Business transaction: types, accounting, accounts

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Business transactions act as objects in accounting. They are elements of the processes taking place in the enterprise, or facts of the economic life of the company. Economic, accounting operations affect the financial position of the company.

Definition

A business transaction is a separate action, as a result of which the volume, composition, use and placement of funds and their sources change. In economic terms, any fact has 2 addresses. Changes in one object provoke an adjustment in another by the same amount. A business transaction is an event or action that leads to a statement of the funds and sources available to the enterprise.

Specifics

Business transactions on the balance sheet affect the assets, that is, the property of the enterprise. They may also relate to the sources of its formation (passive). There are events that affect both parts of the reporting. The facts of economic life constantly affect the balance sheet. This, in turn, leadsto the adjustment of the value of articles of both assets and liabilities.

Classification

There are the following types of business transactions:

• +A-A. This category of events changes the composition of the property, that is, it concerns only the asset. In this case, the balance currency is not adjusted.
• +P-P. These operations affect the sources of formation of the company's material values. They affect only the passive. In this case, the balance currency also remains unchanged.

• +A+P. This category of events affects both the size of property and the sources of its formation. In this case, the adjustment is carried out in the direction of increase. The balance sheet currency for liabilities and assets increases by the same amount.
• -A-P. These operations also affect the property and the sources of its occurrence. But the changes are on the downside.

Accounting for business transactions

Every fact of economic life must be time-determined, valued. In accordance with this, the accounts of business transactions are filled. The definition of a fact in time is determined by the need to establish the moment of registration. Dates reflect:

• Transfer of ownership of products, works, services provided.
• Getting loans and credit funds.
• The procedure for recognizing expenses and income from ordinary and other activities, reflecting them for the relevant periods in the documents.
• Performing payments in foreign currency, etc.

Rating

Each business transaction must have its owncost at the time of completion. The enterprise without fail carries out an assessment of property for its reflection in documents in monetary terms. In accordance with the current accounting principles, all liabilities, assets, equity, expenses, receipts should be reflected in the appropriate value.

Tangibles purchased for a fee are valued by summing up the actual costs of the purchase. Property received free of charge is accepted at the market price in effect on the date of posting. Material values created at the enterprise itself are valued at the cost of production.

Features of reflection

The completed business transaction is executed on paper or electronic media. By means of these documents primary registration of events is carried out. Registration is carried out in the sequence in which the operations were performed. This order allows:

• Keep a continuous, complete record of objects.
• Justify entries that are made in accordance with evidence-based documents.
• Use reporting for operational management and current control of the enterprise.

In addition, financial discipline at the enterprise is ensured, since the primary documentation acts as the main source of information for further supervision over the appropriateness, correctness, and legality of eachoperations.

Double entry

The formation of an information connection of synthetic accounts that arises in the process of registering the facts of the company's economic activity is called correspondence in the nomenclature of the plan. It is worth saying that it also reflects legal relations between subjects. Correspondence may be systematic or chronological. The facts of economic activity are reflected in the accounts according to the principle (rule) of double entry. Its essence lies in the fact that any event is registered twice. Information is reflected in the debit and credit of the account. Such an entry has a control value.

The total debit turnover on synthetic accounts for the month should be equal to the amount of credit. If the values do not match, then an error was made when reflecting events. In accordance with the principle of double entry, the information link that occurs between accounting objects can be shown in different ways. For example, a formulaic image reflects the name of the corresponding accounts. In this case, the numerical value of the entry is indicated. The reflection of offsetting accounts in primary documentation is called account assignment.

Key tasks of a specialist

As part of their practical activities, an accountant needs to solve three issues. They consist in the definition:

• The moment at which the business transaction was carried out.
• Event value.
• A way to classify a transaction according to the nomenclature of the chart of accounts.

From this follow three keytasks, the solution of which will allow to correctly form documentary reporting:

• Identification of the fact of economic activity in time.
• Event evaluation.
• Classification of operation by nomenclature.

Conclusion

Accounting, like any other discipline, has its own subject, objects of observation, specific methods and techniques for registering, collecting, summarizing, accumulating data and transferring them to users. The completeness and reliability of reporting will depend on the competent use of existing tools. This, in turn, will enable stakeholders to get a timely view of the firm's financial position.

Reporting is essential for both external and internal users. The former include investors, creditors, contractors. Internal users are participants, employees of the management apparatus. Reporting allows you to identify areas of spending funds, the validity of costs, loss-making areas of the enterprise. Based on the results of information analysis, important management decisions are made.