Types of Transactions

What are Accounting Transactions?

Accounting transactions refer to any business activity that results in a direct effect on the financial status and financial statements of the business. Such transactions come in many forms, including:

  1. Sales in cash and credit to customers
  2. Receipt of cash from a customer by sending an invoice
  3. Purchase of fixed assets and movable assets
  4. Borrowing funds from a creditor
  5. Paying off borrowed funds from a creditor
  6. Payment of cash to a supplier from a sent invoice

  • 1. Cash transactions

    They are the most common forms of transactions, which refer to those that are dealt with cash. For example, if a company purchases office supplies and pays for them with cash, a debit card, or a check, then that is a cash transaction.

    2. Non-cash transactions

    They are unrelated to transactions that specify if cash’s been paid or if it will be paid in the future. For example, if Company A purchases a machine from Company B and sees that it is defective, returning it will not entail any cash spent, so it falls under non-cash transactions. In other words, transactions that are not cash or credit are non-cash transactions.

    3. Credit transactions

    They are deferred cash transactions because payment is promised and completed at a future date. Companies often extend credit terms for payment, such as 30 days, 60 days, or 90 days, depending on the product or service being sold or industry norms.

    Types of Accounting Transactions based on Objective

    There are two types of accounting transactions based on objective, namely business or non-business.

    1. Business transactions

    These are everyday transactions that keep the business running, such as sales and purchases, rent for office space, advertisements, and other expenses.

    2. Non-business transactions

    These are transactions that don’t involve a sale or purchase but may involve donations and social responsibility.

    3. Personal transactions

    Personal transactions are those that are performed for personal purposes such as birthday expenditures.

    Double-entry Bookkeeping of Accounting Transactions

    When recording accounting transactions, the double-entry method is a system bookkeeping where every entry to an account requires an opposite entry to a different account producing balanced journal entries. The double-sided journal entry comprises two equal and corresponding sides, known as a debit (left) and a credit (right). It will ensure that total debits will always equal total credits.

    Related Readings

    Thank you for reading CFI’s guide to Accounting Transactions. To keep advancing your career, the additional CFI resources below will be useful:

  • Accounting transactions are the events or activities that result in a financial impact on a business. These transactions are recorded in the accounting system to keep track of the financial position and performance of the business. Here are some examples of accounting transactions:

    1. Sale of Goods or Services: When a business sells goods or services to a customer, it generates revenue, which is recorded in the accounting system.

    2. Purchase of Goods or Services: When a business purchases goods or services from a supplier, it incurs an expense, which is recorded in the accounting system.

    3. Payment of Expenses: When a business pays for expenses such as rent, salaries, utilities, or insurance, it records the payment in the accounting system.

    4. Receipt of Cash: When a business receives cash from a customer, a loan, or an investment, it records the receipt in the accounting system.

    5. Payment of Cash: When a business pays cash to a supplier, for an expense or a loan, it records the payment in the accounting system.

    6. Depreciation: When a business uses a long-term asset, such as property, plant, and equipment, it records a portion of the asset's cost as an expense, called depreciation, over its useful life.

    7. Accruals: When a business incurs an expense or generates revenue but has not yet paid or received cash, it records the transaction as an accrual.

    8. Adjustments: At the end of an accounting period, a business makes adjustments to its accounts to reflect the correct amounts of revenue and expenses, such as adjusting entries for depreciation, prepayments, and accruals.

    Recording accounting transactions is essential for the preparation of accurate financial statements that provide insights into the financial health and performance of the business.


  • There are two main types of accounting transactions:

    1. Revenue transactions: These are transactions that involve the sale of goods or services by the business, resulting in an increase in revenue. Examples of revenue transactions include sales of products, services, or goods on credit or cash sales.

    2. Expense transactions: These are transactions that involve the consumption of goods or services by the business, resulting in an increase in expenses. Examples of expense transactions include purchases of raw materials, salaries and wages, rent, utilities, and interest payments.

    In addition to these main types of transactions, there are also other types of transactions that are important to consider in accounting, including:

    1. Asset transactions: These are transactions that involve the acquisition or disposal of assets, such as the purchase of property, plant, and equipment, or the sale of an investment.

    2. Liability transactions: These are transactions that involve the acquisition or settlement of liabilities, such as the repayment of a loan or the payment of an accounts payable.

    3. Equity transactions: These are transactions that involve changes in the equity of the business, such as the issuance of common stock or the payment of dividends to shareholders.

    4. Non-cash transactions: These are transactions that do not involve the exchange of cash, such as the exchange of goods or services, or the issuance of debt or equity securities.

    It is important for businesses to accurately record and classify all types of transactions in order to prepare accurate financial statements and to make informed business decisions.

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