Connell Alexandersen posted an update 1 year, 1 month ago
Accounting is definitely an information system which identifies, records, analyzes interprets and communicates auto data of the financial entity. Accounting is made up of three basic activities – it identifies, records, and communicates auto events of an organization to interested users. Let us take a good look at these 3 activities.
Identifying Economic Events: Many events are happening daily in a business. A number of them are affecting budget from the business whereas, some don’t. Events affecting budget of a business i.e. Assets=Liability+ Owner’s Equity, these are known as Economic events and allowed to be recorded in accounting system. To distinguish economic events; a company selects auto events highly relevant to its business. Examples of economic events include 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 may be appointing a new manager by PepsiCo and departure of an trusted employee from AT & T.
Recording Economic Events: Each company like PepsiCo identifies economic events, it records those events as a way to supply a history of its financial activities. Recording contains keeping an organized, chronological diary of events, measured in dollars and cents. Recording comes via a process called double entry accounting system. The machine 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 through accounting reports. The most typical of those reports are known 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 really make the reported financial information meaningful, PepsiCo reports the recorded data in the standardized way. It accumulates information caused by similar transactions. As an example, PepsiCo accumulates all sales transactions on the certain period of time and reports the info as one amount from the company’s fiscal reports such data are said to get reported within the aggregate. By presenting the recorded data from the aggregate, the accounting process simplifies many transactions and is really a number of activities understandable and meaningful.
A vital element in communicating economic events will be the accountant’s power to analyze and interpret the reported information. Analyses involve utilization of ratios, percentages, graphs, and charts to highlight, significant financial trends and relationships. Interpretation involves explaining the uses, meaning and limitations of reported data.
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