chapter  2
28 Pages

– Recording transactions

Introduction An accounting transaction is a business activity or event that requires accounting recognition. The transactions of most businesses are numerous and complex, affecting many different items that appear on the fi nancial statements. Therefore, a formal system of classifi cation and recording is required so that data may be gathered for day-to-day management and for timely accounting reports. The system that accountants use to record transactions is known as double-entry bookkeeping. Double-entry bookkeeping is based on the dual aspect rule, i.e. a recognition that every transaction has a twofold effect which requires each transaction to be recorded in two locations within accounting records of the company.