Rules for Determining a Cash or Credit Transaction

Deciding whether a transaction involves cash or credit can often confuse students. The following pointers will help to alleviate any confusion. Features of Cash Transaction (i) All transactions in which the word “paid” is mentioned are deemed cash transactions (e.g., rent paid, salaries paid, and so forth) (ii) All transactions in which the words “cash or cheque” are used are deemed cash transacti…

Read more

Business Transactions and Their Classification

Business Transactions: Definition A transaction (also termed a business transaction or financial transaction) refers to an exchange of value. In business, a transaction is an exchange of goods or services at a particular price. Every transaction changes the financial position of a business. For this reason, all transactions must be recorded in the books of accounts. Examples Examples of transactio…

Read more

Classification of Accounts

Accounts are classified using two approaches: Traditional approach (also known as the British approach) Modern approach (also known as the American approach) This article briefly discusses how accounts are classified under both approaches. Classification of Accounts Under the Traditional (or British) Approach According to the traditional approach, accounts are classified into three types: real acc…

Read more

Rules of Debit and Credit

There is no standard definition for the terms debit and credit. Historically, the word “debit” derives from the Latin word debere, which means “to owe.” In accounting, this has been shortened to “Dr.” Similarly, the word “credit” has its historical roots in the Latin word credere, meaning “to believe.” In accounting, this is often abbreviated as “Cr.” In spite of all the discussion surrounding the…

Read more

Analysis of Business Transactions

The accounting cycle begins with the analysis of transactions. The proper analysis of business transactions is important because it ensures that entries in the journal are correct. What are the Steps of Transaction Analysis? Analysis of business transactions involves the following four steps: Ascertaining the accounts involved in the transaction Ascertaining the nature of the accounts involved in…

Read more

Transaction Analysis MCQs

Take this short test on transaction analysis to help you prepare for your exams and interviews. To begin, simply click the “Start Quiz” button below. If you find it difficult to answer any of these multiple choice questions (MCQs), you can read this short article on transaction analysis. Time limit: 0 Quiz-summary 0 of 10 questions completed Questions: 1 2 3 4 5 6 7 8 9 10 Information Distribution…

Read more

Transaction Analysis: Fill In the Blanks

1. John starts business with $100,000 in cash. John’s capital account will be . See answer 2. John purchases supplies for $500 in cash. The supplies account will be . See answer 3. John purchases merchandise for $5,000 on account. The account will be credited. See answer 4. Merchandise are sold to a customer on account. The sales account will be . See answer 5. $4,800 in cash is paid to a creditor…

Read more