Coding Techniques Overview

Study Notes

Coding Techniques

Coding is the systematic assignment of numbers or letters to items to classify and organize them.
There are four coding techniques: sequence codes, block codes, group codes, and mnemonic codes.

Sequence Codes

Items are numbered consecutively to ensure no gaps in the sequence.

Block Codes

Blocks of numbers within a numerical sequence are reserved for categories having meaning to the user.
Example: Product code ranges for an appliance retailer's major product categories:
- 1000000-1999999: Electric range
- 2000000-2999999: Refrigerator
- 3000000-3999999: Washer
- 4000000-4999999: Dryer

Group Codes

Often used in conjunction with block codes.
Example: For a seven-digit product code number:
- Digit 1-2: Product line, size, style
- Digit 3: Color
- Digit 4-5: Year manufactured
- Digit 6-7: Operational features

Mnemonic Codes

Letters and numbers used in combination to identify an item.
Derived from the description of the item and easy to memorize.
Example: Dry300W05 represents a low-end (300), white (W) dryer (Dry) made by Sears (05).

Designing a Coding System

Guidelines for a better coding system:
- Consistency with intended use
- Determining types of system outputs desired by users prior to selecting the code
- Allowing for growth in the number of items to be coded
- Keeping the coding system simple
- Ensuring consistency with the company's organizational structure
- Consistency across different divisions of an organization

Systems Documentation Techniques

Document Flowcharts

Illustrate the flow of documents and information among areas of responsibility within an organization.
Often referred to as internal control flowcharts.

System Flowcharts

Depict the relationship among the input, processing, and output of an accounting information system.

Program Flowcharts

Illustrate the sequence of logical operations performed by a computer in executing a program.
Examples of programming languages: COBOL, FORTRAN, RPG, C++, Java.

Data Flow Diagrams

Graphically describe the flow of data within an organization.
Four basic elements: external entities, processes, data stores, and data flows.

Chart of Accounts

A list of all general ledger accounts an organization uses, with each general ledger account assigned a specific number.

Audit Trail

Provides a means to check the accuracy and validity of ledger postings.
Enables tracing from the source document to the final posting in the general ledger accounts to the financial statements.

Computer-Based Storage Concepts

An entity is something about which information is stored (e.g., employees, inventory items, customers).
Each entity has attributes or characteristics of interest, which need to be stored.
Elements of data storage: data values are stored in a physical space called a field.

Description

Learn about coding techniques used to classify and organize items, including sequence codes and block codes. Explore examples of how code numbers are assigned for different categories, such as product types for an appliance retailer.