In my opinion, everything can be separated into seperate boxes. This does exclude humans on a psychological basis in terms of personality, although people try. That statement is especially true in accounting. There is a place for every single kind of transaction that occurs in your business. There are basic categories that are broken down further to as many “sub accounts” as is necessary. At the time of reporting, these sub accounts are gathered together and are reported on a global category level.
The 5 categories are:
4. Expenses and
The assets, liaibilities and equity are all balance sheet categories. Income and expenses are income statement categories. These 5 items above are broken down into many different items especially the income and expenses.
Example: travel and accommodation can be broken down into, travel and accommodation. Travel can be further seperated into local and international travel. It commonly is seperated into toll fees, fuel purchases and so on.
Expenses can have as many sub accounts as you would like. This is mainly for reporting purposes. It can be useful to keep track of certain expenses that can be subject to “over spending”. Having a breakdown of these accounts can alert business owners who can make changes accordingly.