Get to Know Transaction: Definition, Types, Forms, and Benefits

You must have often heard about and even made transactions. In short, transactions are activities that have a financial impact on business owners, whether they are reduced or increased.

Initially, this activity was carried out by exchanging goods or bartering. At that time, cash was not yet known by the community around the world. But as time goes by, this process is getting easier to do. 

In this article, we will discuss in-depth what a transaction is, the types, the systems involved in it, and the types of proof of transactions. Let’s start with the definition first.

Definition of Transaction

A transaction is an agreement that occurs between a seller and a buyer to exchange goods, services, or in the form of financial assets. In other words, a transaction it’s an activity that has a direct impact on the status or financial condition and financial statements in the end.

In an agency, company, or business, every transaction process will be recorded in the administration. The administration in question is the process of recording activities that have a direct impact on the financial aspects of the agency in a certain way.

Transaction System

A transaction system is a collection of routine transaction records that you can use in various business processes. Also, there are two systems in the community, cash and cashless.

In today’s digital era, the cashless system is growing due to a large amount of digitization in the economic sector. Due to the development of the non-cash system, the cash or paper money system had many changes and provisions recently.

The government in recent years has also increasingly supported a cashless system for transactions that the government says can counter illegal activities on the black market. The level of use of debit cards and credit cards as a means of transaction is also increasing along with the development of the non-cash system.

New payment systems like virtual credit cards are becoming more common in recent years. There are even blog posts that focus on the best virtual credit card for your needs because there are just so many.

Electronic payment systems such as Apple Pay, Google Pay, PayPal, and others also make it easier for people to shop and make transactions using smartphones. Nowadays, you can process payments and generate comprehensive reports of transactions in one platform automatically by using POS Software from HashMicro that is customizable to meet every business need. 

Transaction Type

Internal transactions

It involves various areas within a company that provide changes to the economic situation of the company. So internal audit is involved here to evaluate the company. In other words, an internal audit is a systematic and objective assessment of internal auditors. It aims to examine and evaluate the activities of an organization or company.

External transactions

On the other hand, the external transaction is a type that involves parties outside the company and contributes directly to changes in the company’s economic condition. This activity occurs in most businesses or companies.

Form of Proof of Transaction

Every transaction activity must have reliable evidence. Also, you can use this evidence if an unwanted dispute occurs later. The following are forms of proof of transactions:

Proof of internal transactions

This proof is usually in the form of internal memos that got from superiors to colleagues or subordinates. Also, this proof is evidence of transactions that occur within the company environment.

Proof of external transactions

Proof of external transactions is evidence of recording every transaction that occurs with parties outside the company. Then some examples are as follows:

• Receipt

Proof of receipt of money contains the recipient’s signature and needs to give to the paying party and serves as proof of a valid transaction.

• Debit note

A debit note is proof of transaction for the return of goods that a company has sold and given to the buyer.

• Check

A check is a letter or document containing the total order from a customer for the bank to pay the amount of money in the letter. this type of note can be used or usually used when there is a certain big amount of money involved in the transaction

• Invoice

An invoice is a sale or invoice with an appraisal of payment which is usually on credit. To speed up the invoicing process and maintain the cash flow, you could use HashMicro’s e-invoicing Software. That way, you could spend less time on paperwork & improve your productivity.

Conclusion

That’s a complete explanation of the transaction starting from the understanding, system, types, and forms of evidence. In addition, companies need to record all forms and types of activities involving company finances.

The benefits you get when you have financial records such that you can use them for business planning, knowing the number of sales and purchases, information for management, and also a decision-making tool.

HashMicro provides an Accounting System that can manage various business activities related to finance, cash flow, financial reporting, and others only through the best accounting software. Get a free demo to find out the features of HashMicro accounting software that are suitable for your business.