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• Credit transactions


  Transactions supported by written contracts or credit instruments
• Credit instruments


  • Payable to bearer
  • Payable to order
  • Payable on demand
  • Payable at a future time
• Types of credit instruments

  • Investment credit instruments (e.g. bonds, stocks)
  • Commercial credit instruments (substitute for money in business transactions)
• Preferred stock


  Does not give shareholders voting rights, but usually guarantees a fixed dividend
• Common stock


  Represents shares of ownership in a corporation, confers voting rights, and a claim on profits (dividends)
• Types of commercial credit instruments

  • Secured commercial credit (backed by collateral)
  • Unsecured commercial credit (not backed by collateral)
• Sources of documents for credit transactions

  • Cash transactions (cash receipt, cheque butt)
  • Credit transactions (sales invoice, purchase invoice)
• Sales invoice


  Given by the seller, contains information about the purchased items, quantities, discount, etc.
• Purchase invoice


  Given at the end of a transaction as a confirmation of goods bought, used to record payment and outstanding debt
• Credit is part of our financial power and freedom to control and be literate from it
• Credit can be used for good but may be problematic if you don't know how to use it effectively
• Using credit reliably and earning good credit scores can help you build wealth and allow you to do business with companies
• You can get into trouble if you don't understand how credit works