Why is a coin an asset whereas a note is a liability on the Federal Reserve's balance sheet?

Question

Can someone explain me why coins are assets and notes are liabilities for the U.S. Federal Reserve? I know coins are made from "precious" metals, but even notes are made from various materials too, so I am assuming its not because of this reason. Could anyone explain the logic behind this?

Answer 1

The confusion lies in the fact that the word "note" has multiple meanings even just within the context of finance. You are thinking of its meaning as a shortened reference to a "Federal Reserve Note", which is also called a bill, as in a 20 dollar bill.

To someone working in finance or accounting, the mention of a note typically means a type of debt, as in a promissory note which is a liability, or "Note Payable", on the Balance Sheet. An example of that is the Treasury Dept. of the U.S. Government borrowing money called Treasury Notes, or T-Notes for short. Those are liabilities that comprise a significant portion of the U.S. federal debt..