The Perception of Accounting

Accounting is definitely an information system which identifies, records, analyzes interprets and communicates auto data of an financial entity. Accounting includes three basic activities – it identifies, records, and communicates the cost-effective era of a company to interested users. Let us take a good look at these three activities.

Identifying Economic Events: Many events are happening each day in a business. A lot of them are affecting financial position with the business whereas, some don’t. Events affecting position of an business i.e. Assets=Liability+ Owner’s Equity, are known as Economic events and meant to be recorded in accounting system. To distinguish economic events; an organization selects the economical events strongly related its business. Types of economic events are 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 exactly the same companies could possibly be appointing a whole new manager by PepsiCo and departure of an trusted employee from AT & T.

Recording Economic Events: Once a company like PepsiCo identifies economic events, it records those events so that you can give you a reputation its financial activities. Recording includes keeping an organized, chronological diary of events, measured in money. Recording comes via a process called double entry accounting system. It is made up of recording, summarizing, checking mathematical accuracy and preparing statement of economic position.

Communicating Consolidate Financial Data: Finally, PepsiCo communicates the collected information to interested users through accounting reports. The most frequent of the reports are classified as Fiscal reports. Parties interested into business’s financial information could be classified into three main categories. The interested parties are Internal, External and Government. To really make the reported financial information meaningful, PepsiCo reports the recorded data in a standardized way. It accumulates information as a result of similar transactions. For instance, PepsiCo accumulates all sales transactions over a certain time period and reports the info as you amount within the company’s fiscal reports such data are said being reported inside the aggregate. By presenting the recorded data inside the aggregate, the accounting process simplifies a multitude of transactions and constitutes a group of activities understandable and meaningful.

More information about accounting check out our new webpage.