Keeping Track of Transactions – What Counts as a Transaction
A business transaction takes place when an event that can be measured in terms of money has occurred. There are dozens, probably hundreds, of events that happen in any business on any given day that have no monetary effect: opening the mail, talking on the phone, and writing letters, for example. Turning those occurrences into transactions takes only one thing, and that is money. If that envelope held a customer check, you have a recordable transaction. If that phone call resulted in a sale, you have a transaction.
Most companies have the same general transactions, and those get repeated all the time.
Common transactions include:
- Making sales
- Collecting money
- Paying bills
- Paying employees
- Paying taxes
- Receiving inventory
- Buying equipment
Every transaction affects changes in specific accounts, changing what you owe or what you own. When you record a transaction, you have to know which accounts are affected, and how; when the transaction took place; and its dollar value (even if no money has changed hands yet).