Final answer:
External transactions involve exchanges with outside entities. Examples of external transactions include purchasing inventory from suppliers and borrowing money from a bank. Internal transactions, like paying salaries to employees, do not qualify as they occur within the company.
Step-by-step explanation:
Which of the following are external transactions? External transactions involve exchanges between the business and outside entities, impacting the company's financial position. In this context, the options related to external transactions would be:
- Paying salaries to employees is not an external transaction, as it occurs between the company and its own employees, making it an internal transaction.
- Purchasing inventory from suppliers is an example of an external transaction because it involves an exchange with entities outside of the company.
- Borrowing money from the bank is another example of an external transaction, as it involves an agreement with a financial institution that is separate from the company.
The examples provided of buying a used laptop at a garage sale and ordering flowers over the internet are also external transactions because they involve dealings with external parties.
Firms can access financial capital in various ways such as borrowing from a bank or issuing bonds/stock. Borrowing involves a commitment to repay with interest but allows the firm to maintain control over its operations without answering to shareholders. Issuing stock, however, entails selling company ownership and answering to a board of directors and shareholders.