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