Question

What is a business-like activity? Give an example, and show the journal entries to account for this type of activity.?

Answer 1

Business like activity means the activities are for the purpose of running the business in day to day operations. The policies and programs framed by the owners derives the business activities. Business activities are very important to do the economic activities and perform the business.

Business activities vary from industry to industry. For different businesses, business activities will be different. For example e-commerce business activity will be different as compare to consultancy businesses.

For Example -: Purchasing and selling of merchandise for e-commerce companies are the primary business activities. While associated business activities will be management of work force.

Journal Entry to record business activity i.e. revenue from operations

Cash / Bank A/c Dr. $XXXXXX

To Revenue from Operations A/c $XXXXXX

(Being sale of goods or services accounted)

In the above journal activity, we can see that selling of goods or services are the business activities. Hence to conclude we can say that for any businesses there can be primary /focused business activities and ancillary business activities. But these activities are must to run the businesses.