Financial transactions and reporting entail tracking and analyzing the flow of cash through your company. This can include internal transactions, such as payroll and expense reports, external transactions like rentals or sales of assets, as well as credit-related transactions. It is important to analyze financial transactions to ensure that your accounting records are accurate and reliable. This requires clear definitions and procedures, as well a consistent and regular update.
Internal transactions are those that occur within a business, such as the purchase, sale and leasing of office space. These transactions are also referred to as non-cash due to the fact that they do not require the exchange of goods or services for cash. These transactions could include social responsibility and donations, along with other expenses such as PCard and travel costs.
Non-cash and cash transactions are recorded in the financial system of record, which may vary from a basic accounting software program to a more sophisticated Enterprise Resource Planning (ERP) system. A reliable financial statement depends on policies and procedures that ensure that only the transactions are recorded in the system that can be verified using tangible evidence, such as evidence from the source like sales orders, purchase receipts invoices, cancelled cheques promissory notes, bank statements and appraisal reports.
To confirm the authenticity of the transaction, you need to first identify the accounts involved and determine where it will be deducted and credited. Consider, for instance, that your business received $55,000 in revenue through consulting services. To record the sale, you must identify the income account as well as the receivables accounts, confirm that both are increasing and apply the guidelines for crediting and debiting. To complete the process, you need to then note the transaction in your journal entry.