Exchange of goods for goods is called as barter system. In other words, economic exchanges without the mediation of money are referred to as barter exchanges. 

The four major drawbacks of barter system are the following: 

1. Lack of double coincidence of wants: For example, an individual who has a surplus of rice which he wants to exchange for clothing. If he is not lucky enough he may not be able to find another person who has the diametrically opposite demand for rice with a surplus of clothing to offer in exchange. 

2. Lack of common measure of value: Under barter system, it is very difficult to express the value of goods and services accurately. Here, we cannot keep record of any transactions in terms of value of goods and services exchanged. 

3. Lack of divisibility: Sometimes, it is difficult to divide goods and services according to the needs of people. For instance, the value of a horse is less than the value of cow. We cannot apportion any of these during transactions. 

4. Difficult to carry forward wealth: Under barter system, it is difficult to carry forward one’s wealth. Suppose we have an endowment of rice which we do not wish to consume today entirely. We may regard this stock of surplus rice as an asset which we may wish to consume or even sell off for acquiring other commodities at some future date. But rice is a perishable item and cannot be stored beyond a certain period. Also, holding to a big stock of rice requires a lot of space.