Cash transaction definition

What is a Cash Transaction?

A cash transaction involves the exchange of cash for an asset. Because the exchange is immediate, the seller undertakes no credit risk that the buyer will not pay, as would be the case if credit were granted to the buyer. Cash transactions are most common for smaller retail transactions.

Cash Transactions vs. Credit Transactions

Cash transactions differ substantially from credit transactions, in which there is a payment delay built into a transaction. An example of a credit transaction is a sale made in which the buyer does not have to pay the seller until 30 days from the invoice date. There is no risk of a bad debt arising from a cash transaction, whereas this is an ever-present risk when credit transactions are used instead.