WAEC Commerce 2017 Theory — Question 14

Model answer

(a) Standing order: A standing order is an instruction which a bank account holder gives to the bank to pay a certain amount at regular intervals to another account. The instruction is sometimes known as a banker's order. (b) Bank draft: This can be defined as the cheque which a bank drawn on itself. It states that the bank is indebted to the beneficiary whose name appear on the draft. (c) Legal tender: It can be defined as any document or item which is used as a means of exchange which is backed by law and gold. It comprises the coins and paper money. (d) Money order: A money order is a payment order for a pre-specified amount of money. As it is required that the funds be prepaid for the amount shown on it, it is a more trusted method of payment than a cheque. (e) I.O.U: I.O.U is an abbreviation for 'I owe you'. It is usually an informal document acknowledging debt. It usually specifies the debtor, the amount owed, and sometimes the creditor. It may be signed or carry distinguishing marks or designs to ensure authenticity.