ACCA Applied Knowledge · Management Accounting · Cost classification
Which of the following is a feature of a good cost coding system?
A good coding system uses codes that are unique, simple and applied consistently throughout the organisation. This makes data entry reliable and reports comparable. Codes that are lengthy, personal, secret or constantly changing would cause errors and prevent meaningful analysis of costs.
- ACodes that are long and unique to each employee's preference
- BCodes that are unique, simple and consistently applied across the organisationCorrect
- CCodes that change every month to prevent fraud
- DCodes that are known only to the finance director
Explanation
Good codes are unique, brief, easy to understand, flexible enough to add new items and used consistently. Constantly changing or secret codes make analysis impossible, and lengthy personal codes cause errors and inconsistency.
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