Part A: Classification Of Accounts-Basic Principles

August 3rd, 2007 / No comments yet

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