What is Transaction ? Classification of Transactions:

What is Transaction?

A Transaction means an event which changes the financial position of a person or an institution measurable in terms of money. Thus a transaction means any exchange of goods or services or the happening of any loss or gain, measurable in terms of money, bearing documentary evidence and affecting assets, liabilities, capital revenues and expenses.

Definition:

          According to Field house:- "Every financial change which occurs in your business is a transaction."

                According to Noble and Niwonger :- "Any happening which brings change in the pattern of assets or liabilities or proprietorship of a business concern is a financial transaction to it."

Classification of Transactions:

1. Classification on the basis of the mode of payment. Transaction are Three types.

       a. Cash Transactions:- Cash transactions are those transactions where the value of the transaction is paid immediately either in cash or by Cheque. As for example; Hari bought goods for Rs. 500 in cash from Guwahati Store. It is a cash transaction. In a cash transaction , either the word cash will be mentioned in the transaction or the name of the party will be absent from the transaction.

   b. Credit Transaction:- Credit transactions are those transactions where the value of the transaction is paid later on. As for example; Ram purchased furniture valued Rs. 2000 from Furniture House on credit. Here the payment is not made immediately after the purchase of furniture it is to be paid later on. So it is a credit transaction. In such a transaction the words on credit or the name of the party will be mentioned in the  transaction.

    c. Paper transactions:- Paper transactions are those transactions where the value of the transaction is not to be met at all. For example; A loss by fire (uninsured) to the extent of Rs. 10,000 is a paper transaction as the value of the transaction is not to be met. The words "Cash" or "on Credit" will not be used in such transactions.

2. Classification on the basis of the entity involved:Transaction are Two types.

          a. External Transactions:- External  transactions are those transactions which take place between the business entity and another entity or a party outside the business.Example: Sale of goods to a customer.
       b. Internal Transactions:- An Internal transaction is one that takes place within the business entity itself. Example: The depreciation of machinery used in the business.

3. Classification on the basis of exchange:Transaction are Two types.        

      a. Exchange Transaction :-An exchange transaction results in an exchange of value between two or more parties. Examples:- Sale or purchase of good; payment of rent etc. 

     b. Non- Exchange Transaction:- A non-exchange transaction does not result in an exchange of value. Example:- Loss due to fire, flood or theft. depreciation on fixed assets etc.