Part B: Classification Of Accounts-Advantages Of A Properly Designed Classification of Accounts.

Earlier in Part A, the basic principles of classification of accounts have been discussed.This article relates to the readers the various advantages of having designed a proper set of classified accounts.

Advantages of a properly designed classification of accounts:

It facilitates the recording of business transactions by the provision of suitable and self-defined ledger accounts;

It facilitates the preparation of financial and revenue statements without any further re-arrangement and analysis of information contained in the ledger accounts

It provides for expansion or alteration in the ledger accounts resulting from necessary changes in the business or industry

It provides the plan for the accounting records inasmuch as the original data and books of original entry will be in keeping with the particular classification desired

When represented by a chart of accounts ( usually contained in an Accounting manual), such acts as a guide to the staff in the recording of transactions

By the use of account symbols,economy in clerical effort is achieved

It materially aids the summarization of accounts for the purpose of comparison