Sargent Melchiorsen posted an update 2 years, 3 months ago
Accounting is surely an information system which identifies, records, analyzes interprets and communicates the economical data of a financial entity. Accounting is made up of three basic activities – it identifies, records, and communicates auto era of an organization to interested users. Let’s take a close look at these 3 activities.
Identifying Economic Events: Many events are happening each day in a business. A lot of them are affecting budget of the business whereas, some don’t. Events affecting financial position of an business i.e. Assets=Liability+ Owner’s Equity, are called Economic events and said to be recorded in accounting system. To recognize economic events; an organization selects the economical events tightly related to its business. Samples 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. Samples of non-economic events of the same companies could possibly be appointing a fresh manager by PepsiCo and departure of your trusted employee from AT & T.
Recording Economic Events: Once a company like PepsiCo identifies economic events, it records those events to be able to give you a good its financial activities. Recording includes keeping a planned out, chronological diary of events, measured in dollars and cents. Recording comes via a process called double entry accounting system. The system includes recording, summarizing, checking mathematical accuracy and preparing statement of financial position.
Communicating Consolidate Financial Data: Finally, PepsiCo communicates the collected information to interested users by using accounting reports. The most typical of the reports are known 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 help make the reported financial information meaningful, PepsiCo reports the recorded data in the standardized way. It accumulates information as a result of similar transactions. For example, PepsiCo accumulates all sales transactions more than a certain time frame and reports your data as you amount within the company’s financial statements such data are said being reported in the aggregate. By presenting the recorded data inside the aggregate, the accounting process simplifies many transactions and constitutes a series of activities understandable and meaningful.
A significant take into account communicating economic events could be the accountant’s capacity 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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