A business transaction is any event that affects the financial position of a business. This includes activities like making sales, purchasing goods or services, paying bills, receiving customer payments, taking out loans, or investing money into the business. Essentially, if money moves or changes hands in any way and it’s related to the business, it qualifies as a transaction and should be recorded. Common examples of business transactions include selling goods to a customer, paying office rent, buying supplies or equipment, receiving a loan from the bank, and paying salaries to employees.

When recording a business transaction, the process starts with identifying what actually happened—was it a sale, a purchase, a payment, or something else? Next, you determine which accounts are affected, such as cash, inventory, or loans. Then, you assess whether each account is increasing or decreasing. Once that’s clear, you apply the correct debit and credit entries based on the rules of double-entry bookkeeping. Finally, you record the transaction in your journal or bookkeeping software. While this might seem like a lot at first, it becomes second nature with practice. In fact, most modern bookkeeping software automates much of this process, making it faster and more accurate.

Recording transactions properly ensures that your financial reports are accurate, your taxes are filed correctly, and your business decisions are based on real data—not guesses. If you miss or incorrectly record transactions, your financial records will be incomplete or misleading, which could cause serious issues down the line.

Good record-keeping also helps during audits, loan applications, and when preparing budgets or financial statements. In short, it’s how you keep your financial house in order.