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College of Management: Capiz State University

This document appears to be an assignment from a credit and collection course at Capiz State University in the Philippines. It includes 4 exercises on topics related to money and credit transactions. The exercises define barter, describe the significance and unfavorable effects of money, list the characteristics of good money, explain commodity and non-commodity monetary standards and Gresham's Law, and analyze examples of credit transactions.

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Dave Isoy
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330 views4 pages

College of Management: Capiz State University

This document appears to be an assignment from a credit and collection course at Capiz State University in the Philippines. It includes 4 exercises on topics related to money and credit transactions. The exercises define barter, describe the significance and unfavorable effects of money, list the characteristics of good money, explain commodity and non-commodity monetary standards and Gresham's Law, and analyze examples of credit transactions.

Uploaded by

Dave Isoy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Republic of the Philippines

CAPIZ STATE UNIVERSITY


BURIAS CAMPUS
Burias, Mambusao, Capiz
www.capsu.edu.ph email address: [email protected]

College of Management
Anna Mae I. Isoy Dr. Meri-Lena G. Dionisio
BSBA III-FM Course Facilitator

Credit and Collection


FM 326

Chapter 1 Exercises # 1
1. Give the reasons why barter as a means of exchange has been abandoned.
The reasons why barter has abandoned, first because it was difficult to look for that
person who has the things you need and who also wants the things you are offering for
exchange, There is no common denominator to measure the value of goods and services sought
for exchange. Another reasons is that, most of the goods traded have unequal values, bartering
is also time consuming and very inconvenient for individuals to use the barter system, and it
lacks of generalized purchasing power, that’s why barter system was abandoned by the society.
2. Give the significance of money.
Money is anything used by society as a medium of exchange, and is widely acceptable
for the payment of good and services without questioning the integrity of the person offering it.
Money is of vital importance to the operation of the national and international economy.
Money plays an important role in the daily life of a person whether he is a consumer, a
producer, a businessman, an academician, a politician or an administrator. It occupies a central
position in our modern economy and become the religion of the day in the ordinary business of
life. Money is everywhere and for everything in the modern economic life.
3. Give the unfavorable effects of money.
The unfavorable effects of money are the excessive desire for money profits sometimes
induces businessmen and manufacturers to sacrifice the quality of there products. Because of
money, management and labor disputes arise out of claims to a large sum of money incomes,
sometimes it is the reason behind from judging people and things. Because of money society
has the tendency of becoming too materialistic, and because of to much desire of money it
results of depletion of our nature.
4. Describe the characteristics or attributes of good money.
There are eight characteristics of good money. First, General Acceptability, important quality of
money is its acceptance. Good money requires acceptance to all without any hesitation. Since
the law declares Money as the legal tender, it has an inherent quality of general acceptability.
Second, Stability of Value, all the qualities of good money, stability is probably the most
essential one. The value of money cannot change for a long period of time and hence remain
stable. If the value of money keeps changing, then it will fail to function as a measure of value
and as a standard of deferred payment. Portability, apart from its acceptance, good money
also requires portability. If people can carry or transfer money from one place to another, then
it is good money. Cognizability is also the attributes of good money, The ability to recognize
money is critically important. Today, we can look at a currency note and tell its value. If money
is not cognizable, then people can find it difficult to determine if they are dealing with money or
some inferior asset. Another is Divisibility, talking about the qualities of good money, it is
important to remember the divisibility of money. If someone wants to buy a smaller unit of a
commodity, then divisibility of money can make it possible. Homogeneity or Uniformity, This is
an important quality of good money – homogeneity. If money is not homogeneous, then
transactions will become uncertain as people would be unsure of what they are receiving.
Elasticity, this characteristic refer to the volume of money being capable of manipulation by
monetary authorities. Money supply can easily be increased or decreased depending upon the
need of economy. Lastly, Durability, acceptance and portability aside, the material used to
make money must last for a long time without losing its value. Through these characteristics
you can identify the good money.

Chapter 2 Exercise #2

1. Explain the two (2) broad types of monetary standards.


The monetary standards have two types, first is Commodity Standards sometimes called
the Full-bodied Money, which either monometallic or bimetallic. A monometallic standard is
one metal standard whereby the country uses either gold or silver as their standard unit ot
value. On the other hand, bimetallic standard is two metal standard which means gold and
silver are use as a standard unit of value. Commodity standard exists where the value of
monetary units equal the value of specific amount of commodity. And
Non-commodity or fiat standard which the face value of monetary units is much higher than
that of the value of the material used as money.
2. Explain the important characteristics of the gold exchange standard.
Gold exchange standard does not have to be coined or used as bullions but the monetary unit
of the country must be defined in terms of a specific quantity of gold. The central banks builds
up a credit balance with banks in foreign countries that adopt the gold coin, and the treasury
buys and sells any amount of gold drafts drawn upon banks located in the foreign country to
which it has related its currency or to foreign banks which operated under the gold bullion
standard. People are allowed by the government to export and import their gold and hoard it
and used it for any other purpose. All kinds of currency circulating in the country can ultimately
be redeemed at part in gold drafts, which eventually be equivalent to gold.
3. if the ratio of silver to gold in the mint is 16 to 1 and it becomes 15 to 1 in the market,
which of the two metals become the cheaper metal? Why?

4. Explain Gresham’s Law.


Gresham’s Law states, if coins containing metal of different value have the same value
as legal tender, the coins composed of the cheaper metal will be used for payment, while those
made of expensive metal will be horded or exported and thus tend to disappear from
circulation. It is commonly stated as Bad money drives out Good money.

Chapter III Exercises 3


1. On December 12, 2020, customer Rex Carpio took P2,000 worth of groceries to the casher’s
counter and paid check with a current-dated (12-12-2020), with the approval of the owner. Is
this a credit transaction? Why?
No, because the date of purchased of Rex Carpio is the same date that indicated on
check received.

2. On December 03, 2020, Maria Angela took P3,000 worth of garments and at the counter
paid with a check dated January 8, 2021, which was approved and accepted. Is there a credit
transaction here? Explain.
No, Because the garments was been paid by the check dated January 8, 2021. C

3. On December 15, 2020, Marcia Carro paid for P1,500 worth of groceries with an Bank of
Philippine island credit card. Where is the credit transaction and who are the parties to it?
The credit transaction happened between the credit card issuer which is the Bank of the
Philippines and Marcia Carro the holder of the credit card. The Bank of the Philippines and
Marcia Carro are the parties within this credit transaction.
4. Lorie Luna asked an electrician to replace the old electrical system in her house. The agreed
cost of electrical work is p4,500. As payment, Lorie told electrician to go to her grocery store
and get P4,500 worth of groceries. Is there a credit transaction here? Explain.
There’s No credit transaction here, because the two parties agreed that Lorie will pay
the electrician’s service with groceries worth of P4,500 which has exact amount to the service
payment of electrician.

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