top of page

Transaction and Event

In our previous blog, we learned about the meaning of economic activity and its relation to accounting and how economic activity is performed through transactions and events, therefore for learning accounting it is much necessary to understand Transactions and events in a great manner

What is the meaning of transactions and events in accounting language?


The meaning of transactions has very wide and includes the term as a business, the performance of an act, an agreement etc. i.e. transactions is used to mean a business, performance of an act, or an agreement, while the event is used to mean a happening, as a consequence of transactions, a result of business activity.


An Individual invests Rs. 1,00,000/- for running a grocery shop, he purchased goods for Rs. 60000/-, and sells for Rs. 75,000/- during the month. He also pays shop rent for the month of Rs. 5,000/- and another shop-related expenditure of Rs. 2,500/- and finds that still, he has goods worth of Rs. 5,000/- in hand.

Let’s we understand the transactions and events of the above example in question-answer format.

Q1. Is it an economic activity?

Ans: Yes, an individual performs an economic activity, he running a grocery shop.

Q2. What are the transactions for his business?

Ans: He runs the grocery shop (Business) and for maintenance of his shop, he is required to pay for shop rent and shop-related expenses on a monthly basis (according to requirements or agreements), for the performance of the business he is required to sales and purchases of grocery items. Therefore Purchases, Sales, Shop Rent, and Shop related expenses are the transactions of his business.

Q3. What are the events for his business?

Ans: He will want to know the result of his business activity during the month; while preparing the statement of transactions, he will know the earning of Rs. 12500/- as surplus and Rs. 5000/- having stock in hand.

As a result/ happening and a consequence of transactions, he earns Rs. 12500/- a surplus is an event, also having the stock in hand is another event, while purchase and sale of goods, investment of money, payment of Rent, and shop expenses are transactions.


Amount (Rs)

Goods sold


Goods In hand


Total >>


Less :

​Goods Purchased


​Shop Rent


Shop Exp.


Surplus/ Profit


  • Earning Rs. 12500.00 Surplus/profit is an event, and Rs. 5000.00 is another event.

  • Transaction is a business, performance of an act or an agreement whereas event means a happening as a result or consequence of a transaction.

  • It means a transaction is a deliberate act and an event is a consequential activity. However, both transactions and events have financial impacts. For assessment of the financial impact of these transactions and events, recording of these transactions and events in financial terms is essential.

Recording of transactions and events and their further assessment in terms of results is termed as accounting.


Please make sure to join us by subscribing to learn practical accounting and taxation in layman's language

Recent Posts

See All

Matching Concept

Key Principles and Application of the Matching Concept in Accounting The Matching Concept also referred to as the Periodic Matching of Costs and Revenues, aligns with the accounting period concept. It

Accrual Concept

Key Principles and Application of the Accrual Concept in Accounting The Accrual or Periodicity Concept in accounting emphasises the recording of revenues earned and expenses incurred in the accounting

Realisation Concept

Understanding the Realisation Concept in Accounting Principles The Realisation Concept in accounting revolves around the recognition of revenues when they are legitimately earned, emphasising the actu

bottom of page