Financial transactions and reports involve monitoring and analysis of the flow of cash through your business. These could be transactions that take place internally, like purchases as well as payroll and expense reports; as well as externally, like rentals and sales of assets; or credit-related transactions (e.g., loans, revolving credit, cash advances). Analyzing financial transactions is essential to ensure that your accounting records are accurate and reliable. This requires clear definitions, processes and policies as well as regular, consistent updating.
Internal transactions are those that take place within a business like a company’s purchases, sales and rental of office space. These are also known as non-cash transactions since they don’t involve the exchange of goods or services in exchange for cash. These transactions may 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 could range from a basic accounting program to an Enterprise Resource Planning (ERP). A reliable financial statement depends on the policies and procedures used to ensure that only those transactions are recorded in the system that can be verified by independent evidence, like evidence from the source like purchase receipts, sales orders, invoices, cancelled checks, promissory notes, bank statements and appraisal reports.
To confirm the legitimacy of a transaction, it is necessary to first determine the account involved and determine the location where it will be deducted and credit. Consider, for instance, that your business earned $5,000 in revenue from consulting services. To note the sale, it is necessary to must identify both the income account and the receivables account; determine that both are growing; and apply the rules of debiting and crediting. To complete the process, then record the transaction in your journal entry.
