Transcript

What is Business Transaction? Business Transaction It is Exchange of goods,services,funds Sale of Goods by A to B Goods A B Exchange of Goods Consultancy Services by C to D Service C D Exchange of Services Money given by E to F Money E F Exchange of Funds All these affect Financial Statements (Profit and loss/Balance sheet) What is Business Transaction? It means exchange of goods,services or funds It is a business event having a monetary impact on the financial statements of a business. (Profit and loss or Balance sheet) In easy language Anything which affects Profit and loss or balance sheet is a business transaction Example A entered into contract with B to buy goods and service on 1 Jan A issued Sales bill to B on 5 Jan in this case,there is no business transaction on 1 jan (as no effect on Profit and loss or balance sheet) Business transaction took place on 5 jan when Sales bill issued When is Transacton Settled? When Payment Made for Transaction, it is called Transaction Settled Sale of goods by A to B Goods This is transaction A B Cash This is settlement of transaction Both these dates may be same (Cash transaction) or different (Credit Transaction) Different Types of Transaction (on Basis of Settlement of Value) Cash Transaction Credit Transaction When amount for When amount for transaction is paid transaction is paid or received or received at a immediately later date it is called Cash It is called Credit Transaction Transaction Example Example Cash Sales Credit Sales Credit Sales Credit Purchase Transaction Date Transaction Date and and Settlement Date Settlement Date Same Different Different Types of Transaction (on Basis of Accounting Unit) External Transaction Internal Transaction If transaction is between If transaction is within 2 business entity 1 business entity it called External it is Internal Transaction Transaction Example Example Cash Paid by A to B Cash deposit in Bank Furniture Purchased Depreciation on from C Furniture It is a transaction It is a transaction involving 2 entity involving 1 entity Important Characterstics of Business Transaction 1. It has financial value (Some amount is involved) 2. It is supported by a source document (Example -Purchase Invoice,Bank Statement) 3. One account is debited and other account is credited 4. It brings change in Financial Position (asset or liabiliies or Profit or loss ) Note Transactions of Personal Nature are not Business Transaction Examples Cash withdrawn by the proprietor from his saving bank account Sale of personal asset by the owner Proprietor purchased car for his spouse Note Transactions not involving Money are not Business Transaction Examples Strike By employees Entered contact to buy the goods Promotion of employees