What criteria are considered when identifying a business transaction? Where would donations be listed business transactions?

What criteria are considered when identifying a business transaction?

Where would donations be listed business transactions?

Expert Solution

a) A business transaction should be qualified with following criteria / characteristics :

1) The transaction should be involved with the business entity principle: The
transaction should be separately classified from its owners.

2) The transaction should be of a financial character/certain money amount: The
transaction should be quatified in terms of money.

3)All the transactions should be of duel effect on business: The business transaction
should have two-fold effect of Debit and Credit in Accounting books.

4) Each business transaction should be supported by documents/evidence: Each
transaction should have some supporting document or evidence.

b) All the donations whether monetary or non-monetary should be recorded in the books of accounts. The non-monetary donations should be first valued duly on fair market value. The two ends of the donation transactions should be (a) Cash receipt, so Debit "Cash" or "Assets" and recorded on Assets side and (b) donation received, so no contribution of owner, thus Credit "Capital Reserve" and kept on Liability side.

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ekkarill92 answered 1 year ago

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