Meaning of Transactions and Events
Transaction
A transaction occurs when a company exchanges goods or services for cash or on credit with another company. It refers to a business activity that results in a change in an organization's financial position or net worth due to routine business operations. There are always multiple parties involved in a transaction.
Cash transactions, credit transactions, external transactions, internal transactions, exchange transactions, and non-exchange transactions are only a few examples. If a debtor dies, the amount owed to them becomes a bad debt, which is a monetary loss and is thus treated as a transaction.
Event
Anything resulting from an action is termed an event. These events lead to changes in value over time. An event simply reflects the outcome of a business activity affecting a company's account balances. Whether it involves an increase or decrease in assets or a change in liabilities, we classify it as an accounting event.
Business events are divided into two categories: internal and external. Internal events take place within a company, whilst external events take place outside of the company. For example, the death of a talented employee may result in a significant financial loss to a company, yet this loss is not quantifiable.