(3).CODING OF COSTS.

Coding of costs.

CIMA defines a code as "a system of symbols designed to be applied to a classified set of items to give a brief accurate reference,facilitating entry,collation and analysis"
A cost cording system is therefore based on the selected cost classifications.It is provides a way of expressing the classification of each cost in a short ended symbolised form.

Composite codes
The CIMA terminology describes the use of composite symbols in codes.
For example-
symbol892.113 means
8-labour
9-semi skilled
2-grade 2
THESE CODES ARE SHOWING THIS WAS SEMI SKILLED LABOUR
1-indirect cost
1-east factory
3-finishing department
THIS CODE SHOW US THIS LABOUR EXPENDITURE IS TO BE CHARGED AS INDIRECT LABOUR TO THE FINISHING DEPARTMENT IN THE EAST FACTORY.


The advantages of a coding system

Some of the advantages of a well-designed coding system are as follows

1. More suitable than a description in computerised system.
2. A code reduces ambiguity.
3. A code is usually briefer than description.

The requirements for an efficient coding system

• Should be unique & certain.
• Should be comprehensive & elastic.
• should be as brief as possible.
• To minimise errors.
• The maintenance of the coding system should be centrally controlled.
• All codes should be of the same length.(wherever possible)