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When Did Cash Transactions First Begin?
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Cash transactions in trade is
still young if you consider history, though we are moving to
e-commerce. Trade by exchange was one of the oldest forms of
business known to human beings. A farmer who had excess eggs
would exchange the extra eggs for something that he was short
of, perhaps corn. Weird though it may sound, even human beings
and animals were exchanged by early man. A tribe in South Africa
would trade with copper rods - one rod fetching two cows and two
rods for a wife! The system was known as barter and it remained
a major form of trade until coins and money were introduced.
However, it had its limitation and it was these limitations that
spurred men to think of an alternate method of conducting
business. For instance, if a person had only wheat to offer and
desperately needed eggs, he had to necessarily look for a person
who had eggs to offer and needed wheat. Also there was the
problem of dividing into parts and, therefore, buying the exact
amount one needed remained unsolved. A person had to perforce
buy the quantity offered, whether or not he needed the |
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quantity. Keeping these
problems in mind, man began to use salt, beads and cattle as
means of exchange. But it still did not solve his problem
totally and he needed to work out something else. |
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It was around the year 2000 BC that metal was first used as a means of exchange in the Middle East. Metal was both attractive and durable. China introduced bronze as a means of exchange during the 7th century BC. Bronze was cast as miniature knives or spades and each was assigned the value of the real equivalent. Lydia in modern day Turkey joined the game shortly after, during the reign of King Croesus. He introduced crudely cast slugs of an alloy of gold and silver, found naturally. The alloy was called electrum. Each coin was allocated a value, depending upon its weight. These coins were considered the forerunners of the present day coins.
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China has been credited with having introduced paper money
between the seventh and the ninth centuries AD. Actually, during
medieval times, there was a practice in Europe when businessmen
who were close friends exchanged letters of credit. In later
years, goldsmiths introduced the practice of issuing receipts
for gold left in their custody and these receipts could be
exchanged for money.
During the 18th and 19th centuries, banks began to adapt the
practice. They began to issue notes, each of which was a promise
to pay the holder. (These words, "promise to pay" still appear
on many currency notes.) The holders of the notes could demand
gold for the notes from the issuing bank. This practice was
stopped in the year 1931 and notes began to be used as a means
of exchange for things. In short, one could give notes to a
certain value and buy things.
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Gradually, cheques were introduced in banks. Cheques too were promises to pay by the person attesting his signature on the cheque. Then came the credit cards, when the holder of the card assured payment for things purchased, though not through currency notes but by a transaction of money being taken from his account, known as debit.
And now in the 21st century, even this is slowly being replaced by e-commerce or electronic commerce, where there are no cards or notes, but individuals numbers, codes and trust. |
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