What is a business transaction?

A business transaction is an economic event that affects the financial position of a business. Business transactions can be categorized as either revenue or expense items. Revenue items increase the assets of a business, while expense items reduce the assets of a business. The recording of business transactions is what creates the Financial Statements of a company.

What are the features of the transaction in accounting?

For a business transaction to be recorded in accounting, it must meet four basic criteria: It must involve an exchange of something of value. The exchange must have occurred between two or more entities. The exchanged items must have different Financial Statement effects. Lastly, the exchange must be measurable and identifiable.

What are the four most common types of transactions?

The four most common types of business transactions are revenue transactions, expense transactions, asset transactions, and liability transactions.

How do you analyze business transactions?

Analysis of business transactions involves the following four steps: First, ascertaining the accounts involved in the transaction, ascertaining the nature of the accounts involved in the transaction, determining the effects (i.e., in terms of increases and decreases in the accounts) and lastly, applying the rules of debit and credit.

What is an example of a business transaction?

Examples of business transactions are: buying insurance from an insurer, buying inventory from a supplier, selling goods to a customer for cash.

Business Transactions MCQ Quiz With Answers

This set of multiple choice questions (MCQs) focuses on business transactions, helping students in accounting and finance prepare for their exams and interviews.

This MCQ test consists of 13 multiple choice questions with 4 options for each question. Students need to choose one correct answer to move to the next question.

If you find it difficult to answer these MCQs, we recommend studying the articles on business transactions and analysis of business transactions from our explanation section.

If you're ready to take the test, let's start!

1. A business paid out $12,450 in net wages to its employees. In respect of these wages, the following amounts were shown in the statement of financial position.

		$
Pay payable		2,480
National Insurance payable	-employees'	1,350
	-employers'	1,500

No other deductions were made. Employees' gross wages before deductions were:

$12,450
$27,450
$16,280
$17,780

2. Books of original entry in a double-entry system of accounting are used to list similar transactions, with the totals being posted to the nominal ledger.

True
False

3. Which of the following best explains the imprest system of petty cash?

Each month, an equal amount of cash is transferred into petty cash
The exact amount of petty cash expenditure is reimbursed at intervals to maintain a fixed float
Petty cash must be kept under lock and key
The total petty cash must never fall below the imprest amount

4. Which of the following is a book of original entry?

Nominal Ledger
Journal
Receivables ledger
Asset register

5. The following data were extracted from the payroll records of Kleen Ltd. for the month of February 20x1.

	$
Pay	17,000
Employers' NIC	7,500
Employees' NIC	6,000
Cash paid to employees	50,000

The wage expense for the month is:

$50,000
$56,000
$74,500
$80,500

6. When a purchase invoice is received from a supplier, which two of the following documents would the invoice be checked to?

Sales order
Purchase order
Remittance advice
Goods received note
Credit note

7. G purchases goods on credit from H for $1,000. $100 of these goods are defective and G returns them to H. What document would H issue to G in respect of the returned goods?

Invoice
Remittance advice
Credit note
Delivery note

8. In which book of original entry would discounts allowed be recorded?

Sales day book
Purchases day book
Cash book
Journal

9. In which book of original entry is VAT on credit sales recorded?

Sales day book
Purchases day book
Cash book
Journal

10. In which book of original entry is VAT on purchases from non-credit suppliers recorded?

Sales day book
Purchases day book
Cash book
Journal

11. The petty cash float in a business has an imprest amount of $200. At the end of March, vouchers in the petty cash box amounted to $136 and the amount of cash remaining in the box was $54. Which of the following explains the difference?

A petty cash voucher for $10 is missing
An employee was given $10 too little when making a petty cash claim
An employee reimbursed petty cash with $10 in respect of postage stamps used, but no voucher was prepared
A voucher for $10 was put in the box but no payment was made to the employee