What is Cost Centre in Tally?

In every business, there is a different department where costs are allocated. This separate department is called a Cost Centre. All departments which indirectly bring out prices in the industry are included. Even though the employees of a company are not directly responsible for the profits and losses, they play a role in the costs incurred.

A cost center in Tally.ERP 9 is the unit where costs are allocated in every transaction record. The cost category produces profitably or investments in parallel sets. Click here to know more about bank entry in tally.

Significant Categories in Cost Centre in Tally

The main types of cost centers are as follows:

• Cost Centers related to Production: Here, the products must be processed or manufactured. E.g., assembly area.

• Cost Centers related to Provision of Services: Here, services are supplied to different cost centers. E.g., canteen.

• Personal Cost Centers: Here, the cost center is filled concerning only one person or a small group of people

• Impersonal Cost Centers: Here, the cost center is associated with a location, equipment, or both.

• Operational Cost Centers: Here, the cost center deals with machines, manufacturing processes, and concerns or people who work in manufacturing.

• Process Cost Centers: This cost center also deals with manufacturing concerns and their cases. However, here only a specific type of manufacturing process or enterprise is taken into consideration.

How To Create Cost Center in Tally.ERP 9?

To enable cost center and cost category in Tally.ERP 9, follow these steps.

1. Go to Gateway of Tally.
2. Press F-11 for features.
3. Press F-1 for features about accounting.
4. Change the Maintain Cost Centers from 'no' to 'yes'.
5. Change the 'More than ONE Payroll/Cost Category' to 'Yes'.

To create a cost center and a cost category under it, follow these steps.

1. Select the Accounts Info tab from Gateway of Tally.ERP 9.
2. Go to Cost Centers and select Single Cost Centers.
3. Select Create and enter the name for the category of the cost to be entered.
4. Accept the screen.

To allocate expenses to a cost center, follow these steps.

1. Go to the Gateway of Tally.ERP 9 and select Accounting Vouchers.
2. Click on F5: Payment.
3. Enter the necessary amount under the Expense ledger.
4. Press the enter key once to open the Cost Allocation screen and select Cost Category.
5. Allocate the correct amount for each cost center.
6. Credit the necessary Bank or use cash to finish the transaction.

Conclusion

Cost Centers in Tally.ERP 9 helps to keep a record of transactions regarding every employee. The cost category produces accessible evidence to observe the progress of each project in a business. All expenditures and investments can be entered once you create a cost center and cost categories under it. By following the easy steps on Tally.ERP 9, you can also allocate specific expenses to different cost centers while making a payment. Cost Centers help to recover the overhead costs of a business.

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