Erlandsen Aagaard posted an update 5 months, 2 weeks ago
Accounting is surely an information system which identifies, records, analyzes interprets and communicates the economic data of a financial entity. Accounting includes three basic activities – it identifies, records, and communicates auto era of a corporation to interested users. Let us take a close look at these three activities.
Identifying Economic Events: Many events are happening daily in business. A lot of them are affecting position from the business whereas, some don’t. Events affecting position of a business i.e. Assets=Liability+ Owner’s Equity, these are known as Economic events and said to be recorded in accounting system. To spot economic events; a business selects the economical events strongly related its business. Types 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. Samples of non-economic era of precisely the same companies could be appointing a fresh manager by PepsiCo and departure of the trusted employee from AT & T.
Recording Economic Events: Once a company like PepsiCo identifies economic events, it records those events so that you can provide a history of its financial activities. Recording includes keeping a deliberate, chronological diary of events, measured in dollars and cents. Recording comes by having 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 by way of accounting reports. The most frequent of these reports these are known as Financial Statements. Parties interested into business’s financial information might be classified into three main categories. The your clients are Internal, External and Government. To help make the reported financial information meaningful, PepsiCo reports the recorded data inside a standardized way. It accumulates information due to similar transactions. For example, PepsiCo accumulates all sales transactions on the certain stretch of time and reports your data as one amount from the company’s financial statements such data are said to get reported in the aggregate. By presenting the recorded data from the aggregate, the accounting process simplifies numerous transactions and makes a series of activities understandable and meaningful.
An important take into account communicating economic events will be the accountant’s capacity 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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