Accounting can be an information system which identifies, records, analyzes interprets and communicates the economical data of the financial entity. Accounting includes three basic activities – it identifies, records, and communicates the economical era of a corporation to interested users. Let’s take a closer inspection at these 3 activities.
Identifying Economic Events: Many events are happening each day in business. Some of them are affecting financial position from the business whereas, some don’t. Events affecting financial position of a business i.e. Assets=Liability+ Owner’s Equity, are known as Economic events and said to be recorded in accounting system. To spot economic events; a firm selects the cost-effective events highly relevant to its business. Examples 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 events of the identical companies might be appointing a fresh manager by PepsiCo and departure of the trusted employee from AT & T.
Recording Economic Events: Each company like PepsiCo identifies economic events, it records those events to be able to give a reputation its financial activities. Recording consists of keeping a deliberate, chronological diary of events, measured in dollars and cents. Recording comes via a process called double entry accounting system. The device contains recording, summarizing, checking mathematical accuracy and preparing statement of financial position.
Communicating Consolidate Financial Data: Finally, PepsiCo communicates the collected information to interested users by way of accounting reports. The most frequent of these reports are classified as Fiscal reports. Parties interested into business’s financial information may be classified into three main categories. The your clients are Internal, External and Government. To really make the reported financial information meaningful, PepsiCo reports the recorded data in the standardized way. It accumulates information caused by similar transactions. By way of example, PepsiCo accumulates all sales transactions more than a certain time period and reports the info jointly amount in the company’s financial statements such data have been proved to become reported within the aggregate. By presenting the recorded data from the aggregate, the accounting process simplifies a multitude of transactions and constitutes a group of activities understandable and meaningful.
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