Introduction: What on Earth is a Transaction? 🌍
Picture this: you are the fearless ruler of your own little money kingdom. One day, you decide to buy a golden unicorn statue for your office (because why not?). Another day, you realize your company car is starting to age like milk rather than wine. Both actions – purchasing and realizing depreciation – ring the bells of transaction in the domain of accounting!
External Transactions: When the World Comes Knocking 🚪
Here’s where life gets exciting! An external transaction involves external parties. Think of buying and selling goods, borrowing money, or throwing wild office parties (which are still technically business expenses. 🍾). Here’s how it flows:
graph TD;
A[Start Business] --> B[Purchase Unicorn Statue];
A --> C[Sell Old Unicorn Figurine];
B --> D[Record Purchase in Books];
C --> E[Record Sale in Books];
D --> F[Financial Statements Update];
E --> F
Internal Transactions: When the Drama Happens In-House 🏠
Internal transactions happen inside the business. These are like catching your own shadow or dealing with asset depreciation. It’s all about keeping in-house affairs in check.
graph LR
A[Depreciation
Awareness] --> B[Realize
Deterioration];
B --> C[Record Depreciation];
C --> D[Adjust Asset Value];
D --> E[Updated Financial Picture];
The Roller Coaster of Recording 📜🎢
Every single transaction must be recorded into the grand book of accounts. If you miss even one, you’re inviting a financial mystery novel – but without the excitement and glory.
Assets = Liabilities + Equity
Revenue - Expenses = Net Income
Quizzes: Test Your Transaction Wizardry! 🧙♂️
Ready to see if you have the Midas Touch with transactions?
### Which of the following is an external transaction?
- [ ] Depreciation of equipment
- [x] Payment for office supplies
- [ ] Transfer between company accounts
- [ ] Inventory adjustment
> **Explanation:** External transactions involve interactions with outsiders like paying for office supplies.
### What component is not involved in an internal transaction?
- [ ] Depreciation recording
- [ ] Payroll adjustment
- [x] Customer purchase
- [ ] Inventory valuation
> **Explanation:** Customer purchases are always external transactions!
### In accounting, what essentially keeps track of every financial event?
- [ ] Comic books
- [x] Journals
- [ ] Sticky notes
- [ ] Whiteboards
> **Explanation:** Every transaction must be recorded in accounting journals as the first step of financial bookkeeping.
### Depreciation of an asset affects:
- [ ] Only external transactions
- [x] Internal transactions
- [ ] Skip recording
- [ ] Customer invoices
> **Explanation:** Depreciation adjustments are internal transactions as they occur within the business.
### Buying a new machine for production is what type of transaction?
- [x] External
- [ ] Internal
- [ ] Both
- [ ] None
> **Explanation:** Purchasing a new machine involves a third-party vendor making it an external transaction.
### Adjusting value of obsolete stock relates to:
- [ ] External transaction
- [x] Internal transaction
- [ ] Auction event
- [ ] Customer promotions
> **Explanation:** Stock valuation adjustments happen inside the company and hence are internal transactions.
### Recording sales in the book involves:
- [ ] Internal parties
- [x] External parties
- [ ] Magic spells
- [ ] Optional process
> **Explanation:** Sales involve interaction with customers, making it an external transaction.
### The event leading to an increase or decrease in financial status is called a ____?
- [x] Transaction
- [ ] Dream
- [ ] Mirage
- [ ] Hallucination
> **Explanation:** Every transaction, external or internal, results in financial changes—big or small.
