Modes of payment – Initiation to Accounting (Senior 1 Entrepreneurship) | Ganzaa

Initiation to Accounting

Lessons

Senior 1 · Entrepreneurship

Initiation to Accounting

5 lessons

Lesson 5 of 5

Modes of payment

25 min

Case: five ways to be paid in one month

Nsengiyumva runs a carpentry workshop in Gikondo, Kigali, making school desks, beds and doors. In April 2026 his money arrived in five different ways:

a family paid a deposit of Frw 50,000 for a bed in notes, and walk-in customers paid Frw 35,000 more in cash;
a secondary school paid Frw 1,200,000 for 40 desks with a cheque;
a hotel paid Frw 850,000 for doors by bank transfer;
customers buying stools and shelves paid Frw 265,000 by MoMo Pay.

He also paid his timber supplier in Nyabugogo by mobile money and bought tools with his debit card. (An illustrative case.)

Think about it: why might a business accept so many different ways of paying?

Definition

Mode of payment: the method a buyer uses to transfer money to a seller.

Example: cash, cheque, mobile money, bank transfer or card.

Definition

Cash: notes and coins handed over at the time of the transaction.

Example: a customer pays Frw 35,000 in notes for two stools.

Definition

Cheque: a written, signed order from an account holder (the drawer) to their bank (the drawee) to pay a stated amount to a named person or business (the payee).

Example: the school (drawer) orders its bank (drawee) to pay Nsengiyumva's workshop (payee) Frw 1,200,000.

Definition

Mobile money: a service that stores money in an account linked to a mobile phone number, so that it can be sent, received and paid to shops with the phone. In Rwanda the main services are MTN MoMo and Airtel Money.

Example: customers pay for stools using the workshop's MoMo Pay code.

Definition

Bank transfer: moving money directly from one bank account to another, at a branch, by internet banking or through a banking app.

Example: the hotel's accountant transfers Frw 850,000 into the workshop's bank account.

Definition

Payment card: a plastic or virtual card used at a card machine or online. A debit card spends money already in your account; a credit card spends money borrowed from the bank (Unit 4).

Example: Nsengiyumva pays for a new saw with his debit card.

The parts of a cheque

Part	What it shows	Why it matters
1. Drawee	The bank that will pay	The cheque is an order to this bank
2. Date	The day it was written	A bank refuses a cheque that is too old or dated in the future
3. Payee	Who is to be paid	Only this person or business can receive the money
4. Amount in words	The amount written out, ending "only"	Hard to change; "only" stops extra words being added
5. Amount in figures	The same amount in numbers	Must agree with the words
6. Drawer's signature	The account holder's signature	Without it the bank will not pay
7. Cheque number	A printed serial number	Lets the cheque be traced in the books
8. Counterfoil	The stub the drawer keeps	The drawer's source document for the payment

Worked example 1: writing the amount on a cheque

Write Frw 245,500 as it should appear on a cheque.

Step 1: split the number. 245,500 is 245 thousands and 500.

Step 2: write each part in words. "Two hundred and forty-five thousand" and "five hundred".

Step 3: add "francs only". Two hundred and forty-five thousand five hundred francs only.

Step 4: figures. Write "245,500" close to the left of the box, so nothing can be added in front of it.

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Comparing the modes of payment

Mode	Advantages	Disadvantages	Record it leaves
Cash	Instant; accepted everywhere; no fees	Can be lost or stolen; counting errors; risky for large sums	Only a receipt, if one is written
Cheque	Safe for large sums; clear paper trail	Takes days to clear; can "bounce"; fewer businesses use them now	Counterfoil, bank statement
Mobile money	Fast, day and night; no bank account needed; nothing to steal from a pocket	Fees on some transfers and cash withdrawals; network failures; scams; daily limits	SMS confirmation, MoMo statement
Bank transfer	Safe for large sums; straight into the account	Both sides need bank accounts; transfers between banks may take time; fees	Transfer slip, bank statement
Card	No cash to carry; quick; works online	Needs a card machine or internet; fees for the seller; risk if the PIN is shared; a credit card is borrowing	Card slip, bank statement

Worked example 2: where did April's money come from?

Nsengiyumva's April receipts were: cash $50,000 + 35,000 = 85,000$ ; cheque 1,200,000; bank transfer 850,000; MoMo 265,000.

Step 1: total. $85,000 + 1,200,000 + 850,000 + 265,000 = 2,400,000$

Step 2: share by MoMo. $\frac{265{,}000}{2{,}400{,}000} \times 100\% \approx 11.0\%$

Step 3: share in cash. $\dfrac{85{,}000}{2{,}400{,}000} \times 100\% \approx 3.5\%$

Conclusion. Only about 3.5% of his money arrived as notes and coins, and every other franc left an automatic record: the cheque counterfoil, the bank statement or the MoMo SMS. That makes his bookkeeping much easier.

Tip

Match the mode to the amount and the risk. Small and immediate: cash or MoMo. Large: bank transfer or cheque. Whatever the mode, keep the record: the SMS, slip or counterfoil is your source document.

Warning

Two traps. (1) The "wrong number" SMS: a message says "I sent you Frw 20,000 by mistake, please send it back." Check your real balance through the official app or menu first; a fake SMS adds nothing to your account. Never tell anyone your PIN, not even someone who says they work for the phone company. (2) The bounced cheque: if the drawer's account does not hold enough money, the bank refuses to pay ("dishonours" the cheque). The customer still owes you, so do not hand over large orders until a cheque has cleared.

National Bank of Rwanda, "Rwanda's Cashless Economy Drive" (about 7 minutes, 2018). Watch for why the central bank wants more payments made by phone, card and bank transfer rather than in cash, and what that means for businesses.

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Practice

Name five modes of payment a business in Rwanda can use.
On the school's cheque, who is the drawer, who is the drawee and who is the payee?
Write Frw 385,000 in words, as on a cheque.
Which mode of payment would you advise, and why? (a) Buying a bottle of water. (b) A hotel paying Frw 2,500,000 for furniture. (c) A customer with no bank account paying Frw 30,000 from another district.
In May, Nsengiyumva receives Frw 1,600,000 in total, of which Frw 400,000 comes by MoMo. What percentage came by MoMo?
Give two advantages and two disadvantages of mobile money for a small business.
You receive an SMS: "I sent you Frw 20,000 by mistake, please send it back." What should you do first, and why?
Explain why it is safer for a school to pay a large supplier by bank transfer than in cash.

Show answersHide answers

Cash, cheque, mobile money (MoMo or Airtel Money), bank transfer and card (debit or credit).
Drawer: the school (its bursar signs). Drawee: the school's bank. Payee: Nsengiyumva Carpentry Workshop.
Three hundred and eighty-five thousand francs only.
(a) Cash or MoMo: small and immediate. (b) Bank transfer (or cheque): safe for a large sum and leaves a record. (c) Mobile money: works without a bank account and at a distance.
$\dfrac{400{,}000}{1{,}600{,}000} \times 100\% = 25\%$ .
Advantages, for example: fast; customers need no bank account; less cash to be stolen; an automatic SMS record. Disadvantages, for example: fees; network failures; scams; daily limits.
Check the real balance through the official app or menu before sending anything, because the SMS may be fake and no money may have arrived.
Large amounts of cash can be stolen or lost on the way and counted wrongly; a transfer goes straight into the supplier's account and leaves a record for both sides.

1Case: five ways to be paid in one month

2The parts of a cheque

3Comparing the modes of payment

Case: five ways to be paid in one month

The parts of a cheque

Comparing the modes of payment