There are many examples of non-business transactions. Which of the following is not a business transaction?
- Employer pays salary to employees – 20,000 rupees per employee
- A person buys furniture for his business that is worth 25,000 rupees.
- A bank account holder lawfully withdraws an amount from the bank.
- All of the above.
Answer:The correct is C.
Discussion on the Answer: The correct answer is C because a transaction is conducted.
The transaction does not benefit anybody except the person who performs it.
Though the bank deducts taxes or charges, it is still not a business transaction. A person is solely withdrawing money from the bank.
Withdrawal of the amount does not cost the bank account holder a penny.
Withdrawal of the amount from the bank is not an income or expense.
It is rather a reduction in equity. So, it is a non-business transaction.
Why Other Options Are a Business Transaction?
There are two other transactions that are purely business in nature. In the first statement, the employer pays employees their salaries.
Paying a salary to an employee is a business transaction.
It profits the Company as an employer buys the services of an employee.
So, the first statement is purely business-related in nature.The second statement is also purely business in nature.
A person buys furniture for furnishing his business workplace.
The third option is also incorrect because the first and second options are incorrect.
What Is Not A Business Transaction?
A business transaction is not a business transaction when it does not impact the liability, capital, profits, or income of an institution.
There are a good number of events that occur commercially. But they are not a business transaction.
A business transaction is an event that includes the selling of goods for money.
It may also include services between parties. The transaction can be delivered shortly or briefly in the cash form.
It may also be prolonged as a contract that may extend over the years.
The business transaction is only performed between parties that engage in business.
They conduct a transaction for mutual benefits. A business entity gives mutual benefit to every person present in the contract.
If a transaction misses any of the above elements, it is not a business transaction.
When a person conductsa transaction with a non-business entity, it is not considered a business transaction.
When a CEO gives a plausible commencement speech, it will benefit students as well as Company.
The speech will influencethe minds of the business partners as well. It can also persuade a few parties to work with the CEO.
If any contract is finalized because of the speech, it will not be considered a business transaction.
Any measurable benefit, which occurs as a result of the speech, is not considered a business transaction.
CEO speech, which results in the increased sales and revenue of the Company, is surely a non-business transaction.
On the other hand, many CEOs give a speech in return for cash.
If the CEO receives an amount of money for the speech, it will be considered a business transaction. So, the paid speech transaction offers a ‘change of the values’.
What Are The Types Of Business Transactions?
There are multiple types of business transactions. But if we narrow down, there are only three types of accounting transactions.
What Are The Three Types Of Transactions?
The three types of accounting transactions are given below:
1. Cash Transactions
These are the cash transactions that are commonly conducted. These cash transactions refer to all types of transactions that are paid off with cash.
For instance, a person buys office supplies or furniture and pays using cash or debit card, it is considered a cash transaction.
In cash transactions, the bill is paid using cash at the time. The buyer does not delay or derail the payment.
2. Non-Cash Transaction
This is a non-cash transaction in which cash is not paid. These contracts do not mention cash anywhere in the text.
No future allusions are also made in the contract. For instance, a person purchases machinery for the office.
But if machinery fails, the manager or Company owner has to return the machinery.
In case of return of goods, the Company does not release the payment. This is called a non-cash transaction.
Also, the barter system is a non-cash transaction. When an item is exchanged for another item, it is called a non-cash transaction.
If A gave his house to B in return for a car, it will be called a non-cash transaction.
There are many businessmen who follow the barter system. They exchange items, plots, houses, or cars.
Then, they sell it and earn a profit. The initial exchange of plots, houses, and cars is a non-cash transaction.
3. Credit Transaction
Credit transactions are the payments that are delayed or derailed. The buyer promises delivery of the payment at a future date.
He promises that he will pay the seller at a specified date in the future. This is a credit transaction.
Many companies around the world follow credit transactions.
It helps them in working flexibly and smoothly. Payments are released timely in the future timely.
What Is A Business Transaction Example?
A business transaction is an official activity or an event. Business transactions are measured in terms of money.
It affects the financial operations or position of a business entity.
A business transaction is an activity, which affects various accounting elements of the business.
A business transaction impacts liabilities, income, expense, capital, etc. of a particular business.
To further understand the business transaction, we can take an example of a person who buys insurance policies.
A customer purchases an insurance policy from an insurer. It exerts a positive impact on the expense, income, liabilities, and capital of the insurance company.
Another great example would be a customer buying goods from a seller. In this example, a customer purchasesitems in return for the money.
A seller tends to sell goods to a customer for cash earned.
Also when a customer buys inventory from a supplier, it is alsoconsidered a business transaction.