Financial transactions are integral to business operations. There must be an involvement of two willing parties (seller and buyer), for a financial transaction to work. It basically refers to a business event that has a direct impact on the financial status of at least two organisations or individuals.
Keeping a record of this enables business bodies to stay updated regarding their performance and financial standing.
To know the particularities, refer to the sections below.
Table of Contents
What Does Financial Transaction Mean?
It is referred to the activity that alters the value of any assets, liabilities or equity of an owner. To put it in simple words, it is an agreement or a sort of communication conducted between buyers and sellers for payment in exchange for any assets, goods or services.
It will alter the status of finances and account balances of business bodies or individuals. In this case, there is always an involvement of a minimum of one financial asset, like money or any valuable asset like gold. Every transaction is documented chronologically by business bodies to ensure the proper functioning of a business.
Types of Financial Transaction
There are primarily four types of transactions that are common in the business sphere.
A transaction takes place during business sales. During sales, transactions are carried between sellers and buyers when any tangible or intangible services or assets are sold to buyers against money. Sales of any goods or services enable businesses to earn revenue. Other than cash, sales are carried on in exchange for credit. Sales constitute a major part of business income. Sales transactions are recorded by business bodies as account receivables.
A receipt is a written acknowledgement that acts as a confirmation that the concerned party has received the necessary amount of money or goods after a sale. Such a transaction commences after a business entity receives money for offering a service or product to another business body.
Purchase refers to the process when a business body undergoes a transaction to obtain goods and services and accomplish business goals. The entire acquisition of services or goods is done in exchange for payment. Raw materials are purchased by business entities to make sales. Such transactions are recorded in accounts payables.
Payment involves the voluntary transfer of money or any valuable asset that is equivalent to the amount payable from one party to another for availing of services or in exchange for goods or products. Such financial transactions are preceded by a bill or an invoice.
As payments are integral to business performance, they must be regulated well. For instance, with RazorpayX Vendor Payment, business bodies can easily access all invoices on the dashboard and clear them on time.
Differences Between Financial Transactions and Non-Financial Transactions
Refer to the table below to get an insight into the differences between financial and non-financial transactions.
|Financial Transaction||Non-financial Transaction|
|In this case, there is a transfer of money between accounts. It can also be a transfer of valuable items.||Non-financial Transactions (NFTs) do not carry any monetary value. It does not involve any transactions of goods or money.|
|Instances of them are withdrawal of cash, transfer of money etc.||Some instances of non-financial transactions are balance inquiries, chequebook requests, mini statement printing, updating customer details etc.|
|They are never unidirectional.||Non-financial transactions might be unidirectional.|
How Can RazorpayX Aid in Financial Transactions?
With RazorpayX, the business banking arm of Razorpay, business bodies can tide over all their banking needs seamlessly. From reaping the benefits of instant and automated pay-outs to carrying out smooth transactions, business bodies will get robust assistance from this neo-banking platform.
For instance, with the Razorpay-powered current account, businesses can easily and frequently opt for transactions. There is absolutely no limitation on the number of withdrawals and deposits made every month. Further, business entities can add beneficiaries and start with transacting. Other notable services like RazorpayX Forex funding enables startup businesses to raise funds globally and brings funds to India Seamlessly.
Frequently Asked Questions
What is the role of a financial transaction device?
A financial transaction device refers to the instrument or method that is representative of a financial account that is used during transferring of funds or initiating electronic payments to acquire a good, property or service.
Are the financial transactions included in GDP?
Financial transactions like purchases, sales or loans are not recorded in a nation’s GDP (Gross Domestic Product). Only the final goods production and capital investments are included in GDP.
How can businesses add invoices to the RazorpayX platform?
Business entities can forward invoices via email or import them from any accounting tools they use. They can also allow vendors to add invoices from the vendor portal directly to RazorpayX and ensure a hassle-free transaction.
What is Financial Transaction Tax (FTT)?
Financial Transaction Tax (FTT) is a tax that is charged to businesses for carrying out a transaction. The tax is imposed to mitigate volatility that is related to financial markets and ensure fair tax collection.