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Difficulty: MediumMeans of Payment in Home Trade

Under a standing order instruction in commercial banking, a creditor directly initiates the payment request to withdraw varying amounts of money from a debtor's account at irregular intervals.

Answer: Answer

Answer

The statement is False. A standing order is a debtor-initiated instruction for paying fixed sums at regular intervals, whereas a direct debit allows a creditor to initiate withdrawals of variable amounts.
The statement is false because a standing order is controlled strictly by the debtor to send fixed sums on a recurring schedule, while a direct debit allows the creditor to request and pull variable sums directly from the debtor's account.

Step-by-Step Solution

1
Analyze the features of a standing order in home trade.
A standing order is set up directly by the payer (debtor) to make fixed, regular payments to a payee.
Identifying who controls the instruction and whether the payment amount is constant is essential for identifying the instrument.
2
Compare the stem description with banking payment instruments.
The stem describes creditor-initiated withdrawals of fluctuating amounts, which defines a direct debit.
Distinguishing between debtor-initiated fixed transfers and creditor-initiated variable draws resolves the truth value of the statement.

Key Concept

Standing Order vs Direct Debit in Home Trade
Estimated Time:1m 0s
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Topics

Means of Payment in Home Trade

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