of all the
assets of the business. It is the sum of fixed assets and current assets
5.3.2 Balance sheet preparation

The Balance Sheet is prepared from the point of view of the business (as a separate
entity, distinguished from its owners). Another way to understand a Balance Sheet
is to consider it as a statement of sources of funds (i.e., liabilities) and utilization of
funds (i.e., assets).
The balance sheet can be reported in two different formats: Horizontal format
referred as account form and Vertical format referred as report form.
• The Horizontal format consists of two columns displaying assets on the left
column of the report and liabilities and equity on the right column. You can
think of this like debits and credits. The debit accounts are displayed on the left
and credit accounts are on the right
An example of the balance sheet in horizontal format :
BALANCE SHEET AS AT ……/………/……….

Assets Frw Frw Capital/ Owners’ equity Frw Frw
and Liabilities
Fixed Assets Capital investment xxx
Land xxx Add: Net profit xxx
Building xxx Or less: Net loss xxx
Plant & machinery xxx Reserves xxx
Furniture &fixture xxx Less: drawings xxx
Premises xxx Net capital/ owner’s equity xxx
Equipment xxx Long term liabilities
Total Fixed Asset. xxx Bank loan xxx
Current Assets Mortgage xxx
Cash in hand xxx Total long term liabilities xxx
Cash at bank xxx Current liabilities
Closing stock xxx Bank overdraft xxx
Debtors xxx Creditors xxx
Prepaid expenses xxx Prepaid income xxx

Accrued income xxx Accrued expenses xxx
Total current asset xxx Total current liabilities. xxx
Total Assets xxx Total liabilities xxx
• The Vertical format, on the other hand, only has one column. This form is
one of the most widely used today. By law, all public limited companies must
publish their accounts in this form. Assets are always presented first, followed
by liabilities and equity. In both formats, assets are categorized into current
and long-term assets. Current assets consist of resources that will be used in
the current year, while long-term assets are resources lasting longer than one
year. Liabilities are also separated into current and long-term categories.
An example of the balance sheet in Vertical format :
BALANCE SHEET OF........AS AT ……/………/……….
Assets Frw Frw Frw

Fixed Asset:
Long term investment xxx
Furniture &Fixture xxx
Plant & Machinery xxx
Building xxx
Land xxx
Total fixed assets xxx
Current Assets:
Closing stock xxx
Bills receivable xxx
Sundry Debtors xxx
Prepaid expenses xxx
Accrued income xxx
Cash in hand xxx
Cash at bank xxx
Total current assets xxx
Less: current liabilities

Sundry creditors xxx
Income received in advance xxx

Out standing expenses xxx
Bills payable xxx
Bank overdraft xxx
Total current liabilities xxx
Working capital xxx
Capital employed xxx
Financed by capital & liabilities

Capital:
Opening balance
Add: Net Profit xxx
Or Less: Net Loss xxx
Less: Drawing xxx
Net capital xxx
Long term Liabilities

Long - term loan xxx
xxx
Also assets and liabilities can be arranged according to their realizability and
payment preference, which is called liquidity order basis or on the assumption
that these will be sold and paid only on the liquidation of business which is called
the permanence/fixity basis.
Example 5.
From the example 5.2a and 5.2b; present the balance sheet for M&N Ltd Company
for the year ended 31 December 2017 in both horizontal and vertical format.
Solution: (oder of liquidity)
i. Horizontal format
M & N Ltd Company
Balance sheet as on 31. 12. 2017
Assets Frw Frw Capital and Lia- Frw Frw

bilities
Fixed Assets Current
liabilities
Plant & Machinery 13,000 Loan Current 5 ,000
Liabilities

Less: Depreciation 1,950 Accounts Payable 4 ,000
Buildings 17,000 Bills Payable 5 ,000
Less: Depreciation 1,700 15,300 Outstanding Rent 1 00
Total fixed assets 2 6,350 Total current 1 4,100
liabilities
Current Assets: Owners’ equity
Cash on hand 100 Capital 2 5,000
Cash at Bank 1,600 Add: Net Profit 6 ,150
Accounts 9,650 3 1,150
Receivable Net
capital
Less: Provisions for 500 9,150
doubtful
Closing Inventory 8,000
Insurance 50
Total Current assets 18,900
Total Assets 45,250 Total capital and 4 5,250
liabilities
Vertical format
M & N Ltd Company

Balance sheet as on 31. 12. 2017
Assets Frw Frw Frw
Fixed Assets:
Plant & Machinery 13,000
Less: Depreciation 1950 11,050
Buildings 17,000
Less: Depreciation 1,700 15,300
Total fixed assets 26,350
Current Assets:
Cash on hand 100
Cash at Bank 1,600
Accounts Receivable 9,650
Less: Provisions for doubtful 500 9,150
debts
Closing Inventory 8,000

Insurance 50
Total Current assets 18,900
Less: Current liabilities

Current liabilities
Loan Current Liabilities: 5,000
Bills Payable 5,000
Outstanding Rent 100
Total current liabilities 14,100
Working Capital 4.800
Capital emplyed 31,150
Financed by capital/
owners’equity
Capital 25,000
Add: Net Profit 6,150
Net capital
31,150
1. The following information was obtained from the books of Kaneza and Kamali
Ltd Company as at 31 March 2010.
Frw
Net profit 117,500
Capital 150,000
Creditors 40,000
Plant and Machinery 75,000
Motor Vehicle 50,000
Furniture and fittings 25,000
Debtors 60,000
Stock 35,000
Drawings 17,500
Cash at Bank 45,000
You are required to prepare the business balance sheet as at 31 March 2010 in
both format (Horizontal and vertical)

2. The following was extracted from the books of Alexis traders Ltd as at 31st
December 2011
Account Titles Deb- Credit( Rw)

its(Rw)
Stock at 01.01.2011 50,000 298,000
Purchases 420,000
Sales 557,500
Shop expenses 6,200
Wages 33,500
Telephone expense 500
Travel Expenses 550
Rent paid 750
Debtors 10,100
Shop fittings 40,000
Capital
Bank loan 150,000
Drawings 27,000
Interest paid 4,500 1,120,000
Premises/ Equipment 200,000
Bank 5,850
Creditors 14,500
VAT 2,000
799,000 799,000
Additional Information:
• Stock at 31st December 2011 was valued at 42,000Rwf.
Required: Using a Vertical format,
• Prepare Alexis traders‘ Ltd trading, profit and Loss account for the year ended
31st December 2011

5.4 Interpreting Financial Statements/ financial statements
analysis
Activity 5.4
Refer to the following trading, profit and loss accounts and balance sheet to
answer the questions that follow:
Sales 7,000,000
Less Cost of goods sold
Opening stock 2,300,000
Purchases 4,800,000
Less Closing stock (2,100,000)
COS 5 ,000,000
Gross Profit 2 ,000,000
Less: expenses
Total Expenses 1,800,000
Net Profit 2 00,000

INEZA Balance sheet as 31 March 2017
Frw ‘000’ Frw ‘000’

Non Current assets
Buildings 11,000
Furniture and Fittings 5,500
Motor Vehicle 5,800
22,300
Current assets
Stocks 2,100
Debtors 5,600
Cash at bank 7,900
Cash in hand 400 16000
38,300
Financed by Capital and Liabilities
Capital 30,600
Add: Net profit 200 30,800
Non Current Liabilities

Long term loan 5,000
Current Liabilities
Creditors 2,500
38,300
What is the percentage of Net profit to sales?
a. Calculate the percentage of gross profit to sales
b. How much net profit did 1Frw of capital earn?
c. Calculate the percentage of current assets to current liabilities
d. What do you understand by financial statements analysis?
5.4.1 Definition and purpose of financial statement analysis

Financial statement analysis is the process of reviewing and evaluating a company’s
financial statements, thereby gaining an understanding of the financial health of the
company and enabling more effective decision making. It is an evaluative method
of determining the past, current and projected performance of a company.

The purpose of financial statement analysis is to examine past and current financial
data so that a company’s performance and financial position can be evaluated and
future risks and potential can be estimated. Financial statement analysis can yield
valuable information about trends and relationships, the quality of a company’s
earnings, and the strengths and weaknesses of its financial position.
Financial analysis is done by use of financial ratios. Financial ratios are relationships
determined from a company’s financial information and used for comparison
purposes. Ratio analysis is used to help different users of financial information
to answer some of the questions they are interested in. It may raise several new
questions such as:
i. Is this company/my job safe?
ii. Should i stop selling goods to this firm on credit?
iii. Should i invest in this business Etc...
Below are some of the common ratios:
5.4.2 Liquidity ratio

These measure the ability of the enterprise to meet its short term maturing
obligations. Therefore, they assess the level of current assets and current liabilities.
These ratios include the following.
a. Current ratio
Current assets
Current ratio =
Current liabilities
A high ratio means debtors, stock and cash are high. This shows an inefficient firm
since funds is not used. A low figure means the business is not able to pay the current
liabilities and vice-versa. Usually the ratio should be around 2:1 while comparing
with other businesses, similar business should be considered.
Looking at the trend, a downward trend means there are liquidity problems vice-
versa.
c. Acid Test ratio
Current assets- stock

Acid test Ratio =
Current liabilities
The interpretation is similar to current ratio although here the assets that are hard
to realize are removed. While calculating the acid test ratio inventories are excluded.

Usually the ratio should be around 1:1. This ratio is also known as the quick ratio.
d. Cash ratio
Cash + Cash equivalent
Cash ratio =
Current liabilities
It indicates the cash available to pay the liabilities. It is more refined since it assumes
that debtors may not pay their accounts on time and stock will take time to convert
into cash.
5.4.3 Profitability ratio

There are ratios that indicate the ability of the business to generate enough profit
or returns on the investment made. They measure commercial effectiveness of the
business in generating profits. Those ratios measure the efficiency with which the
firm is using its various assets/resources to generate return/profit
a. Gross profit Margin
Gross profit Margin = Gross Profit x 100
Net Sales
Gross profit margin shows the percentage of gross profit per unit of sales i.e gross
profit on each item sold and therefore the higher the ratio or percentage, the higher
the gross profit per unit of sales. Similarly, the lower the percentage is the lower the
gross profit per unit of sales.
b. Gross profit Mark-up
Gross profit mark-up = Cost of goods sold x 100
Gross profit mark up, refers to gross profit expressed as a percentage of cost price. It
is the ratio of gross profit to cost price of goods sold or cost of sales.
c. Return on capital employed (ROCE)
Operating profit (before interest and taxes)

ROCE = x 100
Total assets less current liabilities
Net profit
ROCE = x 100
Capital employed
Capital employed includes both capital (equity) and non-current liabilities. These
are all the long term funds available for use by a business.

This ratio shows how efficient a business has used funds available to earn a profit.
This ratio is very important to the business owners as it shows them the profitability
of their investment. If the rate is very low, then the investment in business is not
desirable and therefore money should be invested somewhere else, where the rate
of return on capital is very high.
d. Return on Investment (ROI)

Shows how efficient management used total assets to earn profit
Operating profit (before interest and taxes)

ROI = x 100
Total assets
e. Return on Equity (ROE)
This shows the return accruing to shareholders after interest payments to long-term
creditors and taxes have been deducted.
Profit (after tax and interest and

preference dividend)
Return on shareholders’ equity = x 100
Shareholders equity (excluding
preference shares)
5.4.4 Debt to equity ratio
This is the ratio of total debt to the total equity of the business. It measures the
extent to which the borrowed funds are covered by the business owners’ funds.
Total liabilities
Debt/equity ratio = x 100
Total equity
This ratio compares the amount invested by owners to that invested by other lenders.
The higher the ratio, the higher the financial risk and vice versa.
5.4.5 Assets management ratio

This is also referred as Asset turnover ratio which measures how many (Frw) worth of
sales a company can generate from its net assets. Net assets are non-current assets
plus net current assets less non- current liabilities. In otherwords they equal to total
equity.

Total Assets turnover ratio = Turnover x 100
Total assets
Activity 5.4
The following information was obtained from the books of MANIRAREMA
general trader for the year ended 31 July 2017.
Details Frw
Opening 80,000
stock Closing stock 60,000
Purchases 260,000
Sales 600,000
Capital 500,000
Expenses 120,000
Current assets 100,000
Current liabilities 40,000
Question; Calculate the following ratios and make a report for the management
that show your observations/ constatations of business’ performance from obtained
ratios and recommendations for improving their business performance:
a. Gross profit mark-up percentage
b. Acid test ratio
c. Current ratio
d. Gross profit Margin
e. Net profit margin
f. Stock turnover ratio
g. Return on capital employed

5.5 Cash Flow Statements
Analyse the case study and answer the questions that follow ;
Activity 5.5
Figure: 5.4. Mutware’s business
Mr. MUTWARE has been in business for the last 1 year. He was a non-governmental
organization’s employee before venturing into the business of logistics. For year
end, he received financial statement from his accountant, a graduate from one of
reputable business colleges in Rwanda. The following was his income statement
and balance sheet as at December 31, 2017.

Mr MUTWARE
Trading, profit and loss account for the year ended 31 Dec. 2017
Particulars Amount (Frw) Amount (Frw)

Net sales 2,180,000
Less: Cost of sales 1,400,000
Less: expenses
Wages and salaries 60,000
Electricity 25,000
Depreciation of moto vehicle 400,000
Loss on sale of moto bike 115,000
Telephone charges 5,000
Total Expenses 620,000
Net Profit 160,000
Mutware is confused by this report where he is told that he made a profit of only
160,000Frw and need more explanation.
a. Identify where money was spent on and how much

b. Identify where the business got money from and how much they got
c. Calculate the difference between money received and expenses incurred.
Is there any difference with the business’ profit? Where do you think the
difference is coming from?
d. What is a cash flow statement?
e. Cash flow statement activities are grouped into three sections. Identify
them.
f. Why do you think it is important for a business to prepare a cash flow
statement?
Cash flows statement is a statement that provides valuable information about a

company’s gross payments and receipts and allows insights into its future income
needs. Cash flow statement is important because:
• Cash from operating activities can be compared to the company’s net income
to determine the quality of earnings. If cash from operating activities is higher
than net income, earnings are said to be of “high quality.”

• This statement is useful to investors because, under the notion that cash is
king, it allows investors to get an overall sense of the company’s cash inflows
and outflows and obtain a general understanding of its overall performance.
• If a company is funding losses from operations or financing investments by
raising money (debt or equity) it will quickly become clear on the statement
of cash flows
Cash inflow shows activities that result into cash coming into the business
enterprise, i.e. sources of cash. For example; balance b/d, cash sales, debtors, share
capital, interest earned, loans while
Cash outflow shows activities that result in cash going out of the business enterprise,
i.e. uses of cash. For example, cash purchases, salaries, drawings, licenses, rent, taxes,
etc.
Why is it necessary for an entrepreneur to make a Cash flow statement?

• It helps to identify the source of cash inflows in the business and also identify
how cash was used
• It helps management in proper cash planning to avoid excess cash or cash
deficits in the business
• It reports the total amount of cash used during a given period in long term
investment activities such as purchase of fixed assets
• It shows the amount of cash received from various financing sources such as
long term loans and sale of shares
• It helps management to avoid liquidity problems by anticipating when cash
is expected to flow in and plan payments accordingly
• It helps investors to understand how a company’s operations are running
where its money is coming from and it is spent.
Preparation of Statement of Cash Flows

While preparing the cash flow, we will look at each section of the statement of cash
flows and put them all together
Methods of cashflow statement

There are two Methods of cashflow statement
a. Direct method cash flow statement
The direct method for creating a cash flow statement reports major classes of gross
cash receipts and payments (Cash inflow and cash outflow)
FORMAT OF CASH FLOW STATEMENT

Cash flow statement for the year ended as at……/ …… /……...
Details JAN FEB MA APR MA JU JUL AU SE OC NO DEC

cash inflows
cash balance b/d XX XX XX XX XX XX XX XX XX XX XX XX
Bank loan XX XX XX XX XX XX XX XX XX XX XX XX
sales XX XX XX XX XX XX XX XX XX XX XX XX
rent income XX XX XX XX XX XX XX XX XX XX XX XX
Commission Rec XX XX XX XX XX XX XX XX XX XX XX XX
Grants/subsidies XX XX XX XX XX XX XX XX XX XX XX XX
Total cash in
flows(A) XX XX XX XX XX XX XX XX XX XX XX XX
cash outflows
cash purchases XX XX XX XX XX XX XX XX XX XX XX XX
Loan repayment XX XX XX XX XX XX XX XX XX XX XX XX
salaries/ wages XX XX XX XX XX XX XX XX XX XX XX XX
Taxes XX XX XX XX XX XX XX XX XX XX XX XX
Total cash out
flows(B) XX XX XX XX XX XX XX XX XX XX XX XX
Cash balance c/d
(A-B) XX XX XX XX XX XX XX XX XX XX XX XX
Net position XX
At the end of that given period, the business will have a surplus if cash inflows are
more than the cash outflows or deficit if cash inflows are less than the cash outflows.
Example prepare Didi’s cash flow for the month of January, February, March and
April 2006, given the following information below:
• Cash balance b/d or b/f in January was 15000,000 Frw
• Monthly rent income was 5000,000 Frw
• Monthly credit sales to be paid in the next month were 4000,000 Frw
• Sold a business van in February 14,500,000 Frw
• Monthly commission received was 3000,000 Frw
• Monthly cash sales 10,000,000 Frw
• Monthly cash purchases 12,000,000 Frw
• Bought a truck in January 800,000 Frw
• Monthly salaries and wages 5000,000 Frw
• Bought machinery worth 15,000,000rwf, payment of 8,000,000 Frw was
made in January and the balance was paid in two equal installments during

the month of February and March.
Solution
DIDI’S CASH FLOW STATEMENT FOR JANUAtRY, FEBRUARY, MARCH AND APRIL
Details January February March April

cash inflows
cash balance b/d 15,000,000 7,200,000 23,200,000 24,700,000
Rent income 5,000,000 5,000,000 5,000,000 5,000,000
Credit sales 4,000,000 4,000,000 4,000,000
Sales of van 14,500,000
Commission rec 3,000,000 3,000,000 3,000,000 3,000,000
Cash sales 10,000,000 10,000,000 10,000,000 10,000,000
Total cash in
flows (A) 33,000,000 43,700,000 45,200,000 46,700,000
Cash outflows
Cash purchases 12,000,000 12,000,000 12,000,000 12,000,000
Truck 800,000
Salaries/ wages 5,000,000 5,000,000 5,000,000 5,000,000
Machinery 8,000,000 3,500,000 3,500,000
Total cash out
flows(B) 25,800,000 20,500,000 20,500,000 17,000,000
Cash balance
c/d(A-B) 7,200,000 23,200,000 24,700,000 29,700,000
Net position 29,700,000
Exercice 1: Given the information below on central trading company ltd (for the
month of April, May & June)
• On 1st April, 2005 Central Traders Company Ltd had a cash balance of
10,000,000 Frw.
• It expected monthly cash sales of 5000,000 Frw.
• Credit sales were 3,500,000 Frw per month and the payments would be made
in the following months.
• Monthly rent income from some of its properties was expected to be
1,000,000 Frw
• Monthly purchases were 6,000,000 Frw.
• Monthly salaries and wages bills were projected at 800,000 Frw.

• A loan from Umwalimu Sacco was 10,000,000 Frw.
• Interest Monthly payment of 100,000 frw on the loan.
• Monthly raw material for 5000,000 Frw.
Required: Prepare central trading company’s cash flow statement for the month of
April, May, and June.
b. Indirect method cash flow statement
The indirect method uses net-income as a starting point, makes adjustments for
all transactions for non-cash items, then adjusts from all cash-based transactions.
An increase in an asset account is subtracted from net income, and an increase in
a liability account is added back to net income. This method converts accrual-basis
net income (or loss) into cash flow by using a series of additions and deductions
FORMAT OF INDIRECT CASH FLOW STATEMENT

Cash flow statement for year ended ……/……/…...
Cashflow from operating activities FRW FRW

Net income xxx
Adjustment for:
Depreciation /amortization xxx
Investment income xxx
Loss on sale of equipment xxx
Less: Increase in current assets xxx
Decrease in current assets xxx
Increase in current liabilities xxx
Less: Decrease in current liabilities xxx
Total adjustment xxx
Net cash flow from operating activities xxx
Cash flow from investing activities
Cash received from issues of shares xxx
Cash received from dividend xxx
Less: Cash paid to shareholders(dividend) xxx
Net Cash flow from investing activities xxx
Net cash position xxx
Less: Cash balance at the beginning xxx
Cash balance at the end xxx

Example 5.4:
The Dells Company is preparing their annual financial statements for the year ended
June 30, 2015. They have prepared the128income statement, statement of retained
earnings, and balance sheet. Now, we need to prepare the statement of cash flows.
a. Operating Section
a) Operating Section
For the operating
For the operating section,
section, we we income
need the need the income statement.
statement. Dellsincome
Dells Company Company income
statement is below.
statement is below.
Dells Company
Income Statement for Year Ended June 30, 2015
Frw Frw
Sales 1,000,000
Cost of goods sold 600,000.00
Salaries and wages expense 200,000
Rent expense 40,000
Depreciation expense 20,000
Interest expense 3,000
Loss on sale of equipment 7,000
Income before tax 130,000
Less: taxes (60,000)
Net Income 70,000
To start the operating section, what do we need? We need net income, depreciation
To startexpense and any
the operating gainswhat
section, or losses
do we(do not make
need? this harder
We need than it
net income, is — you must
depreciation see and any
expense
the words “gain” or “loss” or do not consider it a gain or loss):
gains or losses (do not make this harder than it is — you must see the words ―gain‖ or ―loss‖ or do not
• Net Income is 70,000Frw
consider it a gain or loss):
• Add depreciation expense 20,000Frw
 Net Income is 70,000Frw
• Add loss on sale of equipment 7,000Frw
 Add depreciation expense 20,000Frw
Our statement of cash flows looks like this:
 Add loss on sale of equipment 7,000Frw
Dells Company
Statement of Cash Flows for Year Ended June 30, 2015
Frw Frw
Cash flows from operating activities:
146 Net Income
Entrepreneurship Senior Six Student Book 70,000
Adjustments to reconcile net income to net cash:
 Add depreciation expense 20,000Frw
 Add loss on sale of equipment 7,000Frw
Dells Company
Frw Frw
Net Income 70,000
Now we move
Nowonwe
to the
movebalance
on to sheet for the sheet
the balance CURRENT assets and liabilities. Notice the increase (or
for the CURRENT assets and liabilities. Notice
decrease) hasthe increase
already (orcalculated
been decrease) for
has you
already
but been
if not,calculated
you wouldfortake
youthe
butcurrent
if not, you amount –
yearwould
take the current year amount – previous year amount. If the current year is more,
there is an increase and if the current year is less that is a decrease.

previous year amount. If the current year is more, there is an increase and if the current year is less
that is a decrease.
Dells Company
Comparative Balance Sheet
June 30 2015 and 2014
2015 2014 Increase (Decrease)
Assets Frw Frw Frw
Current Assets:
Cash 30,000 80,000 (50,000)
Accounts Receivable, Net 160,000 100,000 60,000
Merchandise Inventory 100,000 70,000 30,000
Prepaid Rent 20,000 10,000 10,000
Total Current Assets 310,000 260,000
Property, plant, and equipment:
Equipment 40,000 20,000 20,000
Accumulated Depreciation – Equipment (60,000) (50,000) (10,000)
Total Property, plant, and equipment 340,000 150,000
TOTAL ASSETS 650,000 410,000
Liabilities and Equity

Current Liabilities:
Accounts Payable 50,000 40,000 10,000
Notes Payable – bank - 50,000 (50,000)
Salaries Payable 10,000 20,000 (10,000)
Taxes Payable 30,000 20,000.00 10,000
Total Current Liabilities 90,000 130,000
Stockholder‟s Equity:
Common stock, 10Frw 300,000 100,000 200,000
Paid in capital in excess of par, Common 50,000 0 50,000
Retained earnings 210,000 180,000 30,000
Total Stockholder‟s Equity 560,000 280,000
TOTAL LIABILITIES AND EQUITY 650,000 410,000
We will use the current assets (other than cash) and the current liabilities (other than the notes payable
Webank
willthat
usewethe
willcurrent assets
report in (otherRemember,
financing). than cash)weandADDthe currentand
decreases liabilities
SUBTRACT (other
increases in
than the notes payable bank that we will report in financing). Remember, we ADD
current assets but in current liabilities we will ADD increases and SUBTRACT decreases.
decreases and SUBTRACT increases in current assets but in current liabilities we will
 Accounts
ADD increases and Receivable
SUBTRACT increased 60,000Frw so we will SUBTRACT 60,000Frw since this is a
decreases.
current asset
• Accounts Receivable increased 60,000Frw so we will SUBTRACT 60,000Frw
since this is a current asset
• Merchandise inventory increased 30,000Frw so we will subtract 30,000 Frw
• Prepaid Rent increased 10,000 Frw so we will subtract 10,000Frw
• Accounts Payable increased 10,000Frw but we will add 10,000Frw since this

is a current liability
• Salaries Payable decreased 10,000Frw so we will subtract 10,000Frw
• Federal Income Taxes payable increased 10,000Frw so we will add 10,000Frw
With this information, we can finish the operating section as follows:
Dells Company
Cash flows from perating activities

Net Income 70,000
Adjustiments to reconcile net income to
net cash:
Increase in Accounts Receivable (60,000)
Increase in Merchandise Inventory (30,000)
Increase in Prepaid Rent (10,000)
Increase in Accounts Payable 10,000
Decrease in Salaries Payable (10,000)
Increase in Income Taxes Payable 10,000
Total adjustements (63,000)
Net cash provided by operating activities 7,000
[ 7000 net income + (-63,000) in adjustment]
What does this tell us about the company? It shows that the company was able to
generate 7,000 Frw of cash from its day to day business operations. This could cause
a concern since the company owes 90,000 Frw in the next year (see current liabilities
on the balance sheet). But let’s look at the other sections to see what else we can
learn.
b. Investing Section
For the investing section, we will use the balance sheet and any additional
information provided. On the balance sheet, the only long term asset we have
comes from property, plant and equipment and is the Equipment account. During
2015, equipment was sold for 3,000Frw cash with an original cost of 20,000Frw and
10,000Frw of accumulated depreciation. Additional equipment was purchased for
220,000Frw cash. Let’s look at these transactions:
• Equipment was sold for 3,000Frw cash (we do not need to know the rest of

the information as the important part is the amount of cash). Notice how
the 10,000Frw book value of the equipment (20,000Frw cost –10,000Frw
accumulated depreciation) less the 3,000Frw cash received is the loss
reported on the balance sheet of 7,000 Frw. If we sold equipment, we receive
cash so we will add the 3,000Frw cash.
• Dells purchased additional equipment for 220,000Frw cash so they paid cash.
We will subtract the 220,000Frw cash paid.
The investing section would look like this:
Cash flows from investing

activities:
Cash received from sale of 3,000
equipment
Cash paid for new (220,000)
equipment
Net cash used by investing (217,000)
activities
Notice how the net cash heading changed from provided in by the operating section to
“used” by investing since the number is negative. Negative cash flow for investing arises
because Dells Company sold old equipment and purchased new equipment with cash not
with a loan!
c. Financing Section
For the financing section, we will use the balance sheet and the statement of retained
earnings. On the balance sheet, we are looking at the notes payable – bank from the
current liability section and any other long term liabilities.
If these balances increased, we can assume we received cash and if the balances
decreased, we can assume we paid on the debt unless we are given additional
information on the subject. Notes Payable is the only liability we haven’t already
accounted for on the balance sheet. Next we look at the Equity section of the balance
sheet. We have common stock, paid in capital and retained earnings. Common stock
and paid in capital both increased — why does this account increase? It increases
when we issue shares of common stock. We will assume Dells issued the stock for
cash unless we are given additional information to the contrary. In our case, we are
given no additional information so we will assume all increases or decreases involve
cash. Lastly, we have retained earnings. What is involved in retained earnings? Let’s
look at the statement of retained earnings to find out.
Dells Company

Statement of Retained Earnings For Year Ended June 30, 2015
Retained Earnings, June 30 2014 180,000.00Frw
Add: 2015 Net Income 70,000.00
250,000.00Frw
Deduct: Cash Dividends (40,000.00)
Retained Earnings, June 30 2015 210,000.00Frw
Retained earnings include the beginning retained earnings + net income – dividends to
get the ending retained earnings balance. What do we need for the statement of cash
flows? We already accounted for net income in the operating section but we need to
know dividends. We will assume cash dividends unless the information given tells us
otherwise. In this case, it shows we paid cash dividends.
• N otes Payable – Bank decreased by 50,000Frw, we assume we paid cash of

50,000Frw in 2015 and we will subtract cash
• Common stock increased 200,000Frw and paid in capital increased 50,000Frw
so the total cash received was 250,000Frw (200,000Frw + 50,000Frw) which
will be added
• Cash dividends of 40,000Frw were paid and we will subtract cash
The financing section will look like this:

Cash flows from financing activities:
Cash paid for notes payable (50,000)
Cash received from issuing stock 250,000
Cash paid for dividends (40,000)
Net cash provided by financing activities 160,000
Now we know how Dells was able to purchase new equipment with cash, by issuing
stock. This helped Dells in the current year but what about next year when they owe
90,000Frw? We need to put all 3 sections together to finish the picture.
d. Net Increase (Decrease) in Cash

The final part of the statement of cash flows is to calculate a Net Increase (or
Decrease if negative) in Cash by adding the net cash from operating, investing
and financing. Cash flows from Operating is 7,000Frw + Investing (217,000) Frw +
Financing 160,000Frw which gives a net decrease in cash of (50,000) Frw. We then
take this increase (or decrease) and add it to the beginning cash balance (which is
the previous year cash balance from the balance sheet) to get a calculate Ending
Cash Balance which should agree to the cash balance reported on the balance sheet
for the current year. We can always check our work with a built in check figure of

ending cash! This last section would look like this:
Net Increase (or Decrease) in Cash (50,000)
Cash Balance, 2014 80,000
[80,000 2014 cash balance + (50,000
134
decreases)]
So, the final cash flow statement will appear as follows:

So, the final cash flow statement will appear as follows:
Dells Company
Statement of Cash Flows For Year Ended June 30, 2015

Net Income 70,000
Increase in Accounts Receivable (60,000)
Increase in Merchandise inventory (30,000)
Increase in Prepaid rent (10,000)
Increase in Accounts Payable 10,000
Decrease in Salaries Payable (10000)
Increase in Federal income Taxes Payable 10,000
Total adjustments (63,000)
Net cash provided by operating activities 7,000
Cash flows from investing activities:

Cash received from sale of equipment 3,000
Cash paid for new equipment (220,000)
Net cash used by investing activities (217,000)
Cash flows from financing activities:

Cash paid for notes payable (50,000)
Cash received from issuing stock 250,000
Cash paid for dividends (40,000)
Net cash provided by financing activities 160,000
Net Increase (or Decrease) in Cash (50,000)


From the following balance sheet of XYZ Company, prepare the company’s
cash flow statement
XYZ
Company Balance Sheets as at
Assets Year-End 30/12/ 2016 (Frw) Year-End 30/12/2017 (Frw)
Cash 30,000 35,500
Marketable Securities 10,000 10,000
Accts Receivables 170,000 200,000
Inventory 160,000 180,000
Prepaid Expenses 30,000 20,000
Investments 20,000 50,000
Plant & Equipment 1,000,000 1,100,000
Less Accumulated 550,000 600,000

Net Plant & Equipment 450,000 500,000
Total Assets 870,000 995,500
Liabilities and Owner’s
Capital
Accts Pay Depreciation 45,000 80,000
ST Bank Loans 100,000 100,000
Accrued Exp 35,000 30,000
LT Bank Loans 40,000 90,000
Owners Capital 650,000 695,500

Total Liabilities and 870,000 995,500
Capital
Additional information:
Net income was 110,500 Frw, depreciation is 50,000 Frw, and the firm paid out
dividends in the amounting of 65,000Frw
5.6. Statement of Owners Equity

Activity 5.6
Cooperative ABADAHIGWA KU MURIMO is a well-established cooperative
which is operating in Rubavu district. The cooperative main activity is grow-
ing Irish potatoes but is also extending its activities in transport of its mem-
bers’ produce to cut off the cost they were incurring on transportation. During
the year ended 31 December 2016 ; cooperative had bought 4 trucks worth
150,000,000 Frw (one hundred and fifty million rwandan francs) using long
term loan worth 42,000,000 Frw (Forty Two million rwandan francs) and co-
operative saving. Cooperative owned building valued at 64 Million rwandan
francs and other assets valued at 11 million but farmers were not yet paid 6
million rwandan francs for the Irish potatoes supplied.
a. Calculate the amount that cooperative’s total assets and total liabilities
as at that date.
b. What is the total cooperative’s equity as at December 31.2016.
c. What do you understand by statement of owners’ equity and why is it
important ?
d. How to prepare statement of owners’ equity ?
5.6.1. Definition and importance

This is a financial statement that shows the changes in owner’s equity during a given
time period. It shows the equity balance at the beginning, additions and subtractions
and ending balance.
It explains changes in equity from net income or net loss and from any owner
investments and withdrawals over a period of time. Increases in owner’s equity
come from owner investments and net income. Decreases in owner’s equity result
from owner withdrawals or net loss.
Beginning capital+Additional investments+Net income (Net loss)- Owner
withdrawals= Ending capital
5.6.2. Preparation
Step 1: Gather the needed information
The Statement of Changes in Owner’s Equity is prepared second to the Income
Statement. We will still be using the same source of information. Again, the most
appropriate source of information in preparing financial statements would be the
adjusted trial balance. Nonetheless, any report with a complete list of updated
accounts may be used.

TWIYUBAKE Electronic Repair Services
Adjusted Trial Balance as at 31-Dec-16
Account Title Debit (Frw ‘000’) Credit (Frw ‘000’)
Cash 7,480
Accounts Receivable 3,700
Service Supplies 600
Furniture and Fixtures 3,000
Service Equipment 16,000
Accumulated Depreciation 720
Utilities Payable 1,800
Loans Payable 12,000
Mr. Gray, Capital 13,200
Mr. Gray, Drawing 7,000
Service Revenue 9,850
Rent Expense 1,500
Salaries Expense 3,500
Taxes and Licenses 370
Utilities Expense 1,800
Service Supplies Expense 900
Depreciation Expense 720
Totals 46,570 46,570
Step 2: Prepare the heading

Like any financial statement, the heading is made up of three lines. The first line
contains the name of the company. The second line shows the title of the report. In
this case, it would be Statement of Changes in Owner’s Equity, Statement of Owner’s
Equity, or simply Statement of Changes in Equity. Any of the three would be okay.
The third line shows the period covered. The report covers a span of time, hence
we use For the Year Ended, For the Quarter Ended, For the Month Ended, etc. Some
annual financial statements omit the “For the Year Ended” phrase.

Statement of Changes in Owner’s Equity
For the Year Ended December 31, 2016
Step 3: Capital at the beginning of the period

Report the capital balance at the beginning of the period reported – or the amount
at the end of the previous period. Remember that the ending balance of the last
period is the beginning balance of the current period.
TWIYUBAKE, Capital - beginning Frw 0
Note: Since the company started in December 1, 2016, the beginning balance of the
capital account is zero. In the second year of operations, an amount would already
be shown in the capital’s beginning balance.
Step 4: Add additional contributions

Contributions from the owner increases capital, hence added to the capital balance.

Add: Additional Contributions 13,200,000
Tip: You may need to refer to the journal to find out how much contributions were
made by the owner. Other sources of information may also be used such as a log of
owner’s capital contributions.
Step 5: Add net income

Net income increases capital hence it is added to the beginning capital balance.
Net income is equal to all revenues minus all expenses. We can also refer to the
income statement we previously prepared for the amount.
Net Income 1,060,000

Step 6: Deduct owner’s withdrawals
Withdrawals made by the owner are recorded separately from contributions. You can
easily find it in the adjusted trial balance as “Owner, Drawings”, “Owner, Withdrawals”,
or any other appropriate account. Withdrawals decrease capital, hence are deducted.

Less: TWIYUBAKE; withdrawals 7,000,000
Step 7: Compute the ending capital balance

Compute for the balance of the capital account at the end of the period and draw the
lines. One horizontal line means that a mathematical operation has been performed.
Two horizontal lines (double-rule) are drawn below the final amount.

Less: TWIYUBAKE; withdrawals 7,000,000
TWIUBAKE capital ending 7,260,000
Conclusion
So there you have the preparation of a Statement of Changes in Owner’s Equity. It
is a report that shows the items that affect the capital or equity account. Simply, we
are just presenting this formula in a form al report:
Capital, ending = Capital, beg. + Additional Contributions + Net Income/ profit -
Withdrawals
where: Net Income = Income – Expenses

Kate’s Fashion boutique is a fashion house in downtown Kigali that was started
on January 15, 2015 with Kate’s investment of 15,000Frw. During the 1st
quarter of operation, the company made a profit of $10,000 and Kate decided
to withdrawal 5,000Frw from the company to pay for her living expenses.
Prepare the statement of owner’s equity for the quarter ended 14th April 2015.

1. Which transactions affect the profit of any business?
2. Bread and Baking Business is a business that operates in Nyamuragira
sector. By December 2017, the business made the transactions below:
Cash sales: 21,000
Credit sales: 5,000
Beginning Stock: 30,000 (Flour)
Purchases: 15,000 (raw materials)
Ending inventory: 31000
Expenses:
• wages: 6,000
• Loan from school administration:15,000
• Water: 2,000;
• Telephone: 3,000;
• Rent: 30,000;
• License tax: 12,000
Prepare profit and loss account for Bread and Baking Business and
ascertain whether it made a profit or loss?
3. What should an entrepreneur do to avoid making losses and increase
profits?

End of unit assessment
1. On January 1, 2017 Madenge started a travel agency. The following events
occurred during that first month.
• On January 2, Madenge invested 1 320 000 Frw cash and 100 000 Frw
equipment in the business.
• On January 3, Madenge paid 60 000 Frw cash for furniture for the travel
agency.
• On January 5, Madenge paid 50 000 Frw cash to rent the space for his
business.
• On January 7, he purchased additional equipment on credit amounting to
320 000 Frw
• On January 8, Madenge started offering services in his business. Cash
received from services provided in the first eight days (ended January 15)
is 625 000 Frw.
• On January 16, he provided services on account, the amount is 98 000 Frw.
• On January 17, he received a cheque for services rendered the previous
day on account.
• On January 19, he paid 75 000 Frw to an assistant for working during the
opening.
• Cash received from services provided during the second half of January is
804 000 Frw.
• On January 30, he paid 230 000 Frw part of the money he owed when he
purchased equipment on account.
• On January 31, Madenge made a 310 000 Frw cash withdrawal for personal
us e
• Required
i. Record the preceding transactions in a journal
ii. Post the transactions in a ledger and prepare the trial balance
iii. Prepare an income statement for january
iv. Prepare a statement of owner’s equity for January
v. Prepare a balance sheet as of January 31
vi. Prepare a statement of cash flows

2.The following is trial balance of INGENZI Ltd as at 31 December 2012.
Prepare the company’s trading, profit and Loss account and a balance sheet
for the year ended 31 December 2012
Particulars Dr Cr
Frw Frw
Stock 1 Jan 2012 18,160
Sales 92,340
Purchases 69,185
Carriage inwards 420
Carriage outwards 1,570
Returns outwards 640
Wages and Salaries 10,240
Rent 3,015
Communication 624
Commission payable 216
Insurance 405
Sundry expenses 318
Buildings 20,000
Debtors 14,320
Creditors 8,160
Fixtures 2,850
Cash at bank 2,970
Cash in Hand 115
Drawings 7,620
Capital 50,888
152,028 152,028
Closing stock is Frw 12,000

a. Calculate the following ratios and briefly give an interpretation of
the results:
• Acid test ratio
• Mark up
• Gross profit margin
• Stock turnover ratio
• Return on capital employed
b. From the above trial balance, prepare the statement of the owners’
equity

UNIT6
STOCK CONTROL

Unit 6: STOCK CONTROL
Key unit competence: To be able to assess the need for proper inventory
management
Introduction
All institutions, organizations and companies hold stocks. These are the stores of
materials they keep until needed. An agricultural cooperative, for example, harvests
rice and keeps it in stock until it sells it to customers; a factory keeps a stock of raw
materials for its products; a television company has a stock of recorded programmes;
a research company has a stock of information; a bank holds cash for its day-to-day
transactions; a school stores didactic materials to be used by teachers. Whenever an
organization has materials that it does not use immediately, it puts them into stock.
This unit is designed to equip you with knowledge, skills and attitudes that will
enable you to manage effectively stock and make an inventory, to comply with the
standards, policies and procedures to be followed in the procurement of goods,
services and works in supply chain management. Through this unit, you will learn
how to use basic documents needed in stock management, how to conduct
perpetual and periodical inventory, procurement procedures, as well as evaluation
methods on supplied stock.

Introductory activity
Read the following story and answer the questions that follow;
Kamana is an ambitious entrepreneur, based in Rwamagana town. He is a
famous shopkeeper, with the best quality of goods. Recently, he started to
process maize and produce flour. This new business was very demanding to
an extent that Kamana was obliged to hire an employee responsible for shop
management, as he caters for maize processing business. Kamana became
very busy, to the level that he was no longer able to carry out inventory control,
monitor changes in the marketplace and cater for the needs of customers. So,
designing, planning, executing, controlling, and monitoring of supply chain
activities became responsibilities of the new employee. As the new employee
was not experienced about procurement procedures, stock and inventory
management as well as proper identification and follow up on clients’ needs,
there were often missing items in the stock, despite raised need by clients.
On the other hand, a considerable number of goods were rejected due to the
expiration and damage. After a while, Kamana just noticed that the number of
customers and his revenues were decreasing.
Questions
1. What are the main causes of poor inventory control from the above
story?
2. Identify main effects of poor stock management and inventory control
on a given business.
3. What advise can you give to Kamana and his employee in relation to
proper business management?
4. As an entrepreneur, what can you do in order to avoid incidents related
to poor stock management in your business?
6.1 Meaning of stock, stock management and inventory
Activity 6.1
Suppose you are a top manager of a big organization such as a health center
or a restaurant having a big number of clients who normally come at different
time intervals, which owns different materials and assets used in the provision
of its services. Since these assets have to be kept safely for the purpose of
customer’s satisfaction, and realization of organization’s objective, you
decided to hire some employees to carry out the required activities. Besides, as
a manager before commencing your responsibilities, you were informed that
shareholders need regular reports on the status of their business, including
available assets.

Questions
1. Indicate basic initiatives that you will take to safeguard your organization’s
assets.
2. Identify key persons who will support you to implement those initiatives
and their responsibilities.
6.1.1. Meaning of stock and inventory

In recent years it has become more common to use ‘inventory’ for both the list of
items and the stock itself, and the two terms then become interchangeable. At
the same time, organizations refer to their stock as stores, provisions, stockpiles,
holdings, reserves, accumulated materials, banks, or a host of other names. However,
some groups put slightly different interpretations on the terms. Accountants, for
example, view ‘inventory’ as the amount of money tied up in stocks, rather than
the stocks themselves, or it might be the total value of an organization’s assets. To
finance people, ‘stocks’ are a way of raising capital, in the sense of ‘stocks and shares’
– and have nothing to do with stores of materials. Usually, these differences are fairly
obvious, but sometimes you have to be a bit more careful while using them. In this
unit standard definitions shall be used, where:
• Stock consists of all the goods and materials that are stored by an organization.
It is a store of items that is kept for future use.
• An inventory on the other hand, is a list of the items held in stock.
6.1.2 Importance of stock and inventory management in organizations

• The main purpose of stock is to give a buffer (shield) between supply and
demand. This safety caution is essential to ensure the smooth running of
operations. The amounts held have widespread effects on the performance
of an organization. Without stocks, most operations are impossible.
• Stocks allow operations to become more efficient and productive. Stocks

affect lead times and availability of materials thereby affecting customer
service, satisfaction, and the perceived value of products.
• Stocks affect operating costs and hence profit, return on assets, return on
investment and every other measure of financial performance.
• Stock also helps in tracking of products: for example; you may discover a
product that is selling extremely well, which means you can order more of it
and even test related products. Some other times, it’s easy to lose track of which
products are winners and which products you could probably do without. If you
have large numbers of a product that has been on the shelves for months, it’s
a good indication that it’s not popular and that you may have to slash prices to
move the stock on.

• Improvement of ordering process. Stock taking highlights any shortages
you weren’t aware of and will prompt you to order more. For example, you
may have had on record that you had a whole pallet of those super popular
t-shirts, but stock take could reveal that a large portion were damaged in
transit, or even stolen.
• Helps in finding flaws in pricing strategies: stock management is a great
opportunity to analyze sales and profits and potentially revise any pricing
strategies that aren’t generating maximum profit.
6.1.3 Stock management and Inventory Control

Stock management is the practice of ordering, storing, tracking and controlling
inventory. Stock management applies to every item a business uses to produce its
products or services-from raw materials to finished goods. In other words, stock
management covers every aspect of a business’s inventory.
Stock management must include an inventory control system to ensure the accuracy
of inventory records. The organization will not have the ability to make purchasing
decisions without accurate inventory quantities. Maintaining a balance involves
planning and forecasting, which may include preparing for unforeseen events such as
failure of suppliers to meet the organization’s deadlines. The marketing department,
sales and purchasing must work together to determine the appropriate levels of
stock to have on hand. Sales and marketing provide information such as sales
forecasts to predict the amount of materials the company needs to meet demand.
Purchasing must then consider lead times and supplier reliability when ordering
materials for the company.
The sequence of stock replenishment and reduction to meet demand is repeated
continuously in a stock cycle. Typically, each cycle has the following elements:
i. An organization buys a number of units of an item from a supplier.
ii. At an arranged time, these units are delivered.

iii. Unless they are needed immediately, the units are put into storage,
replenishing the stock.
iv. Customers, either internal or external, create demands for the item.
v. Units are removed from stock to meet these demands.
vi. At some point, the stock gets low and it is time for the organization to place
another order.
Usually deliveries from suppliers are relatively large and infrequent, while demands
from customers are smaller and more numerous. The length of a stock cycle can vary
between a few hours (like newspapers and milk which have frequent deliveries) and
decades (like gold that is rarely passed on to customers).

Inventory control is the “coordination and supervision of the supply, storage,
distribution, and recording of materials to maintain quantities adequate for current
customer needs without excessive supply or loss.”
When it comes to wholesalers and distributors of durable goods, inventory control

can be further defined as the process employed to maximize a company’s use of
inventory. The goal of inventory control is to generate the maximum profit from the
least amount of inventory investment without hindering customer satisfaction levels
or order fill rates.
Inventory control also includes aspects of managing a company’s inventories:

purchasing, shipping, receiving, tracking, warehousing and storage, turnover, and
reordering.” Inventory control is such a critical piece of an organization’s operations
and bottom line that it is too important to leave to human error or antiquated
systems. That’s why so many companies opt to invest in inventory control systems,
so that all of the components of inventory control are managed by one integrated
system.

1. Describe the stock management system in your school
2. Explain the importance of inventory control in an organization
6.2 Necessary documents for stock management
Activity 6.2
Read the story below and answer questions that follow;
Kamanzi is a prosperous trader in Nyarugenge district and owns a very big
business. He is considered an exceptional trader by many customers mainly
because during scarcity of scholastic materials like reams of papers and
exercise books, he is the only trader every parent refers to as he helps them find
the needed materials for their children. Kamanzi is also exemplary in terms of
stock management. This is attributed by the fact that he has employees who
are well trained and manages his stock properly.
1. Mention the documents that can be used for proper stock management
in Kamana’s business.
2. Under which circumstances can his employees record information?
The following are the necessary documents in stock management process:
• Material/ purchase requisition note

• Receipt note
• Return-outward note
• Return-inward note
• Stock sheet (Inventory form)
6.2.1 Purchase/material requisition

The purchase requisition is a document generated by a user department or
storeroom personnel to notify the purchasing department of items it needs to order,
their quantity, and the timeframe. It may also contain the authorization to proceed
with the purchase. It is also called purchase request or requisition.
The purchase or material requisition Form in the procurement process plays an

important role. It is a means whereby an employee of an organization can request
materials or equipment. Once the employee of the organization has completed the
Purchase/material Requisition and it has been authorized, they can then take it to
the purchasing department for a Purchase Order to be created.
Some organizations utilize technology to manage requisitions and the requisition
form is electronic and is simply a way of improving efficiency, with the form being
completed online and then sent off to the relevant person in the purchasing
department.
Although the use of purchase requisitions may seem slightly bureaucratic, they are
very useful, not just in terms of the audit trail, with accountability for orders being
shown, but they also provide the purchasing department with very clear instructions
about what is required, the budget needed, when it should be delivered together
with possible sources of supply.
Often the requisition will contain details of any cost codes that are required for
budgeting purposes ; so, if an item is to be charged to a particular area of the budget
then the purchasing department will be told which cost code to charge the items
to, so it helps keep budgets up to date. Since this information will not be contained
on the Purchase Order, it is a way of ensuring that the books are balanced and there
are no over spends.
The Requisition should also contain details of the time scale for delivery, so if
something is urgent, then this should be noted on the Requisition. It should not be
assumed that the purchasing department will know that something is urgent ; it is
up to the person who is completing the form to make arrangements for the order to
be treated as such.
Example of Requisition
Name of the company : UBUMWE RESTAURANT
Unit : Kitchen
Date : 1/05/2018

Requisition N°: 1
Estimated Estimated
N° Items Quantity Remarks
Unit Price Total Price
1. Beans 10 kg 500 Frw 5,000 Frw
2. Cooking oil (mukwano) 4 liters 1500 Frw 6,000 Frw
3. Rice (pakista) 50kg 800 Frw 40,000 Frw
4. Sugar 25 kg 900 Frw 22,500 Frw
TOTAL PRICE
Requested by (Names) : Muhinda Signature : ……………………
6.2.2 Receipt note

The receipt note or Good Received note is the record of goods received at the point
of receipt. This record is used to confirm that all goods have been received and often
compared to a purchase order before payment is issued.
Example of Receipt note/Good received note

Goods Received Note
Requisition No: 1 Company: UBUMWE RESTAURANT

Name of requisitioning officer: Muhinda Date: 1/5/2018
Delivery note No: 3

Handed over by: Manishimwe (Manager). Date: 1/5/2018
Received by: Muhinda Date: 1/5/2018
Unit Unit Total Unit Total

Item Quantity Quantity Remarks
of price price price price Signature
description ordered delivered
issue (frw) (frw) (frw) (frw)
Beans kg 500 10 5,000 600 8kg 4,800
Cooking oil One

(Mukwano extra
liter 1500 4 6,000 1,300 5liters 6,500
Vegetable jerrican
oil) of 5 litres
Rice
(Pakistan kg 800 50 40,000 800 50kg 40,000
rice)
Sugar kg 900 25 22,500 850 25 21,250
TOTAL 73,500 72,550
Name and signature of receiving officer: Muhinda _

Name and signature of supplier: Manishimwe ………….......

6.2.3 Return-outward note
Returns in accounting refer to the goods returned by a business to its suppliers or
by a customer to a business. In one case, it is a sales return and in the other, it is a
purchase return. The transaction in both cases is reversed and the concerned sale
or purchase does not happen.
Return outwards refer to the goods returned by an organization to its suppliers. They

are goods which were purchased from suppliers, however, because of being
unsatisfactory or different reasons were returned to the suppliers. They are also
called purchase returns.
Therefore a return outward note is a document that records goods returned by an

organization to its suppliers also known to as purchase returns note.
Sometimes, it may be necessary to return few goods back to a supplier when an order
is received. This may be due to poor quality, inaccurate quantity, untimely delivery
or other reasons. Purchase returns reduce total purchases of an organization and the
deduction is shown in the trading account. Suppose company B that manufactures
sugar, receives 2 tons of sugarcanes from company A. Due to their poor quality,
these 2 tons are returned to company A. The 2 tons are returns outwards or purchase
returns for company B. A subsidiary book, namely purchase returns book is prepared
to record all such entries. All returns are primarily recorded in the purchase returns
book unless the returns are not frequent. In such case, they are recorded in the
journal.
6.2.4 Return-in ward note

Return inwards are the goods returned to an organization by its customers. They are
goods which were sold, but usually, because of being unsatisfactory, were returned
by the customers. They are also called the sales returns.
A return in ward note is therefore a document that records goods returned a

customer to the business also known to as sales returns note.
Suppose company B manufacturing sugar, receives 2 tons of sugarcanes from the

company A, due to their poor quality, these 2 tons are returned to the company A.
The 2 tons are returns inwards or sale returns for company A. Sales return reduces
total sales of a company and the deduction is shown in the trading account. A
subsidiary book called sales returns book is made to record all such entries.
6.2.5 Stock sheet /Inventory form

The stock sheet is a document that records regular movement of goods in the store.
The storekeeper indicates the goods received or issued. The storekeeper determines
the balance after the movement of purchases and sales of goods. Each exit and

entry of goods into stock must be justified with a relevant document such as receipt
note and purchase requisition note.
Example of stock sheet

Name of company : Papeterie Umusanzu
Date : 1/05/2018
Initial Received Issued Balance
Stock
N° P/U P/U P/U P/U Total
items Qty Total Qty Total Qty Total Qty
(Frw) (Frw) (Frw) (Frw) (Frw)
Reams
88,000
1. of 6 4,000 24,000 20 4,000 80,000 4 4,500 22 4,000
18,000
papers
Exercise
2. 100 160 16,000 0 - - 20 200 80 160 12,800
books 4,000
3. Pens 60 80 4,800 0 - - 10 100 50 80 4,000
1,000
4. Pencils 30 70 2,100 0 - - 0 - - 30 70
2,100
5. Markers 0 - - 50 100 5,000 10 150 1,500 40 100
4,000
6. Staples 10 100 1,000 0 - - 0 - - 10 100 1,000
TOTAL 47,900 85,000 24,500 111,900
NOTE: The tables given are general templates but can be adjusted depending on
the type of organization.

1. Nyiraneza is a stock manager for SABANA LTD, a distributor of BRALIRWA
products. On March 12th, 2018, SABANA LTD had the following items in the
stock:
Items Number of crates Unit Price

Primus 72cl 12 8,100
Primus 33cl 6 8,100
Mutzig 65cl 4 10,100
Mutzig 33cl 0 10,200
Legend 30 cl 4 12,100
Amstel 33cl 8 14,100
Turbo King 33cl 1 10,200
Heineken 33cl 0 20,000
Soft Drinks 30cl 3 6,700
Soft Drinks 50cl 6 8,000

In the morning of March12th, 2018, Nyiraneza made a Purchase order for the
following items:
Unit price Total price

Items Quantity ordered
(Frw) (Frw)
Primus 72cl 8,100 20 162,000
Primus 33cl 8,100 0 0
Mutzig 65cl 10,100 15 151,500
Mutzig 33cl 10,200 30 306,000
Legend 30 cl 12,100 6 72,600
Amstel 33cl 14,100 10 141,000
Turbo King 33cl 10,200 10 102,000
Heineken 33cl 20,000 5 100,000
Soft Drinks 30cl 6,700 30 201,000
Soft Drinks 50cl 8,000 0 0
TOTAL 1,236,100
BRALIRWA main stock supplied to SABANA LTD the following items on

March12th, 2018:
Quantity
Items Unit price (Frw) Total price (Frw)
delivered
Primus 72cl 8,100 20 162000
Primus 33cl 8,100 0 0
Mutzig 65cl 10,100 15 151500
Mutzig 33cl 10,200 30 306000
Legend 30 cl 12,100 0 0
Amstel 33cl 14,100 10 141000
Turbo King 33cl 10,200 10 102000
Heineken 33cl 20,000 5 100000
Soft Drinks 30cl 6,700 30 201000
Soft Drinks 50cl 8,000 0 0
TOTAL 1,163,500

On the same day (March12th, 2018), SABANA LTD sold the following items:
Items Number of crates

Primus 72cl 15
Primus 33cl 6
Mutzig 65cl 6
Mutzig 33cl 0
Legend 30 cl 4
Amstel 33cl 8
Turbo King 33cl 1
Heineken 33cl 0
Soft Drinks 30cl 12
Soft Drinks 50cl 6
a. Complete the receipt note and stock sheet for SABANA LTD on March 12th,
2018.
b. Develop a purchase requisition (10 crates for each identified item)

for SABANA LTD on March 13th, 2018, following the principle that the
minimum stock level is 6 crates for each item.

6.3 Procurement procedures
Figure 6.1: Procurement procedures in Ubumwe Restaurant
1. In your understanding, what is meant by procurement?

2. Describe the process through which the manager UBUMWE restaurant
purchases food and other materials for his business
6.3.1 Meaning of procurement

Procurement is the process of finding, agreeing terms and acquiring goods, services
or works from an external source, often via a tendering or competitive bidding
process.
Procurement is the business management function that ensures identification,

sourcing, access and management of the external resources that an organization
needs or may need to fulfill its strategic objectives.
Procurement covers the complete range of events from the identification of a need
for a good or service through to its disposal or cessation. It includes activities and
events before and after the signing of a contract as well as the general management
activities associated with a range of contracts such as:
• Pre-contract activities such as planning, needs identification and analysis,

and sourcing,

• Post-contract activities such as contract management, supply chain
management and disposal, and
• General activities such as corporate governance, supplier relationship
management, risk management and regulatory compliance etc.
Procurement delivers a range of benefits. It not only seeks to reduce costs and to
ensure supply, it also supports strategic organizational objectives such as market
expansion and product innovation among others.
6.3.2 Procedures in procurement process.

Step 1 : Need Recognition : A business owner (or procurement department) must
recognize that a product is needed in order to purchase it. That product can be
either a brand new item, or one that is being re-ordered. In order to avoid running
out stock and due to the costs involved in holding inventory, an organization
will aim at holding the minimum amount possible while still being able to satisfy
orders from its customers. The minimum inventory a company can afford to hold
will depend on several factors, including the time between placing an order with a
supplier and receiving it, known as the lead time. The minimum level or safety stock
level is the level of inventory, below which the stock of materials should not be fall.
If the stock goes below minimum level, there is a possibility that the production
may be interrupted due to shortage of materials. In other words, the minimum level
represents the minimum quantity of the stock that should be held at all times.
Step 2: Specific Need: If the organization has specific requirements for various
products, the procurement department should be sure to be up-to-date on those
requirements and order accordingly.
Step 3: Examination of Supplier Options (Source): Every business/organization

needs to determine where to get their goods. Some organizations have an approved
vendor’s list while others are still trying to determine who the best suppliers are. For
public procurement, the law provides guidelines to be followed. Once a supplier
is chosen, organization should stick with that relationship and try to establish
preferred pricing.
Step 4: Price and Terms: Once a supplier is chosen, organization should stick
with that relationship and try to establish preferred pricing and specific terms (i.e.
delivery).
Step 5: Purchase Order: The purchase order outlines the price, specifications and
terms and conditions of the product or service and any other additional obligations.
To assist in record keeping, purchase orders typically have the same number as the
associated purchase requisition. Once the vendor accepts the purchase order, it
becomes a binding contract on both the buyer and seller.

Step 6: Delivery: The transfer of the purchase order may be via email, or fax etc.
Step 7: Expediting: This stage addresses the timeliness of the service or materials
delivered. Delays, for many businesses, are important. The purchase order will have
expected delivery date information.
Step 8: Receipt and inspection: Once delivered, the receiving organization

inspects and, subsequently, accepts or rejects the product. Rejection may be due to
a damaged product.
Step 9: Invoice Approval and Payment: At this stage, three documents must
match when the seller wants payment : the invoice, the receipt note and the original
purchase order. This is known as three-way matching. If there is a discrepancy, it
must be resolved before payment is made.
Step 10: Record Keeping: The receiving (buying) organization must keep good
records. This means saving all relevant documents for every completed purchase.

1. Kalisa is an entrepreneur, wishing to start a new business in your location.
As his advisor, you have shared the business idea and you have already
identified the business opportunity. Now, you are requested to identify
the needs for this business, potential suppliers and prepare purchase
orders. Use the knowledge and skills gained so far to accomplish your
mission.
2. Summarize the procurement process for building a clinic in your sector.
6.4 Perpetual and periodical inventory

Activity 6.4
1. Differentiate between perpetual and periodic inventories
2. Referring to your school, briefly explain how perpetual and periodical
inventories are carried out by the accounting department.
The perpetual and periodical inventory inventory systems give small business the
flexibility about how to track its inventory. A perpetual system keeps an ongoing
record of the inventory balance, and a periodic system records the amount every
once in a while. Although both systems work, their differences should be kept in
mind when choosing which one is best for your organization.

6.4.1 Perpetual inventory
Perpetual inventory is a regular system of recording and controlling the physical
movements of stock and establishing its current balance. Under perpetual inventory
system, inventory and cost of goods sold are updated for each sale/purchase and
return transaction.
Perpetual inventory can also be seen as a method of accounting for inventory that

records the sale or purchase of inventory immediately through the use of
computerized point-of-sale systems and enterprise asset management software.
Perpetual inventory provides a highly detailed view of changes in inventory with
immediate reporting of the amount of inventory in stock, and accurately reflects
the level of goods at hand. A perpetual inventory system constantly maintains the
amount of inventory owned and sold.
The greatest benefit of this system is always having an accurate idea of how much
inventory your company is carrying. At any time, you are able to check your balance
sheet and see the total amount of inventory. Another advantage of a perpetual
inventory system is its automation. Because the inventory balance is always
maintained, your accounting system automatically counts and reconciles inventory.
The number one item to think about regarding a perpetual inventory system is the
cost because you need a software that communicates with every purchase and
sales made. However, a perpetual inventory system is more expensive than other
systems. Additionally, there are ongoing maintenance costs to consider to ensure
the inventory system is running correctly.
The stock held is valued as follows:

Stock Value = Number of Items held x Cost per Item
6.4.2 Periodic Inventory :

Periodic inventory can be defined as a system of inventory in which updates are
made on a periodic basis. The value of stock is determined by a physical counting
on a specific date before the date of preparation of the final accounts. In a periodic
inventory system, no effort is made to keep up-to-date records of either the inventory
or the cost of goods sold. Instead, these amounts are determined only periodically,
usually at the end of each month or year. This physical count determines the amount
of inventory appearing in the balance sheet. The cost of goods sold for the entire
year then is determined by a short computation.
A periodic inventory system is a method of occasionally counting inventory. The

financial statements still track and report inventory ; however, knowing the exact
amount of inventory at all moments is not a priority. Instead, inventory is reconciled
on a monthly basis to get a sense of obsolescence, theft, and business activity.

The main benefit of a periodic inventory system is its simplicity. It requires less
maintenance and is more affordable. However, a periodic system is most likely going
to be manual. This means you have to count the amount in inventory at the end each
month. In addition, the amount reported as your cost of goods sold is estimated.
Therefore, a periodic inventory system sacrifices a bit of quality.
6.4.3 Differences between Perpetual and Periodic Inventory Systems

The following are the main differences between perpetual and periodic inventory
systems :
• Periodic inventory management allows a company to know the beginning
inventory and ending inventory within an accounting period, but it does not
track inventory on a daily basis like perpetual system.
• Inventory Account and Cost of Goods Sold Account are used in both
systems but they are updated continuously during the period in perpetual
inventory system whereas in periodic inventory system they are updated
only at the end of the period.
• Purchases Account, Purchase Returns and Allowances Account are only
used in periodic inventory system and are updated continuously. In perpetual
inventory system purchases are directly debited to inventory account and
purchase returns are directly credited to inventory account.
• Sale Transaction is recorded via two journal entries in perpetual system.
One of them records the sale value of inventory whereas the other records
cost of goods sold. In periodic inventory system, only one entry is made.
• Closing Entries are only required in periodic inventory system to update
inventory and cost of goods sold. Perpetual inventory system does not
require closing entries for inventory account.

Nishimwe and Rugwiza are employees of TURAHEZA COMPANY LTD which has
hardware stores in Huye and Kigali towns. Nishimwe is the manager of Huye
branch, while Rugwiza is the manager of Kigali branch. In their daily work,
Nishimwe records and controls the physical movements of stock. Every time
she sales or purchases an item, she puts the report in the template that she
has developed using excel software. For Rugwizwa, the stock manager of Kigali
branch, the inventory control is done at the end of the month and the monthly
stock value is determined.

Questions.
1. Determine whether the system used by these employees is perpetual or
periodic and explain why.
2. Identify advantages of each system.
6.5 Valuation methods on supplied stock

Activity 6.5 Situation analysis Activity 9.6
AMBARUBERWE Limited bought a range of beachwear in the spring, with each
item costing 15,000 Frw and retailing for 30, 000 Frw. Most of the goods were
sold but, by autumn, ten items remained unsold. These were put on the bargain
rail at 18,000 Frw each. On 31 December, at the end of the store’s financial year,
five items remained unsold.
a. At what price will they be valued at the end of year stock valuation?
b. Twelve months later, three items still remained unsold and have been
reduced further to 10,000 Frw each. At what price will they now be valued
at the end of year stock valuation?
Introduction
The cost of unsold inventory is determined at the end of each accounting period.
Inventory is valued usually at cost or at the market value, whichever is lower. Stocks
are never valued at selling prices when selling prices are above cost prices. The
reason for this is that selling prices include profit, and to value stock in this way
would recognize the profit in the financial statements before it has been realized.
The three common stock valuation methods are first-in, first-out (FIFO); last-in, first-
out (LIFO) and Weighted Average Cost (WAC)..
6.5.1 FIFO
FIFO is the acronym for First-In, First-Out. FIFO is a cost flow assumption often used
to remove costs from the inventory account when an item in inventory had been
purchased at varying costs.
Under FIFO, the oldest cost of an item in inventory will be removed first when one of
those items is sold. This oldest cost will then be reported on the income statement
as part of the cost of goods sold. FIFO also means that the more recent costs of an
item will remain in the Inventory account and will be reported on the balance sheet.
If a company using FIFO method has four units purchased at different costs and in
the following sequence: 6,000 Frw; 6,400 Frw, 6500 Frw and 6,600 Frw, the company
will report its cost of goods sold as 6,000 (the first cost).

6.5.2 LIFO
LIFO is the acronym for Last-In, First-Out. It is a cost flow assumption that can be used
by companies in moving the costs of products from inventory to the cost of goods
sold.
Under LIFO the latest or more recent costs of products purchased (or produced) are
the first costs expensed as the cost of goods sold. This means that the costs of the
oldest products will be reported as inventory.
It is important to understand that while LIFO is matching the latest or most recent
costs with sales on the income statement, the company can be shipping the oldest
physical units of product. In other words, the flow of costs does not have to match
the flow of the physical units. This is why LIFO is a cost flow assumption or an assumed
flow of costs. If the costs flowing matched the physical units flowing, it would be the
specific identification method and there would be no need to assume a cost flow.
Let us illustrate LIFO with a company that has three units of the same product in
inventory. The units were purchased at different costs and in the following sequence:
6,000 Frw; 6,400 Frw and 6,600 Frw. The company ships the oldest item (the one
purchased for 6,000 Frw). However, under LIFO the company will report its cost of
goods sold as 6,600 (the latest cost). Note that the last cost of 6,600 Frw is the first
cost out of inventory-the LIFO assumption.
LIFO has become popular because of inflation and the fact that the income tax rules
can permit companies to use LIFO. With LIFO a company is able to match its recent,
more-inflated costs with its sales thereby reporting less taxable income than would
occur under another cost flow assumption. Also, the matching of the latest costs
with recent sales is a better indicator of the company’s current profitability.
6.5.3 Weighted Average Cost method (WAC)

In Weighted Average Cost method (WAC or AVCO), the weighted average cost of
items is calculated, using the formula:
The weighted average cost is then used to value goods sold. A new weighted average
cost must be calculated each time that further stocks are bought during the year.
Recording stock values

In order to be able to calculate accurately the price at which stocks of materials are
issued and to ascertain a valuation of stock, a stores ledger record or stock card
is used. Note that stock records are usually kept at cost price, not the selling price.

Example of stock card
Papeterie Umusanzu is a company selling office materials. One of the items stocked
is reams of papers. To show how the stock card would appear under FIFO, LIFO and
AVCO, the following data is used:
January 2018: Opening stock of 40 reams of papers at a cost of 3,000 Frw each
February 2018: Bought 20 reams of papers at a cost of 3,600 Frw each
March 2018: Sold 36 reams of papers
April 2018: Bought 20 reams of papers at a cost of 3,750 Frw each
May 2018: Sold 25 reams of papers
1. Stock card using FIFO:
Note: In the FIFO method, units issued at the same time may be valued at different
costs. This is because the quantities received, with their costs, are listed separately
and used in a specific order. There may be insufficient units at one cost, eg see the
May issue, below.
Name of company: Papeterie Umusanzu
Item: Reams of papers
Receipts Issues Balance
Date Total Total Total
Quan- Quan- Quan-
P/U cost P/U cost P/U cost
2018 tity tity tity
(Frw) (Frw) (Frw)
January Balance 40 3,000 120,000
40 120,000
3,000
February 20 3,600 72,000 - - - 20 72,000
3,600
60 192,000
4 12,000
3,000
March 36 3,000 108,000 20 72,000
3,600
24 84,000
4 12,000
3,000
20 72,000
April 20 3,750 75,000 - - - 3,600
20 75,000
3,750
44 159,000
4
3,000 12,000
20
May 3,600 72,000
1
3,750 3,750
25 19 3750 71,250
Total 40 147,000 61 244,000 19 71,250
Note: In the ‘Balance’ columns, a new list of stock quantities and costs is started after
each receipt or issue. When stock is issued, costs are used from the top of the list
downwards.

2. Stock card using LIFO:
Name of company : Papeterie Umusanzu
Date Receipts Issues Balance

Total Total
Quan- Quan- Quan- Total
2018 P/U cost(- P/U cost(- P/U
tity tity tity cost(Frw)
Frw) Frw)
40 120,000
3,000
February 20 3,600 72,000 - - - 20 72,000
3,600
60 192,000
20
3,600 72,000 3,000
March 16 24 72,000
3,000 48,000
36
24 72,000
3,000
April 20 3,750 75,000 - - - 20 75,000
3,750
44 147,000
20
3,750 75,000
May 5 19 3,000 57,000
3,000 15,000
25
Total 40 147,000 61 244,000 19 57,000
3. Stock card using WAC (weighted average cost per unit)

In this method, each quantity issued is valued at the weighted average cost per unit,
and so is the balance in stock. The complete list of different costs does not have to
be re-written each time.
Name of company: Papeterie Umusanzu

Date Receipts Issues Balance

Total Total Total
2018 Quantity P/U Quantity P/U Quantity P/U
cost(Frw) cost(Frw) cost(Frw)
40 120,000
3,000
February 20 3,600 72,000 - - - 20 72,000
3,600
60 192,000
3,200
March 36 3,200 115,200 24 76,800
24 76,800
3,200
April 20 3,750 75,000 - - - 20 75,000
3,750
44 151,800
3,450
May 25 86,250 19 3,450 65,550
Total 40 147,000 61 244,000 19 65,550
Note: Weighted average cost is calculated by dividing the quantity held in stock
into the value of the stock. For example, at the end of February, the weighted average

cost is 192,000Frw ÷ 60 = 3,200, and at the end of April it is 151,800 ÷ 44 = 3,450Frw.
The closing stock valuations at the end of May 2018 under the three methods show
total cost prices of:
• FIFO: 71,250 Frw
• LIFO: 57,000 Frw
• WAC: 65,550 Frw

GASABO Bakery Limited makes cakes which are sold to supermarket chains.
The company uses the first in, first out (FIFO) method for valuing its stocks.
Complete the following stock card for wheat flour for December 2017:
STOCK CARD: WHEAT FLOUR

Receipts Issues Balance
Date To-
Quan- Cost Total Quan- Cost Quan-
tal Cost Total cost
2017 tity per cost tity per tity
cost per kg Frw
Kg kg Frw Kg kg Kg
Frw
Balance at
1 December 1,000 1,000 1,000,000
6 December 2,000 1,100
10 December 2,000
17 December 2,500 1,200

20 December 1,500
25 December 1,000

Interview a resourceful person such school bursar, accountant or an
entrepreneur about the procurement process using the following questions:
1. Why does the business/school get into procurement process when they
are buying materials?
2. What are the necessary documents involved in the procurement process?
3. What process does the business/school follow or go through during
procurement?
4. Why does the business/school manager control a business inventory/
stock?
5. What advice would you give me as inspiring entrepreneur to be on
procurement process or inventory management?

1. What is the importance of stock and inventory management in
organizations?
2. Differentiate between Return inwards and Return outwards.
3. Indicate 3 disadvantages of perpetual inventory system.
4. Identify 3 disadvantages of periodical inventory system.
5. Suppose you are selected to be the Head of Finance Unit in a newly
established public hospital. Prepare a purchase requisition for your office
materials.
6. Explain the relationship between purchase requisition and purchase
order.
• The following information is extracted in the books of a stock manager:
200 bags of 50 kg of cement are bought in January 2016 at a cost of
10, 000 Frw each
• 100 bags are sold in February
• 80 bags are bought in March at a cost of 9,500 Frw each
• 100 bags are sold in April
• 150 bags are bought in May at a cost of 9,800 Frw each.
From this information, prepare stock cards for cement using:
a. FIFO
b. LIFO
c. WAC

UNIT7
BUSINESS
PLAN OF AN
ENTERPRISE
Unit 7: BUSINESS PLAN OF AN ENTERPRISE
Key unit competence: To be able to prepare a business plan for an enterprise
Introduction to business plan

Starting a business is a demanding task. Whether one is buying an existing business
or starting a new business, there are always many tasks to do and issues to deal with.
For example, there is a need to carefully plan the business venture at the start.
Planning is the roadmap map to success in the business world. There is a need to
write a business plan if: starting or buying a business, financing or refinancing your
business, raising debt or equity capital. Much money is made then lost because one
area of a business fails, dragging the positive parts down with it.
The business plan should be an integral part of the management and oversight of a

financial institution/organisation. It should therefore establish the institution’s goals
and objectives.
In this unit, therefore, you will be introduced to the meaning of business plan, why
and when it should be written? What are the users of a business plan and how they
use it? The structure of a business plan, business description and marketing plan
among others.

Imagine you have just finished senior six and that you have been invited for
a 2 weeks none residential training workshop in Huye District for you to get
a well-paying job. This is an important training workshop that you have been
waiting for and you must attend. As you prepare for attending the workshop:
a. What questions will you ask yourself?
b. What answers should you find for each question raised?
No Question Answer
c. What is the importance of asking yourself and answering the questions

(in 1 and 2 above) before you set off for the journey to the workshop in
Huye District?
7.1 Meaning of a business plan
Figure 7.1: A business plan developed from a business idea
Activity 7.1
As a student of senior six;
1. Develop your personal plan daily, weekly, monthly and yearly activities.
2. What do you plan to do after your studies and in your life?
3. How and when do you plan to reach there?
4. As an entrepreneurship student, interpret the meaning of figure 7.1 In
relation to business plan.

7.1.1 What is a business plan?
A plan is a proposed or tentative course of action worked out beforehand for the
purposes of accomplishing a goal. It can also be described as a thought out journey
that would take you to your desired destination.
Ideally, planning is looking into the future and putting in place the means to reach
that future. It is setting goals and how to achieve them, deciding on the end and
the means to the end. We should all be concerned about the future because we will
have to spend the rest of our lives there. Future outcomes are a function of today’s
decisions. For anyone starting a business, a business plan is a vital first step and
every business requires a well-developed business plan.
The business plan is a planning tool that details the goals of the business and gives
the owner a path to follow. It is a written summary of an entrepreneur’s proposed
business venture highlighting its goals and objectives, and his skills and abilities to
implement it.
It helps the owner to make judgments and decisions on opportunities and threats
by providing a framework to assess the options. A business plan describes how the
business operates, how it is managed, how it interacts in the marketplace, how it
functions financially and what its strengths and weaknesses are.
7.1.2. Why and when to write a business Plan?
a. Why write a business plan?
Businessplan serves in the following ways:
1. To Attract Investors. Whether you want to shop your business to venture
capitalists, or attract angel investors, you need to have a solid business plan.
A presentation may pique their interest, but they’ll need a well-written
document they can take away and study before they’ll be prepared to
make any investment commitment. Be prepared for your business plan to
be scrutinized; both venture capitalists and angel investors will want to
conduct extensive background checks and competitive analysis to be
certain that what›s written in your business plan is indeed the case.
2. To Test the Feasibility of Your Business Idea. Writing a business plan is the
best way to test whether or not an idea for starting a business is feasible,
other than going out and doing it without having a plan. In this sense, the
business plan is your safety net; writing a business plan can save you a great
deal of time and money if working through the business plan reveals that
your business idea is untenable.
3. To Give Your New Business the Best Possible Chance of Success. Writing
a business plan will ensure that you pay attention to both the broad
operational and financial objectives of your new business and the details,
such as budgeting and market planning.

4. To Secure Funding, Such As Bank Loans. Having a business plan gives you a
much better chance of getting the money you need to keep operating or to
expand. You’re going to need both operating and start-up capital to start a
new business and you have no hope of getting any money from established
financial institutions such as banks without a well-developed business plan.
5. To Make Business Planning Manageable and Effective. A business plan is
essential if you’re thinking of starting a business, but it’s also an important
tool for established businesses. Viable businesses are dynamic; they change
and grow. The company’s original business plan needs to be revised as new
goals are set.
b. When to write a business plan.

A business is not something static. The business can change over time as the
business develops, and any particular business may have multiple business plans
as its objectives change. Sometimes people often make the mistake of thinking of
a business plan as a single document that you just put together when you’re first
starting out and then set aside.
A business plan should be written when thinking of going into business, that is;
• Before starting a business
• When updating the business is required. For example from plastic to metal
products
• When new information is obtained .For example, changing colours and size
of the products as a result of consumer’s complaints.
• When new experiences are gained. Probably regarding new methods of
production

Case study
Mugabo had a business idea of buying and selling boiled eggs in his village
where all people in this village were doing poultry farming. Mugabo has got a
loan of 30,000Frw from Umurenge Sacco- Gatumba and bought eggs, boiled
them and started selling them but unfortunately he didn’t find any consumers
to buy eggs. After two days, all eggs were damaged and lost his capital.
Through this case study answer the following questions:
1. What do you think is the source of the loss of Mugabo’s capital?
2. Advise Mugabo on the challenges faced by his business.
3. Show Mugabo the importance of writing a business plan for his business.

7.2 Users of a business plan and how they use it.
Activity 7.2
Think of a feasible business of your interest and identify who will be the users
of your business plan and explain how it will be used.
Users of a business plan include but not limited to the following;

a. Business owners. As the owner, you already know the obvious reasons, but
there are so many other good reasons to create a business plan that many
business owners don›t know about. Such important reasons include;
i. To create a new business. Business owners use a plan to establish the

right steps to starting a new business, including what you need to do, what
resources will be required, and what you expect to happen. This helps the
entrepreneur to mobilize and coordinate resources.
ii. To better understand your competition. Creating the business plan helps
you to analyze the competition. All companies have competition in the
form of either direct or indirect competitors, and it is critical to understand
your company’s competitive advantages.
iii. To better understand your customer. Why do they buy when they buy?
Why don’t they when they don’t? An in-depth customer analysis is essential
to an effective business plan and to a successful business.
iv. To enunciate previously unstated assumptions. The process of actually
writing the business plan helps to bring previously “hidden” assumptions

to the foreground. By writing them down and assessing them, you can test
them and analyze their validity.
v. To assess the feasibility of your venture. How good is this opportunity?
The business plan process involves researching your target market, as
well as the competitive landscape, and serves as a feasibility study for the
success of your venture.
vi. To document your revenue model. How exactly will your business make
money? This is a critical question to answer in writing, for yourself and your
investors. Documenting the revenue model helps to address challenges
and assumptions associated with the model.
vii.To determine your financial needs. The business plan creation process
helps you to determine exactly how much capital you need and what you
will use it for. This process is essential for raising capital for business and for
effectively employing the capital.
viii.To reduce the risk of pursuing the wrong opportunity. The process of
creating the business plan helps to minimize opportunity costs. Writing
the business plan helps you assess the attractiveness of this particular
opportunity, versus other opportunities.
ix. To help you research and really know your market. What are the most
important trends in your business? What are the greatest threats to your
business? Is the market growing or shrinking? What is the size of the target
market for your product/service? Creating the business plan will help
you to gain a wider, deeper, and more nuanced understanding of your
marketplace.
x. To plot your course and focus your efforts. The business plan provides a
roadmap from which to operate, and to look for direction in times of doubt.
Without a business plan, you may shift your short-term strategies constantly
without a view to your long-term milestones.
xi. To position your brand. Creating the business plan helps to define your
company’s role in the marketplace. This definition allows you to concisely
describe the business and position the brand to customers, investors, and
partners.
xii.To judge the success of your business. A formal business plan allows you
to compare actual operational results versus the business plan itself. In this
way, it allows you to clearly see whether you have achieved your strategic,
financing, and operational goals (and why you have or have not).
b. The Government agents

• The business plan made by entrepreneur helps the government to assess the
viability of a business to determinate specific incentives like tax exemptions,
credit guarantees and subsidies that the government may give to the

entrepreneur.
• The business plan helps the government to plan for infrastructures and other
services that it may want to put up.
• With business plan, the government ensures which tax a business should be
taxed.
• In some cases, the entrepreneur may want to borrow money from financial
institutions like, banks; Such loans require the government to guarantee such
basing on how good a business plan is.
c. The Managers
The importances of business plan to managers are as follows:
• Business planning is important to managers because the whole point of
management is to allow a business to operate more efficiently and to be able
to achieve its goals. If there is no business plan, managers cannot do these
things. In order to help a business, achieve its goals, managers need to be
able to spell out where the enterprise wishes to go and how it wishes to get
there. They must decide for example, whether and how the business wishes
to expand. They must decide how that expansion could best be carried out.
If there is no business plan, decisions will be taken each day based simply
on immediate needs. This will not allow the business to move forward in an
organized and purposeful way towards its future goals. Such a business is
unlikely to succeed because it would have long range plan.
• Business plan helps managers allocate scarce resources appropriately. The
business plan helps managers to understand the priorities of the organization
and ensures that the available resources can meet the most important
processes adequately.
• Business plan enables managers to make the decision about the direction of
different projects and processes. It enables managers to control the different
aspects of their projects and processes to ensure each task stays on course.
• Business plan also provides the framework for measuring the progress of
the different processes and tasks. It enables managers to stay informed with
regard to how the process are being conducted and how far they are from
their goals.
d. Employees
The business plan is important to the employees of the business in the following
ways:
• The business plan helps the workers to determine production targets that
they have to achieve within set periods. A business plan helps every employee

to know what is expected of each.
• The business plan gives the employees assurance about the duration of their
employment. It gives them job security because they know the expected life
cycle of the business.
• The organizational plan helps define tasks and responsibilities of each of the
workers and so helps reduce conflict. Each worker is able to know what is
expected of him/her, who immediate supervisor is and the chain of command
in the business.
• The business plan helps employees to know the mission and vision of
enterprise.
e. Financial institutions
A well prepared business plan is vital when approaching any ﬁnancial institution
for ﬁnance. It helps them to assess whether it is appropriate to lend money to the
business based on revenue projections and other information included in the
business plan. Almost all the banks expect you to submit a business plan along with
your loan application. The following are what most financial institutions look for:
• Most financiers will closely look and verify the following parts of your business
plan: The balance sheet is probably the first thing your loan officer will turn
to. The balance sheet records your assets, liabilities and capital. Existing
companies show a starting balance as a result of all past activities. Start- ups
need a balance sheet that reflects starting capital, early start-up expenses,
assets either purchased or required, and existing liabilities.
• Along with the balance sheet, they’ll look very carefully at the profit or loss
and the cash flow, which should be very closely related to the balance sheet
and to each other. For existing companies, there should be evidence of steady
cash flow in the past. That would show up in the historical balances. For both
start-ups and existing companies, loan officers are going to expect realistic
monthly cash flow for the next 12 months. Bankers know that profits aren’t
always enough to guarantee cash flow, so they’ll look for an understanding
of real business flows like accounts receivable and inventory.
• Bankers will also look for hard evidence of founders and managers who
know their business. That comes first in the descriptions of the backgrounds
of the management team but also shows up in information about the business
model, company history, locations, products and services, and strategy.
f. Investors
A business plan attracts investors. A formal business plan is the basis for financing
proposals. The business plan answers investors’ questions such as: is there a need for
this product/service? What are the financial projections? What is the company’s exit
strategy? Whether it›s a startup or not, investors need to see a business plan before

they decide whether or not to invest. They will expect the plan to cover all the main
points.

Muberarugo has recently finished her studies; and she would like to start a
small business to offer service like Mobile money services and M2U (Me to
you) in her village. After writing her business plan she finds that she needs
more capital to run her business. Identify how this business plan will help her
get funding for her business.
7.3 The structure of a business plan

Activity 7.3
• Describe the necessary information that must be included in business plan.
Business plans vary in content according to their intended purposes, but the basic
format remains the same. It consists of three elements: First, discuss the business
model and describe your products and services. Then place the business in its
industry and discuss your intended marketplace, including your target customers
and how you’ll reach them, beating your competition. Last, relate these plans to the
real world, discussing your contingency plans and finishing off with spreadsheets
detailing your anticipated sales, costs of doing business and resulting profits.
Though, formats may vary, clarity is the most important quality of any business plan.
For a business plan to do the above, it should have the following components:
1. Cover page
The cover of the business plan is often the first impression of a business for interested
parties or investors. The purpose of a cover is to tell the reader what document is
about. Your cover should say the words business plan and should include :
• Name of the owners and his contact details, date and business name
• Company logo
• Business address including: Location, telephone, fax, email and company
website,
• Other important contact information
Every business plan should begin with a simple cover sheet. The cover sheet should
leave no question for readers since there are other competing businesses.
1. Table of contents

All pages of a business plan should be correctly numbered and the table of contents
should include page numbers. Be sure to list headings for the major sections as
well as for the important subsections. The table of contents allows to easily refer to
sections within the plan. It is a quick overview of the document’s content.
2. Executive summary
The purpose of executive summary is to summarize the key points of a business plan
for its readers, saving them time and preparing them for the upcoming content.
It gives an overview or summary of all the other sections or key elements of the
business plan. The executive summary is often called the most important part of the
business plan because once it is well organized; it entices the reader to read the rest
of the business plan.
The executive summary should be the first section of a business plan after the table
of contents, though it is typically written last after all the other sections.
Basically, an executive summary discusses the following items:

a. Business name, address and contact person.
b. Business idea and goals. This section provides an overview of the business
project, what product or service is being sold and what the entrepreneur’s
goals are. It also indicates where the business expects to be in a year’s time
and later.
c. Legal form e.g sole proprietorship, partnership, company.
d. Marketing. This part looks at how the products or services of business will
be sold. Who will be the main target markets (customer groups)? And what
are the main elements of the proposed advertising and promotion strategy
for the firm?
e. Operations. This is concerned with where the business will be located. How
many staff will be needed and how they will be managed.
f. Finances. How much money is required to finance the plan, where will such
capital be obtained from and how it will be repaid. How much profit the
firm is expected to make by the end of the business plan time period?

Think about any small business that you can do in your vacation.
a. Create the cover page of your business plan.
b. Prepare the executive summary for your business.

7.4 Business description
Activity 7.4
Suppose you have a dream to start your small business after studying. Describe
that small business you want to open.
The business description section of a business plan is another section, coming after
the executive summary. The business description outlines vital details about your
company, such as:
a. The name of a business: This is the official name of your business as registered
in the country where you do business.
b. Contact address: This is the contact anyone can use to ask some information
about your business. It may be a phone number, email, website, fax and the
location address of the business, etc.
c. Legal form: A legal form of business refers to businesses allowed by the
government to be run by business entrepreneurs. The business owner must
choose the legal structure of his business. e. g. sole proprietorship, partnership,
company, cooperative, etc.
d. Types of business: The type of business refers to the nature of business like
agribusiness, manufacturing; trading, service, etc.
e. Description of the business idea and market: This section includes the
following;
• Information about the owner: The first item in a plan should be written
in the description of business owner background, including name, address,
email, phone number, education, family status, sex etc
• Mission statement. A clear mission statement that represent the purpose of
your business;
• Objectives. An outline of what you want to accomplish in the mediate future
based on the data in the rest of the business plan as well as future growth
goals.
• Vision statement about how you envision the future of the company.
• Business location. Where is the business / company and its headquarters?
• Business history. When did the business start or when do you plan to start if
it’s a new business. What inspires you to start the business ?
• Products or services and target market. A brief overview of what you plan
to sell and to whom.
• Description of market which include geographical area, type of customers,

size of total market, description of the competitors, market share for the new
business, etc.
• The analysis of strengths, weaknesses, opportunities and threats (SWOT
analysis). .
SWOT Analysis of the business means:

i. Strengths of the business are things within the business that give it
advantage over other businesses such as product quality, convenient
and good location, qualified personnel, good customer service, sufficient
working capital, robust and adequate production capacity, modern
technology, skilled motivated staff, etc.
ii. Weaknesses of the business are things within the business that limit its
capacity and competitiveness such as poor product quality, poor product
image, insufficient working capital, inadequate production capacity, having
outdated technology, having unskilled staff, small distribution network, etc.
iii. Opportunities of the business are things outside of the business that
are likely to benefit the business such as high population growth rate,
international and national events, invention of new technology, new
favourable government policies (e.g. waiving of income taxes from
educational institutions and farmers), favourable changes in consumer
tastes and preferences, possibility of securing a big order, reduction in
poverty levels, etc.
iv. Threats to the business are things outside the business that are likely to
negatively affect the business such as entry of new competitors, political
instability, world insecurity or terrorism, increased taxation, unfavourable
government policy, changing customer tastes and preferences, etc.

Suppose you want to open a restaurant in your home area,
Set the mission and vision statement of your restaurant
Set any three objectives of your business
7.5 Marketing Plan

Activity 7.5
• Suppose you want to start a bakery business, where you plan to make
bread and different cakes and sell them in your village.
a. Describe the nature your product.
b. Who will be your target customers?
c. How will you promote your products in order to reach your customers?

A marketing plan is a business document outlining market strategy and tactics. It’s
often focused on a specific period of time (12 months) and covers a variety of
marketing related details, such as costs, goals and action steps.
For a business to grow, it also needs a marketing plan. The right marketing
plan identifies the following:
1. Who your target customers are;
2. How you will reach them, and finally;
3. How you will retain your customers so that they repeatedly buy from you.
4. When done properly, the marketing plan will be the roadmap to follow in
order to get unlimited customers and dramatically improve the success of
the organization.
The key elements of any successful marketing plan include:
a. Product description: A portion of a marketing plan should describe the

type of business you run, including a list of the products and services you
offer to potential customers. It is a detailed description of the product or
service. It includes the denomination specification (size, colour, quality) of
the product, packaging and after sales service.
b. Customer description, demand/ need for the product, competition
i. Customer description: Before you can begin marketing your product or
service, you have to know the type of customers you are trying to attract
to your business. Outline your target market by listing characteristics such
as age, income, education level, geographic local, marital status, lifestyle,
hobbies and interests. This information can help you pinpoint the most
effective media to use when you are marketing to your target clients.
ii. Demand/Need for the product: This entails uniqueness of the business
from existing businesses. It looks at the extent to which a particular business
is different from the others. The most important item in this section is a
description of why your product or service is better than or is likely to be
better than that of its competitors.
iii. Competition: Regardless of the size of the business, you likely have
competitors who offer products and services that are similar to what your
business provides. There is a need for every entrepreneur to identify who
their competitor is, by name, listing the types of products and services they
offer, the types of customers they target and take note of the tactics they
use to attract and retain customers. This information will help him/her to
develop his/her own marketing strategies and tactics.
c. Current production: In this section, you compare the quantity that you can
produce to the market and to your competitors (your capacity to produce

all products or services needed to the market). This section includes:
• Capacity to produce,
• What quantity you plan to produce in order to satisfy the market and
compare to competitors;
d. Price: The pricing strategy portion of the marketing plan involves

determining how you will price your product or service; the price you charge
has to be competitive but still should allow you to make a reasonable profit.
You can charge any price you want to, but for every product or service there
is limit to how much the consumer is willing to pay. Your pricing strategy
must consider the last amount the customer is willing to pay.
The most common question small business people have about the pricing strategy
section of the marketing plan is “How do you know what price to charge?” Basically,
as an entrepreneur you set your price through a process of calculating your costs,
estimating the benefits to consumers, and comparing your products, services and
prices to others that are similar. Set your pricing depending on how much it cost
to produce your product or service and adding a fair price for the benefits that the
customer will enjoy. Examining what others are charging for similar products or
services will guide you when you are figuring out what a fair price for such benefits
would be.
The pricing strategy you outline in your marketing plan will answer the following
questions:
• What is the cost of your product or service? Make sure you include all your
fixed costs (these remain constant at all levels of output for example rent,
insurance premium, top management salaries) and variable costs (these
change with changes in output for example cost of labour and materials,
electricity). You may also need to include transport costs, administrative
costs and selling costs.
• How much are customers willing to pay?
• What are competitors’ prices?
• What is your price? How does the pricing for your product or service compared
to the market price of similar products or services?
• Explain how the pricing of your product or service is competitive. For instance,
if the price you plan to charge is lower, why are you able to do this? If it’s
higher, why would your customer be willing to pay more? This is where the
strategy part of the pricing strategy comes into play; will your business be
more competitive if you charge more, less or the same as your competitors
and why? Marginal for discount,
• What kind of return on investment or net profit are you expecting with this

pricing strategy and within what time frame? Etc.
e. Sales forecast for next 12 months: Generally, the primary goal of the
marketing plan is to get people to buy your products or services. The sales
and distribution part of the marketing plan details the following;
i. How is your product or service going to get to the customer? For instance,
will you distribute your product or service through sales representatives,
retail, the mail, website? Describe your distribution channels and the cost
relating to distribution;
ii. Describe your after sale service and how it compares with that of your
competitors.
iii. Compile a sales budget in which you reflect number of units to be sold
per product, sales prices and turnover. Be very clear about where the
sales are generated, list for example, how many units you will sell to
which customers/customer groupings as per their indications. Prepare a
monthly sales budget for the first year of operation and annually for the
first year.
iv. Give a break down for your selling expenses, e.g. transport, mission,
advertising…etc.
v. Business location or business place: This section lays out the distribution
plan for the product or service. It includes all activities and entities
responsible for getting the product or service to the customers. The aim
of place in the marketing plan is to make sure that the product is available
at the right place, at the right time, in the right quantities.
f. Promotion: Promotion includes a description of the planned actions

to inform customers about the opening of new business (e.g. printed
information, brochures, posters, newspapers articles, radio advertisements,
opening ceremony, etc.). There is also a need to determine the message
that you want to send to the targeted audience. Therefore, an entrepreneur/
business owner has to look at these promotion possibilities and decide
which one to emphasise in his/her marketing plan. Promotion includes the
following;
i. Advertising. The best approach to advertising is to think of it in terms
of media and which media will be most effective in reaching your target
market. Then you can make decisions about how much of your advertising
budget you’re going to spend on each medium.
ii. Sales promotion. If it’s appropriate to your business, you may
want to include sales promotion activities into your advertising and
promotion plan, such as: offering free samples, offering credit facilities,
offering discounts, product displays at the point of purchase, product

demonstrations, that is, showing how the product works.
iii. Marketing materials: Every business will include business cards,
brochures, and fliers in their promotion.
iv. Publicity. This is all about making people or the media spread awareness
about your business. Publicity can be done in the following ways :
• Press releases, that is, written, audio taped or videotaped news sent out
or released by the business to the public about its products and activities.
• Product launches
• Special events, including community involvement
• Writing articles in magazines or news papers
• Testimonials, that is, written recommendation from a celebrity or satisfied
customer witnessing about the performance, quality and value/benefits
of the product.
v. Tradeshows. Tradeshows can be incredibly effective promotion and sales

opportunities where you reach a wide section of customer if you go to
the right trade shows

• After your study, you want to start bakery business. Prepare a marketing
plan for that business.
7.6 Organisational plan

This part describes the form of business ownership, the lines of authority and
accountability for members of the new venture. It includes items such as:
• Form of ownership.
• Identification of business partners or principal shareholders.
• Authority of principals.
• Management team and background.
• Roles and responsibilities of members of the organisation.

Prepare the business description and marketing plan sections of a business
plan for business activity of their choice.

1. In your opinion, explain the meaning of business plan.
2. After your studies you have a dream to start a small business and you have
just started writing your business plan. Explain how Rwanda Revenue
Authority can use that business plan.
3. You have just established a mushroom growing business in your home
area. You intend to launch your business to create community awareness.
Prepare your launch program.
4. Describe three challenges that a new enterprise might face.
5. A business that fails to plan will plan to fail, Discuss.
6. Explain the term “marketing mix” as could be used in business planning.

UNIT8
OPERATIONAL
BUSINESS PLAN FOR
AN ENTERPRISE
Unit 8: OPERATIONAL BUSINESS PLAN FOR AN
ENTERPRISE
Source: (https://www.google.com/search?q=operational+business+plan+for+an+enterprise+image&tbm)
Key Unit Competency: To be able to prepare a business plan for an enterprise.
Introduction
An operational plan in a business plan is a description of how the work will be done,
the flow of work from input to end results, including the machines which will be
used. It is analysis of the projected needs for producing or buying the proposed
goods and services.
The operating plan is the section of your business plan where you dig into more
nets and bolts of your business, areas like: production, manufacturing, inventory
and distribution. In other words, this is the time where you put aside the conceptual
aspects of your business to make yourself busy in terms of writing out the details
of how you’re going to make your product, store it, and then ship it out to your
customers.
The major aspects to look into in operational plan will vary based on the kind of
business to be carried out. For instance, if you are starting a retail business, you will
want to think about things like inventory and distribution while a software company
may be more focused on securing office space and computer equipment.

This unit is the continuation of a business plan which was covered in unit 7. For any
business product or service to reach to the final customers, operational techniques
have to be thought of. This section therefore, focuses on description of a production
plan, costs involved and risks expected among others.
• Assume after finishing your studies, you plan to open a bakery business
that produces and sells bread.
a. Identify the necessary required cost to start your business.
b. Describe the factors you will consider in location of your business
premises.
c. Explain the production process you will undertake in bread production.
8.1 Production plan
Activity 8.1
• Suppose you want to open a bakery in your village.
a. Describe where you want to locate your business and explain why?
b. Specify the nature of equipment required in the production process of
your products.
c. Describe and estimate the raw materials required in your business.
Production plan is the guideline to create and monitor output of a product and
how that output affects other parts of a business plan such as marketing, sales and
logistics. A production plan is used to maximize the efficiency of company resources
and to establish benchmarks for future projects
The production plan is the planning of production and manufacturing modules

in any company or industry. It utilizes the resources allocation of activities of
employees, materials and production capacity, in order to serve different customers.
The planning process includes ensuring that you procure enough raw materials,
labor resources and items such as packaging to achieve the required production.
This is an analysis of the projected needs for producing or buying the proposed
products and services. Under this stage, the entrepreneur needs to consider a
number of aspects and answer relevant questions relating to the following aspects.

8.1.1 Location of the business
Figure 8 1: An entrepreneur contampleting on the location for his business
Location is the place where a firm decides to site its operations. A business needs to

decide on the best location. Picking the right location is a big step towards ensuring
that your business has customers. The choice of business location affects your
income, your expenses, etc.
Factors to consider in deciding the location of the business

There are basic factors to consider which include:
1. Distance to your customers and suppliers: Transportation costs are usually
a large component of total supply chain costs. Generally, the further you
are from your customers and suppliers, the higher the transportation costs
will be.
2. Access to the transportation network. Operating an effective supply chain
is contingent upon having good access to your transportation network.
This may include alternate transportation methods. Depending on your
commodity, you will rate modes of transport differently. As an example, a
courier may require close proximity to an airport, whereas a grain producer
would require close proximity to a trans loading facility.
3. Security.The location of a business can increase the probability of being
affected by insecurities. So, it’s better to choose a location which is more
secure and safe for your business.
4. Labour availability. Understanding the labour market situation in the
area will assist in determining projected labour costs and the availability
of workers with the skills you require. In addition, transportation access to
your facility for your staff is very important.
8.1.2. Type, nature and capacity of equipment

Machinery can be tools or equipment that the business uses to produce the products.
Besides describing the equipment necessary and how much of it you need, you also

need to include its worth and cost, and explain any financing arrangements. In case
of bakery, these may include ovens, mixers, cutters, rollers, knives, weighting scale,
baking trays, etc.
Production capacity deals with output and how a manufacturer balances raw
materials, machinery, labor and storage to match demand for its products. Decisions
about production capacity can be strategic and operational, long and short term.
Factors affecting production capacity interrelate to such a level that a change to one
potentially affects all.
8.1.3. Production process and layout

An entrepreneur should describe and document each step of the production process
and ensure that the steps are executed accordingly. There is a need to do an outline
of day to day business operations, such as the hours of operation, and the days the
business will be open. If the business is seasonal, be sure to say so. In this part these
questions will guide the entrepreneur:
• What kind of production process will be followed ?
• Is this the best process to be followed ?
• Does it take into consideration quality control procedures ?
• How long does it takes to produce a unit ?
• When will you be able to start producing your product or service ?
• Include factors that may affect the time frame of production and how you
will deal with potential problems such as rush orders.
8.1.4. Sources of raw materials and other suppliers

Raw materials refer to the basic materials either natural (minerals, timber, cotton
for cloth, clay for bricks, etc) or artificial (plastic, nylon, etc) from which products are
made through a transformation process.
When you are in a business especially at the production level, you need to have
answers for the following questions:
• What raw material inputs are required for the product ?
• How much raw materials are needed per product cycle ?
• Where are you going to get the raw materials you need to use to produce
your product or service ? Are they always available ? Explain what terms you
have negotiated with the suppliers.
• What are your procurement (acquisition) strategies ? For example, how often
will you order and what level or amount of inventory will you maintain to
ensure smooth flow of the production process ?
• Is there any alternative source of raw materials ?

• Will you buy them on cash or credit basis and if on credit how long is the
credit period ?
• What is the cost of the raw materials and the cost of transporting them ?
8.1.5. Production staff/ labour requirements

This part of a business plan explains or describes the personnel needs of the business,
that is, management team and staff, their recruitment, remuneration and retention
and how business ownership is structured.
Staff or employees are the persons who work for the business in return for a wage or
salary. They may be skilled, semi-skilled and unskilled. The following questions will
be examined:
• How many employees will your business need?
• Do you need full-time or part time staff ?
• What kind/type of labour do you need ?
• What kind of skills and knowledge should they possess or their qualifications
?
• What kind of work should they do ?
• How much will they be paid ? This looks at the salary scales for these workers.
• Whether they are readily available and their payment ;
• What fringe benefits or allowances will be given to them ? specify whether
housing, medical, education, lunch, transport allowances is to be given etc ?
• What labour and safety standards must be met ?
• How are they to be recruited ?
• What personnel development or staff training programmes are to be
conducted ?
8.1.6. Quality control

Quality refers to the ability of a product or service to satisfy the needs of customer. It
is related to the characteristics of a product that make it fit for the purpose for which
is meant to serve.
For a product to be considered of quality, the producer should recognize certain

standards depending on the needs of the customers. Quality is relative for example
one customer may consider a computer with camera as of good quality while
another customer may consider a computer with a floppy disk to be of quality hence
quality varies between customers.
Quality control (QC) is a procedure or set of procedures intended to ensure that

a manufactured product or performed service adheres to a defined set of quality

criteria or meets the requirements of the client or customer. The following methods
can be used to control quality in the production process:
• Selection of better raw materials.

• Provision of a good storage for both raw materials and finished products.
• Carrying out market research to know what consumers want.
• Using production machines or equipment for reducing human errors.
• Using skilled staff in production process.
• Regular supervision of production process.
It is important to note at this point that the entrepreneur has to specify how quality
will be controlled to avoid defects and poor quality products and the measures that
have been set up to ensure production of quality goods and services.
8.1.7 Production utilities required

The utilities or business support services are goods and services which are needed
to support the production process and operational business. Availability of such
utilities or business support services helps the business or enterprise to efficiently
function and effectively meet the needs of its customers through production of the
required products and services. Such utilities include electricity, water, telephone,
transport, communication, banking, insurance, security, etc. In this part the following
questions should guide the entrepreneur in utility selection:
• What kind of utilities are required? what is its source, reliability and cost?
• Will the business require electric power ? What is the projected electrical
consumption per month?
• Is it available? If not, what is the cost of installing a power line connected to
the business?
• Will the business require water ? if so, is it available? Etc.
8.1.8. Packing materials

Packaging refers to the process of wrapping, crafting, filling or compressing
of products to protect them from spoilage, breakage, leakage, pilferage and
contamination in the process of transit, storage and use. Packaging makes products
easy to handle and also attractive to customers.
The entrepreneur should ensure that it easy to use, open, be of practical use and
have instructions that can easily be followed and understood. The entrepreneur
should be guided by the following questions:
• How will the products be packaged ?

• Where will the packaging materials be bought from ?
• Who are the suppliers of packaging materials ?
• Are the materials readily available ?
• How much do the packing materials cost ?
• How much packing materials will be required per product cycle ?
• How much inventory (kept in store) will be required to meet the next product
delivery regularly ? Etc.

• Consider a product of your choice and describe its production process and
identify the required raw materials.
8.2 Business operation and costs plan
Activity 8.2
1. Suppose after your studies you plan to run a bakery business, estimate
the costs required to start your business.
2. Mention the sources of money for your bakery business.
8.2.1. Start-up costs

All business start-ups have unique financial needs. Some businesses can be started
with little money while other businesses require large investments in equipment,
inventory and other start-up costs. If someone wants to start a business he/she must
be aware that a certain amount of money is needed during the start - up process of
a business for payments before the business begins, to earn its own income. This
money is called start-up capital or start-up costs. It has two types:
a. Investment capital or pre-operation payment: This means money that

a person starting a business will have to pay before his business starts
operating. The money needed for these payments is invested in the
business as long as the business is operating. Pre-operation investment
capital is spent on buying land, constructing a workshop, building a house
for business, purchasing machinery, tools, equipments, office furniture,
legal fees, water connection, electricity connection and telephone
communication, publicity and advertisement costs, market research costs,
licenses fees and insurance fees, machine and equipment installation fees,
etc.
b. Working capital or initial operation payment: These are payments that

take place when the business starts to operate to cover immediate expenses
until revenues from sales flow back into the business. This time between
starting business operations and when sales revenue flows back depends
on the nature of the business.
c. As the business expands, the working capital needs to be increased because
the business may not be able to replace every article sold and more so
some customers may place big orders and ask for credit facilities for which
payment may not be made on time.. Therefore, working capital has to be
increased to keep the business running and at the same time serve such
customers and retain them.
The distinction between these two categories of payments depends on the time
when payments are made; either before the business starts to operate (investment
capital) or after it has started (working capital). The start-up capital therefore is the
sum of the expenditures for the investment items and the working capital. The future
entrepreneur need to have this amount of money by: using his/her own savings,
finding partners and negotiating loans with banks.
8.2.2. Sources of capital for a business

The possible sources of funds to start the business include:
i. Personal savings or Equity financing: Personal funds or equity capital

is money raised by a company in exchange for a share of ownership in
the business. Ownership is represented by owning shares of stock. Equity
financing allow business to obtain funds without incurring debt, or without
having to repay a specific amount of money at a particular time.
ii. Partners or shareholders: Selling part of the business to others: This can
be done in number of ways such as getting partners to inject in some money
or selling shares to outsides either informally or formally through the capital
market system by converting the business into a public limited liability
company.
iii. Contribution from Family and Friends: One can acquire money from his/
her family and friends. In some incidences, a family member can lend you
money that you will have to pay at an agreed period or it can be capital given
to you freely may be from your parents to start a business.
iv. Borrowing from lending institutions: The option of borrowing is used
when equity funding is not enough. You can borrow money through:
a. Banks: When borrowing from banks, bank officials are normally interested
in the business plan and they pay special attention to the projections of
sales/income, production costs, projected working capital, balance sheet

and cash flow. The financial plan therefore should be convincing enough
and should show the lenders that the business is worth financing.
b. Cooperatives: Entrepreneurs just starting their businesses therefore

may not be easily helped by banks but can use funds from cooperative
societies where they have membership since interest rates are even lower
than those of banks
c. Government scheme and other financial institutions like insurance

companies, among others.
8.2.3. Sales plan

The primary goal of the marketing plan is to get people to buy your products or
services. The sales plan as part of the business plan details how this is going to
happen. A sales plan is a strategy that sets out sales targets and tactics for your
business, and identifies the steps you will take to meet your targets. A sales plan will
help you to:
• Define a set of sales targets for your business

• Choose sales strategies that are suited to your target market
• Identify sales tactics for your sales team
• Activate, motivate and focus your sales team
• Budget and clarify steps you will take to achieve your targets
• Review your goals periodically and improve your approaches to sales.
8.2.4. Monthly cost forecast

A forecast is the act of predicting business activity for a future period of time. Typically,
it is a projection based upon specific assumption, such as targeted prospects or a
defined sales strategy. For example, a sales proforma in abusiness plan is considered
a forecast. So, a cost forecast is a process you can use to adapt cost planning to
constantly changing circumstances.
A business starter has to forecast the total costs of his/her business for at least one
year in order to find out whether the planned sales cover the costs or not. All costs
that occur in a business can be put into the following categories: Materials costs,
Staff costs, Capital costs, utilities costs etc.
A monthly cost forecast plan on the other hand is an instrument that allows the
entrepreneur to estimate how much cash is expected to enter the business and how
much has to be paid out every month. It helps a business person to avoid her/his
business running out of cash. The monthly cost forecast should be updated each
month with data from the record keeping in order to immediately identify deviations

Cost per category J F M A M J J A S O N D
Staff costs: 100,000 80,000 100,000 300,000 200,000 100,000 100,000 400,000 100,000 50,000 25,000 100,000
from the cash flow plan.
Material costs: 30,000 70,000 60,000 20,000 70,000 100,000 45,000 160,000 36,000 50,000 10,000 70,000
Utilities costs 20,000 10,000 40,000 60,000 20,000 35,000 20,000 15,000 13,000 20,000 17,000 20,000
Operational
150,000 160,000 200,000 380,000 290,000 235,000 165,000 575,000 149,000 120,000 52,000 190,000
costs(staff+material+utilities)
Capital costs:
Loan (plus interest) 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000
Depreciation 10%
Total capital costs 30000 30000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000
TOTAL
180,000 190,000 230,000 410,000 320,000 265,000 195,000 605,000 179,000 150,000 82,000 220,000
COSTS(OPERATIONAL+Capital)
An example of a monthly cost forecast for 2017
Entrepreneurship Senior Six Student Book

215
4.

1. Think of a business of your own choice that you can operate after studies
and develop a sales plan for it.
2. Calculate the total monthly cost forecast for year 2019 of your bakery
business.
8.3 Financial plans
Figure 8 2: Some basic tools for preparing financial plans
Activity 8.3
MUHIRE Shop Ltd sells furniture to hotels. The following data refers to the
budgeted cash payments and receipts for the six-month’s period ending 30 June
2018.
i. Bank balance on 1 January 2018 is judged to be Frw175, 000 overdrawn.
ii. Sales for the six months are budgeted as follows:

S/N Months Amount (Frw)
1 January 425,000
2 February 375,000
3 March 400,000
4 April 275,000
5 May 375,000
6 June 350,000
• 30% are paid during the month of sale

• 20% are paid one month after sale
• 50% are paid two months after sale.
iii. The following payments are budgeted to be:
S/N Item Amount of every month

1 Water 1,800 Frw
2 Rates of security 2,500 Frw
3 Heating and lighting 4,000 Frw
4 Electrics materials 1,000 Frw
5 Hygiene 1,500 Frw
iv. Two machines are budgeted to be bought in February and March, the
former costing 85,000 Frw and the latter costing 100,000 Frw.
v. Purchases of raw materials each month are budgeted as follows:
S/N Months Amount (Frw)

1 January 140,000
2 February 200,000
3 March 220,000
4 April 180,000
5 May 200,000
6 June 175,000
Purchases are paid one half in the month of purchase and the other half in the
following month.
Questions;
a. Complete a budget for the half year ended 30 June 2018.
b. Explain why budgets are important for organizations

A financial plan is a document that describes your current financial status, your
financial goals and when you want to achieve them, and strategies to meet those
goals. It is a summary of a company’s financial needs or goals for the future and how
to achieve them. Financial planning for a business is the task of determining how the
enterprise will afford to achieve its strategic goals.
Usually, an organization creates a financial plan immediately after the vision and
objectives have been determined. The financial plan describes each of the activities,
resources, equipment, and materials that are needed to achieve an organization’s
objectives as well as the timeframe.
A financial plan for a business can help managers determine if they can achieve
the organization’s goals. The financial plan is one of the first things created to help
managers make decisions that are in the best interest of the organization. Developing
a financial plan is critical to the success of any organization. It validates the business
plan, by confirming that the objectives set are achievable from a financial point of
view. It also helps the entrepreneur to set financial targets for the organization and
reward staff for meeting objectives within the budget. The financial plan fits into the
overall business plan of an organization.
The financial plan is the most important sections of the business plan, because any
business person reading the business plan would want to know if the business will
make profit, how much profit it will make and when it will make it. The financial plan
contain the following documents:
• Start-up budget
• Trading, profit and loss statement
• Financial forecast or cash flow plan
• Opening balance sheet
• Payback period and
• Return on investment
Before preparing these statements however, you need to gather some of the financial
data needed to prepare them. You must establish the cost of starting and operating
the business which means computation of start -up and operating budgets of the
business.
8.3.1 Start-up budget

The startup budget of a business plan shows the expected sources of money and
how the money will be spent. It shows how much money is required to start the
business and on what activities and items it will be spent. Different businesses have
different needs and so have different start-up budgets. Starting a small business

requires a small budget compared to a big business.
A start-up budget is an itemized list of income and expenses for a new business,
which often covers the period up to commencing operations and perhaps a small
amount of time after operations have commenced.
If you are an aspiring entrepreneur, then the first step of new business creation and
start-up is to figure out how much money it will take to turn your idea into an actual,
operating business entity.
When it comes to calculating your start-up costs, there are three main goals to keep
in mind:
i. You need to figure out the costs associated with getting your business
moving.
ii. It will help you to be aware of any need for additional financing
iii. You need to also be in touch with your living expenses and debt
obligations while you are going about building your business. It may
take a while before your new business will be generating an income, and
there is always the possibility that it won’t be successful. There is also a
need to make good research to ensure your estimates are as accurate as
possible and talk to people that have done similar businesses to get good
information and experience.
An example of Startup budget for Jane’s company
JANE Co. Ltd

Start up Budget
SOURCE OF FUNDS Amount
owner’s funds 200,000
Loan from family member 50,000
Loan from Kalisa 100,000
Loan from 35,000,000

Cooperative”Abisangijabiro”
Total Amount 35,350,000
Planned use of funds
Buying a land 1000,000

Buildings 5000,000
Equipment and machinery 150,000
Office furnitures and fittings 250,000

Water connection 20,000
Electricity connection 10,000
Installation of generator 30,000
Insurance 20,000
Marketing and promotions 200,000
Cash in Bank(operating 80,000

capital)
Total expenses 6,760,000
The total expected funds should be equal to the planned expenditure. If the
expenditure is higher than the expected funds, then you remain with a deficit. This
means you will not have enough money to pay for all the planned activities to start
the business. If the income cannot be raised, then you have to adjust and reduce on
the expenditure.
8.3.2 Trading, Profit and Loss Statement

Trading, profit and loss statement or Income statement is a financial statement or
report showing the profit or loss for a business during a certain period, as well as
the incomes and expenses that resulted into this overall profit and loss. The amount
of the profit or loss for a business during a certain period indicates the financial
performance of the business and therefore shows whether or not your business is
profitable at that point in time.
It is computed based on the formula below: Revenue – Expenses = Profit/Loss.
A trading, profit and loss statement usually covers a year; however, this statement
may be drawn up for shorter periods, such as one month, three months (quarters) or
six months. The period of time that is covered by the income statement (and other
financial statements) is called the accounting period.
A regular 12-month accounting period does not necessarily have to begin on the
first day of the year and end on the last. Accounting periods can, for example, run
from March 1st to February 28th, or July 1st to June 30th of the following year. The
choice of the accounting period rests with the enterprise itself.

While established businesses normally produce an income statement each quarter,
or even once each year, for the purposes of the business plan, an income statement
should be generated more frequently –monthly for the first year.
A trading, profit and loss statement helps to determine whether a business is

operating at a profit or a loss for a given time period of one month to one year. There
are are five specific steps to calculating the trading, profit and loss statements:
i. Sales or revenue: Including sales for cash and credit

ii. Cost of goodssold: This is the price paid by the business for merchandise
sold; it can be computed by adding the value of the goods purchased
during the period to the initial stock, and then subtracting the value of the
stock on hand at the end of the period.
iii. Gross profit: Calculated by subtracting the cost of goods sold from sales.
iv. Expenses: This includes labor costs and other costs of operating the
business.
v. Net profit: Amount remaining when the expenses are deducted from the
gross profit.
An example of an income statement

YOLAMU MULAKI
Trading and Profit and Loss account for the year ending 31 December 2004
Income Rw Rwf
Sales 789,300
Sales returns 15,300
Net income from sales 774,000
Less: Cost of sales
Openning Stock 54,000
Add: Purchases 351,900
carriage inwards 6,750
412,650
Purchase returns 14,400
Cost of Goods Available for
Sales 398,250
Cost of goods sold 296,100
Add: Other incomes

Discount received 15,750
Total income 493,650
Less: Operating expenses
Carriage out 7,875
Rent and rates 36,000
Wages and salaries 162,000
Printing and Stationery 33,300
Telephone and telegraph 5,625
Electricity 6,525
Water 1,575
Bank Charges 540
Insurance 16,200
Motor Expenses 25,200
General office expenses 19,350
Net Profit 166,860

Note: Net purchases = Purchases – Return outwards
Goods available for sale = Opening stock + Carriage + Net purchases
Cost of sales = Goods available for sale – Closing stock.
Gross profit = Net sales – Cost of sales.
Financial forecast or Cash flow plan

Generally, companies can’t function without sufficient cash flow. Cash flow is the
money that comes in and goes out of a company. It is the generation of income and
the payment of expenses. Cash inflows result from either the generation of revenue
through the selling of goods and services, money borrowed, or money earned
through investments.
If more cash is coming into the company than leaving the company, you are
experiencing positive cash flow. But if more cash is leaving the company than
coming into the company, then you are experiencing negative cash flow. Keep in
mind that just because you are experiencing negative cash flow for the moment
doesn’t mean you are going to suffer a loss, because cash flow is dynamic. Cash flow
is reported on the company’s cash flow statement, which is also called a statement
of cash receipts and disbursements.
A cash flow is calculated in different ways for different purposes. Some methods that
are commonly used are discussed below:

• Free cash flow (FCF) measures how much cash you generate after taking
into account capital expenditures for such things as buildings, equipment,
and machinery. The formula is:
FCF = Operating Cash Flow - Capital Expenditures
You can usually find the information necessary to perform this calculation on
your cash flow statement. Let’s look at an example.
Let’s say that your company earned 15,000,000Frw in revenue last year. When
you add up all the capital expenses paid for your factory, equipment, and
machinery, it totals 7,000,000Frw.
Now, let’s figure out the FCF:
FCF = Operating Cash Flow - Capital Expenditures
FCF = 15,000,000Frw - 7,000,000Frw
FCF = 8,000,000Frw
You should note that if the number derived from the equation was negative, it
means that you had negative cash flow. In other words, more money was spent on
capital expenditures than was generated by operations.
• Operating cash flow (OCF) is the measure of your company›s ability to
generate positive cash flow from its core business activities.
Formula:
OCF = Earnings before Interest and Taxes + Depreciation + Amortization –
Taxes
Let’s take a closer look at the equation. Earnings before interest and taxes
(EBIT) is the revenue left over after subtracting the cost of production, selling,
general expenses, and administrative expenses. It›s a measure of your operating
profit before interest and taxes are deducted.
Depreciation is an accounting practice where you deduct the cost of a

tangible capital asset, such as machinery or real estate, over a period of time,
while amortization is where you deduct the cost of an intangible capital asset,
such as a patent, over a period of time. The information needed to perform the
calculation can be found on your company›s cash flow statement.
Example;
Your company’s EBIT IS 2,000,000Frw this past year, and it took 1,500,000Frw in
depreciation expenses and 1,000,000Frw in amortization. It paid taxes of 500,000Frw.

What is your company’s operating cash flow?
OCF = EBIT + Depreciation+ Amortization –Taxes
OCF = 2,000,000Frw + 1,500,000Frw +1,000,000Frw – 500,000Frw= 4,000,000Frw:
Note: Net cash flow (NCF) is the difference between your company’s inflow of cash
and outflows of cash in a given period of time.
Financial forecasts assist you to meet your business goals. They are a future prediction
of your business finances, as compared with statements, which provide details of
actual results or progress.
Predicting the financial future of your business is not easy, especially if you’re starting
a business and don’t have a trading history. However, forecasting and making
adjustments frequently will enable you to become more accurate.
Monthly or weekly forecasts may be necessary when starting your business,

experiencing rapid growth, or having financial difficulties. Regular forecasts allow
you to closely monitor your finances and develop strategies to fix problems before
they become major issues.
Monthly or quarterly forecasts may be more appropriate for a stable, established

business.
Financial forecasts may include:

a. Start up Cost: Whether starting a new business or purchasing an existing
one you will need to factor in start-up costs
b. Sales: Estimating the sales your business will generate over the forecast
period can be difficult. If you are starting a new business you can base your
estimates on market research and industry benchmarks. For an established
business, take into account previous sales data over the same time period.
You will also need to consider the current market and other economic
conditions.
c. Expenses: An expenses forecast estimates your ongoing operational costs
over a period of time. Business expenses may include (amongst others) rent,
insurances, vehicles, advertising, employee wages, and accounting and
legal fees. If you are starting a new business, base your forecast on market
research and industry benchmarks.
d. Cost of goods sold (COGS): If you sell physical products you will need to
forecast how much it costs to produce or stock them. The COGS forecast
relates to your sales forecast. If you are forecasting an increase in sales, the
cost of producing the goods will also increase (you will need to purchase
more components or stock).

To forecast COGS, you will need to include all the direct costs associated
with production and preparation for sale. These may include: The wholesale
cost of buying completed goods, raw materials or parts, packing, insurance,
commissions paid on sales as well as direct labour costs used to manufacture
of product.
An example of a financial forecast/ cash flow plan

XYZ LTD
Cash flow statement for two years
Details Year 1 (2006) Year 2 (2007)

Cash inflows
Bal b/f 50,000,000 129,266,500
Bank loan 70,000,000 -
Income from sales 327,600,000 327,600,000
Total cash inflows 447,600,000 456,866,500
Cash out flows
Interest on loan 11,200,000 8,960,000
Loan payment 14,000,000 14,000,000
Fixed costs 36,832,400 36,782,400
Variable costs 256,301,100 257,607,900
Total cash outflows 318,333,500 317,350,300
Net cash position 129,266,500 139,516,200
If the cash flow plan shows that the business is likely to run out of cash during any
of the subsequent months, the entrepreneur can try taking the following measures:
Increasing cash inflow through:

• Increasing sales
• Giving less customer credit
• Using a bank overdraft
• Selling an investment item
• Asking a friend or family for money
Decreasing cash outflow through:

• Reducing operational costs
• Identifying a cheaper supplier

• Negotiating supplier credit
• Negotiating an extension of the loan period
8.3.3 Opening Balance sheet

A balance sheet is a financial statement or report which indicates what you own
and what you owe on any given day in the life of a business. The financial figures on
the balance sheet change from day to day because money is always coming in and
going out of the business.
The purpose of preparing the balance sheet includes the following:

• To ascertain the nature and value of assets of a business
• To ascertain the nature and amount of liabilities of a business
• To find out the financial solvency of the business or enterprise. An enterprise
is considered to be solvent if its assets exceed the liabilities.
A balance sheet is the financial report that lists all of the accounts of a company
along with their balances. This report follows the formula:
Assets = Liabilities + Capital or Owner’s equity
The balance sheet simply shows assets, liabilities and capital and these are its
components or contents. In general, however, the balance sheet has two parties:
the assets and liabilities.
a. Assets: They are resources or properties owned or possessed by a business
that aid in the generation of income or facilitate business operations. They are
what a company owns, such as cash, equipment, buildings and inventory or
stock. Assets are categorized according to their nature into two major types:
• Current assets: They are possessions or properties of the business that have
short useful life of only one year and get used up or change form during the
day to day operations of the business. They can be easily changed into cash.
• Current assets include cash at hand, cash at bank, debtors (what people owe
you) and inventory or stock, raw materials, prepaid expenses, etc.
• Fixed assets: These are possessions or properties that can be used or benefit
the business for many financial/accounting years and are not meant for sale.
Their useful life extends beyond one year, example two, five or ten years and
above. They cannot be changed into cash easily (within twelve months).
They include land, buildings, machinery and equipment, motor vehicles,
furnitures, etc.

b. Liabilities: These are debts or amounts of money owed by the business to the
outsiders or simply the claims on the business by outsiders. They are financial
obligations of the business enterprise that must be repaid. They are what a
company owes. Liabilities are classified into two types:
• Current or short term liabilities: These are debts or claims on the business by
outsider’s payable with a short time, usually one financial year or accounting
period. They are expected to mature and be paid within the year when
they are incurred. Examples, trade creditors, bank overdrafts, outstanding
expenses, one-year short term bank loans, VAT, etc.
• Long term liabilities: These are debts or financial obligations that are
payable over a long period of time, usually after one year. Examples include
long-term bank loans, bonds, debentures, mortgages, etc.
c. Owner’s equity is how much money company owners have invested in the
business.
An example of a balance sheet
Assets Liabilities and owner’s equity

Fixed assets
Land
Motor vehicle Capital
Equipment Long-term liabilities
Office furnitures Bank loans
Total fixed assets Current liabilities
Current assets Trade creditors
Stock Accruals
Debtors Total liabilities
Cash
Bank
Total current assets
Total assets Total liabilities and owner’s equity
Note: You can choose the format you want to use to prepare the balance sheet
either T-Format / horizontal format or the vertical format.
8.3.4. Payback period and Return on investment

1. Payback period
Payback period is the time in which the initial cash outflow of an investment is
expected to be recovered from the cash inflows generated by the investment.

Payback period refers to the period of time required to recoup the funds used in an
investment, or to reach the break-even point. For example, a 100,000Frw investment
made at the start of year 1 which returned 50,000Frw at the end of year 1 and
year 2 respectively would have a two-year payback period. It is one of the simplest
investment appraisal techniques.
The formula to calculate payback period of a project depends on whether the cash
flow per period from the project is even or uneven. In case they are even, the formula
to calculate payback period is:
Initial Investment
Payback Period =
Cash Inflow per Period
When cash inflows are uneven, we need to calculate the cumulative net cash flow
for each period and then use the following formula for payback period:
B
Payback Period = A +
C
In the above formula,

• A is the last period with a negative cumulative cash flow;
• B is the absolute value of cumulative cash flow at the end of the period A;
• C is the total cash flow during the period after A
Both of the above situations are applied in the following examples.

Decision Rule: Accept the project only if it’s payback period is lessthan the target
payback period.
Examples
Example 1: Even Cash Flows
The enterprise C is planning to undertake a project requiring initial investment of
105,000,000Frw. The project is expected to generate 25,000,000Frw per year for 7
years. Calculate the payback period of the project.
Solution
Payback Period = Initial Investment ÷ Annual Cash Flow = 105,000,000Frw ÷
25,000,000Frw = 4.2 years
Example 2: Uneven Cash Flows
Enterprise C is planning to undertake another project requiring initial investment

of 50,000,000Frw and is expected to generate 10,000,000 in Year 1, 13,000,000Frw
in Year 2, 16,000,000Frw in year 3, 19,000,000Frw in Year 4 and 22,000,000Frw in
Year 5. Calculate the payback value of the project.
Solution:
(Cash flows in millions) Cumulative

Cash Flow
Year Cash Flow
0 (50) (50)
1 10 (40)
2 13 (27)
3 16 (11)
4 19 8
5 22 30
Payback Period
= 3 + (|-11M| ÷ 19M)
= 3 + (11M ÷ 19M)
≈ 3 + 0.58
≈ 3.58 years
2. Return on investment
Return on Investment (ROI) is a performance measure, used to evaluate
the efficiency of an investment or compare the efficiency of a number of different
investments.
ROI measures the amount of return on an investment, relative to the investment’s
cost. To calculate ROI, the benefit (or return) of an investment is divided by the cost
of the investment. The result is expressed as a percentage or a ratio.
The return on investment formula:
ROI = (Gain from Investment - Cost of Investment)
Or
ROI = Net profit/Net worth
In the above formula, “Gain from Investment” refers to the proceeds obtained from
the sale of the investment of interest. Because ROI is measured as a percentage, it can
be easily compared with returns from other investments, allowing one to measure a
variety of types of investments against one another.

Breaking down of Return on Investment
ROI is a popular metric because of its versatility and simplicity. Essentially, ROI can
be used as a rudimentary gauge of an investment’s profitability. The calculation
is not complicated, relatively easy to interpret, and has a range of applications. If
an investment’s ROI is not positive, or if other opportunities with higher ROIs are
available, these signals can help investors eliminate or select the best options.
For example, suppose Izere invested 100,000Frw in Popcorn in 2014 and sold
his shares for a total of 120,000Frw one year later. To calculate his return on his
investment, he would divide his profits (120,000Frw – 100,000Frw = 20,000Frw) by
the investment cost (100,000Frw), for a ROI of 20,000Frw /100,000Frw, or 20%.
With this information, he could compare his investment in Popcorn with his other
projects. Suppose Izere also invested 200,000 in Bakery in 2015 and sold his shares
for a total of 280,000Frw in 2018. The ROI on Izere’s holdings in Bakery would be
80,000Frw/200,000Frw, or 40%. (See Limitations of ROI below for potential issues
arising from contrasting time frames.)
Limitations of ROI
Examples like Izere’s (above) reveal some limitations of using ROI, particularly when
comparing investments. While the ROI of Izere’s second investment was twice that
of his first investment, the time between Izere’s purchase and sale was one year for
his first investment and three years for his second.
Izere could adjust the ROI of his multi-year investment accordingly. Since his total
ROI was 40%, to obtain his average annual ROI, he could divide 40% by 3 to yield
13.33%. With this adjustment, it appears that although Izere’s second investment
earned him more profit, his first investment was actually the more efficient choice.
ROI can be used in conjunction with Rate of Return, which takes in account a
project’s time frame. One may also use Net Present Value (NPV), which accounts for
differences in the value of money over time, due to inflation. The application of NPV
when calculating rate of return is often called the Real Rate of Return.

1. Assume you want to start a business, make your start-up budget for your
business.
2. Refer to capital you have planned to put in your bakery business, Calculate
your Return On Investment.
3. Using your start-up budget that you have done early, prepare your
opening balance sheet for your bakery business.

8.4. Risk Assessment and Contingency Plan
Activity 8.4
• You plan to start your small business to sell phones and offer services like
cafeteria, mobile money (Airtel money, MTN mobile money and Tigo cash)
and deliver electricity (cash power) in high mountain region where many
people ignore how to use phones and IT equipment. Identify and discuss
on all possible risks that may occur in your business.
8.4.1 Risks related to business

Understanding risk is vital when you are starting, running and growing your business.
The process of identifying risks, assessing risks and developing strategies to manage
risks is known as risk management. A risk management plan is an essential part of
any business as it helps to understand potential risks to your business and identify
ways to mitigate them or recover from their impacts.
There are many different types of business risk
Internal and External Risks: An understanding of the internal and external risks in
business management is necessary as part of the planning. Generally, internal risks
are easier to identify and manage while external risks are more elusive.
a. Internal Risks
These are internal factors which affect the business but are within a company’s
control and sometimes occur as a result of improper systems put in place or the
lack thereof. The hidden costs of transportation delays, warehousing and misaligned
strategies among business partners can often hinder the major cost benefits of
global sourcing.
When looking internally, risks to the business may involve the financial solvency of
the company, the ability for the company to have required equipment and other
resources on hand in time to support the business. Personnel issues such as the
sickness or unanticipated termination of a key team member also can be considered
as internal risks to the project.
Internal risks can also involve infrastructure problems such as the availability of
servers, software, and IT support as well as more elementary ingredients such as
the supply of electricity to team members. Obviously, the volatility of essential
infrastructures will vary depending on the location of the team, so it may or may not
warrant consideration during the risk assessment process.

b. External Risks
External risks are outside the control of the project team and its host organization.
Because of this, external risks are generally more difficult to predict and control.
Factors such as a key vendor going bankrupt, economic upheaval, wars, crime,
earthquake, floods and other events may directly impact the project’s effectiveness.
Some risk may be difficult to foresee such as a mine in a foreign country providing
essential elements for the project being taken over by a revolutionary government.
This kind of event directly threatens the project, but often takes project managers
by surprise because of a deficient analysis of external threats.
Figure 8 3: Internal and External risks
8.4.2. Procedure strategies to reduce/avoid the risks

Entrepreneurs face typical business risks but can reduce these risks and their personal
liability through focusing on specific risk-reduction measures.
Generally, businesses of all sizes face risks regarding development of products,

manufacturing them, selling them, earning a profit on these operations and
managing growth. If the entrepreneur is a sole proprietor, s/he faces additional
personal liability risks and financial risks from guaranteeing business loans. Risk
management techniques include risk reduction, risk transfer and risk avoidance.
An entrepreneur therefore can apply these techniques to the business and personal
risk she/he faces:
i. Select a business structure that limits personal liability. Change your
business structure from a sole proprietorship in which you are personally
liable for business operations to a corporation or limited liability company

where you have limited liability.
ii. Transfer risk to insurance companies by insuring against major risks such as
damage to your facilities, product liability, injuries to customers or suppliers
and death or incapacity of company principals.
iii. Perform a risk analysis by evaluating the consequences of risky activities,
the likelihood of the consequences occurring and the benefits of the risky
activities. Avoid risk by not carrying out activities that have severe and likely
consequences and low benefits.
iv. Transfer the risk of activities with severe and likely consequences but high
benefits to other parties. Create a new, independent company to carry out
these activities or assign them to suppliers or partners.
v. Reduce risk from product failure and warranty claims by implementing a
quality assurance program. Develop a system of reporting from customer
service to identify problems. Structure the quality assurance program
to document production tasks and product testing. Link the problems
reported by customer service to specific failures in production or testing
procedures and institute corrective action.
vi. Reduce risk of surprises in operating results by keeping accurate records
and instituting effective controls. Put in place a system that limits who
can authorize specific actions and how much they can spend. Implement
a reporting system that gives you key information about company
performance. Evaluate the controls and reporting system by comparing
actual practice and performance to the control procedures and the reported
information.
vii. Reduce financial risk by managing your accounts receivable to minimize
outstanding balances and identify poor credit risks. Implement credit and
payment standards, specifying which credit scores and payment records
are acceptable. Evaluate customer payments and ask for advance payment
from customers who don’t meet the standards.
viii.Reduce financial risk by keeping outstanding loans and financing needs
to a minimum. Control growth at a rate that the company can finance
internally. If the company can’t pay off some loans, replace short-term credit
with long-term, fixed-rate loans.
8.4.3 Contingency plan

A contingency plan is a course of action designed to help an organization respond
effectively to a significant future event or situation that may or may not happen.
A contingency plan is sometimes referred to as «Plan B,» because it can be also used
as an alternative for action if expected results fail to materialize.
Contingency planning aims at preparing an organization to respond well to an

emergency and its potential humanitarian impact. Developing a contingency

plan involves making decisions in advance about the management of human and
financial resources, coordination and communications procedures, and being aware
of technical and logistical responses. Such planning is a management tool, involving
all sectors, which can help ensure timely and effective provision of humanitarian aid
to those most in need when a disaster occurs.
The guidelines to create a Business Contingency Plan:

1. Determine what main risks are likely to encounter your business: Ideally,
there is a need to figure out what types of disasters are most likely to affect
your business depending on its type and location and plan accordingly.
2. Preparation of an evacuation plan: There is a need to go over with the
personnel and post it conspicuously throughout your business premises.
Personnel need to know when to evacuate, what they should do when
they’re notified of an evacuation, what routes are available out of the
building(s), and should also know who is responsible for checking to see
whether everyone is out safely.
3. Create a communications fan-out system: There is a need to ensure that
if something happened at your business, there is a person responsible
for notifying each person who works there. In this case there is a need to
ensure that phone and email contact lists are up to date and that the people
responsible for contacting others have printed lists as all technology fails
sooner or later and usually at the most inconvenient time. Also decide who
will be responsible for communicating with the public and how (updating
the business website, posting on social media, press releases, signs in the
windows, radio announcements etc.) in case the need arises.
4. Be sure that your on-site emergency kits are complete and up-to-date:
This Emergency First Aid Kit Checklist for Businesses shows exactly what first
aid kits for small businesses need to contain. Depending on what types of
disasters may happen in your area, you may want to add other supplies. For
example, one gallon of water per person per day is one of the recommended
supplies on this list of Emergency Supplies for the Retail Store.
5. Take steps to protect your business data: Your business data is your most
valuable asset. If it was stolen or destroyed, would your business be able
to quickly get up and running again or even carry on at all? Therefore, data
protection is one of many advantages of switching your business to cloud
computing.
6. Ensure your business carries adequate insurance: Fire insurance is the
type that springs to mind, but fire is certainly not the only possible disaster
your small business could experience. Besides other obvious physical
disasters such as flooding or wind damage etc. might affect the business
choosing the proper type of insurance to cover your risks and having good,

up-to-date insurance coverage will go a long way towards getting your
small business up and running again if disaster strikes.
7. Check out local programs and resources: Your city or town or village
may have contingency plans/disaster response plans in place or provide
resources that will make it easier for you to put your own plan together.
For instance, MIDMAR offers information about emergency preparedness
for some locations in Rwanda where it sensitizes people to buy and install
Umurindankuba (lightening rod/conductor) near their houses (for example
in Rutsiro district, Nyaruguru district and especially in the high mountain
region) on its website and offers training workshops on the topic.
Note: Investigate and find out what contingency plan is available in your town or
village before you start writing your own business disaster plan.
8. Keep your business contingency plan handy: The entrepreneur has

to keep his/her disaster plan in an easily accessible place and make sure
everyone who needs to know where it is knows its location.
9. Use Your Business Social Media: Your business website and social media
platforms like Facebook, Telegram, WhatsApp and Twitter are excellent
ways to communicate with customers and business associates in the case
of an emergency. Don’t let your customers wonder if you are open or not
when disaster strikes, a quick post on Facebook can keep them up to date.
Contingency planning therefore, requires an investment of time and resources, but

if you fail to do it or if you do it poorly the costs could be significant if a disaster
happens. A well thought out business contingency plan can mean the difference
between your business’s survival and failure if disaster strikes. A fire, a flood, a
hard drive failure or data theft - any or all of these could put your business out of
commission. Taking the time to do some business contingency planning will help
ensure that your business is able to resume operations in the shortest possible time.

Refer to the risks identified in activity 8.4, suggest the strategies you would put
in place to mitigate those risks and prepare a contingency plan.
8.5 Action plan

Activity 8.5
• As a student who will finish secondary school in this year, plan to start your
small business in your sector. Identify all your business activities needed
and showing their expected time to complete them in order to start that
business.

An action plan is a document that lists what steps and actions must be taken in
order to achieve a business goal. A business action plan is a document prepared to
guide you on the tasks you should do whenever you want your business to grow,
expand and maximize profits. The action plan can be used by employers, employees,
or other business associates. The business action plan has some advantages and it is
advisable to have one for your business.
The purpose of an action plan is to clarify what resources are required to reach
the goal, formulate a timeline for when specific tasks need to be completed and
determine what resources are required and the costs needed. Action plans are
relevant in business because they help a person to know how they will work to
achieve a particular goal or how to respond to the circumstances that may arise in
future.
One of the major benefits of having a business action plan is, it helps the business
person to comprehend the tasks they are needed to perform to accomplish their
business goals. It helps in splitting the goals into small and achievable parts so that
they will end up achieving the goals in the end.
A business action plan is needed before a firm starts or when setting the goals that
you aim at achieving in a particular period. With a well-documented and detailed
business plan, you will be able to set and achieve your business goals. For startups,
having an action business plan is one of the best things they can have. It ensures
that they are on the right track and they can track their progress from the start.
8.5.1. Functions of action plan
A business plan without a viable action plan is like a ship without a steering wheel or
a car without a driver. Because business requires staying on course toward a long–
term goal, it’s essential to have a plan that you can follow. The reason to create a
successful action plan is making it ambitious enough to achieve growth and profit,
but realist enough that your business doesn’t overextended itself.
The functions of action plan are the following:
• The action plan acts as a guide or timetable to the entrepreneur to make
sure he/she fulfills the plans and achieves results. It like a timetable that is
followed by the business to implement its plans.
• The action plan helps to coordinate resources of the business so that resources
available in the right place at the right time.
• The action plan helps to avoid wastage. One of the greatest hazards moving
forward without an action plan is the risk of wasting time, energy, money and
other resources.
• The action plan helps to identify road blocks in advance or expected
challenges so as to take appropriate steps to overcome them.
• Writing action plan help you to learn your own business, your competitor
and your business location.

• The action plan locates sources of information and resources needed for the
business.
Therefore, a well-developed action plan can serve as a blueprint for the project
manager to break a large project down into smaller, more manageable SMART
(Specific, Measurable, Attainable, Realistic and Time-based) goals.
8.5.2. Preparation of an action plan.
Action plan may seem detailed and tedious compared to earlier phases of business
plan which often seem creative in nature.
The organization’s commitment to business plan is commensurate to the extent that
the organization completes action plans to reach each business goal and includes
numerous methods for verifying and evaluating the actual extent of implementation
of the action plan
Main steps in preparation of an action plan;
• Setting clear objective: There is a need to set a motivating goal but
challenging enough to stimulate the work plan. There is also a need to be
precise about what you want to achieve.
• List the benefits you would gain by achieving your goal.
• Start with what you will do now: There is no point in having an action plan
that will start in six months’ time.
• Define clearly the steps you will take. Think of all the possible things you
could do to take you closer to achieving your goal, no matter how small.
Break down any large steps into smaller components, so it doesn’t seem so
difficult to achieve.
• Identify the end point for each step and give yourself a small reward for
achieving it.
• Arrange the steps in a logical, chronological order and put a date by
which you will start each step: Put these dates into your diary or onto a
calendar. Try to set yourself weekly goals: what research you will do into jobs,
what skills you will concentrate on learning etc. It’s also a good idea to get
into the habit of planning a timetable each evening listing your tasks for the
next day or two
• Review your progress. Keep a diary or blog of your daily activities and
record your progress as things happen: this keeps your plan as concrete as
possible. A good time to start your review is about two weeks after you have
begun. Review how far you have got towards your objective, identify any
mistakes you made and what you can learn from them, look at any new ideas
or opportunities that may have presented themselves and then revise your
plan to incorporate these.

An example of an action plan
Business Implimentation / Action Plan
NO. OF ACTIVITY/ITEM TIME IMPLEMENTATION

ITEMS OFFICER
1 Carry out the feasibility study 1 month Entrepreneur/market
to determine the viability of the research firm
project
2 Formulation of a business plan 2month Entrepreneur
3 Loan application process 1month Entrepreneur
4 Selection of the business site and 1month Entrepreneur

purchase of land
5 Construction of premises and offices 8month Construction firm
6 Purchase of machinery& equipment 2months Entrepreneur and
engineer
7 Installation of machinery 2month Engineer
8 Recruitment of human resource 2month human resource
manager
9 Training of employees 2month Human resource
manager
10 Production testing 1 month Production manager
11 Commercial production 2weeks Production manager

12 Marketing of products Continuous Production manager
13 Official production launch 1 day All departments

You have a dream to start your small business where you want to open a coffee
and tea shop. Prepare an action plan for your business.
cation Activity 8.1 ivit.1

8.6. Sample of a business plan
A POUTLY PROJECT PROPOSAL REQUESTING FOR FUND
A POUTLY PROJECT PROPOSAL REQUESTING FOR FUND
Submitted By: AKEZA R. Elsie

and
MUNEZERO D. Purity
Presented on: April 16th, 2018

1. EXECUTIVE SUMMARY
This is a poultry Project specifically designed for eggs production. It is planned
to start with 2015 layer birds. The Total project cost for the poultry project alone
shall be 1, 456,041 Frw broken down as; 12,600 Frw for construction, 1,400,000 Frw
for purchase of the chicks, 204,60.3 Frw for poultry feeds, vaccines and drugs and
other poultry accessories for 18 months. For capacity building, water and electric
installation, administrative costs and labor cost for 18 months. It is assumed that
only 80% production shall be realized, which means 1,620 trays of eggs shall be
realized per month for 12 months on average. The primary customers for the eggs
shall be prominent egg traders within and around Kigali City. The minor customers
shall be the egg venders who usually boil 10 to 15 trays of eggs and vend it at pubs,
market places and streets. The reason for the target market is that egg production in
Rubirizi and Nyacyonga cannot meet market demands.
To increase the sustainability of XYZ Poultry enabling it to continuously support its

mission, helping to improve the social economic welfare and vulnerability of the
Youths in Ndera Sector, Gasabo District. In order to realize the above results, the
following main activities must be implemented:
i. Contract the services of a builder to construct a chicken house
ii. Select and train youths, especially those out of school, to support the
project
iii. Procure and rear chickens to lay eggs to be sold for consumption
iv. Continuously monitor and evaluate activities to ensure objectives are met.
If these activities are implemented, it will create a great impact in the lives of the
project beneficiaries. In the first place, the project will create employment for at least
30 youngsters currently not employed in any productive venture. This employment
will give them an alternative way to generate income and thereby decreasing their
risk of transmitting and contracting HIV/STDs especially girls. In the second place,
it will provide XYZ Poultry a secure source of funding for its program activities,
allowing it to continuously sustain 20% of its current activities
In spite of these goals, XYZ Poultry lacks the financial resources necessary to realize
this project. The project seeks 1, 050,000 Frw to aid in the start-up of this income
generating project.
2. INTRODUCTION
Project Profile
XYZ Poultry is a project not affiliated/related to any religious, political, or social
grouping, but born out of the need to work with teenage youth(s). It seeks to
facilitate the youths to initiate and create income generating projects, and as we

all as creating development initiatives to employ them. It was started by AKEZA R.
Elsie & MUNEZERO D. Purity in February 2018 to respond to the needs of Youths
who were destitute because of the various socio-economic reasons.
3. PROBLEM STATEMENT / PROJECT LOCATION

The problem at hand is that in many cases the project finds itself in financial needs
particularly in addressing the physical, material and educational needs of the youth
despite the fact that the project has a land (3 hectares), with water storage facilities.
These locally available resources could be turned into a viable income generating
project. In addition, some of the youth out of school are unemployed in productive
venture so as to support themselves. This has not only put the project at a high risk
of relying on donor funds to meet its basic needs, but also it will put some of the
youth especially girls at an extremely high risk for contracting HIV and other STDs.
Against this background, we consultatively came up with the poultry project as

income generating project as supplementary sources of income to XYZ Poultry.
Furthermore, the project seeks to provide income generation projects for the youth,
giving them an alternate way to support themselves and their dependents.
4. VISION
To be a passionate people extending God’s grace and hope in every community.
The XYZ Poultry aims at becoming a reference of quality in food for future
generations, working as a team in a socially responsible manner and using all our
resources to respond correctly to the new demands raised by the market. Our work
is focused on the constant development of new products and services, including all
the processes that lead us to achieve an end product with functional capacity and a
high nutritional standard, without incurring any extra expense for consumers.
Our aim is to continue to consolidate our market positioning through the growth of
our customer portfolio, offering customised service and anticipating their demands.
Continuous research, the development of new lines of work and new product
presentations will allow us to improve our competitiveness and continue to be a
company of reference in terms of quality and food safety. We intend to optimise our
business results by promoting teamwork and professionalism, and upholding our
social commitment to the ongoing development of our products and services in a
sustainable manner, and with greater guarantees for the end user.
5. MISSION STATEMENT/GOAL:
Its mission is to promote an environment in which the youths are cared for, supported,
bodily, mentally, socially, morally, spiritually and with an emphasis on education,
nutrition and social support to facilitate a meaningful life.

We will provide quality products for human consumption, certified in accordance
with the strictest quality and food safety standards. Our commitment to continual
development and innovation has allowed us to maintain a high competitive level
and satisfy the needs of our final consumers. We strive to ensure that our customers
grow with us in a setting of ongoing improvement, through joint efforts and by
establishing bidirectional communications between them and our staff. We exert
a proactive attitude, seeking the consolidation and recognition of our business
project and maintaining our commitment to the sustainable development of our
environment and a respect for nature.
6. VALUES
For sustainability, XYZ Poultry has adopted a series of values and undertakings
which are shown in its day-to-day operations, and are defined through the following
aspects:
• Customer focus
• Teamwork
• Commitment to achieving results
• Sustainability
• Interest in people
• Corporate Social Responsibility
• Quality and Food Safety
• Uprightness
7. OBJECTIVES
General Objective
To increase the sustainability of XYZ Poultry to continuously support its mission,
promoting educational and health programmes within the youths.
Specific Objectives
i. To establish a business, raising and selling chicken and eggs (poultry

products) and use its profits to help support the activities of XYZ Poultry
ii. To improve the economic welfare of the youths employing them to run and
support the “poultry farming project”.
iii. To train the youths who have no opportunities to continue for secondary
education in business and management so that they may successfully
support their needs.

8. ACTIVITIES
. Procure materials for constructing a permanent poultry house with

favorable conditions for raising chickens and eggs
. Contract builders to build a structure (poultry house) for raising chicken
and eggs
. Contract the services needed for the installation of electricity
. Contract the services needed to install a water system
. Procure 2,000 chicks and the necessary food and supplies needed to
support them
. Recruit and hire the agriculture extension officer to provide veterinary
services to layer birds and to support the needs of the project
. Train selected the Youth, with the help of partner projects, in business,
management and poultry farming
. Monitor and evaluate the activities of the poultry farm and its overall
impact to its target group and XYZ Poultry as a project, reviewing the
management of the project and the sale of poultry products
9. JUSTIFICATION OF THE PROJECT:

The project is a three-fold strategy, in that it seeks to create a viable income
generation project for XYZ Poultry, giving it an alternate way to support its daily
activities and to improve the welfare of the Youth. The project will produce poultry
products for sale and the proceeds will not only assist the project to meet the basic
necessities of life for the youths such as medical care and scholastic materials, but
also reduce the financial costs the project spends on buying these products for daily
consumption. And it has been proved that poultry products are a cheap source of
the protein which is vital in maintaining the immune system of HIV positive persons
for as long as possible. This will be a great help to some of our youths who are living
with HIV aids.
Second, the project seeks to create employment opportunities to some of the youth
so that they cater for themselves and to some extent their dependents. With respect
to multiplier effect, the activities of this project will be scaled up by non-members.
Or the project will be a model for future income generation projects within the
community and will be replicated by both XYZ Poultry and other indigenous Non-
Government Project too in other localities.

10. TIMELINE FOR IMPLEMENTATION OF ACTIVITIES FOR 2014-2015
2nd Quar- 3rd Quar-

1st Quarter 4th Quarter
ter ter Persons
Apr-Jun Jan-Mar
Jul-Sept Oct-Dec Responsible
2014 2015
Core Activities 2014 2014
1 2 3 1 2 3 1 2 3 1 2 3
Procure
materials to
XYZ Poultry
construct
poultry house
Contract
builders for XYZ Poultry
poultry house,
Contractor
for electricity XYZ Poultry
installation
Contractor
to construct
XYZ Poultry
well and water
system
Recruit project
staff to manage
XYZ Poultry
the poultry
project
Training of
project staff in XYZ Poultry
poultry farming
Procure chicks XYZ Poultry
Procure supplies
– poultry
XYZ Poultry
feed, vitamins,
heaters
Extension
Vaccinations
officer
Rear chicken
(daily XYZ Poultry
monitoring)
Sell eggs (daily
XYZ Poultry
monitoring)
Evaluate
XYZ Poultry
activities

Post evaluation Joint
committee of
the Applicant
project and
donors.
11. PROJECT EXPECTED RESULTS

a. In the first year, the project will have 2,000 laying hens that will produce eggs
for sale. At the end of the first year, the project will earn 25,480 Frw from the
sale of eggs to be used to assist in the costs of sustaining the project
b. At the end of the second year, the project will earn 30,579,500 Frw from the
sale of eggs, enabling it to sustain its elf and realize a profit
c. At the end of each hen’s egg-producing life, each hen will be put the
market. Profits realized from this will be reinvested into the project, as a
part of ensuring its sustainability and assisting project in running of it’s
daily activities.
d. The project will create employment for at least 30 youth who are currently
not employed in meaningful activities. This employment will give them
an alternative way to generate income, decreasing their dependency on
handouts, and thereby decreasing their risk of transmitting and contracting
HIV/STDs.
e. The project will provide the youth with practical skills in poultry keeping,
business, marketing, and management. These skills can be used in future
jobs or income generation activities of their own accord.
f. After the first year, the project will reduce the Project (XYZ Poultry)
dependence on donor funding, enabling it to sustain 50% of its current
activities after.
g. The project will be a model for future income generation projects within
the community and will be replicated by AKEZA R. Elsie & MUNEZERO D.
Purity in other localities.
12. MANAGEMENT AND IMPLEMENTATION OF THE PROJECT

Project capacity
The project has the capacity to run the proposed project effectively. In the first place,
it has some experience in poultry keeping for about 1.5 years, and it can collaborate
with the District agricultural officer to conduct more training to its staff so that they
gain more skills and knowledge on how to rear chicken on a large scale. The project
has a perennial source of water where it can obtain water during dry spell. It has its
pick-up vehicle which will be used to access its products to markets in Ndera Sector,
Kigali City, and other busy commercial centers like “Quartier Commercial, Quartier

Matheus” and in modern Hotels.
Institutional framework and linkages

In the first place, XYZ Poultry will partner with the Department of Agriculture in
Rwanda Agricultural Board (RAB) which has expatriates in agriculture and animal
husbandry. The project will partner with poultry projects in Rubirizi in Kanombe
Sector, Kicukiro District which are also involved in poultry farming activities. The
project will draw on the experiences of these people to help in the training and
development of this project as it progresses. These relationships will help to ensure
this project is successful.
Implementation
The project will be executed by the AKEZA. R. Elsie & MUNEZERO D. Purity. However,
it will set up a separate project committee which will be responsible for the day to day
coordination and implementation of the project activities. It will also be responsible
for planning, supervising, monitoring and reviewing all project activities.
Implementation of the project activities will call for close collaboration with a wide
range of partners such as potential buyers of poultry products, sellers of animal
feeds, agricultural District department, Rwanda Agricultural Board (RAB) and the
project funders.
This will enhance the opportunities for the realization of the broad goals and
objectives of this project.
Monitoring and evaluation

General Monitoring and evaluation will be an ongoing activity throughout the
project life. Monitoring will be routinely done through meetings monthly reports,
check lists, surprise visits and support supervision visits. These reports shall indicate
the constraints and challenges in the implementations and necessary adjustments
that had been taken. Progress evaluation will be done through use of monthly
quarterly reports, steering committee meetings, annual report, registry records, work
plans indicating planned and accomplished activities, functional accountability for
project resources including equipment, facilities, assets and activities.
Progress monitoring and evaluation will help the project team to assess the extent
to which implementation is meeting the set objectives. This will enable the project
team to revisit the objectives and priorities and to find ways and means of improving
the performance and better resource used
Financial Management of th e project

Finances accruing to this project will be entered into the proper books of accounts

when received. A special Account in the name of the project will be opened to cater
for only project funds. To ensure effective control, management and monitoring
of project funds, no single signatory will be allowed to access project funds, and
the signatories of this account will be three. Under the consent of the three and
approval of the committee funds will be withdrawn from the bank and utilized for
the intended purpose.
Books of accounts will be audited regularly through external auditors. After auditing
the project accounts, the auditors will submit an audit report, which will satisfy the
donors and the stakeholders that correct and proper books of accounts have been
be maintained.
There will be the project committee which exercises budgetary control over project
finances. This will be exercised through the comparison of expenses estimated in
the budget with actual expenses incurred during the period.
Project Profit Projection

It is assumed that only 80% production shall be realized, which means 374 trays of
eggs shall be realized per week for 12 months. That is to say 54 trays X 30 days X
12 Months = 19.440 trays of eggs in one year. A tray of eggs goes at 1540 Frw. This
means gross revenue of 29,937,600 Frw shall be realized from the sale of eggs.
The off layers at the end of production shall be sold at 2800 Frw each, raising
additional revenue 5600 Frw. This implies that total gross revenue of 35537.6 Frw
shall be realized at the end of the production cycle in 18 months, and this implies a
net profit of 12417.3 Frw shall be made at the end of 18 Months.
Project sustainability
In the initial stage, the project will be sustained by the founder’s and a loan funds.
However, in the long run the project will finance itself. Part of the funds will be used
to execute the project while another percentage will be re-invested in the poultry
business to expand the project, hence increasing sales and profits.
Through a capacity building workshops, the project staff will be empowered with
skills in treatment of layers and have appropriate knowledge on feeds.
13. THE POULTRY BUDGET
ITEM QUANTITY UNIT COST TOTAL COST

(Frw) (Frw)
Chicken 2000 700 per 1,400,000
chick
Fowl run (construction) 12,600

Chicken feeds 20,460.3
Chick mash 104x 50 kgs 18,550 1,929.2
Growers mash 640 x 50 kgs 13,090 8,377.6
Layers mash 480 x 50 kgs 13,090 6,283.2
Vaccines 3,590.3
Other expenses 2,800
GRAND TOTAL 1,456,040.6
CONCLUSION
Now poultry business is a very popular business in Rwanda and in Gasabo District in
particular. This business does not require huge capital and it requires small amount of
investment needed to start it. Although the business has many existing competitors
in the market, but more still, we have a high chance to succeed because the existing
competitors can`t fulfill the customers demand. They are also failing to meet the
customers need in the perspective of service care. So, we believe that choosing this
business is our right decision.

1. Suppose your friend wants to start a business of selling eggs, prepare for
him a business plan which he will present to Umurenge Sacco-Kabeza in
order to borrow money.
2. Assume you want to open a bakery business in your area, identify all
activities required in your business and prepare the action plan to be
followed.

Prepare the production plan, business operation and Costs Plan, and Financial
plan for the business activity they chose in lab 7

End of Unit
Assessment
1. Suppose your mother wants to start a hotel business, based on your
knowledge and skills gained from entrepreneurship subject,
Prepare for her the following:

a. Production plan
b. Action plan
2. Explain the various components of a financial plan
3. Explain the guidelines followed in business contingency planning.
4. Mention the elements of a business planPrepare a business plan for your
school business club.

UNIT9
QUALITY ASSURANCE
AND QUALITY
COMPLIANCE IN
BUSINESS
Unit 9: QUALITY ASSURANCE AND QUALITY COM-
PLIANCE IN BUSINESS
Act according to progress

monitored
Key unit Competency: To be able to establish an effective quality compliance

system in business activities
ABBREVIATIONS AND ACRONYMS USED IN THIS UNIT

COMESA - Common Market for Eastern and Southern Africa
EAAB - East African Accreditation Board
EAC - East African Community
IAF - International Accreditation Forum
ILAC - International Laboratory Accreditation Cooperation

ISO - International Organization for Standardization
NIB - National Inspectorate Board
RSB - Rwanda Standards Board
NQTL - National Quality Testing Laboratories
NMO - National Metrology Organization
NMI - National Metrology Institute
RAS - Rwanda Accreditation Services
RADA - Rwanda Agriculture Development Authority
RARDA - Rwanda Animal Resources Development Authority
SQMT - Standardization, Quality Assurance, Metrology and Testing
Introduction
In Unit 8 (S1), you were introduced to the basic concepts of standardization, you
analysed the need for metrology, quality testing and accurate measurement in unit
8(S2) while in S3 unit 10, you covered the requirements for acquiring a certification
mark for a given business. In S5 unit 12, you were able to appreciate that there is
need for conformity assessment in business. This unit will help you appreciate that
doing businesses requires entrepreneurs to conform to the required accreditation,
quality and metrological standards.
As a result of entrepreneurship and all economic activities such as banking, insurance,

building infrastructure (i.e. roads and pipelines, mines, and tourism facilities etc.),
the economy and the people can be affected in one way or the other. This therefore
requires entrepreneurs to be keen with what and how they produce hence need for
effective quality management, assurance and compliance.
When customers feel satisfied with what is being offered to them in terms of quality,
they’re more likely to give you their repeat business. Consistent quality and assurance
in business takes hard work, attention to detail and systems for monitoring and
assessing whether your products meet the standards you have set for your business.
Quality control is an ongoing process that touches stage of business from purchasing
of raw materials, manufacturing and to distribution.
Do you know why we have certain measurements /weights in business products and
services ? For instance have you ever wondered why entrepreneurs sell products in

certain measurements like liters, small or medium sizes and in kilograms ? These are
questions that can only be answered if you learn more about metrology. This unit as
well is designed to help you analyse the significance of metrology in business and to
understand how measurements affect business and the lives of people.
Quality assurance and Compliance Case Study:
The government of Rwanda through Rwanda Standards Board is mandated
to provide National standards and conformity assessment guidelines that
entrepreneurs/traders ought to follow during production and sell of their goods
and services. These guidelines help entrepreneurs to be cautious and careful
with the quality and measurements of raw materials used, goods produced
and the technology used. If your business conforms to the required quality
management, assurance and compliance standards, it reduces the mistakes
and inconsistencies that could make these goods unsafe. If you manufacture a
food product, your quality control processes should monitor temperature and
foreign bodies to decrease the likelihood that you will make someone sick.
Ensuring customer safety saves your business money and averts damage to
your reputation.
One of the ways that the business can strengthen its quality is by listening to
its customers and incorporating their feedback in the business processes and
production systems. Product quality issues that customers normally report
should be tracked and managed through a rigorous process of investigation
and resolution. These and more processes help the business to continually
enhance customer satisfaction. It’s also important that businesses are genuine
in their measurements of goods produced and sold.
Questions
Referring to the above case study, answer the following questions.
a. What does the National Standards and conformity assessment guidelines
expect entrepreneurs to do ?
b. What are likely negative effects the business may face if customers are not
satisfied as a result of wrong measurements of the goods bought ?
c. Explain the benefits a business will attain if there is an effective quality
management, assurance and compliance standards ?
d. What strategies would you propose to the entrepreneurs to implement to
ensure the safety of their customers ?
e. Design a simple quality management system of the business idea you
intend to start in your community.

9.1 Meaning and background of metrology
Activity 9.1
Figure 9.1 Measuring tape
Figure 9.2 Weighing scale
While entrepreneurs are producing products and services, they take into account
different measurements of raw materials, or products. These measurements can
be according to depth, length and weight. This Measurement plays an important
role in providing a basis for fair and accurate trade, optimization of production,
fostering consumer and business confidence in products and in the development
of new technologies and innovation.

Using the background knowledge for example from what you studied in S2 about
metrology, quality testing and measurements, and by analyzing the pictures and
paragraphs above;
a. What do you understand by the term Metrology in business?
b. Explain the major purpose of metrology in business.
9.1.1. Meaning of Metrology

This section covers the meaning and background of metrology as well as the
importance and applicability of metrology in business activities.
Metrology is defined as the science of measurement. It is a science of precision and

measurement that includes measurement of quantities like width, length, depth,
angles of the related products.
9.1.2. Background of Metrology

Effective metrology has always been one of the key foundations of successful
manufacturing. Today due to high demands for more advanced manufacturing
techniques, lean and agile business structures, ever tighter specifications and a boom
in new measuring equipment and technologies, It’s time to update old knowledge
and make metrology add value in business, cutting out the waste often hidden
across multiple business budgets and cost centers especially time. Businesses have
to use the right technology and appropriate measurements that conform to the
regulatory standards and as well meet customers’ needs. This would reduce costs
and make metrology relevant work for the businesses.
In the past the main reflection of metrology activity in society was weights and
measures, the inspection of measurement devices used in day to day trade but
today all the weights and measurements have to take into account the regulatory
standards set by the government and customers’ needs and preferences. There is a
lot of creativity today towards how products are measured in terms of shape, color,
height, length and other necessary product requirements.
9.1.3. Current situation

Rwanda Standards Board (RSB) is mandated to provide metrology services in
the country. It has been offering a number of services in legal and industrial
metrology since October 2007. These services are provided in six laboratories (Mass,
Dimensions, Pressure, Volume, Electricity and Temperature laboratories). These
laboratories do not have sufficient equipment to carry out all the required work
and some measurements such as force, energy and transformer, Radio Frequency

and Microwave, Time, Flow, Photometry, Acoustics, Radiations, High Frequency and
Chemical Metrology do not have equipment and are not carried out.
In the field of Legal Metrology, inspections, verification and calibration (reverification)

of equipment used in trade like fuel dispensers, scales and other weighing equipment
is regularly done by personnel from the laboratories on a basic scale as well as health
and safety related equipment. Type approval of the measuring equipment is not
currently done.
The Constitution of the Republic of Rwanda adopted in June 2003 ensures the
protection and sustainable management of environment and encourages rational
use of natural resources.
Analysis of current situation and possible options

Globally, the National Metrology Infrastructure consists of three distinct and separate
metrology establishments representing three categories of metrology stated below:
1. A National Metrology Institute (NMI) responsible for scientific and
industrial metrology;
2. A Legal Metrology Department (LMD) or Weights and Measures

Department; responsible for Legal Metrology and;
3. Private Calibration Services (PrCS) and/or Public Calibration Services (PuCS

covering calibration and instrument testing.

For the business you intend to start in your community, what different
measurement standards would you emphasize?
What strategies would you implement to make sure that the environment
you are operating in is safe ranging from production processes, packing of
materials or products and measurements?
9.2. Metrology and its Types, Its Application in Business activi-

ties and Importance of accurate Measurements
Introduction
Under this section you will cover the types of metrology in business, applications of
metrology in business activities as well as the importance of accurate measurements
in business and life. You will be able to appreciate the role of metrology in life.

Figure 9.3, Use of measurements in business
Activity 9.2
a. What do you observe in the above illustrations?
b. What lessons do you learn from the above illustrations?
c. Why should buyers of given products make sure that products bought
conform to the right measurements?
9.2.1 The Types of Metrology

1. Scientific Metrology: it deals primarily with Research on definition
and realization of measurement standards. It looks at establishment of
units of measurement, unit systems, and quantity systems. The units of
measurement sets standards adopted conventionally and by law, of the

definite magnitude of a physical quantity. On the other hand, the unit’s
systems are composed of the traditional systems, metric systems, and the
natural systems. There are also some unit systems that are derived from a
set of fundamental units. The quantity systems are the standard systems
used in the control of measure, net weight, or number of constant quantity
packed goods.
Moreover, scientific metrology goes beyond just the establishment of

units, and includes the realization of these standards to the users in the
society; and the development of new methods in measurement.
2. Industrial Metrology: this deals with the satisfactory safe keeping and
dissemination of measurement units to Industry and Laboratories. Applied
metrology is rather specific in its applications, which are primarily various
industrial processes including manufacturing among others. This type of
metrology intends to establish the importance of measurement in the
industry. It also ensures the appropriateness of measurement instruments
including the maintenance, quality control, and proper calibration of these
instruments.
3. Legal Metrology: it is responsible for enforcement of trade, safety and
health measurement regulations, and type approval of measurement
instruments. It also embraces the regulation of pre-packages for retail goods.
When there are clear and appropriate rules and regulations pertaining to
measurement, and measurement instruments as well, the consumers are
definitely protected and guaranteed that fair trade is observed.
9.2.2. Applications of Metrology in Business activities

Metrology is important to every area that has measurement of a value or quantity
as part of its makeup or production process. For example, Inyange industry located
in Masaka sector in Kabuga that produces high quality mineral drinking water, fruit
juices, milk and other dairy products have different measurements in different units
for these products. The volume and quantity of these products must be measured
for uniformity, standards, taxation and royalty purposes. The accuracy of all of these
measurements will determine also the efficiency of customer’s satisfaction and with
which revenues will be collected.
9.2.3. Importance of accurate measurements in business

Measurements are so often taken for granted and we sometimes do not appreciate
the grand importance measurements play in our lives. Measurements fall into the
categories of weight, area, volume, length and even temperature.
The specifications for business products or services must confirm to the right
and accurate measurements in terms of size and texture. To make sure each and

every product or service meets these specifications, the entrepreneurs must take
into account all aspects of the production, starting with ingredients. They have
to create a set of instructions, or procedures, to control production. These might
include procedures for inspecting the process of production. For example, in the
production of juice, sugar as an ingredient must be accurately measured to make
sure it conforms to the acceptable tolerance and satisfaction of customers, this
would require the industry/business to have quality control department to ensure
quality control systems are being followed and applied.
The importance of accurate measurements in business may include the following;

i. Safety reasons; for any product made if less or more expected ingredients
are used, the product may be catastrophic and harmful to the people.
Accurate measurements of the ingredients and raw materials while making
products must be observed.
ii. Consumer protection; measurement, and goods packed by measure,
has generally replaced number and simple measures (bucket, plate etc.)
as the basis of transaction for a wide range of consumer commodities
and products. The increased consistency of these measurements, when
adequately controlled, has significantly reduced disputation, and fraud and
increased the efficiency of the marketplace.
iii. Meeting customer’s preferences; for example, when it comes to clothes,
proper size and measurements as per customers’ preferences must be
taken into consideration. Customers would want to put what suits them
according to their preferred size.
iv. Accurate measurements help entrepreneurs to make proper decisions.
For example, if the quantity of what customers need is over estimated while
making decisions, it may lead to losses as much resource would have been
wasted in producing more than what customers need.
v. Effective stock control; accurate measurements of quantity to sell by
individual businesses provides accurate and effective stock control to
facilitate the ordering of new stock.
vi. Building image; if the business is well known for producing products
that conform to accurate measurements for example producing accurate
weights of goods, it builds high image and reputation to the business.
vii.Transportation capacity; accurate measurements help in estimating proper
weights of different vehicles with different capacities ought to transport.
Otherwise if too much weight of products is transported, mechanical
problems to the vehicle may arise.

Applicatin Activity 9.2
As members from the same community, you want to start a project or a
business that will help transform peoples’ lives. Using your knowledge and
skills about metrology;
What factors would you take into account while apportioning different sizes
of products to make?
How would you ensure that there are accurate measurements of ingredients
used while making products and that the products made conform to the right
standard measures?
9.3. Quality Management, Assurance and Compliance

Introduction
This section covers the key elements of managing quality in a business that is; quality
assurance, management and compliance. Through this section, you will be able to
reorganize the relationship that exits between quality assurance, compliance and
management.
Figure 9.4 Showing quality measurements standards

Activity 9.3
a. Given your background knowledge and skills about stock control and
standards in business, define the following terms;
i. Quality compliance
ii. Quality assurance
iii. Quality management
b. What relationship exists between quality control, compliance and

management?
c. Think about businesses that exist in your community, how have they
failed to observe quality expectations?
9.3.1. Quality Management

Quality management can be defined as the managing structure, responsibilities,
procedures, processes, and management resources to implement the principles and
action lines needed to achieve the quality objectives of an organisation.
Quality Management is essential part in business process that business owners or

managers ought to pay attention to while running their businesses. In managing
quality, entrepreneurs or business leaders don’t only focus on quality, price and
profits but also focus on their core customer base in order to build and maintain
market share through continuous improvement of products and services.
In a total quality management (TQM) approach, businesses must understand who

their current customers are (and are not), noting their key needs and requirements
and keep these expectations at the forefront of their strategy and processes. This
principle should extend to internal clients, as well, treating coworkers as customers
and satisfying their demands.
Quality management aims at achieving the following;

i. Satisfying customers by ensuring customer feedback is incorporated in
management process and procedures while producing products.
ii. Continual improvement of products, services, working environment, staff
development, and management and production processes.
iii. Reduces wasted products, repeated or corrective work and unnecessary
processes.

9.3.2. Quality Assurance
9.3.2 Quality Assurance
Change and review plans Plan and implement

where necessary
Act according to
Monitor progress after
progress monitored
implementation
Figure 9.5 Quality assurance planning cycle

Figure 9.5 Quality assurance planning cycle
This illustration above shows a quality assurance system the business can apply to ensure
This illustration above shows a quality assurance system the business can apply to
quality assurance in day to day business activities/processes.
ensure quality assurance in day to day business activities/processes.
Explanation
Explanation ofof Figure9.5
Figure 9.5
1) Plan. This involves a set of activities set by the business to ensure the business
1. Plan: This involves a set of activities set by the business to ensure the
achieves quality expectations.
business achieves quality expectations.
2) Do. After planning stage, set quality activities are implimented in day to day activities
2. Do: After planning stage, set quality activities are implimented in day to day
of the business.
activities of the business.
3) Monitor. This stage
3. Monitor: This stageinvolves
involves monitorng progress
monitorng of the implimented
progress activities meant
of the implimented
to achieve quality. This helps the business to ascertain whether
activities meant to achieve quality. This helps the business to ascertain the set quality
standardsthe
whether areset
meant.
quality standards are meant.
4) Act. This stage involves
4. Act: This stage involves acting according
acting to the results
according to thegot after implimentation.
results got after It is
the stage that informs
implimentation. It is thethestage
entrepreneur whether
that informs the he/she needs towhether
entrepreneur change orhe/review
plans.
she needs to change or review plans.
Quality
Qualityassurance
assuranceisisthe the systematic effortby
systematic effort bya abusiness
businessto to ensure
ensure that that its product
its end end (s)
product (s) satisfies
satisfies its intended
its intended use, meetsuse, meets customers’
customers‘ expectations,
expectations, and isconsistently
and is produced produced with
consistently
zero defects.with zero defects.
If the businesses have no systems in place to control business processes or measure

If the businesses have no systems in place to control business processes or measure customer
satisfaction, then they are not sure of what customers need, decisions to change what they are
doing to maintain or increase market share will always be biased.
Entrepreneurship Senior The business
Six Student 263
Bookwill continue
236
customer satisfaction, then they are not sure of what customers need, decisions to
change what they are doing to maintain or increase market share will always be
biased. The business will continue to operate in the future the way it has been in the
past, and it will thrive, stagnate, or fail, and you will have no clue as to why it did any
of those three things.
The driving force behind all quality control systems is customer feedback. Without
the customer, you have no business. Unless the customer is satisfied with your
product, you will not have a business for long. Unless you know what the customer
wants and expects, you cannot possibly deliver it and therefore businesses have
to ensure products made and sold satisfy customers’ needs and expectations by
creating a rigorous quality assurance system that is inclusive of customers’ feedback.
Quality Assurance Procedures

The business has to make sure that products made or services provided are fit
for purpose (be fit for their intended purpose). Remember quality assurances are
businesses processes and procedures involved in making sure a product or a service
consistently complies with the customers’ expectations.
The following are procedures the business can undertake to ensure the products
made or services provided are quality assured;
i. Customers’ input; customers’ feedback must be taken into consideration

for the business to assure quality of products/services produced.
ii. Current specifications of products; the business sets product or service
specifications/particulars that will be applied to ensure quality is achieved.
These particulars can be according to customers’ tastes and preferences.
iii. Inspection; this involves activities set by the business to ensure the set
quality standards are achieved for example use of quality assurance team
to inspect and support members towards achieving set standards.
iv. Monitoring and Evaluation; this involves activities that are done to monitor
progress of the quality standards set. This helps the business to make the
decision on whether to review quality standards set for the business or
continue implementing.
v. Complying with regulatory standards as set by the regulatory body;
the business has to ensure that they apply in the business procedures the
right standards set by Rwanda Standards Board.
9.3.3. Quality Compliance

Compliance is either a state of being in accordance with established guidelines or
specifications, or the process of becoming so. Businesses in Rwanda, for example
in their production processes have to comply with with specifications created by

a standards body (Rwanda Standards Board). Compliance encompasses efforts to
ensure that organizations/businesses are abiding by both industry regulations and
government legislation. In this case, minimum quality limits have been set and the
businesses must make changes in manufacturing to reach those minimums.
Businesses as well have to create minimum work compliance systems that translate
into a better, safer workplace where people are better at their jobs. Businesses have
to create a safe working environment for employees and demonstrate that the
employees’ health and well-being are important.
9.3.4. Relationship between Quality Assurance, Compliance and

Management.
It is important for businesses to pay close attention to Quality Assurance (QA),
Quality Compliance (QC) and Quality Management (QM) since they form an integral
part of the business’ success. Customer satisfaction and maintenance (customer
retention) rely heavily on the applicability of the quality assurance, compliance and
management in production and management processes.
Quality assurance Quality Quality

management compliance
Figure 9.6 Relationships between QA, QM and QC.
Looking at the above illustration, quality assurance and compliance must be man-
aged and controlled by the given quality control department of the business. The
illustration shows that if businesses have clear processes of managing quality and
abide to laws and guidelines set by regulatory body (RSB), then there is quality man-
agement.
The relation between the three in terms of standards means that quality management
system is comprised of quality assurance and compliance activities that ensure the
establishment of a set of quality policies and objectives which act as guidelines
within an organization or business.
9.3.5. Quality Management system

A quality management system (QMS) is a formalized system that documents
processes, procedures, and responsibilities for achieving quality policies and
objectives.
For businesses to be able to promote quality standards in their businesses, they

need to develop quality management system. This system becomes part and parcel
of business culture and it’s monitored by the business’ quality control team. The

following is a quality management system that can be used by business to promote
and ensure quality of their products or services:
i. Define and document necessary components of quality management
system: This would include key guidelines and elements of what the
business per takes as quality for example which kind of raw materials will
have to be used.
ii. Define the quality policy: This includes the business’ mission that is what
customers want and value from the business. This should be given top
priority in the business.
iii. Quality objectives must be communicated to the team and well
understood: ISO requires that quality objectives are derived from quality
policy and measured.
iv. Define the product defect: that is what contributes to poor quality,
whenever such defects are seen they must be recorded and communicated
accordingly.
v. Develop the documents for the system: This could be a manual that
includes the necessary policies, procedures and forms. ISO 901 2008
requires that organizations have quality manuals.
vi. Define the quality process: this includes corrective and preventive action
process, management review and communication process. In short this
involves ways of solving given challenges to quality implementation.
vii.Determine the training needs: Entrepreneur must identify the gaps
within the team so that the workers are trained and supported accordingly
to meet and comply with quality standards.
viii.Use the system. This is the stage when the system is implemented
accordingly.
ix. Measure and monitor performance: Measuring performance happens
after implementation and would vary greatly from organization to
organization depending on size, potential risk, and environmental impact.
x. Take action that improves performance: This is the last step that is
implemented and when solutions to the risks are identified as per the
quality process, they communicate them to the employees.

a. Given the business that you want to start of your choice, what different
measures will you implement to maintain quality in business?
b. Develop a Quality Management System (QMS) of the above business.

9.4. Accreditation and its Role in cross Border Business
Introduction
This section covers accreditation, its role across borders and the role it plays in
fostering trade. In this section you will learn about accreditation bodies at national,
East Africa and international level. You will be able to assess the role of accreditation
in facilitating, promoting and regulating trade across borders.
Activity 9.4
a. Given your background knowledge on conformity assessment studied in
S5, what is the meaning of accreditation in business?
b. Why does government of Rwanda put strict and clear regulations

governing the flow of goods and services within and across its borders?
Accreditation is one of the critical quality infrastructure elements that facilitate trade.
Accreditation is the process used by countries’ regulatory body (RSB for Rwanda) to
ensure that businesses/organizations maintain minimum standards of quality and
integrity regarding measurement and certification requirements governing trade.
Accreditation of conformity assessment bodies provides the acceptance of tests

results, inspection reports and certificates that accompany products and services
traded across borders.
9.4.1. Accreditation in Rwanda

According to international best practices, a responsible authority could employ
its own inspectors or an independent recognized inspection body could be
subcontracted to carry out the work in the implementation of standards and
technical regulations, concentrate on issuing guidelines and monitoring activities.
In Rwanda standards board is the one in charge of accreditation.
Rwanda Standards Board

The board is responsible for certifying products for quality compliance to standards
and ensures their control at all points of their production, marketing and consumption
within the country. Responsible ministries like Ministry of health and infrastructure
and REMA ensure that activities and projects conform to the required certification
requirements.

Figure 9.7 Certification bodies under RSB as the accreditation body
9.4.2. East African Community Accreditation

The East African Community has issued regulations to enhance the operationalization
of the EAC Standardization, Quality Assurance, Metrology and Testing Act (SQMT) of
2006. The SQMT regulations are geared towards facilitating regional trade.
The Regulations were approved by the Council of Ministers in November 2013 and
are issued in line with Article 6 of the Protocol on Establishment of the EAC Common
Market, with reference to Free Movement of Goods.
9.4.3. International Accreditation

Everyday commercial transactions and international trade rely on the support of
standards, metrology and accreditation quality systems. Through international
efforts to establish mutual recognition and harmonization across national borders
in each area of standards and conformance, goods and services calibrated, tested,
inspected or certified in one economy can be accepted by trading partners.
It is the primary purpose of regulatory bodies like international laboratory

accreditation cooperation (ILAC) and international accreditation forum (IAF) to
establish multilateral arrangements between their member accreditation bodies
based on mutual evaluation and acceptance of each other’s accreditation systems.

In this way the acceptance of products and services across national borders is made
easier by removing the need for them to undergo additional tests, inspections or
certification in each country into which they are sold.
9.4.4. Role of Accreditation across Borders

As international trade has grown, there is need for technical regulations, standards,
testing, inspection, certification and accreditation procedures across all borders. This
is meant to meet the legitimate requirements of quality and safety that consumers,
businesses, regulators and other organizations demand of goods and services,
whatever their country of origin.
Accreditation across boarders plays a key role towards consumers and businesses in
facilitating, regulating and promoting trade as seen below;
i. Multilateral arrangements between national accreditation bodies have also
helped make accreditation an internationally recognised ‘stamp of approval’
to demonstrate compliance against agreed standards and requirements
and this means businesses spend less time tied up with bureaucracy.
ii. International accreditation agreements help increase the choice of goods
and services available on the market and help to ensure that these meet
relevant standards of quality and safety, whatever their country of origin.
iii. Holding accredited conformity assessment results shows credible evidence
of conformance with national and international standards and regulations
which can differentiate a business from its competitors.
iv. As accreditation is recognised internationally, it can open doors overseas
equally as well as those in the domestic market. Indeed, an increasing
number of organisations in both the public and private sectors in domestic
markets and overseas are specifying accredited testing, inspection or
certification as a precondition to tendering for contracts.
v. Accredited conformity assessment can also contribute to the operational
efficiency of businesses in other ways, saving time and money by reducing
bureaucracy and by helping with risk management and key aspects of
decision -making. For instance, it can be used as a basis on which to make
efficient and informed choices about domestic suppliers and promotes
confidence in imports from other countries.

M and J Enterprises Ltd. is a medium sized business that is just starting. It’s
located in Muko sector in Musanze district and deals in Juice and water related
products. The business requires obtaining certification marks for the products.
a. As a student of entrepreneurship, advise M and J enterprises ltd. on which
accreditation bodies they need to go through to obtain certification mark
for their products at;
i. National level
ii. East African level
iii. International level
b. Why does the business need to obtain certification mark for their products
by the above accreditation bodies?
9.5. Practical Activity on Quality assurance

The government of Rwanda through the Ministry of Youths (as of April 2018) wants
to promote youth led activities. The ministry wants to finance high level projects
that are able to solve community problems. However, for the youth to qualify for this
program, they have to develop quality assurance plans for the projects they intend
to start. Using the above information, design a quality assurance plan for the project
you would present to the government in order to be supported.
1. The following are the elements of the quality assurance plan that can be
implemented by businesses;
i. Objectives of the quality assurance plan to be achieved. This explains
the main intentions the project wants to achieve in relation to managing
quality for example ensuring the right and quality raw materials are used
by securing them from the suppliers that are well known or accredited.
ii. Testing, inspection and examination of the project; this includes activities
that will be implemented to ensure that quality objectives are met. For
example, having a quality control team that checks and monitors materials
making sure they comply with the required quality standards.
iii. The steps in the process that establish the standard operating procedure
of an organization; For example, creating Environmental management
plans. This includes what will be taken to make sure the environmental
challenges resulting from the project activities are mitigated.
iv. Methods of measuring the achievement of the project; this includes the
method that will be applied to measure the achievement of the quality

planed goals. For example, the quality team can carry out a survey in the
business checking the progress of the quality standards.
v. The allocation of responsibility and resources to be used in the quality
assurance plans; this includes who will be in charge of what and what
resources will be needed to support the team to achieve the stipulated
quality assurance planned activities.
An example;
Roles Responsibility
Project Manager Preparing, maintaining and executing the quality
assurance plan
Project coordinator Communicate and coordinate quality assurance planned
activities
Others Execute the planed quality assurance activities of the
project

For a business activity of your choice, describe the process you will use/follow
to ensure effective quality compliance.

1. Ingabire, Sandra and Jean Claude are planning to start up a business in
your sector; they approached you for more information on metrology in
business activities.
a. First explain to them the different types of metrology
b. Having accurate measurements in business activities is very important.
Justify the statement to the above people and show why they should
feel confident to apply metrology in their business activities.
2. Explain the following concepts as used in metrology

a. Quality assurance
b. Quality compliance
c. Quality management
d. Quality management system
e. Accreditation
3. Explain the relationship between quality compliance, assurance and

management
4. As a member of partnership business that you and the colleagues started
in your community, you have been tasked to design for them a Quality
Management System (QMS). Using your background knowledge and
skills about quality management, design your business’ QMS.
5. Describe the procedures that are embedded in quality assurance.
6. Explain how accreditation aids and promotes trade across borders.

UNIT10
WORK HABITS AND
BEHAVIOUR
Unit 10: WORK HABITS AND BEHAVIOUR
Key Unit Competence: To be able to apply for a job and maintain professional
conduct at workplace.
Introduction
Succeeding in the workplace, calls for developing work habits that reflect a desire
to help the organization. Managers and coworkers enjoy working with people who
report to work every day, interact in positive ways, take pride in their work and
complete their assignments on time. With a bit of extra effort, you can prove your
value to your colleagues and your boss.
A solid foundation of good work habits sets a precedence of efficiency, productivity,

reliability, and teamwork. Basic work habits can include cooperation, effective
communication, following policy, organization, punctuality, regular attendance,
and time management. Employees who utilize good work habits can extend their
normal job duties and tasks by assisting their peers in an auxiliary role to optimize
company efficiency and productivity to meet the bottom line (profitability)
Paul J. Fleyer Quotes “Good work habits help develop an internal toughness and a
self-confident attitude that will sustain you through every adversity and temporary
discouragement.”

However, in several business organizations there are a category of employees who
normally portray bad work habits and behavior like being uncooperative, deliberate
refusal to meet deadline, constant conflicts with fellow colleagues, irregular
attendance and bad time management. Such people are a normally stumbling block
for the success of organizations. When such people are identified, the management
has to take necessary measures to ensure that they adhere to the norms of the
organization. This unit therefore is designed to help you analyze the characteristics
of appropriate work behaviors and attitudes. Through this unit, you will also learn
how to make an appropriate CV and application letter.
Introductory Activity
Kamaliza graduated from University of Kigali in 2016 where she acquired ample
skills in computer Science. After graduating, she thought it would be easy for
her to get a job. But due to stiff competition in the labor market, getting a job
is not easy. She tried different positions in different places but all in vain, up to
now she is still unemployed.
Besides, all her close friends have secured good paying jobs and they are living
a decent life. Kamaliza is now frustrated and does not want even to meet her
old friends.
Basing on the above story and your knowledge about choosing a suitable
career gained from S3 as well as knowledge about career opportunities and
communication skills from S4, answer the following questions:
a. What advise can you give to Kamaliza given the situation she is in.
b. What steps are normally followed in the process of finding a job?

10.1 Finding a job
Activity 10.1.1
Figure 10.1: Searching for an employment
In your community, identify different resources for finding employment.
Finding a job is one of the hardest and most stressful things one has to do since it
requires much more efforts in information search, writing applications, preparing
for interviews and the related.
It is a process that applies to almost every job seeker but it calls for perseverance
and patience
However, to some people it may take a short period of time while others it may take
a long period. Today, because of stiff competition in the labor market, job seekers
need to be open minded and updated in matters related to job search. Besides,
finding a job, also calls for excellent skills in application writing as well as better
interview techniques.
10.1.1 Finding employment information

When one is looking for a job, there is a range of information sources and supports
to help him/her in the search process. Are you looking for a job for the first time? Do
you want to change the current job and you are looking for another one? Below are
guiding sources for finding employment information.

Figure:10.2: Sources of Job information
1. Newspapers: Newspapers are often the first place people turn when they
start their job search. It makes sense since newspapers are a good place to
find local openings. For example job advertisements from Imvaho nshya,
the New Times etc.
2. Through Media: One can also search jobs through Media like Radio,
television etc.
3. Potential work places: This can be through Notices, announcement etc.
4. Internet: There are plenty of reliable job sites and social networking
communities available on the internet. The Internet has become a great
source for finding job openings. It’s free, easy and may be done from a
library or the comfort of your home computer. Job sekeers normally use
internet channels like Tohoza.com, Mucuruzi.com, Umurimo.com, jobs in
Rwanda to look for job advertisements.
5. Government agencies and offices: Some government agencies provide
Information on jobs, career, and consultancy. Forexample; Akazi in Rwanda
found on (http://recruitment.mifotra.gov.rw), Youth Employment Systems
(YES) Rwanda, established by Kigali City Employment Service Centre (KESC)

to contribute to the Government target by offering information on job
vacancies, Training information Internship information, Self-employment,
Job matching career guidance etc.
6. Non-government organizations, especially those that focus on youth
development:
7. Cooperatives: Many worker cooperatives are set up with a primary
goal of providing formal and decent employment for their members;
8. Recruitment agencies: For example; Mara jobs, Winafrica, Musanze
Employment Service Centre (MESC) which provides job vacancy information
and links to job seekers. (www.musanze.gov.rw or www.musanze.lmis.gov.
rw), etc.
9. Networking: It is a process of syestematic meeting and talking with people
who may be able to provide you with information that may lead to a job of
your interest. A network is made up of people you know like family, friends,
school, etc. It also involves giving and receiving information, ideas, referrals
and recommendations from different people. The bottom line is that an
application that is received with a recommendation from a friend or current
employee has a much stronger chance of getting the job than someone
who blindly responds to a classified advertisement.
Note: While the above job sources may sound simple, combining them together in
a mass “market yourself” campaign will prove successful.
10.1.2 Writing Curriculum Vitae (CV) and an Application Letter

Finding a job requires quite a lot of aspects among which CV and application letter
writing are part. It is imperative to point out that a well written CV together with a
proper application letter contributes much in finding job. A good job application
letter and a CV are always tailored to the vacancy you are applying for.
Activity 10.1.2
a. What is the difference between a CV and an application letter?
b. Describe the type of information found in the Curriculum Vitae
Meaning of a CV
The letters CV stand for curriculum vitae which in Latin means “Course of life”.
When used in a job seeking context, a CV is a brief history of your education, work
experience and activities, skills, accomplishments and any other information relevant
to getting a job. It is an alternative to writing a Resume (is a written compilation of
your education, work experience, credentials, and accomplishments. CVs are thus

much longer than resumes, and include more information, particularly related to
academic background) to apply for a job.
Nowadays, many organizations prefer online applications. So, an applicant is

required to follow the guidelines given and attach/upload the PDF copies of your
identification (ID card) and required degree together with other relevant documents.
Meaning of an Application Letter/Cover Letter

An application letter also referred to as Cover letter is a letter to an employer
expressing your interest in a job or area of work and highlights why you are qualified
for the work. Effective application letters explain the reasons for your interest in the
specific organization and identify your most relevant skills or experiences.
Your application letter should let the employer know what position you are applying
for, what makes you a strong candidate and why they should select you for an
interview. This letter should not be more than one page.
Writing a CV
Curriculum Vitae vary depending on one’s field and experience, but there are many
general format and style guidelines one can follow when creating a CV. There are
also certain sections most people include in their CV.
Here are tips for both how to format your curriculum vitae and what to include :
CV Writing and Format Tips

1. Include relevant information only: Your CV should not include all details
about your life. Keep it simple, clear and neat
2. CV Length: While resumes are generally one page long, CV is longer. Most
CV are at least two pages long, and often much longer.
3. Font and Size: Do not use ornate fonts that are difficult to read ; Times
New Roman, Arial, Calibri, or a similar font is best. Your font size should be
between 10 and 12 points, although your name and the section headings
can be a little larger and/or bolded.
4. Format: However, in deciding to organize the sections of your CV, be
sure to keep each section uniform. For example, if you put the name of
one organization in italics, every organization name must be in italics. If
you include a sentence or two about your accomplishments in a position,
fellowship, etc., make a bullet list of each accomplishment. This will keep
your CV organized and easy to read.
5. Be accurate: No spelling or grammatical errors. Be sure to edit your CV
before sending it. Check spelling, grammar, tenses, names of companies
and people, etc. Have a friend or career services counselor check over your

CV as well.
6. Be consistent: punctuation, highlighting, verb tense, spacing etc. should
be verified.
7. Spells out acronyms the first time it appears, put the acronym in
parentheses and then use the acronym after that.
Elements of Curriculum Vitae

Not all Curriculum Vitae look the same. But there are general sections that have
to be included in almost all CV. However, one may choose to include only some
sections because others do not apply to his/her background or industry. Include
what seems appropriate for your area of specialty. In your CV you can include :
1. Contact Information: At the top of your CV, include your personal
identification/name and contact information (address, phone number,
email address, etc.).
2. Education background: This may include the school/institution attended,
dates of study, and degree received.
3. Work Experience: List relevant work experience ; this may include non-
academic work that you feel is worth including. List the employer, position,
and dates of employment. Include a brief list of your duties and/or
accomplishments.
4. Skills
• Professional competencies relevant to the position for which you are
applying.
• Computer Skills:
• Language Skills:
• Etc
5. References: In this part, include people who knows you and who might
be contacted in case they need any information about you.
Lastly, end by certifying that the information is from the best of your knowledge.
Writing an application letter

An application letter will be the first correspondence you are going to have with
your possible boss. The employer will definitely judge you on your application letter
if you are worthwhile being interviewed. Always remember that any job competition
is very tough. Therefore, your application letter must stand out because employers
usually deal with hundreds of job applications for a single position.

Devote time in the body paragraphs to tell the employer more about your experience
and qualifications. Explain why you’re the best candidate for that particular post.
• Start your letter by adding your contact information at the top. You want
to make it as easy as possible for your prospective employer to contact you
and know who you are. Before you begin your letter, make sure that you have
the proper letterhead.
i. Name
ii. Address
iii. Phone number
iv. Email address
v. Personal website (if you have one)
• Include the company’s information. After you include your information, you
need to include the title of the employer to whom you are applying for the
job, the name of company and address. By including the contact information
of the company to which you are applying, you are showing that you have
taken the time to write a specific letter or application to this company, and
have done your research on the hiring manager for the position.
• Address your letter to the person whom you are writing. To begin your
letter, you want to be formal and start with a proper address. Once again,
a simple “Dear Manager, Director” etc. This will depend on the information
given from the advertisement.
• Salutations: These are greetings used in a letter. Eg Dear Sir/Madam, Dear
Mr……../Mrs……../Ms………./Dr………, etc.
• Subject line: It indicates the title or the position being applied for.
• Body of the letter: Think of this section as having three distinct parts.
1. In the first paragraph, you’ll want to mention the job you are applying for
and where you saw the job listing.
2. The next paragraph(s) are the most important part of your letter.
Remember how you gathered all that information about what employers
was seeking, and how you could meet their needs? This is where you’ll share
those relevant details on your experience and accomplishments.
3. The third and last part of the body of the letter will be your word of
appreciation to the employer; you can also offer follow-up information.
• Complimentary Close : Complete your letter with a polite close, such as

«Best» or «Sincerely,» followed by your signature and your name.
Notice: When you apply online in e-Recruitment, follow the structure/format

provided to you

Sample of an application letter
Name
Address
Telephone number
Email Address
Month, Day, Year

Title of the authority receiving the application
Name of Organization
P. O. Box Address
Dear Mr. /Ms. /Dr. General Director
Subject line: Include the title /position you are applying for
Opening paragraph: State what position you are applying to; how you learned of
the organization or position, and basic information or qualifications about yourself.
2nd paragraph: indicate why you are interested in the type of work; demonstrate
that you know enough about the position to relate your background to the position.
Mention specific qualifications which make you a good fit for the employer’s needs.
This is an opportunity to explain in more details relevant items in your CV/resume.
Refer to the fact that your CV/resume is enclosed. Mention other enclosures if such
are required to apply for a position.
3rd paragraph: Indicate briefly why you’re so passionate about the opportunity
you’re applying for. State that you would be glad if you are granted a job. Thank the
employer for her/his consideration in advance.
Sincerely,
(Your handwritten signature)
Your name typed

Assume MTN is looking for a cashier and advertises in the New Times. Prepare
a CV and an application letter to apply for that position.

10.2 Interviews Process and Techniques
Activity 10.2
Observe the picture and answer questions below;
Figure 10.3: A job applicant being interviewed
1. Assume you are the interviewee in the above interview, which techniques
you will use in order to succeed.
2. Describe the process involved in interview process.
10.2 1 Interview process

A job interview is an opportunity for the employer to find out more about you, your
education, work background, interests, hobbies and personality and for you to find
out more about the employer/business/company/organization and the specific job
to which you are applying for.
An interview is a major tool for selection process which is set up by the employers
to know in detail about the candidates. It is a formal verbal interaction between the
employers and the prospective candidates which helps the employers in extracting
as much information as possible about the candidate.

In general, there are three main parts of the interview:
1. Opening: This part involves greetings, introductions, and it is where the

employer states purpose of interview.
2. Body of the interview: This is the major part of the interview process where
the interviewee is asked questions by interviewers to elicit information in
relation to the post.
In the process of questioning, interviewers should ensure that clear questions are
asked and the interviewee is given time to respond. To be able to answer well, the
interviewee should also listen attentively to questions and respond accordingly.
Common questions asked in interviews may include;

a. Tell me/us about yourself
b. What qualities and skills do you have that will help you perform this job?
c. What previous experiences do you have that are related to this position?
d. Are you familiar with this company/business/organization?
e. What do you know about this company/organization?
f. What are your strengths and weaknesses?
g. What makes you fit for this position?
1. Closing the interview: In closing the interview, ask whether the candidate
has anything more to tell you about his candidacy or any questions about
the job/employer. Thank the interviewee for turning up for the interview.
The interviewee should also thank the interviewer and also expresses
interest and enthusiasm regarding the next step.
10.2.2 Interview techniques

An interview is an integral part of the recruitment process. Interviews range from
conversations lasting a few minutes to several formal meetings, sometimes with
more than one interviewer. The interview process allows you to demonstrate that
you are the right candidate for the job. The better prepared you are, the more relaxed
and comfortable you will be when the interview questions begin.
Getting the most out of interviewing is a combination of preparation, suitable

questioning and listening.
Before the interview

• Learn as much as you can about the organization or business to which you
are applying for a job: What do they do? Where? Size? Who are their clients?
etc.

• Think about how your previous work experience, schooling and activities will
help you perform the job to which you are applying.
• Dress appropriately for the interview: neat, clean clothing and shoes.
• Allow plenty of time to get to the interview.
• Write down questions you may have for the interviewer.
• During the interview
• Greet the interviewer. Speak slowly, clearly and distinctly in a confident voice.
• Think before speaking.
• Be respectful.
• Listen carefully: One of the most neglected interview skills is listening. Make
sure you listen attentively and respond accordingly.
• Be a good listener: Wait until the interviewer has finished talking before you
respond.
• Stay calm.
• Ask the interviewer to repeat or re-phrase a question if you have not fully
understood it.
• If you do not know the answer to a question, be honest and let the interviewer
know why.
• Be honest in your answers but present any negative experiences in a positive
light or as lessons learned.
• Present yourself as being confident that you can do the job.
• Thank the interviewer.
After the interview

Thank the interviewers and after sometime make a follow up to find out if you were
considered for the next step for example you can inquire through an email.

Case study: An Interview with Mutesi
Mutesi has applied to be a cashier in one of the supermarkets in her district.
She has prepared and sent in her CV showing different experiences she has
acquired as a cashier. She has practiced answering questions she thinks might
be asked. She is confident in her ability to handle the duties of the cashier.
One week before her interview, Mutesi got a call from the owner of the
supermarket, requesting her to prepare for the interview which was scheduled
in two weeks to come. Without panicking, she quickly got on the internet to
research how she could best show her skills. She approached her relatives and
friends for advice on how best she can approach the interview.
On the day of the interview, she was very confident, clear and was able to
sell her skills successfully. She was able to demonstrate several things that
ultimately made her the best suited for the job. She showed the interviewer
that she understood the challenges facing the retail, wholesale businesses and
the competitors that the supermarket could capitalize on. Finally, she proved
that she understood the business she wanted to enter in and that her skills
were appropriate for the position.
Read the above case study and answer the questions that follow;
1. What did Mutesi do to prepare for her interview?
2. During her interview what skills did she demonstrate that made her the
suitable candidate?

10.3 Appropriate Workplace Behaviors and Attitudes
Figure 10.4: Standards of behavior and attitude at work
Activity 10.3
a. Basing on experience related to any kind of work you have done at
schoolor in your community, What habits and behaviors were required
of you to do the work successfully?
b. Considering the behaviors and attitudes you exhibited to succeed in the
above work, what do you think is the meaning of work behaviors and
attitudes?
Every place of work has a different atmosphere, a different environment, a different

ethos. An efficient and harmonious working environment is created largely by the
way people behave in the workplace. This includes the behaviour of employees, em-
ployers and to some extent, even customers and clients.

Behavior is an action or reaction that occurs in response to an event or internal
stimuli (i.e., thought). Work behavior is the behavior one uses in employment and
is normally more formal than other types of human behavior. This varies from
profession to profession, as some are far more casual than others.
On the other hand, Attitude is a feeling, belief, or opinion of approval or disapproval

towards something. A simpler definition of attitude is a mindset or a tendency to
act in a particular way due to both an individual’s experience and temperament.
Typically, when we refer to a person’s attitudes, we are trying to explain his or her
behavior. Attitudes are a complex combination of things we tend to call personality,
beliefs, values, behaviors, and motivations. As an example, we understand when
someone says, “She has a positive attitude towards work” versus “She has a poor
work attitude.” When we speak of someone’s attitude, we are referring to the person’s
emotions and behaviors. (Attitudes and perception by Jeffrey Pickens, PhD)
Work attitude means a feeling, belief or an opinion about a particular activity. At

work place some people may feel uncomfortable towards doing certain type of
work or may not be interested in helping others. Such attitudes reduce productivity
and team work at work.
Proper workplace behavior and attitude contribute much to the success of a given
organization. Work behavior and attitude include the following;
• Dressing neatly and appropriately for the work: If wearing a uniform
make sure it is clean and neat; clothes should not get in the way or prevent
you from doing your work; it should not be distracting to you or others.
• Keeping time and managing it well: Attendance and punctuality are
essential to keep your job. Let your supervisor know if you are going to be
late.
• Speaking to co-workers in a positive and respectful manner
• Being honest: Being honest will gain you the respect of co-workers.
• Keeping discussions and interactions related to work: Don’t bring your
personal problems to work or let them affect how you do your job or interact
with others. Avoid topics or making comments that might make others feel
uncomfortable.
• Staying positive: Don’t complain or be pulled into negative discussions
about work. Rather, approach problems positively and help to think about
how to improve the situation.
• Being respectful of others and your environment: Take proper care of
equipment, put things back where they belong and keep the environment
tidy.
• Being a team player: Participate proactively and respectfully and listen to the
ideas of others as well.

• Respecting the roles and contribution of others.
• Believing in yourself and what you do: Being positive about your job and
how you do it will help you to succeed and achieve your goals.
• Open mindedness. This involves having increased receptiveness to new
ideas.
• Valuing new experiences. This calls for desire to seek out and take on new
challenges.
• Desire for self-improvement. To attain it, one should exercise continued
learning as well as self-instruction.

As an inspiring entrepreneur, identify appropriate work place behavior and
attitudes you will re-enforce in your business.
10.4 Time Management skills
Activity 10.4
Case study
Nkundimana is a senior S5 student and the chairperson of Rutoma secondary
school; as the students’ leader he leads 2-3 meetings in a week and he is always
on time. During the course of the week, He wakes up at 5:00am to prepare for
the day and to do personal revision. His peers refer to him as a good time
manager and he is also one of the best students academically. He attributes his
good time management skills to the personal timetable that he consistently
respects in his day to day activities.
Use the above case study to answer the following questions:

a. Was Nkundimana a good time manager? Justify your answer.
b. What advantages are associated with being a good time manager?

Figure: 10.5 Time management guidelines
Time management is the process of planning and exercising conscious control of

time spent on specific activities, especially to increase effectiveness, efficiency or
productivity. It is a juggling act of various demands of study, social life, employment,
family, and personal interests and commitments with the finiteness of time. Using
time effectively gives the person “choice” on spending/managing activities at their
own time and expediency. Time management is the ability to use your time wisely
and appropriately.
It is managing oneself in relation to time. It is setting priorities and taking charge

of the situation and time utilization. It means changing those habits or activities
that cause waste of time. It is being willing to adopt habits and methods to make
maximum use of time.
Time management can also be seen as the development of processes and tools that
increase efficiency and productivity for a person/student or a business organization.
Time management does not just happen for any one, it’s a skill that must be worked
on, and that most people find it a lifelong challenge.
Time management skills include :

• Setting goals : When trying to manage or planning for your time, you should
think about what you really want to achieve/accomplish within a given period
of time. When setting goals, rely on the SMART goal-setting process. SMART
stands for Specific, Measurable, Attainable or achievable, Realistic and Time
bound.

i. Specific: Identify your goal clearly and specifically.
ii. Measurable: Include clear criteria to determine progress and
accomplishment.
iii. Attainable: The goal should have a 50 percent or greater chance of success.
iv. Relevant/Realistic: The goal is important and relevant to you.
v. Time bound Commit to a specific timeframe.
• Prioritizing: This means generating a list of tasks you need to do in order

to reach your goal(s). Put your list of tasks in order of importance or logical
progression. Prioritizing what you need to do in a day, week, month, etc. This
means that you need to scale up tasks depending on the level of urgency.
• Making decisions: Making proper decisions helps in taking important choices
among many alternatives given and thus fostering time management.
• Planning and Scheduling: Identify the strategies which can be used for
planning and scheduling what you need to do.
You can do a calendar of activities where you show the date, activity which
must be done, who will do the activity and the observations.
Mr. Claude is planning to start up a poultry project, below is an example of the

timetable/schedule of when different activities for the project will happen;
Activity Date (during Lead/Responsible Observations

months of Aug and person for the activ-
September 2018) ity
Carrying out a feasibility 10th Aug Owner done
study about the project
Identifying the 15th Aug Owner Not yet done
appropriate place to
construct
Buying of raw materials 22nd Aug Owner
to use
Starting the 27th Aug-7th Sept Owner
construction
Buying chicks and their 21st September Owner
feeds
Note: These skills can be applied in your personal life and at work.
There are many benefits of good time management skills. At work, there may be
improved job performance and possible promotions as a result. In your personal life,
you may have a better marriage, more family time, more time with friends, less debt
and less stress.

• Analysis : A vital part of having a successful time management strategy is
self-analysis. To develop your time management skills you need feedback
but in the case of time management there is no one to monitor your efforts
at using time effectively other than yourself. For this reason, set aside a few
minutes each day to evaluate how your time plan is working. Determine
whether tasks have been accomplished or not, and figure out why.
• Awareness: To be successful at time management, it is necessary to be
strategic. This involves several steps. First, you plan - in this instance, plan how
you will use your time. Second, you monitor - is this working? Am I achieving
what I planned to do? How am I enjoying this? How difficult is it? Third, you
analyze - why did or didn’t this plan work? If it did work, you look at where or
how else effective strategies can be used. If the plan didn’t work, you develop
new strategies and try them out. The common denominator of all these steps
is awareness of the importance of time management, of how you are using
your time, and of what works or doesn’t work for you.
• Information: Learning to manage time is an ongoing process. The more aware
you are of how other people use their time, the more quickly you will see
and pick up new strategies. The bigger your repertoire of time management
strategies, the easier it will be to adapt to new challenges. Keep your eyes
open, listen when people talk about how time is used, and keep trying out
new methods and techniques. The ability to manage time effectively is a very
valuable asset to have in the working world.

Keza has been having issues with managing time at the carpentry workshop
where she works. She has approached you to help her start managing time
appropriately. What time management strategies would you advise her to
adopt?
10.5 Personal qualities that help one to manage time
Activity 10.5
In your opinion, identify some elements that can help you to balance your
work and personal life.
Certain personal qualities can help you become a better time manager: They include:
• Good organizational skills : A person with great time management

skills can adapt to new problems and readjust as needed to complete an

assignment. This combination of planning, scheduling, strategy, delegation,
and adaptability are the kinds of traits that make an employee dependable,
and employers look out for that. Here are some organizational skills related
to time management:
i. Creating and keeping deadlines
ii. Delegation
iii. Goal setting and meeting goals
iv. Decision making
v. Managing appointments
vi. Team management, Etc.
• Self-discipline: Self discipline is the ability you have to control and motivate
yourself, stay on track and do what is right. Self-discipline at the workplace is
a positive effort which helps in developing set ways for our thoughts, actions
and habits. It is an art of self-control and self-reliance, which empowers a
person to stick to his/her decisions and propels the individual towards
achieving the set goal.
• Motivation: Motivation are Internal and external factors that stimulate
desire and energy in people to be continually interested and committed to a
job, role or subject, or to provide an effort to attain a goal.
Motivation results from the interaction of both conscious and unconscious

factors such as the intensity of desire or need, incentive or reward value of
the goal, and expectations of the individual and of his or her peers. These
factors are the reasons one has for behaving a certain way.
• Being focused on accomplishing tasks and not getting distracted : There

is a need to eliminate distractions, concentrate, have a plan that is always
objective. Start your day with writing down what you need to do, when do
you need to do it, what do you need to achieve. When you have a plan, when
you have a schedule, it is that much easier to focus and to stay focused. Finally
take regular breaks for relaxing.

• Balancing work and personal life
Figure 10.5: Balancing work and personal life.
Balancing work and personal life is very important in keeping a job. Being able to
strike a balance between your professional and personal life can help you become
more productive. You must be able to communicate and manage time effectively at
home and at work for helping to create this balance.

The balancing act takes careful planning and preparation, but it is possible. There
is a need to make plans with the people in your life. The following will guide you in
balancing work and personal life;
• Set priorities. To successfully balance between professional and personal
life you need to understand where your priorities lie. Review your list and
rank the items starting with: as the most important, and the second most
important etc. Your rankings will show where your priorities lie. In that way
you can be sure to make an effort to incorporate these top priorities into your
daily and weekly schedules.
• Be inventive. Regardless of how hard you try, there will be some times
when one or the other becomes more demanding in your life. Learn to be
creative and think up possible ways you can meet the urgent priority while
still attending to the other.
• Manage procrastination. Procrastination is a major obstacle that could be
standing in your way of striking a good balance. You may see your professional
and personal life seeping into one another because you often wait until the
very last minute to get things done. This causes you to end up working late,
or being distracted at work by personal tasks.
• Learn to say “no”. It may seem rude or selfish at first, but, with practice, you
may find that selectively turning down different projects or opportunities is
quite freeing. Say “yes” to those requests that meet your top priorities and
that do not constrain your already packed schedule.
• Timing tasks. Time management requires you to know how long something
takes. This is easier if you break a larger project down into smaller tasks. Often,
one or two of these will take longer than you expect. It may be aspects of
starting and finishing tasks that take longer than expected. Plan for all stages,
and find out how much time you need to allocate for each stage

• Describe the basic qualities that can help you manage time.
10.6 Developing a career plan

Activity 10.6
1. Explain the meaning of career and career plan.
2. Why do you think it is important to develop a career plan in your life

Figure 10.7 Developing a career plan
A career plan is an individual’s choice of occupation, organization and career path.

It is the progress and actions taken by a person throughout a lifetime, especially
those related to that person’s occupations. A career is often composed of the jobs
held, titles earned and work accomplished over a long period of time, rather than
just referring to one position.
A career plan is a set of goals and actions that will lead you to your ultimate long-
term career goal. It involves choosing an occupation and developing a plan of the
steps it will take you to get to that occupation. It is a plan for temporary and long-
term self-reliance.
If you are seeking new employment opportunities, you might seek assistance
discovering additional training, writing a resume, preparing for an interview, or
identifying potential job leads and networking contacts.
Career planning encourages individuals to explore and gather information, which

enables them to synthesize, gain competencies, make decisions, set goals and take
action. It is a crucial phase of human resource development that helps the employees
in making strategy for work-life balance.
A career plan helps you determine your skills and interests; it lists short- and long-
term career goals and the actions you can take to achieve them. Career plans can
help you make decisions about what classes to take, and identify the extracurricular
activities, research, and internships that will make you a strong job candidate.
Though programs differ, four distinct elements of career planning programs emerge
:

• Individual assessments of abilities, interests, career needs, and goals: It is
basically a process of self-exploration and analysis. Individuals are frequently
guided by self-assessment exercises.
The self-assessment process is basically viewed as an individual responsibility;

however, organizations can aid in this process by providing the employee
with materials and opportunities for self-exploration and analysis.
• Organizational assessments of employee abilities and potential: A key

issue in career counseling sessions is whether an employee’s goals are realistic
in terms of organizational possibilities and organizational assessments of
employee abilities and potential. Accurate assessments of employee abilities
and potential are important to both the organization and the individual.
Organizations have several sources of information for making assessments of

employee abilities and potential. First is selection of information, including
ability tests, assessment center test, interest inventories, and biographical
information such as education and work experience. Second is current job
history information, including performance appraisal information, records
of promotions and promotion recommendations, salary increases, and
participation in various training and development programs. Organizations
have traditionally relied on performance appraisal data as the primary basis
for assessing employee potential.
• Career Information within an Organization: Before realistic goals can be

set, the employee needs information about career options and opportunities.
This includes information about possible career directions; possible paths
of career advancement; and specific job vacancies. In organizations with
informal career planning programs, employees learn about career options
and opportunities from their supervisors within the context of developmental
performance appraisal interviews. Organizations with more established
career planning programs make greater use of workbooks, workshops, and
even recruiting materials to communicate career options and opportunities.
• Career counseling to set realistic goals and plan for their attainment:
It is in counseling sessions, typically with supervisors and managers in
developmental performance appraisal interviews, that most employees
explore career goals and opportunities in the organization. Supervisors and
managers need accurate assessments of employee abilities and potential,
as well as information about career options and opportunities in the
organization.
Below are some helpful steps to guide you in developing a career plan customized
to your interests and ambitions.

• Identify your career options: Develop a refined list of career options by
examining your interests, skills, and values through self-assessment. Narrow
your career options by reviewing career information, researching companies,
and talking to professionals in the field. You can further narrow your list
when you take part in experiences such as job shadowing, volunteering, and
internships.
• Setting goals: Now that you’ve identified your career options, develop an
action plan to implement this decision. Identify specific, time-bound goals
and steps to accomplish your plan. Set short-term goals (to be achieved in
one year or less) and long-term goals (to be achieved in one to five years)
Steps to reach the goals : In order to reach goals and keep resolutions in, take these
five steps toward success :
i. Choose a goal wisely: setting a goal that is meaningful to you will increase
your motivation to achieve it.
ii. Make it positive: When you create a list of your highest values and then
align your goals with them; you will have a sense of being on purpose and
are more likely to be motivated naturally and become more consistent.
iii. Write it down: After writing down your goal, keep it where you can see it.
Let it serve as a daily reminder to help keep you motivated.
iv. Create a detailed action plan : A successful action plan consists of breaking
down goals into small, manageable steps. Before taking action, write out
each action step you plan to take. Be as specific and detailed as possible.
v. Reward yourself : Have a reward in place for when you accomplish your
goal ; it can serve as a powerful motivator.
• Pooling together necessary information needed (CV, Application letter,

etc.): Develop your CV and application letter. Refine your career goals
and strategy. Regular updating of their resume will help jobseekers review
their career plans periodically and define themselves in terms of skills set and
competencies instead of merely job titles. Successful career development
should eventually enable the jobseeker to find the best way to start a new
career. The ultimate outcome of which will be the fulfillment of personal
career goals, attainment of financial stability and achievement of work-life
balance.

• Develop a career plan of the career you intend to pursue in your life.

Part 1 (Multiple choice questions) choose the most appropriate answers
by ticking accordingly
1. Resources used to find work include:
a. Friends and family
b. Newspaper advertisement
c. Job notices
d. Writing a letter of application to a potential employer
e. All of the above
2. A CV should include:
a. Contact information
b. Skills summary
c. Work experience
d. Education
e. All of the above
3. During an interview:
a. Speak quickly so you can share a lot of information about yourself
b. Interrupt the interviewer once you have understood the question and
have an answer
c. Present yourself as confident that you can do the job
d. Make up answers that aren’t always true in order to present your-self
positively
e. All of the above
4. During an interview when you are asked a question that you do not know
the answer. You should:
a. Ignore the question and talk about something else
b. Tell the interviewer you do not know the answer and explain why
c. Keep quiet until the next question is asked
d. Make up an answer even if it is not completely true

e. None of the above
5. Good time management involves:
a. Planning
b. Prioritizing what needs to be done
c. Avoiding distractions
d. Staying focused on the task
e. All of the above
6. You work as a waiter in a restaurant. Fridays are usually busy and there is
short of staff but you really want to go out dancing with your friends. You
should:
a. Not show up to work
b. Show up to work but leave early
c. Plan another evening for dancing with your friends
d. Tell your employer that you are sick
e. None of the above
Part 2 (True/False questions), Tick accordingly
7. A CV and an application letter are the same things.
a. True b) FalsWe
8. When you disagree with a co-worker, it is better to avoid an argument by
avoiding contact and not listening to his or her ideas.
a. True b) False
9. To manage your time at work and make sure it does not interfere with
your personal life, get work tasks done quickly, regardless of the quality
of work you do.
a. True b) False
10. Hard working, being on time, being respectful, and being honest
will help you keep a job.
a. True b) False

Part 3 (structured questions)
1. Nyaruguru district is looking for a lands officer, explain the process you
will follow for applying on the position
2. Explain the difference between a CV and a Resume
3. What are the elements of a well written CV and application letter?
4. Identify and explain the elements of a career plan

UNIT 11
MONEY
MANAGEMENT
Unit 11: WORK SAFETY AND HEALTH
“Inyamaswa idakenga yicwa n’umututizi”: When not cautious, an animal can be killed
by an ordinary tree cutter.
Key Unit Competency: To be able to apply standard health and safety practices
and regulations in the workplace
Introduction
Successfully managing health and safety practices in the workplace relies on

commitment, consultation and co-operation. Everyone in the workplace need to
understand the need for standard health and safety, what their role is in making the
workplace safer, and how they can abide to regulations and fulfil their responsibilities
and duties.
Setting up a hazard management program to identify workplace hazards, to assess
the risks those hazards pose to the health and safety of people in the workplace, and
to introduce measures to control those risks is the basis for a planned, systematic
approach to making sure workplaces are better places to be.
Health and safety is part of any business, just like production and quality. Health
and safety affects production quality, and your financial results. So it should be
managed in the same way as other aspects of your business. There are some key
questions which have to be asked to find out how health and safety performance

are effectively managed at work:
• What is a business health and safety policy?
• What is the business’s health and safety plan?
• What are the health and safety laws that the business has to comply with?
• Are health and safety aspects at work place always considered whenoperating
procedures and work instructions are developed?
• Is health and safety always considered when planning, designing or
purchasing new equipment or processes?
When it is time to respond during an emergency, knowing what steps to take can
be crucial. If an emergency happens in the workplace, it could be your responsibility
to provide help. Ensuring standard health and safety practices and regulations
in the workplace is therefore an important practical step towards providing and
maintaining a working environment that is safe and without risks to health.
Introductory Activity-Self-assessment
There are no right or wrong ways to answer this assessment. It is for your own
use during this unit. You will read an element of competence listed in the left
column. Think about yourself: do you think you can do this? How well? Read
the statements across the top. Put a tick in the column that best represents your
situation. At the end of this unit, you will take this assessment again.

My experience
I have a lot of
I have enough I have a lot of
I don’t have I know a knowledge to
knowledge knowledge
any knowledge little about practice this
to do this to do this
Knowledge, Skills and about this this consistently
sometimes regularly
Attitudes & accurately
Describe the
importance of good
personal care and
healthy habits at work

Identify the primary
hazards found in
workplaces
Identify unsafe
situations that could
harm people while on
the job
Identify ways to
prevent accidents and
getting sick at work

Respond appropriately
if there is a safety
hazard, an accident or
an emergency at Work
Practice health & safety
laws in the workplace

11.1.Safety an d health at workiv
Activity 11.1
1. Think about the proverb found at the beginning of this unit “Inyamaswa
idakenga yicwa n’umututizi” (When not cautious, an animal can be killed
by an ordinary tree cutter). What is the relationship between the proverb
and safety and health at work place?
2. Read the following habits for good health and think about your own
health, and the ways in which we stay healthy. Put a tick in the appropriate
column that describes your health habit.
Habits For Good Health Always Sometimes Never
1. I get enough rest.
2. I try to eat foods that are nutritious for me.

3. I avoid smoking and drinking alcohol
4. I brush my teeth every after a meal
5. If I do not abstain, I practice safe sex.
6. I strive to be clean and keep my surroundings clean.
7. I take precautions against malaria.
8. I avoid injuries when possible (e.g. wear helmet when
riding moto)
9. I treat minor injuries and illnesses promptly.
10. I strive to have happy relationships.
11. I avoid gossiping about others.
12. I like to see others do well.
13. I avoid thinking about myself in a negative way.
14. I strive to look my best.
15. I always wash my hands after visiting a toilet
16. I always wash my body parts with clean water and soap
17. I drink a lot of water every day
18. I at least have 30 minutes physical exercise daily
19. I wash fruits and other raw food before eating them
20. I sleep under a mosquito net
3. Why is it important to have good personal care and healthy habits at the
workplace?

Positive health and safety practices
Workplace health and safety (WHS) is concerned with protecting the health and
safety of all stakeholders in the workplace from exposure to hazards and risks
resulting from work activities. Health and safety is important because it protects
the wellbeing of employers, visitors, customers, work premises, products and the
environment in general.
Best practice business owners not only recognize the basic value of good WHS, but
see that extra efforts to ensure that its people are not harmed or made ill in any way
at work (even at a minor level) is also an essential part of a truly excellent enterprise.
Best practices in organizations therefore believe that workplace health and safety
has the following importances:
•• Helps demonstrate to all stakeholders that a business is socially responsible,
•• Protects and enhances an organization’s reputation and credibility,
•• Helps maximize the performance and/or productivity of employees,
•• Enhances employees’ commitment to the team/organization as a whole,
•• Builds a more competent, happier and healthier workforce,
•• Reduces business costs and disruption,
•• Enables organizations to meet customers’ WHS expectations, and
•• Encourages the workforce in general to stay longer in active life.
•• Protects staff from:
a. back pain and other musculoskeletal disorders
b. injuries from slips and trips
c. falls from heights
d. accidents involving vehicles at work
e. aches, pains and strain from using display screen equipment
f. the effects of noise and vibration
g. Work-related skin diseases, Etc.
•• Saves insurance and legal costs: a good WHS can reduce your insurance
premiums, as well as the costs of accidents that are not covered by your
insurance, such as sick pay, production delays or repairs to plant or equipment.
Healthy Habits
•• injuries from slips and trips

•• falls from heights
•• accidents involving vehicles at work
•• aches, pains and strain from using display screen equipment
•• the effects of noise and vibration
•• Work-related skin diseases, Etc.
•• Saves insurance and legal costs: a good WHS can reduce your insurance
premiums, as well as the costs of accidents that are not covered by your
insurance, such as sick pay, production delays or repairs to plant or equipment.
Healthy Habits
Figure 11.1: Good Healthy Habits

A healthy habit: is any behavior that benefits physical, mental, and emotional
health. These habits improve overall well-being and make you feel good.
Healthy habits include but not limited to eating well, exercising, getting enough rest
and avoiding harmful substances, etc
•• Get enough sleep. In order to be a very healthy person, you need to
consistently get enough sleep. A good night of sleep can improve your
memory and concentration, boost your immune system, and help you cope
with stress more easily.
•• Manage stress. Stress can affect your mood and your physical health. It
can cause anxiety, anger, and irritability as well as headaches, muscle pain,
exhaustion, and sleeping problems. Establish firm boundaries with your co-
workers and friends about taking on too many extra tasks.
•• Find time to relax. Set aside time every day for self-care and relaxation. Make
a routine for yourself, so that relaxation becomes a daily ritual. Don’t schedule
anything else during this time. Find a practice or activity that soothes you, such
as taking a bubble bath or reading a book.
•• Meditate once a day: Meditation may help you manage pain, reduce blood
pressure, improve symptoms of depression and anxiety, and cope with daily
stress.
•• Maintaining a healthy social life. It is not just diet and exercise that lead
to improved mood. Whether it is volunteering, joining a club, or attending a
movie, communal activities help improve mood and mental functioning by
keeping the mind active and serotonin levels balanced.
•• Maintain healthy eating habits: To get all the nutrition the human body
needs, you must eat a balanced diet including dairy, grains, protein, fruits and
veggies, as well as fat. By doing so, you’ll have a healthy and a fully functional
immune system. Eating highly varied foods will also help insure you get all the
vitamins, minerals, oils, and enzymes your body craves.
•• Get some exercise every day, even just a little. This will not only make you
feel better but also make you look better. Try walking if you cannot afford
another as it is a great exercise. A
Assume you get employed after your studies, what advice would you give to
your workmates to ensure appropriate safety and health in the workplace.

11.2. Healthy hygiene and sanitation practices
Activity 11.2
One of the important health habits for workers is‘striving to be clean and keep the
surroundings clean.’ In many workplaces, this is called ‘hygiene and sanitation’.
‘Hygiene’ is personal cleanliness and ‘sanitation’ is public cleanliness.
a. Give some examples of personal cleanliness.
b. Give some examples of public cleanliness.
c. What can happen if we do not keep ourselves, our communities or workplaces
clean?
2. a). What are germs?
a. How do you help prevent germs from getting you or others sick?
b. Give some examples of Personal Hygiene Practices that everyone can practice
at home and the workplace.

Healthy hygiene and sanitation practices
Hygiene is a set of personal practices that contribute to good health. It includes

things like hand-washing, bathing and cutting hair/nails. Hand-washing is the single
most important activity we can all do to encourage the stop of disease
Sanitation is the effective use of tools and actions that keep our environment
healthy. These include latrines or toilets to manage waste, food preparation, washing
stations, effective drainage and other such mechanisms.
All workplace environments need to be hygienic and safe for employees and
visitors, even those which are not involved in the production and handling of food
and personal products. A proper healthy hygiene and sanitation practice not only
prevents the spread of illness but also contamination at workplace by germs.
Germs are very small organisms that can grow in the body and cause some infectious
diseases. They can make you sick and are easily transferred. One can prevent germs
and contamination through practicing proper healthy and sanitation.
Healthy hygiene and sanitation is very important for every workplace and below are
some healthy hygiene and sanitation that can be practiced both at home and the
workplace:
i. Protect water sources and use clean water for drinking and washing.
Boil water and store in clean containers.
ii. Wash hands before preparing and eating food Regular hand washing,
particularly before and after certain activities, is one of the best ways to
remove germs, avoid getting sick, and prevent the spread of germs to
others.
a. One should always wash his/her hands:
• Before, during, and after preparing food
• Before eating food
• Before and after caring for someone who is sick
• Before and after treating a cut or wound
• After using the toilet
• After changing diapers or cleaning up a child who has used the toilet
• After blowing your nose, coughing, or sneezing
• After touching an animal, animal feed, or animal waste

• After handling pet food or pet treats
• After touching garbage
b. How should you wash your hands?

• Wet your hands with clean, running water (warm or cold), turn off the tap,
and apply soap.
• Lather your hands by rubbing them together with the soap. Be sure to
lather the backs of your hands, between your fingers, and under your nails.
• Scrub your hands for at least 20 seconds..
• Rinse your hands well under clean, running water.
• Dry your hands using a clean towel or air dry them.
iii. Washing and cooking food in addition to washing one’s hands
thoroughly, one should:
Wash food off before eating it so that you do not ingest germs through food.
Use a clean water source to wash off fruit and vegetables if you are going to eat,
before preparing to eat or serve.
Cook the food thoroughly to get rid of germs that could be on the food.
iv. Wash dishes and store food. Germs can also be on dirty dishes and
cooking pots and pans. Therefore:
Before and after using the cooking supplies (including utensils) you should wash
these with soap and water (preferably hot water).
When you are storing food, try to make sure that it is sealed in a bag. If you see rat
droppings in the food, you should throw it out. Rodents carry many diseases that
can make you sick.
v. Personal hygiene. This refers to the cleanliness, appearance and habits

of employees, which can occasionally be a sensitive issue for managers
and business owners. Personal hygiene practices may include showering,
using deodorant or perfume, grooming facial hair and hair-washing.
vi. Work area cleanliness: Workplace hygiene policies should also make
provision for each employee to clean and maintain their own workstation
or work areas. This could include regular cleaning of surfaces with
disinfectant to reduce the risk of bacterial contamination, keeping the
area tidy and free of clutter, etc
vii. Restroom facilities: The workplace hygiene policies and requirements
should provide restrooms for all employees to be equipped with hot

and cold running water, hand soap, toilet paper and hand drying towels
or equipment. This is to ensure that workers have the opportunity to
practice personal hygiene after using the facilities.
viii. Kitchen: Hygiene policies for the kitchen area in a workplace
environment need to cover regular cleaning and maintenance of utensils
and equipment. pplication activity 11.2 1.

1. Germs, or microbes, come from many different origins (including food itself ).
Completethe table below by filing in the prevention technique for each source
of germs identified.
Sources of germs/contamination Prevention Techniques
Contaminated kitchen surfaces

Dust
Insects, rodents and pets
Dirty hands and dish wipers
Raw foods
Utensils and equipment
Toilets

2. Musore is in charge of preparing meals at his workplace. Recently there have been
complaints of food contamination by some of the workers.
Advise Musore on what to do in order to prevent illness and contamination of the

food at the workplace. Musore is in charge of preparing meals at his workplace.
Recently there have been complaints of food contamination by some of the workers.
Advise Musore on what to do in order to prevent illness and contamination of the
food at the workplace.
11.3. Hazards in the Workplace

Activity 11.3
Analyse the picture below of a work place and answer questions that follo
Figure 11.2: Typical workplace (Entrepreneurship Teacher Manual for Secondary Schools, 2017)
Questions:
1. Name some of the things in the picture that make the above workplace
not safe or harmful to people working there.
2. Briefly explain what you understand by the following terms as relates to

health and safety at work
a. Hazards
b. Safety hazards
c. Chemical hazards
d. Biological hazards
3. What do you think can be done to make the workplace above safe?
Anything that presents a potential threat to employees, whether physical or

psychological, can be classified as a workplace hazard. Hazards exist in every
workplace. Identifying hazards at workplace is important to better be prepared to
control or eliminate them and prevent accidents, injuries, property damage and
downtime.
a. Safety Hazards: Safety Hazards are unsafe working conditions that can
cause injury, illness and death. Safety hazards are the most common
workplace hazards. They include:

•• Anything that can cause spills or tripping such as cords running across the
floor;
•• Anything that can cause falls such as working from heights, including
ladders, scaffolds, roofs, or any raised work area;
•• Unguarded machinery and moving machinery parts that a worker can
accidentally touch;
•• Electrical hazards like frayed cords, missing ground pins, improper wiring;
•• Confined spaces.
b. Chemical Hazards: Are present when a worker is exposed to any chemical
preparation in the workplace in any form (solid, liquid or gas). Some
are safer than others, but to some workers who are more sensitive to
chemicals, even common solutions can cause illness, skin irritation, or
breathing problems. Beware of:
•• Liquids like cleaning products, paints, acids, solvents – ESPECIALLY if
chemicals are in an unlabelled container!
•• Vapours and fumes that come from welding or exposure to solvents.
•• Gases like acetylene, propane, carbon monoxide and helium.
•• Flammable materials like gasoline, solvents, and explosive chemicals.
•• Pesticides.
c. Biological Hazards: Biological Hazards include exposure to harm or
disease associated with working with animals, people, or infectious plant
materials. Workplaces with these kinds of hazards include, but are not
limited to, work in schools, day care facilities, colleges and universities,
hospitals, laboratories, emergency response, nursing homes, or various
outdoor occupations.
Types of things you may be exposed to include:

•• Blood and other body fluids.
•• Fungi/mould.
•• Bacteria and viruses.
•• Plants.
•• Insect bites.
•• Animal and bird droppings.
d. Physical Hazards: A Physical hazard can be any factors within the
environment that can harm the body without necessarily touching it.
They include:

Radiation: Including ionizing, non-ionizing (EMF’s, microwaves, radio waves, etc.)
High exposure to sunlight / ultraviolet rays.
Temperature extremes – hot and cold.
Constant loud noise.
e. Ergonomic Hazards: Occur when the type of work, body positions and
working conditions put a strain on your body. They are the hardest to spot
since you don’t always immediately notice the strain on your body or the
harm that these hazards pose. Short-term exposure may result in “sore
muscles” the next day or in the days following the exposure, but long term
exposure can result in serious long-term illness. Ergonomic hazards include:
•• Improperly adjusted workstations and chairs.
•• Frequent lifting.
•• Poor posture.
•• Awkward movements, especially if they are repetitive.
•• Having to use too much force, especially if you have to do it frequently.
•• Vibration.
f. Work Organization Hazards: Hazards or stressors that cause stress (short
term effects) and strain (long term effects). These are hazards associated
with workplace issues such as workload, lack of control and/or respect, etc.
Examples include:
•• Workplace violence.
•• Intensity and/or pace.
•• Respect (or lack thereof ).
•• Flexibility.
•• Social support or relations.
•• Sexual harassment

Analyse the pictures below and answer the following questions:
a. Identify the potential work hasard
b. Suggest ways the hasard can be controlled

11.4. Ways to make work safer
Activity 11.4
Refer to anyone potential hazard such as slippery floors, suggest how this
workplace hazard can be reduced or eliminated?
Whether you work in a business, manage it, or own it, you all have the same goal
of not letting anyone get hurt on the job. There is something each of us can do to
make sure we all make work safer. One step at a time, we can make our workplaces
better places to work.
The workplace can be made safer by following the methods:

Method 1: Remove the Hazard
The best control measure is to remove the hazard from the workplace altogether, or
keep it isolated (away from workers) so it can’t hurt anyone. This way, the workplace
itself is safer, and all the responsibility for safety doesn’t fall on individual workers.
Here are some examples:
•• Use safer chemicals, and get rid of hazardous ones
•• Store chemicals in locked cabinets away from work areas
•• Use machines instead of doing jobs by hand
•• Have guards around hot surfaces
Method 2: Improve Work Policies and Procedures

If you can’t completely eliminate a hazard or keep it away from workers, good safety
policies can reduce your exposure to hazards. Here are some examples:
•• Safety training on how to work around hazards
•• Regular breaks to avoid fatigue
•• Assigning enough people to do the job safely (lifting, etc.)
Method 3: Use Protective Clothing and Equipment
Personal protective equipment is the least effective way to control hazards.

Personal protective equipment (PPE): Employers have duties concerning the
provision and use of personal protective equipment (PPE) at work. PPE is equipment
that will protect the user against health or safety risks at work. It can include items
such as respirators, protective clothing such as gloves, face shields, eye protection
, safety helmets, gloves, eye protection, high-visibility clothing, safety footwear and
safety harnesses and it also includes Respiratory Protective Equipment (RPE) that
serve to provide a barrier between the wearer and the chemical or material PPE must
be properly looked after and stored when not in use, e.g. in a dry, clean cupboard. If
it is reusable it must be cleaned and kept in good condition.
Figure 11.3: Fire and wire maintenance in the workplace
Figure 11.3: Fire and wire maintenance in the workplace

11.5. Emergencies at work
Figure 11.4: Emergencies at work

No business owner expects an emergency or disaster - especially one that affects
Hazard Scenes and Solutions

•• Analyse the story/picture below and identify ways (Methods) to prevent the
injury or hazard from happening again
1. Alphonsine is a 17-year-old dishwasher in a restaurant kitchen. To clean cooking

pans, she soaks them in a powerful chemical solution. One day, as Marie was lifting
three large pans out of the sink at once, they slipped out of her hands and back
into the sink. The cleaning solution splashed all over the side of her face and got
into her right eye. She was blinded in that eye for two weeks.
a. Name any potential health hazards to Alphonsine at her workplace
b. What strategies can you suggest to control or prevent such hazards?

2. Jacques works in the fields spraying pesticides on crops. After a few days of
spraying, Jacques became very ill. His eyes burned, his chest hurt, he had difficulties
breathing, and he felt dizzy. His friends took him to the health clinic but a week
later he was still having chest pains and difficulties breathing.
a. Name any potential health hazards to Jacques at his workplace
3. Safari was helping unload a big truck that supplies cement to the local area. He
was under a lot of pressure from the boss to get the truck unloaded quickly. When
he picked up one large and heavy sack, he slipped and fell. He tried to keep his
balance so that he wouldn’t drop the sack. He felt a very sharp pain in his lower
back. He kept working because he was embarrassed to let anyone know how
much he was hurting. The next day he couldn’t come to work, he was in so much
pain. He lost 5 days of work and his back still hurts.
a. Name any potential health hazards to Safari at his workplace

4. Patrick is 18 years old. He is very proud to have gotten a job working as a waiter
in a hotel restaurant. One day he slipped off some stairs while carrying a bowl
of soup. He tried to stop his fall but burned his arm and a customer‘s back in the
process. He also injured his back when he hit the stairs.
a. Name any potential health hazards to Patrick at his workplace
5. Kassim works for a construction company that makes large office buildings.
One day he arrived late and realized that the other workers were already up on
the roof. With some supplies in his backpack, he quickly climbed the ladder as
he did not want to get in trouble for being late. While scurrying up the ladder, he
slipped and fell. He survived, but broke several bones in his back and spent three
months in a cast.
a. Name any potential health hazards to Kassim at his workplace

them, their employees, and their business personally. The best way to protect
yourself, your workers, and your business is to expect the unexpected and develop
a well-thought-out emergency action plan to guide you when immediate action is
necessary.A
ActiviSty 11F.5activity 11.5
Activity 11.5
Activiw
1. Why is it important to recognize, prevent and handle different types of
hazards at home and in the workplace?
2. What does workplace emergency mean?
3. Name any situations that may be taken as emergencies at your school or
v any workplace you are familiar with. c
4. For any emergency situation identified above, what can be done to
handle it?
Workplace emergencies
A workplace emergency is an unforeseen or unplanned situation that threatens

your employees, customers, or the public; disrupts or shuts down your operations;
or causes physical or environmental damage. Emergencies may be natural or
manmade and include the following:
•• Severe injury,
•• Chemical spills,
•• Earthquake,
•• Severe storm,
•• Workplace violence resulting in bodily harm and trauma,
•• Floods,
•• Fires,
Responding to emergencies at the workplace

•• You are in charge of the health and safety of all employees in certain company
in your community. What would you do or advice would you give to fellow
workers in case of:
a. A fire outbreak
b. Chemical spill
c. Earth quake
d. Moving at night

e. Unhygienic practices at work
By its very nature, no one can predict an emergency. However, you can prepare for
one. Employers need to take time to ensure they have the training and planning
in place to effectively respond to an emergency. An emergency is defined as any
unforeseen crisis that demands an immediate response.
Emergencies in the workplace can lead to:

a. A disruption of work
b. Harm to employees or customers
c. Damage to materials, equipment, or facilities.
Below is how one can respond to the most common types of emergencies.
1. Earthquakes: During an earthquake, at work people will be at the
greatest risk from collapsing ceilings, windows, light fixtures, and other
falling objects. In case of an earthquake:
•• Wherever you are when an earthquake starts, take cover immediately. Move a
few steps to a nearby safe place if need be. Stay there until the shaking stops.
•• Stay inside.
•• Drop under heavy furniture such as a table, desk, bed or any solid furniture.
•• Cover your head and torso to prevent being hit by falling objects.
•• Hold on to the object that you are under so that you remain covered. Be
prepared to move with the object until the shaking has finished.
•• If you can’t get under something strong, or if you are in a hallway, flatten
yourself or crouch against an interior wall and protect your head and neck with
your arms.
•• Stay away from windows, and shelves with heavy objects.
•• If you are in a wheelchair, lock the wheels and protect the back of your head
and neck.
•• Do not use elevators. If you have to evacuate the building, use stairways to
leave the workplace.
•• Be ready to rescue people who may fall victim to the earthquake.

Fire outbreak
Figure 11.5: Fire Safety Checklist
Fire is dangerous especially if employees don’t know what to do and haven’t received
clear and concise training and instruction, and equally importantly, haven’t taken
part in routine and regular fire drills.
You may invite a local fire department representative to the workplace to help
identify fire hazards and to discuss how you and your staff should respond to a fire
in the workplace. Prevention is better than the cure.
Responding to a fire should start before the outbreak itself by:

•• Reviewing your fire risk management
•• Making sure that all staff is aware of any fire safety plans and procedures in
place, along with the location of fire extinguishers, escape routes and assembly
point(s)
•• Holding regular fire drills and fire alarm tests so that staff is well aware of their
escape routes and their responsibilities.
In case of fire in a workplace, follow the following basic steps:

•• Raise the alarm. Anyone discovering a fire should raise the alarm immediately,
regardless of how small the outbreak is or how innocuous it appears to be.
Fires can develop very quickly and every second counts
•• Evacuate: Evacuation should be prompt and calm, with everyone making
their way to the designated assembly point
•• Any hazardous machinery or processes should be shut down in line with the
fire evacuation procedure for the site
•• Do not stop to collect any personal belongings, and never use lifts in the event
of fire. This is because the lift could stop working, trapping you inside, or the
doors could open on the afflicted level and expose the occupants to flames,
heat and toxic gases
•• Head directly to the nearest emergency fire exit. Put your hand against any
doors you go through to check that the fire is not on the other side, and the last
person out should try to close doors behind them to prevent the fire spreading
through the building’s “fire compartments” and also to reduce the level of
oxygen available in any room to feed the fire
•• If the escape route is affected by smoke, drop down onto the ground and crawl,
as the available air will be cleaner closer to the ground
•• If the fire is small and controllable and you are trained in the use of a fire
extinguisher, you may attempt to extinguish the fire.
•• Get to the Assembly Point One of the most important steps in any fire
evacuation plan is choosing an assembly point
•• The location of the assembly point must be easily accessed by all exiting
persons and should have safe access for the emergency services.
•• Once you have exited the building, everyone should meet at the designated
assembly point.
•• A headcount (or nominal roll call) should be performed, making sure that any
visitors are accounted for.
•• You should not re-enter the building until told to do so by an attending Fire
Officer
•• Be sure to leave yourself a clear escape route and know how to recognize when
the fire grows out of your control.
•• Instruct a nearby employee to dial the emergency number
•• If your alarm system is not equipped to automatically communicate with local
emergency responders.
•• If it’s clear the fire cannot be controlled by a fire extinguisher, evacuate
immediately.
•• Do not wait around or attempt to manage the fire on your own.
•• Follow established evacuation procedures and assist fellow employees along
the way.

Release of hazardous substances
Hazardous substances are any substances dangerous to your health such as:
•• Solvents
•• Pesticides
•• Paints
•• Petroleum products
•• Heavy metals
In case of release of hazardous substances or chemical spills:

• If you come into contact with a chemical spill in your workplace, first try to
determine whether it is a low hazard or high hazard spill.
• Alert everyone in the area of the spill and evacuate to a safe location.
• If there is time, try to ventilate the area. If you have access to windows, open
them completely.
• If there is a chemical fume hood in the area of the spill, open the face of the
hood completely to begin the ventilation process.
• Notify the appropriate personnel or officials immediately, and try to secure
the area of the chemical spill so no unauthorized personnel can come into
contact with the spill
• Never touch the chemical spill without protective clothing and gloves, even
if you do not perceive immediate danger.
• If you know of or suspect that flammable gasses or vapours may be involved,
do not operate any electrical or motorized equipment, except to turn them
off. Remove any sources of heat from the area of the chemical spill as well
• If someone has been injured during the course of the chemical spill, remove
him or her entirely from the area so that they can get fresh air.
• Remove any items of clothing that may be contaminated.
• Get the person to a shower or other water source, and immediately flush
their skin and eyes with clean water for at least fifteen minutes. After fifteen
minutes of flushing with fresh water, use a gentle soap to clean their skin
• If you experience a chemical spill that is potentially an emergency or high
hazard spill, you should take great care to avoid the area of the spill entirely.
Emergency chemical spills are those that involves serious personal injury that
requires immediate medical attention, cause uncontrollable volatility and
fire hazards, cause airborne contamination, involves the contamination of a
public area, involves any amount of metallic mercury being spilled, demands
the use of a supplied air breathing mechanism, causes significant structural
damage in the area of the spill, involves substances that are unknown, and
involves a spill that will require a long and prolonged clean up

• Chemical spills classified as emergency or hazardous should only be treated
by professionally trained individuals. If you come in close contact with this
type of chemical spill, evacuate the area immediately. Try to isolate the area
of the spill by locking any entrances to the area, or barricading the area with
any materials you can find. If the chemical spill threatens to spread beyond
the area, pull the nearest fire alarm to evacuate anybody who may be in the
same building. If you are ever unsure as the nature of the chemical spill, it is a
good idea to assume that the hazard level is high. Treat this type of chemical
spill as a high hazard spill. Evacuate and secure the area, and contact the
appropriate authorities immediately
Keeping safe at night

• Try to plan ahead. Make sure someone knows where you are going, who you
are meeting and when you expect to return. Always plan how you are going
to get home again
• Know your limit. Alcohol will dull your instincts and can lead to you making
unsafe decisions
• Stay Alert! Avoid talking on your mobile phone or listening to music on your
head-phones, as this will distract you from your surroundings and prevent
you from hearing any potential danger signs
• Stick to busy streets if you can. Avoid poorly-lit areas, deserted parks, or quiet
alleyways
• If you are socialising with a group of people, take care of each other and make
sure everyone stays safe
• If you see someone else in trouble shout for help or call the police immediately.
Don’t ignore someone in trouble, but getting directly involved may aggravate
the situation
• Always carry the telephone number of a trusted, licensed taxi or minicab
company with you.
• Have your house keys ready before you get to your front door and carry them
on your person rather than in your bag just in case
• If you are being followed, head towards a public place and text a friend to
meet you or call the police. Shout and run if you feel that you are in danger
• Tell someone where you are going. Before you leave home, let someone
know where you are going and when you expect to be back
• Charge your cell phone. Always have a fully charged cell phone with you. If
you are in trouble, you can quickly call for help. You might also need your
phone to use mapping or other functions to get you to your destination safely
• Carry a small flashlight. Keep a mini flashlight on your keychain, where it will
always be with you. It will provide light in extra dark areas and give you more

confidence. Or learn to use the built-in torch on your phone. Travel with a
friend or in a group. There truly is safety in numbers, as criminals are less likely
to attack a group than an individual
• Be aware of your surroundings. Look around while you walk and pay attention
to what is going on around you. It will give you an early warning if someone
is looking to make trouble
• Stay in the well-lit areas. Walk or drive in well-lit, highly visible areas. Even if
it takes you longer, stay on a well-lit route rather than taking shortcuts down
dark roads or paths. Stick to streets populated with houses and shops rather
than empty lots or vacant stores
Good Hygiene Practices in the Workplace
Figure 11.6: Hygiene Practices
The goal of management is to prevent accidental exposures caused by inhaling

or ingesting hazardous substances. By consistently practicing good hygiene
when working with hazardous substances, exposures caused by accidental cross-
contamination can be prevented.
The best safety and health management practices involve not only the employer,
but the individuals in the company buying into the health and safety culture.
Below are some of the hygiene practices that maybe enforced at the workplace:
• Mandatory Hygiene Signs. Workplace mandatory hygiene signs have been
proven to have shown an increase in employee hygiene standards. These

signs should be placed in clear view of workers preparing food in the kitchens,
and for those taking a bathroom break in the toilets.
• Smoke, eat, and drink only in designated areas away from areas where
hazardous materials are used or stored. Small amounts of the substances
may be present in the area, and smoking, eating, and drinking nearby will
cause you to inhale or ingest the hazardous material. You should always wash
before smoking, eating, or drinking if you have been working with hazardous
materials. (now would be a good time to reference your substance abuse
prevention program)
• Keep work clothes clean and in good condition. Holes or tears will allow
hazardous materials to get on your clothes or skin, increasing the likelihood
that you will be exposed to the substance.
• Do not mix contaminated clothing with your home laundry. Not only will
cross-contamination occur, but it is possible to cause a fire if these clothes are
laundered. Find out what to do with your contaminated clothing before you
leave work. Many companies have an industrial laundry facility specifically
for contaminated clothing.
• If you splash hazardous materials on your eyes, skin, or clothing, wash
promptly in the proper manner, even if you have no apparent symptoms.
The SDS (Safety Data Sheet) will provide information about what to do in
case of splashes. Of course, the best time to look at the SDS is before you use
the substance, not when an emergency happens. In the event of an injury,
consult your E.M.S. or Medical Safety Program.
• Always wash before you apply makeup, lotion, lip balm, or gloves. Applying
these to contaminated skin is likely to cause an accidental exposure.
• Remove contact lenses when working in an area where vapors are present.
Contact lenses absorb substances from the air, causing eye irritation and
other potentially serious conditions.
• Keep hazardous material storage areas clean. In case of a spill, the area
should be cleaned according to proper spill control and clean-up procedures.
Materials used to clean up the spill must also be disposed off properly.

You have been given a job as a restaurant manager after your senior six, describe
the safety and health measures you would put in place for better services to
clients and working conditions of workers.

End Unit Assessment
Read and answer the following questions
1. If you are inside a building and begin to feel the shaking of an earthquake,
what should you do?
2. If you smell smoke and suspect a fire burning somewhere in the building,
what should you do?
3. If an unknown chemical spills in your workplace, what should you do?
4. If you are working outside when a storm with lightening starts, and you
can‘t get to shelter, what should you do?
5. A co-worker slips on a slippery floor and hits his head, losing consciousness.
What do you do?
6. If a co-worker falls off a ladder and injure his back, what should you do?
7. Which is more hazardous, a sharp knife or a dull knife?
8. True or False? If you are caught in a fire you should stay close to the ground.
9. What are some security measures that can replace the chance of workplace
violence?
10. What phone number should you call to report an emergency?
11. What should you do for a severe cut?
12. What should you do for a very serious second or third degree heat burn?
13. You are working on a construction site and a co-worker faints and falls into
a trench. What do you do?
14. You are driving home from work. It is late and you are on a road in a remote
rural area of Kigali. Your motorcycle breaks down. What should you do?
15. What are the steps for using a fire extinguisher?
16. Name 3 times where it is necessary to wash your hands.
17. What is at least one item that should be included in an emergency kit?
18. Name two things that should be an Emergency Action Plan.
19. If a chemical gets into your eye, what should you do?
20. If your clothes catch fire, what should you do?
21. Mention at least one factor that increases your risk of being robbed at work?
22. Mention two methods to clean water so that it becomes safe for drinking?
23. What should be used to put out a grease fire on a stove?
24. Name 2 personal hygiene practices that can prevent spreading germs when
working in a restaurant.
25. What does the skull and crossbones symbol mean?

26. Wipe cooking services once at the end of every evening when working in
a restaurant to avoid spreading germs. True or False?
27. What are some security measures that can reduce the chance of workplace
violence?
28. How many exit routes should a workplace have?
29. Describe the possible workplace health hazards depicted by each symbol
below

Bibliography
EDC, U. P. (2015). Work Readiness Training Program. In U. P. EDC, Akazi Kanoze Youth
Livelihoods Project (pp. 177-214). Kigali-Rwanda: EDC, USAID, PEPFAR.
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What is the purpose of the book?

What is the purpose of the book?

What are some of the topics covered in the book?

What are some of the topics covered in the book?

ENTREPRENEURSHIP

STUDENT’S BOOK FOR

Kigali, January 2019

ii Entrepreneurship Senior Six Student Book

Rwanda Education Board is honoured to present to you this Entrepreneurship book

The government of Rwanda emphasizes the importance of aligning teaching and

In competence-based curriculum, learning is considered as a process of active

• Work on given activities which lead to the development of skills

Entrepreneurship Senior Six Student Book iii

Dr. NDAYAMBAJE Irénée

Director General, REB

iv Entrepreneurship Senior Six Student Book

Special acknowledgement goes to the University of Rwanda which provided experts

Entrepreneurship Senior Six Student Book v

Unit 3: CUSTOMS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 8

Unit 5: FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 8

Unit 6: STOCK CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6 4

Unit 7: BUSINESS PLAN OF AN ENTERPRISE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 8 8

Unit 8: OPERATIONAL BUSINESS PLAN FOR AN ENTERPRISE . . . . . . . . . . . . . . 2 0 6

Unit 9: QUALITY ASSURANCE AND QUALITY COMPLIANCE IN BUSINESS. . . 2 5 2

Unit 10: WORK HABITS AND BEHAVIOUR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 7 4

Unit 11: WORK SAFETY AND HEALTH. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 0 4

viii Entrepreneurship Senior Six Student Book

Key Unit Competency: Evaluate the contribution of entrepreneurship towards

2 Entrepreneurship Senior Six Student Book

Entrepreneurship Senior Six Student Book 3

Rwanda is a fast developing country in terms of social, economic infrastructural

4 Entrepreneurship Senior Six Student Book

Social-economic development: it is a process of social economic transformation

Entrepreneurship Senior Six Student Book 5

Figure1.2 Ese URWIBUTSO/SINA GERARD Company

Ese RWIBUTSO/SINA GERARD Company certified since 2007 is currently supporting

The company has different activities which include:

6 Entrepreneurship Senior Six Student Book

1. Describe some of the changes in terms of development that you have

1.2 Factors and indicators of socio-economic development

1.2.1 Factors for socio-economic development

Entrepreneurship Senior Six Student Book 7

8 Entrepreneurship Senior Six Student Book

1.2.2 Indicators of Socio-economic development

Entrepreneurship Senior Six Student Book 9

10 Entrepreneurship Senior Six Student Book

2. Every last Saturday of the month, all Rwandans participate in

a. Briefly share with the congragation a presentation about the

b. Discuss the different challenges to social economic development of

c. Suggest and briefly explain possible

Entrepreneurship Senior Six Student Book 11

Entrepreneurship has an important role to play in the development of the country.

12 Entrepreneurship Senior Six Student Book

Figure 1.4: Role of entrepreneurship in an economy

Entrepreneurship helps in the process of socio-economic development in the

Entrepreneurship Senior Six Student Book 13

Example: Mahoro opened a restaurant. He has employed a manager, an accountant,

Increases Government revenue (Business Taxes). Government imposes taxes as a

14 Entrepreneurship Senior Six Student Book

i. Provide variety of goods (products) and services. Enterprises produce