Classification of public expenditure are as follows:
(I) Classification on the Basis of Benefit: Cohn and Plehn have classified the public expenditure on the basis of benefit into four classes:
(a) Public expenditure benefiting the entire society, e.g., the expenditure on general administration, defence, education, public health, transport.
(b) Public expenditure conferring a special benefit on certain people and at the same time common benefit on the entire community, e.g., administration of justice etc.
(c) Public expenditure directly benefiting particular group of persons and indirectly the entire society, e.g., social security, public welfare, pension, unemployment relief etc.
(d) Public expenditure conferring a special benefit on some individuals, e.g., subsidy granted to a particular industry.
(II) Classification on the Basis of Function: Adam Smith classified public expenditure on the basis of functions of government in the following main groups:
(a) Protection Functions: This group includes public expenditure incurred on the security of the citizens, to protect from external invasion and internal disorder, e.g., defence, police, courts etc.
(b) Commercial Functions: This group includes public expenditure incurred on the development of trade and commerce, e.g., development of means of transport and communication etc.
(c) Development Functions: This group includes public expenditure incurred for the development infrastructure and industry