What are the purposes of accounting codes? How are they used? Provide an example.
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3: What are the purposes of accounting codes? How are they used? Provide an example.
The reason to use accounting codes is that they provide a way to summarize expenses by category. Let's say a person is looking through their bank account and/or credit card to figure out how much their vacation actually cost. That is an informal way to summarize expenses by a cost code. In business, the process is more formal than looking through the bank account and credit card for vacation charges.
In business, the checks and charges are 'spread' or assigned to an expense account, and at month end, the expenses are added up. The normal format for entry is a journal of some kind, usually a cash disbursements journal. If a company is using QuickBooks, the checkbook function of recording checks is the entry for a cash disbursements journal. By printing an account report, the journal can be viewed.
Having a summarized listing of expenses by category (or account code), a company is better able to manage their business. The data can be used comparatively (we spent more for office supplies this month than we did last month), or can be used to ...
The 739 word, cited solution presents a clear discussion about accounting codes and source documents with examples for better understanding.