Lesson 33-Cost Centres

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A Cost Centre
is any unit of an organization to which transactions (generally, revenue) can
be allocated. When only costs or expenses are allocated to these units, they
are referred to as Cost Centers. When profits are also allocated to these
units, they become Profit Centers. You can now obtain a Profit and Loss account
of each such Profit Centre.
Cost Centre in Tally.ERP 9 allows an additional
dimension to a transaction where a Ledger account indicates the nature of the
transaction. It does not readily disclose, except in the narration field, which
part of the organization was involved in the transaction.
With the help of Cost Centers, a
transaction can be allocated to it, which would then enable accumulation of the
all transactions for that particular Cost Centre. Tally.ERP 9 gives you the
Cost Centre break-up of each transaction as well as details of transactions for
each Cost Centre.
Some examples of Cost Centers are
·        
Departments of an organization – Finance, Manufacturing, Marketing, and
so on.
·        
Products of a company.
·        
Individuals such as Salesman A, Salesman B.

Use of Cost Centers

You can classify Cost
Centers, just as how you classify Group/Ledger accounts. You can have Primary Cost Centers
and several levels of Cost Centers under each Primary Cost Centre.
Consider the following example.
Primary Cost Centers – Finance,
Manufacturing, Marketing.
Under Marketing,
classify the company’s sales executives as Cost Centers. This will help you
track a sales executive’s performance, in terms of cost and revenue generated.
You will then have the following
Cost Centre structure.

Primary Cost Centre – Marketing
Under Marketing:
·        
Salesman
A
·        
Salesman
B
·        
Salesman
C
Allocate expenditure incurred on
sales by the salesmen, as well as the sales generated by them, directly to
their Cost Centers. The allocation is done at the time of voucher entry. This
prevents allocation errors at the end of the period.
By allocating expenses and sales
transactions to the salesmen, you are setting up a valuable information system
that tracks the performance of your salesmen.
Creating a
Single Cost Centre
To create a Cost Centre,
set Maintain
Cost Centres to Yes in F11:
Accounting Features. For parallel allocation of Cost, you can set More than ONE
Payroll/Cost Category to Yes.
By default, Tally.ERP 9 activates
the Cost Centre feature for Ledger accounts under Sales Accounts, Purchase Accounts, Expense
and Income
groups.
Go to Gateway of Tally>
Accounts Info.> Cost Centres> Create (Single Cost Centre)
The Cost Centre Creation
screen is displayed as shown.
A brief explanation on each of the
fields in the Cost Centre Creation screen follows.

Name

Enter the name of the
Cost Centre in this field. For example, Name, function, activity, department,
task and so on.

Alias

Enter an alternative
name, if required. For example, a short name or a code number.

Under

Select the parent Cost
Centre under which the Cost Centre is grouped or created from the List of Cost
Centres. If you want the Cost Centre to be a Primary Cost Centre, select
Primary from the list.
Note: Unlike Groups, you can allocate transactions to Primary
Cost Centres. However, you should do so when you do not have Sub
Cost Centres under the Primary Cost Centre.

Displaying
a Single Cost Centre

To display the details of Cost
Centre masters: Go to Gateway of Tally > Accounts Info. > Cost
Centres > Display (under Single Cost Centre), The Cost Centre
Display screen appears. It is not possible to make any modifications to the
Cost Centre master in the Display mode. You can only view the details in this
mode.

Altering a Cost Centre

To alter an
existing Cost Centre: Go to Gateway of Tally> Accounts Info.> Cost
Centres> Alter (under Single Cost Centre), The Cost
Centre Alteration displays, 
Make the necessary changes and
Accept to save.

Deleting a Cost Centre

You can delete a
Cost Centre from the Cost Centre Alteration screen by pressing ALT+D.
You can delete a Cost Centre only if
·        
It
does not have any Cost Centres created under it.
·        
It
is not used in any transactions.

 

Explanation of Buttons for Cost Centres in Single Mode

Groups,
Ledgers, Voucher Types

It enables you to switch to these
areas without having to quit from the current screen.

F11:
Features

To change company features. For more
information refer F11: Features in Tally.ERP 9.

F12:
Configure

To change the configuration of
master information. For more information refer F12: Configurations in Tally.ERP
9.
Note: F12: Configuration
changes affect all companies in the data directory, whereas
F11: Features
changes affect the current company only.

Creating Multiple Cost Centers

You can create multiple Cost Centers
in this mode.
Go to Gateway of Tally> Accounts Info.> Cost Centers> Create (under
Multiple Ledgers)
The Multi Cost Centre Creation screen is displayed as shown.


A brief explanation on each of the
fields in the Multi Cost Centre Creation screen follows.

 

Under Cost Centre

Select a particular Cost Centre as
the
parent Cost Centre, to create cost centers under it. If you wish
to create cost centers under different Cost Centers, select All Items and
specify the relevant cost centers in the Under field.

Name of Cost Centre

Enter the name of the
Cost Centre to be created.

Under

The Parent Cost Centre selected in
the
Under Cost Centre field displays automatically in the Under field
for Cost Centers created newly. If All Items is selected in the Under Cost
Centre field, you have the option of selecting the Cost Centre from the List of
Cost Centers.

Displaying Cost Centers in Multiple Mode

You can display the details of
multiple Cost Centers at a time in this mode. Go to Gateway of Tally>
Accounts Info.> Cost Centers> Display (under Multiple Cost Centers). Select
a Cost Centre or All Items to display the details of all the Cost Centers under
it. Alteration of Cost Centers will not be possible in Display mode.
Note: The alias option will not be available in Multiple
Cost Centre Creation mode. However, you can specify aliases
to Cost Centers by selecting each cost centre.
  

Altering Cost Centers in Multiple Mode

You
can alter multiple Cost Centers at a time in this mode. Go to Gateway of Tally >
Accounts Info.> Cost Centers > Alter (under Multiple Cost Centers)

RECOMMENDED READ  Lesson 39-Auto Bank Reconciliation
Use to move back
to the field Under Cost Centre or use the button F4: Parent to change parent
Cost Centre. Make the necessary changes in the respective fields and Accept to
save.
Note: You cannot delete a Cost Centre in multiple mode.

 

Explanation on Buttons in Multiple Mode

F4: Parent

It is used to move the cursor to the
field Under Cost Centre.

 

Ctrl + F4:
New Parent

It is used to bring up the list of
Cost Centres, to select a new parent Cost Centre.

 

F6: Skip
Name/Edit Name

It is used for faster data entry
when you need to alter only the Category and the Parent Cost Centre, but not
the names. While skipping names, you might change the Category or the parent
Cost Centre to one, which belongs to another Category, in such instances
Tally.ERP 9 displays an error message at the time of accepting the screen.

 

F7: Skip
Parent/Edit Parent

It is used for quicker data entry,
when you do not need to alter the parent Cost Centres but only the name of the
Cost Centre. While skipping Parent Cost Centres, you might change the Category
or the Cost Centres names, in such instances Tally.ERP 9 displays an error message
at the time of accepting the screen.

 

Groups,
Ledgers, Cst Cat:

It enables you to switch to these
areas without having to quit from the current screen.

 

F11:
Features:

To change Company features. Press F11: Features in Tally.ERP 9.

Latest Comments
  1. Corporate Account

    How to use cost centre as an investment centre to track assets and liability of investment unit.

  2. Sumit Kumar Gogawat

    Its very simple, you can create fund manager cost centre of every Investment. Suppose if you invest in HSBC Fund Manager then you can create "HSBC-FUND MANAGER" cost centre. & It will show you how much money is invest in HSBC fund manager different plans. The same process will be on liability side.
    Or if you don't understand please send your query in details smt_gogawat@yahoo.co.in

  3. Tally Training

    This is very really useful website for tally……

  4. Anonymous

    How can we pass entries in accounts without allocating to any cost centers, were cost centers are set as applicable

    Eg: if transportation expenses account is set as cost center applicable, how can we pass entries were expense do not relate to any of the cost center

    • Sumit Kumar Gogawat

      When you pass any entry (ledger having cost center yes) ledger shows to applicable specific cost center. On this field select you can select not applicable and pass the entry. Now entry is not related with any of cost center.

  5. Anonymous

    how can I know which are the ledgers created with cost centres in tally.. now I can't delete the cost centre as it seems some ledgers are there under

  6. Anonymous

    how can I delete a cost centre while using that cost centre in a transaction?? I have already use a cost centre in a transaction ,now i want to delete the cost centre.is it possible??

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