For ex. in an organization, there might be lot of teams,
each teams will do a separate projects, team will spent
amount on their particular project, If you have to track on
the amount spent by each team, you have to maintain cost center.
A Cost Centre is any unit of an organisation to which
transactions (generally, revenue) can be allocated. When
only costs or expenses are allocated to these units, they
are referred to as Cost Centres. When profits are also
allocated to these units, they become Profit Centres. You
can now obtain a Profit and Loss account of each such
Cost Centre in Tally.ERP 9 allows an additional dimension
to a transaction where a Ledger account indicates the
nature of the transaction. It does not readily disclose,
except in the narration field, which part of the
organisation was involved in the transaction.
With the help of Cost Centres, a transaction can be
allocated to it, which would then enable accumulation of
the all transactions for that particular Cost Centre.
Tally.ERP 9 gives you the Cost Centre break-up of each
transaction as well as details of transactions for each
Some examples of Cost Centres are
Departments of an organisation - Finance, Manufacturing,
Marketing, and so on.
Would it not be easier to make the decision for your
business if you have the option to view the
costs incurred on each of your business unit and how much
profit each unit made? This is exactly what the
‘Cost Center and Cost Category’ in Tally.ERP 9 can do for
The cost center in Tally.ERP 9 refers to an organizational
unit to which costs or expenses can be
allocated during transactions while the cost category is
used to accumulate costs or profits for parallel sets
of cost centers. For example, you can use cost center to
track expenses of each employee while cost
category can be used to see the effectiveness of each project.
To use cost center in Tally.ERP 9, let’s consider a ‘Sales
department’ in an organization which has
4 different Salesmen. To record their expenses and
Cost centre is a unit of organisation. which allocate the organisation department parts. For example: Marketing department, Sales department, Administration department, etc.
In another word cost centre is a unit of expenses or revenue of a Company. For example:- Unit of office expenses are Milk,Tea bag,sugar,Water,Buiscuit,etc.
In a private limited company,if owner/shareholder withdraws different amounts from company account, then where should be that amount be accounted for/in which head of account that amount should be placed????