CMCP Credit Instruments-Definition, Classes, and Kinds Questions and Correct Answers

Limited acceptability acceptance is predicated within a restricted field such as the credit standing of the issuer, length of payment time, amount involved, and some other aspects. Credit Instrument a document evidencing the existence of a credit obligation which defines the responsibility of the debtor towards his creditor and the right of the creditor to collect from the debtor on the date designated. As to Acceptability Credit instruments may either be of general or limited acceptance General acceptability widely acceptable as can be passed from one hand to another without further questions of their sources and exchangeability As to Form The credit instruments may either be orders or promises to pay. Order to pay defined as the order of one person to another to pay a third person money on demand or at a definite future time Promise to pay a vow of one person to pay another money on demand or at a definite time As to Function Credit instruments may be classified into credit money, commercial credit instruments, and investment credit instruments. Credit money for general acceptability as a medium of exchange. Commercial credit instruments portrays the use of credit in a short-term mode and for commercial purposes. Investment credit instruments facilitates long term credit transactions Credit money paper money in the form of credit instrument being issued by the government to serve as the standard money that is allowed to circulate and made acceptable in payment for goods and services as well as settlement of obligations. Commodity standard the money use is back up by specific commodity or commodities and money adopted is convertible into the commodity backing it.