The cash term refers to physical form of money in the form of coins or banknotes. This definition of cash however is different from a business standpoint. A cash balance for a business includes coins and banknotes, short-term deposits, and current accounts. In general businesses consider many cash equivalents (liquid financial instruments easily convertible to cash) to be cash, while individuals consider cash to be only official legal tender in form of coins and banknotes.

Apart from this definition, the term may also mean, converting a product which has monetary value to cash. For example, someone may say that they want to cash their check. It simply means that check, which has monetary value, is being converted to cash. Therefore, a bank or financial institution is obliged to give cash to the holder of the check. Besides, accountants also use the term, cash, to indicate an asset that can be quickly converted into cash. For example, it is quite common for accountants to designate stocks and bonds as a form of cash because anyone holding these financial products can quickly convert them into cash. In contrast, large assets such as factories, mills, homes and cars are not considered a form of cash because they cannot be converted into cash, quickly.


Nevertheless, cash is generally used to describe paper currency such a dollar bill. Just like its definition, linguistics are not so sure about the exact origin of the word, cash. To most, the word has Tamil origins, an Indian language. Others argue that it is a Sinhalese word which was first used by traders of East Indian trading company. Still others argue that its origin lies in the French word 'caissa' while some are sure that it is an Italian translation of 'cassa' or 'capsa'.

Need for Cash

The need for banknotes and metal coins was seldom felt in early ages. Since ancient times, people had been using gold and silver coins to carry out financial transactions. Actually, it were silver coins which were in wider use because there was no shortage of silver, and the fact that paper was not invented until the 13th century. Even after the invention of paper, cash as we know today, never became popular. One of the reasons was that world markets traded mainly in gold bullion, and the discovery of gold in South America as well as precious metals in Indian empire provided ample supply of these materials.

In fact, it was not until 19th century that governments realized the importance of paper, as a form of currency. Main reason of producing paper currency was depletion of natural resources, and the need for a product that could be readily broken down into smaller parts so that everyone should have access to it. Therefore, banknotes became a popular choice whereas metal coins replaced gold coins as the preferred method of transaction. Consequently, the term cash was invented to reflect the ownership of banknotes and coins.


In the past, inflation was not a concern because whoever had access to more gold could engage in cross border trade to balance demand and supply of products. Initially, some governments generated too much cash by printing large amounts of banknotes. Such overproduction lead to inflation where people had more cash, but there weren’t enough products to buy. Nevertheless, governments learned from their mistakes, and soon began producing enough cash that their economy could sustain, realistically.