Lesson 33-Cost Centres

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)

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.