What is the COST CENTER and COST CATEGORY in TALLY ERP9?

Cost centers and Cost Categories feature in Tally is a part of advanced accounts.

Let me give you some examples and explain about them (Cost centers and Cost Categories)

EXAMPLE:
Our Company paid a salary in cash to Raju of Stores Department of Rajam Branch – Rs. 20,000/-.

In the above transaction, the Company paid a salary to the employee Raju. He belongs to the Rajam branch and Stores department. In Tally ERP9, That transaction comes in a PAYMENT voucher, and we can enter it in two ways.
1. Single Entry Mode
2. Double Entry Mode

In Single Entry mode, Account, Particulars, and Amount fields are there.
At the ACCOUNT field, we can select CASH Ledger.
At the PARTICULARS field, we can select SALARIES Ledger.
At the AMOUNT field, we can enter the amount there.

In Double Entry mode, the entry will be:
Salaries A/c – Dr 20,000 (Expenses debited)
Cash A/c – Cr 20,000 (Asset is credited because its value decreases.)

In both single and double entry modes, We do not specify department and branch which are involved in the transaction, because they are not ledgers.
Salary and cash are only ledgers in this transaction. Reports and Account Books generate automatically when the payment voucher is accepted. If you check in account books, there will be a report with a salary ledger and cash ledger. We can view them daily, monthly basis, and yearly basis or with some particular period.

We may enter the information of the department and branch at the Narration field in voucher. But it does not generate any account books or any reports. Its just data in the voucher only.

But, As per our business, Assume, Headoffice is paying salary to Branch offices and departments every month. And Headoffice is paying maintenance expenses to the Branch office every month. Now we want to report for six months that how much amount spent on the Stores department or how much amount spent on the Rajam branch etc.
The reports you can view for salary, cash, etc., are ledgers. But there is no report for the Department / Branch Office.

So, COST CENTERS and COST CATEGORIES feature in TallyERP9 gives you a solution to this problem. You can maintain and generate reports as per your requirement with this feature.

EXAMPLES FOR COST CENTERS:
1. Department
2. Branch
3. Sales Man

EXAMPLES FOR COST CATEGORIES:
1. Finance Department, Stores Department
2. Rajam, Palakonda
3. Ramesh, Suresh

ASSIGNMENT ON
COST CENTERS AND
COST CATEGORIES

  1. Create the following COST CATEGORIES
    • Branch
    • Telephone
    • Employee
  2. Create the following COST CENTERS
    • Rajam, Palakonda, Amadalavalasa, Srikakulam Under Branch
    • 7989895101 & 8897889984 Under Telephone
    • Tarak, Vijay, Somesh, Siva Under Employee
  3. Create the following VOUCHERS with using COST CENTERS and COST CATEGORIES
    • Commission Received in Cash – Rs. 50,000/(From – Branch – Rajam 10,000/- , Srikaklulam 5,000/-, Palakonda – 15,000/- and Amadalavalasa – Rs. 20,000/-
    • Telephone Charges Paid in Cash – Rs. 500/- ( For 7989895101 – Rs. 400/- and For 8897889984 – Rs. 100)
    • Salaries Paid in cash – Rs. 80,000/- (Rs. 20,000/- for Tarak, Rs.20,000 for Vijay, Rs. 20,000 for Somesh and Rs.20,000 for Siva)

SOLUTION

STEP: 01

  • Press F11 for Company Features
  • Press F1 for Accounting Features
  • Maintain Cost Centers > YES
  • Maintain More than One Payroll or Cost Category > YES
  • Accept_YES

STEP: 02

  • Gateway of Tally > Accounts Info > Cost Categories > Create
  • Name: Branch
    Allow Revenue Items: YES
    Allow Non-Revenue Items: YES

    ACCEPT_YES
  • Name: Telephone
    Allow Revenue Items: YES
    Allow Non-Revenue Items: YES
    ACCEPT_YES
  • Name: Employee
    Allow Revenue Items: YES
    Allow Non-Revenue Items: YES
    ACCEPT_YES

STEP: 03

  • Gateway of Tally > Accounts Info > Cost Centers > Create
  • CATEGORY: BRANCH
    NAME: RAJAM
    Press Enter > Accept- Yes

    NAME: PALAKONDA
    Press Enter > Accept – Yes

    NAME: SRIKAKULAM
    Press Enter > Accept – Yes

    NAME: AMADALAVALASA
    Press Enter > Accept – Yes
  • Press BACKSPACE to change COST CATEGORY
  • Now enter the remaining all COST CENTERS same as above

TO ALTER THE COST CENTERS / COST CATEGORY:

Gateway of Tally > Accounts info > select COST CENTERS / COST CATEGORIES > Press Enter > ALTER > select cost center / cost category > Press Enter > Now modify the details and Accept the Screen

STEP: 4

  • Gateway of Tally > Accounting Vouchers
  • Press F6 for RECEIPT Voucher
  • Account: Cash
  • Particulars: ALT + C >
    Name: Commission Received
    Under: Indirect Incomes
    Cost centers are applicable: YES
    Accept_YES
  • Amount: 50,000
    Press Enter
    Now select Cost Category BRANCH – Press Enter
    Select Cost Centers now and distribute the amount
    Rajam – 10,000
    SKLM – 5,000
    Palakonda – 15,000
    Amdalavalasa – 20,000
  • press Enter- Accept the voucher

Enter the remaining transactions same as above

STEP: 5

  • Gateway of Tally > Display > Statements of Accounts > Cost Centers > Category Summary >