Financial transactions and reporting entails tracking and analysis of the flow of cash through your business. This could be internal transactions, such as expense and payroll reports, external transactions such as sales or rental of assets, as well as credit-related transactions. It is crucial to review financial transactions to ensure that your accounting records remain accurate and reliable. This requires clear definitions, processes and policies as well as regular, consistent updating.
Internal transactions are those that happen within a company like a company’s purchases, sales, and the rental of office space. These transactions are also referred to as non-cash because they do not involve the exchange of items or services in exchange for cash. These transactions could include social responsibility and donations, as well other expenses such as PCard charges and travel expenses.
The financial system of record records all cash and non-cash transactions. This can be anything 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 transactions that can be verified objectively are recorded in the system. These include sources documentation such as sales orders, receipts for purchase invoices, purchase invoices bank statements, cancelled checks as well as appraisal and promissory note reports.
To verify an accurate transaction, you must first determine the accounts involved and determine the account that the transaction will be debited or credit. For instance, suppose that your company earns $5,000 revenue from consulting services. To record the sale, you must identify the income account as well as the accounts receivables account. You must confirm that both are increasing and apply the rules for crediting and debiting. The transaction must be recorded into your journal entry to complete the process.
