Sometimes
transactions are worded in such a way that it
becomes difficult to decide whether they are cash or
credit transactions. The following rules will make
the position clear:1. A transaction is regard as a cash transaction
if:
(a) The word "cash"
is mentioned in the transaction. For example Bought
goods for cash $5000 from A.
(b) The name of the
seller or buyer is not mentioned in the transaction.
For example, Bought goods $5000.
2. A transaction is regarded as a credit
transaction if:
(a). The words "on
credit" or "on account" are mentioned in the
transaction. For example, Bought goods worth $5000 on
credit.
(b). The name of
the seller or buyer is mentioned in the transaction
and the word "Cash" is not mentioned. For example,
Bought goods from A worth $5000.
Every
business transaction brings a double change in the
financial position of the business. It brings a
change in the assets, liabilities, owner's equity,
expenses or revenues of a business.
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