Business transaction

A business transaction is an economic event with a third party that is recorded in an organization's accounting system. Such a transaction must be measurable in money. Examples of business transactions are:

  • Buying insurance from an insurer
  • Buying inventory from a supplier
  • Selling goods to a customer for cash
  • Selling goods to a customer on credit
  • Paying wages to employees
  • Obtaining a loan from a lender
  • Selling shares to an investor

High-volume business transactions may be recorded in a special journal, such as the purchases journal or sales journal. Once business transactions are entered into these journals, they are periodically aggregated and posted to the general ledger. Lower-volume transactions are posted directly to the general ledger. These transactions are eventually summarized into the firm's financial statements.

A business transaction should always be supported by a source document. For example, the purchase of inventory from a supplier could be supported by a purchase order, while the payment of wages to an employee could be supported by a timesheet.