DIFFERENCE BETWEEN TRANSACTION AND EVENT

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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.

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