Financial transactions and reporting involves tracking and analyzing the flow of cash through your company. It could refer to transactions that occur within the company, such as purchases and payroll reports; externally, like rentals and sales of assets; or credit-related transactions (e.g. loans or revolving credit, cash advances). Analysis of financial transactions is crucial to ensuring that your accounting records are accurate and reliable. This requires clear definitions and processes and a consistent regularly updated.
Internal transactions are those which take place within a company for example, the purchase, sale and leasing of office space. These are also referred to as non-cash transactions since they do not involve the trading of goods or services for cash. These transactions may involve social responsibility and donations, as well as other expenses like PCard charges and travel expenses.
The financial system of record tracks all cash and non-cash transactions. It can range from a simple accounting program to an Enterprise Resource Planning (ERP). A solid financial statement is based on procedures and policies that ensure that only those transactions are recorded in the system that can be verified using independent evidence, like documents from the source, such as purchase receipts, sales orders invoices, cancelled checks bank statements, promissory notes and appraisal reports.
To confirm the validity of the transaction, you need to first determine the accounts involved and determine the place where it will be deducted and credited. For example, suppose your business earns $5,000 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 procedure, you should then enter the transaction into your journal entry.
