Classification is about how to record entities and their transactions in an accounting system. The classification rules of the system in question are used to determine which bodies should be included within that system, and how their activity should be recorded. The classification rules therefore affect all outputs from the accounting system, such as the overall surplus/deficit.
There are different systems for the classification of transactions depending on whether we are considering resource accounts and budgets, or national accounts and the fiscal rules, since these systems have different purposes.
These short papers introduce the classification systems. Readers new to the area are advised to read these papers as they introduce the national accounts, the fiscal rules and main fiscal aggregates and the concepts used in financial accounts and departmental budgets and estimates.
The information requested in the accompanying questionnaires make it possible for HM Treasury to determine the likely classification of entities and their receipts. This is necessary for the correct calculation of National Accounts and the public sector finances.