Cash
Encyclopedia
In common language cash refers to money
in the physical form of currency
, such as banknote
s and coin
s.
In bookkeeping
and finance
, cash refers to current asset
s comprising currency or currency equivalents that can be accessed immediately or near-immediately (as in the case of money market
accounts). Cash is seen either as a reserve for payments, in case of a structural or incidental negative cash flow
or as a way to avoid a downturn on financial markets.
The word is variously attributed. Some claim that the word "cash" comes from the modern French
word caisse, which means (money) box, from the Provençal word caissa, from the Italian
cassa, from the Latin capsa all meaning box. In the 18th century, the word passed to refer to the money instead of the actual box containing it.
Another claim is that it was derived from Tamil
word kaasu - காசு meaning a coin by East India Company
.
"Cash" used as a verb means "to convert to cash"; for example in the expression "to cash a check".
(silver objects hacked into pieces) were for centuries the only form of money, until Venetian
merchants started using silver bars for large transactions in the early Middle Ages
. In a separate development, Venetian merchants started using paper bills
, instructing their bank
er to make payments. Similar marked silver bars were in use in lands where the Venetian merchants had established representative offices. The Byzantine empire
and several states in the Balkan area and Russia also used marked silver bars for large payments. As the world economy developed and silver supplies increased, in particular after the colonization of South America, coins became larger and a standard coin for international payment developed from the 15th century: the Spanish and Spanish colonial coin of 8 reales
. Its counterpart in gold was the Venetian ducat
.
Coin types would compete for markets. By conquering foreign markets, the issuing rulers would enjoy extra income from seigniorage
(the difference between the value of the coin and the value of the metal the coin was made of). Successful coin types of high nobility would be copied by lower nobility for seigniorage. Imitations were usually of a lower weight, undermining the popularity of the original. As feudal states coalesced into kingdoms, imitation of silver types abated, but gold coins, in particular the gold ducat and the gold florin were still issued as trade coins: coins without a fixed value, going by weight. Colonial powers also sought to take away market share from Spain by issuing trade coin equivalents of silver Spanish coins, without much success.
Initially East India Company coins were minted in England and shipped to the East. In England over time the word ‘Cash’ was adopted from Sanskrit
कर्ष karsa, a weight of gold or silver but akin to Old Persian 𐎣𐎠𐎼𐎿𐏃𐎠 karsha-, a weight. a unit of value equivalent to one cash coin. East India Company coinage had both Urdu
and English writing on it, to facilitate its use within trade. In 1671 the directors of The East India Company ordered a mint to be established at Bombay, known as Bombain. In 1677 this was sanctioned by the Crown, the coins, having received royal sanction were struck as silver Rupees; the inscription runs The Rupee of Bombaim, by authority of Charles II.
At about this time coins were also being produced for The East India Company at the Madras mint. The currency at The Company’s Bombay and Bengal administrative regions was The Rupee. At Madras, however, the Company's accounts were reckoned in “pagodas”, “fractions”, “fanams”, “faluce” and “cash”. This system was maintained until 1818 when the rupee was adopted as the unit of currency for the Company's operations, the relation between the two systems being 1 pagoda = 3-91 rupees and 1 rupee = 12 fanams.
Meanwhile, paper money
had been developed. At first, it was thought of for emergency issues, hence were most popular in the colonies of European powers. In the 18th century, important paper issues were made in colonies such as Ceylon
and the bordering colonies of Essequibo
, Demerara
and Berbice
. John Law
did pioneering work on banknotes with the Banque Royale. However, the relation between money supply
and inflation was still imperfectly understood and the bank went under, while its notes became worthless when they were over-issued. The lessons learned were applied to the Bank of England
, which played a crucial role in financing Wellington
's Peninsular war
, against French troops, hamstrung by a metallic Franc de Germinal.
The ability to create paper money made nation-states responsible for the management of inflation
, through control of the money supply
. It also made a direct relation between the metal of the coin and its denomination superfluous. From 1816, coins generally became token money
, though some large silver and gold coins remained standard coins until 1927. The first world war saw standard coins disappear to a very large extent. Afterwards, standard gold coins, mainly British sovereigns, would still be used in colonies and less developed economies and silver Maria Theresa thaler
s dated 1780 would be struck as trade coins for countries in East Asia until 1946 and possibly later locally.
Cash has now become a very small part of the money supply. Its remaining role is to provide a form of currency storage and payment for those who do not wish to take part in other systems, and make small payments conveniently and promptly, though this latter role is being replaced more and more frequently by electronic payment system
s.
Money
Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past,...
in the physical form of currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
, such as banknote
Banknote
A banknote is a kind of negotiable instrument, a promissory note made by a bank payable to the bearer on demand, used as money, and in many jurisdictions is legal tender. In addition to coins, banknotes make up the cash or bearer forms of all modern fiat money...
s and coin
Coin
A coin is a piece of hard material that is standardized in weight, is produced in large quantities in order to facilitate trade, and primarily can be used as a legal tender token for commerce in the designated country, region, or territory....
s.
In bookkeeping
Bookkeeping
Bookkeeping is the recording of financial transactions. Transactions include sales, purchases, income, receipts and payments by an individual or organization. Bookkeeping is usually performed by a bookkeeper. Bookkeeping should not be confused with accounting. The accounting process is usually...
and finance
Finance
"Finance" is often defined simply as the management of money or “funds” management Modern finance, however, is a family of business activity that includes the origination, marketing, and management of cash and money surrogates through a variety of capital accounts, instruments, and markets created...
, cash refers to current asset
Current asset
In accounting, a current asset is an asset on the balance sheet which can either be converted to cash or used to pay current liabilities within 12 months...
s comprising currency or currency equivalents that can be accessed immediately or near-immediately (as in the case of money market
Money market
The money market is a component of the financial markets for assets involved in short-term borrowing and lending with original maturities of one year or shorter time frames. Trading in the money markets involves Treasury bills, commercial paper, bankers' acceptances, certificates of deposit,...
accounts). Cash is seen either as a reserve for payments, in case of a structural or incidental negative cash flow
Cash flow
Cash flow is the movement of money into or out of a business, project, or financial product. It is usually measured during a specified, finite period of time. Measurement of cash flow can be used for calculating other parameters that give information on a company's value and situation.Cash flow...
or as a way to avoid a downturn on financial markets.
Etymology
French language
French is a Romance language spoken as a first language in France, the Romandy region in Switzerland, Wallonia and Brussels in Belgium, Monaco, the regions of Quebec and Acadia in Canada, and by various communities elsewhere. Second-language speakers of French are distributed throughout many parts...
word caisse, which means (money) box, from the Provençal word caissa, from the Italian
Italian language
Italian is a Romance language spoken mainly in Europe: Italy, Switzerland, San Marino, Vatican City, by minorities in Malta, Monaco, Croatia, Slovenia, France, Libya, Eritrea, and Somalia, and by immigrant communities in the Americas and Australia...
cassa, from the Latin capsa all meaning box. In the 18th century, the word passed to refer to the money instead of the actual box containing it.
Another claim is that it was derived from Tamil
Tamil language
Tamil is a Dravidian language spoken predominantly by Tamil people of the Indian subcontinent. It has official status in the Indian state of Tamil Nadu and in the Indian union territory of Pondicherry. Tamil is also an official language of Sri Lanka and Singapore...
word kaasu - காசு meaning a coin by East India Company
East India Company
The East India Company was an early English joint-stock company that was formed initially for pursuing trade with the East Indies, but that ended up trading mainly with the Indian subcontinent and China...
.
"Cash" used as a verb means "to convert to cash"; for example in the expression "to cash a check".
History
In Western Europe, after the Collapse of the Western Roman Empire, coins, silver jewelry and hacksilverHacksilver
thumb|300px|right|Hacksilver from the medieval period, Museum für Hamburgische Geschichte, Hamburg, Germany.Hacksilver, or Hack-silver, is fragments of cut and bent silver items treated as bullion, either for ease of carrying before melting down for re-use, or simply used as currency by weight...
(silver objects hacked into pieces) were for centuries the only form of money, until Venetian
Republic of Venice
The Republic of Venice or Venetian Republic was a state originating from the city of Venice in Northeastern Italy. It existed for over a millennium, from the late 7th century until 1797. It was formally known as the Most Serene Republic of Venice and is often referred to as La Serenissima, in...
merchants started using silver bars for large transactions in the early Middle Ages
Early Middle Ages
The Early Middle Ages was the period of European history lasting from the 5th century to approximately 1000. The Early Middle Ages followed the decline of the Western Roman Empire and preceded the High Middle Ages...
. In a separate development, Venetian merchants started using paper bills
Banknote
A banknote is a kind of negotiable instrument, a promissory note made by a bank payable to the bearer on demand, used as money, and in many jurisdictions is legal tender. In addition to coins, banknotes make up the cash or bearer forms of all modern fiat money...
, instructing their bank
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
er to make payments. Similar marked silver bars were in use in lands where the Venetian merchants had established representative offices. The Byzantine empire
Byzantium
Byzantium was an ancient Greek city, founded by Greek colonists from Megara in 667 BC and named after their king Byzas . The name Byzantium is a Latinization of the original name Byzantion...
and several states in the Balkan area and Russia also used marked silver bars for large payments. As the world economy developed and silver supplies increased, in particular after the colonization of South America, coins became larger and a standard coin for international payment developed from the 15th century: the Spanish and Spanish colonial coin of 8 reales
Peso
The word peso was the name of a coin that originated in Spain and became of immense importance internationally...
. Its counterpart in gold was the Venetian ducat
Ducat
The ducat is a gold coin that was used as a trade coin throughout Europe before World War I. Its weight is 3.4909 grams of .986 gold, which is 0.1107 troy ounce, actual gold weight...
.
Coin types would compete for markets. By conquering foreign markets, the issuing rulers would enjoy extra income from seigniorage
Seigniorage
Seigniorage can have the following two meanings:* Seigniorage derived from specie—metal coins, is a tax, added to the total price of a coin , that a customer of the mint had to pay to the mint, and that was sent to the sovereign of the political area.* Seigniorage derived from notes is more...
(the difference between the value of the coin and the value of the metal the coin was made of). Successful coin types of high nobility would be copied by lower nobility for seigniorage. Imitations were usually of a lower weight, undermining the popularity of the original. As feudal states coalesced into kingdoms, imitation of silver types abated, but gold coins, in particular the gold ducat and the gold florin were still issued as trade coins: coins without a fixed value, going by weight. Colonial powers also sought to take away market share from Spain by issuing trade coin equivalents of silver Spanish coins, without much success.
Initially East India Company coins were minted in England and shipped to the East. In England over time the word ‘Cash’ was adopted from Sanskrit
Sanskrit
Sanskrit , is a historical Indo-Aryan language and the primary liturgical language of Hinduism, Jainism and Buddhism.Buddhism: besides Pali, see Buddhist Hybrid Sanskrit Today, it is listed as one of the 22 scheduled languages of India and is an official language of the state of Uttarakhand...
कर्ष karsa, a weight of gold or silver but akin to Old Persian 𐎣𐎠𐎼𐎿𐏃𐎠 karsha-, a weight. a unit of value equivalent to one cash coin. East India Company coinage had both Urdu
Urdu
Urdu is a register of the Hindustani language that is identified with Muslims in South Asia. It belongs to the Indo-European family. Urdu is the national language and lingua franca of Pakistan. It is also widely spoken in some regions of India, where it is one of the 22 scheduled languages and an...
and English writing on it, to facilitate its use within trade. In 1671 the directors of The East India Company ordered a mint to be established at Bombay, known as Bombain. In 1677 this was sanctioned by the Crown, the coins, having received royal sanction were struck as silver Rupees; the inscription runs The Rupee of Bombaim, by authority of Charles II.
At about this time coins were also being produced for The East India Company at the Madras mint. The currency at The Company’s Bombay and Bengal administrative regions was The Rupee. At Madras, however, the Company's accounts were reckoned in “pagodas”, “fractions”, “fanams”, “faluce” and “cash”. This system was maintained until 1818 when the rupee was adopted as the unit of currency for the Company's operations, the relation between the two systems being 1 pagoda = 3-91 rupees and 1 rupee = 12 fanams.
Meanwhile, paper money
Paper Money
Paper Money is the second album by the band Montrose. It was released in 1974 and was the band's last album to feature Sammy Hagar as lead vocalist.-History:...
had been developed. At first, it was thought of for emergency issues, hence were most popular in the colonies of European powers. In the 18th century, important paper issues were made in colonies such as Ceylon
Sri Lanka
Sri Lanka, officially the Democratic Socialist Republic of Sri Lanka is a country off the southern coast of the Indian subcontinent. Known until 1972 as Ceylon , Sri Lanka is an island surrounded by the Indian Ocean, the Gulf of Mannar and the Palk Strait, and lies in the vicinity of India and the...
and the bordering colonies of Essequibo
Essequibo (colony)
Essequibo was from 1616 to 1814 a Dutch colony in the region of the Essequibo river on the north coast of South America. The colony formed a part of the colonies that are known under the collective name of Dutch Guyana.- History :...
, Demerara
Demerara
Demerara was a region in South America in what is now Guyana that was colonised by the Dutch in 1611. The British invaded and captured the area in 1796...
and Berbice
Berbice
Berbice is a region along the Berbice River in Guyana, which was between 1627 and 1815 a colony of the Netherlands. After having been ceded to the United Kingdom in the latter year, it was merged with Essequibo and Demerara to form the colony of British Guiana in 1831...
. John Law
John Law (economist)
John Law was a Scottish economist who believed that money was only a means of exchange that did not constitute wealth in itself and that national wealth depended on trade...
did pioneering work on banknotes with the Banque Royale. However, the relation between money supply
Money supply
In economics, the money supply or money stock, is the total amount of money available in an economy at a specific time. There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits .Money supply data are recorded and published, usually...
and inflation was still imperfectly understood and the bank went under, while its notes became worthless when they were over-issued. The lessons learned were applied to the Bank of England
Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694, it is the second oldest central bank in the world...
, which played a crucial role in financing Wellington
Arthur Wellesley, 1st Duke of Wellington
Field Marshal Arthur Wellesley, 1st Duke of Wellington, KG, GCB, GCH, PC, FRS , was an Irish-born British soldier and statesman, and one of the leading military and political figures of the 19th century...
's Peninsular war
Peninsular War
The Peninsular War was a war between France and the allied powers of Spain, the United Kingdom, and Portugal for control of the Iberian Peninsula during the Napoleonic Wars. The war began when French and Spanish armies crossed Spain and invaded Portugal in 1807. Then, in 1808, France turned on its...
, against French troops, hamstrung by a metallic Franc de Germinal.
The ability to create paper money made nation-states responsible for the management of inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
, through control of the money supply
Money supply
In economics, the money supply or money stock, is the total amount of money available in an economy at a specific time. There are several ways to define "money," but standard measures usually include currency in circulation and demand deposits .Money supply data are recorded and published, usually...
. It also made a direct relation between the metal of the coin and its denomination superfluous. From 1816, coins generally became token money
Token money
Token money is money made from tokens of some form, as opposed to account money. Coins are token money, as are paper notes.Token money has a strong privacy feature in that it works as money without the intervention of any other party in each transaction between two parties. Privacy makes money...
, though some large silver and gold coins remained standard coins until 1927. The first world war saw standard coins disappear to a very large extent. Afterwards, standard gold coins, mainly British sovereigns, would still be used in colonies and less developed economies and silver Maria Theresa thaler
Maria Theresa thaler
The Maria Theresa thaler is a silver bullion-coin that has been used in world trade continuously. Maria Theresa Thalers were first minted in 1741, using the then Reichsthaler standard of 9 thalers to the Vienna mark. In 1750 the thaler was debased to 10 thalers to the Vienna Mark...
s dated 1780 would be struck as trade coins for countries in East Asia until 1946 and possibly later locally.
Cash has now become a very small part of the money supply. Its remaining role is to provide a form of currency storage and payment for those who do not wish to take part in other systems, and make small payments conveniently and promptly, though this latter role is being replaced more and more frequently by electronic payment system
Payment system
A payment system is a system used for transferring money. What makes it a "system" is that it employs cash-substitutes; traditional payment systems are negotiable instruments such as drafts and documentary credits such as letter of credits. With the advent of computers and electronic...
s.
See also
- Legal TenderLegal tenderLegal tender is a medium of payment allowed by law or recognized by a legal system to be valid for meeting a financial obligation. Paper currency is a common form of legal tender in many countries....
- Cash (currency)Cash (currency)The cash is a name for several historical currencies used in Asia. It is applied to units used in China, Vietnam, and Madras in British India. It is also occasionally used to refer to the Korean mun and the Japanese mon....
, several historical currencies used in Asia - Cash seal (China)
- Cash registerCash registerA cash register or till is a mechanical or electronic device for calculating and recording sales transactions, and an attached cash drawer for storing cash...
- Cash transfersCash transfersCash transfers are direct transfer payments of money to eligible people. Cash transfers are usually provided by the state and federal government.-Targeting:...
- Cash and cash equivalentsCash and cash equivalentsCash and cash equivalents are the most liquid assets found within the asset portion of a company's balance sheet. Cash equivalents are assets that are readily convertible into cash, such as money market holdings, short-term government bonds or Treasury bills, marketable securities and commercial...
- Cash flowCash flowCash flow is the movement of money into or out of a business, project, or financial product. It is usually measured during a specified, finite period of time. Measurement of cash flow can be used for calculating other parameters that give information on a company's value and situation.Cash flow...
- Cash counter
- Cash managementCash managementIn United States banking, cash management, or treasury management, is a marketing term for certain services offered primarily to larger business customers...
- Petty cashPetty cashPetty cash is a small amount of discretionary funds in the form of cash used for expenditures where it is not sensible to make any disbursement by cheque, because of the inconvenience and costs of writing, signing and then cashing the cheque...
- CashbackCashbackCashback may refer to:* Cashback website, a site where customers can earn cash rebates on online purchases that they make* Debit card cashback, cash that shoppers receive along with their goods when paying by debit card...
Further reading
- Clyn Davies - A History of Money From Ancient Times to the Present Day (University of Wales Press, 1994) ISBN 0-7083-1351-5
- Peter Spufford - How rarely did medieval merchants use coin? (Geldmuseum, Utrecht, 2008) ISBN 978-90-73882-21-8