Ibrahim Sameer (MBA - Specialized in Finance, B.Com – Specialized in Accounting & Marketing)

Coding

What is code?

A code is a system of words, letters, figures or

symbols used to represent others.

Coding

For elements of cost and income to be correctly

analysed, classified and recorded they must initially be

correctly coded for entry into the accounting records.

Types of Coding Coding system can be:

Sequential (or progressive) codes

Numbers are given to items in ordinary numeral sequence,

so there is no obvious connection between an item and its

code. For example

000042 42cm nail

000043 office stapler

000044 hand wash

Types of Coding Block (or group classification) codes

These are an improvement on simple sequence codes,

in that digit (often the first one) indicates the

classification of an item. For example

4NNNNN Nails

5NNNNN Screws

6NNNNN Bolts

Types of Coding

Faceted codes

These are a refinement of block codes, in that each

digit of the code gives information about an item. For

example

Types of Coding

The 1st digit: 1 Nails

2 Screws

3 Bolts

The 2nd digit: 1 Steel

2 Brass

3 Copper

Types of Coding

The 3rd digit: 1 50mm

2 60mm

3 75mm

A 60mm steel screw would have a code of 212

Types of Coding Mnemonic codes

Under this type of coding the code means something,

it may be an abbreviation of the object being coded.

Most of the time airport use this type of coding. For

example

SIN – Singapore

LAX – Los Angeles

Types of Coding Hierarchical codes

This is a type of faceted code where each digit

represents a classification, and each digit further to the

right represents a smaller subset than those to the left.

For example

3 = Screws

31 = flat headed screws

Advantages of Coding

A code usually briefer than a description, thereby

saving clerical time in a manual system & storage space

in a computerized system.

A code is more precise than a description and

therefore reduce ambiguity.

Coding facilitates data processing.

Document for Buying & Selling

When goods are required by a business the person

requiring the good must normally complete a

purchase requisition form which must be authorised

by an appropriate manager.

Document for Buying & Selling

The supplier will then provide a quotation and the

purchasing department will then send a purchase

order to the supplier.

Document for Buying & Selling

The goods sent will usually be accompanied by a

delivery note and when the business receives the

goods, a good received note will be completed. The

supplier will later send a purchase invoice to the

supplier detailing the amount due.

Correct Sequential Flow

Document for Recording Materials

The physical quantity of each line of inventory will

often be recorded on a bin card in the stores

department and a similar document known as the

stores ledger account will be kept by the accounts

department which also includes inventory values.

Document for Recording Materials

The physical quantity of each line of inventory will

often be recorded on a bin card in the stores

department and a similar document known as the

stores ledger account will be kept by the accounts

department which also includes inventory values.

Document for Recording Materials

Remember that material requisition will be raised

by production manager most of the time.

And also, good received note will be raised by

warehouse clerk most of the time.

Document for Recording Materials

Difference between Bin card and stores ledger a/c

Cost details are recorded in the stores ledger account,

so that the unit cost and total cost of each issue

and receipt is shown. The balance of inventory after

each inventory movement is also valued. The value is

recorded as these accounts form part of the costing

bookkeeping records.

Document for Recording Materials

𝑭𝒓𝒆𝒆 𝒊𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚

= 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑖𝑛 ℎ𝑎𝑛𝑑 + 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑜𝑛 𝑜𝑟𝑑𝑒𝑟

− 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑡ℎ𝑎𝑡 ℎ𝑎𝑠 𝑏𝑒𝑒𝑛 𝑠𝑐ℎ𝑒𝑑𝑢𝑙𝑒𝑑 𝑓𝑜𝑟 𝑢𝑠𝑒

Document for Labour Cost

Hourly paid workers are generally paid a flat rate per

hour with a premium for overtime hours

The hours worked are often recorded on clock cards,

job cards, or timesheet.

Q & A