A cash transaction has two essential features. A transaction that takes place and cash is given immediately. Cash needs to be paid upfront and even the delivery shall take place at the same time. If delivery takes place now and payment is to be settled at a later date agreed by both parties involved in the transaction then it is no longer a cash transaction. The simplest example of a cash transaction can be if you walk into a garment shop, pick out a jacket, pay for it in cash and walk out with the jacket. In the above transaction both elements are then fully satisfied as cash payment and delivery both take place at the same time.
Cash transaction has it prospective benefits and drawbacks. For instance advantages would include; a seller who gets cash in place of a sale spontaneously, his cash circulation remains good. He never gets low on cash. He always has enough money to involve in other business transactions. A cash buying and selling business allows the owner to be free from fear of bad debts. His money is no longer stuck with debtors and he does not need to worry about how to make his debtors pay.
However these benefits are not always the case. Sometimes cash transactions have their drawbacks too. Firstly, some businesses who usually make bigger transactions do not like cash being involved. They’re transactions are relatively huge and they prefer to be allowed to pay at a future settlement date. So the seller in this case is the one who bears the risk of non-payment. Other than this he also compromises on a numerous number of clients because he does not allow credit. Most people involving in transactions would prefer to make payment at a later date so that they have cash available to them for longer periods. Moving on, there is always a risk when cash is involved. Cash can be easily stolen or manipulated.
Essentially cash transactions are easier and it usually depend upon the nature of the transaction fo us to determine whether using or not using cash is wise.
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