BCom Financial Accounting Study Material Notes Recording of Business Transaction

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Meaning of Business Transaction

An exchange of money or money’s worth as goods and services between two parties is called a business transaction. It may relate to the purchase and sale of goods, receipt, payment of cash, and rendering of service by one party to another. In accounting, only business transactions are recorded. (BCom Financial Accounting Study Material Notes Recording of Business Transaction)

When the payment of a business transaction is made immediately, it is called a cash transaction but when the payment is postponed to a future date, it is called a credit transaction. (BCom Financial Accounting Study Material Notes Recording of Business Transaction)

There are two main stages of Recording Business  Transactions. In the first stage, transactions are recorded in a journal, and in the second stage, items are posted from the journal to the ledger.

It is necessary to know how business transactions will be recorded in the accounting books. Ledger and journal are accounting books. Accounting books mean those books which are used for recording business transactions. An exchange of money or money’s worth as goods and services between two parties is called a business transaction. It may relate to the purchase and sale of goods, receipt, payment of cash, and rendering of service by one party to another.

In accounting, only business transactions are recorded. When the payment of a business transaction is made immediately, it is called a cash transaction but when the payment is postponed to a future date, it is called a credit transaction. There are two main stages of recording transactions. In the first stage, transactions are recorded in a journal, and in the second stage, items are posted from the journal to the ledger. (BCom Financial Accounting Study Material Notes Recording of Business Transaction)

Sub-Division of Journal

All business transactions are to be first recorded in the journal. When the number of transactions is large, recording all transactions in one journal will not only be inconvenient but also cause delays in collecting the information required. Thus, where transactions are numerous and particularly of repetitive and similar nature, it is practicable to divide the main journal into sub-journals in order to facilitate the recording of transactions of similar nature. 

Thus the journal can be divided as follows :

• Cashbook
• Purchases book
• Sales book
• Purchases return book
• Sales returns book
• Bills receivable book
• Bills payable book
• Journal proper

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