Understanding Financial Transactions

Financial Transactions

Finance is for everybody who can understand numbers. Financial transactions are the most important part of everyday life. Every time you step out of your homes or now in e-commerce age even from the comfort of homes you are buying things. All these actions are financial statements. Simply speaking there are four kinds of financial transactions.

  • Money goes out – Whenever you buy something or pay for a service, the dollars come out of your pocket.  This is the most common kind of financial transaction. For example when you buy an ice-cream cone for $5 it is a financial transaction where money goes out of your pocket.
  • Money coming in – Salary day is the most awaited day right! We are waiting for our bank account sum to increase. This is another common type of financial transaction. All kinds of transactions where you will get the money are of this type. For example you are taking a seminar and being paid a fees. The fee is money coming to you.
  • Money supposed to come in – Sometimes the money is not paid instantly. The buyer will take some time to pay the money due. This is the money which is supposed to come in. For example if you are running a wholesale business you will have to give goods on credit to the retailer. This credit is the money supposed to come in.
  • Money Supposed to go out – If you have taken a loan a monthly installment goes every month. This is the money which is supposed to go out every month.

Financial transactions entail only these four kinds. It is very simple. I will introduce the way these are used in financial statements  which need to be prepared by companies next time. Feel free to ask questions.

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