Basic finance 1.2

• Earliest forms of money

  • Commodity Money
  • Metals Used as Money
  • Paper Money
  • Coins
• Commodity Money


  A kind of money whose face value is equal to the value of the commodity used as money, which may be either metallic or non-metallic in nature
• Metals Used as Money


  The latter forms of regular medium of exchange because of the difficulties of using commodities as money
• Metals used as money


  • Copper
  • Iron
  • Lead
  • Tin
• Today, monetary units of many countries of the world are defined in terms of a certain weight of a precious metal, gold or silver of a given fineness or purity. Philippine Peso = is defined as 7 and 13/21 grains of gold with 0.9 fineness.
• Paper Money


  Developed in connection with the use of gold or silver as standard money, to overcome the inconveniences of carrying large quantities of heavy metals and to avoid the risk of losing them, and to minimize or eliminate the loss through wear and tear as well as their physical appearance
• Before the effectivity of the Central Bank's Act, the Philippine Peso Bill used to bear the promise of the Philippine Treasury to redeem such notes in gold or silver coins to bearer on demand. But at present money now circulated by the Bangko Sentral ng Pilipinas are mere liabilities of the bank and fully guaranteed by the government of the Republic of the Philippines.
• The amount of money issued by the BSP shall be backed up/supported by its assets. Its general acceptability is by force of law and the government makes them legal tender for all debts, public or private.
• Coins


  The mass of metals shaped in convenient forms and contain specific weight and purity guaranteed by the government for use as medium of exchange. Coins are used to facilitate the settlement of small transactions involving less than a peso.
• Kinds of Coins


  • Standard Coins
  • Subsidiary/Token Coins
• Standard Coins


  Made up of standard metal gold or silver based from the mint rules and regulations, where the bullion value is equal to its face value. Also known as full-bodied money.
• Subsidiary/Token Coins


  Made up of cheap metals and their face value is greater than their bullion value. Also known as representative full-bodied money.
• Coinage


  The act of manufacturing uniform coins and stamping them as a way to guarantee their purity and of their weight. It is also the act or process of cutting the metals designated as money by the authorities into pieces of uniform weight and quality certified by the government seal.
• Today, coinage is not only a function, but also a monopoly of the government through the Bangko Sentral ng Pilipinas and any private coinage is considered a counterfeit.
• Terms in Coinage


  • Coin
  • Fineness
  • Weight
  • Mint
• Coin


  A shaped-metal with specific weight and fineness, stamped with some particular design and denomination intended for use as money.
• Fineness


  The purity of the precious metal contained in the coin. It is the ratio of pure gold or silver to the total weight of the coin.
• Weight


  The heaviness/bulkiness of the precious metal contained in the coin.
• Mint


  The place or factory where coins are manufactured or minted.
• Kinds of Coinage


  • Free/Unlimited Coinage
  • Limited Coinage
  • Gratuitous Coinage
• Free/Unlimited Coinage


  Exists when a person is given the privilege to take any amount of metals to the mint for coinage.
• Limited Coinage


  Exists when coinage is solely on the account of the government where it purchases metals in the market and manufactures them into coins and to be made available to the general public for circulation.
• Gratuitous Coinage


  Exists in a country if the owner of the mint does not charge the owner of the metals a fee for coinage, in short, it is free of charge.
• Fees Charged in Coinage


  • Brassage Fee
  • Seigniorage Fee
• Brassage Fee


  A coinage fee charged by the government or the mint that is just enough to cover the actual cost of minting (e.g. cost of cutting the metal, cost of stamping and assaying the metal).
• Seigniorage Fee


  A coinage fee charged by the government or the mint which is sufficiently high to yield profit. In short, the amount to be collected by the mint is more than the actual cost of minting.
• Kinds of Money (on the basis of material used/evolution)


  • Commodity Money
  • Paper Money/Fiat Money
  • Bank Money/Check
  • E-Money
• Commodity Money


  A kind of money whose face value is equal to the value of the commodity used as money, which maybe either metallic or non-metallic in nature.
• Paper Money/Fiat Money


  Made up of special kind of paper so as to be able to withstand the normal or legitimate wear and tear which used in transaction. Paper Money carried a guaranty that it was convertible into coins or a fixed quantity of precious metal. Fiat Money was decreed by the government as legal tender but not convertible into coins or precious metal.
• Bank Money/Check


  Comes in the form of checks which are made up of special kind of paper and thicker than paper money issued by the Bangko Sentral ng Pilipinas.
• 1. Money


  Electronic payments technology can substitute not only for checks, but also for cash in the form of debit/credit cards, stored value card/smart card, e-cash, etc.
• Debit/Credit Card


  Enable customers to purchase goods & services by electronically transferring funds directly from their bank accounts to a seller's account.
• Stored-Value Card/Smart Card


  Contains a computer chip that allows it to be loaded with digital cash from the owner's bank account whenever needed. Smart cards can be loaded from ATM machines, personal computers with a smart card reader or especially equipped telephones.
• 1. e-Cash


  A customer gets e-cash by setting up an account with a bank that has links to the Internet and then has the e-cash transferred to her PC. When she wants to buy something with e-cash, she surfs to a store on the Web and clicks the "buy" option for a particular item, whereupon the e-cash is automatically transferred from her computer to the merchant's computer.
• Kinds of Money (on the basis of the nature/character of the issuer)

  • Treasury Money
  • Commercial Bank Money
  • Central Bank Money
• Treasury Money


  Treasury money are those that were issued by the National Treasury before 1949 which consist of treasury notes and coins in varying denominations.
• Commercial Bank Money


  These were issued and circulated by the Bank of the Philippine Islands and the Philippine National Bank which were circulated to supplement the treasury notes issued by the Philippine government.
• Central Bank Money


  These are issued and circulated by the Central Bank of the Philippines since the effectivity of its operation in 1949.
• Kinds of Money (on the basis of their popularity)

  • Paper Money
  • Fiat Money
  • Subsidiary Coins
• Paper Money


  Paper money does not have any commodity value nor intrinsic value which is less popular and less acceptable.