Financial transactions and reporting entails monitoring and analyzing the flow of money through your business. This could include internal transactions, for example expense and payroll reports, as well as external transactions such as rental or sales of assets, as well as credit-related transactions. Financial transaction analysis is critical to ensuring that your accounting records are accurate and reliable. This requires clear guidelines, processes and definitions and consistent, regular updating.
Internal transactions are those that occur within a business for example, such as the purchase, sale or leasing of office space. They are also known as non-cash transaction because they don’t involve the trading of goods or services in exchange for cash. These transactions can include social responsibility and donations, as well as 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 application to a more sophisticated Enterprise Resource Planning (ERP) system. A reliable financial statement is based on policies and procedures which ensure that only transactions that can be verified objectively are recorded in the system. These include source documentation like sales orders purchase invoices, receipts, cancelled check, bank statements as well as appraisal and promissory note reports.
To confirm the validity of an activity, you must first identify the accounts involved, and identify the account from which it will be debited and credited. For instance, suppose that your company earned $55,000 in revenue through consulting services. To document the sale, you must identify the income account as well as the accounts receivable account, verify that both are growing and follow the guidelines of crediting and debiting. To complete the process, you need to then enter the transaction into your journal entry.