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Transaction means act of performance, an exchange a transfer etc. However, for the purpose of accounting, only those transactions are taken into consideration, which are of financial nature,

  • Which alters the financial position of a concern, and
  • Which can be measured in the terms of money


The consequence of a transaction is known as events. The distinction between transactions and events can be properly understood with the help of the following example.



Suppose Mr. X starts business with the cash of Rs. 1,00,000. During the whole year, he makes purchase and sale of goods and thus earns the net profits of Rs. 10,000. At the end of year, he has the cash balance of Rs. 15,000, stock of goods of Rs. 50,000 and sundry debtors of Rs. 45,000.



In this situation, starting of businesspurchasing of goods and selling of goods are financial transaction and earning the profit of Rs. 10,000, having the cash balance of Rs. 15,000 having the stock of Rs. 50,000 and having the sundry debtors of Rs. 45,000 are the events of a particular firm or company.




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