What is an Accounting Event? Meaning, Features, and More.

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Before understanding accounting event it is necessary to understand accounting transaction because accounting event is based on or a result of accounting transaction.

Accounting Transaction: An accounting transaction is a financial relationship between two or more persons and is recorded in the accounting books of the organization. Being recorded in the accounting books, it affects the financial position of the organization. Every accounting transaction that takes place in the organization is supported by supporting documents because while recording the transactions, accounting principles, concepts, rules, etc. are followed to maintain accounting standards.

In a business, a number of events occur every day and these events may be of financial and non-financial nature like meetings, contracts, sales, purchases, etc. Out of these, all the events of financial nature are called accounting events and are managed through accounting process which includes identifying, measuring, recording, classifying, summarizing, analyzing, interpreting, and communicating, etc.

What is an Accounting Event?

An accounting event is the outcome/consequence of an accounting transaction and includes everything from the transaction to its outcome and it affects the financial position of the organization. For example, 1. Purchase of goods on credit, Result: Increase in liability and also increase in asset, 2. After payment, Result: Decrease in liability and also decrease in asset. While recording the accounting event in the accounting books, proper accounting principles, rules, concepts, etc. are followed which increases the reliability in the accounting information.

Accounting event is classified into two parts, one internal and the other external. Internal accounting event include internal transactions of the organization, which are not connected with external parties, for example charging depreciation on assets, supply of goods from one department to another department in the same organization, etc. And external accounting event include external transactions of the organization, which are connected with external parties, for example, sales, purchases, payments, receipts, etc.

Features of Accounting Event

Following are the features of accounting event:

1. Financial Nature:

An accounting event is financial in nature because an event is called an accounting event only if it involves a monetary element. For example, purchase of a product and its effect on the accounting information of the organization is an accounting event, so are sales, receipts, payments, etc. Note: If an event does not involve a monetary element, then that event is not called an accounting event.

2. Consequence:

An accounting event is the consequence of an accounting transaction because unless an accounting transaction occurs, an accounting event also does not occur. Accounting event include all the results from the transaction taking place. For example, buying the product on credit increases the stock which increases the asset and at the same time increases the creditor which increases the liability, etc.

3. Recorded in the Books:

Accounting event is recorded in the accounting books of the organization as it helps in generating accounting information that helps in understanding the organization’s position, performance, etc. For example, recording accounting events helps in preparing accounting reports like trading account, profit and loss account, balance sheet, etc.

4. Affects Information:

Accounting event affects the accounting information prepared in the organization because it is recorded in the accounting books and accounting information is prepared through the accounting books. In simple language, it provides data to prepare accounting information, and accounting information is prepared as per the data received.

5. Classified:

Accounting event is classified into two parts, one is an internal accounting event and the other is an external accounting event. This classification helps in understanding accounting events better. Internal event means the event in which an external party is not involved, and an external event means the event in which an external party is involved.

Read Also:

• What is Accounting Data? Meaning, Features, and More.
• What is Accounting Information? Meaning, Features, and More.

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