How to use Cost Center in Banking

In our earlier post, we discuss cost centres, but some of the viewers query us how to use cost centre in Bank allocation or use cost centre in banking transactions.

For Example, Ramesh make expenses of 1,50,00,000 for a project. He applies for a loan or Over Draft facility from the bank for the project and bank sanctioned him the said amount with interest or bank charges. So first we need to know how we can make a project in tally to show the starting and completion of the project with all the cost and expenses. 

First, we know how can we enable cost centre?

Press F11 - Accounting Features - Under Cost / Profit Centers Management - Enable yes to Maintain Cost Centre

As per below image, you can see we have enabled the option of Cost Centre. You can also manage the cost centre for Job work charges.

Now create a ledger account and you can see there is an option available for a use cost centre.

Now go to Accounts Info - Cost Centre - Create:

For Example, I have created Project - 1, you can name it to your own project.

Now when you received a bank loan or Overdraft facility for your project. So you need to create bank loan a/c or overdraft a/c as shown in below pic:

Note: If Bank give you Loan then it should be under Secured Loan or If bank provide you overdraft facility then it should be under grouping Bank O/d 

Now pass a receipt entry.

In Receipt entry you see there is option appear for Cost Centre/ Classes: Cost centre created by you will be appearing there. Select your cost centre and pass the entry as above. Now you need to see the impact of the entry for your cost allocation, go to - Gateway of Tally - Display - Statement of Accounts - Cost Centre - Category Summary - Project - 1. You can see the receipt of Rs. 1,50,00,000 available there. Similarly when I pass a payment voucher for bank charges towards loan processing or any other charges related to your project then you need to select against Project - 1 in Cost Centre as shown in below image:

Now we can see the amount debited by the bank towards project 1 will be shown net balance. When each time you pass payment entry for the party or for expenses you need to select the cost centre to affect your cost for the project.

For monthly re-payment, you need to pass the following entry:

You need to ensure that the cost centre will be enabled in Interest ledger account, otherwise, you will unable to locate the interest expenditure in your Project cost.

In this lesson, we provide you the solution, How to manage the project in tally. If your project related to Sales / Purchase then you need to follow the same instructions.

We have manage more than 40 project in a single time with cost centres. So I hope you like this tutorial. Please keep comment and we welcome suggestions on our official facebook page:
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