Part A: Classification Of Accounts-Basic Principles

Classification is a very important step when designing an efficient accounting system. Append below are some basic principles used in the classification of Accounts:-

Basic Principles In The Classification Of Accounts

The classification should be governed by the form in which financial and operating statements are to be presented

Each ledger account should be given a title which is self-descriptive and which clearly indicates the purpose for which is it intended

The classification should be sufficiently detailed so that each item representing an asset, liability, expense or revenue should find its place in a single account

Groupings of balance sheet and revenue statement items should be clearly defined so that various classes may be distinguished.

The classification of revenue accounts should if possible be designed to facilitate the preparation of taxation and similar government returns;

The classification should be sufficiently flexible to permit of the introduction of new accounts