Money

Meaning:

Money is defined as any item that is widely accepted as payment for goods, services, or repayment of debts. It can be in the form of cash, coins, digital balances, or

electronic transfers. Money facilitates buying, selling, saving, and investing, thus replacing the barter system (directly exchanging goods).

Functions of Money:

Medium of Exchange : Used to conduct transactions for goods and services.

Store of Value : Retains value over time, allowing for savings.

Unit of Measurement:  Provides a standard measure for valuing goods and services.

Standard for Future Payments: Establishes prices for future transactions.

Difference Between Money and Cash:   Money is a comprehensive term that includes all forms of value used in transactions, such as cash, bank balances, UPI payments, cards, cheques, and digital wallets.

Cash refers specifically to physical money, including paper notes and coins.

While all cash is money, not all money is cash; money represents various forms of wealth,  while cash represents only physical currency.

Types of Money: 

Physical Money: Cash and coins.  

Digital Money: Bank balances, UPI, and net banking.

Fiat Money: Currency issued by the government.

Commodity Money: Historical items like gold that were used as money.

Importance in Finance:  

Money is crucial for the financial system, enabling borrowing, lending, investing, pricing,  and fostering economic growth.

Role in Goods and Business:  

Money is essential for businesses to acquire raw materials, pay salaries, manage operations,  and sell products, thereby keeping the economic cycle active.