Forms of Business Organization

PAPER MONEY

• After metallic money the next development in the payment and transaction system was paper money which includes currency notes issued by the central bank of country.
• Some Economist believe that the paper money has been originated from China, as the China was the inventor of paper in 9th century.
• From the middle of 8th century to the middle of 17th century, the Chinese emperor and the Mongols made an extensive use of paper money.
• Iran also made some unsuccessful use of paper money in their economy in the middle of 13th century.
• But in the late 17th century convertible paper money was issued on large scale by a wide variety of institutions by almost all the developed countries of the world.

• But some Economics says that the origin of paper money has been started with Goldsmith and the people at that time was keeping their gold and silver for the safe custody with them.
• For that Goldsmith was issuing a receipt to them of the equivalent value of gold and silver which was then used as a medium of exchange.
• Later on this practice brings the idea of paper currency in the mind of government.

• Paper currency has the advantage that it is lighter than coins. Paper currency is legal tender by the state.
• The drawback of paper currency is that payment in large amount is difficult to count and it is also difficult to carry a huge amount of paper currency from one place to another place, such drawbacks are overcame by the use of credit or bank money.

CREDIT OR BANK MONEY

• With the passage of time banking system is introduced in the economic sphere of life which brought about an easier and modern system of payment in transactions in terms of credit money.
• “Now a days the transactions are made through the payment and receipts of bank cheques, draft and bill of exchange etc, all such means for making payments and receipts in transactions is known as credit or bank money.”
• These instruments were accepted on the basis of actual money deposited in the bank.
• Check is not a legal tender because it by itself is not money it can not be enforced in payment of debt.
• Although in most of the developed countries most of the businesses done through credit money.

ELECTRONIC MONEY

• With the development of computers and advanced communication technology, transactions became more easier.
• Through advanced computerized banking system new ways of payments and receipts for transactions are introduced such as, ATM cards, credit cards. Such means of computerized transactions are known as electronic or plastic money.

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