Money and Credit
Commerce is the process of exchanging goods and services on a large scale. Commerce is an important academic stream that imparts detailed knowledge related to economy, finance, accounting, and other topics which you can easily relate to daily lives. Specifically, the subjects included in this stream are Economics, Business Studies, Accountancy, and English along with a choice of Maths or Computer Science. It is a very important subject that will help students learn about how the business world actually works.
Since commerce involves a lot of processes to be completed it will have to employ lots of laborers in the process, thus it easily generates various employment opportunities in other areas such as transport and logistics, banking, and retail. Commerce overall is an essential component of national development and wealth creation which highly contributes to the economy of the country. Commerce education is mainly aimed at giving adequate knowledge about the wholesale trade, retail, export trade, import trade, and entire- port trade. Moreover, it provides some knowledge about the movement of goods, etc., Transport, Communication Insurance, Ware-housing, Money, Banking & Finance, and Mercantile Agencies.
Explanation
Money serves as a decent medium of exchange that enables the user to make transactions and buy goods and avail services from any form of business that prevails in the market.
Credit is the money borrowed for some personal use from a bank or lender based on the promise that the money will be paid back in the future along with the interest amount that will be calculated for every month. The flow of credit in an economy controls the money supply of any country and affects the stock market too.
Introduction about Money and Credit
Money, in its rudimentary understanding, relates to the currency that we use. It can be either in the form of paper notes or coins. However, the scope of the concept of money is much broader as it includes a whole host of instruments within it.
Credit, as it is understood in the common parlance means borrowing, but technically, it also falls within the ambit of money.
Read on to know more about money and credit.
Main Functions of Money
Money and credit notes would mention the following as the role of money within the present-day economy in relation to -
Production
For deciding, planning, executing, and managing activities of production.
Distribution
Allocation of reward across various production factors in the form of rent, wages, interest, etc.
Consumption
Payment by consumers for goods or services
Capital Formation
Savings may be mobilized for investment into profitable ventures.
External Trade
Foreign currencies in external trade are taken as receipts.
Public Finance
Government receives taxes as a way of income and subsequently makes an expenditure for administrative and development processes.
Various Functions of Credit
The main functions of credit to be presented in money and credit ppt are –
There is elimination or minimization of the inconveniences or risks that are present in a cash transaction.
Remittance of funds becomes much easier with credit instruments.
Large scale production is facilitated by the credit system.
Short-term credit is crucial for industries.
Different Forms of Money
For the money and credit class 10 project, you may have to mention the various forms of money. The different forms of money are –
Paper Money
It includes notes of various denominations, made out of paper and issued by the Central bank.
Metallic Money
Metallic money includes both token money and coins. The coins represent metallic money and are mainly issued in the denominations of Rs. 1, 2, 5, and 10.
Legal Money
It indicates the money that is accepted as a valid means for payment in discharging a debt. All coins and notes issued by the Reserve Bank of India or the government fall within this category.
Bank Money
Forms of bank money include cheques, drafts, and bills of exchange.
Near Money
Any type of instrument which is easily convertible to money is called near money. Examples – government bonds, deposits, etc.
Plastic Money
Smart cards, credit cards, etc. are termed as plastic money.
How is Credit Extended?
The main two forms of availing credit are – (1) Bank loan, and (2) Credit card. For money and credit extra questions, an elucidation may be required on this point.
Banks hold on to cash deposits, which are termed as cash reserve ratio. This fund is generated from the money that is deposited by the customers of the bank. A portion of such a deposit is lent out as a credit, at an interest rate. This interest corpus then acts as the income of the bank.
Credit cards, as another way for availing credit, will find an explanation in the money and credit project pdf. Credit cards are used to pay for purchased services or products without having to pay cash. The payment is undertaken electronically. The debt owed to the credit card company will have to be repaid at the end of the billing cycle.
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FAQs on All About Money and Credit: Explained
1. What are the Different Forms of Credit?
The main forms of credit, as elucidated in money and credit class 10 notes, are given through banks or by way of a credit card.
The credit process through banks involves loans approved by such financial institutions. The credit extended by banks can be both secured and unsecured. Secured credit is backed by collateral, whereas unsecured credit is not asset-backed.
On the contrary, a credit card extends a line of credit for making purchases, or payment for services or goods without having to pay cash. The credit card holder has to pay back the loan amount at the end of the billing cycle. One can understand that the concept of money and credit are inter-related even within different forms of credit.
2. What is Understood By Money and Credit?
Money relates to such an object which is accepted as payment for any services or goods. The primary function of money is that of a medium of exchange. The underlying meaning of credit is the borrowing of money, and the same has to be repaid at a deferred date. In the case of credit, the repayment amount becomes more than the borrowed amount, owing to a charge of interest. Both money and credit circulate within an economy, and understanding of the same is important for further improvement of an economy.
3. What are the Main Forms of Money?
The main forms of money that may be mentioned in a project on money and credit include – (1) paper money, (2) metallic money, (3) legal money, (4) bank money, (5) near the money, and (6) plastic money.
No matter the form of money involved, its value will always be connected to its exchange value. There is no other independent value attached.
4. How is Commerce an easy-scoring subject?
Commerce is a subject where if you learn all the definitions, concepts and graphs well you can easily get high scores. Every subject needs prior preparation. Vedantu website provides lots of past years' question papers and other sample question papers with solutions as well for you to prepare more efficiently. By referring to them you can easily find out what are the most repetitive questions that appear every year and you can give more attention to them. Commerce is a subject where you can write without any limits but you should check the marks system and manage time as well because we can't be wasting time on one single question over the others.
5. What is the major difference between credit and money?
The key difference between cash and credit is that cash is your own earned money and credit is the bank's or someone else's money. When you pay with cash, you hand over the money, take your goods or any particular services, and you are done with that transaction. But when you pay with credit, you borrow money from someone else or from some other sources to pay, and hence you are liable until you repay them.
6. Do banks create money by giving loans?
The modern money that is available today is simply through providing credit facilities to the people. Banks can very easily create money literally out of nothing, simply by making and giving out loans. This misconception may stem from the seemingly magical simultaneous appearance of entries on both the liability and the asset side of a bank's balance sheet when it creates a new loan. It is an expense when the bank initially processes loans for any people but then it comes back in with interest and the original amount hence a profit-making situation for the banks.
7. When should one use credit as an option?
There are 5 main situations where you can use credit
If you're repairing your credit score because you feel you have made a few money mistakes in an earlier business stage and now your credit score is lower than you'd like then you can very well opt for credit options in your future transactions.
If you're stockpiling rewards.
If you're making a large purchase like buying a house with home loans or buying any electronic items for your home.
If you're going on vacation or a foreign trip and cannot bear the entire expense with your own money.
If you're shopping online then you can very well use your credit card for transactions.
8. How are overdraft and cash credit different from each other?
Cash credit is known as a short-term business loan. It is meant for entrepreneurs wanting to get quick working capital to grow or expand their business to the next stage. An overdraft facility, on the other hand, is definitely a comfortable yet risky long-term financial assistance. It lets you withdraw money from your account even with zero balance and also certain financial institutions even consider bank statements as proof to lend further money to see their credit status.
9. What are the Different Forms of Credit?
The main forms of credit, as elucidated in money and credit class 10 notes, are given through banks or by way of a credit card.
The credit process through banks involves loans approved by such financial institutions. The credit extended by banks can be both secured and unsecured. Secured credit is backed by collateral, whereas unsecured credit is not asset-backed.
On the contrary, a credit card extends a line of credit for making purchases, or payment for services or goods without having to pay cash. The credit card holder has to pay back the loan amount at the end of the billing cycle. One can understand that the concept of money and credit are inter-related even within different forms of credit.
10. What is Understood By Money and Credit?
Money relates to such an object which is accepted as payment for any services or goods. The primary function of money is that of a medium of exchange. The underlying meaning of credit is the borrowing of money, and the same has to be repaid at a deferred date. In the case of credit, the repayment amount becomes more than the borrowed amount, owing to a charge of interest. Both money and credit circulate within an economy, and understanding of the same is important for further improvement of an economy.
11. What are the Main Forms of Money?
The main forms of money that may be mentioned in a project on money and credit include – (1) paper money, (2) metallic money, (3) legal money, (4) bank money, (5) near the money, and (6) plastic money.
No matter the form of money involved, its value will always be connected to its exchange value. There is no other independent value attached.
