Hello everyone, in this session we will be learning about what is the meaning of accounting? What is the meaning of financial transaction example explaining how to identify the financial transaction. So, let's begin let us see what is the meaning of accounting accounting if you see by definition accounting means the process of identifying, measuring, recording, classifying, summarizing and interpretation of financial transactions. So now let's see this one by one. The first identifying identifying means to determine whether a particular transaction is a financial transaction or not. Then measuring measuring means valuing that particular financial transaction in monetary terms okay?

Targets recording, recording of financial transactions means your passing of journal entries posting of those journal entries in your ledger accounts okay. So, each and every financial transaction needs to be recorded in the books of accounts. Then after recording the transactions we have to classify classifying of the transactions means grouping of the similar financial transactions. Say for example, your assets liabilities, expenses income, then again in assets you have various categories like fixed assets, current assets, in liabilities, you have long term liabilities, short term liabilities, expenses, you have direct expense, indirect expense, then income also you have direct income, indirect income and so on. Then, summarizing, summarizing means preparing a statement Using the financial transactions okay for example your balance sheet your profit and loss account and finally, we have interpretation interpretation is understanding how a particular entity is performing by looking at the summarized financial statements okay.

So this entire process means accounting. Now if you see the identifying, measuring, recording classifying summarizing and interpretation of what of financial transactions, so, to identify financial transactions, we must know what is the financial transaction okay. So, let us understand what is a financial transactions. So, this is a meaning of financial transaction whenever there is an obligation to give or take money Goods services assets for the purpose of business it is known as a financial transaction. Now, this is very important, there are thousands of transactions that are taking place every day in the business, but we have to identify which of those are financial transactions, only financial transactions are recorded in the books of accounts. So, if you go by definition, there has to be obligation Okay.

That is, you should have a future obligation to give either to give or to take what either to give or take the money from that particular person or entity or either to give or take goods or either to give or take some services or either to give or take some assets. So, if there is an obligation to give Take money goods services assets for the purpose of business again this is important every give and take should be for the purpose of the business. Remember a person is different from the business okay. financial transaction is also known as business transaction. Now, let us take one example and identify whether a particular transaction is a financial transaction or not. So now, let's see this example example of financial transaction.

Mr. A has started a business of nursery and Gardening Services. His business includes providing Gardening Services sale of plants sale of seed and other related services. Now they have given the description and we have to identify whether a particular transaction is a financial transaction or not. Okay, first, Mr. Mohan has given a loan of rupees 10 Thousand for the business in cash, okay. So Mr. A has obtained a loan from Mr. Mohan of rupees 10,000 for business in cash. So, now this loan needs to be repaid Okay.

Now there is an obligation, okay, do pay back this money in the future and it is for the purpose of the business. So this is a financial transaction. Next, Mr. A has completed all the formalities related to opening a bank account with l&d bank where the business does zero balance bank account is open for the business. Now, there is a zero balance bank account usually for all the businesses there is a current account facility wherein you can keep a zero balance Okay, so that bank account has been opened and all the formalities are completed. Now, if you see this transaction, there is no obligation to give or take any money any goods or any assets or any services okay. So, he has only opened a bank account right.

So, this is not a financial transaction it need not be recorded in the books of accounts third Mr a deposited cash of rupees 5000 in the bank account with lnd Bank Okay. Now, if you see Mr E has deposited a cache of rupees 5000 Okay. So, there is an obligation to deposit the cash in the bank account okay with the lnd bank so, it needs to be recorded in the books of account so, this is a financial transaction next month To a purchase gardening equipments worth rupees 5000 on credit from PNC limited okay. So, for the purpose of business is purchase some gardening equipments worth rupees 5000 on credit on credit means he has obtained the asset but he will pay it later. So, if you see there is a financial obligation okay what is the obligation he has received the asset took that asset what is the asset here gardening equipments and there is an obligation to pay to Mr. PNC later.

So, this is also a financial transaction next, Mr. A paid for advertising in newspaper rupees 200. Now, Mr. He has paid whom he has various paid to newspaper for advertising. So, there is another obligation to pay and obligation to receive services of rupees 200. So, this is also a financial transaction. Next Mr. A signed a contract agreement for labor with Mr widget as per the terms of contract Mr. A is required to pay rupees hundred per hour as and when services are available.

So, here Mr a has signed a contract with him with a laborer known as Mr. vj. So, as and when he will provide the services according to number of us work Mr a will be giving giving him hundred rupees per hour. So, if you see there is only contract which has been signed okay. So as of now no fixed services are being availed from him and there is no obligation to pay Mr. vj as of now, okay. So, obligation to pay an obligation to acquire services will arise only when there is some business and Mr. A wants the services then there will be an obligation for him to pay Mr widget. So, as of now only contract assign there is no financial obligation.

So, this is not a financial transaction Okay. Now, the next Mr. A received his first inquiry from a Sonakshi and he provided a quotation to customer for rupees 5000. So, Mr. He has received an inquiry and he has provided a quotation. So, as of now only quotation is provided to miss Sonakshi. So, Mr. A is not obliged to provide services to miss Sonakshi neither Mr soon She is obliged to pay Mr. A.

So, as of now, this is not a financial transaction. So, if need not be recorded in the books of accounts next, Mr. Knox she confirms the order she also gives rupees 2000 as advance in check. Now, here there are two things one is Mr. nack she confirms the order that is the services are required to be provided. Now, Mr a is obliged to provide services to miss Sonakshi and for that she has paid rupees $2,000 advance. So, there is an obligation for Mr. A to provide services in return of which Mr. noxee has given him 2000 as advance so this are the financial transactions and it has to be recorded in the books of account. Then next, Mr. A purchases plants and seeds in gash for loop thousand.

So, Mr he purchases plants and seeds in cash. So, there is an obligation to receive the goods and there is an obligation for Mr a to pay in cash. So, this is also a financial transaction. Now, the next Mr. Vijay contract laborer works for eight hours and rupees 800 is payable to him as per the terms of the contract, okay. So, he is Mr. vj, we have seen in our earlier example, that is we have seen it here in this transaction. Okay.

So, Mr. A has signed a contract with Mr. Vijay okay. So for payment of rupees hundred per hour as and when the services are outbid. So accordingly, Mr. Vijay works for a TAS and rupees 800 is payable to him. Now what does it now there is obligation for Mr. A to pay Mr. Vijay for his services acquired. So, this is a financial transaction next client Mr. Nash, he pays balance amount of rupees 3000 in cash. Again, Mr. A has obligation to receive the balance amount from Mr. Naqvi for the services which he has given.

So, this is also our financial transaction, then Mr. A pays a partial loan amount of 6000 taken from Mr. Mohan. So, there was a first transaction wherein he had taken a loan from Mr. Mohan. So, now he has paid a partial amount of load that is there is an obligation of Mr. A to pay 6000 to Mr. Mohan. So, this is also a financial transaction. So, accordingly we have to identify whether a particular transaction is a financial transaction or not.