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

August 3rd, 2007 Comments off
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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

 

 

 

 

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Financial Accounting

 
 

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