We have a custom record that is a child of transaction. For example, on a sales order it will get a reference to the other record that is created, but I have found I don't necessarily need to do it that way. On the custom record I can specify what transaction it is associated with. Is there any specific reason why you wouldn't want to do it this way or is it just preference. The con is that there is no "saved" reference on the transaction, but you do have the subtab that would show the records associated. The benefit of that is it allows us to associate a custom record with a transaction without having to edit the transaction to add the reference.

field on a transaction referring the custom record is the reverse of what you described, the transaction is a child of the custom record and the custom record is the parent

I may have described it poorly. The custom record has the transaction field on it and the box Record is parent is selected. When the sales order gets created we have a workflow go out and create another record and the internal id/record link gets stored in a field on the transaction record. However for legacy sales orders the only way for us to add the connection is to edit the sales order and create the associated record.. This isn't ideal since we don't want to be editing approved orders. It appears all the reporting requirements would be fine without having to store the record in a field on the transaction itself.

internal id/record link gets stored in a field on the transaction record

ok so even though we have the transaction field set to record is parent on the custom record if we have the workflow set to "store results in" on a transaction field it makes the transaction a child of the custom record?

if it helps, in a hierarchy, a parent can have multiple children

I actually see what you are saying in the system. When I look at the record now it says 1 child and on my record it says 1 parent. For the body field (List/Record - Custom Record) on the sales order it is marked as "Record is Parent" Where as with my new custom record I have a transaction field and mark that as "Record is Parent"