How to manage a project using cost center in Tally ERP 9

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Offshore projects are a common place in today’s SME business. It is a practice in such projects for the client to reimburse expenses and costs incurred by the service provider.

The service provider would want to bill the customer accordingly and know the actual profitability by assessing the exact cost of the project.

Scenario

In this case study we will look at a business owner having a project “Manipur” going on in Manipur with the need to manage costs of the project. The business owner sends his employee to Manipur and that employee manages the work being onsite. During his stay in Manipur the employee incurs both personal expenses and also costs related to the project. We will account all project costs and manage using cost centres.

Business Owner – Mr Pratap

His Employee – Mr Kumar

The employee is allocated some amount for this project/ the organization (NGO) receives grants to be used for this project.

Payment of amount to the employee

1.Mr pratap gives Rs. 10,000 to his employee Mr. Kumar and sends him to Manipur for this project. Simultaneously Mr Pratap will keep track of expenses so that later he can send a bill to the client and if need be can also get his reimbursements for the expenses for that project.

Make a payment of Rs. 10,000 to Mr. Kumar for Project “setting up a centre in Manipur”

 Payment

create a Project (Manipur Project) as a cost centre under the Primary cost category ( under Primary)

Create cost center

Recording of expenses incurred by Mr. Kumar both personal and for the project.

Mr. Kumar purchases raw material worth Rs. 2500 for the project.

Note: To take account of Purchases for a project using cost centers we need to make purchases in a journal voucher or purchase in the voucher mode. As of now, the purchase voucher does not take into account cost centres in the invoice mode.

Mng_Prjt_Cst_ctr_3___purchase

Mr. Kumar spends Rs. 1000 on Travelling expenses for the Manipur project.

Travelling expense for the project

The advantage of using a journal voucher for these entries is that along with maintaining travel expenses related to the Project in Manipur. We can also keep track of expenses by the employee ( using against Reference ). Note the current balance for Mr. Kumar shows as 9000( 10,000-1,000).

Similarly, the employee incurs an expense of 5000 on Hotel stay and 2000 on Food during his Manipur tour.

Hotel Expense manipur project

Please note that we have only taken into account the expenses for cost center consideration. In any voucher –only one of the ledgers should be tagged with cost centers, this shall enable us to get a clear report while making a cost category analysis. Therefore food expenses is booked separately as shown below.

Cst_ctr_6___food_exp

Note that current balance of Mr. Kumar is only Rs. 2,000 the 8,000 have been spent as;

5000-Hotel

2000-Food

1000-Travel

Report Analysis

Go to Display > Statement of Accounts > Cost centres > Cost center break up > Select project Manipur from th list of cost centres

Press enter and then go to detailed view, it clearly shows that under in-direct expenses you have the expenses incurred by the employee (you could also create a sub group employee wise)

Cost center breakup

Now let us say we make a bill of 25,000

Go to Display > Statement of Accounts > Cost centres > Cost center break up > select project Manipur

The report displays a break up and the closing balance at the grand total also gives us the actual profit after deducting the expenses.

Mng_Prjt_Cst_ctr_8___cst_rpt_with_bill_amt

In this case the profit is Rs.14,500

Now at the end of the project, go to

Display > statement of accounts > Outstandings > Receivables > All items

Mng_Prjt_Cst_ctr_9___cst_rpt_all_items

Mng_Prjt_Cst_ctr_10___kumar_ledger

This again shows that after the project Mr. Kumar has to return Rs. 2,000 for the project. Also we need to see what is the outstanding of the Manipur Party ( from whom we need to take the payment- tha party to whom the sales bills had been issued)

Mng_Prjt_Cst_ctr_11___manipur_pty

Similarly we can have multiple projects going on and we can also compare a report, let us say another Project was going on in Mumbai and another Employee named Mr Poddar was sent to Mumbai to oversee the project.

Now,  the expenses were made in the Mumbai project by Mr. Poddar and report of the cost center is shown below for the Mumbai project.

Mng_Prjt_Cst_ctr_12___mumbai

A comparison report of the two projects can be obtained, press ALT+C in above report screen and select Manipur project and then select the last group as Primary.

A report is obtained as shown below:-

Mng_Prjt_Cst_ctr_13___new_column

Also, if you want a complete report of all the cost centers you can press F12 and enable the Total Column and get a report and summary of all the cost centers being maintained.

How to manage a project using cost center in Tally ERP 9
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4 thoughts on “How to manage a project using cost center in Tally ERP 9

  1. i am working in service sector, I need to know how to prepare cost centes and cost categories in tally? its a business consultancy firm and its main work is facilitates people in start a business in dubai,company auditor told me that from next month I have to show profits , cost, revenue earned from each client in the business by use of cost centre and cost categories,,,, I need you to contact me via mail nanban5301@gmail.com. plz help me

    Reply
  2. hello sir we have a construction business i.e we take a contracts from government and i want to know how much cost or expenses are use to a particular projects. but the problem is we have a same work name but in same area as well as different area for Ex. Construction of Shade in Kurla but there are many sites in kurla. how to deal with it please help as soon as possible.

    Thanks & Regards
    Sanjay

    Reply
  3. Hello sir i am shashi i want to know how i do cost accounting in tally erp 9 in fmcg sector. for example travelling expenses occured in two ways
    (a) for factory purpose
    (b) for sales purpose
    how should i do journal entry in both conditions .How i identify the difference between them

    Thanks &Regards
    Shashi

    Reply
  4. Hi, I am from Master Serv India pvt. ltd.
    We are engaged in construction activities and Agency for some item for which we are the dealer in Kerala.
    We used to purchase material which is to be used either in construction or sales and keep the same in our store. if we want to use that material to our project by issue how can we make an entry in tally ERP. Please explain

    Thanks
    Sasidharan

    Reply

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