A transaction is a business event that has a monetary impact on an entity's financial statements, and is recorded as an entry in its accounting records. Examples of transactions are as follows:

  • Paying a supplier for services rendered or goods delivered.

  • Paying a seller with cash and a note in order to obtain ownership of a property formerly owned by the seller.

  • Paying an employee for hours worked.

  • Receiving payment from a customer in exchange for goods or services delivered.

A high-volume transaction, such as a billing to a customer, may be recorded in a specialized journal, which is then summarized and posted to the general ledger. Alternatively, lower-volume transactions are posted directly to the general ledger.

When the cash basis of accounting is being used, a transaction is recorded when cash is spent or received. Alternatively, under the accrual basis of accounting, a transaction is recorded when revenue is realized or when an expense is incurred, irrespective of the flow of cash.

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