Lesson-34 Cost Categories

Cost Categories are useful for organizations that require allocation of Revenue and Non-Revenue Items to parallel sets of Cost Centers. Cost categories facilitate third dimensional reporting of Expenditure and revenue. Some of the examples of Cost Categories can be Region wise or geography wise, Grade wise, Department wise and so on.

 

Use of Cost Categories

By using Cost Categories you may allocate, in parallel, a transaction to more than one set of Cost Centers. The following example illustrates the use of Cost Categories.

The Cost Centers such as Marketing, Finance and Manufacturing can now belong to a category - Departments.

The Salesmen A, B and C can be Cost Centers under a Category - Executives.

Similarly, you can create a new Cost Category Projects under which Cost Centers such as Airport construction, Road construction and Buildings may be created. The classification appears as following:

Cost Categories	Departments	Executives	Projects
Cost Centers	Marketing	Salesman A	Airport Construction
	Manufacturing	Salesman B	Road Construction
	Finance	Salesman C	Building

Specify a Cost Category to allow allocation of only revenue items or items of both revenue and capital (Non-Revenue) nature. Here in this instance, enable Revenue Items and Non-Revenue Items to Yes for Departments and Projects Categories and only Allow Revenue Items for Executives.

By allocating expenses to parallel Cost Centers under different categories, you are simply assigning the amounts to them; the amount does not increase. Tally.ERP 9 performs an automatic reconciliation on real-time basis, saving you the effort of reconciling Ledgers and Cost Centers.

Note: Transactions are not allocated to Cost Categories but to Cost Centers only.

 

Creating a Single Cost Category

To create a Cost Category, set Maintain Cost Centres to Yes in F11: Accounting Features and then set More than ONE Payroll/Cost Category to Yes

This option is by default, set to No. When this option is set to Yes, Tally.ERP 9 creates a single Cost Category called Primary Cost Category automatically and allows creation of Cost Centres under the Primary Cost Category. However, you may also create new Cost Categories or alter existing Cost Categories.

 

To create a Cost Category

Go to Gateway of Tally > Accounts Info. > Cost Categories > Create (under Single Cost Category), The Cost Category Creation screen is displayed as shown.

A brief description on each of the fields in the Cost Category Creation screen follows.

Name

Enter the name of the Cost Category.

Note: There is no sub-classification of Cost Categories and hence you do not find an Under option. Though, there is a Primary Cost Category, it is not a parent of other categories.  

 

(Alias)

Enter an alias, if you wish to call the Category by another name or even by a code number. This field displays only if you set Allow ADVANCED entries in Masters in Gateway of Tally >F12: Configure> Accts/Inv Info. to Yes.

Allocate Revenue Items

Set this option to Yes, to allocate all sales, purchase, expenses and income related transactions to Cost Centers created under this Cost Category. However, if you wish to allocate only capital/non-revenue items to Cost Centers created under this Cost Category, set this option to No.

Allocate Non-Revenue Items

Set this option to Yes, to allocate transactions related to capital or non-revenue nature to Cost Centers created under this Cost Category. By default, this option is set to No.

Note: Enable either Revenue or Non-Revenue items, or both. Do not disable both. Tally.ERP 9 sets Yes, by default, for Revenue items and No for Non-Revenue items.

Displaying a Single Cost Category

To view the details of the selected Cost Category masters from this mode

Go to Gateway of Tally> Accounts Info.> Cost Categories> Display (under Single Cost Category)

·         Select a Cost Category from the List of Categories. The Cost Category Display screen is displayed.

You cannot make any changes to the fields in the Display mode.

Altering a Cost Category

To alter an existing Cost Category

Go to Gateway of Tally> Accounts Info.> Cost Categories> Alter (under Single Cost Category), Select the Cost Category from the List of Categories. The Cost Category Alteration screen displays. Make the changes in the required fields and Accept to save.

Deleting a Cost Category

You may delete a Cost Category that does not have any cost centre under it from the Cost Category Alteration screen. Use ALT+D to delete it. Tally.ERP 9 does not allow deletion of a Cost Category that has Cost Centers.

Buttons in Single Cost Category screens

Groups, Ledgers, Cost Center, Vch Types

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

F11: Features

To change company features. A detailed explanation on features has been given in the earlier section under Gateway of Tally.

Note: F12: Configuration changes affect all companies, whereas F11: Features changes affect only the current company.

Creating Multiple Cost Categories

You can create multiple Cost Categories at a time using the multiple mode.

Go to Gateway of Tally > Accounts Info. > Cost Categories > Create (under Multiple Cost categories), The Multi Cost Category Creation screen is displayed as shown:

An explanation on each of the fields in Multi Cost Category Creation screen follows.

S. No.

This is an auto-generated serial number.

Name of Category

Enter the name of the Cost Category.

Allocations for

The Allocations for column is divided into two options, Revenue Items and Non-Revenue Items.

Revenue Items

This is set to Yes, by default. However, you have the option of altering it. This denotes whether you want to allocate revenue items to Cost Centers created under the Cost Category.

Non-revenue Items

This option is set to No, by default. You can set it to Yes, if you wish to allocate Non-Revenue or Capital items to Cost Centers created under the Cost Category.

Note: There is no Under field as you cannot sub-classify Cost Categories. Cost Categories have Cost Centers as their sub-classification.

 

Displaying Cost Categories in multiple mode

You can display multiple Cost Categories at a time in this mode. To display Cost Categories in the multiple mode

Go to Gateway of Tally> Accounts Info.> Cost Categories > Display (under Multiple Cost Categories)

The Multi Cost Category Display screen is displayed. View the details of all the Cost Categories created. It is not possible to make any changes in display mode.

Altering Cost Categories in Multiple mode

You can alter multiple Cost Categories at a time in this mode. To alter Cost Categories in the multiple mode

Go to Gateway of Tally> Accounts Info.> Cost Categories > Alter (under Multiple Cost Categories)

The Multi Cost Category Alteration screen displays. Make the necessary changes and Accept to save.

Note: You will not be able to delete a Cost Category in multiple mode.

 

Buttons in Single Multiple Cost Category screens

F6: Skip names

It is used for quicker data entry when you need to alter only the Allocation details and not the names of the Cost Categories.

F8: Skip Details

It is used for faster data entry when you do not need to alter the Allocation (Revenue and Non- revenue) details. You need to give only the names and the default allocations of Yes for Revenue and No for Non-revenue display automatically when you are creating Cost Categories. If you are in Alter mode, the allocations that you opted for when creating the Categories are retained.

Groups, Ledgers, Cst Ctr

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

F11: Features

It is used to change company features.  For more information refer F11: Features in Tally.ERP 9.

Note: F12: Configuration changes affect all companies, whereas F11: Features changes affect only the current company.

Creating Cost Centres under Cost Categories

To create a Cost Centre under a Cost Category, set More than ONE Payroll/Cost Category to Yes in F11: Accounting Features

Go to Gateway of Tally > Accounts Info. > Cost Centre > Create (under Single Cost Centers)

Category

This field appears only when you have opted for More than ONE Payroll/Cost Category in F11: Features. Else, Tally.ERP 9 automatically creates a Primary Cost Category to which all cost centres are assigned.

All the other fields are described in detail in the section Creating Cost Centers in Single mode

Displaying and Altering Cost Centers under Cost Categories in Single mode is similar to Displaying and Altering Cost Centers in Single mode explained previously. The only additional field is Category.

Creating Multiple Cost Centers under Cost Categories

Go to Gateway of Tally> Accounts Info.> Cost Centers> Create (under Multiple Cost Centers)

This is a quick way to create multiple cost centers under a single Cost Category at a time.

Under Cost Centre

Select a particular Cost Centre as the parent cost center, if you wish to create multiple cost centers under it.

Category

Select the Category under which the Cost Centre will be created from the List of Categories or create a new category by pressing [Alt+C]

Name of Cost Centre

Enter the name of the new cost centre. The alias facility is not available in this mode. Select single alter to give aliases to Cost Centres created in multiple mode.

Under

Select the parent Cost Centre from the List of Cost Centres. The list displays only the Cost Centres that belong to the selected Category.

Displaying and Altering Cost Centres under Cost Categories in Multiple mode is similar to Displaying and Altering Cost Centres in Multiple mode explained in the respective chapters. The only additional field is Category.

 

Error in Categorisation of Cost Centres:

PARENT BELONGS TO ANOTHER CATEGORY!

This error occurs when you try to assign a cost centre to a parent cost centre belonging to a different category. In most places, Tally.ERP 9 prevents you from making this error, by not displaying a cost centre belonging to a different category.

However, this action is not possible when you are altering a cost centre in multiple mode, selecting All Items in Under Cost Centre field. (You may have chosen to skip either or both).

You would have changed the Category without changing the name and the parent. However, Tally.ERP 9 will prompt for this error only at the time of accepting the screen.