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Unit 3 business and management personal finance A1 functions and roles of money Btec level 3 extended diploma business and management UNit 3 personal finance
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A. UNDERSTAND THE IMPORTANCE OF MANAGING PERSONAL FINANCEA1 - Functions and role of money
The ability to handle money received, and to control money paid, is a fundamental requirement for
personal and business success. This success relies on understanding what ‘money’ is.
Task 1
Explain the following Functions of money
1. unit of account
A unit of account is something that is a standard numerical unit of measurement of market
value of goods and services and you can record data such as debts and make calculations
to account for profits, losses, and income due to money being countable.
2. means of exchange
businesses can sell and customers buy using money allowing us to trade.
3. store of value
A store of value is a store for your money to be kept without losing its value, for example
gold, this can be used to then buy goods in the future.
4. legal tender.
A legal tender is money (bank notes/coins) that can be used as payment for something or
paying off debt
Task 2
Role of Money
Role of money is affected and influenced by several factors:
Explain how the following factors influences the role of money
a) (personal attitudes towards risk and reward, borrowing, spending, and saving)
If someone who likes to spend money but they don’t have enough the only option is to
borrow money from someone, as you spend it you have to always pay back the amount
you received at some point. However, there are risks to borrowing as it can end with
debt if not managed correctly. The type of person you are influences the way you spend
your money and how it is perceived as from that person’s point of view, their attitudes
towards saving maybe different therefore the role of money to them will be just
borrowing to get what they want as soon as rather than having to wait for them to save
for a specific good.
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