What Criteria Are Considered When Identifying A Business Transaction?

Accounting Tools for Business Decision Making, Ch. 3 The Accounting Information System What criteria are considered when identifying a business transaction The criterion used in identifying a business transaction is the accounting equation. First a business transaction which is an accounting transaction is one that causes a measurable change in the accounting equation (Atrill McLaney, 2013). Transactions that do not cause a change in the accounting equation, for example, placing an order for goods is not an accounting transaction. The accounting equation accounts for business transactions with the equation Assets Liabilities Equity. Assets being what the business owns, liabilities being what the business owes and equity being what the business owes to owners, any business transaction will affect at least two of the elements in the accounting equation (Kieso, Weygandt, Warfield, 2010). Reference Atrill, P., McLaney, E. (2013). Accounting and finance for non-specialists. 8th Ed. . Harlow, UK Pearson Publishing. Kieso, D. E., Weygandt, J. J., Warfield, T. D. (2010). Intermediate accounting IFRS edition (Vol. 2). John Wiley Sons. How are debits and credits used to record these transactions Debits and credits are used to record accounting transaction under the double entry system. In this system every business transaction is