Cash Transaction

Cash transaction-transaction should be understood as a legal act (agreement) between at least two parties, which executes at least one payment. Cash transaction is a transaction that implicite the prompt exchange of cash for a rescoure . In another it is an action which is taking place between the seller and the buyer, which aims to exchange goods or services.Cash transactions occur in every business concern. However, it exist various types of cash transactions.

Types of cash transaction

The following types of cash transactions have been distinguished: Withdrawal of cash from an ATM-it is a process that the person is requiring a cash from autmatic telling mahine. For such kind of action is it necessary to have a plastic card, which should be located in a slot of ATM. The cash machine wilk require PIN as an authorization for action on the account. When the PIN number is correct, the customer is able to withdraw requested amount . Payment of cash in a cash deposit - determines cash that has been transferred to the bank by the client. Payment or withdrawal of cash at a bank branch is a situation where the customer is going to the bank to make a cash transaction. Usually today people do actions like that via Internet, but still the greatest solution for many people, especially if it applies to a large sum of money, is to go to the branch of the bank and talk about plans with agent who is able to lead verbal conversation. Payment in the store in cash, the person who is buying an asset is obligated to pay by cash immediate for the dealer on the time and place of purchase.

Difference between cash transaction and non-cash transaction

Transaction can be divide for two section, such as: cash and non-cash transactions. Cash transaction are those which involve cash inflows (receipes) and cash outflows (payments). However, cash transaction are very popular if the amount of transaction is not high. Richard Lipsey in his book indicato that average value of cash transaction is 11 pounds Non cash transactions are those, which not include cash flows. A lot of non-cash transactions are connected with credit transactions of purchase and sale of goods Non-cash transactions therefore apply to monetary settlements in which both parties to the settlement have a bank account and it is not necessary to use a cash on any stage of transaction. Non cash tranasction is also transaction are for ex ample . :

• transfer order,
• direct debit,
• standing order,
• debit card,
• prepaid card,
• credit card,
• charge card
• a settlement check,
• electronic transfers,
• mobile payments

In case of cash transactions there is a high probability of theft or loss of money. There is no possibility, as in the case of a credit card, reservations, and often the money that has disappeared is not recoverable. Amnog others it is the reason about increase in the percentage of electronic payments. Electronic payments i also more taken for more comfort by the fact that it is not necessary to ATM to make a transaction.

The number of transactions

David H. Bumprey In his book shows numerous of cash transaction as this way of payment is increasingly replaced by another methods as for exapmle paing by credit card, bank transfer etc. In his opinion cash is very comfortable in use as there is no hidden costs in connection with the transaction as for example with bank transfer (keeping an account is usually conditioned by guidelines that should be met for the bank). We can see that the estimated transaction use of cash in the countries look like this :

• 78% in the Netherlands,
• 86% in Germany,
• 90% in the United Kingdom,

In many countries which are developing numbers of cash transaction can be higher because of a lack of acceptabte alternative payment instruments. Currently the number of cash transactions is decreasing, due to the popularity of using card and online transfers. This situation occurs due to the right increase in the popularity of online shopping, where payment can only be settled via electronic means only.

Examples of Cash Transaction

• Buying groceries: A cash transaction occurs when a customer pays for goods with cash at a grocery store. The customer pays the cashier, who then gives them the goods.
• Paying for services: Cash transactions are often used when paying for services, such as a haircut or a massage. The customer pays the service provider with cash, and the service provider gives them the service.
• Buying a car: Cash transactions are also used when buying a car. The buyer pays the seller with cash, and the seller gives them the car.
• Paying rent: Cash transactions are also used when paying rent. The tenant pays the landlord with cash, and the landlord gives them access to the property.
• Paying taxes: Cash transactions are also used when paying taxes. The taxpayer pays the tax authority with cash, and the tax authority gives them a receipt.

Advantages of Cash Transaction

Cash transactions offer a number of advantages to the parties involved, such as:

• Instant access to funds: Cash transactions provide the buyer with immediate access to the funds they are using to purchase the goods or services, making it easier to manage their finances.
• Low cost: Cash transactions do not incur any additional costs, such as those associated with credit or debit card transactions.
• Privacy: Cash transactions provide a level of privacy that other payment methods do not.
• Security: Cash transactions are also secure, as they do not rely on any third parties or electronic networks to process the payment.
• Flexibility: Cash transactions are more flexible than other payment methods, as they can be used in a variety of situations.

Limitations of Cash Transaction

Cash transactions have a number of limitations, which can hinder their usage in certain situations. These include:

• Limited Security: Cash transactions are prone to theft, loss and fraud. There is no way to protect or recover the money once it is exchanged, which can lead to serious financial losses.
• No Record Keeping: Cash transactions do not leave a paper trail, making it difficult to trace the origin of the money or to conduct audits. This can be a problem for businesses that need to track and report their income and expenses.
• Lack of Mobility: Cash is bulky and difficult to transport, making it difficult to use for long-distance transactions or international transactions.
• Limited Flexibility: Cash transactions are often limited to a certain amount and cannot be used to pay for large purchases or long-term commitments.
• High Transaction Costs: Cash transactions can involve costly fees, such as bank charges and currency conversion costs. This can make cash transactions more expensive than other payment methods.

Other approaches related to Cash Transaction

In addition to the transaction between the seller and the buyer, there are other approaches related to Cash Transaction:

• Cashless Transactions: When goods or services are exchanged for money, but the money is not exchanged in the form of physical cash. Examples include debit and credit cards, electronic transfers, and payments made through mobile wallets.
• Online Transactions: When goods or services are exchanged for money over the internet. Examples include online shopping, ecommerce, and other digital payments.
• Cash-on-Delivery Transactions: When goods or services are exchanged for cash upon delivery. This is often used for online purchases, where the buyer pays the seller with cash when the goods are delivered.
• Automated Cash Transactions: When cash is exchanged through an automated machine, such as an ATM or a vending machine.

In summary, cash transactions involve the exchange of goods or services for money, and can take many forms, including cashless transactions, online transactions, cash-on-delivery transactions, and automated cash transactions.

Footnotes

Cash Transaction — recommended articles

In-House Financing — Void Transaction — Lombard loan — Cash in lieu — Acquiring bank — Debit Note — Collecting bank — Dishonoured cheque — Ijarah

References

• Humphrey D. B., (1995), Payment Systems: Principles, Practice, and Improvements , The International Bank for Reconstruction and Development
• Kamthekar D.P., (2018), Specific Elective DSE Courses Accountancy & Financial Management , Lulu Publications
• Kasi M., Reddy S., (2007), Managerial Economics and Financial Accounting , PHI
• Lipsey R., Chrystal A., (2015), Economics , Oxford
• Piper F., Murphy S., (2002), Cryptography: A Very Short Introduction , Oxford

Author: Dominika Król