(Solved Homework): A negotiable instrument can be used as a substitute for money or as a credit device. Discuss the…

A negotiable instrument can be used as a substitute for money or as a credit device. Discuss the advantages and disadvantages of using a negotiable instrument instead of money. It can’t be plagiarized! and it has to be ALEAST *150* WORDS!! Thank You

Expert Answer

A negotiable instrument has many advantages and few limitations also. The first advantage is its treatment as a document that tells the source of money from-where it is paid and the destination to whom the funds is transferred. Hence, it will help in vigilance. The second advantage is its acceptability for different purposes. For example, in a transaction of the high volume of funds, hard-core money is not allowed to be used, but a negotiable instrument in the form of Cheque or draft is easily accepted. The third advantage is its nature of transferability. A negotiable instrument are transferrable without any documentation and it is owned by the bearer or on the basis of endorsement. As another advantage, it is always in writing, so retraction of the transaction is possible.
Though, there are some disadvantages also. It may not work with small vendors who only deal is cash or hard-core currency. They may not accept the cheque or draft. The second disadvantage is the issuance cost of the negotiable instrument. The third disadvantage is the scope of fraud or bounce of the negotiable instrument such as cheque due to non-availability of the funds in the account. The fourth disadvantage is the time gap between submission of the instrument and realization of funds in the account.

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