Business Transactions and Book Keeping

Business transactions involve exchange of goods for money or promise for payment in future.

Features of Business Transactions

  1. Business transactions are business activities.
  2. These involve exchange of goods or services like transportation, storage, packaging, etc for money or money’s worth.
  3. These are monetary in nature.
  4. In cash business transactions, goods or services are exchanged for money.
  5. In credit business transactions, goods or services are exchanged but money is received or paid at a future date.
  6. All business transactions are recorded in the books of accounts.

Business transaction is defined as - An exchange of goods, services, or any other activity for money or money’s equivalent. It involves exchange of money also. In simple words, it includes all events and activities of business which are financial in nature. Business transaction is recorded in the books of the business.


Book-keeping is concerned with recording of financial data relating to the business operations in a significant and orderly manner. Book-keeping involves the systematic recording of the financial transactions and the maintenance of the correct & up-to-date financial records of the organization.

Accounting is primarily concerned with designing the systems for recording, classifying and summarizing the data and interpreting them for internal and external end users.

Need and Objectives of Book-Keeping

It is significant for a business to have transparent record keeping systems which would make the transaction clear. 

1. Helps in Assessing the Financial Position: Recording the business transactions would be helpful to businessman for monitoring the financial success or failure of his business. 

2. Helps in making business decisions: Keeping a record would help to make future business decision. Business decisions have to be taken by considering the financial consequences that happened earlier and the same can be done by maintaining the accounting books properly.

3. For Record for Income tax Purposes: Maintaining books of accounts would help businessmen to file the income tax returns accurately. Every business entity has to file income tax returns and pay income tax. With proper records, it is very easy to prepare the tax returns and filing can also be done on time without any delay.

4. Preparing Budgets: Keeping the older transactions would help you to plan the budget for forthcoming year. Preparing budget would keep you on the safer side and help you to avoid the unwanted expenditure.

5. Tax Assessment: Keeping good records would help you to prepare payroll, tax returns and sales tax without any delay. If you are doing a partnership business, you can avoid unwanted issues in profit distribution by recording your business transactions accurately.

Moreover, effective book-keeping would help you to identify the activities, which are not profitable, and the unwanted operating expenses. Businessman can avoid such expenditures and prepare an effective budget to optimize business financially.