It is true that an external transaction is a transaction the firm conducts with a separate economic entity.
An internal transaction is any financial activity that occurs within an organization rather than with a third party. Usually, money is exchanged between divisions or between the business and its employees. Even while internal transactions aren't sales like external ones are, they still have an impact on the company's finances.
An external transaction is one that involves a third party from outside the transaction. A company conducts external transactions the majority of the time throughout an accounting period.
The acquisition of goods from a supplier, the payment of cash to a creditor, and the payment of wages to employees are examples of external transactions.
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