Connell Lang posted an update 11 months, 1 week ago
Accounting can be an information system which identifies, records, analyzes interprets and communicates the economic data of the financial entity. Accounting includes three basic activities – it identifies, records, and communicates the economical era of an organization to interested users. Consider a good look at these three activities.
Identifying Economic Events: Many events are happening every day in business. A number of them are affecting financial position of the business whereas, some don’t. Events affecting budget of an business i.e. Assets=Liability+ Owner’s Equity, are classified as Economic events and supposed to be recorded in accounting system. To recognize economic events; a business selects the cost-effective events strongly related its business. Types 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. Examples of non-economic events of precisely the same companies could be appointing a fresh manager by PepsiCo and departure of your trusted employee from AT & T.
Recording Economic Events: Each company like PepsiCo identifies economic events, it records those events in order to give you a reputation its financial activities. Recording contains keeping a systematic, chronological diary of events, measured in dollars and cents. Recording comes by way of a process called double entry accounting system. The system 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 through accounting reports. The most typical of those reports are called Fiscal reports. Parties interested into business’s financial information could be classified into three main categories. The interested parties are Internal, External and Government. To really make the reported financial information meaningful, PepsiCo reports the recorded data in a standardized way. It accumulates information resulting from similar transactions. By way of example, PepsiCo accumulates all sales transactions more than a certain time frame and reports the info as you amount from 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 a multitude of transactions and constitutes a number of activities understandable and meaningful.
A significant consider communicating economic events may be the accountant’s ability 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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