Increasing trend of electronic banking or transactions which is many a times are called cashless tra

Question

Increasing trend of electronic banking or transactions which is many a times are called cashless transactions can be considered in which of the following type of cost?

Examoogle · Accepted Answer

Cash cost

Explanation: Cash costs represent the actual flow of money out of an organization resulting from a transaction. Since electronic or cashless transactions involve the immediate or near-immediate transfer of funds from one account to another through a banking system, they constitute a direct cash outflow.

Working Principle: In engineering economics, a cost is classified as a 'cash cost' if it involves a tangible movement of liquid assets or currency. Cashless transactions utilize digital payment gateways (like UPI, NEFT, or IMPS) to facilitate this transfer, where the electronic debit acts as a direct substitute for the physical movement of banknotes.

Key Formulas: $TC_{cash} = \sum C_{digital} + \sum C_{physical}$ — Total Cash Cost summation

Key Points: Cash costs involve the actual exchange of money, regardless of the medium (digital or physical).; Book costs are non-cash items, such as depreciation or amortization, which represent value reduction without cash movement.; Opportunity costs represent the potential benefit foregone by choosing one alternative over another.

Advantages: High transparency in accounting.; Elimination of manual counting errors.; Real-time financial tracking for engineering project management.

Disadvantages: Dependency on digital infrastructure.; Potential for transactional service fees.

Applications: Procurement of raw materials for engineering projects.; Payment of labor and contract wages.; Routine utility bill payments in industrial units.

Additional Info: Book cost involves accounting entries without cash movement (e.g., depreciation).. Opportunity cost is a theoretical cost not reflected in standard ledger books.. In economics, if a transaction is recorded as an immediate debit to the cash/bank account, it is explicitly a cash cost.

Answer: A is correct — Electronic transactions involve a direct outflow of funds from an account, classifying them as cash costs.

Exam Tip: Always differentiate between 'Cash Costs' (actual cash flow) and 'Book Costs' (non-cash adjustments like depreciation) in project economics as this is a frequent trap in professional engineering exams.

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