Financial transactions and reporting is the process of monitoring and studying the flow of money through your company. These could be the transactions that occur internally, such as purchases as well as payroll and expense reports; and externally, like rentals and sales of assets; and credit-related transactions (e.g., loans and revolving credit, as well as cash advances). It is important to analyze financial transactions to ensure that your accounting records remain accurate and reliable. This requires clear definitions, policies and processes, as well as regular, consistent updates.
Internal transactions are those which occur within a business for example, such as purchases, sales and rent of office space. They are also known as non-cash transactions because they do not involve the trading of goods or services in exchange for cash. These transactions may include social responsibility and donations, as well as other expenses, such as PCard and travel costs.
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 solid financial statement is based on the policies and procedures that ensure that only those transactions are recorded in the system which can be verified using independent evidence, like sources of documentation such as purchase receipts, sales orders invoices, cancelled checks, promissory note statements, bank statements and appraisal reports.
To verify the authenticity of a transaction, you have to first identify the accounts involved and then determine the account where the transaction will either be debited or credit. Consider, for instance, that your advantages of succession planning company earned the sum of $5,000 due to consulting services. To record the sale, you must identify the income account and the accounts receivables account, confirm that both are increasing and follow the rules for debiting and crediting. You must enter the transaction in your journal entry to complete the process.