- Answer: Yes

- Definition of External Transaction: An external transaction is a business activity involving an exchange between the entity and a separate party, such as a customer or supplier.
- Explanation: In the scenario where a business entity lends money to a particular person, it is considered an external transaction because the entity is engaging in a financial exchange with an external party, the individual borrowing the money. This transaction involves the transfer of funds from the business entity to the borrower, creating a financial relationship between the two parties.
- Impact on Financial Statements: This external transaction would be recorded in the business entity's financial statements, typically as a loan receivable on the balance sheet. The terms of the loan, including interest rates and repayment schedules, would also be documented to ensure proper accounting and tracking of the transaction.
- Importance of External Transactions: External transactions are essential for businesses to conduct operations, as they involve interactions with external parties that can impact the entity's financial position and performance. Proper recording and management of external transactions are crucial for accurate financial reporting and decision-making within the business.
In conclusion, the lending of money by a business entity to a particular person is considered an external transaction due to its nature as a financial exchange with an external party. It is important for businesses to carefully document and account for such transactions to maintain transparency and accuracy in their financial records.