The Idea of Accounting

Accounting is an information system which identifies, records, analyzes interprets and communicates the economical data of a financial entity. Accounting contains three basic activities – it identifies, records, and communicates auto events of a corporation to interested users. Consider a good look at these three activities.

Identifying Economic Events: Many events are happening every day in a business. Some of them are affecting budget with the business whereas, some don’t. Events affecting position of an business i.e. Assets=Liability+ Owner’s Equity, are called Economic events and meant to be recorded in accounting system. To identify economic events; an organization selects auto events relevant to its business. Examples 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. Examples of non-economic era of precisely the same companies might be appointing a new manager by PepsiCo and departure of an trusted employee from AT & T.

Recording Economic Events: After a company like PepsiCo identifies economic events, it records those events to be able to give a good its financial activities. Recording contains keeping a deliberate, chronological diary of events, measured in dollars and cents. Recording comes through a process called double entry accounting system. The machine includes recording, summarizing, checking mathematical accuracy and preparing statement of financial position.

Communicating Consolidate Financial Data: Finally, PepsiCo communicates the collected information to interested users by using accounting reports. The most common of these reports are called Financial Statements. Parties interested into business’s financial information might be classified into three main categories. The your clients 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 caused by similar transactions. By way of example, PepsiCo accumulates all sales transactions on the certain period of time and reports the data jointly amount within the company’s fiscal reports such data have been proved being reported in the aggregate. By presenting the recorded data in the aggregate, the accounting process simplifies a variety of transactions and produces a number of activities understandable and meaningful.

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