Differences between Cash Transactions and Credit Transactions:
The main differences between Cash transactions and credit transactions are:
1. A Cash transaction is a transaction which involves immediate (i.e., ready) payment or receipt of cash. On the other hand, a credit transaction is a transaction where the payment or the receipt of money is postponed to a future date.
2. In a cash transaction, personal account may or may not be involved. But in a credit transaction, personal account is definitely involved.
3. A concern may carry on business with only cash transactions. But no concern can carry on business with only credit transactions.
Examples: State which of the following are cash transactions and which are credit transactions:
1. Antony commenced business with Rs.1,00,000.
It means that cash is received by the business from the proprietor. It results in the immediate receipt of cash. So, it is a cash transaction.
2. Bought goods for cash Rs.2,000.
It means that goods are bought for cash. It results in the immediate payment of cash. So, it is a cash transaction.
3. Bought goods from Balamurli on account Rs.4,000.
This means that goods are bought from Balamurli on credit. Here, the payment of cash is postponed. So, it is a credit transaction.
4. Paid Balamurli on account Rs.500.
This means that cash is paid to Balamurli on account of the previous (i.e., old) balance. It results in the immediate payment of cash. So, it is a cash transaction.
5. Commission received Rs 50.
This means that cash is received for commission. It results in the immediate receipt of cash. So, it is a cash transaction.
6. Commission due to Chander Rs.100.
This means that commission is due to Chander, and it has to be paid later. Here, the payment of cash is postponed. So, it is a credit transaction.
7. Charged commission to David Rs.20.
This means that commission is due from David, and it has to be received later. Here, the receipt of cash is postponed. So, it is a credit transaction.
8. Took loan from bank Rs.2,000.
This means that money (i.e., cash) is received from bank as loan. It results in immediate receipt of cash. So, it is a cash transaction.
9. Interest on loan due to bank Rs.100.
It means that interest on loan is due to the bank, and it has to be paid later. Here, the payment of cash is postponed. So, it is a credit transaction.
10. Paid salaries Rs.2,000.
This means that cash is paid for salaries. It results in the immediate payment of cash. So, it is a cash transaction.
11. Sold goods for Rs.1,000.
This means that goods are sold for cash. It results in the immediate recovery of cash. So, it is a cash transaction.
12. Sold goods to Eshwar on account Rs,.2,000.
This means that goods are sold to Eshwar on credit. Here, the receipt of cash is postponed. So, it is a credit transaction.
13. Received from Eshwar on account Rs.1,000.
This means that cash is received from Eshwar on account of the previous (ii.e., old) balance. It results in immediate receipt of cash. So, it is a cash transaction.
14. Sold goods for cash Rs.1,000.
This means that goods are sold for cash. It results in immediate receipt of cash. So, out is a cash transaction.
15. Purchased goods for cashRs.500.
This means that goods are purchased for cash. It results in immediate payment of cash. So, it is a cash transaction.
The main differences between Cash transactions and credit transactions are:
1. A Cash transaction is a transaction which involves immediate (i.e., ready) payment or receipt of cash. On the other hand, a credit transaction is a transaction where the payment or the receipt of money is postponed to a future date.
2. In a cash transaction, personal account may or may not be involved. But in a credit transaction, personal account is definitely involved.
3. A concern may carry on business with only cash transactions. But no concern can carry on business with only credit transactions.
Examples: State which of the following are cash transactions and which are credit transactions:
1. Antony commenced business with Rs.1,00,000.
It means that cash is received by the business from the proprietor. It results in the immediate receipt of cash. So, it is a cash transaction.
2. Bought goods for cash Rs.2,000.
It means that goods are bought for cash. It results in the immediate payment of cash. So, it is a cash transaction.
3. Bought goods from Balamurli on account Rs.4,000.
This means that goods are bought from Balamurli on credit. Here, the payment of cash is postponed. So, it is a credit transaction.
4. Paid Balamurli on account Rs.500.
This means that cash is paid to Balamurli on account of the previous (i.e., old) balance. It results in the immediate payment of cash. So, it is a cash transaction.
5. Commission received Rs 50.
This means that cash is received for commission. It results in the immediate receipt of cash. So, it is a cash transaction.
6. Commission due to Chander Rs.100.
This means that commission is due to Chander, and it has to be paid later. Here, the payment of cash is postponed. So, it is a credit transaction.
7. Charged commission to David Rs.20.
This means that commission is due from David, and it has to be received later. Here, the receipt of cash is postponed. So, it is a credit transaction.
8. Took loan from bank Rs.2,000.
This means that money (i.e., cash) is received from bank as loan. It results in immediate receipt of cash. So, it is a cash transaction.
9. Interest on loan due to bank Rs.100.
It means that interest on loan is due to the bank, and it has to be paid later. Here, the payment of cash is postponed. So, it is a credit transaction.
10. Paid salaries Rs.2,000.
This means that cash is paid for salaries. It results in the immediate payment of cash. So, it is a cash transaction.
11. Sold goods for Rs.1,000.
This means that goods are sold for cash. It results in the immediate recovery of cash. So, it is a cash transaction.
12. Sold goods to Eshwar on account Rs,.2,000.
This means that goods are sold to Eshwar on credit. Here, the receipt of cash is postponed. So, it is a credit transaction.
13. Received from Eshwar on account Rs.1,000.
This means that cash is received from Eshwar on account of the previous (ii.e., old) balance. It results in immediate receipt of cash. So, it is a cash transaction.
14. Sold goods for cash Rs.1,000.
This means that goods are sold for cash. It results in immediate receipt of cash. So, out is a cash transaction.
15. Purchased goods for cashRs.500.
This means that goods are purchased for cash. It results in immediate payment of cash. So, it is a cash transaction.
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