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Explain internal and external transaction. |
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Answer» Internal transaction : These type of transactions would take place within business. In certain transactions of business, there is no need of other parties. That is why, these transactions are called Internal transactions, e.g., Loss in business due to natural calamity, depreciation on asset, asset became out of dated, etc. Internal transactions are all economic transactions but are non-cash transactions. These transactions are recorded in the books of accounts. External transaction : When transactions are taken place between the business and other parties, then these transactions are called External transactions, e.g., purchased goods from traders, cash withdrawn from bank, amount paid for insurance premium, paid salary to employees, purchase of asset, payment of interest on B.O.D. to bank, etc. External transactions are all economic transactions, which are recorded in the books of accounts. |
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