Accounting is definitely an information system which identifies, records, analyzes interprets and communicates auto data of a financial entity. Accounting is made up of three basic activities – it identifies, records, and communicates the economical events of a company to interested users. Let’s take a close look at these 3 activities.
Identifying Economic Events: Many events are happening every day in business. Some of them are affecting budget with the business whereas, some don’t. Events affecting position of a business i.e. Assets=Liability+ Owner’s Equity, these are known as Economic events and said to be recorded in accounting system. To distinguish economic events; a company selects the economical events highly relevant to its business. Samples 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 events of the identical companies could possibly be appointing a brand new manager by PepsiCo and departure of a trusted employee from AT & T.
Recording Economic Events: After a company like PepsiCo identifies economic events, it records those events as a way to supply a history of its financial activities. Recording includes keeping a planned out, chronological diary of events, measured in dollars and cents. Recording comes through a process called double entry accounting system. The system includes 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 most common of those reports these are known as Fiscal reports. Parties interested into business’s financial information might be classified into three main categories. The your customers 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. By way of example, PepsiCo accumulates all sales transactions over the certain time frame and reports your data jointly amount inside the company’s fiscal reports such data are said to get reported within the aggregate. By presenting the recorded data within the aggregate, the accounting process simplifies numerous transactions and produces a compilation of activities understandable and meaningful.
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