Accounting can be an information system which identifies, records, analyzes interprets and communicates the economic data of an financial entity. Accounting consists of three basic activities – it identifies, records, and communicates the economic events of an organization to interested users. Let’s take a close look at these 3 activities.

Identifying Economic Events: Many events are happening every day in business. A lot of them are affecting budget in the business whereas, some don’t. Events affecting position of the business i.e. Assets=Liability+ Owner’s Equity, are known as Economic events and said to be recorded in accounting system. To recognize economic events; a business selects auto events relevant to its business. Types 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 events of exactly the same companies could possibly be appointing a brand new manager by PepsiCo and departure of a 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 good reputation for its financial activities. Recording consists of keeping a planned out, chronological diary of events, measured in dollars and cents. Recording comes by way of a process called double entry accounting system. It contains 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 most frequent of the reports these are known as Financial Statements. Parties interested into business’s financial information might be classified into three main categories. The interested parties 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. As an example, PepsiCo accumulates all sales transactions over the certain time frame and reports your data as one amount in the company’s fiscal reports such data have been demonstrated to become reported in the aggregate. By presenting the recorded data in the aggregate, the accounting process simplifies numerous transactions and makes a group of activities understandable and meaningful.

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