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Transaction and Event

Every individual performs some kind of economic activity. Economic activities are performed through transactions and events. Transaction means “a business, performance of an act, or an agreement”. An event means “a happening, as a consequence or result of a transaction(s)”.

Example: Purchase and sale of goods, payment of salary, investment of money etc. is transaction, closing stock, profit or loss at the end of accounting period is an event.

Definitions of Accounting

  • Traditional definition: In 1961, The American Institute of Certified Public Accountants (AICPA) formulated the following definition of Accounting: “Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of a financial character and interpreting the results thereof.”
  • Modern definition: In 1966, the American Accounting Association (AAA) defined accounting as follows: “Accounting is the process of identifying, measuring and communicating economic information to permit informed judgements and decisions by the users of the information”

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