All forms of business are set up to provide goods and/or services to their customers or to benefit the public (i.e. charitable work). In order to facilitate the provision of such goods and services they will need to engage in a series of transactions. These transactions need to be recorded in the accounting system so that the individuals who manage and control the business can produce and review reports to help them understand the financial performance and position of the business. This information will help them operate the business in a more effective and efficient manner.
Cash and credit transactions are used in the sale and purchase of goods and services and in the receipt of income and payment of expenditure.
Small, day-to-day transactions are commonly paid in cash. Larger transactions tend to be paid for by cheque or other payment made from the business bank account, such as automated payments. Such expenditure is authorised at different levels in the business and within a system of financial control.
Payments to employees are also controlled and authorised and made regularly and in a timely manner.