A transaction is an event that has a financial impact on the business.

For a transaction to occur, there must be a change in a company’s resources and claims to those resources

We record transactions using debits and credits

One of the KEY takeaways which we will continue to talk about in today’s lesson is when to record a transaction. For a transaction to occur, there must be a change in the company’s resources or claims to those resources.

• If a company thinks of buying something, there is no transaction because there is no change in the company’s resources. However, if it buys something and is presented with an invoice, then there is a claim on its resources and a transaction has occured

There must be an event that occurred (or is probable to occur) and the amount must be reliably measured.

A company breaks down the financial statement elements into accounts. The list of accounts is called the chart of accounts

The general ledger provides a chronological record of all the company’s transactions and the balance for each of a company’s accounts (as listed in the chart of accounts)

The trial balance lists all accounts and their balances at a specific point in time