Tuesday, 22 November 2011

Describe the various forms of money

The money is generally classified under three main heads :

Now we discuss these in details :

It consists of coins made of gold. Silver, copper or nickel. It varies in weight fineness and value. All coins are stamped with dye. It has two kinds :

i. Full Bodied Money :-
The full bodied money is that whose face value is equal to the value of metal contained in it.

ii. Token Money :-
Its face value or printed value is higher than value of the metal contained in it.

Any means of payment which has state sanctioned behind it and a debtor can legally compel his creditors to accept. It is called legal tender money.

i. Limited Legal Tender :-
Legal tender money is that which a creditor can accept in settlement of claims upto certain limit only. So legal tender money can be forced upon others in payments up to certain extent.

ii. Unlimited Legal Tender :-
Unlimited legal tender money is that which can be forced upon others in payment upto unlimited extent.

Paper money consists of notes issued by the Central Bank and by the Govt. For example one Rupee note is issued by Govt. and other notes are issued by the state bank. It has three kinds :

i. Convertable Paper Money :-
Convertable paper money is that money which is fully backed by the equivalent metallic reserves. The holder bank note can easily get it converted into metallic money on demand.

ii. Inconvertible Paper Money :-
It is that paper money which can not be converted in to full bodied coins, gold, silver or any other form of money.

iii. Fiat Paper Money :-
Fiat money is composed of token coins and convertible paper money. It circulates because Govt. has declared it legal tender money. So in this way it becomes fiat money.
At present age all types of money excluding bank deposits are termed as fiat money.

iv. Standard Money :-
It presents the money of account. By money of account is meant the monetary unit in which the prices, denotes and other transactions are expressed.

The term bank money applies to that near money which is not legal tender currency but is accepted as a medium of exchange on account of confidence in the issuing authority. Bank money chiefly consists of cheques, bill of exchange and drafts.

i. Cheque :-
A cheque is an order on a bank by its client to pay a sum of money to himself or to a third party on demand. There are three kinds of it.
1. Bearer Cheque
2. Order Cheque
3. Crossed Cheque

ii. Bill Of Exchange :-
A bill of exchange is an order from a drawer to a drawee to pay a certain sum of money mentioned on the bill to the former or to the bearer at a fixed future date.

iii. Draft :-
A draft is a cheque drawn by a bank on its own branch or on the branch of another bank at a different place requesting it to pay on demand a specified amount to the persons named in it.


Sandhez 8 December 2011 at 00:12  

Very Resourceful and good and precise Notes

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