Banknote

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 Instrument

    A bearer instrument, or bearer bond, is a type of fixed-income ...
  2. Bills Payable

    Similar to accounts payable, this term is used to describe a ...
  3. Bearer Share

    An equity security that is wholly owned by whoever holds the ...
  4. French Franc - F

    A currency used in France, prior to the introduction of the euro. ...
  5. C-Note

    A slang term for a one hundred dollar banknote. The "C" in C-note ...
  6. AUD

    In the currency market, this is the abbreviation for the Australian ...
Related Articles
  1. Personal Finance

    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. Investing

    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. Personal Finance

    Promissory Notes: Not Your Average IOU

    These may be a handy way to borrow money, but this convenience does not come without risk.
  4. Economics

    Understanding the History of Money

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

    What is a Promissory Note?

    A written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.
  6. Forex Education

    The History Of Money: Currency Wars

    Find out how conflicts have changed the role money plays in our lives.
  7. Personal Finance

    Why Are People Hoarding Coins?

    Meet the new class of investor: the coin hoarder.
  8. Forex Education

    History Of Coinage In The U.S.

    From the barter system to commemorative coins, we look at the history of U.S. money.
  9. Credit & Loans

    The Evolution Of Banking

    Banks are a part of ancient history. Find out how this system of money management developed into what we know today.
  10. Economics

    Macroeconomics: Money And Banking

    By Stephen Simpson TMoney can be thought of as any good that is widely used or accepted in the transfer of goods and services. Today, there are three common forms of money in use. Commodity ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. What is the difference between fiat money and legal tender?

    Learn more about fiat currency and legal tender. Find out how these terms are used by economists to describe different types ... Read Answer >>
  5. What happens to the shares of stock purchased in a tender offer?

    Learn what a tender offer is, whether it is a good idea to accept a tender offer and what happens to the shares of stock ... Read Answer >>
  6. When would a vendor care about its accounts payable turnover ratio?

    Read about some of the reasons that vendors should pay attention to their accounts payable turnover ratio, and how it helps ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center