Financial transactions and reporting involves tracking and analysis of the flow of cash through your business. It could refer to transactions that occur internally, such purchases as well as payroll and expense reports; and externally, like rentals and sales of assets, or credit-related transactions (e.g., loans or revolving credits, cash advances). Analysis of financial transactions is crucial to ensure that your accounting records are accurate and reliable. This requires clear definitions and procedures and a consistent, regular update.
Internal transactions are those that happen within a business, such as a company’s purchases, sales and rental of office space. These transactions are also known as non-cash due to the fact that they don’t involve the exchange of goods or services in return for cash. These transactions may include social responsibility and donations, along with other expenses like PCard and travel charges.
The financial system of record keeps track of all cash and non-cash transactions. It can range from a simple accounting software to an Enterprise Resource Planning (ERP). A reliable financial statement depends on policies and procedures that ensure that only the transactions are recorded in the system that can be verified with tangible evidence, such as documents from the source, such as sales orders, purchase receipts invoices, cancelled cheques, promissory notes, bank statements and appraisal reports.
To confirm the authenticity of a transaction, you must first determine the account involved and identify the account from which it will be deducted and credit. For example, suppose your business receives $5,000 in revenue from consulting services. To record the sale, you must identify the income account as well as the receivables accounts, confirm that both are increasing and apply the rules for debiting and credits. You must enter the transaction in your journal entry to complete the process.
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