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

हिन्दी में पढ़ें:

An organization is established to exchange something between two or more persons and this exchange can be economic, non-economic, profit motive, non-profit motive, etc. which is called a transaction and when an economic element is involved in a transaction then it is called an accounting transaction or economic transaction. Note that it is not necessary that profit is a motive in accounting transactions or economic transactions.

In simple words, the term accounting transaction is made up of two words, one is accounting and the other is transaction, in which accounting means economic element and transaction means exchange of something between two or more persons. Talking about the example of accounting transactions includes transactions related to sales, purchases, returns, receipts, payments, etc.

What is an Accounting Transaction?

An accounting transaction is an economic activity that is done between two or more persons, and it affects the accounting information of the organization as it provides data for preparing accounting information. In accounting transaction, both sides like debit and credit are equal as it follows dual aspect accounting concept or principle, and it is recorded in the books as per the process of accounting with accounting standards.

Every accounting transaction that takes place in the organization is supported by a source document as these help in creating and maintaining reliability on accounting information. For example, sales and purchase transaction is supported by invoice/bill/memo, payment received and paid is supported by payment receipt, cash deposited in the bank is supported by cash deposit slip, etc.

Features of Accounting Transaction

Following are the features of accounting transaction:

1. Economic Activity:

Accounting transaction is an economic activity because it involves economic element and it is done between two or more persons. For example, buying a machinery with cash, in this case cash is an economic element. Note: Accounting records only those transactions that have economic value or element, that is why all the transactions recorded in the accounting books are called economic transactions.

2. Provide Data:

Accounting transaction provide data for preparing accounting information such as trading account, profit and loss account, balance sheet, cash flow statement, manufacturing account, etc. For example, sales data, purchase data, payment data, receipt data, etc.

3. Recorded in the Books:

Accounting transaction is recorded in accounting books, and it is recorded through the accounting process which includes identifying, measuring, recording, classifying, summarising, etc. Different types of organizations adopt different methods to record accounting transactions but within the jurisdiction of accounting standards.

4. Supported:

Accounting transactions are supported by supporting documents because without supporting documents accounting transactions are not recorded in the accounting books. If an organization records transactions without supporting documents, then persons may have low confidence or doubt the accounting information presented by it. Note that the governing authority can influence this.

5. Affects information:

Accounting transactions affect accounting information because they provide data for preparing accounting information and accounting information is prepared according to the data. Note that not all transactions that take place in an organization are recorded in the books, only those transactions are recorded in the books which are related.

Read Also:

• What is Accounting Data? Meaning, Features, and More.
• What is Accounting Information? Meaning, Features, and More.
• What is Accounting? Meaning, Features, and More.
• Process of Accounting
• Advantages and Disadvantages of Accounting

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