NCERT Class XI Accountancy: Chapter1 – Introduction to Accounting - Part4

Class XI NCERT Accountancy Text Book Chapter 1 Introduction to Accounting is given below.


1.1.1 Economic Events
Business organisations involves economic events. An economic event is known as a happening of consequence to a business organisation which consists of transactions and which are measurable in monetary terms. For example, purchase of machinery, installing and keeping it ready for manufacturing is an event which comprises number of financial transactions such as buying a machine, transportation of machine, site preparation for installation of a machine, expenditure incurred on its installation and trial runs. Thus, accounting identifies bunch of transactions relating to an economic event. If an event involves transactions between an outsider and an organisation, these are known as external events. The following are the examples of such transactions:

• Sale of Reebok shoes to the customers.
• Rendering services to the customers by Videocon Limited.
• Purchase of materials from suppliers.
• Payment of monthly rent to the landlord.

An internal event is an economic event that occurs entirely between the internal wings of an enterprise, e.g., supply of raw material or components by the stores department to the manufacturing department, payment of wages to the employees, etc.