Accounting event definition

What is an Accounting Event?

An accounting event is anything that alters the information reported in an organization’s financial statements. This event is recorded as a business transaction through the entity’s bookkeeping system, either using a journal entry or an entry through one of the modules in the accounting software. It is usually derived from a source document, such as a supplier invoice or a customer invoice.

An accounting event can be triggered by an action external to the organization, such as the sale of goods or services to a third party, or the sale of an asset. An event can also be internal, such as a transaction to record the depreciation of an asset, or to write off an asset.

Examples of Accounting Events

Here are several examples of accounting events:

• Sale of goods to a customer. When a company sells products to a customer, it records revenue and either a cash or accounts receivable entry, depending on whether payment is immediate or on credit. This transaction increases the company’s revenue and affects its income statement. It also impacts the balance sheet by changing asset accounts like inventory and receivables.

• Purchase of equipment. Buying equipment for business use is an accounting event that increases fixed assets on the balance sheet. If purchased with cash, it reduces the cash account; if financed, it increases liabilities. The equipment will also lead to future depreciation expenses, affecting the income statement over time.

• Payment of employee salaries. When salaries are paid, the business incurs an expense that reduces net income on the income statement. At the same time, the cash account on the balance sheet decreases. This event reflects the cost of labor as a necessary part of operations.

• Borrowing funds from a bank. Taking out a loan results in an increase in both cash (asset) and loans payable (liability) on the balance sheet. This inflow of cash supports business activities but also creates a future repayment obligation. Interest on the loan will affect future income statements.

• Issuance of company stock. When a company issues shares to investors, it receives cash or other assets in exchange for equity. This increases both the equity section (common stock and possibly additional paid-in capital) and assets on the balance sheet. It’s a key event for funding operations without incurring debt.