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  • Linnet Serrano posted an update 1 year, 7 months ago

    Accounting is surely an information system which identifies, records, analyzes interprets and communicates the economic data of your financial entity. Accounting contains three basic activities – it identifies, records, and communicates auto era of a company to interested users. Consider a close look at these 3 activities.

    Identifying Economic Events: Many events are happening on a daily basis in business. A lot of them are affecting financial position from the business whereas, some don’t. Events affecting budget of your business i.e. Assets=Liability+ Owner’s Equity, are classified as Economic events and allowed to be recorded in accounting system. To spot economic events; a firm selects auto events strongly related its business. Types of economic events will be 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 the same companies might be appointing a whole new manager by PepsiCo and departure of the trusted employee from AT & T.

    Recording Economic Events: When a company like PepsiCo identifies economic events, it records those events as a way to give a good its financial activities. Recording contains keeping a planned out, chronological diary of events, measured in dollars and cents. Recording comes by having a process called double entry accounting system. The device 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 way of accounting reports. The most frequent of such reports are classified as Financial Statements. Parties interested into business’s financial information could be classified into three main categories. The your list are Internal, External and Government. To help make the reported financial information meaningful, PepsiCo reports the recorded data in the standardized way. It accumulates information caused by similar transactions. By way of example, PepsiCo accumulates all sales transactions more than a certain time frame and reports the data together amount in the company’s fiscal reports such data have been proved to be reported in the aggregate. By presenting the recorded data inside the aggregate, the accounting process simplifies a multitude of transactions and constitutes a compilation of activities understandable and meaningful.

    A vital consider communicating economic events may be the accountant’s capacity to analyze and interpret the reported information. Analyses involve use of ratios, percentages, graphs, and charts to focus on, significant financial trends and relationships. Interpretation involves explaining the uses, meaning and limitations of reported data.

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