Construction Sector using cost centres

The construction sector involves a lot of complexity; however they can be well managed in tally.
The two most important requirements are that of managing a project wise expense and earnings and the other important thing is to be able to maintain a no- inventory Balance sheet and at the same time to be able to selectively manage inventory for some items/transactions.
Tally enables you to manage this beautifully, you only need to know a small trick in Tally.
First of all you need to be able to maintain cost centers ( not cost category) that should be used when you want a much more detailed report. For the time being most of the functions can be obtained by using the cost centers itself.
Here in the construction business we will take the example of purchasing bricks say at the rate of Rs. 8/ pc.
Now there can be two cases where I would want to show inventory in certain cases and in other cases I wouldn’t want to show:-
We have two solutions for this :-
1)      F11- integrate accounts with inventory to be NO
2)      Item master – Advanced entries in masters – Yes and then set – Treat all purchases as consumed – Yes

let us say we are purchasing bricks from a supplier but don’t want to show the item – as I don’t want any inventory so it is being purchased on account invoice and not item invoice

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now if you are wondering how you can write Bricks Purchased-24 Pcs at Rs. 8

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now let us say we want to create a purchase invoice in the item mode – because we want to keep track of its inventory as:-

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We can maintain the inventory of some products while leave the inventory for others. Basically we can choose what we want to show.

Ok let me throw a question to you, what if I want to maintain the inventory but at the same time don’t want it to reflect in my stock summary as this would adversely impact my balance sheet ?

There are two options – one being pass a stock journal entry every time , but Tally provides a beautiful feature while creating Item masters and that is –> open an item master for alteration or for new creation:-

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now we need to enable this :-

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Treat all purchases as consumed – YES, this would keep the stock inventory as nil always.

And you can get any report related to this item as :-

Display –> Inventory Books –> Stock Item

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Let us say we are providing construction services at Town 1 to party XYZ. we may also provide construction services to party XYZ for construction at town 2. however we should have a perfect inventory for that. Let us see how the sales voucher is passed.

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In case you want to know how to enable cost centres, but always remember most of the times alone cost centre can suffice the purpose, cost category enabling may make the scenario more complex.

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Go to F11 ->

Now we make another sales to the party named Supplier at another location :-

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now the 2nd cost centre is tagged.

let us take a view of the reporting as of now :-

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We will now see the third option where direct allotment is not done after the purchase, that is after the purchase the inventory is stored at the Head office inventory and later on given to the branches for use.

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let us buy the bricks as :-

In case you have been following my posts, you would know that for cost centres we have to pass these entries in the voucher mode only, this has been done as above.

Now let us say that 3 pcs were passed on to a Town 1 for usage. we can show the entry in a journal for this transfer as :-

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Now let us see the cost centre report :-

Before that we can also pass a purchase voucher for a purchase done directly to Town 1

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Now the report is obtained as :-

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this report tells us – sales worth Rs. 5,00,000 have been done by Town 1 and goods worth Rs 40,000 + Rs. 300( due to stock transfer)

have been used.

Now let us view the BS of the company where we should not see excess inventory only the one from Item A – where ( we did not enable the option of “treat all purchases as consumed”

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Here closing stock is only the value of item A inventory and nothing else.

 

PS Note*- Let us know your feedback for the article.

This article is only for an educational purpose and the author holds no form of responsibility whatsoever.