Accounting transaction refers to any business activity that results in a direct effect on the financial status and financial statements of the business. Such transactions come in many forms, including sales in cash and credit to customers, receipt of cash from a customer by sending an invoice, purchase of fixed assets and movable assets, borrowing funds from a creditor, paying off borrowed funds from a creditor, payment of cash to a supplier from a sent invoice and so on. It is important to remember that every transaction should show the balance between the assets and the liabilities or the debit and the credit, such that a receipt of cash from a customer equals an increase in revenue or that a purchase from a supplier equals an increase in expenses and a decrease in cash. Relevance indicates a transaction has predictive value. In short, the transaction should add value to the business and allow for predicting future earnings. Accountants must record transactions in the proper period to meet relevance requirements.

Sruthy Santhosh

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