COLEGIO DE STA. ANA DE VICTORIAS, INC.

Osmeña Avenue, Victorias City, Negros Occidental, 6119

MODULE 1
LEARNING MODULE
BLENDED FLEXIBLE LEARNING
Business Finance (FINA 221)

AN OVERVIEW

INTRODUCTION

Man’s 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 the early
years, to the use of different forms of money – from shells to metals, until coinage
came into being followed by paper money. In our country, 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.

LEARNING OUTCOMES
At the end of this module, you should be able to:

1. Discuss the concept of 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 different types of money and apply their utility in modern-
day finance.

LEARNING RESOURCES

LEARNING INPUTS

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 COLEGIO DE STA. ANA DE VICTORIAS, INC.
Osmeña Avenue, Victorias City, Negros Occidental, 6119

MONEY
LESSON 1

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, advise or warn. In ancient Greece, the
word moneta meant advisor, one who warns, or makes people remember.

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.

What is Money?

Money is defined by Merriam-Webster as 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 standing of the person who offers it. So
long as the money being tendered is genuine and no counterfeit, it is accepted as
payment without regard as to who is making the payment. What matters is the
authenticity of the money being tendered as 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 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 seller, also called lawful money. Anything that is
used as a medium of exchange is the equivalent of 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.

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 COLEGIO DE STA. ANA DE VICTORIAS, INC.
Osmeña Avenue, Victorias City, Negros Occidental, 6119

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.

LESSON 2 BARTER

In the old times, people were basically self – sufficient. They did simple farming,
or planting, fishing and hunting. They provided the food that they need in order to
survive. There was a little need for exchange as they lived very simple lives during
those times.
As society evolved, the habits and way of life of men changed. Men found the
need to exchange what they produced for what they needed. Thus, barter came into
practice.

What is Barter?
It is defined as the exchange of things for other things. For example, rice was
traded for a fish or meat.

Cattle are probably the oldest of all forms of money as domestication of

animals tended to precede the cultivation of crops. It is described as the first
working capital asset. The word pecuniary (concerning or consisting of money) has
its roots from Latin word pecus, meaning “cattle”.

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 use objects
to exchange for items they wanted. These were objects that had value and where
used as money as well. Examples are gold, copper, silver, salt, large stones, shells, &
cannabis.

As a medium of exchange during the early times, people used items like the
cowrie shell, which had only agreed-upon or symbolic worth, but with no intrinsic
value. It was first used in China around BCE 1766 – 1027 during the Shang Dynasty. It
is a shell used of mollusk widely available in the waters of the Pacific and Indian
Oceans. They used cowrie shell as form of their currency. It is extended until the
20th century in parts of Africa and considered as the longest currency in history.

Another symbolic currency, used widely in the Americas and by the North
American Indians in the 16th century, was wampum, an oblong shaped clamshell
sawed into beads, polished and strung together and used as an ornament. Wampum
is from an Indian word that means white.

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 COLEGIO DE STA. ANA DE VICTORIAS, INC.
Osmeña Avenue, Victorias City, Negros Occidental, 6119

Metals were also used as commodity money because of their intrinsic value.
They are durable, malleable, scarce and are divisible into smaller units.

LESSON 3 COINAGE

The use of metals as money proved to be sufficient for the needs of society. One
of the problems was determining the purity of metal used as money. The discovery
of the touchstone, a machine used to test the purity of metal and the total content
of a particular lump paved way to the metal commodity for money and coinage. As a
result, the concept of using the standard coinage was developed.

Coinage is the conversion of metals into coins of a fixed weight. It became a

convenient commodity for exchange transactions and later, a convenient tool for
comparing and storing values. Still, at a later period 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 or 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 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.

LESSON 4 PAPER MONEY

The Chinese invented printing and the use of paper money during Tang Dynasty
( 618 – 906 AD). While the Yuan Dynasty ( 1271 – 1368 AD) was the first dynasty to
circulate currency completely as a medium of exchange. During the Ming Dynasty
(1368- 1644 AD), the Chinese placed the emperor’s seal and the signature of the
treasurer on a crude paper made from mulberry bark.

Mongolia was the second country to begin using paper money in the 11 th
century. Until in Asia , Arab countries and in Europe. They used promissory notes/
IOU to merchants to avoid thefts and bringing large amount of money.

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 COLEGIO DE STA. ANA DE VICTORIAS, INC.
Osmeña Avenue, Victorias City, Negros Occidental, 6119

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. 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 the use of
commodities like gold and silver which have intrinsic value). Representative money
was later replaced by what is termed fiat money.

LESSON 5 PLASTIC MONEY

They are hard plastic cards used in everyday exchange transactions in place of
actual bank notes. These cards are more portable than money and less risky than
carrying large sums of money.

These are the types of plastic money:

1. Credit Card - It allows owners to buy products on credit from different stores,
in lieu of cash or money, except that it has credit limit. Examples of credit
cards are American express, Visa, Mastercard and Discover.
2. Debit Card - The bank where the account is maintained, issues the debit card.
Unlike credit card, payment using a debit card are immediately charged to
cardholders account instead of paying it on a later date. If the bank gives an
overdraft line, the holder can purchase up to the extent of the draft line given
to him.
3. Cash Card - It is a re-loadable prepaid electronic debit card. It only allows
withdrawal of money through an Authorized Teller Machine (ATM). The
cardholder can enjoy the security and convenience of an ATM card (withdraw
money and pay for shopping) without having to open a deposit account.
4. Prepaid Cash Card - It is a card where you can use to pay for things. It is
either reloadable or has a money loaded when you purchased it. It is also
called as prepaid debit card or store-value card which can be bought at many
stores and online.
Types of Prepaid Cash Card
 Gift card/certificate - It is a prepaid cash card/ certificate that can
be given as gift so that the recipients can choose what they want as a
gift. It can be issued by store where it can be purchased, or financial
institutions that can be used at any stores. Once it is fully used, it has
no value at all.

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 COLEGIO DE STA. ANA DE VICTORIAS, INC.
Osmeña Avenue, Victorias City, Negros Occidental, 6119

 Store card - It is like a credit card issued by a particular store and can
be purchased in the same store. This is a simple credit granted by
stores to encourage customers to spend more in their store.
 Multi-currency prepaid card - It is like a debit card; however, it can
load up to 6-15 different currencies. It can be used and withdraw from
all affiliated merchants or ATMs locally and internationally regardless
of the currencies loaded.