MONEY

NATURE OF MONEY
 Money was derived from the Latin word moneta, surname of the
Roman goddess Juno.
 Moneta refers to a mint or a place for coining money.
 According to the etymonline.com, it also comes from the Old French
monoie and the Modern French monnaie, meaning money, coin,
currency, or change.
 “bucks” – from the word “buchskins,” a medium of exchange used
by the settlers during early times.
Money defined….
 It is something generally accepted as a medium
of exchange, a measure of value, or a means of
payment. – Merriam-Webster
 It is anything authorized by law to be generally
accepted as legal tender, as a medium of
exchange, and a standard of value in payment
of goods and services without reference to the
general standing of the person who offers it.
Money defined….
 Money is the lawful token used in our society to pay
goods, services, and debt.
 It is anything which is used as a medium of exchange
and which is widely acceptable for the payment of
goods and services without reference to the general
standing of the person who offers it. Miranda(2004)
Money….
1. Medium of exchange
2. Legal tender
3. Measure of value
4. Means of payment
5. Standard of value
CHARACTERISTICS OF MONEY
1. Scarcity
2. Divisibility
3. Portability
4. Durability
Characteristics of Money
Scarcity
 It makes something valuable, and over-abundance
makes it worthless. Scarcity means rare or hard to find.
This is based on the basic economic law of supply and
demand.
 The harder a thing is to find, the more that thing
becomes. This is the reason why precious metals,
especially gold and silver, deemed a good choice as a
medium of exchange. However, limited supply makes
these metals impractical or too expensive to use.
Characteristics of Money
Divisibility
 It is another feature that enables one to suit the medium
of exchange to the kind of transaction, big or small. Small
units apply to small transactions and big units apply to
big transactions.
 It refers to the quality of being broken down into smaller
units. The property of malleability of metals makes them
desirable for coinage because they can be melted and
formed into different shapes and sizes and different
denominations.
Characteristics of Money
Portability
 An ease in handling or carrying makes one thing
desirable as a medium of exchange.
 This allows people to bring it with them anywhere
they go to enter into a transaction.
 A piece of metal is easier to carry than a
carabao. Paper money is more portable than
metals or even coins.
Characteristics of Money
Durability
 It means long lasting. Metal is almost indestructible that is
why it became a medium of exchange for a long time.
 There are countries nowadays that use plastic polymer
money in place of paper money. Plastic is more durable
than paper.
 Philippine Coins are made of metals while paper bills are
composed of 80% cotton and 20% abacca.
FUNCTIONS OF MONEY
The basic functions of money:
To facilitate the exchange of goods and
services

To lessen the time and effort required to

carry on trade
Functions of Money
1. Medium of Exchange
2. Standard of Value
3. Store of Value
4. Means of Deferred Payment
5. Conveyance
Functions of Money
Medium of Exchange
➢ The use of money to facilitate the transfer of goods
and services and settle obligations has made money
the basic medium of exchange.
➢ In the history of money, various commodities had
been used as a medium of exchange. Therefore, we
can say that in those times, whatever commodity was
used to effect transfer could be considered “money”-
cowries, wampums, and cattle.
➢ Money, as a medium of exchange, can be used for
exchange of goods and services.
Functions of Money
Standard of Value
➢ Money is our measuring stick to measure the
value or worth of something.
➢ Goods, services, assets, liabilities, and net worth
(equity or capital) are all measured in terms of
money.
➢ As a standard of value, money measures the
relative worth of goods and services. In short,
money is the common denominator, the basis
for comparison.
Functions of Money
Store of Value
➢ The excess of income over expenses is usually saved.
Our savings, usually in the form of money, is stored
either in the bank or at home for future use – that is the
idea of store of value.
➢ The value needed in the future is stored. When we
make investments in the form of stocks, bonds, or other
securities and fixed assets like land, or excess money is
stored in these assets. In case we need money in the
future, we can sell them and produce the money we
need.
Functions of Money
Means of Deferred Payment
➢ As legal tender, money is acceptable in payment of debts
or liabilities. If payment is to be made in the future, money
becomes a means of deferred payment.
➢ Deferred means postponed or held for future use. So long
as prices remain stable, the amount owed is what is paid,
and the creditor is able to buy the same amount of goods
or services.
➢ However, when prices rise, the amount owed will be able
to buy less (creditors lose); when prices go down, the
amount owed will be able to buy more (creditors gain).
Functions of Money
Conveyance
➢ It refers to the means of transport or transfer.
➢ In law (which finance uses), conveyance means
the process of or the documents effecting the
transfer of property from one owner to another.
The said document is the money because it
facilitates transfer of ownership, while the process
is the transfer of title or ownership.
Functions of Money
Conveyance
➢ The seller owns the goods he is selling. The buyer
owns the money he wishes to spend. If he wants
the goods the seller is selling, he will exchange his
money with the goods. After the transaction is
consummated, the goods now belong to the
buyer, and the money belongs to the seller. This is
similar to the function of medium of exchange.
➢ Money conveys or transfers title or possession.
CLASSIFICATIONS OF MONEY
Paper Money
 The Chinese invented printing and the use of paper
money during the Tang Dynasty (618-906 AD).
 Mongolia was the second country to begin using paper
money in the 11th century.
 The Bank of Sweden issued the first paper money in
Europe in the 17th century.
Paper Money
 The government issued paper money to represent certain
quantities of gold or silver kept by the government to
cover what has been issued, representative paper
money.
 The was replaced with the term fiat money.
Plastic (Polymer) Money
 Plastic money is actual cash made of super-resistant
polymer film (instead of paper).
 Polymer money feels like regular paper bill, but lasts
longer.
 Australia was the first country to develop and use
polymer notes in general circulation in 1988 after
significant research and development done by the
Commonwealth Scientific and Industrial Research
Organization (CSIRO) and the Reserve Bank of Australia.
Plastic (Polymer) Money
Plastic Money
 It is the hard plastic cards used in everyday exchange
transactions in place of actual bank notes
1. Credit Cards
2. Debit Cards
3. Cash Cards
1. Gift Card/Certificate
2. Store Card
3. Multi-currency Prepaid Card
Plastic Money
Credit Card
 Allows owners to buy products on credit from different stores
and establishment, in lieu of cash or money, except that it
has a credit limit, that is, the maximum amount that can be
charged to the credit card.
 It bears a relatively higher rate of interest, but if the
cardholder pays his balance in full each moth (on or before
the due date), no interest is charged.
 Examples: American Express, Visa, MasterCard, and Discover
Plastic Money
Debit Card
 the bank where the account is maintained issues the debit
card.
 Payments using this card are immediately charged to the
cardholder’s bank account, instead of paying the card at a
later date.
Plastic Money
Cash Card
 it only allows withdrawal of money through an Automated
Teller Machine (ATM).
 It can be used as a debit card as well.
 It is convenient in that the holder need to stay in line inside
the bank to withdraw money.
Prepaid Cash Card
Gift Card/ Certificate
 A prepaid cash card that can be given as gift so that the
recipients can choose what they want as a gift.
 This card can be a specific prepaid cash card issued by the
store where it can be used for purchase.
 It can also be issued by financial institutions and can be
used at any store, just like credit card.
 Once fully used, it has no value at all.
Prepaid Cash Card
Store Card
 It is like a credit card, generally issued by a particular store
and can be used for purchase in the same store.
 This is a simple credit granted by stores to encourage
customers to spend more in their store.
Prepaid Cash Card
Multi-currency Prepaid Card
 An example of this card was launched by EastWest Bank last
Sept. 30,2013, Southeast Asia’s first multi-currency prepaid
card.
 It can load up to six different currencies – US dollar, Euro,
British pound, Hong Kong dollar, Australian dollar, and
Japanese yen.
 It can be used from all Visa-affiliated merchants here in the
Philippines and abroad regardless of the currencies loaded.
Classification of Money
 Full-bodied Money
 Representative full-bodied money
• Issued by government
1. Token coins
2. Representative token money
3. Circulating promissory notes
• Issued by banks
1. Circulating promissory notes issued by central bank
2. Circulating promissory notes issued by other banks
3. Demand deposits subject to check
Full-Bodied Money

 Moneywhose value as a commodity for non-

monetary purposes is as great as its value as
money
Representative Full-Bodied Money

 Usually made of paper

 Ithas no significant value as a commodity, but it

represents in circulating an amount of metal with
a commodity value equal to the value of the
money.
Gold Certificate
Credit Money or Fiat Money
 Any money, except of representative full-bodied money,
that circulates at a value greater than the commodity
value of the material from which it is made.
 It can also result as the issuing authority buys all the
money material offered to it, but at a price significantly
below the monetary or face value of the money into
which it is transformed.
Types of Money Issued in the Philippines
 Standard Money – Central Bank Notes
Types of Money Issued in the Philippines
 Representative Money – Philippine Treasury Certificates
1903
Types of Money Issued in the Philippines
 Convertible Representative Money – Philippine Treasury
Certificates 1903
Types of Money Issued in the Philippines
 Fiat Money (old concept) – Japanese War Notes
Types of Money Issued in the Philippines
 FiatMoney (current concept) – bangko sentral notes
 Token Coins – Metallic Coins
Types of Money Issued in the Philippines
 Credit Money – Bangko Sentral Notes
Guerilla notes
Forms of Money
1. Commodity Money
• It has its own value other than using it as money.
• It has its own intrinsic value, the value of the commodity
itself.
• Example: shells, cattle
2. Currency (Bills and Coins)
• The government of any country issues currency that is legal
tender in the country,
• These bills and coins are in different denominations (the
divisibility feature), minted and printed, by the central bank
of a country.
• Domestic currency can only be used in its country of origin.
3. Check
• It is generally used by businesses and persons in
conducting business, as well as personal
transactions.
• It is a written order to a bank (drawee), by the
person, who issues the check (maker or drawer) to
pay someone whose name is written on the face of
the check (payee) a certain amount of money on
demand (upon presentation/immediately) or at a
future date (post-dated check).
Parties to a Check
1. Maker – the drawer or writer of the check
2. Drawee – the bank which is order to pay the payee
3. Payee – the one to whom the check is to be paid
 Personal Check – issued by persons to be drawn
against their own current/checking account in
the bank
Business Check – a check issued by companies/businesses.
It is drawn on the issuer’s bank checking or current
account. It is used for business transactions.
Cashier’s Check – it is issued by the bank against its own
account ensuring availability of funds. It is purchased with
a fee from a bank that issues the check. It can be signed
by the bank cashier or any other bank official.
Certified Check – it is issued by the bank certifying that the
account of the person issuing it has available funds (just
like any ordinary personal check). The bank certifies the
availability of fund by earmarking the corresponding
amount on the check which will only be used to pay the
check itself.
Traveler’s Check- it is a fixed amount check which is
preprinted, allowing the signatory of the financial institution
who is selling the traveler’s check to make an unconditional
payment to whoever has the traveler’s check in his
possession.
Parties to a traveler’s check
1. Issuer or obligor – the company issuing or producing the
traveler’s check
2. Agent – the financial institution who sells the traveler’s
check.
3. Purchaser – the person buying the traveler’s check and
will use it as a form of money
4. Payee – the seller of goods or services to be paid with
the traveler’s check.
4. Bank Draft
➢ is issued by banks against their own account
➢ Ensure availability of funds without any need to
check on the character of the person issuing
the check
➢ Prevalent in the UK
Bank Draft
Types of Bank Draft
1. Demand Draft (sight draft) – payable on demand or
upon sight
2. Time Draft – payable sometime in the future like post-
dated check
3. Local Draft – issued by a bank in a single country
4. International Draft – used globally or internationally
5. Automatic Bank Draft (ABD)- takes out money from the
payer’s account electronically at a regular intervals
5. Money Order – it refers to the instrument issued generally
by the post office of a country ordering a sum of money to
be paid to the payee indicated on the instrument itself. This
under R.A. 7354, an Act Creating the Philippine Postal
Corporation under Art. II, Sec. 6.
6. Warehouse Receipt (WR)
 It covers all warehouses, whether public or private,
bonded or not
 A document of title to goods
 A proof of the possession or control of the goods
 Authorizing or purporting to authorize the possessor of the
documents to transfer or receive, either by endorsement
or by delivery goods represented by such document
Warehouse Receipt
SECURITY FEATURES OF PHILIPPINE
MONEY
 Title
• Text
 Title
• Text
Title
CHECK THE COMPLETE PARTS OF THE
CHECK
 Kinds of check
• Postdated
• Stale dated
• Outdated
• Crossed check
• Bearer check
• Manager’s Check
Accept or Reject?
Activity
• For deposit to Roy Ang’s account on Sept 25, 2012.
• For deposit to Roy Ang’s account on Sept 25, 2012.
 END OF
MODULE 2