Simple! Mastering the Art of Transactions: Exploring Types and Systems in Business & Accounting Part 1

 

transactions or financial transactions are all activities measured in money

 In accounting, transactions or financial transactions are all activities measured in money that have an effect on the financial position of the company. We go over the meanings and types in full on the Mekari Journal blog. Think about what activities you did last week. Are you buying things at the supermarket, paying bills that are not yet due? If you do any of the above, you are part of a financial transaction.

[Event Definition]

 What is the problem? A simple definition of a transaction is an agreement between a buyer and a seller to exchange goods, services or financial assets. On the contrary, the basic concept of accounting can be interpreted as any business activity that has a direct impact on the financial position and financial statements of your company. For example, you own a trading and distribution company. You sell some goods to a customer for 5 million in cash. You can measure these events with money and affect the financial health of your company, so they are called events. Just like if you paid an employee 4 million in salary. These events are also events because they have a monetary value and have a financial impact on your business. The accountant or bookkeeper records all the events that occur in the books or diary of the company.

[Formula of Event]

 To better understand this, here are some examples or transactions that can be found in a company or business:

•        Sales to customers in cash or by credit card.

•        Receive cash payments for outstanding customer invoices.

•        Purchase of fixed assets from suppliers.

•        Reporting on periodic depreciation of fixed assets.

•        Purchase supplies from suppliers.

•        Invest in other companies.

•        Borrow money from creditors.

•        Distributes dividends to investors.

•        Sale of assets to third parties.

[Event Type]

 Transactions in simple or complex financial statements are further divided into several types, namely:

 - Based on institutional relations

 The first type that we consider is based on institutional relations, which are divided into internal and external:

•        Internal events

 Internal transactions occur when external parties are not involved. It does not involve an exchange between two parties, but a transaction that can be measured in money. Example: Recording depreciation methods for fixed assets and recording property losses caused by fires and internal financial activities such as equipment use, temporary use of a building, use of machinery and others.

•        External events

 The term external transaction is a type in which firms exchange value with external parties. Every company does most of these things. For example, buying goods from suppliers, selling goods to customers, buying fixed assets for a business, paying rent to landlords, paying gas, electricity or water bills, paying employees, etc.

- Based on currency exchange.

 On the basis of money exchange, there are three types of accounting transactions namely cash, non-cash and credit.

1. Financial transactions

 Or transactions where cash is paid or received directly in connection with the transaction. For example, you sell several products to a customer at a price of  50,000 and the customer pays directly on the spot

 This is called making money instantly with the products you sell to your customers. Similarly, if you buy furniture for your business and pay the price directly to the supplier in cash. In today's modern world, cash payments are not limited to just using bills or coins to make or receive payments. All transactions made using debit or credit cards issued by financial institutions are also classified as cash payments and digital payments such as through Gopay, OVO, Funds and others.

2. Unsatisfied payment

 This type of transaction is not related to whether cash has been paid or will be paid in the future. For example, if Company A buys a machine from Company B and discovers that it is defective, cash is not required to return it, as in a cashless transaction.

3. Credit transactions

 With this type of credit, cash does not change hands immediately after the transaction. In other words, cash will be received or paid in the future. For example, you bought a product from your vendor for 10 million. At your request, the seller agrees to pay you $10,000 for the products sold during the next month. You take ownership of the goods and transport them to the store. This is a type of credit transaction because there is no direct cash payment when purchasing the product. Similarly, you sell some products to your customers and get paid in the following month.

[Intention]

 There are three types of accounting transactions based on their purposes namely commercial, non-commercial and personal and their interests:

•        1.Transfers of companies. All day-to-day operations that keep the business running, such as sales and purchases, building rentals, advertising and other expenses.

•        2. Except for commercial transactions. Does not involve selling or buying, such as donations and social responsibility.

•        3. Personal events. Offered for personal purposes such as birthdays.

[Proof of Event]

 Each event is recorded by making an entry in the accountant's journal. This affects the financial position of the company, so the accountant or bookkeeper must ensure that the transaction is authorized by the responsible person and also documented before making a journal entry. Common examples of documents used as evidence are sales invoices, purchase invoices, cash receipts, payment receipts, bank statements, payment orders, pay stubs and other documents containing basic information that can be presented as valid evidence. Also check out the benefits of this note taking app. The following documents are required to prove the company's transactions:

•        Invoice, proof of sale given by the seller to the buyer, which contains information about the product, quantity and agreed product or service to be delivered by the seller to the buyer. Check out Billing Solutions' recommended billing apps.

•        Receipts or Receipts, documents that confirm that someone has received payment.

•        Checks, documents that require the bank to pay a sum of money in the person's name from the person's account.

•        Bill of lading, a document used by sellers to inform buyers of current debt obligations or documents drawn up by buyers when they return goods received on credit.

•        A bank deposit is a bank deposit that proves to customers that they have transferred their money to a target account.

•        Giro, a summary of financial transactions in a bank account over a period of time.

•        Bilyet Giro, an order addressed to the bank to transfer funds from the applicant's account to the recipient's account.

•        Certificates of inflows and outflows, cash receipts or payments with appendices.

•        Memo proof, which is a transaction ID usually assigned to intracompany transactions at the end of the period, a record of accrued employee wages.

[Event registration system]

 In general, the bookkeeping system or transaction record used in businesses is double entry, where each entry in an account requires a reverse entry to another account, resulting in a balanced journal. Double-sided or two-sided journal entries consist of a debit (left) and a credit (right). This ensures that the total debit amount always equals the total credit amount. In addition, cash or accrual accounting can be used to record transactions. Transaction recording systems refer to the procedures and methods used to record, process and report business transactions. The purpose of the transaction record system is to accurately and completely record all financial transactions within the company. Here is an explanation:

 - Posting using the cash accounting method

 For entrepreneurs who still have relatively small businesses, the most commonly chosen method is cash accounting. This method is fairly easy to implement because it involves a system that records when cash or payments are actually received from customers. In this approach, if a sale occurs in September but payment is made in October, the transaction is entered on the books in October when the payment is received.

- Origin accounting

 This method is more often used by large companies with a significant annual turnover. Accrual accounting means that it is recorded when a product or service is delivered or completed, not when payment is received. In the system of cumulative recording of transactions, payments are recorded in September, although the payments are actually received in October.

[Effect of business transactions on changes in accounting data]

 A financial or business transaction refers to a business activity directly performed by a company that may affect the financial condition or results of the company's operations. In accounting, companies record only those business transactions that affect the increase or decrease in the balance of each account. In other words, business transactions cause changes in the accounting equation, which must then be recorded and reported. All business transactions always affect changes in the three components of the basic accounting equation ie. assets, liabilities and equity, for example:

 A. As the company's assets grow

•        the volume of other funds decreased

•        growing debt

•        equity increases

 B. If the company makes a purchase transaction in cash

•        equipment increases

•        less cash

 C. When the company makes a purchase transaction on credit

•        equipment increases

•        increased debt.

Different effects of an event on changes in accounting data affect different financial statements. Small recording errors have a big impact on financial reporting. Transactions have a significant impact on accounting changes. Whenever a transaction takes place, whether buying, selling, paying or receiving money, accounting must be done to record changes in the financial position of the company. The following are some of the effects of business transactions on changes in accounting information.

 

 1. Balance sheet changes: Transactions can cause changes in the company's financial position, which are reflected in the balance sheet. For example, acquisition of fixed assets increases the amount of fixed assets reported on the balance sheet, while debt management reduces the amount of reported debts.

2. Changes in the income statement: Business transactions can also affect a company's income statement. Selling products or services increases revenues reported on the income statement, while buying raw materials or paying wages increases reported expenses.

 3. Changes in cash flow: Business transactions also affect a company's cash flow. Any event related to the receipt or payment of cash affects the cash balance reported in the statement of cash flows.

 4. Changes in Journal Entries: Every business transaction requires a journal entry to record changes in related accounts. The corresponding debit and credit of each event are recorded in the journal, which reflects the effect of the event on the financial position of the company.

 5. Changes in accounting cycle: Business transactions also affect a company's accounting cycle. The accounting cycle includes several steps from the identification of transactions, their recognition, adjustment and preparation of financial statements. Each business event triggers these phases, which in turn become gogogs

To ensure correct and reliable reporting of financial information, the effect of financial operations on changes in accounting information is very important. Accurate and timely accounting allows companies to track and accurately report their financial results and meet the reporting requirements of applicable accounting standards.

[Business Event Management with Journal Accounting Software]

 Regardless of the accounting method used to record transactions, it is not easy to ensure that all transactions are correctly recorded, especially when recording is done manually. Therefore, you can use online accounting software such as Journals to record all business transactions that automatically appear in financial statements such as the balance sheet, income statement, cash flows and changes in capital. So you don't have to work twice, so you can save time and reduce the risk of mistakes. Enjoy features like:

•        Snap Journal: Upload all documents such as receipts, invoices, proof of payment, cashier's receipts, receipts and other attachments that are automatically saved to your Journal account so you can view your financial reports in real time.

•        Approval System: Ensures that an administrator reviews all sales entered by a given user. Therefore, you must confirm every transaction you make.

•        Bank Reconciliation: Combine reports and transactions on the same page so you don't have to save reports again.

•        Transfer Cashlink: A magazine feature that allows payments to be transferred directly to a bank account.

There are many other features that you can take advantage of using journals, such as inventory management, business financial reporting, cash flow management, etc. To ensure correct and reliable reporting of financial information, the effect of financial operations on changes in accounting information is very important. Accurate and timely accounting allows companies to track and accurately report their financial results and meet the reporting requirements of applicable accounting standards.

[Business Event Management with Journal Accounting Software]

 Regardless of the accounting method used to record transactions, it is not easy to ensure that all transactions are correctly recorded, especially when recording is done manually. Therefore, you can use online accounting software such as Journals to record all business transactions that automatically appear in financial statements such as the balance sheet, income statement, cash flows and changes in capital. So you don't have to work twice, so you can save time and reduce the risk of mistakes. Enjoy features like:

•        Snap Journal: Upload all documents such as receipts, invoices, proof of payment, cashier's receipts, receipts and other attachments that are automatically saved to your Journal account so you can view your financial reports in real time.

•        Approval System: Ensures that an administrator reviews all sales entered by a given user. Therefore, you must confirm every transaction you make.

•        Bank Reconciliation: Combine reports and transactions on the same page so you don't have to save reports again.

•        Transfer Cashlink: A magazine feature that allows payments to be transferred directly to a bank account. There are many other features that you can take advantage of using journals, such as inventory management, business financial reporting, cash flow management, etc.