DIFFERENCE BETWEEN TRANSACTION AND EVENT

Before understanding the difference between transaction and event, one must clearly understand the two concepts.

TRANSACTION

Transaction refers to any exchange of goods and services on cash or credit basis by the business with the outside parties i.e. other business or customer. Transaction is an economic activity. It has an effect on the net worth or financial position of the business.

FEATURES OF TRANSACTION

The following are the features of transaction:

ECONOMIC ACTIVITY

Transaction is an economic activity. It includes the dealing such as purchase and sale of goods, lending or borrowing money etc. It does not include any kind of social activity such as inviting a friend to dinner or giving money as gift on some occasion.

IMPACT ON FINANCIAL POSITION

Transaction has a great bearing on the financial position of the firm. Each transaction may have little or great impact on the financial position of the firm. It results in either inflow or outflow of cash and inflow or outflow of goods and services.

MAY BE QUANTITATIVE OR QUALITATIVE

Transaction may be quantitative or qualitative. Quantitative transactions are those that involve the exchange of money. Example: purchase of furniture worth Rs. 5,000 for cash.

On the contrary, qualitative transactions are those that involve no exchange of money. Example: Depreciation or decrease in the value of the asset.

FINANCIAL CHANGE

Transaction brings financial change for the business or parties. Only that event is regarded as transaction that impacts the financial position. Example: Death of a debtor turns the amount due from him/her into bad debt, which is a monetary loss, hence regarded as transaction.

On the other hand, death of an inefficient employee leads to no monetary loss, hence not regarded as transaction.

EVENT

An event may be described as anything that occurs as a result of something. These are the occasions which cause changes in the value due to time element. An event can be said as the final outcome of a business activity, which can affect the accounts of the company, if it is financial in nature.

TYPES OF EVENTS

There are mainly two types of events:

INTERNAL EVENT: When the transaction takes place within the framework of the organization, the result would be an internal event. Example: Supplying raw material by stores to the manufacturing department, payment of wages, transfer of material from one department to another etc.

EXTERNAL EVENT: When the business entity transacts with an external organization, the outcome would be an external event. Example: purchase of goods from supplier, sale of goods to the customer etc.

DIFFERENCE BETWEEN TRANSACTION AND EVENT

BASIS OF DIFFERENCE	TRANSACTION	EVENT
MEANING	Transaction refers to any exchange of goods and services on cash or credit basis by the business with the outside parties i.e. other business or customer.	An event may be described as anything that occurs as a result of something. These are the occasions which cause changes in the value due to time element.
CAUSE OR EFFECT	Transaction is a cause.	An event is an effect.
ACCOUNTING RECORD	All transactions are recorded in the records as they arise.	Only those events are recorded which are financial in nature.
IMPACT ON FINANCIAL POSITION	It results in change in the financial position of the company.	It may or may not impact the financial position of the company.
NATURE OF CHANGES	It involves quantitative as well as qualitative changes.	It involves only qualitative changes
SCOPE	It is wider in scope.	It is narrower in scope.
TYPES	These are of many types: Cash transaction Credit transaction External transaction Internal transaction Exchange transaction Non-exchange transaction	An event is of mainly two types only: Internal event External event
PARTIES INVOLVED	It always involves more than one parties.	It involves only one party.
NATURE OF ACTIVITY	It is an economic activity.	It is a historical activity.
FEATURE	All transactions are events.	All events are not transactions.

CONCLUSION

To conclude the difference between transactions and events, it can rightly be said as all the transactions are events but all events are not transactions. The transaction results out of the business activity and event results out of the transaction.

Also Study	Also Study	Also Study	Also Study
Accounting	Non profit organisation	Depreciation	Liquidity ratios
Nature of Accounting	Receipts and Payments Account	Depreciation Accounting	Acid Test Ratio
Benefits of Accounting	Scope of accounting	Hire Purchase Accounting	Cash Ratio
Difference between cost accounting and financial accounting	Financial accounting, cost accounting and management accounting	Difference between hire purchase and instalment system	Financial ratio analysis
Difference between transaction and event	Transactions	Users of Accounting	Ratio analysis
Limitation of Accounting	Capital Expenditure	Instalment System	Difference between consignment and sale
Book Keeping	Revenue Expenditure	Reserves Accounting	Abnormal loss vs normal loss in consignment
Accountancy	Difference between capital and revenue expenditure	Provisions	Treatment of loss on consignment
Accounting as science or an art	Accounting Equation	Single entry system	Accounting treatment of consignment
Book Keeping vs accounting	Deferred Revenue Expenditure	Difference between statement of affairs and balance sheet	Joint venture vs consignment
Book keeping vs accountancy	Capital receipt	IFRS	Departmental Accounting
Accounting vs accountancy	Revenue receipt	Balance Sheet	Methods of departmental accounting
Basis of Accounting	Difference between capital and revenue receipt	Profit and loss Account	Allocation of expenses in departmental accounting
Branches of accounting	Difference between accounting concepts and conventions	Trading Account	Inter-departmental transfers
Cash and mercantile system of accounting	Accounting Standards	Voyage Account	Different types of branches
Accounting Principles	Objectives of Accounting	Accounting for Incomplete Voyage	Departmental vs Branch accounting
Golden ru les of accounting	Process of Accounting	Joint venture	Methods of branch accounting
Double entry system of book keeping	Scope of Accounting	Joint Venture Vs Partnership	Incorporation of branch trial balance
Double entry vs Single entry system	Accounting Concepts vs Accounting conventions	Methods of recording transactions in Joint Venture	Garner VS Murray Rule
History of Accounting	Difference between provisions and reserves	Consignment