Transaction

DEFINITION of 'Transaction'

1. An agreement between a buyer and a seller to exchange goods, services or financial instruments.

2. In accounting, the events that affect the finances of a business and must be recorded on the books. Transactions are recorded in what are known as "journal entries." Each entry describes a single transaction and states its date and amount.

BREAKING DOWN 'Transaction'

1. Here are some examples of activities you engage in that would be considered transactions:

- Buying or selling a stock
- Buying a cup of coffee
- Selling your freelance services
- Buying or selling a house

2. An accounting transaction will be recorded differently if the company uses accrual accounting rather than cash accounting. Accrual accounting records transactions when revenues or expenses are realized or incurred, while cash accounting records transactions when the business actually spends or receives money.

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