Lecture Transaction Processing and Coding PDF

**SBCS Global Learning Institute** **MA1 -- Management Information** **Transaction Processing and Coding** It is universal practice in accounting systems to use coding systems to refer to customers, suppliers, accounts and employees. Codes are used because they are concise and precise, and can be...

**SBCS Global Learning Institute** **MA1 -- Management Information** **Transaction Processing and Coding** It is universal practice in accounting systems to use coding systems to refer to customers, suppliers, accounts and employees. Codes are used because they are concise and precise, and can be subject to computer checking. A code is a system of words, letters, figures or symbols used to represent others. Codes are commonly used for entering information into computer systems. **[A Good coding system will possess the following features:]** - - - - - **[Types of Coding System:]** **(1) Sequential 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. Example 000042 -- 2 cm nails 000043 -- Office stapler 000044 -- Hand Wrench **(2) Block or Group Classification Codes** These are an improvement on simple sequences codes, in that a digit (often the first one) indicates the classification of an item. Example 4XXXXXX Nails 5XXXXXX Screws 6XXXXXX Bolts (Note, 'X' stands for another digit; 'XXXXX' indicates there are five further digit in the code.) **(3) Faceted Codes** These are a refinement of block codes, in that each digit of the code gives information about an item. Example: \(i) The First Digit: 1 -- Nails 2 -- Screws 3 -- Bolts \(ii) The Second Digit: 1 - Steel 2 - Brass 3 - Copper \(iii) The Third Digit: 1 - 50mm 2 - 60mm 3 - 75mm Example a 60mm steel screw would have a code of 212 **(4) Mnemonic Codes** Meaning of mnemonic is a learning technique to aid the memory. Under this type of coding the code means something. It maybe an abbreviation of the object being coded. Example three letter coding used for airports: LAX -- Los Angeles SIN -- Singapore CAI -- Cairo LHR -- London Heathrow **(5) 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. **Example:** 3 = screws 32 = Round headed screws 31 = Flat headed screws **(6) Alphabetical Codes** This type of code uses part of the company or person's name. there is a disadvantage in that names can be duplicated, therefore an additional code may be necessary. **(7) Numeric Codes** This type of code uses numbers in its identification.   **Materials** Materials are an important component of any production process and often make up a significant proportion of costs. **Types of Material:** **Buying Materials** A business needs to implement controls and procedures for buying goods, in order to minimize the risk of financial losses.   **Issuing Materials** Items are issued from stores to production using a materials requisition note (also sometimes called a stores requisition) The material requisition note is also used to update the inventory records. If the amount required is set too high then the extra is put back into stores using a materials returned note. **(1) Material Requisition Note** - - - **(2) Materials Returned Note.** - - - **Ordering Inventory** **Purchases = Production/Sales + Closing Inventory -- Opening Inventory** (1)  (2) **Controlling the Level of Stock** An important control level that the storekeeper might use when monitoring the level of stock is called the **Free Stock.** **Free Stock is** the stock that is in stores or on order from a supplier which has not yet been requisitioned for a specific use. **Formula: Free Stock = Materials in Stock X** **+ Materials on order from suppliers X** **- Materials requisitioned, not yet issued [(X)]** **= Free Stock balance [X]** **Example (1):** wholesaler has 8,450 units outstanding for part X100 on existing customer's orders; there are 3,925 units in stock and the calculated free stock is 5,525 units. **Calculate the amount ordered from suppliers?** **Example (2):** there are 457 units of item 982 in stock. The stores department has outstanding materials requisitions from production cost centres amounting to 280 units in total. An order for 400 units has been placed with the supplier and the delivery is expected in three days. **Calculate the amount of free stock for item 982.** **Questions:**