YEAR 11
ACCOUNTING
CLASSIFICATION OF
ACCOUNTS
REASON OF CLASSIFICATION
Each accounting element is further classified
into different categories. The reason of
classification is to:
Give more detailed information in the financial
statements
ASSETS
Assets are further classified into:
CURRENT ASSETS
NON CURRENT ASSETS, which are further
classified into:
Property, Plant and Equipment
Intangible Assets
Investments
ASSETS
Current Assets
Property, Plant
and
Equipment
Non Current Assets
Investments
Intangible
Assets
CURRENT ASSETS
Current Assets are assets that:
 Is Cash OR
 Can or expected to be turned into cash in the
next 12 months (For Example: Accounts
Receivable) OR
 Will be or expected to be used up in the next 12
months (For example: Stationary on Hand).
NON CURRENT ASSETS
Non Current Assets are assets other than
Current Assets.
That means the assets will be retained in the
business for more than 12 months
Property, Plant and Equipment
Property, Plant and Equipment are tangible assets
which will be retained in the business for
more than 12 months.
Property, Plant and Equipment are used:
To Produce goods and services (such as
Machinery)
For business’s administration purpose (such as
Office Equipment)
For Rental to others (like Property to Rent)
Investments
Investments are investments with using
business’s surplus cash. These kinds of
investments are usually due:
Within 12 months
After 12 months
Intangible Assets
Intangible Assets are assets which are
UNTOUCHABLE but brings in future
economic benefit.
For example:
Goodwill (Business’s reputation) brings in
future economic benefit of extra income due
to good business’s reputation.
Examples
Inventory
Current Assets
Cash at Bank
Current Assets
Term Deposit (due June 2006)
Current Assets
Shares in AIA Ltd
(expected to be sold in 2010)
Investments
Petty Cash
Current Assets
Goodwill
Intangible Assets
Delivery Vehicle
Property, Plant and Equipment
Furniture and Fittings
Property, Plant and Equipment
Computers
Property, Plant and Equipment
Trademark
Intangible Assets
LIABILITIES
Liabilities are further classified into:
 Current Liabilities
 Non Current Liabilities
Current Liabilities
Guess what do we mean by Current
Liabilities
Current Liabilities are liabilities that are
settled or expected to be settled in the next
12 months.
Non Current Liabilities
Non-current liability means….
Any liability that is settled or expected
to be settled after 12 months.
LIABILITIES
Current Liabilities
Non Current
Liabilities
Examples
Accounts Payable
Current Liabilities
Bank Overdraft
Current Liabilities
Loan (due Jan 2007)
Current Liabilities
Mortgage (due Jan 2017)
GST Payable
Non Current Liabilities
Current Liabilities
EXAMPLES (cont’d)
Hire Purchase (due Dec 2006)
Loan (due Dec 2011)
Current Liabilities
Non-Current Liabilities
INCOME
Income are classified into the following:
Revenue
 Other Income

Revenue
Main source of income for businesses
Trading Entity
(like Dairy Store)
Sales
Service Entity
(like Health clinic)
Fees Received
Other Income
Incomes other than Revenue. Examples could be:
Interest
Received
Gain on Sale
Commission Received
Dividends Received
Rent Received
INCOME
Revenue
Other Income
EXPENSES
Expenses are further classified into different
categories according to their function.
Expenses are further classified into:
Distribution Expenses
Administration Expenses
Financial Costs
Distribution Expenses
Distribution expenses are costs incurred in
transferring ownership of finished goods to
the consumer.
Those expenses incurred through the
promotion, storage, selling and delivery of
the inventory for sale.
Distribution Expenses Example
Give us examples of distribution expenses in
a florist shop (Refer back to the features of
Distribution Expenses)
Administration Expenses
Administrative expenses are costs
associated with the administration of the
entity as a whole.
Examples
Give us examples of administration
expenses in a florist shop. (Remember,
Administration Expenses relates to the
administration side of the entity)
Financial Costs
Finance costs arise from an entity financing
its operations from external sources. (i.e.
costs relate to funding from outsiders)
Finance Costs are limited to different types
of interest paid.
EXPENSES
Distribution
Expenses
Administration
Expenses
Financial
Costs
Examples
Advertising
Distribution Expenses
Wages (Office workers)
Admin. Expenses
Interest on Loan
Financial Costs
Rent (Shop)
Distribution Expenses
Wages (Shop Assistants)
Distribution Expenses
Examples cont’d
Interest on Hire Purchase
Delivery Truck Expenses
Financial Costs
Distribution Expenses
Maintenance to Office Equipment Admin Expenses
Loss on Sale on Shop Equipment Distribution Expenses
Stationery
Admin Expenses
Commission Paid
Distribution Expenses