Difference Between Event and Transaction [Notes with PDF]
Today we will learn what is the difference between Event and Transaction? Transactions are created through events, but not all events can be called transactions.
Before we understand the difference between an event and a transaction, we first know what is an event? and what is the transaction?
Event:
Everything that happens in every moment of human life is an event. Events can be financial and non-financial. There may be two parties in the event or not. The event may be complete and may be incomplete.
Transaction:
The transaction is a phenomenon that is measurable by money and influences the assets, liabilities, and ownership rights of any business entity. Each transaction must have two parties and if there is no financial change then there will be no transaction.
Difference between Event and Transaction
Although the events and transactions seem to be the same, there is a considerable difference between them.
The following are the differences between the event and the transaction:
| SN. | Point of Difference | Event | Transaction |
| 1. | Definition | Everything that happens in human life is called an event. | Transactions are the events through which the financial condition of the business changes |
| 2. | Relation | One event may or may not have a relationship with another. | Each transaction is unique and autonomous. |
| 3. | Classification | There are two types of events. Namely: financial events and non-financial events. | There are different types of transactions. |
| 4. | Magnitude | The magnitude of the event is extremely wide. | The magnitude of the transaction is limited compared to the event. |
| 5. | Party | There is no need for a party to organize the event. | The transaction requires two parties. |
| 6. | Exchange | In the event of an exchange of goods or services, it may or may not always happen. | In the event of an exchange of goods or services, it always happens. |
| 7. | Documentary Evidence | It is not necessary to have a valid document for the event. | The transaction must have a valid document. |
| 8. | Record of Accounts | It may or may not be necessary to hold an account for the event. | It is necessary to hold an account for every transaction. |
| 9. | Motive | There may not be a specific motive behind the event. | There must be a purpose behind every transaction. |
| 10. | Monetary Value | There may or may not be monetary value in the event. | The transaction must have a monetary value. |
| 11. | Financial Change | Financial changes do not have to happen by an event. | Every transaction must have financial changes. |
I think you’re clear about what is the difference between event and transaction? Don’t forget to comment on us, if you have any confusion.
You may also read:
- Accounting Transaction
- Understanding the Accounting Equation
- Debit and Credit in Accounting
- The Best Accounting Job Interview Questions and Answers
Key takeaways
- Every transaction is an event, but not every event is a transaction.
- An event becomes a transaction when it has a measurable monetary effect on assets, liabilities or equity.
- Transactions are recorded in the books. Events without a monetary effect are not.
- An event can turn into a transaction later, for example when an order is delivered and invoiced.
| Event only | Transaction |
|---|---|
| A customer asks for a quotation | Buying equipment for cash |
| A new manager is appointed | Paying the manager’s first month’s salary |
| A competitor opens nearby | Selling goods on credit |
Quick check
1. Is a customer asking for a quotation a transaction?
No. It is an event with no monetary effect on assets, liabilities or equity.
2. Is paying rent of 1,000 in cash a transaction?
Yes. Cash decreases by 1,000 and rent expense increases by 1,000.
Frequently asked questions
What is the difference between an event and a transaction?
An event is anything that happens. A transaction is an event with a measurable monetary effect that must be recorded in the books.
Can an event become a transaction?
Yes. Receiving an order is only an event, but delivering the goods and invoicing the customer is a transaction.
Are all events recorded in the accounts?
No. Only transactions that can be measured in money and affect the business’s finances are recorded.
Related: Transaction lesson · Journal entry · Accounting equation
Your next step
Continue the learning path: Capital and Revenue Transactions →
Test yourself with a quiz · See the full Start Here path · Look up a word in the glossary
