The change of financial position may occur in two ways: The event causing a financial change of a business concern is called transaction. An event to be a transaction must bear the following features Change in financial position Hermanson, Edward and Salmon say, “Transaction is a recordable happening or event that affects the assets, liabilities, owner’s equity, revenue or expense of the event.” Nature and Features of Accounting TransactionsĪll transactions are events but all events are not transactions. Noble and Niswonger say, “Any happening which brings change in the pattern of assets or liabilities or proprietorship of a business concern is a financial transaction to it.” On the basis of traditional and modem concept transaction means the events that bring change in financial position or change in assets, liabilities and owner’s equity of a person or an organization. and owner’s equity lead to the change of financial position.
One states the changes of financial position and the other states changes of assets, liabilities and owner’s equity. In fact, both the concepts bear the same meaning. According to them the events which bring changes in assets, liabilities and owner’s equity of any business concern are called transactions. The modem accountants have explained the matter in different ways. Therefore, the exchanges of goods or services measurable in terms of money which bring financial changes to a person or organization are called transactions. $1,000 purchase for cash, $2,000 sale on account, $500 salary payment etc. One party receives the benefit and the other one offers. Events occurred measurable in terms of money are called transactions. In every transaction of an individual or organization, two parties or accounts are involved. The dictionary meaning of transaction is to give and take. Events treated as transactions are recorded in the books of accounting.Įvents other than transactions are not recorded in the books of accounts. Transactions are very important elements in Accounting.
The events related to money are the sources of transactions. Events in Accounting are classified into two groups
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