Cost Centre may be defined as “a Location or Person or Place or Machine or Thing for which cost can be ascertained and used for the purpose of Cost Control. “Hence, Cost Centre may be a Department, Division, Product or even a person to which cost can be ascertained. It is mainly for the purpose of monitoring and controlling the cost.
Otherwise, this can be described as parallel analysis that gives Branch / Division / Department wise Profit & Loss account.
To enable cost center, press F11, F1 keys one by one and Set ‘Yes’ to ‘Maintain Cost Centres’ field.
Enabling ‘Cost Centre’ feature
Enabling Feature in Masters
Entering Cost Centre details in vouchers
Display of Cost Centre Reports
Printing Cost Centre Reports
Cost Category – Enabling, Entry & Reports:
Cost category is probably misinterpreted as head of Cost Centres. Accountants are trying to use this like Groups. But the usage of Cost Category is for absorbing expenses to identical set of cost centres.
Let us assume that a company holds 3 Cars and 3 Drivers. All three Drivers will drive any Car and fill Fuel from an authorized Petrol station. The company wants to check the fuel economy of each Vehicle and to control any theft by Driver. In this case, if Drivers are meant as Cost Centres, Car details will not be available. If Cars are considered as Cost Centres, Driver details will be missing. To get both, Cost Category must be activated.
Chapter – 6 Cost Centre & Cost Category
Exercise:
Create a company by name ‘Cost-1’ with your Regn.no. For ex:’Cost-1’, Choose ‘Accounts with inventory’ and Enable Cost Centre alone. Imagine that the company is a dealer for rain coats and its head office is at Thanjavur and has a branch in Karur.
- 100 Rain Coats purchased on credit from M/s Duckbag for Ho Sales Credit 27500
- 10 Rain coats sold locally Cash 4000
- Lorry Charges given for rain coats Cash 1500
- 50 Rain coats sold by HO for DD DD 18750
- 50 Rain coats purchased on credit from
M/s Duckbag for karur branch Credit 13750
- Lorry charges given for rain coats Cash 1200
- 30 Rain coats sold at HO for DD DD 11250
- Stationery purchased at karur Cash 175
- 5 Rain Coats sold locally at karur Cash 2000
- 25 Rain Coats sold by karur for DD DD 9375
- Refreshment bill paid at Thanjavur Cash 342
- 10 Rain Coats sold locally at Thanjavur Cash 3800
- 7 Rain coats sold locally at karur Cash 2800
- 3 Rain coats sold locally at karur Cash 1200
- 10 Rain coats sold by karur for DD DD 3800
- Salary-Thanjavur Staff Cheque 6000
- Salary- Karur Staff Cash 3000
- Coffee, Tea expenses at Karur Cash 126
Prepare 1.Cost Category Summary, 2. Cost Centre break-up for Thanjavur, 3. Ledger breakup for Sales and 4. Compare P & L A/c with Cost Category Summary.