Accounting is surely an information system which identifies, records, analyzes interprets and communicates the economical data of an financial entity. Accounting contains three basic activities – it identifies, records, and communicates the economic events of a company to interested users. Let’s take a close look at these 3 activities.
Identifying Economic Events: Many events are happening each day in a business. Many of them are affecting position in the business whereas, some don’t. Events affecting budget of the business i.e. Assets=Liability+ Owner’s Equity, are known as Economic events and said to be recorded in accounting system. To identify economic events; an organization selects the economic events strongly related its business. Instances of economic events are 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 the identical companies may be appointing a fresh manager by PepsiCo and departure of a trusted employee from AT & T.
Recording Economic Events: Each 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 dollars and cents. Recording comes by way of a process called double entry accounting system. The system 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 using accounting reports. The most typical of these reports these are known as Financial Statements. Parties interested into business’s financial information can be classified into three main categories. The your list are Internal, External and Government. To make the reported financial information meaningful, PepsiCo reports the recorded data within a standardized way. It accumulates information caused by similar transactions. As an example, PepsiCo accumulates all sales transactions over a certain time period and reports the info jointly amount in the company’s fiscal reports such data have been demonstrated to get reported within the aggregate. By presenting the recorded data inside the aggregate, the accounting process simplifies numerous transactions and is really a compilation of activities understandable and meaningful.
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