{"id":119,"date":"2018-04-16T20:22:09","date_gmt":"2018-04-16T20:22:09","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/?post_type=chapter&#038;p=119"},"modified":"2024-04-26T22:15:52","modified_gmt":"2024-04-26T22:15:52","slug":"transactions","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/chapter\/transactions\/","title":{"raw":"Transactions","rendered":"Transactions"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li>Define transactions<\/li>\r\n<\/ul>\r\n<\/div>\r\n<h2>Transactions Defined<\/h2>\r\nA transaction for financial accounting purposes is an economic event that has a monetary impact on the financial statements. \u00a0Each monetary transaction is recorded in a journal, and the journal entries are then sorted by account and posted to a ledger. \u00a0The ledger balances are transferred to the financial statements. Recall the monetary unit assumption that states that the amounts on the financial statements are monetary amounts, so in the United States, the amount of the transaction would be in U.S. dollars.\r\n\r\nBecause transactions are monetary events, they almost always produce some kind of supporting document. For instance, when a company purchases supplies, the supplier issues a receipt. Assume your company pays $2,000 for consulting services. This is an expense to the business and the invoice from the consulting firm is the documentation that supports the expense. Recall that expenses (an accounting transaction) are recognized (recorded) as incurred\r\n\r\nExamples of transactions for a small, mom-and-pop grocery store:\r\n<ul>\r\n \t<li style=\"font-weight: 400;\">Collect cash from a customer in exchange for a product<\/li>\r\n \t<li style=\"font-weight: 400;\">Pay a supplier for produce that will be sold in the store<\/li>\r\n \t<li style=\"font-weight: 400;\">Place an advertisement in a weekly newspaper<\/li>\r\n \t<li style=\"font-weight: 400;\">Pay employees to work in the store stocking shelves<\/li>\r\n<\/ul>\r\n<h2>Pay Cash for Inventory<\/h2>\r\nInventory is the term for goods held for sale in the ordinary course of business. \u00a0In the grocery store, eggs are inventory. When the store buys milk from the supplier, the bookkeeper records the purchase of inventory in U.S. dollars and records the payment to the supplier as an expenditure in the check register. \u00a0The supplier should provide a receipt. (By the way, for the supplier, this is a cash sale to a customer.)\r\n<h2>Purchase a Display Case on Account<\/h2>\r\n<img class=\"alignright wp-image-3257\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/2985\/2018\/04\/14221952\/rawpixel-1046277-unsplash.jpg\" alt=\"Photograph of two people shaking hands. Both individuals are only shown from hand to elbow.\" width=\"300\" height=\"205\" \/>When the owner buys an asset, like a display case, the bookkeeper records the acquisition of the asset and a related debt. For a small purchase such as this it would be an Accounts Payable entry (generally 90 days or less). However, If it was a larger purchase, such as a piece of machinery where the seller finances it for a period of time the entry may be to Notes Payable instead of Accounts Payable.\r\n\r\nNot every business event rises immediately to the level of an accounting transaction, even though it may fit the definition of a legal transaction.\r\n\r\nFor instance, assume the owner decides to hire you as a consultant and you both sign an agreement stating that, upon completion of the work, the owner will pay you $1,500. \u00a0Although there is backup documentation and a dollar amount, there is no completed transaction for the bookkeeper to record, since the economic event occurs upon completion of the contract. \u00a0In other words, if you don\u2019t do the work, you don\u2019t get paid, so the transaction is recorded when the work is done, even if the cash is paid in advance.\r\n<div class=\"textbox tryit\">\r\n<h3>Practice questions<\/h3>\r\nhttps:\/\/assess.lumenlearning.com\/practice\/5b39d237-03f4-4980-b846-3d1b840e8755\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li>Define transactions<\/li>\n<\/ul>\n<\/div>\n<h2>Transactions Defined<\/h2>\n<p>A transaction for financial accounting purposes is an economic event that has a monetary impact on the financial statements. \u00a0Each monetary transaction is recorded in a journal, and the journal entries are then sorted by account and posted to a ledger. \u00a0The ledger balances are transferred to the financial statements. Recall the monetary unit assumption that states that the amounts on the financial statements are monetary amounts, so in the United States, the amount of the transaction would be in U.S. dollars.<\/p>\n<p>Because transactions are monetary events, they almost always produce some kind of supporting document. For instance, when a company purchases supplies, the supplier issues a receipt. Assume your company pays $2,000 for consulting services. This is an expense to the business and the invoice from the consulting firm is the documentation that supports the expense. Recall that expenses (an accounting transaction) are recognized (recorded) as incurred<\/p>\n<p>Examples of transactions for a small, mom-and-pop grocery store:<\/p>\n<ul>\n<li style=\"font-weight: 400;\">Collect cash from a customer in exchange for a product<\/li>\n<li style=\"font-weight: 400;\">Pay a supplier for produce that will be sold in the store<\/li>\n<li style=\"font-weight: 400;\">Place an advertisement in a weekly newspaper<\/li>\n<li style=\"font-weight: 400;\">Pay employees to work in the store stocking shelves<\/li>\n<\/ul>\n<h2>Pay Cash for Inventory<\/h2>\n<p>Inventory is the term for goods held for sale in the ordinary course of business. \u00a0In the grocery store, eggs are inventory. When the store buys milk from the supplier, the bookkeeper records the purchase of inventory in U.S. dollars and records the payment to the supplier as an expenditure in the check register. \u00a0The supplier should provide a receipt. (By the way, for the supplier, this is a cash sale to a customer.)<\/p>\n<h2>Purchase a Display Case on Account<\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-3257\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/2985\/2018\/04\/14221952\/rawpixel-1046277-unsplash.jpg\" alt=\"Photograph of two people shaking hands. Both individuals are only shown from hand to elbow.\" width=\"300\" height=\"205\" \/>When the owner buys an asset, like a display case, the bookkeeper records the acquisition of the asset and a related debt. For a small purchase such as this it would be an Accounts Payable entry (generally 90 days or less). However, If it was a larger purchase, such as a piece of machinery where the seller finances it for a period of time the entry may be to Notes Payable instead of Accounts Payable.<\/p>\n<p>Not every business event rises immediately to the level of an accounting transaction, even though it may fit the definition of a legal transaction.<\/p>\n<p>For instance, assume the owner decides to hire you as a consultant and you both sign an agreement stating that, upon completion of the work, the owner will pay you $1,500. \u00a0Although there is backup documentation and a dollar amount, there is no completed transaction for the bookkeeper to record, since the economic event occurs upon completion of the contract. \u00a0In other words, if you don\u2019t do the work, you don\u2019t get paid, so the transaction is recorded when the work is done, even if the cash is paid in advance.<\/p>\n<div class=\"textbox tryit\">\n<h3>Practice questions<\/h3>\n<p>\t<iframe id=\"assessment_practice_5b39d237-03f4-4980-b846-3d1b840e8755\" class=\"resizable\" src=\"https:\/\/assess.lumenlearning.com\/practice\/5b39d237-03f4-4980-b846-3d1b840e8755?iframe_resize_id=assessment_practice_id_5b39d237-03f4-4980-b846-3d1b840e8755\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:300px;\"><br \/>\n\t<\/iframe>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-119\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Transactions. <strong>Authored by<\/strong>: Freedom Learning Group. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Handshake. <strong>Authored by<\/strong>: Rawpixel. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/www.rawpixel.com\/image\/413940\/two-business-people-shaking-hands\">https:\/\/www.rawpixel.com\/image\/413940\/two-business-people-shaking-hands<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/about\/cc0\">CC0: No Rights Reserved<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":62559,"menu_order":3,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Transactions\",\"author\":\"Freedom Learning Group\",\"organization\":\"Lumen 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df29aa7a-ae8c-4f58-aaf9-2ef709e092e6","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-119","chapter","type-chapter","status-publish","hentry"],"part":103,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/119","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/users\/62559"}],"version-history":[{"count":17,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/119\/revisions"}],"predecessor-version":[{"id":4025,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/119\/revisions\/4025"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/parts\/103"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapters\/119\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/media?parent=119"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/pressbooks\/v2\/chapter-type?post=119"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/contributor?post=119"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-accountingformanagers\/wp-json\/wp\/v2\/license?post=119"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}