The Basic Requirement of A System of Codification of Overhead Expenses Are:
- It should classify the expenses according to nature, object or function in order to distinguish each element or group from the other.
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- It should be simple and easy to comprehend.
- It should be easy to memories.
- It should be concise and preferably numerical to facilitate mechanization of accounts.
- It should be flexible i.e. there should be enough provision for inclusion of new items.
- It should conform to the statutory requirements as specified in the Scheduled VI of the Companies Act.
- It should be economical and according to the needs of the concern.
- It should facilitate the process of allocation, apportionment and absorption of overheads.