A company, in operation, of course, often makes transactions. The company’s financial transactions are one of the important points in its operations.
Therefore, every business actor must understand exactly what the purpose, function and method of recording are. This time, we summarize the meaning, types, and steps for recording company financial transactions that you can apply.
Definition of Corporate Financial Transactions
The definition of a transaction in accounting is any form of activity that can be measured in money and affects the company’s financial position or condition.
While the company’s financial transactions are all activities that have an impact on the company’s finances.
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Not only related to buying and selling, but also the possibility of loss of assets due to a disaster or other phenomenon whose value can be measured in money.
Once the importance of the company’s financial transactions, because it needs to be recorded with evidence of transactions as a reference.
Company financial transactions for employee expenses can also be accessed easily through cost management software.
Before reviewing how to book or record it, we first identify the types of company financial transactions.
Types of Company Financial Transactions
In accordance with his understanding, that a company’s financial transactions do not only include buying and selling, so you must understand the types of financial transactions in it.
The types of company financial transactions are:
1. Internal Transactions
Internal transactions are all forms of transactions involving only internal parties without outsiders.
That is, internal transactions occur within the company and affect the company’s financial condition.
This transaction is also often referred to as a non-exchange transaction, because there is no buying and selling activity in it.
For example, in a small or medium scale business, there is incoming and outgoing cash which is indicated by a record of depreciation of business assets.
2. External Transactions
External transactions are all transaction activities related to external parties. Examples are buying and selling, paying debts and paying off receivables.
Expenditures in the form of employee salaries and procurement of production tools and raw materials are included in this external transaction.
After understanding the type, you must save every existing transaction evidence. The goal is to facilitate the process of accounting for the company’s financial transactions.
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The following is a brief explanation of the proof of transaction and its benefits for the company’s finances.
Examples and Benefits of Proof of Transaction for Company Finances
Every financial transaction activity must be accompanied by proof of transaction.
What’s more, if the transaction is related to your business, there must be real evidence that can be justified for its accuracy.
This evidence will really help business owners in making the company’s financial reports correctly and can be used as an evaluation of their future business.
There are several examples of transaction evidence that we often get or use, for example, shopping receipts.
Meanwhile, for more complex business transactions, examples of proof of company financial transactions are:
- Receipt, including the business name, cashier’s name, date and time of transaction, name, price and quantity of goods, total payment and method of payment. Now there is also an online cash register or what is known as a Point of Sales.
- Receipt, proof of payment transactions made by the recipient. Where is the head for the recipient, while the tear is for the payer
- Invoices, proof of transactions that contain details of purchase invoices as well as delivery of goods. Where payments can be made by credit or installments
- Check, proof of transaction in the form of a payment order that must be disbursed by the recipient to the bank, after the check is signed by the buyer
- Bilyet giro, proof of transaction in the form of an order to the bank to transfer an amount of funds from the sender’s account to the recipient’s account
- Proof of bank transfer or deposit, proof of transaction showing that the customer has transferred money to the destination account
- Debit notes, proof of transactions used by vendors to inform the amount owed by the buyer or evidence provided by the buyer when returning goods paid for on credit
- Memorandum, proof of transaction that explains all kinds of events within the company’s internal and generally takes place at the end of the period
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With various kinds of transaction evidence, you have accurate data regarding all transactions. The data from these evidences will later be grouped and compiled in bookkeeping .
Some of the benefits that can be obtained from having proof of transactions in company financial transactions are:
- As material or data to prepare financial reports
- It becomes concrete or real evidence if there is an error in the transaction, or a complaint from the buyer
- Identify the total income per day or at a certain time period that you want to know
- Become a reference for projected profits, which can help business development efforts
- Know clearly the parties who are responsible for every financial transaction that has been carried out
- Minimizing the possibility of fraud such as embezzlement of money or misappropriation of company fund allocations
How to Make a Record of Company Financial Transactions
In building a business, we must have neat and orderly financial records or books either manually using excel or automatically using an online bookkeeping application .
This will greatly affect the continuity of your business, because from these books you can make the right decisions regarding business continuity.
The way to prepare a company’s financial transaction report is with a double entry system or you can also use the cash or accrual accounting method.
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1. Double Entry Bookkeeping
This method is done by balancing the debit and credit journal entries.
That is, each entry on the books requires a opposite entry on the other side of the journal. So the debit and credit amounts will always be the same.
2. Accrual Bookkeeping
This bookkeeping method is often used by large-scale companies. Companies that have a significant nominal income per year.
This method is executed once the product or service has been delivered or completed, not when payment is received.
Therefore, in this method you will often find payment records one month earlier than the actual payment time.
For example, you have shipped products to customers in September. Even though the payment will be made in October, on record it will be in September.
3. Bookkeeping Cash Accounting
For recording small-scale business financial transactions, this cash-based method is recommended.
The method is very easy and simple, you will only record when you actually receive the payment.
Because in small businesses, generally no transactions are made on credit. So you can record according to the actual cash receipt time.
From the explanation above, it can be concluded that the company’s financial transactions are all forms of transactions that occur both from internal and external companies.
That is, the transaction in question is not only about buying and selling but also various events that affect the company’s financial condition.
Such as depreciation of assets due to disasters or other calamities that can be measured in monetary terms.
In maintaining the company’s financial stability, it is necessary to have detailed and factual company financial accounting.
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To be able to make it happen, you need to collect and store every evidence of existing transactions. You can also record it with the best accounting software of your company’s choice.
The benefit of having proof of a company’s financial transactions is that it facilitates the bookkeeping process, as well as oversees the company’s financial flows so that it is easier to evaluate for smooth operations and business development.