What do you mean by transaction?    

The main function of an accountant is to record properly the financial transactions of a business concern in the books of accounts and to ascertain its true result at the year end. Thus, transaction is the foundation of accounting – the first and formest element of accounting. In a word, it is the life and blood of accounting. Hence the accountant must have a fair idea about the term “transaction.”

  • In ordinary language “transaction” means exchange of something. But in Accounting it is used in a special sense. If the financial position of a business concern changes on the happening of an event which is measurable in terms of money, that event is regarded as a “transaction” in accounting.                                                    Or
  • A business event which can be measured in terms of money, and which must be recorded in the books of accounts is called a “transaction”.

What is an Event ?

In ordinary language “Event” means anything that happens. Human life is full of events. So many events take place in the family and social life of a person. The events may be classified into two types: 

(i) Monetary Events:
  • Events which are related with money, i.e. which change the financial position of a person are known as “monetary events”. For example, daily shopping, marriage ceremony, birthday anniversary, marriage anniversary etc.
(ii) Non-Monetary Events:
  • Events which are not related with money i.e. which do not change the financial position of a person are known as “non-monetary events”. For example, winning a game, delivering a lecture in a meeting etc.
  • In business accounting only those events which change the financial position of the business and which call for accounting are recognized as “Events”. In other words, all monetary events are regarded as “business transactions.”
  • Remember, it is not that anything which results in exchange of something will be regarded as transaction. On the other hand, something may be regarded as a transaction even though it involves no exchange.
Example:
  • R sends a price list to his customer, A. This involves exchange of price list-between R and A, yet it is not regarded as a transaction, because it is not measurable in term of money, and it does not change the financial position of both the persons.
  • Again, suppose, goods worth ₹ 1,000 are destroyed by fire. This does not involve any exchange, yet it is regarded as a transaction, because it is measurable in terms of money, and it changes the financial position of the business.
  • It must be noted that an event, although measurable in terms of money, may not be regarded as a transaction.
Example:
  • We receive an order for supply of goods worth ₹1,000. Although it is measurable in terms of money, it is not regarded as a transaction, since it has not changed the financial position. It will, however, be regard as a transaction when the goods are supplied according to the order.
  • It appears from the above discussion that the following two conditions must be satisfied in order that an event may be regarded as a transaction in accounting.           

(i) The event must be measurable in terms of money. 

(ii) The financial position of the business must change on account of that event.

What do you mean by Business transactions?

A business transaction is a financial event which recorded through accounting process in a business organization’s accounting system. All events are not business/accounting transaction, but every business transaction is an event. An event should be a transaction if that event has the following features. There are many features of business transaction which are described below:

Features/Characteristics of Business transactions?

  • It is measured in terms of money.
  • It changes the financial position of the business.
  • It has dual aspects.
  • It must be an event visible or invisible
  • It should be independent and complete.
  • It may be historical or future nature.
  • It has documentary evidence.
  • It may be cash basis or accrual basis.

3 thoughts on “What do you mean by transaction and event?”

Leave a Comment

Your email address will not be published. Required fields are marked *

Shopping Cart
Scroll to Top
0%
2 votes, 5 avg
45

Wishing You All The Best On Your Test!

Good Luck...!

Thanks for participating in the quiz.

We Appreciate Your Hard Work.


1 / 26

1. The balance on the debit side of the bank column of cash book indicates?

2 / 26

2. Following details are related to a firm’s banking transactions at 31st March, 2019. Balance as per bank statement Rs. 22,650; uncleared lodgements Rs. 3,110; unpresented cheques Rs. 6,290. Bank credit recorded twice by bank in error as Rs. 650.
Which balance for cash at bank should appear in the Balance Sheet as at 31st March, 2019?

3 / 26

3. A business receives its bank statement showing the closing balance as Rs. 8,500 overdrawn. It is found that there were unpresented cheques amounting to Rs. 2,000 and uncredited deposits amounted to Rs. 1,500. Overdraft as per Cash Book is:

4 / 26

4. Overdraft as per Cash Book is Rs. 10,000. Cheques deposited but not credited Rs.2,500. Cheques issued but not encashed Rs.3,500. What is the balance as per Pass Book?

5 / 26

5. A bank reconciliation statement is mainly prepared for:

6 / 26

6. Unfavourable bank balance means

7 / 26

7. VRC Ltd. receives a check for Rs. 100 records it in cash book and deposits it on the same day. A statement sent by the bank that day does not show this Rs. 100. How is this shown on the bank reconciliation statement?

8 / 26

8. Find out the Bank Balance as per Cash Book from the following particulars :
(i) Overdraft as per Pass Book = Rs. 5,000.
(ii) Cheques deposited into the bank but not credited = Rs.2,000

9 / 26

9. When check is not paid by the bank, it is called?

10 / 26

10. Unfavourable bank balances means:

11 / 26

11. Bank Reconciliation Statement is prepared:

12 / 26

12. If balance in the bank statement shows Rs. 3,000 (Dr.) and there are deposits of Rs. 800 not yet credited and unpresented cheques totalling Rs. 500, the balance in the Cash Book should be:

13 / 26

13. Payment done by the account holder through issuing a cheque is entered in

14 / 26

14. A Bank Reconciliation Statement is:

15 / 26

15. Passbook is a copy of:

16 / 26

16. Uncollected checks are also known as?

17 / 26

17. Customer’s copy of the account provided by the bank to the depositor to record deposits and withdrawals is called:

18 / 26

18. Ravi’s bank reconciliation statement shows cheques deposited but not credited by bank of Rs. 3,800 and cheques issued but not presented by suppliers of Rs. 3,500. His bank balance as per Cash Book is Rs. 25,000. Balance as per pass book statement is

19 / 26

19. Cash book balance was Rs. 1,790 (Dr.). When compared with the bank statement, it was identified that unpresented cheques were Rs. 1,040 and deposits not credited were Rs. 820. Balance of the bank statement will

20 / 26

20. ‘NSF’ marked in cheque sent back by the bank indicates

21 / 26

21. Current account shows Rs. 1,000 as overdrawn. When bank statement is received, it was identified that one of debtors has deposited Rs. 400 into the account and bank charges of Rs. 20 had been debited to the account. Bank Statement balance is

22 / 26

22. Bank charges Rs.5,000 debited twice in pass book. What should be done in BRS if overdraft as per cash book is starting point?

23 / 26

23. Bank statement also called?

24 / 26

24. A bank reconciliation statement is prepared by

25 / 26

25. The cheque which is issued to creditor but is not presented for payment is called?

26 / 26

26. Pass Book of the account holder is a copy of

Share With Your Friends!

LinkedIn Facebook Twitter
0%

Rate Us?

Thanks For Participating In The Quiz..!

Login