Cost Centres & Cost Categories

1. Core Concept

  • Cost Centre: An organizational unit, department, location, or project to which expenses or incomes are allocated to monitor department-wise profitability and spending.
  • Cost Category: Used to classify cost centres into logical groups when you need to track expenses across parallel dimensions (e.g., tracking expenses by Department and by Project simultaneously).
  • Cost Centre Classes (Pre-defined Percentages): A feature in TallyPrime that allows you to automate percentage-based allocation (e.g., automatically splitting Direct Expenses as 80% Factory, 10% Stores, and 10% Packaging) without typing percentages manually during voucher entry.

2. Feature Activation in TallyPrime

Step A: Enable Cost Centres

  1. Press F11 (Features) on the Gateway of Tally.
  2. Set Enable Cost Centres to Yes.
  3. Press Ctrl + A to save.

Step B: Create Categories & Cost Centres

  1. Gateway of Tally → Create → Cost Category (e.g., Direct Expenses Category and Indirect Expenses Category).
  2. Gateway of Tally → Create → Cost Centre:
    • Create Factory, Stores, and Packaging under Direct Expenses Category.
    • Create Office and Marketing under Indirect Expenses Category.

Step C: Set Up Cost Centre Classes (Automated % Allocation)

  1. Gateway of Tally → Alter → Voucher Type → Payment.
  2. Scroll to the field Name of Class at the bottom right and type a class name (e.g., Direct Expense Class).
  3. Set allocations:
    • Factory: 80%
    • Stores: 10%
    • Packaging: 10%
  4. Create a second class named Indirect Expense Class:
    • Office: 75%
    • Marketing: 25%
  5. Press Ctrl + A to save.

3. Ledgers Required to be Created First

Ledger Name Group (Under) Apply Cost Centres
Wages to Workers A/c Direct Expenses Yes
Factory Rent A/c Direct Expenses Yes
Electricity Direct A/c Direct Expenses Yes
Machinery Servicing Charges A/c Direct Expenses Yes
Salary to Staff A/c Indirect Expenses Yes
Office Rent A/c Indirect Expenses Yes
Electricity Indirect A/c Indirect Expenses Yes
Stationery A/c Indirect Expenses Yes
Cash A/c Cash-in-Hand No
Bank A/c Bank Accounts No

4. Complete Practice Set

Payment Criteria Rule:

  • Direct Expenses: Below ₹3,000 → Cash | Above ₹3,000 → Bank
  • Indirect Expenses: Below ₹2,500 → Cash | Above ₹2,500 (or >₹3,000) → Bank

Part 1: Expenses (Direct) Payment Vouchers (F5)

Allocation Class: Factory (80%), Stores (10%), Packaging (10%)

Date Particulars / Ledger Amount (₹) Payment Mode Cost Centre Breakup (Auto Allocated)
April 7 Wages to workers 1,00,000 Bank (>₹3000) Factory: ₹80,000 | Stores: ₹10,000 | Packaging: ₹10,000
April 20 Factory Rent 25,000 Bank (>₹3000) Factory: ₹20,000 | Stores: ₹2,500 | Packaging: ₹2,500
April 25 Electricity Direct 20,000 Bank (>₹3000) Factory: ₹16,000 | Stores: ₹2,000 | Packaging: ₹2,000
April 26 Machinery servicing charges 2,000 Cash (<₹3000) Factory: ₹1,600 | Stores: ₹200 | Packaging: ₹200
May 7 Wages to workers 1,00,000 Bank (>₹3000) Factory: ₹80,000 | Stores: ₹10,000 | Packaging: ₹10,000
May 20 Factory Rent 25,000 Bank (>₹3000) Factory: ₹20,000 | Stores: ₹2,500 | Packaging: ₹2,500
May 25 Electricity Direct 20,000 Bank (>₹3000) Factory: ₹16,000 | Stores: ₹2,000 | Packaging: ₹2,000
May 26 Machinery servicing charges 2,000 Cash (<₹3000) Factory: ₹1,600 | Stores: ₹200 | Packaging: ₹200

Part 2: Expenses (Indirect) Payment Vouchers (F5)

Allocation Class: Office (75%), Marketing (25%)

Date Particulars / Ledger Amount (₹) Payment Mode Cost Centre Breakup (Auto Allocated)
April 7 Salary to staff 1,00,000 Bank (>₹2500) Office: ₹75,000 | Marketing: ₹25,000
April 20 Office Rent 25,000 Bank (>₹2500) Office: ₹18,750 | Marketing: ₹6,250
April 25 Electricity Indirect 20,000 Bank (>₹2500) Office: ₹15,000 | Marketing: ₹5,000
April 26 Stationery 2,000 Cash (<₹2500) Office: ₹1,500 | Marketing: ₹500
May 7 Salary to staff 1,00,000 Bank (>₹2500) Office: ₹75,000 | Marketing: ₹25,000
May 20 Office Rent 25,000 Bank (>₹2500) Office: ₹18,750 | Marketing: ₹6,250
May 25 Electricity Indirect 20,000 Bank (>₹2500) Office: ₹15,000 | Marketing: ₹5,000
May 26 Stationery 2,000 Cash (<₹2500) Office: ₹1,500 | Marketing: ₹500

5. Checking Reports & Verifying Breakdown

1. View Cost Centre Breakup Reports:

  • Navigation Path:
    Gateway of Tally → Display More Reports → Statements of Accounts → Cost Centres → Category Summary / Cost Centre Breakdown
    (Shortcut: Press Alt + G → Type Cost Centre Summary)

2. To Check / Delete / Modify Payment Entries:

  • Navigation Path:
    Gateway of Tally → Display More Reports → Statements of Accounts → Statistics → Payment
    OR: Gateway of Tally → Display More Reports → Account Books → Payment Register
  • Action: Select the month → Press Enter on the payment voucher to inspect or alter details. Press Alt + D inside the voucher to delete it.