MONEY is the medium by which we may acquire from others, who are willing
to part with them, such things as we may desire. The price of an article is the value set
upon it by the possessor, as represented by an expressed sum in money.
The price of some things are arbitrarily fixed by law or custom, such as
stamps, professional fees, duties, &c.
The standard of value in this country is gold, and it is as against
gold, represented by coins of different denominations, that the value of all commodities
The authorised coins of the United Kingdom consist of the following
Five-sovereign piece, equal to Five pounds.
Two-sovereign piece, equal to Two pounds.
One-sovereign piece, equal to One pound.
Half-sovereign piece, equal to Half-a-pound.
A crown, or five-shilling piece, equal to one-fourth of a sovereign.
Double-fiorin, or four-shilling piece, equal to one-fifth of a sovereign.
Half-a-crown, or two shillings and sixpence, equal to one-eighth of a sovereign.
Florin, or two-shilling piece, equal to one-tenth of a sovereign.
Shilling piece, equal to one-twentieth of a sovereign.
Sixpenny piece, one-half of a shilling.
Threepenny piece, one-half of a sixpence.
A penny, equal to one-twelfth of a shilling.
Halfpenny, equal to one-half of a penny.
Farthing, one-fourth of a penny.
In writing or speaking of sums of money the expression takes the form of
"pounds, shillings, and pence"; for example, Twenty-one pounds five shillings
and nine pence. Sometimes the word "sterling" is added, meaning genuine or
standard coin of the realm. In accounts the figures are placed in three parallel columns
under the heading of £ s. d. "£" for pounds, "s." for shillings, and
"d." for pence, from Libri, solidi, and denarii, the Latin equivalents for these
Another form of money, if it may be so termed, is the Bank note. This is
simply a promise to pay, on demand, the amount represented on the note, in gold or some
legal tender. The most common in use are £5 notes, but there are others of different
denominations, such as £10, £20, £50, £100, &c. Some country banks still issue
these notes, but they are by law restricted from issuing beyond a certain amount fixed by
the Bank Act of 1844. No new bank can issue notes, and those which have the privilege are
gradually relinquishing it, so that in course of time there will be only one bank entitled
to issue notes, and that is the Bank of England.
The notes of country banks, other than the Bank of England, are not a
legal tender; that is, it is not compulsory on anyone to accept them in payment of a debt.
The Bank of England is the oldest joint-stock bank in the country, and
although, in its constitution, it does not differ materially from other joint-stock banks,
yet, being the agent of the British Government in all money matters, and possessing other
exclusive privileges, it is looked upon as one of the endunng institutions of the
country.* (* See Joint-Stock Banks, p. 68.)
Amongst other privileges it enjoys is the authority to issue promissory
notes to a certain extent, representing respectively sums of £5, £10, £20, £50, £100,
£200, £500, and £1,000.
These Bank of England notes, as they are termed, are absolutely
convertible, that is to say, the bank is legally bound to exchange them for gold at all
times when demanded; and a certain amount of gold has always, by law, to be kept in stock
for the purpose. Moreover, the tender of Bank of England notes, the same as with gold, in
payment of a debt, cannot, in this country, legally be refused. No one, however, can be
compelled to give change; that is to say, if you owe a person £4 15s., you are bound in
strict law to pay him that exact sum. You cannot offer him a five-pound note and insist
upon his giving you 5s. change, though, as a matter of courtesy and convenience, payments
are constantly accepted in that form.
It must be obvious that these Bank of England notes are a great
convenience, and even a necessity to the public, as it would be quite impossible to carry
on the enormous business of the country if such a cumbersome medium as gold coins was the
only legal way of paying debt. Nevertheless, gold coin of proper weight is a legal tender
to any amount. Silver is not a legal tender for sums over two pounds, nor bronze for sums
over one shilling.
But even with bank-notes the requirements of business are not fully
satisfied, as there is always the risk of their being lost or stolen. To avoid this risk,
and to provide facilities for buying and selling, with the complications incident thereto,
and the passing of money from one hand to another, an intermediary agency is required, and
that agency is to be found in the banking companies. In nearly every town, having a
pretence to the name, in the United Kingdom, will be found a branch bank of some
establishment of more or less repute, and those who are fortunate enough to possess money
will do well to take advantage of such an agency for their money matters, having, of
course, first ascertained that the standing of the company is such that they may do so
with safety and confidence.
As a first step we give an example of what is occurring daily in
hundreds of cases.
Miss Jane Smith is a lady who has been brought up without the slightest
instruction in business matters, indeed has rather plumed herself on the idea of being
quite above such things. Suddenly she finds herself dependent upon others for guidance and
advice. She would like to act for herself if she only knew how to do so safely, being of a
somewhat suspicious temperament and mistrustful of advice from friends or acquaintances.
Even the highly respectable lawyer, who has handed her a packet of documents and £500 in
cash (a legacy from her uncle), with much sage counsel, she is not quite sure about, for
she has imbibed the idea from her youth that lawyers are not always to be trusted.
The packet of documents in the tin box as they came to her is set aside
in a safe place for the moment, but the bank-notes and gold are a matter of serious
concern to her. She fears to carry them about her person lest she should lose them, or be
robbed, and feels sure that if kept in the house they will attract any burglars that may
be in the neighbourhood.
The best thing Miss Smith can do is to go to one of the neighbouring
banks of repute - say the Blankshire Bank - and ask them to help her out of the
She has an interview with the Manager or Cashier, tells her story, and
is advised to leave the money at the bank and have an account opened in her name. This
course she consents to adopt, and hands over the £500, requesting some acknowledgment
that she has done so, in common terms, "something to show for it."
Many banks provide and require their customers to use "paying-in
slips," that is, printed forms specifying the payments made to the bank under the
head of cheques, notes, gold, and silver. A form is handed in with each payment, and the
initials of the cashier placed against the amount noted on the counterfoil, which is
retained by the customer.
In addition to this Miss Smith will be presented with what is called a
pass-book - a book passing between the bank and herself, now become a customer - in which
she will find it stated in the briefest business manner, that the Blankshire Bank is Dr.
(debtor) to, or owes, Miss Jane Smith £500. She will be told that portions of this money
may be drawn out from time to time as she may need it, but this can only be done by
cheques, or forms of request to the bank to pay out the amount desired.* These forms,
provided by the bank, are printed, blank spaces being left to be filled up in writing, and
they are made up in books of various sizes, each form bearing a penny stamp. The customer
pays for the book according to the number of stamps it contains, but no more. Miss Smith
buys a cheque-book, and, opening it, finds the following form in print:- (* The practice
with some people of writing cheques on plain paper is discountenanced by bankers, and is
to be condemned.)
| No. 10901. | No. 10901. 189 |
| | |
| 189 | To the Blankshire Banking Company, |
| | Blanktown. |
| | |
| | Pay to or bearer |
| | |
| | the sum of |
| | |
| £ | £ |
| | |
She then recollects that she has no money to go on with, and asks to
have £10 of the £500 she has left in the bank. The cashier offers to fill up the blank
spaces in her first cheque, making corresponding entries in the counterfoil, and having
done so asks her to sign it at the foot.
It then appears as follows :-
| No. 10901. | No. 10901. March 1, 1898 |
| | |
| March 1, 1898 | To the Blankshire Banking Company, |
| | Blanktown. |
| | |
| Self | Pay to Self or bearer |
| | |
| | the sum of TenPounds |
| | |
| £10 | £10 JaneSmith |
| | |
The cheque is detached from the counterfoil at the dotted line, and is
retained by the cashier, who hands over £10 to the lady together with the book containing
the remaining cheques.
"Oh! I had quite forgotten - I owe Miss Tucker, the milliner, £23
10s. Will the cashier please to let me have £23 10s. to pay her with."
Miss Smith is told that there is no need of incurring the risk of
carrying the money through the streets, as a cheque in favour of Miss Tucker will equally
answer the purpose; and again he fills up the blank spaces in a second cheque, which
appears thus :-
| No. 10902. | No. 10902. ! ! March 1, 1898 |
| | ! ! |
| March I, 1898 | To the Blank!hir! Banking Company, |
| | !Bla!ktown. |
| | ! ! |
| MissTucker | Pay to MissTucker or order J.S. |
| | ! ! |
| | the sum of Twenty-threepounds10/- |
| | ! ! |
| £2310/- | £2310/- ! ! JaneSmith |
| | ! ! |
"You see," says the cashier, "I have struck out the word
'bearer' and substituted the word 'order.' This will oblige Miss Tucker to sign her name
on the back of the cheque (technically, to 'endorse it') before it can be paid. "Your
initials are required to confirm the alteration.* I have also drawn parallel lines across
the cheque, which makes it what is termed 'a crossed cheque,' and a crossed cheque cannot
be cashed direct, but must be paid into an account at a bank. So you see you will have the
signature of Miss Tucker, proving that she has been paid her bill by means of this cheque;
and it is obvious that by crossing the cheque, should it be lost and made an improper use
of, there would be no difficulty in tracing through whose hands it passed." (* Banks
also issue cheques with the word "order" printed instead of "bearer.")
Miss Smith soon learns that all her tradesmen's bills may be paid in the
same way, without going to the bank to draw the money, and with the advantage that the
cheque is not only a proof of payment, but that she has also a record of her accounts in
the bank pass-book.
It may here be mentioned that should a banker cash a cheque with a
forged endorsement, he is not responsible, and the loss falls on the drawer of the
cheque.* The crossing of a cheque, however, necessitating its being paid to a bank
account, would facilitate the discovery of the culprit. An additional security is given to
a crossed cheque if it bears the words "not negotiable" written underneath the
crossing. This means that it cannot legally be used as a means of payment to a third
party. In the event of such a cheque going wrong, the loss would fall upon a bank
negotiating it for a customer. The bank could be called upon to make good the amount to
the payee. (* If, however, he pays a cheque with a forged signature he is responsible, as
he is supposed to know the handwriting of his own customer.)
It is illegal to post-date a cheque, the reason being that bills of
exchange, which are obligations to pay money at a future date, bear a much higher stamp
duty than cheques. It would, therefore, be a fraud upon the revenue to make cheques do
duty for bills of exchange.