Question

What criteria are considered when identifying a business transaction? How are debits and credits used to record these transactions?

Answer 1

A business transaction is an event involving an interchange of goods, money or services between two or more parties with reasonable consideration. The transaction can be as brief as a cash purchase or as long-lasting as a service contract extending over years. The business transacted can be between two parties engaged in business and conducting the transaction for their mutual benefits, or between a business entity, like a retail shop, and a customer.

Rules for debit or credit

1 debit the receiver or credit the giver

2 debit .What comes in credit what goes out

3 debit all expense and losses ,,,, credit all income and gains.