What is the definition of Barter in finance

Definition

The term ‘barter’ originates from the word ‘baretor’—a system of exchange where all parties involved directly exchange goods and services among themselves without involving any other medium of exchange such as money. Simply put, barter is the exchange of goods and services between two parties and without the use of money. The barter system is a direct exchange for a commodity or service in direct proportion of another commodity.

Barter Explained

Bartering is the oldest form of commerce, dating back to history, before the advent of money. In early times, bartering simply worked by two or more parties exchanging their goods and services for another. For example, a farmer and a hunter who both need each other’s goods. They can simply come to an agreement and exchange their products in direct proportion. The bartering system of exchange may be as old as time; it is however still used today. Individuals or companies seeking cashless exchanges can simply identify barter interested parties that suit their preference and agree to the terms of the trade. Basically, the barter exchange system offers individuals, company’s, and countries the opportunity of trading items or resources they have little need for, in exchange for resources or items they need without directly involving money in the exchange.

Example;

Troy, a farmer needs a little handy-work done on his farmhouse worth $2000. He may or may not have such an amount at the moment. Then, he finds a handy-man willing to accept any form of payment for the work done. Once the work has been completed, Troy, the farmer pays the handy-man $2000 worth of crops or farm produce as the agreed choice of payment, rather than give out $2000 in cash or check.