WHAT IS ACCOUNTING???

what is accounting?

    why is accounting so popular? what consistently ranks as one of the top career opportunities in business? what frequently rates among the most popular majors on campus? what was the undergraduate degree chosen by Nike founder Phil knight, Home depot co-founder Arthur Blank, former acting director of the Federal Bureau of Investigation (FBI) Thomas Pickard, and numerous numbers of congress? Accounting why did this people choose accounting? they wanted to understand what was happening financially to their organization. Accounting is the financial information system that provide these insights. In short to understand your organization , you have to know the numbers.

   Accounting consists of three main activities ــــ it identifies, record, and communicates the economic events of an organization to interested users. Let's take a closer look at these three activities.

Three Activities

    To identify economic events, a company select economic events relevant to it's business. Example of economic events are the sale of snack chips by PepsiCo, providing of telephone services by AT&T, and payment of wages by ford motor company.

    Once a company like PepsiCo identifies economic events it record s those events in order to provide a history of it's financial activities.recording consists of keeping systematic,chronological diary of events,measured in dollars and cents .in recording,PepsiCo also classifies and summarize economic events.

    Finally,PepsiCo communicates the collected information to interested users by means of accounting reports.the most common of these reports are called financial statements.to make the reported financial information meaningful,Kellog 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 financial statements.such data are said to be reported in the aggregate by presenting the recorded data in the aggregate,the accounting process simplifies a multitude of transactions and make a serious activities understandable and meaningful. 

    A vital element in communicating economic events is the accountant's ability to analyze and interpret the reported information.analysis involves use of ratios percentages, graphs, and charts to highlight significant financial trends and relationships.interpretation involves explaining the uses, meaning, and limitations of reported data.

    You should understand that the accounting process includes the bookkeeping function. bookkeeping usually involves only the recording of economic events.it's therefore just one part of accounting process.in total, accounting involves the entire process of identifying, recording, and communicating economic events.