Define barter system.

Exchange of goods. in place of money. practised mostly in olden days or with farmers.

 Barter System is that system in which goods are exchanged for goods. In ancient times when money was not invented trade as a whole was on barter system. This was possible only in a simple economy but after the development of economy, direct exchange of goods without the use of money, was not without defects. There were various defects in this system. 

 System where there is an exchange of goods without involving money.

its the system in which the exchange of goods take place without the use of money.

 Barter is a simple form of trade where goods or services are exchanged for a certain amount of other goods or services, i.e. there is nomoney involved in the transaction. Barter trade was common in societies where no monetary system existed or in economies suffering from a very unstable currency (as when hyperinflation hits) or a lack of currency.

The disadvantage of using barter in the past was that it depended on the mutual coincidence of needs. Before any transaction could be undertaken, the needs of one person must mirror the needs of another person. That is, if you have a surplus of goats and need more wheat, you must find someone that has a surplus of wheat and needs more goats. To overcome this mutual coincidence problem, intermediaries developed that would store, trade, and warehouse commodities. However, this often implied that the intermediaries suffered from extreme risk.

Because barter is so expensive, it is very rare. To organize production and to distribute goods and services among their populations, many pre-capitalist or pre-market economies relied on tradition, top-down command, or community democracy instead of market exchange organized using barter. Relations of reciprocity and/or redistribution substituted for market exchange. Trade and barter was primarily reserved for trade between communities or countries.

Barter becomes more and more difficult when more people become dispossesed of the means of production needed to produce products, including their subsistence. For example, if money was totally abolished in the United States, most people would have nothing of value to trade for food (since the farmer can only use so many cars, etc.)

To overcome the mutual coincidence barrier, some people have proposed the creation of "barter exchange companies" that offer an alternative currency, the barter dollar. However, this is not true barter, because it involves currency.

In finance, the word "barter" is used when two corporations trade with each other using non-money financial assets (such as U.S. Treasury bills). Alternatively, the standard definitions of money could be seen as being too narrow and needing to be expanded to increase near-money assets.