Course Title: CREDIT AND COLLECTION

Course Code: P23O6

Term: 1st Semester, SY 2021-2022

Faculty: CENITH GONZALES BUENAFLOR, MBA

INTRODUCTION:
Transition From Barter Economy to Money
Economy
Money, in and of itself, has no actual value; it can
be a shell, a metal coin, or a piece of paper.
Its value is symbolic; it conveys the
importance that people place on it.
Money derives its value by virtue of its functions:
as a medium of exchange, a unit of measurement,
and a storehouse for wealth.
INTRODUCTION:
Transition From Barter Economy to Money
Economy
Money allows people to trade goods and services
indirectly, it helps communicate the price of goods
(prices written in dollar and cents correspond to a
numerical amount in your possession, i.e. in your
pocket, purse, or wallet), and it provides
individuals with a way to store their wealth in the
long-term.
INTRODUCTION:
Transition From Barter Economy to Money
Economy
Money–in some way, shape or form–has been part
of human history for at least the last 3,000 years.
Before that time, historians generally agree that a
system of bartering was likely used.
Transition From Barter Economy to Money
Economy
Time was when man contented himself with hand
to mouth existence.
What he needed, he produced, and he produced
only what he needed.
He realized some needs could only be satisfied by
other men’s produce.
So, he learned to exchange his goods with his
neighbor’s.
Transition From Barter Economy to Money
Economy
This was called a barter which is a type of
trade in which goods or services are directly
exchanged for other goods and/or services.
Transition From Barter Economy to Money
Economy
 Thus, an uncomplicated system developed.
 Later on, he likewise realized the inconvenience
of bringing bulky products to exchange for others’
goods, a realization that led to the use of a
medium of exchange: in the beginning stones,
then gold or any valuable item, and finally money.
Transition From Barter Economy to Money
Economy
 Money is valuable merely because everyone
knows that it will be accepted as a form of
payment.
 However, throughout history, both the usage
and the form of money have evolved.
Transition From Barter Economy to Money
Economy
 In carrying about large amounts of money in
the pursuit of trade proved to be disastrous, a
system using a medium of exchange based
on trust was established.
Transition From Barter Economy to Money
Economy
 Ancient Romans are said to have given
credit practices a systematic form, but credit
was already used in a variety of ways
centuries before this.
 As early as 1300 B.C. loans were made
among Babylonians and Assyrians on the
security of mortgages, advance deposits, and
even trusts.
Transition From Barter Economy to Money
Economy
 By 1000 B.C., the Babylonians had already devised a
crude form of the bill of exchange, so that a creditor
merchant could direct a debtor merchant in a distant
place to pay a third party to whom the first merchant
was indebted.
 Installment sales of real estate were being made by
the Egyptians in the time of Pharaohs. Recourse of
credit was also prevalent among the traders in the
Mediterranean area, including Phoenicia, Greece and
Rome.
Transition From Barter Economy to Money
Economy
 Today, we see credit being passed on to
debtors in various forms; it could be items
bought through a credit card; it could be
items transacted through an existing credit
line of customer; or simply items bought
from the corner.
 We find most businesses thriving mostly on
charge sales/purchases in various forms.
Transition From Barter Economy to Money
Economy
 In growing business where competition is a vital
factor, credit has to play an important role-it is the
key to increased sales.
 However, it needs proper handling and
management, as misuse of credit can either make
or break business.
 A person who has been extended credit and abuses
the use of it, may be a potential credit wreck.
Transition From Barter Economy to Money
Economy
 As can be seen in today’s business, credit
plays an important role in commerce.
 We see a lot of business entrepreneurs
securing their capital from bank loans.
 Banks have been the base of the credit
system.
Transition From Barter Economy to Money
Economy
 Practically all credit transactions, a
significant role of the credit pie is
contributed by the banking system.
 Banking system has been created,
developed, and strengthened to be the trustee
of our savings at the same time to be
judicious provider of credit.
CONCLUSION:
Transition From Barter Economy to Money
Economy
While the system of exchanging goods for
goods, services for services and the like was
found to be convenient and in some
communities was considered almost the best
system of exchange at that time, barter
presented some difficulties which make
people dissatisfied.
CONCLUSION:
Transition From Barter Economy to Money
Economy
These difficulties were eventually overcome
when a system of exchange or trade was
developed and money became the essential
part of the modern exchange mechanism and
thereby facilitates specialization and
production.
CONCLUSION:
Transition From Barter Economy to Money
Economy
We may say, then, that the sole purpose of
money in the economic system is to enable trade
to be carried on as cheaply as possible.
 Credit was also established as money substitute
based on trust since carrying about large
amounts of money in the pursuit of trade proved
to be disastrous.