Question

Many types of activities occur in a business that result in the need for an accounting transaction. Make a list of at least ten activities that would occur in a large retail store that would result in an accounting entry. Classify each as revenue moving in, revenue moving out, or another type of activity that results in a change in an account.

Answer 1

The activities for the retail store that would result in an accounting transaction / entry are:

(1) Sales : This is the primary activity of the retail store from which revenue is generated. When the sale is made, revenue comes in the business. It creates the accounting transaction, that involves cash and revenue accounts.

(2) Purchases: When the purchases for inventory is made, it involves an expense and revenue moves out of the business. In this transaction, accounting entry is made by involving the accounts of purchases and cash or accounts payable.

(3) Rent paid: If the retail store is taken on lease or rent, then the rental payments are the expenses and revenue moves out of the business. In accounting, the entry involves rental expense and cash.

(4) Insurance: If the insurance policy is taken for the retail store, then the insurance premium paid is an expense and revenue moves out of the business. In accounting, the entry involves rental expense and cash account.

(5) Salaries: When the store pays salary to its employees, then the salaries paid is an expense and revenue moves out of the business. In accounting, the entry involves salary expense and cash / checking account.

(6) Scrap sales: When the store has scraps lying in its premises and it sells the scrap, then there will be revenue generated out of that scrap. When the scrap sale is made, revenue comes in the business. It creates the accounting transaction, that involves cash and other revenue accounts.

(7) Equipment and other asset purchase: When the equipment and other fixed assets are purchased. then it involves an expenditure and revenue moves out of the business. In this transaction, accounting entry is made by involving the accounts of equipment and cash.

(8) Cash / cheques deposited into account: When the store deposits its cash or cheques into its Bank, then this transaction involves an accounting entry involving cash and the bank or checking account. This transaction does not involve any revenue or expense, rather it is simply a banking transaction of the retail store.

(9) Membership fees or charges received: If the retail store has issued some membership cards or like to its customers, then its membership fees or anything relating to it recovered from the customers is a revenue to the store. It involves an accounting entry involving other revenue and cash or checking account.

(10) Charges or fees paid: If there are any charges or fees paid by the retail store like bank charges or interest charges or fees (eg VISA, Mastercard etc processing fees), then it is an expense and revenue moves out of the business. The accounting entry involves interest or fees or bank charges account and cash or checking account).