Binary number system is most common for computer due to two stable states of its components. However unfortunately this isn't a very natural system for us as we deal with decimal number system. So how does computer carry out the arithmetic? One answer that is followed in most computers is to convert all input values into binary system. Then computer carries out arithmetic operations and ultimately converts results back to decimal number thus we can read it easily. Is there any substitute to this technique? Yes, there is an alternative method of performing computation in decimal form however it needs the decimal numbers must be coded correctly before carrying out these computations. Generally decimal digits are coded in 7-8 bits like alphanumeric characters however for purpose of arithmetic calculations the decimal digits are treated as 4 bit binary code. As we already know 2 binary bits can signify 22 = 4 different combinations, 3 bits can signify 23 = 8 combinations and in the same way 4 bits can signify 24 = 16 combinations. To signify decimal digits in binary form we need 10 combinations however we need to have a 4-digit code. One such general representation may be to use first 10 binary combinations to signify ten decimal digits. These are generally called Binary Coded Decimals (BCD). Figure below shows binary coded decimal numbers. 

Figure:  Binary Coded Decimals (BCD)