The Notion of Accounting

Accounting is an information system which identifies, records, analyzes interprets and communicates auto data of an financial entity. Accounting is made up of three basic activities – it identifies, records, and communicates auto era of a corporation to interested users. Consider a close look at these 3 activities.

Identifying Economic Events: Many events are happening daily in a 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 supposed to be recorded in accounting system. To recognize economic events; an organization selects the economical events highly relevant to its business. Samples 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. Instances of non-economic events of the identical companies could possibly be appointing a brand 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 give a reputation its financial activities. Recording is made up of keeping an organized, chronological diary of events, measured in money. Recording comes by having 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 through accounting reports. The commonest of these reports these are known as Financial Statements. Parties interested into business’s financial information can be classified into three main categories. The your customers are Internal, External and Government. To help make the reported financial information meaningful, PepsiCo reports the recorded data within a standardized way. It accumulates information as a result of similar transactions. By way of example, PepsiCo accumulates all sales transactions over the certain stretch of time and reports your data as one amount within the company’s financial statements such data have been proved to get reported from the aggregate. By presenting the recorded data in the aggregate, the accounting process simplifies a multitude of transactions and produces a series of activities understandable and meaningful.

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