year 11 accounting classification of accounts. reason of classification each accounting element is...
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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 Non Current Assets
Property, Plantand
EquipmentInvestments
IntangibleAssets
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
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)
more than 12 months.
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
Cash at Bank
Term Deposit (due June 2006)
Shares in AIA Ltd(expected to be sold in 2010)
Current Assets
Current Assets
Current Assets
Investments
Petty Cash
Goodwill
Delivery Vehicle
Furniture and Fittings
Computers
Trademark
Current Assets
Intangible Assets
Property, Plant and Equipment
Property, Plant and Equipment
Property, Plant and Equipment
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 LiabilitiesNon Current
Liabilities
Examples
Accounts Payable
Bank Overdraft
Loan (due Jan 2007)
Mortgage (due Jan 2017)
GST Payable
Current Liabilities
Current Liabilities
Current Liabilities
Non Current Liabilities
Current Liabilities
Hire Purchase (due Dec 2006)
Loan (due Dec 2011)
EXAMPLES (cont’d)
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)
Service Entity(like Health clinic)
Sales
Fees Received
Other Income
Incomes other than Revenue. Examples could be:
Interest ReceivedGain on SaleCommission ReceivedDividends ReceivedRent Received
INCOME
Revenue Other Income
EXPENSES
Expenses are further classified into different categories according to their function.
Expenses are further classified into:Distribution ExpensesAdministration ExpensesFinancial 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
DistributionExpenses
AdministrationExpenses
FinancialCosts
Examples
Advertising
Wages (Office workers)
Interest on Loan
Rent (Shop)
Wages (Shop Assistants)
Distribution ExpensesAdmin. Expenses
Financial Costs
Distribution ExpensesDistribution Expenses
Examples cont’dInterest on Hire Purchase
Delivery Truck Expenses
Maintenance to Office Equipment
Loss on Sale on Shop Equipment
Stationery
Commission Paid
Distribution Expenses
Financial Costs
Admin Expenses
Distribution Expenses
Admin Expenses
Distribution Expenses