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Lecture 3 - Codification Accounts in Computerized Accounting 1

1) The document discusses codification of accounts in a computerized accounting system. Codification refers to assigning unique code numbers to accounts grouped in a hierarchical structure, such as assets, liabilities, revenue, and expenses. 2) An effective accounting code is unique, precise, sequential, flexible, and standardized. It uniquely identifies each account in the accounting system. 3) To code transactions, accounts are first grouped as income statements or the statement of financial position. Transactions are then coded according to the grouping, such as trading income coded as 1000, cost of goods as 2000, and fixed assets as 5000.

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280 views2 pages

Lecture 3 - Codification Accounts in Computerized Accounting 1

1) The document discusses codification of accounts in a computerized accounting system. Codification refers to assigning unique code numbers to accounts grouped in a hierarchical structure, such as assets, liabilities, revenue, and expenses. 2) An effective accounting code is unique, precise, sequential, flexible, and standardized. It uniquely identifies each account in the accounting system. 3) To code transactions, accounts are first grouped as income statements or the statement of financial position. Transactions are then coded according to the grouping, such as trading income coded as 1000, cost of goods as 2000, and fixed assets as 5000.

Uploaded by

Makinwa Rehoboth
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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REDEEMER UNIVERSITY

Faculty of Management Science


Department of Accounting
Introduction to Accounting Workshop (ACC 207)

TOPIC:
CODIFICATION ACCOUNTS IN COMPUTERIZED ACCOUNTING SYSTEM

Computerized accounting system


An automated accounting system is an accounting information system that processes financial transactions and events
in accordance with generally accepted accounting principles (GAAP) to produce reports needed by users. It is a
collection of various processes, procedures, and controls designed to collect, record, classify and summarize financial
data. A computerized accounting system involves making use of computers and accounting software to record store
and analyze financial data to enable interpretation and management decision-making. It uses software programs that
are stored on a company's computer, network server, or remotely accessed via the Internet. To accomplish its report
requirement. Computerized accounting systems allow a company or an individual to set up income and expense
accounts, such as wages, rent, electricity, salaries, advertising expenses, and material costs, or sales income.

Codification of accounting transaction


Codification refers to allotting code numbers to accounts in a hierarchical structure. In a computerized accounting
system, accounts are first systematically grouped into Major Heads, such as Assets Liabilities Revenue Receipts
Capital Receipts Revenue Expenditure Capital Expenditure. After that, a code, which a unique identification number is
allocated to each accounting head.

Characteristics of good accounting code


The character of good accounting code includes
1. Uniqueness: Every code must be different from each other
2. Precision: It must not be too lengthy
3. Seriality: It must serial. That is numbered in sequential order
4. Flexibility: It must be designed to embrace expandability
5. Standardized: It must be consistent and uniformed

Coding process
To achieve the coding of accounting transaction, the following step should be taken
1. Group the account into
(a) Income statements
(b) Statement of financial position

2. Code the transactions according to grouping


Income statements should be coded according to:
Trading Income e.g., 1000
Cost of goods e.g., 2000
Other Income e.g., 3000
Expenses e.g., 4000

Statement of financial position should be coded according to:


Fixed Assets e.g., 5000
Current Assets e, g. 6000
Capital and Liability e.g., 7000
Current Liability e.g., 8000
Practiced question
You are required to code the following transactions

ITEMS DR CR
Cash and Bank (6,000 and 3,500) 9,500
Debtors / Creditors 454,219 366,516
Buildings at cost 1,000,000
Equipment at cost 365,114
Capital 1,363,388
Purchases / Sales 1,067,000 1,754,590
Carriage inwards / Outwards 6,590 18,760
Staff Salaries 554,501
Rent and rates 16,540
Office expenses 26,430
Sundry expenses 3,360
3,503,254 3,503,254

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