What is Cash? Meaning
Cash may be in any form of currency, like banknotes and coins, which have a legal acceptance and recognition in the market.
The acceptance of cash by its user indicates that it has a trading value when tendered for purchase of goods and services.
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Definition of Cash
The definition of the term cash can be stated as follows,
"Cash is money in form of banknotes and coins that are issued by the government of a country under the administration and control of its finance ministry or department of finance."
Function of Cash
The function of cash is depicted in the following diagram.
Please refer above diagram while reading following listed points to study and understand the function of cash.
- Consumers spend cash to fulfill their primary (basic) needs like food, clothing, shelter, education, etc. They also spend cash to satisfy their ancillary needs such as entertainment, buying luxurious goods, tourism, so on.
- Entrepreneurs accumulate cash in the form of profits earned by providing goods and services to consumers. They use this profit for the expansion of business. Some amount of this profit is then distributed among investors and is also used for maintaining reserves to meet contingencies.
- Employees or workers get a return for their work in form of salaries (wages), short-term benefits and allowances like medical and travelling allowance, and long-term benefits such as provident fund, gratuity, pension and so on.
The function of a cash is a continuous and never-ending process.
Recognition of Cash
The recognition of cash by its users can be explained as follows:
- For an individual, cash is usually interpreted as money in the physical or tangible form.
- For a business, the term cash has a wider scope. Since, cash is an asset to the business, and it is sub-grouped in current assets of the entity.
Conclusion on Cash
Today, cash acts as one of the most prominent mediums of exchange for the purchase goods and services, especially in the retail market. Therefore, it is mandatory to have a recognized exchange value for cash.