At the end of this lesson, Students will be able to:

 Define money
 Explore the functions of money
 Show how money eliminate the difficulties of barter systemof
Financial Manager
 Describe the characteristics of Corporations
 Distinguish between Corporation and Partnership
 Definition of Money:
Money is anything that performs the function of money.
Money is anything which is widely accepted in payments for goods or
in discharge of other kinds of obligations.
Chandler and Goldfield (1997) defined money as “anything that is
generally acceptable as a medium of exchange”.
Amacher and Ulbrich (1986) defined it as “an item that people accept
as payment for goods or services.”
Cox (1983) defined it as “anything which passes freely from hand to
hand and is generally acceptable in settlement of debt and other
financial obligation is money.”
 Functions of Money
Money performs a number of primary, secondary, contingent and
other functions which eliminate the difficulties of barter.
Primary functions:
(a) Money serves as a medium of exchange. With the introduction
of money, goods and services are exchanged with money and thus
exchange is facilitated. With money as a mean of exchange, the
problems of barter are bye-passed.
(b) Money serves as a unit of account. All business transactions are
accounted in oney units. Whether it is payments, debts or costs, it
is made in money units. This facilitates exchange or transactions.
(c) (c) Money serves as a measure of value. With money, one can
measure the quality or value of goods, services or different
occupations.
 Functions of Money Continue…

Secondary functions:
(a)Money serves as a standard for deferred payments - With the use
of money, one can postpone or defer the payment for goods and
services purchased. This function is important these days when
business transactions are carried out mostly on credit basis.
(b)Money serves as a store of value. In-so-far as there is no inflation
and deflation in the economy, money serves as a store of value
since money would not lose its value any period it is kept.
(c)Money serve as a transfer of value: since money is a generally
acceptable means of payment and acts as a store of value.
 Functions of Money:
Contingent functions:
(a) Money as the most liquid of all liquid assets - Money as the most liquid of all liquid
assets in which wealth is held. Individuals and firms may hold wealth in infinitely
varied forms.
(b) Basis for the credit system - Money is the basis of credit system. Business
transactions are either in cash or on credit.
(c) Equaliser of marginal Utilities and productivities: Money acts as an equaliser of
marginal utilities for the consumer. The main aim of a consumer is to maximise his
satisfaction by spending a given sum of money on various goods. This happens
when the ratios of the marginal utilities and prices of the various goods are equal.
(d) Measurement of National Income: It was not possible to measure the national
income under the barter system. Money helps in measuring national income.
This is done when the various goods and services produced in a country are
assessed in money terms.
(e) Distribution of National Income: Money also helps in the distribution of national
income. Rewards of factors of production in the form of wages, rent, interest and
profit are determined and paid in terms of money.
Quiz Test
Quiz Test
Quiz Test
Quiz Test