Financial transactions and reporting entails monitoring and analysing the flow of funds through your business. This can include internal transactions like expense and payroll reports, as well as external transactions like rental or sales of assets, and credit-related transactions. It is crucial to review financial transactions to ensure that your accounting records remain accurate and reliable. This requires clear definitions and procedures, as well a consistent periodic update.
Internal transactions are those which occur within a company that are part of a company, for example, purchases, sales, and the rental of office space. They are also known as non-cash transactions because they don’t involve the exchange of services or goods for cash. They can include social responsibility and donations spending, as well as other expenses, such as travel and PCard charges.
Non-cash and cash transactions are recorded in the financial system of record, which may range from a simple accounting software program to a sophisticated Enterprise Resource Planning (ERP) system. A solid financial statement is dependent on policies and procedures which ensure that only transactions that can be verified objectively are recorded in the system. These include sources documentation like sales orders receipts for purchase invoices, purchase invoices bank statements, cancelled checks as well as appraisal and promissory note reports.
To verify the accuracy of the transaction, you need to first determine the account involved and determine the location where it will be deducted and credit. For instance, suppose that your business receives $5,000 in revenue from consulting services. To document the sale, you must identify both the income account and the accounts receivable account; confirm that both are growing; and apply the rules of debiting and crediting. To complete the process, you need to then record the transaction in your journal entry.