WAEC Commerce 2022 Theory — Question 5

Model answer

(a) Loans from bank; loans from family and friends; profit plough-back; credit purchase. (b)(i) Acceptance credit: a type of letter of credit that is paid by a time draft, used to authorize payment on or after a specific date, once the terms of the letter of credit have been complied with. (ii) Luncheon voucher: a ticket used to pay for food in a restaurant, issued by an organization to its staff. (iii) Bill of exchange: a written order binding one party to pay a fixed sum of money to another party on demand or at some point in the future. (c) Advantages: it improves sales on the part of the seller; it enables the buyer to use goods that he does not have ready cash for. Disadvantages: it is usually more expensive than a cash purchase; a buyer can abscond with the goods; the seller may incur costs in recovering instalments.