TAILIEUCHUNG - BRIEF HISTORY OF CREDIT AND ITS DEFINITION

According to Adam Smith, money originated in man’s rational effort to meet the necessity of finding some medium of exchange. Money is responsible for increasing the production and thus adds to the creation of wealth and also in accelerating consumption with the concomitant rise in the standard of living of the people. | BRIEF HISTORY OF CREDIT AND ITS DEFINITION Barter- is the exchange of goods or services to another goods or services. It increases the productivity of tribal units particularly due to specialization. Money- serves as a medium of exchange. According to Adam Smith, money originated in man’s rational effort to meet the necessity of finding some medium of exchange. Money is responsible for increasing the production and thus adds to the creation of wealth and also in accelerating consumption with the concomitant rise in the standard of living of the people. One of the unique features of our business system is that it operates to a large extent on promises called credit. Credit comes from the latin word “credere” which means to trust. Credit is akin to a two way street. In banking, credit is held to refer to “ an entry in the books of the bank showing its obligation to a customer” that is for the deposits made by the latter. In bookkeeping, credit is “ an entry showing that the person named has the right to demand some thing but not necessarily money”. In commerce, credit pertains to “an exchange transaction”. Credit is the ability to obtain a thing of value in exchange for a promise to pay definite sum of money on demand or future determinable time. Credit is defined as a transaction involving the transfer of goods, services, funds, property or rights, thereby creating an obligation on the part of those who receive them, that must be complied with in the future. Items Examples Goods Groceries, Appliances,medicines,etc Services Car repair, beauty parlor and the like Funds Cash loan from pawnshop, bank or friend Property Hammer for temporary use by a neighbor Rights Possession or use of a commercial store space bonds, stocks etc. Note: Not all of these 5 types of transactions would necessarily result in the creation of credit. Reasons for Concern. When a transaction is consummated and all parties are satisfied, there is no reason to be concerned. But since a transaction .

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• responsible for increasing
• production and thus adds
• accelerating consumption
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