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State Four Functions of Money – 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
  • Unit of Account:  Money serves as a standard and numerical unit of measurement of the 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 that helps 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