Transactions – Meaning And Classification

CONTENT

• Meaning of Transaction
• Classification of Transactions

Transaction

Transaction involves the transfer of goods, services, money or money’s worth (e.g. assets) to and from a business organization.

The essential feature of transactions in accounting is that such transactions to be recorded should be quantifiable in monetary terms hence it is usually described as financial transactions.

CLASSIFICATIONS OF TRANSACTIONS

Financial transactions which are recorded, summarised, classified and analysed in accounting could be either of two types

1. Cash Transactions: This occur whenever goods are received by a person or business and payment is made immediately for such goods or services received. Payment in this sense could be either by cash, cheque, bankdrafts, postal orders etc.

Credit Transactions: This occur whenever goods are received by a person or business and the payment for such goods received (or services enjoyed) is postponed or deferred to a future time.

EVALUATION

1. Differentiate between Cash Transactions and Credit Transactions.
2. Give three examples of business transactions that are not financial in nature.

READING ASSIGNMENT

Simplified and Amplified Financial Accounting Page 16 – 17

WEEKEND ASSIGNMENT

Identify whether the transactions below are cash transactions or credit transactions

1. Jan 2:         Started business with N10, 000 cash
2. Jan 3:         Paid N7, 000 of the business money into the bank
3. Jan 7:         Paid rent of shop by cash N600
4. Jan 12:       Bought goods for cash N1, 200
5. Jan 14:       Bought goods on credit from Ayodele N30, 000
6. Jan 15:       Sold goods and received cheque in payment N14, 000
7. Jan 20:       Bought Motor vehicle paying by cheque N9, 000
8. Jan 25:       Paid salary of shop assistants by cheque N1, 000
9. Jan 28:       Sold goods to Akinyemi N7, 000
10. Jan 31:       Bought furniture for cash N3, 000