Generally, a business enterprise has numerous transactions every day during an accounting period. Unless the transactions are recorded and analysed, it is not possible to determine the impact of each transaction in the above two basic statements. Traditionally, accounting is a method of collecting, recording, classifying, summarising, presenting and interpreting financial data aspect of an economic activity. The series of business transactions occurring during the accounting period and its recording is referred to an accounting process/mechanism. An accounting process is a complete sequence of accounting procedures which are repeated in the same order during each accounting period. Therefore, accounting process involves the following steps or stages: 1. Identification of transaction r14 In accounting, only business transactions are recorded. A transaction is an event which can be expressed in terms of money and which brings change in the financial position of a business enterprise. An event is an incident or a happening which may or may not being any change in the financial position of a business enterprise. Therefore, all transactions are events but all events are not transactions. A transaction is a complete action, to an expected or possible future action. In every transaction, there is movement of value from one source to another. For example, when goods are purchased for cash, there is a movement of goods from the seller to the buyer and a movement of cash from buyer to the seller. Transactions may be external (between a business entity and a second party, e.g.. goods sold on credit to Hari or internal (do not involve second party, e.g., depreciation charged on the machinery). Illustration: State with reasons whether the following events are transactions or not to Mr. K. Mondal, Proprietor. (1) Mr. Mondal started business with capital (brought in cash)Rs. 40,000 (ii) Paid salaries to staff Rs. 5,000. (iii) Purchased machinery for Rs. 20,000 in cash. (iv) Placed an order with Sen & Co. for goods for Rs. 5,000. (v) Opened a Bank account by depositing Rs. 4,000. (vi) Received pass book from bank. (vii) Appointed Sohan as Manager on a salary of Rs. 4,000 per month (viii) Received interest from bank Rs. 500. (ix) Received a price list from Lalit