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Definition of Terms
Definition of Terms
Definition of Terms
Transaction Glossary
Name:
Introduction
Cash and non-cash transactions are fundamental concepts in finance and accounting that describe
different methods of exchanging value. Understanding these terms is essential for individuals,
businesses, and organizations to manage their financial activities effectively.
Cash transactions involve the immediate exchange of physical currency or its electronic
equivalent. They are straightforward and instantaneous, typically occurring when goods or
services are purchased, and payment is made on the spot. Cash transactions play a vital role in
daily commerce, enabling swift and convenient exchanges of value.
Non-cash transactions, on the other hand, do not involve the direct exchange of physical
currency at the time of the transaction. Instead, they encompass a variety of methods for
transferring value, such as credit arrangements, bartering, electronic transfers, or the issuance of
securities. Non-cash transactions often involve deferred payment or the exchange of assets,
services, or goods without the immediate transfer of cash.
Distinguishing between cash and non-cash transactions is essential for financial reporting,
analysis, and decision-making. It helps businesses assess their liquidity, understand their
financial position, and evaluate their performance over time. Additionally, it enables individuals
and organizations to effectively manage their cash flow, mitigate risks, and make strategic
financial decisions that align with their goals and objectives.
Definition of Terms
1) Credit Card:
A credit card is a payment card, usually issued by a bank, that allows you to borrow money with
which to pay for goods or services or withdraw cash on credit. You must repay the borrowed
money, plus any applicable interest, either in full by the billing date or over time .
Scenario of credit Card: Jessie walks into a department store to buy a new dress for an
upcoming party. As she approaches the checkout counter, she realizes she left her wallet at home.
Panicked, she remembers she has her credit card tucked safely in her phone case. She pulls it out,
taps it against the card reader, and completes her purchase within seconds. Relief floods over her
as she heads out the door, grateful for the convenience of her credit card.
Image of credit Card:
2) Cheques:
A cheque is a written, dated, and signed document that authorizes a bank to pay a specific amount
of money from the writer's account to the person or organization named on the cheque. It serves
as a legal instrument for transferring funds, often used in business transactions and personal
payments.
Scenario of Cheques:
John receives his monthly rent invoice from his landlord. To settle the payment, he writes a
cheque for the specified amount, fills in the date, signs it, and drops it into the landlord's mailbox.
The cheque serves as a convenient and formal way for John to fulfill his financial obligation for
the month.
Image of Cheque:
3) Deposit:
A deposit refers to the act of placing money or assets into a bank account, investment account, or
financial institution for safekeeping, storage, or to earn interest. It can also involve putting down
money as security or partial payment for a purchase or service. Deposits serve as a means of
securely storing funds and facilitating various financial transactions.
Scenario of Deposit:
Maria walks into her local bank branch with a handful of cash she earned from selling some old
items. She approaches the teller and requests to make a deposit into her savings account. The
teller counts the money, inputs the amount into the system, and provides Maria with a receipt
confirming her deposit. Maria leaves the bank knowing her money is safely stored and earning
interest.
Image of Deposit:
4) Advanced payment:
Advanced payment is the upfront transfer of funds or provision of goods or services before their
delivery or completion, establishing a financial commitment prior to the fulfillment of the
transaction.
Scenario of advanced Payments:
Before starting construction on a new home, the homeowner provides the contractor with an
advanced payment to cover the cost of materials and initial work. The contractor receives the
payment, allowing them to commence the project and purchase necessary supplies upfront.
Image of advanced Payments:
5) Voucher:
A voucher is a document or electronic record that serves as evidence of a transaction, typically
representing a specific monetary value or entitlement to goods or services. It can be redeemed or
exchanged for goods, services, or discounts at a later time, often used in retail, hospitality, or as a
form of payment.
Scenario of Vouchers:
At the end of their meal, Sarah presents a voucher to the waiter at the restaurant. The voucher
entitles her to a 20% discount on her total bill. The waiter deducts the discount amount from the
bill, and Sarah pays the remaining balance before leaving the restaurant, enjoying the savings
provided by the voucher.
Image of Vouchers:
6) Company Charges:
Company charges refer to the legal obligations or claims that a company places on its assets or
revenues to secure debt or financing arrangements. These charges serve as collateral for creditors
in case the company defaults on its obligations. They can include mortgages, debentures, or other
forms of security interests that creditors use to protect their investments in the company.
ABC Corporation secures a loan from a bank to expand its operations. As part of the loan
agreement, the bank imposes a company charge on ABC Corporation's machinery and equipment.
This charge serves as collateral, ensuring that the bank has recourse if ABC Corporation defaults
on the loan.
Image of company Charges:
7) Refunds:
A refund is the return of money to a customer who is dissatisfied with a product or service, has
overpaid, or is returning goods, typically initiated by the seller or service provider as
reimbursement.
Scenario of Refunds:
After receiving a defective electronic device, Corey contacts the online retailer to request a
refund. The retailer processes her request promptly, issuing a refund to her original payment
method. Sarah receives the refunded amount in her bank account within a few business days,
resolving the issue satisfactorily.
Image of Refund:
8) Travelers Cheque:
Traveler's cheques are pre-printed, fixed-amount cheques that travelers can purchase from banks
or financial institutions before embarking on trips. They serve as a secure and convenient
alternative to carrying cash. Traveler's cheques are widely accepted worldwide and can be
replaced if lost or stolen, providing travelers with a reliable form of payment while abroad.
Image of Receipt:
12) Balancing:
Balancing refers to the process of ensuring that financial records, accounts, or transactions
accurately reflect the corresponding assets, liabilities, and equity. It involves comparing and
reconciling various accounts, statements, or ledgers to identify and rectify discrepancies, ensuring
that all debits equal credits and that financial records are accurate and complete. Balancing is
essential for maintaining the integrity and reliability of financial information within an
organization.
Scenario of Balancing:
The cashier counts the cash in the register and compares it to the sales recorded on the till. After
confirming they match, the cashier completes the balancing process for the shift.
Image of Balancing:
13) Financial Institution:
Financial institutions are organizations that offer various financial services, such as banking,
lending, investing, and insurance, to individuals, businesses, and governments.
Scenario of Financial Institution:
Suzi visits his local bank to deposit his paycheck and inquire about a loan for a new car. The
bank's representative helps him deposit the funds into his savings account and provides
information about loan options, interest rates, and repayment terms. John leaves the bank feeling
confident about managing his finances with the support of the financial institution.