Characteristics of Business Transactions

Characteristics of Business Transactions

In this article we would explain some important characteristics of business transaction.  These characteristics may be expressed in terms of business purpose, monetary terms, transaction recording, and reliable measurement.

1.   For the business Purpose:

Business transactions are entered into for the business. Thus personal affairs or transactions are not entered in the books of accounts.

2.   Monetary Value:

Business transactions must have some monetary value. Thus a non monetary transaction does not qualify to be a financial transaction. Examples of non monetary items are qualification, skills, hardworking.

3.   Transaction Recording:

Business Transactions are reordered with the help of debit and credit rules. Transactions are recorded in the journal. Each transaction would have dual aspect i.e. debit and credit aspect. The debit aspect is always equal to credit aspect.

4.   Reliable Measurement:

Business Transactions must be able to measure reliably for recording purposes.

5.   Examples of business transaction:

a.    Expenses payment.

b.    Asset purchased.

c.    Liability settlement.

d.    Transfer of asset.

6.   Types of business transaction:

Business transactions may be classified into simple business transaction and complex business transaction. A simple transaction is one time transaction and does not involve any complexity like purchase of plant on cash, while some transactions are of ongoing nature like financial lease, loan, construction contract etc.

a.    Simple business transaction.

b.    Complex business transaction.

List of characteristics of business transactions:

Some important characteristics of business transactions are listed below

a.    Business transaction entered for business purpose.

b.    It has some monetary value.

c.    It is recorded in journal.

d.    It is recorded in term of debit and credit.

e.    Reliable measurement is required for recognition.