Difficulty: Introductory | Prerequisites: None
This set of notes covers five foundational business and economics concepts: fiscal policy (how governments steer an economy through spending and taxation), cost accounting and indirect costs (how organisations track and allocate expenses), the recruitment process (how firms identify, attract and select employees), and supply chain management (how goods move from raw materials to finished products). These are introductory-level definitions you will encounter across business, economics and management courses.
Fiscal policy
Government adjustments to public spending levels and tax rates, used to influence a nation's economic activity. In simple terms, this means the government deciding to spend more (or less) and tax more (or less) to speed up or cool down the economy.
Cost accounting
The process of recording, classifying, analysing, summarising and allocating costs associated with a business process, and then developing courses of action to control those costs. Think of it as the internal scorekeeping that tells a company exactly where its money goes.
Indirect costs (aka overheads)
Expenses that are not directly traceable to a specific product or service but are necessary for the general operation of the business, such as utilities, rent and administrative salaries. In simple terms, these are the bills you would still pay even if you stopped making any one product.
Recruitment process
The sequence of steps an organisation follows to fill a vacancy: identifying the need for a new employee, defining the job role, attracting candidates and selecting the most suitable individual. Think of it as the hiring pipeline from "we need someone" to "you're hired."
Supply chain management (SCM)
Managing the flow of goods and services from raw materials through to finished products delivered to the end customer, including procurement, production, logistics and storage. In simple terms, it is everything involved in getting a product from its raw ingredients to the customer's hands.
Fiscal policy is one of the two main levers governments use to manage the economy (the other being monetary policy, which operates through interest rates and the money supply). It works through two channels:
Government spending – increasing spending injects money into the economy (expansionary); cutting it withdraws money (contractionary).
Taxation – lowering taxes leaves households and firms with more disposable income; raising taxes does the reverse.
The goal is to smooth out business cycles: stimulating demand during recessions and restraining overheating during booms. Fiscal policy decisions are made by elected officials (parliament or congress), which distinguishes them from monetary policy decisions made by central banks.
Real-world application: When governments issued stimulus cheques during economic downturns, that was expansionary fiscal policy in action, putting money directly into consumers' pockets to boost spending.
Cost accounting sits inside management accounting. Its purpose is to give managers the detailed cost information they need to make decisions, set prices and control waste. The core steps are:
Recording – capturing every cost as it occurs.
Classifying – sorting costs into categories (direct vs. indirect, fixed vs. variable, product vs. period).
Analysing and summarising – aggregating the data so patterns and outliers become visible.
Allocating – assigning shared costs to specific products, departments or processes.
Controlling – using the information to develop actions that reduce or contain costs.
Direct costs can be traced straight to a product or service (raw materials, production-line wages). Indirect costs cannot: they support the business as a whole. Common examples include rent, utilities, insurance and administrative salaries.
The challenge with indirect costs is allocation. Because they do not attach naturally to a single product, accountants must choose an allocation base (labour hours, machine hours, floor space) to spread them fairly. The choice of base can significantly change the apparent profitability of a product.
Real-world application: A bakery's flour cost is direct (traceable to each loaf), but the electricity bill for the whole shop is indirect. If the bakery makes both bread and pastries, it needs an allocation method to decide how much of that electricity bill each product line should bear.
Recruitment is the funnel through which an organisation fills a vacancy. The standard stages are:
Identifying the need – a manager recognises that a new hire is required (growth, replacement, restructuring).
Defining the role – writing a job description and person specification that set out duties, qualifications and competencies.
Attracting candidates – advertising through job boards, agencies, social media, employee referrals or internal postings.
Screening and shortlisting – reviewing applications against the person specification to create a manageable candidate pool.
Selection – interviews, assessments and reference checks to identify the best-fit candidate.
Offer and onboarding – extending the offer and integrating the new hire into the organisation.
Recruitment can be internal (promoting or transferring existing employees) or external (hiring from outside). Each has trade-offs: internal recruitment is faster and cheaper but limits the talent pool; external recruitment brings fresh perspectives but costs more and takes longer.
Real-world application: When a tech company posts a role on LinkedIn, runs a coding challenge, then conducts panel interviews, it is executing steps 3 through 5 of this process.
Supply Chain Management (SCM) covers the entire lifecycle of a product, from sourcing raw materials to delivering the finished good to the customer. The key functions within SCM are:
Procurement – sourcing and purchasing raw materials or components from suppliers.
Production – transforming inputs into finished goods through manufacturing or assembly.
Logistics – moving goods between locations (inbound to factories, outbound to customers).
Warehousing and inventory – storing raw materials, work-in-progress and finished goods, and managing stock levels to balance availability against holding costs.
Distribution – getting products to retailers or end customers through wholesale, retail or direct-to-consumer channels.
Effective SCM aims to minimise cost while maximising speed, reliability and flexibility. Modern supply chains often span multiple countries and involve dozens of intermediaries, making coordination and visibility critical.
Real-world application: When a smartphone manufacturer sources chips from Taiwan, assembles handsets in China and ships them to retailers worldwide, every handoff in that journey is a supply chain management decision.
Students often think fiscal policy and monetary policy are the same thing. They are not. Fiscal policy is about government spending and taxation; monetary policy is about interest rates and money supply, and is typically set by a central bank, not elected officials.
Students often confuse indirect costs with variable costs. An indirect cost is defined by traceability (can you link it to a specific product?), while a variable cost is defined by behaviour (does it change with output?). Rent is indirect and fixed; electricity may be indirect and variable.
Students sometimes assume recruitment ends at the job offer. Onboarding is part of the recruitment cycle, and a poor onboarding experience can undo a successful selection.
Students frequently describe supply chain management as "just logistics." Logistics is one component. SCM also includes procurement, production planning, inventory management and demand forecasting.
Expect a question asking you to distinguish fiscal policy from monetary policy and name who controls each.
Cost accounting questions often ask you to classify a list of expenses as direct or indirect. Read each one carefully: the same expense can be direct in one context and indirect in another (a supervisor's salary is direct to the department but indirect to a single product).
Recruitment questions may ask you to compare internal versus external recruitment and state advantages and disadvantages of each.
SCM questions frequently test whether you understand the full scope of the supply chain beyond transportation.
True or false: Fiscal policy is set by the central bank. (False, it is set by the government/legislature.)
Fill in the blank: Cost accounting's final step is developing courses of action to ______ costs. (control)
True or false: Rent is an example of a direct cost. (False, rent is typically an indirect cost.)
Fill in the blank: The recruitment process begins with identifying the ______ for a new employee. (need)
True or false: Supply chain management covers only the transportation of finished goods. (False, it spans procurement through to final delivery.)
Q: Define fiscal policy and name the two tools a government uses to implement it.
A: Fiscal policy is the use of government spending and taxation to influence economic activity. The two tools are adjustments to public expenditure and changes to tax rates.
Q: What is the difference between direct costs and indirect costs? Give one example of each.
A: Direct costs are traceable to a specific product or service (e.g. raw materials). Indirect costs are not directly traceable and support the business as a whole (e.g. rent or utilities).
Q: List four stages of the recruitment process in order.
A: Identifying the need, defining the role, attracting candidates, and selecting the most suitable individual.
Q: Explain why choosing an allocation base matters in cost accounting.
A: The allocation base determines how indirect costs are spread across products or departments. Different bases (labour hours, machine hours, floor space) can make the same product appear more or less profitable, which affects pricing and strategic decisions.
Q: What does supply chain management encompass beyond logistics?
A: SCM also includes procurement of raw materials, production planning, inventory management, warehousing and demand forecasting.
Fiscal policy connects to macroeconomics (aggregate demand, GDP, the multiplier effect) and public finance. Understanding it alongside monetary policy gives a complete picture of how governments and central banks manage economic cycles.
Cost accounting feeds into managerial decision-making, pricing strategy and budgeting. If you study operations management later, the cost structures you learn here underpin break-even analysis and make-or-buy decisions.
Recruitment links to human resource management more broadly, including training, performance management and employment law. Supply chain management connects to operations management, international trade and logistics, and increasingly to sustainability and ethical sourcing.
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