- 1 Asset Accounts
- 2 Investments and Treasury Securities
- 3 Prepaid Items
- 4 Liabilities
- 5 Accrued Items
- 6 Valuation Reserves
- 7 Capital and Surplus
- 8 Income
- 9 Expense Accounts
These general groups may be further subdivided indefinitely into groups of nine, keeping in mind continually that the process of division should be from general to special and that the progress should be gradual.
- 1 Asset Accounts
- 11 Fixed Assets
- 111 Land
- 1111 Used and Useful in Operation
- 11111 Details in Subsidiary Books
- 1112 Held for Speculative or Investment Purposes
- 11121 Details in Subsidiary Books
- 11122
- 112 Buildings
- 113 Machinery
- 114 Tools
- 115
- 116
- 117
- 118
- 119
- 12 Current Assets
- 121 Cash in Bank
- 1211 Local Bank
- 1212 New York Bank
- 1213 Chicago Bank
- 122 Petty Cash Fund
- 123 Notes Receivable
- 124 Accounts Receivable
- 125 Merchandise
- 1251 Inventories
- 1252 Purchases Raw Material
- 1253 In Process
- 1254 Finished Goods
- 1255
- 1256
- 126
- 127
- 128
- 129
- 8 Income Accounts
- 81 Sales
- 811 Merchandise
- 8112 By Departments, etc.
- 812 Consignments
- 8121 Details in Subsidiary Records
- 9 Expense Accounts
- 91 Manufacturing
- 911 Prime
- 9111 Wages
- 9112 Freight
- 912 Manufacturing Expenses
- 92 Selling Expenses
- 921 Salaries
- 9211 Details in Subsidiary Records
- 922 Traveling Expenses
- 923 Commissions
- 924 Advertising
- 925 General Selling
- 93 Administrative Expenses
- 94 General Expenses
All accounts under 100 are general ledger accounts, and accounts over 100 are accounts kept in subsidiary records.
From this outline it is apparent that even though each series is limited to nine as in the Dewey decimal system, it may be indefinitely expanded to include a large number of accounts, and will be elastic enough to accommodate any number of future additions to the system. It also classifies accounts so definitely that errors in posting are very rare. A skilled bookkeeper would not be likely to post an income account in any account beginning with 9 for instance.
If this system is used by a large corporation or holding company which operates branches or factories in different sections of the country, all forming part of the general system, letters of the alphabet may be allotted to each factory or branch in addition to the numerical classification. By this means the accounts of each branch may be kept separate on the books of the head office, but the corresponding expense accounts will have the same numbers and may be incorporated in the head office books or balance sheet without any difficulty. This illustrates the principle of grouping all accounts belonging to the same classification and separating all accounts which belong to different units of the same organization.
In establishing a special system of classification for any purpose whatever, the main points to be kept in mind are that the following requirements shall be fully met:
1. To enumerate all the kinds of information which may be classified.
2. To group these items into a limited number of classes.
3. To give each class a definite and unchanging symbol.