Cost Centers Example – 1 in Tally Prime

Cost Centers Example – 1 in Tally Prime

Let's consider a small business that sells products online and has two main cost centers: production and administration. The production cost center includes expenses related to manufacturing the products, such as raw material costs, labor costs, and manufacturing overhead costs. The administration cost center includes expenses related to running the business, such as rent, salaries, and office supplies.

In Tally Prime, you can set up the two cost centers as follows:

1. Creating cost centers:
• Go to the "Gateway of Tally" screen and select "Accounts Info".
• Select "Cost Centers" and then select "Create".
• Enter the name of the first cost center as "Production" and set the classification to "Primary Cost Category".
• Enter the name of the second cost center as "Administration" and set the classification to "Administrative Cost Category".
• Save the cost centers.
2. Allocating expenses to cost centers:
• Go to the "Gateway of Tally" screen and select "Accounting Vouchers".
• Select the voucher type that corresponds to the expense you want to allocate, such as "Payment" or "Purchase".
• Enter the transaction details as usual, but be sure to select the appropriate cost center for each expense.
• Save the voucher.
3. Viewing cost center reports:
• Go to the "Gateway of Tally" screen and select "Display".
• Select "Statements of Accounts" and then select "Cost Centers".
• Select the report you want to view, such as the "Cost Center Break-up" report or the "Cost Center Summary" report.
• Set the appropriate filters to view the report for the desired time period and cost center(s).
• View the report.

By setting up and allocating expenses to cost centers, the business can track and analyze the profitability of each segment. For example, the business can use the Cost Center Summary report to compare the expenses and revenues for the Production and Administration cost centers and identify areas for improvement. The business can also use the Cost Center Break-up report to view the details of each expense and revenue item allocated to each cost center, and to view the profitability of individual cost categories within each cost center.