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