Financial transactions and reports involve tracking and analyzing the flow of cash through your company. It could refer to the transactions that occur internally, like purchases and payroll reports, as well as externally such as sales and rental of assets; and credit-related transactions (e.g., loans or revolving credit, cash advances). It is important to analyze financial transactions in order to ensure that your accounting records are accurate and reliable. This requires clear definitions, processes and policies and regular, consistent updates.
Internal transactions are those that take place within a company for example, such as purchases, sales, and the rental of office space. They are also referred to as non-cash transactions due to the fact that they do not involve the trading of goods or services for cash. These transactions could include social responsibility and donations, along with other expenses, such as PCard and travel charges.
The financial system of record keeps track of all cash and non-cash transactions. This could range from a simple accounting program to an Enterprise Resource Planning (ERP). A reliable financial statement is dependent on procedures and policies 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 bank statements, cancelled checks as well as appraisal and promissory note reports.
To confirm the legitimacy of a transaction, you must first determine the accounts involved and identify the account from which it will be debited and credited. For instance, suppose your business receives $5,000 in revenue from consulting services. To record the sale, you must identify both the income account and the accounts receivable account, determine that both are growing and follow the guidelines of crediting and debiting. You must add the transaction into your journal entry to complete the process.