Nominal codes are the codes that are used in the chart of accounts to record income and expenditure.

Accounting software comes with a standard set of codes and most people don’t change them. However, codes can be customised and although they are commonly four digits, they can be up to eight.

Using nominal codes makes it easy for businesses and accountants to see what type of financial transactions have been made and to file any reports for the financial year.

Some businesses never look at the codes themselves and focus on the category name instead.