There are many terms in accounting. One of the terms that often appear in it is account. Well, these accounts are divided into several groups which are generally known as accounting classifications.
The existence of these accounts is very important to record various financial transaction activities or resources owned by the company. Account becomes like a place that can store every financial activity of the business in more detail
In presenting accounts, you must make business financial information more logical, systematic, and easier to analyze. Thus, the business decision-making process can be carried out more accurately and relevantly.
On this occasion, we will discuss the classification of accounts that are generally used by accountants. Anything? Read the article on accounting classification below to the end.
Contents
1 Classification of Accounting
1.1 1. Assets Accounts
1.1.1 Current Assets
1.1.2 Fixed Assets
1.1.3 Intangible Property
1.2 2. Liability Accounts (Debts)
1.2.1 Current Debt
1.2.2 Short-Term Debt
1.2.3 Long-Term Debt
1.3 3. Capital Account
1.4 4. Income Account
1.5 5. Expense Account
1.5.1 Operating Expenses
1.5.2 Non-Business Expenses
2 Conclusion
Accounting Classification
Based on the type, there are several accounting accounts classified, namely:
1. Asset Account
There are many terms in the asset account, some call it an asset account and some call it an asset account. Both remain the same even though the pronunciation is different.
Assets or assets are assets used by the company to run company operations. Assets are classified again based on their smoothness, such as current assets, long-term assets, investments, tangible assets, fixed assets, and many more.
1. Current assets
Current assets in this case can be in the form of cash or a lot of cash which can generally be converted into cash. Referred to as current assets because they can be used in less than one year.
Some examples of current assets are receivables, cash, notes, equipment, inventories, up-front costs, dividends, income still received, securities, and privileges.
2. Fixed Assets
Fixed assets or fixed assets are assets that are permanent in nature and have a turnover period of more than one year. The existence of this property can be used for business operations, so it is not for resale.
Some examples of fixed assets are transportation equipment, office equipment, machinery, warehouses, land, and so on.
3. Intangible Treasure
Intangible assets are usually obtained from the creativity and thoughts of someone who has privileges and benefits for the company in achieving profits. Some examples of intangible assets are copyrights and patents.
2. Liability Accounts (Debts)
The second accounting classification is a liability account or what is commonly referred to as a debt account. Liability is an economic sacrifice that is generally made by corporate bodies in order to increase their business capital.
The company will have to pay to other parties who have lent the capital funds.
Debts that occur in companies are very common and many are carried out by companies because of needs or transactions in the past.
Debt accounts are further divided based on the settlement time, namely:
1. Current Debt
Current debt is debt that can be repaid by the company in a short period of time, which is generally less than 12 months. This debt is usually carried out by companies that need funds to meet operational needs, such as buying production equipment, paying employee wages, and others.
2. Short Term Debt
Usually, companies will make loans to banks for short-term debt. The debt is carried out with a period of 2 to 3 years. Generally, this debt is used as mortgage debt and bonds for the company.
3. Long-term debt
Just as the name suggests, long-term debt is debt that is carried out with a long enough loan period, generally around 10 years.
Companies will usually take on debt in large enough amounts, so the repayment time is quite long, and the installments are also lighter.
3. Capital Account
The next accounting classification is the capital account. The capital account is the difference between the company’s assets and liabilities. Sources of capital can be obtained from company cash, shares, investors, owners, bonds, investments, and so on. Capital becomes the right of the owner of the company itself.
The existence of this capital is very important, the funds will always be recorded in the financial statements. Because, capital is important information for management in seeing the condition or financial status of the company.
4. Income Account
Revenue accounts are all profit receipts generated by the company from business processes or selling assets within a period. In the world of accounting, income is divided into two types, namely:
1. Operating income: namely income obtained from the company’s buying and selling activities and is the company’s main source.
2. Non-Business Income: namely income derived from the company’s main activities. For example, interest income or rental fees and can come from the sale of several assets carried out by the company.
5. Expense Account
The last accounting classification is expense accounts. These accounts are often equated with liabilities. Yet the two are clearly different. Expenses are costs that must be incurred by the company for business operational needs in order to continue to earn income.
Expense accounts are divided into two types, namely:
1. Operating expenses
In addition to debt, the company also has a burden. The burden becomes a routine expense issued by the company in order to support the company’s operations in order to obtain a more decent profit. Some examples are paying wages, water bills, electricity, internet, telephone, and so on.
2. Expenses Outside of Business
The company can also bear the burden that is outside of its business operations. Examples are expenses incurred to pay interest and take care of banking administration.
Conclusion
So, accounting classification is a very important activity in every company to make it easier to do the bookkeeping. If the bookkeeping can be done properly, it will be easier to input it in the company’s financial statements.