The Idea of Accounting
Accounting is an information system which identifies, records, analyzes interprets and communicates the economic data of the financial entity. Accounting contains three basic activities - it identifies, records, and communicates the cost-effective events of an organization to interested users. Let's take a closer inspection at these 3 activities.
Identifying Economic Events: Many events are happening every day in a business. Many of them are affecting position in the business whereas, some don't. Events affecting financial position of your business i.e. Assets=Liability+ Owner's Equity, these are known as Economic events and said to be recorded in accounting system. To distinguish economic events; a firm selects the economic events tightly related to its business. Types of economic events would be the sale of snack chips PepsiCo, Providing of telephone services by AT & T, and payment of wages by Ford Motors Company. Samples of non-economic era of the same companies could be appointing a new manager by PepsiCo and departure of the trusted employee from AT & T.
Recording Economic Events: Each company like PepsiCo identifies economic events, it records those events as a way to provide a history of its financial activities. Recording includes keeping an organized, chronological diary of events, measured in money. Recording comes by having a process called double entry accounting system. The system is made up of 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 typical of those reports these are known as Fiscal reports. Parties interested into business's financial information could 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 due to similar transactions. For example, PepsiCo accumulates all sales transactions more than a certain period of time and reports the data as one amount within the company's fiscal reports such data have been demonstrated to be reported inside the aggregate. By presenting the recorded data in the aggregate, the accounting process simplifies numerous transactions and makes a number of activities understandable and meaningful.
An essential consider communicating economic events could be the accountant's power to analyze and interpret the reported information. Analyses involve utilization of ratios, percentages, graphs, and charts to highlight, significant financial trends and relationships. Interpretation involves explaining the uses, meaning and limitations of reported data.
For more information about thu thuat excel check out this website.