Financial transactions and reporting entails monitoring and analyzing the flow of money through your company. This can include internal transactions like expense and payroll reports, as well as external transactions like rentals or sales of assets, as well as credit-related transactions. It is essential to examine financial transactions in order to ensure that your accounting records remain accurate and reliable. This requires clear definitions and procedures, as well a consistent regularly updated.
Internal transactions are those that take place within a company like a company’s purchases, sales, and the rental of office space. These transactions are also referred to as non-cash, since they do not involve the exchange of products or services for cash. They may include donations and social responsibility spending, as well as other expenses, such as travel and PCard fees.
The financial system of record keeps track of all cash and non-cash transactions. This could range from a basic accounting program to an Enterprise Resource Planning (ERP). A dependable financial statement is based on policies and procedures that ensure that only those transactions are recorded in the system that can be verified with the aid of objective evidence, for example sources of documentation such as purchase receipts, sales orders invoices, cancelled checks, promissory note statements, bank statements and appraisal reports.
To verify an accurate transaction, you must first identify the accounts in the transaction and determine which the transaction will be debited or credit. Suppose, for example, that your business made an amount of $5,000 in revenue from consulting services. To record the sale you must identify the income account and the receivables accounts, verify that both are growing and follow the rules for crediting and debiting. To complete the process, you must then note the transaction in your journal entry.