Financial transactions and reporting involve monitoring and analyzing flow of money through your business. This can include transactions that occur internally, such purchases, payroll and expense reports, as well as externally like rentals and sales of assets; or credit-related transactions (e.g. loans or revolving credits, cash advances). It is essential to examine financial transactions to ensure that your accounting records remain accurate and reliable. This requires clear definitions, processes and policies as well as regular, consistent updates.
Internal transactions are those which take place within a company for example, such as the purchase, sale or rental of office space. These transactions are also known as non-cash due to the fact that they do not require the exchange of products or services in exchange for cash. They can include social responsibility and donations spending, in addition to other expenses, such as travel and PCard fees.
Non-cash and cash transactions are recorded in the financial system of record. This can vary from a basic accounting software program to a more sophisticated Enterprise Resource Planning (ERP) system. A dependable financial statement is based on the policies and procedures that ensure that only those transactions are recorded in the system which can be verified using objective evidence, such as evidence from the source like sales orders, purchase receipts invoices, cancelled checks bank statements, promissory notes and appraisal reports.
To confirm the authenticity of a transaction, it is necessary to first identify the accounts involved and identify the account from which it will be deducted and credited. Consider, for instance, that your company earned the sum of $5,000 through consulting services. To record the sale you must identify the income account and the receivables accounts, confirm that both are increasing and follow the rules for debiting and credits. The transaction must be recorded into your journal entry to complete the process.
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