Transaction

Meaning :

A transaction is characterized as any activity involving the exchange of money for goods, services, or value, necessitating participation from two parties: a payer and a receiver. Transactions may be conducted in cash, through digital platforms, or via credit  arrangements.

Example : 

For example, executing a payment of ₹200 using UPI to acquire groceries illustrates the concept of a transaction.

How to Understand : 

A transaction represents the movement of funds from one individual or account to another.

It is recorded as:

•Debit: indicating the outflow of funds

•Credit: indicating the inflow of funds

Every financial activity, such as shopping, settling bills, or transferring money, qualifies as  a transaction.

Importance :

Transactions underpin all economic and business activities, facilitating seamless operations within the marketplace.

They are instrumental in tracking expenditures and income, aiding individuals and  organizations in financial oversight.

Transactions are fundamental to accounting practices and the maintenance of accurate  financial records.

They enable the functionality of digital payment systems, enhancing transaction efficiency and convenience.

Transactions promote accountability and transparency in financial interactions, fostering  a trustworthy economic environment.