Accounting is an information system that identifies, records, analyzes and interprets the economic data of a financial unit. Accounting consists of three basic activities – it identifies, records and communicates the economic events of the organization to the interested users. Let's look closely at the three activities.
Identification of economic events:
There are many events happening every day in a business. Some of them affect the financial position of business, while some do not. Events affecting the financial position of an enterprise, namely the Assets = Liability and Shareholder Share, are called economic events and have to be accounted for in the accounting system. Identification of economic events; a company selects the economic events associated with its business. Examples of business events include selling the PepsiCo snack chip, providing AT & T phone services, and paying the wages of the Ford Motors Company. For example, the non-economic events of the same companies could be the appointment of a new manager of PepsiCo and the departure of the AT & T employee.
Recording Economic Events:
As a company such as PepsiCo identifies economic events, it registers these events in order to secure its historical financial activity. Recording is a systematic, chronological diary of events, measured in dollars and cents. Recording takes place through a double-settlement system. The system consists of recording, summarizing, verifying and mathematical accuracy of mathematical accuracy
Uniforming financial data:
Finally, PepsiCo has contacted the interested users about the information collected through accounting reports. The most common of these reports is financial statements. Parties interested in business financial information can be classified into three main categories. Interested parties are internal, external and governmental bodies. In order for the reported financial information to be meaningful, PepsiCo records the recorded data in a standard manner. Similarly, you collect information from similar transactions. For example, PepsiCo collects all sales transactions over a period of time, and the data is reported as a sum in the company's financial statements for which the data is reported in the aggregate. By presenting aggregated data, the accounting process simplifies the multitude of transactions and makes a range of activities comprehensible and comprehensible.
An essential element of communicating economic events is that the accountant is able to analyze and interpret the reported information. Analyzes include the use of ratios, percentages, graphs, and graphs to highlight outstanding financial trends and relationships. Interpretation includes the use, meaning and limitations of the reported data.
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