Stallings Aagaard posted an update 3 years, 7 months ago
Accounting can be an information system which identifies, records, analyzes interprets and communicates the cost-effective data of your financial entity. Accounting includes three basic activities – it identifies, records, and communicates the economical events of a business to interested users. Let’s take a good look at these three activities.
Identifying Economic Events: Many events are happening daily in a business. A lot of them are affecting budget in the business whereas, some don’t. Events affecting budget of your business i.e. Assets=Liability+ Owner’s Equity, are called Economic events and allowed to be recorded in accounting system. To recognize economic events; a company selects the cost-effective events strongly related 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. Examples of non-economic events of precisely the same companies could be appointing a whole new manager by PepsiCo and departure of the 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 good its financial activities. Recording consists of keeping a deliberate, chronological diary of events, measured in money. Recording comes through a process called double entry accounting system. It consists of 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 way of accounting reports. The commonest of those reports are classified as 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 caused by similar transactions. For instance, PepsiCo accumulates all sales transactions on the certain time period and reports the info as you amount inside the company’s financial statements such data have been proved to be reported within the aggregate. By presenting the recorded data from the aggregate, the accounting process simplifies a variety of transactions and is really a number of activities understandable and meaningful.
A vital aspect in communicating economic events is the accountant’s power to analyze and interpret the reported information. Analyses involve usage of ratios, percentages, graphs, and charts to spotlight, significant financial trends and relationships. Interpretation involves explaining the uses, meaning and limitations of reported data.
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