How many types of business transactions are there in accounting?
Even if not strictly a ‘business’ all organisations will have business transactions. Typically these will include:
1. Purchasing goods and materials. Purchases can be for cash or credit. Cash purchases are paid for immediately and are fairly rare in most businesses. Credit purchases are paid for after some time, typically a month or so
2. Purchasing services, for example, repair s to equipment, advertising, printing costs.
3. Sales. Cash sales, for example in shops, are paid for immediately. Credit sales are paid for after some time.
4. Paying wages and salaries.
5. Purchase of non-current assets.
6. Raising finance and paying rewards to the suppliers of finance. For example, owners putting in capital or loans being raised from banks. Owners of the business expect rewards based on a share of the profit; banks usually expect interest to be paid.
7. Accounting for and paying tax.
8. Movements of cash and money in the bank account. These movements usually arise from the transactions above.