Transactions include sales, purchases, receipts, and payments made by an individual or organizations.
Overview of Sales
A sale is a transfer of property for money or credit. Revenue is earned when goods are delivered or services are rendered. In double-entry bookkeeping, a sale of merchandise is recorded in the general journal as a debit to cash or accounts receivable and a credit to the sales account. The amount recorded is the actual monetary value of the transaction, not the list price of the merchandise. A discount from list price might be noted if it applies to the sale. Fees for services are recorded separately from sales of merchandise, but the bookkeeping transactions for recording sales of services are similar to those for recording sales of tangible goods (Figure 1).
Overview of Purchases
Purchasing refers to a business or organization acquiring goods or services to accomplish the goals of its enterprise. This transaction results in a decrease in the finances of the purchaser and an increase in the benefits of the sellers. Purchases can be made by cash or credit. As credit purchases are made, accounts payable will increase.
Overview of Receipts
Receipts refer to a business getting paid by another business for delivering goods or services. This transaction results in a decrease in accounts receivable and an increase in cash or equivalents.
Overview of Payments
Payments refer to a business paying another business for receiving goods or services. The business that makes the payment will decrease its accounts payable as well as its cash or equivalents. On the other hand, the business that receives the payment will see a decrease in accounts receivable but an increase in cash or equivalents.