Business Events in Accounting


A business event in accounting is also known as business transactions which basically means an exchange of value between two different groups. The exchange is usually called an event when it impacts the accounting equation in one way or another. A business transaction or event occurs when the assets, liabilities, or owner’s equity of a company is changed.

One good example is a purchased of goods, wherein you pay for your purchase and leave with your bag of groceries, that’s how business transactions works. An event always impacts the accounting equation of a company because it is an exchange of financial statement elements for other financial statement elements. It also an example of an external events.

Events can also occur within a single company and called as an Internal event. Transferring good from storage to assembly plant is a good example. The raw materials in storage are transferred to the production floor where they turn into goods in process inventory. The asset accounts are affected, and the change is measurable. All events are recorded in the accounting system as a general journal entry. One account is debited, and the other account is credited as per the double entry accounting method. In our inventory example, the inventory account would be debited and while the cash account was credited.

Not all business happenings are considered events. Signing of production contract or lease agreement doesn’t usually change the accounting equation in a way so it is not considered as a business event.

Other examples of Business Events:

  • Purchase of Supplies
  • Purchased of Fixed Assets
  • Payment of Expenses
  • Borrow Funds in the Bank
  • Sales in Cash/ Credit
  • Investment in another business

Key Difference Between Transaction and Event

  • Transactions means the exchange of asset or discharge of liabilities for adequate consideration between two persons or accounts. Event on the other hand is the happening of the consequence to the to the business enterprise as a result of a transaction, that can be measured in monetary terms.
  • While transactions are the deliberate acts performed by the business entities, events are the results of transactions.
  • In accounting, all the transactions are recorded, as when they take place, whereas only those events are recorded in the books of accounts which are financial in nature.
  • The business transactions may change the financial position of the company, as it has a direct impact in the company’s finances. On the contrary, the events may or may not have an impact on the business finances.
  • The scope of an event is wider than a transaction because a transaction is an event, but an event may or may not be a transaction.


10 thoughts on “Business Events in Accounting

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