Paper money :


The term paper money refers to the note; issued by the state or by bank, usually the central bank. The use of paper money has become very wide due to its many convenience as a medium of exchange. Paper currency may be representative, convertible or fiat.

Bank money :

Bank money occupies a very predominate position as a medium of exchange in the advanced countries of the world today. Nearly 9/10 of all transaction take place by cheques. 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.

Cheque :

A Cheque is merely an order on a bank but its client to pay a sum of money to himself or to a third party on demand. There are three kinds of chaques.

a. bearer chaque;
b. order chque; and
c. cross cheque.


Bearer Chaque :

Barer Chaque is that which can be cashed from a bank by any person who presents is at the counter. Bearer cheque requires no endorsement.


Order Cheque :

If the word bearer is stuck off from the cheque, it then becomes an order cheque. Order cheque is a safe form of payment because it can not be enacted unless a bank that is paid to the right person ascertains it is paid to the right person.

Crossed Cheque :

If two parallel lines are drawn across the face of the cheque and the words. “& Co” are written between them, it become a crossed cheque. The payment made by the crossed cheque can only be deposited in the payee’s account or it can be endorsed to somebody else account by the payee. The crossed cheque cannot be cashed when presented at the counter of the bank.


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 the bearer or the bearer at a fixed further time. A bill of exchange is of two types. It may be sight bill which is payable on demand or time bill which can be paid after a certain specified period. The bill of exchange is used for commercial purposes only both inside and outside the country. When it is used for financing trade inside the country, it is named as inland bill of exchange. It is used for foreign trade, it is called foreign bill of exchange.


Draft :

A draft is 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 person named in it. It is one of the cheapest methods of remitting money to persons both inside and outside the country.