Financial transactions and reporting is the process of monitoring and studying the flow of money through your business. This may include internal transactions, for example payroll and expense reports, as well as external transactions like rentals or sales of assets, as well as credit-related transactions. Analysis of financial transactions is vital to ensure that your accounting records are accurate and reliable. This requires clear definitions, procedures and policies as well as regular, consistent updates.
Internal transactions are those which take place within a company, such as the purchase, sale or rental of office space. These are also referred to as non-cash transactions because they don’t involve trading of services or goods for cash. They could include social responsibility and donations spending, in addition to other expenses such as travel and PCard fees.
The financial system of record keeps track of all cash and non-cash transactions. This could range from a simple accounting package to an Enterprise Resource Planning (ERP). A reliable financial statement is based on policies and procedures that ensure that only transactions that can be verified objectively are recorded in the system. These include documentation from the source such as sales orders, receipts for purchase invoices, purchase invoices cancelled check, bank statements as well as appraisal and promissory note reports.
To confirm the legitimacy of an activity, you must first determine the accounts involved and determine where it will be deducted and credit. For instance, suppose that your business earned $5,000 in revenue due to consulting services. To keep track of the sale, you must identify both the income account and the receivables account; establish that both are increasing; and apply the rules of crediting and debiting. You must record the transaction in your journal entry to complete the process.