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    Cost Codes

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    sami
    The document discusses cost codes, the types of codes used including composite, sequence, block, hierarchical, and mnemonic codes. It explains that cost codes provide a unique identifier for each cost that makes cost data easier to manage, and outlines features of an effective coding system such as being easy to use, comprehensive, time-saving, and regularly updated. The advantages of a coding system are that codes save time and storage space compared to descriptions, provide precise identification to reduce ambiguity, and facilitate data processing.

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    Cost Codes

    Uploaded by

    sami
    31 views8 pages
    The document discusses cost codes, the types of codes used including composite, sequence, block, hierarchical, and mnemonic codes. It explains that cost codes provide a unique identifier for each cost that makes cost data easier to manage, and outlines features of an effective coding system such as being easy to use, comprehensive, time-saving, and regularly updated. The advantages of a coding system are that codes save time and storage space compared to descriptions, provide precise identification to reduce ambiguity, and facilitate data processing.

    Original Title

    11. Cost Codes

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    The document discusses cost codes, the types of codes used including composite, sequence, block, hierarchical, and mnemonic codes. It explains that cost codes provide a unique identifier for each cost that makes cost data easier to manage, and outlines features of an effective coding system such as being easy to use, comprehensive, time-saving, and regularly updated. The advantages of a coding system are that codes save time and storage space compared to descriptions, provide precise identification to reduce ambiguity, and facilitate data processing.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    31 views8 pages

    Cost Codes

    Uploaded by

    sami
    The document discusses cost codes, the types of codes used including composite, sequence, block, hierarchical, and mnemonic codes. It explains that cost codes provide a unique identifier for each cost that makes cost data easier to manage, and outlines features of an effective coding system such as being easy to use, comprehensive, time-saving, and regularly updated. The advantages of a coding system are that codes save time and storage space compared to descriptions, provide precise identification to reduce ambiguity, and facilitate data processing.

    Copyright:

    © All Rights Reserved
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    Download as pdf or txt
    of 8

    COST CODES

    Areas to be covered:
    • Cost Codes

    • Types Of Codes

    • Advantages Of Coding System

    • Practice Questions
    Cost Codes:
    After classifying cost, a coding system can be applied to make it easier to manage the cost

    data. It can be manual or computerized. Each cost is identified through its unique code.

    Features of good coding system

    An effective and efficient coding system should include the following features:

    • Code must be easy to use and well communicated.

    • Unique code

    • Coding system must allow for expansion

    • Codes should be flexible


    Cost Codes:
    • It should be comprehensive system ( suitable code )

    • Codes should be time-saving

    • Codes should be error free

    • Regularly updated codes

    • Code numbers should be issued from a single central point ( standardisation)

    • Dots, dashes. Colon etc should be avoided in codes

    • They should be uniform ( length or structure)

    • Not confusing.
    Types of Codes

    a. Composite codes: In costing, the first three digits in the composite code 211392 might

    indicate the nature of the expenditure ( subjective classification ) and the last three might

    indicate the cost centre of cost unit to be charged ( objective classification).

    b. Sequence (or progressive) codes: Numbers are given to items in ordinary numerical

    sequence, so that there is no obvious connection between an item and its code.

    c. Block codes: Block codes are often used to categorise sequential codes

    together. This means that it is possible to classify up to 1000 different expenses using this

    block.
    Types of Codes
    d. 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.

    e. F a c e t e d C o d e s : T h e s e a r e r e f i n e m e n t o f g r o u p c l a s s i f i c a t i o n c o d e s ,
    in that each digit of the code gives information about an item.

    f. Group Classification Codes: These are an improvement on simple


    codes, in that a digit indicates the classification of an item.

    g. Mnemonic codes: Under this type of coding the code means


    something, it may be an abbreviation of the object being coded.
    Advantages of coding system

    • A code is usually briefer than a description, thereby saving clerical time in a manual system
    and storage in a computerised system.

    • A code is more precise than a description and therefore reduces a ambiguity.

    • Coding facilitates data processing.


    Practice Question:

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