There is a notch in the inner transom so that the inner gunnels sit in it. The transom cap covers the end of the inner gunnels, and the outer gunnels run past to end flush with the outer transom.
As has been pointed out, there is typically a metal bracket securing the gunnels to the transom as well.
The photo should show this joint. Note that this canoe uses wooden knees instead of the metal brackets as it will never be used with a motor, so the space is not needed.