Setting up Cost Centers and Cost Categories in Tally Prime

Tally Prime is a comprehensive accounting software that allows businesses to manage their financial operations efficiently. One of its powerful features is the ability to create and manage cost centers and cost categories. This guide will walk you through the step-by-step process with a practical example.

Step 1: Enable Cost Centers and Cost Categories

1. Open Tally Prime.
2. Go to Gateway of Tally.
3. Navigate to F11: Features.
4. Under the Accounting Features, set Maintain Cost Centers to Yes.
5. Set Use Cost Categories to Yes.
6. Press Ctrl+A to save the changes.

Step 2: Create Cost Categories

Cost categories are used to group cost centers for better organization. Let’s create a cost category for our example:

1. Go to Gateway of Tally.
2. Select Create under Cost Categories.
3. Enter the name of the category, e.g., Project Management.
4. Specify whether it is for revenue or non-revenue transactions.
5. Press Enter and then Ctrl+A to save.

Step 3: Create Cost Centers

Now, let’s create cost centers under the cost category created earlier.

1. Go to Gateway of Tally.
2. Select Create under Cost Centers.
3. Enter the name of the cost center, e.g., Project A.
4. Select the cost category, e.g., Project Management.
5. If applicable, assign a parent cost center. If not, leave it as Primary.
6. Press Enter and then Ctrl+A to save.

Step 4: Allocate Expenses to Cost Centers

Let’s allocate expenses to the cost center to understand its practical use:

1. Go to Gateway of Tally.
2. Select Accounting Vouchers.
3. Choose a voucher type, e.g., Payment.
4. Enter the details of the expense, such as ledger, amount, and narration.
5. Under the cost allocation section, select the cost category and cost center, e.g., Project Management -> Project A.
6. Press Enter and then Ctrl+A to save.

Step 5: View Cost Center Reports

To analyze the data, generate reports for the cost centers:

1. Go to Gateway of Tally.
2. Select Display More Reports.
3. Choose Cost Center under Statements of Accounts.
4. Select the desired cost center, e.g., Project A.
5. View the report showing all expenses allocated to that cost center.

Example

Suppose a construction company is managing two projects: Project A and Project B. The company creates a cost category named Project Management and cost centers for each project under this category. All expenses, such as material purchases and labor costs, are allocated to the respective cost centers. This allows the company to track and analyze expenses for each project individually.

Conclusion

By setting up cost centers and cost categories in Tally Prime, businesses can effectively monitor and manage expenses, ensuring better financial control. This feature is especially useful for organizations with multiple projects or departments.