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    Accountingtools: Accounting Transaction Definition

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    Ashok Nagpal
    An accounting transaction is a business event that affects a company's financial statements. Examples include sales, purchases, asset depreciation, borrowing, and dividends. Every transaction must follow the accounting equation of assets equaling liabilities plus equity. Transactions are recorded through journal entries, either directly or indirectly through accounting software modules. Journal entries must balance with equal debits and credits.

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    Accountingtools: Accounting Transaction Definition

    Uploaded by

    Ashok Nagpal
    44 views2 pages
    An accounting transaction is a business event that affects a company's financial statements. Examples include sales, purchases, asset depreciation, borrowing, and dividends. Every transaction must follow the accounting equation of assets equaling liabilities plus equity. Transactions are recorded through journal entries, either directly or indirectly through accounting software modules. Journal entries must balance with equal debits and credits.

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    An accounting transaction is a business event that affects a company's financial statements. Examples include sales, purchases, asset depreciation, borrowing, and dividends. Every transaction must follow the accounting equation of assets equaling liabilities plus equity. Transactions are recorded through journal entries, either directly or indirectly through accounting software modules. Journal entries must balance with equal debits and credits.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    44 views2 pages

    Accountingtools: Accounting Transaction Definition

    Uploaded by

    Ashok Nagpal
    An accounting transaction is a business event that affects a company's financial statements. Examples include sales, purchases, asset depreciation, borrowing, and dividends. Every transaction must follow the accounting equation of assets equaling liabilities plus equity. Transactions are recorded through journal entries, either directly or indirectly through accounting software modules. Journal entries must balance with equal debits and credits.

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    AccountingTools

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    Accounting transaction definition Search

    April 16, 2021


    Accounting Books
    What is an Accounting Transaction?
    Finance Books
    An accounting transaction is a business event having a monetary impact on
    the financial statements of a business. It is recorded in the accounting Operations Books
    records of the business. Examples of accounting transactions are:
    Send us your e-mail address to
    receive monthly course
    • Sale in cash to a customer
    discounts *
    • Sale on credit to a customer
    • Receive cash in payment of an invoice owed by a customer

    • Purchase fixed assets from a supplier


    • Record the depreciation of a fixed asset over time SUBMIT

    • Purchase consumable supplies from a supplier


    • Investment in another business

    • Investment in marketable securities


    • Engaging in a hedge to mitigate the effects of an unfavorable price
    change

    • Borrow funds from a lender


    • Issue a dividend to investors

    • Sale of assets to a third party


    There can also be fraudulent accounting transactions that are essentially
    made up by management or the accounting staff. These transactions can
    be avoided through the use of a comprehensive system of controls.

    Every accounting transaction has to follow the dictates of the accounting


    equation, which states that any transaction must result in assets equaling
    liabilities plus shareholders' equity. For example:

    • A sale to a customer results in an increase in accounts receivable


    (asset) and an increase in revenue (indirectly increases stockholders'
    equity).

    • A purchase from a supplier results in an increase in expenses


    (indirectly decreases shareholders' equity) and a decrease in cash
    (asset).
    • A receipt of cash from a customer result in an increase in cash (asset)
    and a decrease in accounts receivable (asset).

    • Borrowing funds from a lender results in an increase in cash (asset)


    and an increase in loans payable (liability).

    Thus, every accounting transaction results in a balanced accounting


    equation.

    Accounting transactions are either directly or indirectly recorded with a


    journal entry. The indirect variety is created when you use a module in the
    accounting software to record a transaction, and the module creates the
    journal entry for you. For example, the billing module in the accounting
    software will debit the accounts receivable account and credit the revenue
    account every time you create a customer invoice.

    If a journal entry is created directly in a manual accounting system, verify


    that the sum of all debits equals the sum of all credits, or the transaction will
    be unbalanced, which makes it impossible to create financial statements. If
    a journal entry is created directly in an accounting software package, the
    software will refuse to accept the entry unless debits equal credits.

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