Grossman Lang posted an update 9 months, 2 weeks ago
Accounting is surely an information system which identifies, records, analyzes interprets and communicates auto data of your financial entity. Accounting consists of three basic activities – it identifies, records, and communicates auto era of a business to interested users. Let us take a closer inspection at these 3 activities.
Identifying Economic Events: Many events are happening on a daily basis in business. A lot of them are affecting position from the business whereas, some don’t. Events affecting financial position of the business i.e. Assets=Liability+ Owner’s Equity, are called Economic events and meant to be recorded in accounting system. To spot economic events; a company selects the economic events relevant to its business. Types of economic events will be the sale of snack chips PepsiCo, Providing of telephone services by AT & T, and payment of wages by Ford Motors Company. Instances of non-economic events of exactly the same companies might be appointing a fresh manager by PepsiCo and departure of an trusted employee from AT & T.
Recording Economic Events: Each company like PepsiCo identifies economic events, it records those events to be able to give a history of its financial activities. Recording includes keeping a planned out, chronological diary of events, measured in dollars and cents. Recording comes by having a process called double entry accounting system. The device 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 by means of accounting reports. The most typical of those reports are called Financial Statements. Parties interested into business’s financial information could be classified into three main categories. The your customers are Internal, External and Government. To 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 over the certain period of time and reports the data together amount inside the company’s financial statements such data have been demonstrated to become reported within the aggregate. By presenting the recorded data from the aggregate, the accounting process simplifies numerous transactions and produces a series of activities understandable and meaningful.
A vital take into account communicating economic events may be the accountant’s capacity to analyze and interpret the reported information. Analyses involve usage 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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