I am learning how to use sprites, but still have a long way to go :O,

When making my navigation, should I add a class to each of the anchor tags or should I add a class to each list item element? I have seen some codes placing the classes on the a tag, while others prefer to add it to the li.
My Questions:
1.Which is correct?
2. When is it preferable to use one over the over?
(for example.. when adding sprite images to a regular list, should I place the class on the li, and when using an anchor tag within an li, should I place the class inside the anchor tag instead?)
Hopefully I didn't confuse anyone with my questions.


ex:

HTML Code:
<!-------add class to the a tag?------->

<ul class="navigation">
<li><a href="#" class="home">Home</a></li>
<li><a href="#" class="about">About</a></li>
<li><a href="#" class="contact">Contact</a></li>
</ul>

<!--------- or add class to the the LI?----------> 

<ul class="navigation">
<li class="home"><a href="#">Home</a></li>
<li class="about"><a href="#">About</a></li>
<li class="contact"><a href="#">Contact</a></li>

Thank you!!!!