Cost Centers in Tally : A how to do guide in Tally

Cost Center

Cost Centers in Tally helps to determine cost and profit loss of specific job or  a project.

Often most SMEs have projects going on at different places. These projects involve a lot of costs and expenses that are to be reimbursed by the client.

Also to bill the customer and to know the actual profitability the business owner needs to know exactly how much has been the expenditure for that project.

In this case study we will try to take up a case where A business owner has a project “Manipur” going on in Manipur and he needs to manage costs for that.

The business owner sends his employee to Manipur and that employee manages the work there.

During his stay in Manipur he incurs his personal costs and also incurs costs related to the project.

We will account all of that.

Cost Centers in Tally :Case Study

Business Owner – Mr Pratap

His Employee – Mr Kumar

Expenses incurred by the employee for a specific project.

Now he might be allocated some amount for this project/The organization (NGO) might get some grant so that they can use this money for a specific project.

1.Mr pratap gives Rs. 10,000 to his employee Mr. Kumar and sends him to Manipur for this project.

Simultaneously Mr Pratap will keep track of expenses so that later he can send a bill to the client and if need be can also get his reimbursements for the expenses for that project.

For instance:- let us make an payment of Rs. 10,000 to Mr. Kumar for Project “setting up a centre in Manipur”

Cost Center

 

Now he will incur expenses towards this Project.

He might need materials, incur expenses towards food, travel and stay( Hotel expenses)

We will create a Project (Manipur Project) as a cost centers  under the Primary cost category ( under Primary)

cost center set up

Operations:-

Let us say He Purchases some basic raw material worth 2500 now.

Note that: To take account of Purchases for a project using cost centers we need to make purchases in a journal voucher or purchase in the voucher mode

As of now, The purchase voucher does not take into account cost centers in the invoice mode.

cost center 2

Let us say the employee incurs a Travelling Expense of 1000 for the Manipur project

Read : Stock Item Cost tracking

COST CENTERS IN TALLY : VOUCHER ENTRY SCREEN SHOT

 

Cost center in voucher Entry

Read : How to pass Journal Voucher in Tally

The advantage of using a journal voucher for these entries is that along with maintaining travel expenses related to the Project in Manipur. We can also keep track of expenses by the employee ( using against Reference )- Note the current balance for Mr. Kumar shows as 9000( 10,000-1,000)

Similarly The employee incurs an expense of 5000 on Hotel stay and 2000 on Food during his Manipur tour.

The Food expenses as below:-

Please note that we have only taken into account the expenses for cost center consideration.

In any voucher –only one of the ledgers should be tagged with cost centers, this shall enable us to get a clear report while making a cost category analysis.

Cost center voucher entry sceen shot

Note that current balance of Mr. Kumar is only Rs. 2,000 the 8,000 have been spent as

5000-Hotel

2000-Food

1000-Travel

Now let us analyse this report.

Cost Centers in Tally : how to Generate Cost Reports

Go to Display  Statement of Accounts Cost centers Cost center break up

Now select Project Manipur ( or any name that you gave for your project)

Press enter and then go to detailed view , it clearly shows that under in-direct expenses you have the expenses incurred by the employee( you could also create a sub group employee wise )

Report Analysis

cost centers in Tally

Now let us say we make a bill of 25,000

Now we Go to Display Statement of Accounts Cost centers Cost center break up

here when we select Manipur project it shows us a break up and the closing balance at the grand total also gives us the actual profit after deducting the expenses.

Cost reports in Tally

 

In this case the profit is Rs.14,500

Now at the end of the project, go to

Display statement of accounts Outstanding Receivables  All items

cost center screen shots

 

cost center explained in Tally

 

Here you would see:-

This again shows that after the project Mr. Kumar has to return Rs. 2,000 for the project.

Also we need to see what is the outstanding of the Manipur Party ( from whom we need to take the payment- that party to whom the sales bills had been issued)

 

image

Similarly we can have multiple projects going on and we can also compare a report, let us say another Project was going on in Mumbai and another Employee named Mr Poddar was sent to Mumbai to oversee the project.

Now the expenses were made in the Mumbai project by Mr. Poddar and report of the cost center is shown below for the Mumbai project

cost center analysis

A comparison report of the two projects can be obtained by doing ALT-C right from here.

And selecting the Manipur project, and select the last group as Primary.

A very beautiful report is obtained as shown below:-

Cost Center reports

 

Also if you want a complete report of all the cost centers in Tally, you can press F12 and enable the total

Column and get a report and summary of all the cost centers being maintained.

You can send me a feedback on this article by commenting here.

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About the author /


Hi Just like you, I am one of the souls on EARTH who has a desire to be able to maintain my accounts accurately and be most efficient in using the powerful features of Tally. Currently I work as an accountant at a firm in Durgapur. I am a Tally lover and would be happy to solve your queries related to Tally, however I may not be able to reply to all the queries instantly but will surely try to solve them and give u a solution( provided I get free time from my daily work :) )

3 Comments

  1. Rasesh Gupta

    Dear Sir,

    I want to know that how to make a purchase entry in Tally erp 9 with cost centers.

    Thanking You

  2. Love Tally

    You can make the entry in the “As Voucher ” mode – the cost centres can be tagged there.

  3. T.P. TYAGI

    mai nahi smajh paya hoon cost centre ke bare main

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