Financial transactions and reporting is the process of recording and communicating financial data to different stakeholders such as investors, creditors and regulatory authorities. This information is vital to the success of a business as it can help inform decisions regarding funding, investments and other business activities.
Recognizing and classifying transactions for financial reporting purposes can be difficult, but there are steps you can take to improve accuracy as well as streamline the process. Standardizing transaction identification methods by streamlining workflows and promoting routine feedback will reduce the chance that debits or credit are missed or misclassified. A clear focus on what matters for the financial health of a business can aid in ensuring accurate reporting and prevent inconsistencies with accounting standards.
Financial transactions can be of many kinds. Some of the most common financial transactions are payments, receipts, and purchases. Purchases are financial transactions in which the business buys goods or services later to sell to customers. Receivables are financial transactions in which the business is compensated to provide goods or services to another company. Payments are financial transactions where the business receives payment for the services or goods it receives from another business.
To properly document these financial transactions, is crucial to adhere to a set of rules and regulations known as Financial Reporting Standards. This set of rules includes Generally Accepted Accounting Principles, which are the rules that publicly-owned companies in the United States must follow when preparing their financial statements. International companies can follow the same set of rules called International Financial Reporting Standards.