Nominal codes are general ledger codes used to record a business’s daily financial transactions. These transactions are processed through bookkeeping, posted to the general ledger, and included in the Trial Balance.
Businesses also assign account codes to customers and suppliers to make identification easier. Each business follows a set system for allocating these codes, which should be applied consistently to new customers and suppliers. For example, a supplier called BETTY SERVICES may be given the code BET01.
Once assigned, the account code must be used on all related sales invoices, purchase invoices, and credit notes. Accurate coding ensures transactions are correctly recorded in the books of prime entry.
Businesses may also use codes for products and services to track sales performance. Overall, coding helps management produce reports, monitor sales and expenses, and identify key customers, suppliers, and product lines.
