Accounting is definitely an information system which identifies, records, analyzes interprets and communicates auto data of the financial entity. Accounting contains three basic activities – it identifies, records, and communicates the economic era of a business to interested users. Let us take a closer inspection at these three activities.
Identifying Economic Events: Many events are happening each day in a business. A number of them are affecting budget with the business whereas, some don’t. Events affecting budget of your business i.e. Assets=Liability+ Owner’s Equity, these are known as Economic events and supposed to be recorded in accounting system. To distinguish economic events; an organization selects the economical events highly relevant to 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. Examples of non-economic era of the identical companies might be appointing a whole new manager by PepsiCo and departure of the trusted employee from AT & T.
Recording Economic Events: When a company like PepsiCo identifies economic events, it records those events to be able to provide a good reputation for its financial activities. Recording includes keeping a deliberate, chronological diary of events, measured in dollars and cents. Recording comes through a process called double entry accounting system. The machine includes recording, summarizing, checking mathematical accuracy and preparing statement of economic position.
Communicating Consolidate Financial Data: Finally, PepsiCo communicates the collected information to interested users by using accounting reports. The most typical of those reports are classified as Financial Statements. Parties interested into business’s financial information could be classified into three main categories. The your list are Internal, External and Government. To really make the reported financial information meaningful, PepsiCo reports the recorded data inside a standardized way. It accumulates information due to similar transactions. As an example, PepsiCo accumulates all sales transactions on the certain period of time and reports your data jointly amount within the company’s fiscal reports such data are said to become reported within the aggregate. By presenting the recorded data from the aggregate, the accounting process simplifies numerous transactions and is really a group of activities understandable and meaningful.
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