Connell Alexandersen posted an update 1 year, 1 month ago
Accounting can be an information system which identifies, records, analyzes interprets and communicates the cost-effective data of your financial entity. Accounting contains three basic activities – it identifies, records, and communicates the economic era of a corporation to interested users. Let’s take a closer inspection at these three activities.
Identifying Economic Events: Many events are happening every day in business. Some of them are affecting position of the business whereas, some don’t. Events affecting budget of your business i.e. Assets=Liability+ Owner’s Equity, are called Economic events and allowed to be recorded in accounting system. To identify economic events; a company selects the economic events relevant to its business. Samples 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. Examples of non-economic era of exactly the same companies could possibly be appointing a fresh manager by PepsiCo and departure of a trusted employee from AT & T.
Recording Economic Events: Once a company like PepsiCo identifies economic events, it records those events so that you can provide a good its financial activities. Recording includes keeping a deliberate, 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 through accounting reports. The most typical of these reports these are known as Financial Statements. Parties interested into business’s financial information may 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 on the certain time frame and reports the info as one amount inside the company’s financial statements such data have been demonstrated to get reported inside the aggregate. By presenting the recorded data inside the aggregate, the accounting process simplifies numerous transactions and produces a compilation of activities understandable and meaningful.
A vital take into account communicating economic events is the accountant’s ability to analyze and interpret the reported information. Analyses involve use of ratios, percentages, graphs, and charts to spotlight, significant financial trends and relationships. Interpretation involves explaining the uses, meaning and limitations of reported data.
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