Day-2 (Contents)

Transaction and Event

Different between Event and
Transaction
Classification of Transaction
Some important Terms
 Day -2
Transaction and Event
Accounting means recording of and
drawing conclusion from Several
Transactions . But before recording
you have to know what a
transaction is and how it differs
from an event.
 Transaction
“A Transaction may be defined
as an economic activity that
changes the financial
position of a parson.”
 Feature of a transaction
Following are the features of a transaction-
It involves an economic activity;
There must be at least two parties;
It brings about a change in financial
position of the parties;
The Change must be capable of being
expressed in terms of money;
 Event
“Event is an occurrence , happening ,
change or incident, which may or
may not bring any change in the
financial position of the business .”
“Every transaction is an event but
every event may not be a
transaction.”
 Difference between Event and
Transaction
Event Transaction
 May or may not involve  Involve two parties
two parties Bring changes in the
 May or may not bring financial position
any change in the Must be expressed in
financial position terms of money
May or may not be
expressed in terms of
money
Example-
State whether the following events are transactions or not –
I. Mr. X started business with capital of Rs. 40000 -
Transaction;
II. Paid salaries to staff Rs. 5000 – Transaction;
III. Placed an order to Sen & Co. for goods of Rs. 5000 –
Event;
IV. Opened a bank account by depositing Rs. 4000 –
Transaction;
V. Appointed Mr. B. Sen as manager at a salary of Rs. 4000
per month – Event;
VI. Received interest from Bank Rs. 500 – Transaction;
VII. Gave lift to a supplier in the business car – Event;
 Classification of Transaction
Cash Transaction
Credit Transaction

Transaction

Cash Credit
 Cash Transaction-

“A transaction which involve

immediate payment or receipt
is called cash transaction.”
Ex- Purchase goods in cash Rs.
5000
 Credit Transaction
“A transaction which does not
involve immediate payment or
receipt is called credit transaction
.”
EX- Sold goods on credit to Radhe
Example
State whether the following are cash or credit
transaction –

Sl. No. Transaction Answer

A Paid rent Rs. 2000 Cash

B Bought furniture from Gupta Bros. Credit

C Purchase goods from Amol Rs. 10000 for cash Cash

d Sold goods to Samir Rs. 20000 on credit Credit

 Assets
“Assets are economic recourses which are owned by a
business and expected to benefit future
operations”.
Assets includes the following …..
• Fixed assets--- (e.g. Land ,Building , Plant &
Machinery , Furniture & Fixture , Computer etc.)
• Investment (e.g. Fixed Deposit with banks,
Shares , Debentures etc.)
• Stock / Inventories of business, cash/Bank
balances.
• Sundry debtors, Loans/ Advances given etc.
Liabilities- Liabilities are debts owed by a
business to outsiders .
 Capital- The excess of assets over
outsiders liabilities of an enterprise is
termed as Capital.
 Drawing- Money or value of goods
belonging to business used by the
proprietor for his personal use is
drawings.
Revenue-It is the monetary value of the
products sold or services provided to the
customers during the period under
consideration .
 Expenses – Money spent by an enterprise
to earn revenue is termed as expense.
 Proprietor- The person who invests
money into the business and bears the
risk of the business is the proprietors.
 Debtor- A person , who owes money
(due to any sales made to him previously )to
the business is called debtor.
 Creditor- Person to whom the business
owes money , due to any purchases made
from him previously.
 Profit- The terms “profit” can be defined
as what is left from revenue after all
expenses have been provided for. In other
words ,profit = Revenue – Expenses .
Loss – The terms “Loss” can be excess
of expenses over revenue . In other
words , loss= Expenses –Revenue.
Inventory- Raw materials, finished and
unfinished product of a business
which have not been sold are called
inventory.