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E-book Accounting Principles
As a starting point to the accounting process, a company identifi es the economic events relevant to its business. Examples of economic events are the sale of snack chips by PepsiCo, the provision of cell phone services by AT&T, and the payment of wages by Facebook. Once a company like PepsiCo identifi es economic events, it records those events in order to provide a history of its fi nancial activities. Recording consists of keeping a systematic, chronological diary of events, measured in dollars and cents. In recording, PepsiCo also classifi es and summarizes economic events. Finally, PepsiCo communicates the collected information to interested users by means of accounting reports. The most common of these reports are called fi nancial statements. To make the reported fi nancial information meaningful, PepsiCo reports the recorded data in a standardized way. It accumulates information resulting from similar transactions. For example, PepsiCo accumulates all sales transactions over a certain period of time and reports the data as one amount in the company’s fi nancial statements. Such data are said to be reported in the aggregate. By presenting the recorded data in the aggregate, the accounting process simplifi es a multitude of transactions and makes a series of activities understandable and meaningful.
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