Accounting can be an information system which identifies, records, analyzes interprets and communicates the economical data of an financial entity. Accounting includes three basic activities – it identifies, records, and communicates the economic era of an organization to interested users. Consider a close look at these 3 activities.
Identifying Economic Events: Many events are happening daily in business. A number of them are affecting budget with the business whereas, some don’t. Events affecting position of the business i.e. Assets=Liability+ Owner’s Equity, are called Economic events and said to be recorded in accounting system. To recognize economic events; a company selects the economic events tightly related to its business. Types 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. Examples of non-economic events of the identical companies might be appointing a fresh manager by PepsiCo and departure of an trusted employee from AT & T.
Recording Economic Events: When a company like PepsiCo identifies economic events, it records those events as a way to give you a good its financial activities. Recording includes keeping a systematic, chronological diary of events, measured in money. Recording comes by having 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 means of accounting reports. The commonest of these reports these are known as Financial Statements. Parties interested into business’s financial information might be classified into three main categories. The your clients are Internal, External and Government. To help make the reported financial information meaningful, PepsiCo reports the recorded data in a standardized way. It accumulates information due to similar transactions. As an example, PepsiCo accumulates all sales transactions over a certain time frame and reports the data as one amount from the company’s fiscal reports such data have been demonstrated being reported in the aggregate. By presenting the recorded data from the aggregate, the accounting process simplifies a variety of transactions and makes a compilation of activities understandable and meaningful.
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