Accounting is an information system which identifies, records, analyzes interprets and communicates the economic data of your financial entity. Accounting includes three basic activities – it identifies, records, and communicates auto era of an organization to interested users. Let’s take a good look at these 3 activities.
Identifying Economic Events: Many events are happening each day in a business. A number of them are affecting position of the business whereas, some don’t. Events affecting position of the business i.e. Assets=Liability+ Owner’s Equity, these are known as Economic events and said to be recorded in accounting system. To distinguish economic events; a company selects the economic events highly relevant to its business. Types of economic events would be the sale of snack chips PepsiCo, Providing of telephone services by AT & T, and payment of wages by Ford Motors Company. Types of non-economic era of precisely the same companies might be appointing a whole new manager by PepsiCo and departure of an trusted employee from AT & T.
Recording Economic Events: Once a company like PepsiCo identifies economic events, it records those events to be able to give you a good its financial activities. Recording contains keeping an organized, chronological diary of events, measured in money. Recording comes by way of a process called double entry accounting system. It contains recording, summarizing, checking mathematical accuracy and preparing statement of monetary position.
Communicating Consolidate Financial Data: Finally, PepsiCo communicates the collected information to interested users by way of accounting reports. The most typical of such reports are classified as Fiscal reports. Parties interested into business’s financial information may be classified into three main categories. The your customers are Internal, External and Government. To help make the reported financial information meaningful, PepsiCo reports the recorded data in the standardized way. It accumulates information caused by similar transactions. For instance, PepsiCo accumulates all sales transactions over the certain period of time and reports your data as you amount inside the company’s financial statements such data are said to get reported from the aggregate. By presenting the recorded data in the aggregate, the accounting process simplifies many transactions and makes a series of activities understandable and meaningful.
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