Money is a medium that is accepted for the payment of goods, example, groceries, clothes, sneakers and many other things.

Functions of Money

There are three functions of money

1. Money is a medium of exchange - meaning that money can be used to purchase any item that a person may want.

2. Unit of account - meaning that the value of the item can be easily calculated.

3. Store of value - meaning that when money is stored for a period of time, the value of the money would be maintained.

Back in the time of Columbus people used goods inorder to purchase other goods. This was called barter. Example

Columbus: I will give you trinkets in exchange for your gold.

Arawak: Okay!

Problems may have arisen when a person may not have wanted the item that you may have wanted to exchange. Also it was hard to determine the value of a item, a herd of sheep, for example.

1 sheep costs 2 mangoes or three oranges?

In addition, imagine that in those days Columbus may have wanted to purchase a bag of coconuts in exchange for his bunch of bananas. Unfortunately, the person is out of the island and will not be back for a week. He will not be able to store his bananas until next week because it will rot.

Therefore, a medium had to be invented to prevent any problems from occurring.

Dollars

Dollars are expressed with the dollar sign, $, in front of the amount .

Example

Twenty-five dollars would be expressed as $25

Addition in Dollars

                                    $45
                                    $67+
                                 -----------
                                  $112
                                 -----------

Subtraction in Dollars

                                    $67
                                    $45 -
                                 -----------
                                    $22
                                 -----------

Cents

Cents are expressed with the cent sign, ¢, after the amount

Example

Fifty cents would be expressed as 50 ¢

Addition in Cents

                                   17¢
                                   45¢ +
                                -------
                                   62 ¢
                                -------

Subtraction in Cents

                                    67¢
                                    45¢ -
                                 -----------
                                    22¢
                                 -----------

Multiplication in Cents

NB: There are 100 cents in a dollar

If a sweet costs 67¢ and we wanted three of them, how much would that cost?

If we multiply 67¢ by 3 we will get 201 cents. Remembering that there are 100 cents in a dollar, 201 cents will give us two dollars and one cent

                                    67¢
                                     3 ×
                                -----------
                                $2.01
                                -----------

Dollars and Cents

Money is often written as a decimal with the dollars to the left of the decimal point and the cents to the right.

Example

Twenty-five dollars and fifty cents would be expressed as $25.50

Addition in Dollars and cents

When adding in dollars and cents it is important to line up the decimal points so that they fall one below the other.

Example

A shirt costs $65.63 and a short pants costs $45.72. How much would it cost altogether?

                                $65.63
                                $45.72 +
                              --------------
                              $111.35
                              --------------

Subtraction in Dollars and Cents

When subtracting in dollars and cents, too, it is important to line up the decimal points so that they fall one below the other.

                                $65.63
                                $45.72 -
                               --------------
                                $19.91
                               --------------

If your mummy gave you $200.00 to purchase the shirt and the short pants previously bought, how much change would you receive?

                                $200.00
                                $111.35 -
                               --------------
                                $188.65
                               --------------

Multiplication in Dollars and Cents

Multiplication is also a simple process. When mulitplying in dollars and cents by a number we must first disregard the decimals in the beginning. Then when multiplication is complete, we must find the total number of decimal positions of the numbers being multiplied and then place that number of decimal positions after the point starting from the left.

Multiplication by a Whole Number

1 coca cola costs $1.50, how much would 4 coca colas cost?

                                150
                                    4 ×
                             --------------
                                600
                             --------------

Now there are 2 decimal positions in $1.50 and 0 decimal positions in 4, therefore, 2 + 0 = 2. So, the decimal point must be placed in such a position such that there are 2 positions after the point starting from the left.

                                $1.50
                                      4 ×
                             --------------
                                $6.00
                             --------------

Multiplication by a Fraction

Mummy wants to buy two and a half yards of cloth. Each yard costs $1.50. How much would two and a half yards cost?

                                 150
                                   25 ×
                             --------------
                                3750
                             --------------

Now there are 2 decimal positions in $2.50 and 1 decimal position in 2.5 therefore, 2 + 1 = 3. So, the decimal point must be placed in such a position such that there are 3 positions after the point starting from the left.   

                                 150
                                   25 ×
                             --------------
                                3.750
                             --------------

A discount is a deduction or subtraction from a cost or price which results in a reduced quantity or value.

Many stores will often have sales and you will see things like

60% Off or Save 50% or Discounted by 25%

The store will discount an item by a percent of the original price.

Example,

If the original cost of a shirt was $40 and then discounted at 5%. What would the discount cost be and what would be the sale price of the shirt after the discount?

                                                                    5           $40.00
                                                                 ------  ×     ----------  = $2.00
                                                                  100              1

The discount cost is $2.00

Sale Price = Original Cost Price - Discount cost

Sale Price = $40.00 - $2.00 = $38.00

Profit

A profit occurs when the selling price for an item is greater than the cost price. Profit is calculated by deducting the cost price from the selling price.

Profit = Selling Price - Cost Price

Example

The cost price of a pair of Nikes is $210. The Selling Price is $345. What is the Profit?

$345 - $210 = $135

Profit = $135

Loss

A loss occurs when the selling price is less that the cost price. Loss is calculated by deducting the selling price from the cost price.

Loss = Cost Price - Selling Price

Example

The cost price for a pair of jeans was $80. However, due to it being damaged, it was sold ot $68. What was the loss?

$80 - $68 = $12

Loss = $12

Example

If the selling price for a skirt was $75 and the cost price was $50 determine whether it was sold for a profit or a loss.

The selling price is $75 and the cost price is $50.

The selling price is greater than the cost price therefore, it was sold for a profit.

$75 - $50 = $25

Profit = $25