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The accounting environment

Accounting coding systems

As a method of summarising and classifying transactions in an organised manner,
businesses usually make use of coding systems as part of their record-keeping.

Such coding systems enable managers to access relevant information, whether it is
an individual transaction, or a group of similar transactions.

It is generally accepted that codes should be:

 Unique – In order to avoid ambiguity, each item must have only one possible
code.

 Useful – There is no point in using a code if there is to be no benefit from its
use. The code will need to be logical and understood by those who use and
apply it.

 Compact – It is generally accepted that the shorter the code the easier it is to
learn and therefore the likelihood of mistakes and confusion is reduced.

 Meaningful – If the code can be made meaningful by the characters of the code
being connected in some way to the item that the code represents, the code will
be more easily remembered and understood.

 Self-checking – To ensure that the information provided by the system is of
value, each of the codes must be validated.

 Expandable – If the code is not expandable, then it is likely that the system will
need to be changed sooner rather than later.

 Standard size – If the codes are of varying size, then different users may write
the same code differently.

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