Transaction involves transfer of money or money’s worth (goods or services or ideas) from one person to another. Transaction can be classified into cash transaction, bank transaction and credit transaction.
When immediate cash is involved in a transaction, it is called cash transaction. For example, goods are sold for cash Rs. 5,000. In this case, cash Rs. 5,000 comes into the business and goods worth Rs. 5,000 go out of the business.
In a transaction, if bank is involved, it is a bank transaction. Bank transaction includes the following:
i. Cash deposited into the bank
ii. Income of the business directly received by the bank
iii. Receipts through Cash Deposit Machine (CDM)
iv. Payment made by the customers of the business through debit card, credit card, net banking, National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS), etc.
v. Cash withdrawn from the bank
vi. Bank charges levied by the bank
vii. Payments made by the bank as per standing instructions
viii. Payments made by cheque
ix. Payments made by the business through debit card, credit card, net banking, NEFT and RTGS
When settlement is not made by cash or through bank immediately in a transaction, it is called credit transaction. But, the amount is to be settled within a specified period. For example, purchase of goods on credit for Rs. 3,000. In this case, goods worth Rs. 3,000 come into the business and a liability of creditors worth Rs. 3,000 arises.