Financial reports and transactions are procedures of recording and transmitting financial information to various stakeholders, including creditors, investors, and regulatory authorities. This information is crucial to the success of a company as it helps make decisions regarding the funding, investment, and other business activities.
It isn’t easy to identify and classify transactions for financial reporting. However, there are ways to improve accuracy and speed up the process. Standardizing methods for identifying transactions as well as streamlining workflows and encouraging regular feedback will lower the likelihood that debits and credit are misclassified or missed. A clear focus on the key elements that affect the company’s financial picture can help ensure accurate reporting and prevent inconsistencies with accounting standards.
There are a myriad of kinds of financial transactions that can be carried out within a business. Some of the most common financial transactions include payments, receipts and purchases. Purchases are financial transactions where the business purchases products or services later to sell to customers. Receipts are financial transactions that result in the business getting paid for supplying goods or services to other businesses. Payments are financial transactions where the business receives payment for the services or goods it has received from another business.
In order to accurately record these financial transactions it is crucial to adhere to a set of rules and regulations referred to as Financial Reporting Standards (FRS). The rules in this group include Generally Accepted Accounting Principles (GAAP) which are the set of accounting principles that publicly-owned businesses must adhere to in the United States when preparing financial statements. International companies can follow a set of rules similar to the International Financial Reporting Standards.