Financial Transactions and Reporting

Financial transactions and reports involve tracking and analyzing money flow through your business. These could be transactions that take place internally, such as purchases or payroll and expense reports; and externally, like rental and sales of assets; and credit-related transactions (e.g. loans, revolving credit, cash advances). It is crucial to look over financial transactions in order to ensure that your accounting records remain accurate and reliable. This requires clear definitions and procedures and a regular periodic update.

Internal transactions are those that occur within a firm for example, the purchase, sale or rental of office space. They are also referred to as non-cash transactions since they do not involve the trading of goods or services in exchange for cash. These transactions could include social responsibility and donations, as well as other expenses such as PCard and travel charges.

The financial system of record records all cash and non-cash transactions. This could range from a simple accounting package to an Enterprise Resource Planning (ERP). A reliable financial statement depends on the policies and procedures that ensure that only the transactions are recorded in the system that can be verified with the aid of objective evidence, for example documents from the source, such as sales orders, purchase receipts, invoices, cancelled checks, promissory notes, bank statements and appraisal reports.

To verify an accurate transaction, you have to first identify the accounts that are involved and determine the account where the transaction will be debited reference or credited. For instance, suppose that your business received an amount of $5,000 in revenue from consulting services. To document the sale, you must identify both the income account and the accounts receivable account; determine that both are growing and follow the guidelines of debiting and crediting. The transaction must be recorded in your journal entry to complete the process.