Faceted Codes
Types Of Codes
(e) Faceted
Alphabetic characters and/or numbers are often used to identify pieces of information called facets that can also be used to define accounts. Each facet is a piece of information. The facets are combined like building blocks to construct an account.
A faceted code is one that is made up of group or category codes (code segments) each of which identifies a unit of information. In constructing a faceted chart of accounts, the complete account code is actually made up of many mini-codes (facets). Each mini-code (facet) tells us something about the account.
To illustrate the use of a faceted code, we're going to use our mnemonic code for the type of accounts from above as one of our facets (code segments) and add an additional mnemonic facet (code segment) representing the account's name to develop a simple chart of accounts using our earlier example of a simple chart of accounts that used block codes.
We already have our table from the previous lesson for the type of assets, so now we need to define our other facet which is the account name. In this table we're going to use an abbreviated alphabetic code instead of a number (numeric) code like we did in an earlier example.
Mnemonic Facit Account Short Name | Account Full Name |
| RETSALE | Retail Sales |
| WHSALE | Wholesale Sales |
| SERVSALE | Service Sales |
| COGS | Cost Of Goods Sold |
| SW | Salaries & Wages |
| CL | Contract Labor |
| PRT | Payroll Taxes |
| UTIL | Utilities |
| TEL | Telephone |
| RENT | Rent |
| OFFSUP | Office Supplies |
| POST | Postage |
| MAINT | Maintenance |
| INS | Insurance |
| DEPREC | Depreciation |
| ENT | Entertainment |
| TRVL | Travel |
| ADV | Advertising |
| DCONT | Dues & Contributions |
| MISCI | Miscellaneous Income |
| MISCE | Miscellaneous Expenses |
Mnemonic Facit Account Short Name | Account Full Name |
| CA | Cash In Bank |
| PC | Petty Cash |
| AR | Accounts Receivable |
| INV | Inventory |
| MS | Material & Supplies |
| PREPAY | Prepaid Expenses |
| DEP | Deposits |
| LAND | Land |
| BLDG | Buildings |
| ADBLDG | Accumulated Depreciation-Buildings |
| TE | Tools & Equipment |
| ADTE | Accumulated depreciation-Tools & Equipment |
| VEH | Vehicles |
| ADVEH | Accumulated Depreciation-Tools & Equipment |
| FF | Furniture & Fixtures |
| ADFF | Accumulated Depreciation-Furniture & Fixtures |
| ORG | Organization Costs |
| AP | Accounts Payable |
| NP | Notes Payable |
| STP | Sales Tax Payable |
| FICA | FICA Taxes-Payable |
| FWHT | Federal Withholding Taxes |
| SWHT | State Withholding Taxes |
| UT | Unemployment Taxes |
| MA | Miscellaneous Accruals |
| OCAP | Owner's Capital Accounts |
| OWITH | Owner's Withdrawals |
Our last step to build our new simple chart of accounts is to combine or assemble our two facets (code segments), type of assets and abbreviated account name.
Simple Chart Of Accounts
Using Mnemonic Codes and Facets
Using Mnemonic Codes and Facets
To create our first account we'll use the A facet to identify the account as an Asset and the CA facet to further identify the account as Cash. A-CA is our first account. We would continue this process of assigning our facets (code segments) to arrive at the following completed chart of accounts:
| Account | Account Name |
| R-RETSALE | Retail Sales |
| R-WHSALE | Wholesale Sales |
| R-SERVSALE | Servide Sales |
| C-COGS | Cost Of Goods Sold |
| E-SW | Salaries & Wages |
| E-CL | Contract Labor |
| E-PRT | Payroll Taxes |
| E-UTIL | Utilities |
| E-TEL | Telephone |
| E-RENT | Rent |
| E-OFFSUP | Office Supplies |
| E-POST | Postage |
| E-MAINT | Maintenance |
| E-INS | Insurance |
| E-DEPREC | Depreciation |
| E-ENT | Entertainment |
| E-TVL | Travel |
| E-ADV | Advertising |
| E-DCONT | Donations & Contributions |
| R-MISCI | Miscellaneous Income |
| E-MISCE | Miscellaneous Expenses |
| Account | Account Name |
| A-CA | Cash In Bank |
| A-PC | Petty Cash Fund |
| A-AR | Accounts Receivable |
| A-INV | Inventory |
| A-MS | Materials & Supplies |
| A-PREPAY | Prepaid Expenses |
| A-DEP | Deposits |
| A-LAND | Land |
| A-BLDG | Buildings |
| A-ADBLDG | Accumulated Depreciation-Buildings |
| A-TE | Tools & Equipment |
| A-ADTE | Accumulated Depreciation-Tools & Equipment |
| A-VEH | Vehicles |
| A-ADVEH | Accumulated Depreciations-Vehicles |
| A-FF | Furniture & Fixtures |
| A-ADFF | Accumulated Depreciation-Furniture & Fixtures |
| A-ORG | Organization Expenses |
| L-AP | Accounts Payable |
| L-NP | Notes Payable |
| L-STP | Sales Tax Payable |
| L-FICA | FICA Taxes Payable |
| L-FWHT | Fedearal Withholding Taxes |
| L-SWHT | State Withholding Taxes |
| L-UT | Unemployment Tax |
| L-MA | Miscellaneous Accruals |
| O-OCAP | Owner's Capital Account |
| O-OWITH | Owner's Withdrawals |
Just a quick review. What does the first character of our chart of accounts tell us ? Hopefully, you said the type of account.
A-Asset
L-Liability
O-Owner's Equity
C-Cost Of Goods Sold
R-Revenue
E-Expenses
L-Liability
O-Owner's Equity
C-Cost Of Goods Sold
R-Revenue
E-Expenses
How about the remaining characters ? They identify the specific accounts, cash, accounts receivable, etc.
If you recall, the advantage of using mnemonic codes is that they help trigger your memory. Which one of these accounts triggers your memory 1000 or A-CA ?
Although they both are acceptable and identify the Cash Account, personally, I prefer the mnemonic code structure (A-CA).
What's Next ?
Combination Codes
