Accounting is surely an information system which identifies, records, analyzes interprets and communicates the economical data of the financial entity. Accounting consists of three basic activities – it identifies, records, and communicates auto events of a business to interested users. Let us take a closer look at these 3 activities.

Identifying Economic Events: Many events are happening on a daily basis in a business. A lot of them are affecting financial position in the business whereas, some don’t. Events affecting financial position of the business i.e. Assets=Liability+ Owner’s Equity, are known as Economic events and meant to be recorded in accounting system. To recognize economic events; an organization selects the cost-effective events tightly related 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. Types of non-economic era of precisely the same companies could be appointing a fresh manager by PepsiCo and departure of your trusted employee from AT & T.

Recording Economic Events: When a company like PepsiCo identifies economic events, it records those events in order to provide a history of its financial activities. Recording contains keeping a deliberate, chronological diary of events, measured in money. Recording comes via a process called double entry accounting system. The device consists of recording, summarizing, checking mathematical accuracy and preparing statement of economic position.

Communicating Consolidate Financial Data: Finally, PepsiCo communicates the collected information to interested users through accounting reports. The most frequent of these 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 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. As an example, PepsiCo accumulates all sales transactions more than a certain period of time and reports your data as you amount within the company’s financial statements such data are said to become reported within the aggregate. By presenting the recorded data from the aggregate, the accounting process simplifies many transactions and constitutes a series of activities understandable and meaningful.

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