Tag: basic accounting terminologies

Every economic activity is performed through transactions and events. A transaction may be a business, performance of an act or an agreement. Event is used to mean a happening as a consequence of transaction(s).

Any business transaction which occur during the course of business must have the documentary evidence. Since the accounts of the business need to be audited in future, all evidence must be available for records.

The transactions are recorded first of all in the journal and then they are posted to the ledger. Thus the journal is the book of first or original entry while the ledger is the book of second entry. Journal records transactions in a chronological order. Journal is more reliable then ledger. The process of recording transactions is termed as journalising.

Accounting cycle starts only when there is an event or transaction of monetary value. If a transaction is completed, its considered an event to record the same in business books. Non economic transaction should not be considered as an event. Hence, no recording is done.

Every economic activity is performed through transactions and events. A transaction may be a business, performance of an act or an agreement. Transaction is used to an economic event in accounting.

Accounting is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information. transactions and events of financial information. It revels profit or loss for a given period, and the value and nature of firm's assets, liabilities and owner;s  equity. It is the language of business.

A cash transactions is a transaction where there is an immediate payment of cash for the purchases of an asset. It differs from other type of transactions that involves delayed delivery of purchased item, or delayed payment for the item.

A post-dated check (or post-dated cheque) is a check written with a future date. In other words, the date that appears on the check is after the date when the check was written. Even with a future date appearing on the check, the check could clear (be paid from) the bank account prior to that date.

Any exchange of value for value ( for money or money's worth) is called a transaction. Something having value is received, and something having value goes out.  Selling or purchasing of goods or taking or granting any loan are examples of transactions. 

Unsold items i.e Closing stock is captured in the financial statements as 'Current Asset'. An event can be internal or external. This is an internal event.