Connell Lang posted an update 8 months, 3 weeks ago
Accounting is definitely an information system which identifies, records, analyzes interprets and communicates auto data of your financial entity. Accounting is made up of three basic activities – it identifies, records, and communicates auto era of a company to interested users. Consider a closer inspection at these 3 activities.
Identifying Economic Events: Many events are happening every day in business. A lot of them are affecting budget in the business whereas, some don’t. Events affecting financial position of an business i.e. Assets=Liability+ Owner’s Equity, are known as Economic events and meant to be recorded in accounting system. To identify economic events; a firm selects auto events highly relevant to its business. Types 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. Types of non-economic events of exactly the same companies could be appointing a whole new manager by PepsiCo and departure of your trusted employee from AT & T.
Recording Economic Events: When a company like PepsiCo identifies economic events, it records those events as a way to give a good its financial activities. Recording is made up of keeping a deliberate, chronological diary of events, measured in money. Recording comes through a process called double entry accounting system. The machine 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 by using accounting reports. The most common of the reports are called Fiscal reports. Parties interested into business’s financial information could 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 within a standardized way. It accumulates information resulting from similar transactions. For instance, PepsiCo accumulates all sales transactions on the certain period of time and reports the info as you amount inside the company’s fiscal reports such data are said being reported from the aggregate. By presenting the recorded data inside the aggregate, the accounting process simplifies a multitude of transactions and makes a group of activities understandable and meaningful.
An important aspect in communicating economic events is the accountant’s capacity to analyze and interpret the reported information. Analyses involve using 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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