Financial transactions and reporting is the process of recording and transmitting financial information to various stakeholders, including creditors, investors and regulatory authorities. This information is crucial to a company’s growth as it informs decisions about the funding, investment and other business activities.
It can be difficult to recognize and classify transactions for financial reporting. However there are methods to improve accuracy and streamline the process. Streamlining workflows, standardizing transaction identification methods and promoting regular feedback can lower the risk of missed or misclassified credits and debits. A focus on the financial picture of the business can help ensure accurate reporting.
Financial transactions can be of various kinds. The most common include purchases, receipts and payments. Purchases are financial transactions that result in the business acquiring goods or services that they later sell to customers. Receivables are financial transactions in which the business is paid to provide goods or services to a different business. Payments are financial transactions where the business purchases goods or services it received from a third party business.
In order to properly record these financial transactions it is important to follow a set of rules and regulations referred to as Financial Reporting Standards (FRS). This set of rules includes Generally Accepted Accounting Principles (GAAP), which is the set of principles that publicly-owned businesses must adhere to in the United States when preparing financial statements. International companies can use a set of rules similar to the International Financial Reporting Standards.