What is an 'Accounting Event'

An accounting event is a transaction that is recognized in the financial statements of an accounting entity. In accounting, a transaction includes such things as recording the depreciation of an asset or payment of dividends. Accounting events can be either external or internal. An external event involves an outside party and includes such things as the purchase or sale of a good. An internal event involves other changes that need to be reflected in the accounting entity's records. These may include the "purchase" of goods such as supplies from one department by another department, or the recording of depreciation expenses.

BREAKING DOWN 'Accounting Event'

An accounting event is any business event that impacts the account balances of a company's financial statements, and the recording of these events must follow the accounting equation, which specifies that assets must equal liabilities plus shareholder's equity. The sale of a good, for example, reduces inventory, increases accounts receivable, and because it affects profits, it has an impact on shareholder's equity. Similarly, depreciation expenses lower asset values, and because they reduce net income and retained earnings, they, therefore, reduce shareholder's equity.

Accounting events are only those events that can be measurable in monetary terms. Events such as natural disasters may be recorded as accounting events if they damage a company's property and other assets because the damage can be assigned a monetary value. Other events, such as the signing of a contract, do not affect the financial statements and therefore are not recorded as accounting events.

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