Credit involves a promise to pay in the future. To establish this promise, there must be evidence of the right to repayment in the future. Such evidence is very vital and is quite numerous. The principal ones are;
- Banknotes
- Bank drafts
- Government bonds
- Promissory notes
- Cheques
- Money orders
- Postal orders
Other written documents that serve as evidence of credit facility transactions between two parties are; letter of credit, hire purchase contract, bill of exchange, promissory notes, credit card, IOU, Lease agreement, mortgage agreement, etc
Evaluation Questions
1. Explain the following terms relating to credit;
i. Credit
ii. Creditor
iii. Debtor
iv. Mortgage
v. credit worthiness
2. Name five credit instruments known to you
3. Differentiate between hire purchase and credit sales
4. Give four advantages of hire purchase for each of the following.
i. A seller
ii. A buyer
5a. Differentiate between hire purchase and deferred payment
b. State five problems of credit sales
6. a What is credit?
b. State features of hire purchase (SSCE June, 2000)
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