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  1. Marine Insurance | Week 1
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  2. Non-insurable Risks | Week 2
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  3. Banking - Central Bank of Nigeria | Week 3
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  4. Types of Account | Week 4
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  5. Warehousing | Week 5
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  6. Capital | Week 6
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  7. Credit | Week 7
    3 Topics
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  8. Profit | Week 8
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  9. Turnover | Week 9
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  10. Business Law | Week 10
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Lesson 7, Topic 3
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Credit Instruments

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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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Question 6


6 (a) What is credit?
(b)State features of hire purchase (SSCE June, 2000)


a. Credit occurs when a seller grants permission to a buyer to take possession and enjoy a commodity with a promise to pay in the future.


i. In hire purchase, buyers can take possession of goods but not ownership
ii. Hire purchase is good for durable goods
iii. It must be evidenced in writing
iv. The cash price and hire purchase price of the goods must be stated
v. The seller has the right to repossess the goods if the buyer fails to pay
vi. It attracts higher prices.
vii. The goods will continue to be under hire and will not belong to the buyer
viii. A copy of the agreement is to be made available to the hirer within 14 days of entering into the agreement.