Part A: Classification Of Accounts-Basic Principles
August 3rd, 2007
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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 |
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