Question 3 of 34beginner💡 UnderstandMCQ1 mark

Which of the following is not a business transaction?

Exercise: Test Your Understanding - IV | Q: 1 | (Chapter: 15)
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Explanation

Option (C) is correct because a business transaction must involve the business entity and be measurable in monetary terms. According to the concept of 'Entity' (1.5.1), a business has a separate existence from its owner. Paying fees from the owner's 'personal bank account' is a personal activity that does not impact the business organisation's accounts. In contrast, Option (D) is a business transaction (classified as 'Drawings') because it involves money leaving the business.

Solution Steps

  1. Step 1: Identify the definition of a 'Transaction' from the context: an event involving some value between two or more entities.

  2. Step 2: Apply the 'Entity' concept, which states that a business has a definite individual existence separate from the owner.

  3. Step 3: Analyze Option (C): 'Paid sons fees from her personal bank account'. Since the payment is made from a personal account, the business entity is not involved, and no business asset or liability is affected.

  4. Step 4: Conclude that since the business entity is not involved, it is not a business transaction.

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