Accounting For Business Transactions — Flashcards

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A business transaction is an economic event that involves the exchange of goods or services between two parties and has a financial impact on the business. It must be measurable in monetary terms. Exa…

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A source document is the original evidence of a business transaction. It provides details like date, amount, parties involved, and nature of transaction. Examples include cash memos, invoices, receipt…

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An accounting voucher is a document prepared based on a source document to record a transaction in the books of account. It includes details like date, account names, debit and credit amounts, and nar…

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The accounting equation is a fundamental principle that states: Assets = Liabilities + Capital. This equation must always remain balanced. For example, if a business starts with ₹5,00,000 cash from th…

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When an owner introduces capital, both assets and capital increase equally. For example, if ₹3,00,000 is invested in cash, the asset 'Cash' increases by ₹3,00,000 and the capital account also increase…

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When goods are purchased for cash, one asset (cash) decreases and another asset (inventory) increases by the same amount. There is no change in liabilities or capital. For example, purchasing goods wo…

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Purchasing goods on credit increases both assets (inventory) and liabilities (creditor) by the same amount. For example, buying goods worth ₹60,000 on credit increases inventory by ₹60,000 and creates…

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The dual aspect concept states that every business transaction has two effects: a debit and a corresponding credit. This is the foundation of the double-entry system. For example, when a company buys …