Transactions

Transaction 

Any exchange of goods or services for cash or on credit by the business with any other business or customer is called transaction. It is an economic activity of the business that change in an organization's flnancial position. 

Classification of Transaction Transactions may be classified on different basis and modes e.g. 

1) Mode of Payment involved : 

On the basis of payment involved in a transaction, the transactions can be classified as : 

a) Cash transaction (e.g. purchase of goods for cash, rent paid etc.) 

b) Credit transaction (e.g. purchase of goods on credit) 

2) Entity Involved : 

An organisation of persons for achievement of a common goal is known as entity. 

On the basis of entities involved in the transactions are : 

a) External transaction (e.g. sale of goods to customers) 

b) Internal transaction (e.g. depreciation on machinery) 

3) Exchange 

On the basis of exchange of value, the transactions can be classified as : a) Exchange transactions (e.g. Simultaneous purchase and sale of goods from the same person) b) Non-exchange transactions (e.g. payment of income tax) 

Paper Transaction 

A transaction which occurs between the outsiders and entity is termed as external transaction whereas, transaction which occurs between the internal wings of the organisation denotes internal transaction. These internal transactions are otherwise called as Paper transactions. The followings are some of examples of internal/ paper transactions :

 a) Goods lost by theft, fire or accident. 

b) Discount allowed to debtors.

c) Discount received from supplier. 

d) Depreciation charged on building. 

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