Module 1-The Concept and Development of Money

1
Afafafaf Cor Jesu College, Inc.

College of Accountancy, Business and Entrepreneurship
S.Y.2020-2021
Module Overview Module 1
The Concept and

Development of Money
In this Module
• Definition of Money
• Functions of Money
• Forms of Money
• Classifications of Money
• Characteristics of a Good Medium of Exchange
Introduction
At the completion of this module, you should be able to:
1. Discuss the concept pf money and the origin of the word “money”
2. Define money and discuss the concept of legal tender
3. Explain barter and how it works and discuss the applicability of
barter in today’s world
4. Explain the system of coinage as an important stage in the history
and development of money
5. Differentiate the types of money and apply their utility in modern
day finance
6. Analyze the role of credit card in today’s economy and discuss the
pros and cons of using it
7. Discuss the different plastic card/plastic money being used in
today’s world
8. Appreciate the Value of barter exchanges and explore their
possibility of dominating the current trade and how it will affect the
economy of the country
9. Elaborate on the functions of money and how it serves men
10. Differentiate a check from a draft and discuss the parties involved
in them
Are you ready? Then the lesson starts now!
Gen Ed 12- Business Logic

Instructor: Earlynne H. Villegas, MBA
2
S.Y.2020-2021
Lesson 1
The Concept of Money
Learning Outcomes:
1. Discuss the concept pf money and the origin of the word “money”
2. Define money and discuss the concept of legal tender
3. Explain barter and how it works and discuss the applicability of
barter in today’s world
4. Explain the system of coinage as an important stage in the history
and development of money
ANALYSIS
What do you think?
• What is money for you?
• Can we produce more money to fight against financial crisis?
Let’s Discuss
Man civilization has advanced by leaps and bounds, creating the need for money. in
the early years of civilization, there was no need for money. People simply exchanged
what they had for what they wanted. this exchange is termed as barter. Nowadays,
money is important. if one has money, he can buy a house, a car, a big piece of land,
or even a farm. he can put up his own business so that he can be his own boss. as
the saying goes, money talks.
This chapter will discuss the evolution of money, starting with barter in early years, to
the use of different forms of money- from shells to metals, until coinage came into
being followed by paper money. in the Philippines, we use coins and bills or paper
money. some countries use polymer or plastic money. in time, credit card and other
forms of plastic cards were introduced. Nowadays, there are people who prefer to use
credit cards rather than pay in cash, which may cause trouble if not properly managed.
Barter exchanges exist today just like barter in the olden times, but with organized
systems and procedures. businesses and individuals with slow moving merchandise

3
S.Y.2020-2021
can get rid of such goods merely by listing them in the exchange, which transactions
are done online, provided that they are a member of the said exchange. This will also
be discussed in detail in this chapter.
Origin of the Word “Money”
The development of the concept of money begun with the problem of men with regard
to the medium of exchange. Men used several mediums of exchange from simple
seashells to the more complex metals. They realized that there was a need for a
medium of exchange, an established integrity in business and personal transactions,
and a sense of security and order in the economy.
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. relative to the attribute of Juno
Moneta as the Guardian of the finances of the Roman Empire, it could also have been
from the Latin monere, meaning advice or warn. In ancient Greece, the word moneta
meant advisor, one who warns, or makes people remember.
The first Roman mint was constructed adjacent to the temple of Juno in BCE 289,
originally producing bronze and later silver coins. many of these coins bore an image
of the head of Juno moneta on its face. Moneta, therefore, eventually became the
word to refer for both coin and mint, and later changed the word money as you call it
at present.
Another term for money is “bucks”, which came from the word “buckskins”, meaning
deer hides, a medium of exchange used by settlers during the early times.
Definition of Money
Money is defined by Merriam-Webster something generally accepted as a medium of

exchange, a measure of value, or a means of payment. money is commonly defined
as 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 studying of the person who offers it. So long as the money
being tendered is genuine and not counterfeit, it is accepted as payment without
regard as to who is making the payment. In short, money is the lawful token used in
our society to pay for goods, services, and debt.
Miranda (2004) defined money “as 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.” According to
Businessdictionary.com, legal tender consists of denomination of a country's currency
that, by law, must be accepted as a medium for commercial exchange and payment

4
S.Y.2020-2021
for a money debt. While all denominations of the circulating paper money are usually
legal tenders, the denomination and amount in coins acceptable as legal tender vary
from country to country. Checks and Postal orders are not legal tenders and are
accepted only at the option of the creditor, lender, or a seller, also called lawful money.
Webster defined money as currency (coins and bills) used as a medium of exchange.
Government sets it as the means to pay for debts and, hence, is termed as legal
tender.
from the foregoing definitions of money, it can be noted that money is:
1. medium of exchange
2. legal tender
3. measure of value
4. means of payment; and
5. standard of value.
Barter
In the olden times, people were basically self-sufficient. They did simple farming or
planting, fishing, and hunting. they provided the food they needed in order to survive.
there was very little need for exchange as they lived very simple lives during those
times.
As society evolved, the habits and ways of life of a man changed. Men found the need
to exchange what they produced for what they needed. Thus, barter came into
practice. Barter is defined as the exchange of things for other things. for example, rice
was traded for fish or meat; coconut was traded for sugar or coffee.
Davis (2002) described cattle as mankind’s “first working capital asset”. the word
“pecuniary” (concerning or consisting of money) has its roots from the Latin word
pecus, meaning “cattle” an in the Welsch language, da, which is a noun for both
“cattle” and “goods”.
In these early societies, the goods used as proto- money, that is, commodities
acceptable to everyone engaged in trading, vary. These goods are called commodity
money. they had values assigned by those using them, but they also had intrinsic
value - the value of the goods because of their usefulness. Commodity money is a
money which value comes from a commodity of which it is made. people used objects
to exchange for items they wanted. These are objects that had value and were used
as money as well. some examples of commodities that have been used as mediums
of exchange include gold, copper, silver, salt, peppercorns, large stones, shells,
alcohol, cigarettes, cannabis, candy, barley, among others.
As a medium of exchange during the early times, people also used items like the
cowrie shell, which had only agreed upon or symbolic worth, but with no intrinsic
value. The cowrie shell was first used in China around BCE 1766 -1027 during the

5
S.Y.2020-2021
Shang Dynasty. It is the shell of a mollusk widely available in the waters of the Pacific
and Indian oceans. other than China many societies in India and Africa used cowries
as their form of currency. The use of cowries extended until the middle of the 20th
century in some parts of Africa. As such, cowrie is the most widely and longest used
currency in history.
Another symbolic currency, used widely in the Americas and by the North American
Indians in the 16th century, was wampums, an oblong shaped clamshell sought into
beads polished and strung together and used as ornament. Wampum is an Indian
word, which means “white,” the color of the beads. It was used as legal tender in
several early American colonies and states.
Other than cattle, cowrie shells, and wampums, metals were also used as commodity
money because of their intrinsic value. metals are durable, malleable (can be melted
and casted) and are divisible into smaller units, which make them portable. They are
also scarce. As such, metals were later used as the medium of exchange.
Coinage
The use of metals as money proved to be insufficient for the needs of society. one of
the problems was determining the purity of metal used as money. for gold, the use of
touchstone helped. the simplest and oldest tool to determine the purity of gold was the
touchtone used in the 16th century. a gold coin (of unknown purity) is rubbed against
a dark stone creating a streak. then more streaks are made with pieces of gold with
known amounts of silver (or copper), and the colors of the streaks are compared until
an exact color matched to the unknown is obtained. this match indicates that both are
of the same purity. the discovery of the touchstone, a machine used to test the purity
of metal and the total content of a particular lump paved the way to metal based
commodity for money and coinage. as a result, the concept of using standard coinage
was developed.
Coinage is the conversion of metals into coins. the place where metals are made into
coins is known as mint. With coinage, metals are made into coins of a fixed
weight. money in the form of coins became a convenient commodity for exchange
transactions, and, later, a convenient tool for comparing and storing values. Still, at a
later. As provided in the Philippine constitution, it became an exclusive prerogative of
the government of the Republic of the Philippines and, hence, the symbol of the state
of government issuing the said coin. The system of coinage marked a very important
stage in the history and development of money. Soon, coinage became a routine
process in the monetary system of countries.
A coin is an ingot of metal, the weight and fineness of which are certified by the
integrity of the design on its surface and the power of the issuing authority. The need
for an issuing authority is due to the fact that without such, the use of coins as medium
of exchange would be chaotic. If coinage became a private domain of individuals, there

6
S.Y.2020-2021
would be an unlimited number of coins used as a medium of exchange, making their
recognition and usage difficult to understand. Hence, the government is the only
authority granted the power of coinage and, ultimately, the power to print bills as
money. this is an essential step in any monetary system.
The government was granted the power to mint coins. It protected the process of
minting. Coins were carefully processed and stamped with an emblem that guaranteed
the weight and value of the metal which composed them. Eventually, the government
resolved to put value to the coin’s emblem and not on its content, thus, lowering its
metal content. coins minted by the government were out standard weight and fineness
and had their own distinct design and shape. The harder and more expensive the
metal used in a coin, the more durable it is. Copper is a little cheaper than bronze,
silver, and gold, but the risk of abrasion and clipping is high. pure gold and silver are
very soft and though more expensive, are less desirable as coin money.
With the government's sole authority to mint coins and print bills, the following basic
purposes are assumed:
1. prevent confusion
2. ensure uniformity and fineness (ratio of weight of pure metal to total weight,
express in decimal or carat) of coins
3. facilitate exchange
4. ensure confidence on the part of the citizenry with respect to the government's
monetary system
It is for these reasons that the fundamental law or the constitution of any country grants
the power to mint coins and print bills to its government alone, usually vested in its
central bank. In the Philippines, this power is vested in the Bangko Sentral ng
Pilipinas (BSP). BSP ensures stability in the Philippine monetary system.
With the power to mint coins solely vested in a government, any private coinage is
considered counterfeit. the government has made it difficult for coins to be
counterfeited.
KINDS OF COINAGE
1. Free coinage or gratuitous coinage - this is a system whereby metals may

be brought to the government mint and converted into standard money without
any charge for minting except for the delay involved in the process.
2. Brassage - this is the kind of coinage where the fee charged by the government
to mint metals into coin it's just sufficient to cover the cost of minting. The
government does not earn anything.
3. Seignorage/Seignorage - this is the kind of coinage where the fee charged by
the government is more than the cost of minting, so the government earns a
profit. the government defines the size, shape, design, and weight of coins. the
government allows people to bring their precious metals like gold (gold bullions

7
S.Y.2020-2021
or bars) to be minted. they pay the government seignorage to convert their
precious metals into standard coin money.
4. Limited Coinage - this type of coinage is 1 wherein the government converts
metals into coins only at its option. there is no privilege of free coinage in such
a case. the government buys precious metals in the open market and mints
them as coin money or the standard medium of exchange at face value higher
than material content to facilitate trade.
APPLICATION
A. Identification
______________1. Medium of exchange, standard of value, legal tender.

______________2. Exchange of goods for other goods
______________3. Shell of mollusk which is first used as money in China.
______________4. Clamshell which is first used as money in the Americas by the
Indians.
______________5. Converting metals into coins.
______________6. An ingot of metal
______________7. Place of coinage
______________8. Has monopoly for coinage
______________9. Free charged by the government for converting metals into coins
including the profit made by the government.
______________10. Free charges for the process of minting without profit.
B. Essay: Answer this using your own words.
1. Explain barter and how it works.
2. Is barter still applicable in today’s modern world? Discuss.
Congratulations! You just finished lesson 1 in your module

Should there be some parts of the lesson which need
clarification, please ask your instructor during your session.
Get ready for the next lesson!

8
S.Y.2020-2021
Lesson 2 Forms of Money
Learning Outcomes:
1. Differentiate the types of money and apply their utility in modern

day finance
2. Analyze the role of credit card in today’s economy and discuss the
pros and cons of using it
3. Discuss the different plastic card/plastic money being used in
today’s world
ANALYSIS
What do you think?
• Find old money and coins. What are their notable features that
make them different from the currency today?
ABSTRACTION
Let’s Discuss
Paper Money
The Chinese invented printing and the use of paper money during the Tang dynasty
(618-906 AD). The song dynasty, also called Sung dynasty (960-1279 AD) used paper
money alongside coins. The Yuan Dynasty (1271-1358 AD) was the first dynasty to
circulate currency completely as the medium of exchange. The dynasty was formerly
established by Kublai Khan, changing the original state in two Yuandadu (Currently
Beijing) as the capital. During the Ming Dynasty (1368-1644 AD), the Chinese placed
the emperor seal and his signature of the treasure on a crude paper made from the
mulberry bark.
Mongolia was the second country to begin using paper money in the 11th century. The
use of paper money developed much later in Europe than in Asia and in Arab countries
because Europe did not use paper then. it was in the 12th century that the Moors
established the 1st paper mill in Europe in what is now known as Spain. introduced by

9
S.Y.2020-2021
the heathen Moors, paper was less preferred by Christian officials who favored the
use of parchment or vellum. However, convenience made paper the medium of choice
for money. The Bank of Sweden issued the 1st paper money in Europe in the 17th
century. In the same period, The Bank of England was founded, which began issuing
promissory notes, originally handwritten but later printed.
the use of gold as money became risky (gold with high value/price) so the Goldsmiths
started writing out notes on pieces of paper, which stated that whoever has the note
can trade it for gold. this started the use of paper money in Europe. a British banknote
would contain statements saying, “I promise to pay the bearer undim and the sum of
______.”
The use of paper money alleviated the problem of scarcity of the precious metal used
in the minting of coins. Moreover, paper money is lighter than coins, making it more
portable. to facilitate exchange, the government issued paper money to represent
certain quantities of gold or silver kept by the government to cover what has been
issued. As such, paper money can be cold representative paper money, following
the long use of commodity money (referring to the use of commodities like gold and
silver which have intrinsic value). representative money was later replaced by what is
termed fiat money. below is a figure that illustrates the Philippine 100 peso bill a paper
money or fiat money.
P100.00 Bill
All banknotes include several security features, indicated on the front side:
1. embossed prints (republic)
2. serial number (in variable sized figures)
3. security fibers
4. watermark
5. see-through mark ("Pilipino" spelled in Baybayin, letters, used before the arrival
of the Spanish.)
6. concealed value
7. security thread
8. optically variable device (only on 500- and 1000-peso notes)
9. embossed print (money value)

10
S.Y.2020-2021
Polymer Money
Unlike the commonly known plastic money or credit card (to be discussed later), the
newly invented plastic money is made of polymer. plastic money is actual cash made
of super resistant polymer film (instead of paper). polymer money feels like regular
paper bill but lasts longer. when holding up a local plastic bill to a light, a small see-
through window can be seen. this confirms that the bill was printed on clear plastic
film. The polymer used for manufacturing foreign money is as thick and rigid as
American money.
Australia was the first country to develop and use polymer notes in general circulation
in 1988 after the significant research and development done by the Commonwealth
scientific and industrial research organization (CSIRO) and the Reserve Bank of
Australia. in 1996, Australia became the first country to have a full set of circulating
polymer banknotes with all denominations. Today, 23 countries used polymer
banknotes.
Polymer is more durable, harder to counterfeit, and environment friendly. It is less

polluting, and the production process is more energy efficient. It is also recyclable at
the end of its useful life its durability makes it cost effective in the long run. The
polymers see through window feature and optically variable devices make it extremely
difficult to counterfeit. The raised ink, transparent text, metallic portraits or images, and
hidden numbers are some of the other security features. Polymer notes lasts up to
four times longer than paper notes.
However, using polymer notes has disadvantages. when polymer notes come in
contact with water or some other liquids, they tend to stick together. Moreover, they
are not suitable for folding. when folded, a permanent crease is created. the problem
of bulkiness of creased polymer notes, and the print durability are other
disadvantages. Consequently, Thailand reverted the paper after testing polymer notes

11
S.Y.2020-2021
in circulation. Also, there are still a lot of governments that feel secure against
counterfeiting and still prefer to print paper money that polymer (plastic) money.
Plastic Money
The hard plastic cards used in everyday exchange transactions in place of actual
banknotes are called plastic money. they come in various classifications as credit card,
debit card, cashcard, prepaid cash card and store card. these cards are more portable
than money and less risky than carrying large sums of money. they are easier to use
because once transaction is not paid immediately. Instead, they allow one to
“lengthen” or “stretch” his budget.
CREDIT CARD
Credit card allows owners to buy products on credit

from different stores and establishments, 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. holders of the credit card are not allowed to
charge anything beyond their credit limit. Credit card
can also be used to pay for services if the company
rendering the service has a credit card terminal, a
machine needed to execute the transaction. It bears a relatively higher rate of interest,
but if the cardholder pays his balance in full each month (on or before the due date),
no interest is charged. There are other charges, however, that go with credit cards like
foreign currency conversion fees for international cards, annual fees , dormancy fees
, and other finance charges.
Examples of credit cards are American Express, Visa, MasterCard, and discover.
Banks and other financial institutions issue Visa cards or MasterCard that bear their
name like BDO, Wells Fargo, Metro Bank, RCBC, among others. as stated, credit card
is more portable and safer to carry. if lost money is seldom found. If credit card is lost,
one can simply report it immediately to the issuing company to void the card so no one
else can use it. Any unauthorized use of the card shall be reported to the credit card
company. The holder is not obliged to pay any unauthorized transaction. In addition,
most credit card companies give rewards if credit card holders use their cards
frequently. the more one uses the card, the more rewards he will get.
DEBIT CARD
The bank where the account is maintained issues the debit card. Unlike credit card,
payments using a debit card are immediately charged to the heart holders bank
account, instead of paying the card at a later date. the Holder can purchase goods or
services up to the amount that is in the account to where it is linked. in some instances,
if the bank gives an overdraft line, the Holder can purchase up to the extent of the

12
S.Y.2020-2021
overdraft line given him. the overdraft line refers to the credit (up to a certain limit)
granted by the bank to the holder of the card.
CASH CARD
Cash card only allows withdrawal of money through an authorized teller machine
(ATM). in short it is used for ATM transactions only. a cash card could be used as a
debit card as well. it is convenient in that the Holder need not stay in line inside the
bank to withdraw money. ATM machines are located in various locations, such as
outside or inside the bank, at department stores, and alongside roads. banks put up
ATM machines in locations where depositors go, including entertainment centers, for
easy access to their deposited money.
PREPAID CASH CARD
Prepaid cash card, as the name implies, is paid by buyers upon purchase. this card
includes:
1. Gift Card/ Gift Certificate - gift card is 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 a credit card; however, the amount that can be spent is fixed.
once fully used, it has no value at all.
2. Store Card – store card is like a credit card, generally issued by a particular
store and can be used for purchase in the same store. this is exactly the same
as the prepaid cash card discussed in the previous section. very seldom can it
be used in other establishments. this is a simple credit granted by stores to
encourage customers to spend more in their store.
3. Multi-currency prepaid card - the Philippine star, September 30, 2013 edition
reported that East West Bank launched 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. It can be used for purchases at point of sale (POS)
terminals. It has locked in exchange rate for currencies loaded. It can also
withdraw local currencies from all visa affiliated ATMs worldwide. All purchases
would require the client signature. It comes with a companion card that can be
used if the primary card is lost.
Major Forms of Money
1. Commodity Money – cowries, wampums, cattle, and other items used as a

medium of exchange
2. Currency – bills and coins issued by the government as a medium of exchange

13
S.Y.2020-2021
3. Check-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).
An example of the parts of a check are shown below:
In writing a check,
a. Date - include the month, day, and year you are writing the check
b. Payee - Write the name of the person or business on the line, “Pay to the order
of.”
c. Amount (in numbers) - Write the amount of the check in numbers.
d. Amount (in words) - Write the amount of the check in words.
e. Drawer’s (payer/issuer) signature - Sign all checks the way you sign the
signature card.
f. Memo - Use the memo area to note the reason for the check.
g. Routing numbers - The nine-digit string of numbers used to identify your bank
to process the transaction
h. Account number - The number used to identify your unique account within the
bank.
i. Check Number (Bank ID#) - The number used to identify a specific check within
the sequence of the register. It usually includes 3 or 4 digits.
j. Transit number - Used to list checks for deposit.
TYPES OF CHECK
a. Personal Check – issued by individuals with checking/current account in a

bank

14
S.Y.2020-2021
b. Business Check- issued by businesses with checking/current account in a
bank
c. Cashier’s Check/Manager’s Check – purchased from bank
d. Certified Check – personal or business check certified by the bank that
funds are available to pay the same
4. Bank Draft – also purchased from the bank, like cahier’s or manager’s check;
it can be:
(a) Sight or demand draft – to be paid upon presentation
(b) Time draft – to be paid at a future date
(c) Traveler’s check – can be purchased from certain stores or financial
institutions generally used by travelers
(d) Money order – can be purchased from the post office, certain stores, or
financial institutions that can be used like money for payment of any
obligation.
APPLICATION
A. Identification
_____________1. Type of coinage where the people bring their coins for minting.
_____________2. Type of coinage where the government has to buy metals form the
market for mining.
_____________3. Type of coinage where having coins does not involve any cost to
people.
_____________4. Started the use of paper as money.
_____________5. Substance used to manufacture plastic money.
_____________6. The most common plastic money.
_____________7. Another name for an ATM card.
_____________8. Gift certificates and gift cards are examples of these.
_____________9. Place where members can dispose of what they have in exchange
for what they need.
____________10. Works like a credit card but all purchases are immediately charged
to the account of the cardholder.
B. Discussion
1. Discuss the pros and cons of the use of credit card.

15
S.Y.2020-2021
2. Which of the different types of money (coin, paper money, plastic money,
“plastic money” or the different credit/debit cards) is the most advantageous?
Why?
C. Activity
Find someone with a credit card and ask for a copy of the credit card statement. Note
the details on the credit card, including the back, and ask him or her what they mean.
Note the details in the statement and highlight the charges on the card. Ask him or her
its advantages and disadvantages and its benefits and charges.
(Disclaimer: all the details that will be disclosed are for educational purposes only)
Congratulations! You are done with the second lesson. Should there
be some parts of the topics which need clarification, please ask your instructor during
your session. You can now proceed to the next lesson!

16
S.Y.2020-2021
Lesson 3
Functions of Money
Learning Outcomes:
1. Elaborate on the functions of money and how it serves men.

2. Appreciate the value of barter exchanges and explore their
possibility of dominating the current trade and how it will affect the
economy of the country
ANALYSIS
What do you think?
• What type of money do you usually use daily?
• What characteristics will you look for a good medium of
exchange?
Let’s Discuss
Functions of Money
From the definition of money, it is evident that the basic function of money is as a
medium of exchange and standard of value to facilitate exchange transactions of
goods and services. The following are the uses or functions of money:
1. 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. You buy goods, you pay
money; you have a haircut, you pay money.

17
S.Y.2020-2021
2. 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.
3. 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, our 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.
4. 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 owned is what is paid, and the creditor is able to buy the same amount
of goods or services. However, when prices rise, the amount owned will be able to
buy less (creditors lose); when process go down, the amount owned will be able to
buy more (creditors gain).
5. Conveyance
Conveyance refers to the means of transport or transfer. In law (which finance

uses), conveyance means the process of or the document 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. 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.

18
S.Y.2020-2021
Characteristics of a Good Medium of Exchange
On the basis of experience of countries with the use of medium of exchange, such
medium of exchange ought to possess certain characteristics such as:
1. Scarcity – 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 valuable that thing
becomes. This is the reason why precious metals, especially gold and silver,
were deemed a good choice as a medium of exchange. However, limited supply
makes these metals impractical or too expensive to use.
2. Divisibility – 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. Divisibility 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.
3. Portability – or ease in handling or carrying makes one thing desirable as a
medium of exchange. This allows people to bring it with the, anywhere they go
to enter a transaction. A piece of metals is easier to carry than a carabao. Paper
money is more portable than metals or even coins.
4. Durability – another factor to consider in determining the desirability of an item
as a medium of exchange. 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.
The use of metals is a practical choice of medium of exchange. Moreover, they have
intrinsic value and floor value or cost or effort, extraction, and refining which adds to
its worth. Copper, iron, lead, and tin were in the form of useful tools as knife, spear,
bow and arrow, fork, and pot. When silver and gold became abundant, there were
used as a medium of exchange. Gold and silver are great ornaments and are portable.
Modern coins have metals in them.
Barter Exchange and Barter Card
Advancement in technology and online networking have facilitated the formation of the
so-called Barter Business Exchange which is a network of business owners who want
to trade products and services to increase sales and, consequently, profit together
with a reduction of cash outlay, thus freeing business cash for other purposes to run
the business. It is a business-to-business exchange. It provides companies with the
resources needed to use barter as a strategic business tool. It is a means of getting
rid of slow-moving inventory in exchange of what the company needs that are available
in the network. Even gift certificates and gift cards can be traded in these exchanges.

19
S.Y.2020-2021
Members of the exchange for their own inventory, thereby making additional sales or
services. Such transactions improve operational efficiency and add value to the firm
and the stakeholders.
Members receive a plastic card (barter card) and an interest-free line of credit. If an
individual sells a particular item in the exchange, trade points or barter money (in peso)
are credited to his account in the exchange. If the business has certain goods or
services that is able to sell in the exchange, the company’s account with the exchange
is credited with trade points. The said trade points or credit, plus his line of credit, are
what the person or the entity will use as means to purchase in the exchange. Barter
exchanges use such barter money or trade points (e.g., 1 credit = P1.00, depending
on the country) accrued on barter cards of exchange members.
Unlike debit and credit cards, barter card does not need to be recharged with cash,
thereby giving the members access to extra cash they can use to finance personal or
business needs. Members do not need to accept one another’s merchandise directly.
Most of the time, they work or choose to work with other businesses through exchange
network. Examples of barter exchanges one can find on the Internet are BarterPX,
B2B Exchange Network, BizXchange, and BEX Barter EXchange Philippines.
Advantages of Trading Through the Barter Exchanges
Among the many advantages of using barter exchanges are the following:
1. Turn unproductive assets into a medium of exchange (barter peso, dollar, or
any other currency)
2. Better cash flow and, therefore, better cash position for the company
3. Increase sales and create new markets (new customer and customer base)
4. Greater profitability with increased sales
5. Enable faster turnover of inventories
6. Slow-moving inventories are sold at regular (full) instead of reduced prices
7. Otherwise idle time is made productive
8. Provide computerized bookkeeping by providing online account balances,
histories, and monthly statements
9. Billing hassle is dispensed with or eliminated
10. Can provide employee bonuses and benefits without the use of cash
11. Increase a company’s or a person’s credit line through the credit line (usually
non-interest bearing) granted by the exchange to the exchange members

20
S.Y.2020-2021
APPLICATION
1. Discuss on your own words on how barter exchange works.
2. Cite an example of a barter exchange on the internet (exclude those

examples that is already cited on the module). What are the advantages
of using their barter exchange?
Well done! You just finished the three lessons provided on this
module. Should there be some parts of the lesson which need
clarification, please ask your instructor during your session.
Get ready for the next lesson!


Module 1-The Concept and Development of Money

Uploaded by

Copyright:

Available Formats

You might also like

Module 1-The Concept and Development of Money

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Module 1-The Concept and Development of Money

Uploaded by

Copyright:

Available Formats

1

Afafafaf Cor Jesu College, Inc.

Module Overview Module 1

The Concept and

Are you ready? Then the lesson starts now!

Gen Ed 12- Business Logic

Gen Ed 12- Business Logic

Origin of the Word “Money”

Money is defined by Merriam-Webster something generally accepted as a medium of

Gen Ed 12- Business Logic

Gen Ed 12- Business Logic

Gen Ed 12- Business Logic

1. Free coinage or gratuitous coinage - this is a system whereby metals may

Gen Ed 12- Business Logic

______________1. Medium of exchange, standard of value, legal tender.

B. Essay: Answer this using your own words.

1. Explain barter and how it works.

2. Is barter still applicable in today’s modern world? Discuss.

Congratulations! You just finished lesson 1 in your module

Get ready for the next lesson!

Gen Ed 12- Business Logic

Lesson 2 Forms of Money

1. Differentiate the types of money and apply their utility in modern

Gen Ed 12- Business Logic

Gen Ed 12- Business Logic

Polymer is more durable, harder to counterfeit, and environment friendly. It is less

Gen Ed 12- Business Logic

Credit card allows owners to buy products on credit

Gen Ed 12- Business Logic

Major Forms of Money

1. Commodity Money – cowries, wampums, cattle, and other items used as a

Gen Ed 12- Business Logic

a. Personal Check – issued by individuals with checking/current account in a

Gen Ed 12- Business Logic

1. Discuss the pros and cons of the use of credit card.

Gen Ed 12- Business Logic

Gen Ed 12- Business Logic

1. Elaborate on the functions of money and how it serves men.

Gen Ed 12- Business Logic

Money is our measuring stick to measure the value or worth of something.

4. Means of Deferred Payment

As legal tender, money is acceptable in payment of debts or liabilities. If payment

Conveyance refers to the means of transport or transfer. In law (which finance

Gen Ed 12- Business Logic

1. Scarcity – makes something valuable, and over-abundance makes it worthless.

Barter Exchange and Barter Card

Gen Ed 12- Business Logic

Advantages of Trading Through the Barter Exchanges

Gen Ed 12- Business Logic

1. Discuss on your own words on how barter exchange works.

2. Cite an example of a barter exchange on the internet (exclude those

Get ready for the next lesson!

Gen Ed 12- Business Logic

You might also like