What is the point of Classifying accounting system Essay

What is the point of Classifying accounting system - Essay Example The classification also helps us to understand why some national systems dominate over others (Jeno, 2010). In addition, classification is important because it aids the policymakers to assess the prospects and the challenges associated with international harmonization (Nobes, 2011). Due to classification policymakers at the national level become better placed to make a prediction of likely problems, as well as identifying solutions given the knowledge of experience in other countries. Third world nations that wish to adopt appropriate accounting systems used by other countries may do so with the help of classification. What is more, accounting classification is important for accountants and auditors who operate internationally. There are two major qualities of a good classification system in accounting, namely mutually exclusive and collectively exhaustive (Flynn, 2005). By mutually exclusive it implies that a good classification system necessitates that all the items that are being classified should be able to fit into only one category. For instance, the classification of items into a group by the use of an alphabetical system will possess the quality of being mutually exclusive. A name cannot start with more than a single alphabet letter, and thus, it can either be classified as either A, B or C and so on. In accounting mutual exclusiveness becomes problematic when trying to sort items (McNair, Olds & Milam, 2013). For instance, classifying a large supply of papers purchased is difficult in the sense that it can either be grouped as an expense or an asset. Furthermore, if the accounting system tries to place similar items into categories, it can be classified as stationery or under a particular title. T hus, most accounting classification systems do not have the aspect of being mutually exclusive, and the decision is based on judgement and experience has to be always considered. A collectively exhaustive