Chapter Three Flashcards
Business wants revenue and costs incurred to be charged to the correct responsibility center, how does this happen
The revenue or expenditure must be coded to show what type it is and which responsibility center it is to be charged to
A coding list for account should be designed so that’s it…
Possible to collect and produce information for both management and accounting purposes
What does a coding list for accounts avoid ?
The need to enter the same information on the computer twice
Benefits of coding
Record and retrieve info quickly and easily
Be automatically accurate and have built in checking facilities
Be caaapbel of sorting info in different ways and printing off detailed reports required
Cons of coding
Potential to enter data wrong
Some costs relate to more than one cost center (eg an electric bill)
Revenue expenditure must be coded to show what
What type it is in which responsibility centre it is to be charged to
Most businesses arrange their larger accounts into groups representing what?
Representing the different accounting aspects of the business,
The groups represented different accounting aspects of the business might include
Income accounts, expense accounts, asset accounts, liability accounts, capital accounts
How should a coding list for accounting transaction be designed?
So that it’s possible to collect and produce information for both management and financial accounting purposes
Cost incurred by business should be analysed how?
Into materials labour expenses and coded to the correct cost centre
What happens to the net amount of each purchase invoice that arrives
Must be analysed to determine the type of cost and the cost centre to which it should be charged
Each element of the invoice must then be coded to ensure what
That the cost is collected for the correct cost centre
What else could a cost centre be?
It may also be a profit centre
Similar elements of the cost of employing people such as an Nic may be charged as
An expense/overhead (indirect cost) rather than as labour
What are the three benefits of a coding system?
Record and retrieve information quickly and easily, be automatically accurate and have built-in checking facilities, be capable ofl of sorting information in many different ways and printing off detailed reports as required
What are the problems with coding?
Potential to enter the data incorrectly into the computer system
Problems of coding can arise as some cost relate to more than one class centre
