Cash – definition and meaning
Cash refers to money in its most physical form. In other words, it refers to banknotes and coins. Technically, it also includes short-term deposits, checks, and other negotiable instruments. However, in layman’s terms, it just means coins and notes.
In finance and bookkeeping, the term means a company’s current assets. They include currency or currency equivalents that are immediately or near-immediately accessible.
There are several slang terms, such as dough, bread, and reddies (UK: dosh, lolly).
In business, we use the term when referring to a reserve for payments in case the company suddenly has liquidity problems. It may also serve as a buffer to protect against a downturn.
As a verb, the word means to convert something into liquid money, as in the expression “to cash a check.”
Origin of the word ‘cash’
The English term either came from the romance languages or southern India.
In accountancy, we report the amount of cash or its equivalents on the balance sheet as the first item of current assets. The term cash equivalents refers to assets that can be cashed in rapidly.
Romance languages – the modern English word probably originated from the French word ‘caisse’ which means a (money) box, the Provençal word ‘caissa,’ Italian ‘cassa,’ and Latin ‘capsa.’ The Provençal, Italian, and Latin words all mean a ‘box.’
In the 18th century, the term changed from just meaning a box containing money to money itself.
Southern India & Sri Lanka – some people say the term came from the Tamil word kāsu (Tamil: காசு), which means a coin. They say that people who worked in the East India Company brought it to Europe.
The FT Lexicon defines cash as:
“Coins and banknotes, as well as short-term deposits, cheques and other negotiable instruments that can be readily exchanged into coins and banknotes.”
Demand for cash declining
Banknotes and coins make up a much smaller part of the money supply today compared to many years ago. Their current role is to provide a form of payment and currency storage for people who do not want to use financial services.
In other words, banknotes and coins are popular with people who do not have bank accounts.
We also use coins and banknotes for making small payments. However, electronic payment systems are rapidly taking over. As debit card usage has grown, the demand for coins and banknotes has declined.
Even so, the amount of cash in circulation has risen. The value of US dollars in circulation grew by 42% from 2007 to 2012. The value of British pounds in circulation increased by 29% from 2008 to 2013.
We must not confuse the term with ‘cash flow,’ which is the movement of funds in and out of a company, organization, or an account.
Companies keep a few coins and notes on hand for making minor payments. We call this money ‘petty cash.’ The person in charge of this money is the petty cash custodian or petty cashier.