Money is all that serves as a medium of exchange. It includes metallic coins, currency notes, bills of exchange and drafts.

Functions of Money

1. Its serves as a medium of exchange. All buying and selling is done through the medium of money.

2. Money is used as a common measure of value. The values of all commodities are measured in terms of money.

3. It serves as a standard of deferred payment. All browsing and lending is done in money.

4. It serves as a store of value. We store value in the form of money, not in the form of any other commodity.


Types of Money

1. Standard money: It is that forms of money in terms of which all values are measured and the face value of which is equal its intrinsic value e.g. gold coins.

2. Token money: It is that form of money the intrinsic value of which is less than its face value e.g. small coins and paper notes.

3. Paper money: It is made of paper and issued by the government of a country. It is of two kinds (a) Convertible (b) Inconvertible.
(a) Paper money is convertible when it can be convertible into standard money at the option of the holder.
(b) It is said to be inconvertible when it cannot be redeemed into gold or silver on presentation. Such notes may be issued by the government of a country in times of emergency.

4. Legal Tender Money: Money which can be legally tendered. Payment of debts or other obligations is said to be legal tender money.

There are two kinds of legal tender:

a. Limited legal tender: It is that form of legal tender money which can be paid in discharge of an obligation up to a certain limit. Small coins other than 50 paisa bits are legal tender up to Rs. 10.

b. Unlimited legal tender: It is the form of legal tender money which can be paid in discharge of debt to any amount.

Also See: Monetary Standard , Value of Money

Next Chapters

Estimating Procedure
Difference between Estimating & Costing
Depreciation & Obsolescence
Material Cost Calculation
Calculating Labor Cost
Direct and Indirect Expenses
Component Cost
Machine Shop Estimating
Forging and Forging Types
Starting an Organization
Welding Cost Estimation
Jigs and Fixtures
Qualities of an Entrepreneur
Starting Small Scale Industries
Budget and Budgetary Control
Supply & Law of Supply
Exchange and Barter Exchange
Classification of Market
Money and Types of Money
Trade Cycle
Break Even Analysis
Financial Management

Latest Articles

Average Acceleration Calculator

Average acceleration is the object's change in speed for a specific given time period. ...

Free Fall Calculator

When an object falls into the ground due to planet's own gravitational force is known a...


In Mathematics, the permutation can be explained as the arrangement of objects in a particular order. It is an ordered...

Perimeter of Rectangle

A rectangle can be explained as a 4-sided quadrilateral which contains equal opposite sides. In a rectangle

Perimeter of Triangle

A three sided polygon which has three vertices and three angles is called a triangle. Equilateral triangle...