What is a 'Banknote'

A banknote is a negotiable promissory note issued by a bank and payable to the bearer on demand. The amount payable is stated on the face of the note. Banknotes are considered legal tender, and, along with coins, make up the bearer forms of all modern money.

Also known as a "bill" or a "note."

BREAKING DOWN 'Banknote'

Originally, objects such as gold and silver were used to pay for goods and services. Eventually, they were replaced by paper money and coins that were backed by precious metals.

Currently, banknotes are backed only by the government. Although in earlier times commercial banks could issue banknotes, the Federal Reserve Bank is now the only bank in the United States that can create banknotes.

RELATED TERMS
  1. Bearer Share

    An equity security that is wholly owned by whoever holds the ...
  2. Euro Notes

    Legal tender in the form of a banknote that can be used in exchange ...
  3. Bearer Instrument

    A bearer instrument, or bearer bond, is a type of fixed-income ...
  4. Order Paper

    1. An order paper is a negotiable instrument that is payable ...
  5. Bearer Bond

    A fixed-income instrument that is owned by whoever is holding ...
  6. Bills Payable

    Similar to accounts payable, this term is used to describe a ...
Related Articles
  1. Investing

    Bearer Bonds: From Popular To Prohibited

    These coupon bonds are transferable, negotiable and anonymous - so why aren't they sold in the U.S.?
  2. Personal Finance

    Is Money in Your Pocket Worth the Same as Your Money in the Bank?

    Cash in your pocket is a different form of money than that in your bank account, and it takes a strong institutional infrastructure for them to be equal.
  3. Investing

    Understanding the History of Money

    Money has been a part of human history for at least 3,000 years, evolving from bartering to banknotes.
  4. Insights

    Are $1 Coins A Better Option Than $1 Bills?

    We look at how much the government could save if it took $1 bills out of circulation.
  5. Tech

    The History Of Money: From Barter To Banknotes

    Money has been a part of human history for at least 3,000 years. Learn how it evolved.
  6. Insights

    What is Money?

    Money: It's a part of everyone's life, and we all want it, but do you know how it gains value and how it is created?
  7. Investing

    Calculating the Accounts Payable Turnover Ratio

    The accounts payable turnover ratio measures the speed at which a company pays its suppliers.
  8. Tech

    New Counterfeit-Proof £1 introduced by the British Royal Mint

    Dubbed "the most secure coin in the world", the new British £1 coin entered circulation March 28.
  9. Insights

    Giant Gold Coin Stolen From German Museum

    The 221-pound coin would be worth close to $4.5 million at current gold prices.
  10. Investing

    Why Are People Hoarding Coins?

    Meet the new class of investor: the coin hoarder.
RELATED FAQS
  1. Are accounts payable an expense?

    Learn about how to differentiate between liability accounts and expense accounts, and see why accounts payable is considered ... Read Answer >>
  2. What is the difference between a bill of exchange and a promissory note?

    Learn what bills of exchange and promissory notes are, along with notation of the primary differences between these two documents. Read Answer >>
  3. Are accounts payable counted as revenue?

    See how accounts payable is treated on the balance sheet, and why it is considered an expense and liability rather than revenue ... Read Answer >>
  4. Are accounts payable an asset?

    Find out why the general ledger accounts payable is considered to be a current liability, not a current asset, and how it ... Read Answer >>
  5. How are accounts payable listed on a company's balance sheet?

    Find out how accounts payable is listed on a company's balance sheet, why it is considered a current liability, and how it ... Read Answer >>
Trading Center