a) State four functions of money.   b) Explain six advantages of payment by cheque

a) State four functions of money.

 

b) Explain six advantages of payment by cheque

Explanation

(a)  Functions of money:

  • It is used as a medium of exchange;
  • It serves as a standard of deferred payment.  Goods can be bought on credit and payment made in a month’s time
  • Unit of Account:  Money serves as a standard and numerical unit of measurement of market value of goods and services
  • It serves as a store of value which enables money to be kept for use in future.

           

(b)  Advantages of payment by cheque:

  • It minimizes the use of cash in settling indebtedness;
  • If a cheque is lost, it is easier to trace than when cash is lost;
  • It is more convenient to move about with cheque than cash;
  • The drawer of a cheque can stop payment before it is cashed;
  • Cheque stubs serve as a receipt which help the drawer to keep records of payment;
  • Postdated cheque serves as means of deferred payment;
  • Cheques can be made out for any amount;
  • Payment by cheque saves time and energy in counting cash;
  • The parties to the transaction need not meet since cheques can be sent by post;
  • It is more secured to move around with cheques than cash
You May Also Like