Accounting can be an information system which identifies, records, analyzes interprets and communicates the economical data of your financial entity. Accounting consists of three basic activities – it identifies, records, and communicates the economic era of an organization to interested users. Let us take a closer look at these 3 activities.

Identifying Economic Events: Many events are happening every day in a business. Many of them are affecting budget from the business whereas, some don’t. Events affecting financial position of your business i.e. Assets=Liability+ Owner’s Equity, are known as Economic events and supposed to be recorded in accounting system. To spot economic events; a company selects the economic events strongly related its business. Samples of economic events include 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 could be appointing a new manager by PepsiCo and departure of your trusted employee from AT & T.

Recording Economic Events: Each company like PepsiCo identifies economic events, it records those events in order to provide a history of its financial activities. Recording includes keeping a planned out, chronological diary of events, measured in dollars and cents. Recording comes via 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 typical of such reports are known as Financial Statements. Parties interested into business’s financial information may 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 a standardized way. It accumulates information caused by similar transactions. For instance, PepsiCo accumulates all sales transactions on the certain period of time and reports the info jointly amount inside the company’s financial statements such data have been proved being reported from the aggregate. By presenting the recorded data in the aggregate, the accounting process simplifies a multitude of transactions and constitutes a number of activities understandable and meaningful.

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