What are Business Transaction?

A business transactions is any business activity that affects what a business owns and owes, as well as the ownership of the business. We learned in Part III to keep track of business transaction by using an expanded form of the accounting equations. Most business, however, are involved in daily business transactions.

Information to keep track of:

• When we added a business transaction to the accounting equation, we showed the change that took place in the specific record.
• This increase or decrease is an important part of our record, but we also want to keep track of the date that a particular transaction takes place.
• Some form of explanation is also helpful, especially if the specific item acquired may not be apparent from the title of the record we maintain for it.

Thus, every business transaction should contain three kinds of information:

1. The date of transaction.
2. An explanation of the transaction (where necessary).
3. The amount of the transaction and its result; whether it represents an increase or a decrease.