When goods or services are transferred between two persons in terms of money for a legal business purpose, it will be called as a business transaction. It means the business transaction has the following main features:-

  • There should be a business.
  • There should be two parties relating to business transaction.
  • There should be transfer or goods or services or money.
  • The business must be legal.

For example M/s XYZ Limited sold goods to M/s ABC Limited, it is a business transaction. A business firm paid salary to his employee that is also business transaction because it relates to business only.

On the contrary, a businessman celebrates the birth day of his son and invites his employees on birthday party and gives some gifts to the employee from his personal account it is not business transaction. Though the relation between employer and employee is totally official but it is not the official duty of the owner of the firm to invite his employees in his personal functions.

On other hand, if the owner gives the gift to his employees on the birth day of any employee, it will be called as business transaction and treated as business expenditure.

The following types of transactions take place in business organizations:-

  1. Purchase of goods or services.
  2. Sale of goods or services.
  3. Giving loans.
  4. Accepting loans
  5. Payment of expenses
  6. Receipt of commission, rent, interest and dividends etc.
  7. Depositing the cheques
  8. Issuing the cheques
  9. Withdrawal of cash from banks,
  10. Depositing cash in to bank.
  11. Return of goods.
  12. Dishonor of cheques etc.

The transaction may be a cash transactions or a credit transaction. Some time few transactions are done even with out involving the transfer of money or goods or services. For example adjustment of certain accounts, depreciation on fixed assets, provisions for liabilities, accrued income etc.