5 Types of Accounting Transactions You Must Know

Types of Accounting Transactions.Accounting Transactions or Commercial Operations are acts of being able to buy or sell goods, securities and / or services on credit or cash, arising in a company on a certain date.In the world, millions of daily business transactions are carried out on a continuous basis. And the fact is that the continuous contact between buyers and sellers, as well as the rise of commerce on the planet, have caused an intensification in the volume of transactions that we carry out on a daily basis.

For a transaction to be effective, the number of elements necessary for it are four:

  • A buyer.
  • A salesman.
  • The capita lor the good agreed for the payment.
  • A good or service.

In addition to these four elements, more agents can be involved in a business transaction. That is, often a business transaction involves more business transactions with each other. From transportation to the insurance agency itself that could guarantee the payment of the property when transferring ownership, they are independent commercial transactions that, in turn, integrate the same final commercial transaction.

All companies of any type, carry out a series of transactions or operations that require accounting records.

An accounting transaction can be defined as a commercial event that produces financial effects on the resources and sources from which those resources come and that therefore must be recorded in the accounting books as a daily ledger, balance sheet that reflect the result of the year. Example: Buying a desk, paying for utilities, etc. Business transactions or operations. generally they must be based or supported by commercial documents. These documents constitute the data source for accounting processes. They can be receipts, bills of exchange, promissory notes, invoices, credit notes, etc. It depends on the commercial law of each country, the mandatory accounting books that are legally required for each type of company will vary.
There are the following types of accounting transactions: Permutative Transactions that are subdivided into Positive and Negative; Modifying Transactions that are subdivided into Favorable and Unfavorable; Mixed Transactions that are also subdivided into Favorable and Unfavorable.

5 Types of Accounting Transactions You Must Know

Permutative Transactions:
They are commercial operations that do not affect equity when they arise, that is, it does not increase or decrease, on the contrary, it remains static.A Positive Permutative Transaction is when an asset is generally exchanged for another asset or a liability for another liability. Example, Asset for another asset: (purchase of computer equipment for $ 10,000)
A Negative Permutative Transaction is when a liability is normally exchanged for an asset. Example Liability for Asset (interest payment for $ 1,000 per month per loan obtained from the bank).
Modifying Transactions are commercial operations that affect equity when they arise, that is, it necessarily increases or decreases.
A Favorable Modifying Transaction :
It is one that, when the company arises, obtains a profit, that is, the equity component (Accumulated Results) increases. Example, the computer equipment is sold for $ 15,000 obtaining a profit of $ 5,000.
An Unfavorable Modifying Transaction is one that, when it arises, obtains a loss, that is, the equity component (Accumulated Results) decreases. Example, the computer equipment is sold at $ 5,000 obtaining a loss of $ 5,000
Mixed Transactions are commercial operations that arise through the combination of Permutative and Modifying transactions, that is, they are events of assets for assets, liabilities for liabilities, assets for liabilities with an impact on equity.
A Favorable Mixed Transaction:
It is one that, when it arises, affects changes on the patrimony, obtaining a profit for the company. The example is given in the favorable modifying transaction.An Unfavorable Mixed Transaction is one that, when it arises, affects changes on the equity, obtaining a loss for the company. The example is given in the unfavorable modifying transaction.

Transactions in daily life

In the same way, in the routine activities of our daily life we ​​are making transactions continuously.

Likewise, a transaction can be carried out between two parties, for example, when a jeweler sells a watch in exchange for a sum of money.

Also, it can be done between a person and a machine, it would be the case when we buy a coffee from a dispensing machine.

That is, we are executing transactions continuously, when we go to a boutique, to a restaurant, to a bank among some ways that we can mention.

Types of transactions by type of company

To talk about transactions and understand them better, first we are going to clarify that there are companies and these can be divided into the following classes, according to the activities they carry out:

1. Commercial companies

It turns out that commercial companies get that name because they are dedicated to buying and selling merchandise. Among the companies that sell merchandise, we can mention suppliers, wholesalers and also retailers.

2. Manufacturing or industrial companies

On the other hand, there are manufacturing or industrial companies . What these companies do is transform and convert inputs or raw materials, to modify them in some way and then put them up for sale; as in the case of a clothing maquila, a toy factory, a furniture store, among others.

3. Service companies

In addition, there are service companies . What these companies sell in the market are services, such as beauty salons, medical clinics, banks, among some of the many that we can mention.

Of course, all these companies sell something in the market, and they are originating transactions in the market; since the word transaction relates to the process of exchange of goods and services in economic terms.

Therefore, a transaction can be considered a purchase, a sale, a return, a payment, of the many economic actions that a company performs.

Types of companies

Types of transactions by what they generate./ Types of Accounting Transactions

We can find two great types. On the one hand those that generate expenses and on the other those that generate income.

1. Expense-generating transactions

Apart from, the transactions that generate expenses produce an outflow of financial capital from the company; so we could say that they have a cost for the company.

  • They represent a liability, since the company has to withdraw money, since any transaction that causes an expenseimplies that it will cause a decrease in capital.
  • For example, a restaurant has to incur service charges such as water, telephone, electricity, advertising, etc.

So, every company has operating expenses, which refers to all the disbursements that must be made so that the company can function and may have production costs when it requires inputs or raw materials to produce or transform the good or service that it sells.

2. Income-generating transactions

In the same way, every transaction that generates income for a company originates from the sale of the goods and services it offers to the market.

  • The incomeform the assets of a company, since they increase or increase their financial capital.
  • For example, a beauty salon can increase its income and correspondingly its assets when it performs a haircut, when it does a manicure, a hairstyle, among many of the services it sells in the market.

Transactions that generate income or expenses

To finish the subject of transactions, we can say that these are carried out routinely in the daily life of companies and these transactions that generate expenses or income, are the ones that finally allow entrepreneurs to determine in their financial analysis if they are making profits or losses.

Consequently, a company that has more costs than income, faces a loss, since it implies that its liabilities are higher than its assets; and when revenues are greater than costs, this is the ideal situation that every company seeks, because it makes the company report profits and can operate with an adequate margin of profitability.

by Abdullah Sam
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