Tally 7.2 Advance function

Cost Centres
Tally's concept of Cost Centres allows an additional dimension to a transaction. While a ledger account would indicate the nature of a transaction, it would not readily disclose, except in the narration, which part of an organisation was involved. By providing cost centres, a transaction can be allocated to it which would then enable extraction of all transactions for a cost centre. Hence, a cost centre can be said to be 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. Tally gives you the cost centre break-up of each transaction as well as details of transactions for each cost centre. When you also allocate income to the units, they become Profit Centres. You can now obtain a Profit and Loss account of each such Profit Centre. For your purposes, the terms Cost Centre and Profit Centre are interchangeable.
Examples of cost centres:
Departments of an organisation, e.g.,
Finance, Manufacturing, Marketing, etc.
Products of a company, e.g., Tally dss 4.5, Tally ees 6.3etc.
Even individuals like, Salesman A, Salesman B, etc.
Use of Cost Centres
Quite like the Groups/Ledger classification of accounts, you can classify your cost centres too. Hence, you may have Primary Cost Centres and several layers of cost centres under each
Primary Cost Centre. e.g.
Primary cost centres = Finance, Manufacturing, Marketing
Under Marketing, you may wish to create the company's sales executives as cost centres. This would be so, if you need to keep track of a sales executive's performance - cost and revenue generated. Hence, you would have the following cost centre structure (shown only for Marketing Department):
Primary cost centre - Marketing
Under marketing:
- Salesman A
- Salesman B
- Salesman C
You may allocate expenditure incurred on sales by the salesmen, as well as the sales generated by them, directly to their cost centres. The allocation is done online at the time of transaction entry itself. This prevents period end allocation problems when you find a large number of transactions not allocated. Of course, you would by now have assumed, Tally allows modification of wrong allocations at any time by alteration of entries. (Facility available to authorised users only). By allocating your expense and sales transactions to the salesmen you have set up a valuable information system to know the efficiency and effectiveness of the salesmen.
Your actual screens would appear thus:

Cost Categories (For advanced usage only)
Cost Categories have been introduced for organisations requiring allocation of resources to parallel sets of cost centres. Such organisations would usually be project oriented.
Most organisation s would not need cost categories at all. Proper use of Cost Centres itself would give you the same benefits. Cost categories would increase your data entry worked as well as complexity. Hence, before opting for it, please evaluate carefully whether you actually need cost categories. Always attempt to first use cost centres alone.
Use of Cost Categories
If it were not for Cost Categories, there would be only one set of cost centres, e.g., only one set of Primary Cost Centres with each Primary cost centre having its own subsidiaries. By using Cost Categories you may allocate, in parallel, a transaction to more than one set of cost centres. Its use becomes apparent with the following example: Let us extend the above example itself. The Primary Cost Centres Marketing, Finance and Manufacturing can now belong to a category - Departments. The Salesmen A, B & C can be cost centres under a Category - Executives. Similarly, you can create a new Cost Category 'Projects' under which cost centres Airport construction, Road construction and Buildings may be created. The classification would look somewhat like the matrix below:
Cost Categories:
Cost Centres:
Marketing Manufacturing
Finance Buildings
Salesman A
Salesman B
Salesman C
Airports cont.
Road const.
You may specify a cost category to allow allocation of only revenue items or items of both revenue and capital nature. In this example, we would allow both for Departments and Projects categories and only revenue for Executives.
Now, Salesman A incurs conveyance expenses of 1000/- . If he has incurred it for marketing, allocate this amount to the cost centres Marketing and his own cost centre Salesman A. (You would do it while entering a payment voucher debiting Conveyance and credit Cash. If the salesman now incurs expense for the project Buildings, you would allocate to the cost centres Salesman A and Buildings.
You may allocate an expense to one or more cost centres and it is not essential to always allocate to all cost centres. An expense can remain unallocated to other cost centres.
If you did not have cost categories, you would have been able to allocate the expense to either the Project Buildings cost centre or Salesman A and not to both. In such a case, you would not obtain the third dimension.
Hence, you are able to obtain details of conveyance incurred by Salesman A on Marketing as well as on Buildings project when you have cost categories. You cannot, however, extract a single report giving details of marketing expenses incurred by Salesman A on Project Buildings. These are different cost categories and cannot be merged. If such reports are required, you must create ledgers like Conveyance - marketing which will help generate the desired report.
By allocating to parallel cost centres under different categories, you are simply assigning the amount to them; it does not increase the amount. In the above example, the conveyance of 1000/- remains an expense of 1000/- only. Tally performs an automatic reconciliation on real-time basis and you do not need to worry about reconciling ledgers and cost centres.
Note: You do not allocate transactions to cost categories you allocate them to cost centres only. The concept is not unlike group/ledger account classification

How to manage and operate Cost Centres
In the introduction to this chapter, the concept and use of cost centres were explained. You should go through them now if you have not already done it.
Create a Cost Centre
Gateway of Tally —> Accounts Info. —> Cost Centre —> Single Create
This field appears only when you have opted for 'more than ONE Cost Category'. Otherwise, Tally automatically creates a 'Primary Cost Category' to which all cost centres are assigned. This default Primary Cost Category is transparent to you and you need not worry about it till you want more than one cost category. (Cost categories have been explained above and under Advanced usage).
You will normally not need more than one category and should not use it till you are absolutely sure that the same information is not available with cost centres alone. We shall create a primary cost centre Bangalore.
The name of the Cost Centre. We create the Cost Centre 'Bangalore' here.
We can call the Cost Centre Bangalore with another name, say Head Office, or even a code number.
This field is for the parent cost centre of the cost centre Bangalore under creation. You had already created a Primary Cost Centre Departments with cost centre Marketing, Salesman A, Salesman B and Salesman C. You may put the cost centre Bangalore under any one of these. However, since it would not be suitable you may have it as a primary cost centre. Assign Bangalore to Primary and accept the screen. You may go on to create a new Cost Centre 'Finance' under 'Departments' as an exercise.
** Unlike groups, you may allocate transactions to primary cost centres too. However, you should do so when you do not have sub-cost centres under the primary. Allocation to a higher level cost centre is often unnecessary and your information is more meaningful if you allocate to the lowest levels
Alter a cost centre
Gateway of Tally —> Accounts Info. —> Cost Centres —> Single Alter —> List of Cost Centres
The screen is exactly the same as the creation screen and is, therefore, not reproduced here.
Name and alias
Change them if you need to do so.
You may change the parent to any other cost centre.
Explanation on Buttons for cost centres in single mode
F3:Company: To work with a different company. In the creation mode, you can create cost categories in the other company. In alter mode, you can copy the information by accepting the screen ( or +
). The old company's information remains. Not available in Display mode.
Groups, Ledgers, Cost Centres, Voucher Types:
To enable you to switch to these areas without having to quit from the current screen.
F11:Features:To change company features. A detailed discussion on features has been done in earlier section under Gateway of Tally.
F12:Configure:To change configuration of master information.
NOTE: Configuration changes affect all companies whereas Features changes affect on the current company.(similar to ledgers).






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Accounting Education: Tally 7.2 Advance function
Tally 7.2 Advance function
Accounting Education
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