Accounting transaction

What it means

An accounting transaction is a fact that changes assets, liabilities, equity, costs or revenue. It is the event itself, not the paper about it: the accounting document only evidences it.

What matters is the day the transaction happened, not the date the invoice was issued. That day fixes the period it belongs to and the exchange rate used to translate a foreign currency.

Not every event in a company is an accounting transaction. Signing a contract, receiving an order or sending a quote does not yet change assets or liabilities, so nothing is posted. Significant future commitments, such as guarantees given, are still tracked in off-balance-sheet records so that management knows about them.

How it works in practice

Every transaction reaches the books through an accounting entry on two accounts. Typical dates are delivery of goods, performance of a service, payment, a cash receipt or the handover of an asset.

Some transactions have no external paper at all: depreciation, provisions, valuation allowances, exchange differences, accruals and deferrals. These are supported by an internal document carrying the calculation and a signature.

In the monthly processing we match each document to the transaction it evidences, and it is not always one to one. A single invoice can carry both a delivery of goods and a service, while a single purchase may be evidenced by an advance invoice, a tax document for the payment received and the final invoice.

What to watch out for

Posting by the invoice date instead of the delivery date. In a foreign currency that picks the wrong rate and creates an artificial exchange difference, and across a year end the cost drops into the wrong period.

The same transaction posted twice: once from the pro forma and once from the final invoice. A pro forma invoice is only a request for payment, not evidence of delivery, and the double entry doubles both the cost and the VAT deduction, which the VAT control statement and supplier matching expose before the company itself notices.