ELEMENT OF BANKING 1 – BFN 111

• Instructor: Lagos City Polytechnic
• Lectures: 6
• Duration: 2 hours

LAGOS CITY POLYTECHNIC, IKEJA

 DEPARTMENT: ACCOUNTANCY 

TO WHOM: ND 1

COURSE CODE: BFN 111

COURSE TITLE: BFN 111 ELEMENT OF BANKING 1

COURSE UNIT: 2

LESSON 1

LESSON OUTLINE:

• Introduction to Money
• Function of Money
• The Characteristic of Money

MONEY

Money, as defined in economics, is anything that is readily and widely accepted as a medium for the exchange for goods and services or in settlement of debts. Money plays a crucial role in the economic system of any country. It is a means for promoting specialization and exchange on which modern economic activity is based. Before the invention of modern money in the forms of currency notes and coins as we know today, trade had been conducted by barter, through the use of commodity monies such as cowries’ shells, cow, manilas, iron bars, etc. The barter system refers to a situation where goods are directly exchanged for goods. The problems associated with the system are:

• Double coincidence of wants: It entails finding a person who has what you want and requires what you have. For example, a person who has a cow and needs a yam must search for another person who has a yam and needs a cow. This process is cumbersome and leads to a waste of time.
• No common unit of measure: It is difficult to arrive at a uniform or an easily acceptable exchange rate between different commodities
• The absence of a means of storing wealth or value: Under the barter system, it is difficult to store wealth because most articles of trade, especially agricultural products are easily perishable.
• Difficulty in making deferred payment: As a result of exchange rate problem, the barter system makes deferred payment impossible.
• Problem of bulkiness and indivisibility of most goods: The goods are often too bulky to be carried from one place to the other, and are not capable of being divided into similar units to facilitate transaction The introduction of money has enabled man to overcome the problem associated with the barter system.