1) What is a Cost Centre?

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 Centres. When profits are also allocated to these units, they become Profit Centres. You can now obtain a Profit and Loss account of each such Profit Centre.

Transactions are allocated to cost centres. This enables accounting all transactions for that particular cost centre.  You can view the cost centre break up of each transaction as well as the details of transactions for each Cost Centre.


Some examples of Cost Centres are:

  • Departments of an organization -Finance, Manufacturing, Marketing, and so on.
  • Products of a company.
  • Individuals such as Salesman A, Salesman B.

You can classify cost centres, just as you classify Group/Ledger accounts. You can have Primary Cost Centres and several levels of Cost Centres under each Primary Cost Centre.

Consider the following example.

Primary Cost Centres – Finance, Manufacturing, Marketing.

Under Marketing, classify the company’s sales executives as Cost Centres. 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 Centres. 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.



2) How to Enable Cost Centres?



To enable cost centres

  1. From Gateway of Tally > Click F11: Features > Accounting Features.
  2. Enable the option Maintain Cost Centres?
  3. Enable the option Maintain more than one payroll or cost category? To maintain cost categories

  1. Press Ctrl+A to save the Company Operations Alteration screen.

By default, Tally.ERP 9 activates the Cost Centre feature for Ledger accounts under Sales Accounts, Purchase Accounts, Expense and Income groups


3) How to Create a Cost Centre?

In order to create a Cost Centre, Enable Maintain Cost Centres in F11:

Accounting Features For parallel allocation of Cost, you can enable Maintain more than one payroll or cost category. By default, Tally.ERP 9 activates the Cost Centre feature for Ledger accounts under Sales Accounts, Purchase Accounts, Expense and Income groups. .

To create a single cost centre

  1. Go to Gateway of Tally > Accounts Info. > Cost Centres > Create (Single Cost Centre) .
  2. Press Backspace to change the default Category , if required.
Note: The field Category is available only if the option Maintain more than one payroll or cost category set to Yes in F11 (Features)
  1. Enter the Name.
  2. Select the parent cost centre under which the cost centre has to be grouped.
  3. Press Enter to save the Cost Centre.
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.



4) How to Create Multiple Cost Centres?


Multiple cost centres can be created in one go in multiple mode

To create multiple cost centres

  1. Go to Gateway of Tally > Accounts Info. > Cost Centres > Create (under Multiple Cost Centres ).
  1. Select the parent cost centre in the field Under Cost Centre .
  2. Select the Cost Category .
Note: The field Category is available only if the option Maintain more than one payroll or cost category? is set to Yes in F11 (Features)
  1. Enter the Name of the Cost Centre.
  2. Select the Cost Centre in the field Under .
Note: If you select All Items in the field Under Cost Centre , then you can select a specific cost centre in the field Under . If a specific cost centre is selected in the field Under Cost Centre , the selected cost centre will be displayed in the field Under.




5) How to Alter a Cost Centre?

You can alter an existing cost centre in the single mode. Alternatively, multiple cost centres can be altered in the multiple mode, if required. Cost centres can also be deleted in the alteration mode.

To alter a cost centre

  1. Go to Gateway of Tally > Accounts Info. > Cost Centres > Alter (under Single Cost Centre ).

The Cost Centre Alteration appears as shown below:

  1. Make changes as required.
  2. Press Ctrl+A to accept.

To delete a cost centre

  1. Go to Gateway of Tally > Accounts Info. > Cost Centres > Alter (under Single Cost Centre ).
  2. Select the Cost Centre from the List of Cost Centres . The Cost Centre Alteration screen appears.



  3. Click D: Delete 

 




SOURCE: help.tallysolutions.com