Analyzing Business Transactions
Identifying Recordable Events
The accounting cycle begins by identifying transactions that have a measurable financial effect on the business. Only economic events that can be measured reliably are recorded in the accounting records.
- Sale of goods or services.
- Purchase of inventory or equipment.
- Payment of salaries.
- Collection of customer payments.
- Borrowing or repaying loans.
Note
Events such as hiring employees or signing certain contracts may not be recorded immediately unless they create measurable financial effects.
Summary
Only measurable economic events are recorded as accounting transactions.