Accounting is surely an information system which identifies, records, analyzes interprets and communicates auto data of your financial entity. Accounting is made up of three basic activities – it identifies, records, and communicates the economic era of an organization to interested users. Let’s take a closer look at these three activities.
Identifying Economic Events: Many events are happening daily in business. Many of them are affecting budget in the business whereas, some don’t. Events affecting budget of an business i.e. Assets=Liability+ Owner’s Equity, are classified as Economic events and supposed to be recorded in accounting system. To identify economic events; a business selects the economic events relevant to its business. Instances of economic events will be the sale of snack chips PepsiCo, Providing of telephone services by AT & T, and payment of wages by Ford Motors Company. Samples of non-economic era of the identical companies might be appointing a fresh manager by PepsiCo and departure of the trusted employee from AT & T.
Recording Economic Events: When a company like PepsiCo identifies economic events, it records those events in order to provide a reputation its financial activities. Recording contains keeping a systematic, chronological diary of events, measured in money. Recording comes via a process called double entry accounting system. The device is made up of recording, summarizing, checking mathematical accuracy and preparing statement of economic position.
Communicating Consolidate Financial Data: Finally, PepsiCo communicates the collected information to interested users by using accounting reports. The most typical of these reports are known as Fiscal reports. Parties interested into business’s financial information may be classified into three main categories. The interested parties are Internal, External and Government. To make the reported financial information meaningful, PepsiCo reports the recorded data within a standardized way. It accumulates information resulting from similar transactions. As an example, PepsiCo accumulates all sales transactions over a certain stretch of time and reports the info as one amount from the company’s financial statements such data have been demonstrated to be reported within the aggregate. By presenting the recorded data inside the aggregate, the accounting process simplifies numerous transactions and is really a group of activities understandable and meaningful.
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