Describe some considerations useful in the design of accounting codes. For each consideration you name, provide an example to illustrate your point.
Accounting codes are normally designed to follow the basic formula for double entry bookkeeping: assets = liabilities + equity. For a regular business or corporation, the standard is:
100 for Assets
200 for Liabilities
300 for Capital
400 for Revenues
500 to 900 for expenses
Then within the asset category, current assets (following a balance sheet format) would have the lower numbers and non-current assets the higher number. For liabilities, current assets would be first. The numbering of expenses would follow the nature of a business. For example, if a business sells a product, the 500 might be all the cost of goods sold section accounts.
A larger company might make their categories four digit: 1000s for assets, 2000s for liabilities, etc to give the company a wider range of numbers for account assignment. Even more elaborate ...
The 550 word solution presents samples of common accounting code layouts with explanations and variations. A discussion about Quickbooks is included, as well it should be.