Connell Heath posted an update 1 year, 3 months 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 the economic events of a corporation to interested users. Let’s take a closer look at these three activities.
Identifying Economic Events: Many events are happening on a daily basis in a business. A number of them are affecting position of the business whereas, some don’t. Events affecting position of the business i.e. Assets=Liability+ Owner’s Equity, these are known as Economic events and allowed to be recorded in accounting system. To spot economic events; a business selects the economical events tightly related 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. Types 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: When a company like PepsiCo identifies economic events, it records those events so that you can give you a good its financial activities. Recording consists of keeping a planned out, chronological diary of events, measured in dollars and cents. Recording comes by way of a process called double entry accounting system. The machine contains 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 known as Financial Statements. Parties interested into business’s financial information can 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 in the standardized way. It accumulates information due to similar transactions. As an example, PepsiCo accumulates all sales transactions over the certain time period and reports the information jointly amount inside the company’s financial statements such data are said to become reported inside the aggregate. By presenting the recorded data within the aggregate, the accounting process simplifies a variety of transactions and constitutes a number of activities understandable and meaningful.
A vital take into account communicating economic events will be the accountant’s capability to analyze and interpret the reported information. Analyses involve using ratios, percentages, graphs, and charts to focus on, significant financial trends and relationships. Interpretation involves explaining the uses, meaning and limitations of reported data.
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