Business Growth App for Tally Users
A cost centre can be defined as a separate department or function within an organisation where costs are allocated. It does not directly contribute to profit but still costs money to run, such as the accounting, human resources, or information technology departments. When just costs or expenses are assigned to these units, they are referred to as Cost Centres.
Cost Centre in Tally can be defined as an organisational unit in a company. In this unit, expenses are allocated in terms of transactions. On the contrary, different cost categories are used for gathering costs or profits.
For example, the employees of the cost centre, are not responsible for the profitability or investment decisions of the company, but they are a part of the company, and hence can be categorised as a part of organisational costs. Cost centres are assigned for doing transactions. They can be classified in the same way that Group/Ledger accounts are done in a company. Each Primary Cost Centre can have several levels of Cost Centres beneath it.
Some of the cost centres in tally with example are as follows:
Consider the following example:
By doing this, you're able to put together a useful information system that keeps track of your various performances by allocating expenses and sales transactions to them.
The cost centre in Tally.ERP 9 is an organisational unit in which costs or expenses can be assigned. On the other hand, a cost category is a grouping of similar costs through which cost centres can evaluate cost limits or expenses.
Cost centres, for example, can be used to track each department spendings, while cost categories can be used to assess the effectiveness of each project in a department of a company.
Cost Unit is a standardised method of measuring costs. It facilitates a comparison between different costs produced by a company to produce, store, and sell one unit of products or services. On the contrary, the Cost Centre is a separate department where business costs are incurred from different organisational departments.
The cost unit in the road-building business, for example, is Km or m. Another example is that the cubic meter is the cost unit in the gas sector, whereas a Cost Centre example is customer service, advertising, marketing, etc.
For Ledger accounts such as Purchase Accounts, Sales Accounts, Income and Expense groups, Tally.ERP 9 enables the Cost Centre function by default.
After setting the parameters, you have to create cost centres to which the costs would be allocated.
Also Read: Shortcut Keys in Tally Prime
Now you can select Create under ‘Single Cost Centre’ to create one cost centre at a time or select ‘Multiple Cost Centres’ for making all the cost centres at one go.
To achieve this, choose the Cost Category under which you wish to classify the newly created cost centre, and then follow the steps below:
Now you can select Create under ‘Single Cost Category’ to create one cost category at a time:
The cost centre window appears as shown below:
Or you can also select ‘Multiple Cost Categories’ for making all the cost categories at one go:
The Multi Cost Category Creation window looks like this:
Press Enter to save.
Enter the Cost Category name and accept the screen.
If any adjustments are required, you can change an existing cost centre in a single mode. Alternatively, many cost centres can be changed in a variety of ways by following the respective steps:
3. Make the required changes.
4. Press Ctrl + A to save.
Cost Centres can also be deleted in the alteration mode according to the respective steps:
Note: A cost centre can be deleted only if:
After creating the cost centre and cost categories, you have to apply cost centres to the ledger accounts.
To enable the Cost Centre for Payment ledger – transportation account, for example, go to Gateway of Tally>Accounts Info.>Ledger>Create.
Set cost centres are applicable to Yes.
For cost centre allocation in the voucher:
3. The payment voucher entry screen appears once the Cost Centres have been assigned.
4. The cost of total conveyance expense of Rs. 2500 distributed to cost centres (Salesman A & B).
Cost Centre in Tally ERP 9 delivers reports that display complete data of all cost centres and their linked transactions in various ways for quick identification and detailed study of how expenses are allocated to business units.
The name and features are enumerated below:
Type of cost centre report
Path to Generate Report
The Cost Category Summary shows all of the cost categories to which the voucher transactions have been assigned.
Gateway of Tally> Display> Statements of Accounts> Cost Centres
Cost Centre Break-Up
The cost centre break-up highlights the ledger accounts utilised in vouchers, to which cost centre they were assigned, their total transaction values, and their balance.
To use the Cost Centre break-up screen:
The Ledger break-up report is another observation of the distribution of a ledger account across various cost centres in a company.
To use the Ledger break-up screen:
Group Break Up
The Group break-up of cost centre report gives you a distinct perspective on a cost centre report by allowing you to examine how a group (of ledger accounts) is distributed across multiple cost centres.
To use the Group break-up screen:
The path to proceed to the cost centre report is as below:
The ‘Cost Category Summary' report, for example, is displayed below:
Knowing how to calculate cost centres in Tally. ERP 9 is vital for a company. It's crucial since it not only lets you distribute spending to different units but also allows you to track cost centre reports, allowing you to make strategic decisions.
Due to this, you can use Cost Centres in Tally, easy-to-use software that accounts for your accounting and inventory activities. Its simple functionalities simplify business owners to record and track all of their records without too much effort. Biz Analyst is one such app that helps in analysing and developing such reports with ease.
Let’s see some of the popular tally cost centre questions and answers.
1. How to view the budget variance report in the Cost Centre in tally?
The Budget Variance report consists of the Trial Balance, Group Summary, and Monthly Summary.
As illustrated below, select the required budget to see the Corporate Budget, Actuals, and Corporate Budget Variance.
The values of the budget, which have previously been defined, are displayed in the Corporate Budget.
The Actual Budget shows the amount of money spent in the real world.
Corporate Budget Variance depicts the differences between Actuals and Corporate Budget, i.e. Corporate Budget - Actuals equals = Corporate Budget Variance.
2. What is the best way to divide an expense into distinct cost centres?
By enabling the option, you can distribute one item to various cost centres. In transactions, use pre-defined cost centre allocations.
3. How can I see the details of a Tally Cost Centre in a stock summary report?
The cost centre details are not visible in the Stock Summary report; only stock group/stock item details are visible. However, by enabling the Show Cost Centre Details option in the F12: Configuration screen, the Stock Vouchers report can display the Cost Centre details for the stock item.
4. Is it possible to use cost centres in a Delivery Note and a Receipt Note?
Cost Centres cannot be assigned in the Receipt or Receipt Note. However, they can be utilised in the Delivery Note.
5. In reports, how do I see the Cost Centre details for Payment Vouchers?
Go to Tally's Gateway > Display > Accounts Statements > Cost Centres.
In a cost centre, the ledger accounts used in vouchers are listed, together with the cost centre to which they were assigned, their total transaction values, and the balance. To see the ledgers, press F1: Detailed.
6. Can the specifics of Cost Centres be seen in the Balance Sheet and Profit & Loss Account?
No. Cost Centre information is not available in the Balance Sheet or Profit & Loss Account.
7. If a salesperson has been designated as a cost centre, how can you examine each salesperson's data together with the net amount?
To see the cost centre by cost centre report, go to Tally's Gateway > Display > Statement of Accounts > Cost Centre > Cost Centre Break-up. From the List of Cost Centres, select the required salesperson (Cost Centre).
Business Growth App for Tally Users