Stallings Hoppe posted an update 5 months, 3 weeks ago
Accounting is definitely an information system which identifies, records, analyzes interprets and communicates auto data of a financial entity. Accounting contains three basic activities – it identifies, records, and communicates the economic events of a corporation to interested users. Let’s take a good look at these three activities.
Identifying Economic Events: Many events are happening each day in business. A number of them are affecting budget in the business whereas, some don’t. Events affecting budget of an 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 company selects auto events relevant to its business. Examples 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. Types of non-economic events of precisely the same companies might be appointing a brand new 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 in order to supply a good its financial activities. Recording consists of keeping a planned out, chronological diary of events, measured in dollars and cents. Recording comes via a process called double entry accounting system. It includes 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 means of accounting reports. The most typical of these reports are classified 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 make the reported financial information meaningful, PepsiCo reports the recorded data in the standardized way. It accumulates information due to similar transactions. For instance, PepsiCo accumulates all sales transactions over a certain period of time and reports the data as you amount in the company’s financial statements such data are said to be reported in the aggregate. By presenting the recorded data within the aggregate, the accounting process simplifies a multitude of transactions and constitutes a compilation of activities understandable and meaningful.
A vital aspect in communicating economic events will be the accountant’s capacity to analyze and interpret the reported information. Analyses involve using 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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