examples of Cost Centres are
Departments of an organisation - Finance, Manufacturing, Marketing, and so on.
Products of a company.
Individuals such as Salesman A,
Use of Cost Centres
You can classify Cost Centres, just as how you classify Group/Ledger accounts. You can have
Primary Cost Centres and several levels of Cost Centres under each Primary Cost Centre.
Consider the following example.
Primary Cost Centres -
Finance, Manufacturing, Marketing.
Under Marketing, classify the company's
sales executives as Cost Centres. This will help you
track a sales executive's performance, in terms of cost and revenue generated.
You will then have the following Cost Centre structure
Primary Cost Centre - Marketing
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 at the time of voucher entry. This prevents allocation
errors at the end of the period.
By allocating expenses and sales transactions to the salesmen, you
are setting up a valuable information system that tracks the performance of