Transaction

What is a transaction?

A transaction is any exchange of money or value. When you send an invoice, receive a payment, pay a supplier, or transfer money between accounts, each is a transaction. Tracking transactions is the foundation of bookkeeping—every financial activity gets recorded as a transaction.

Types of business transactions

Common transactions for small businesses:

• Sales transactions — Invoices sent and payments received
• Purchase transactions — Buying materials, supplies, or services
• Expense transactions — Paying bills, rent, utilities
• Transfer transactions — Moving money between accounts
• Payroll transactions — Paying employees or yourself
• Loan transactions — Receiving or repaying borrowed money

Recording transactions

Every transaction should be recorded with the date, amount, accounts affected, and a description. Accounting software does much of this automatically when you enter invoices, record payments, and categorize expenses. Accurate transaction records are essential for financial reporting and tax compliance.