First: What is a Cost Center and Why Do We Use It?
A Cost Center is simply a tool that helps you classify accounting transactions and link them to a specific entity within your company, whether it’s a project you’re working on, a specific location (branch), or a custom classification you define yourself called an “Additional Field”.
The benefit of this is that you won’t just know that your company spent a certain amount, but you’ll know exactly which project or location that amount went to, giving you a clearer view and more precise control over your expenses and revenues.
Second: The Difference Between Project, Location, and Additional Field
These three are the types of cost centers available to you, and each one is independent from the others, and you can use them together in the same entry.
A Project is any project you’ve previously created in the Tasks and Projects list within the system. When you link an entry to it, all project data will be automatically updated, such as total expenses, total income, income statement, and its balance sheet.
A Location is any geographic location or specific branch within your company that you want to attribute this entry to.
An Additional Field is a custom classification that you define in advance through the additional fields settings for manual entries, and it gives you greater flexibility in classification according to your company’s needs.
The important point here is that the project and additional field are completely independent of each other, meaning you can link a single entry to a specific project and at the same time link it to a different additional field, and this doesn’t create any conflict.
Third: How Do I Add a Cost Center to a Manual Entry Step by Step?
First Step, Access the Entry Creation Screen: Go from the main menu to the Accounting section, then select Manual Journal Entries, then click Create Manual Entry. You’ll find yourself on the new entry screen which contains several lines, each line represents one side of the entry.
Second Step, Identify the Required Icon: When you look next to each line of the entry, you’ll notice an icon that looks like a chart. This icon is your gateway to linking that line to a cost center. Each line has its own independent icon, which means you can link each line to a different cost center if you wish.
Third Step, Select the Cost Center: After clicking the icon, options will appear for you to select the additional field, project, or location associated with the account in that line. Choose what suits you.
Fourth Step, Confirm Successful Completion: Once you select a cost center, you’ll notice the icon color has changed to blue. This color change is a clear visual indicator telling you that this line has been successfully linked to a cost center.
Fourth: The Two Linking Methods and the Difference Between Them?
There are two ways to link an entry to cost centers, and knowing the difference between them is very important so you can choose the most appropriate for your situation.
First Method, Line-Level Linking: This is what we explained in the previous steps through the chart icon next to each line. When using this method, the cost center you choose affects only this line and doesn’t extend to the other lines of the entry. For example, if your entry contains four lines and you link the second line to a specific project, the first, third, and fourth lines will remain unlinked to any project unless you link them separately.
Second Method, Entry-Level Linking: This is done through the Additional Fields tab within the entry. When using this method, the cost center you select will be applied to all lines of the entry that don’t have a cost center specified individually. In other words, if you have a line that’s already linked to a specific project through the icon, that line won’t be affected by your selection at the entry level and will remain linked to what you specified. But lines that you haven’t specified anything for will take the cost center you selected at the entry level.
Fifth: How Do I Edit a Cost Center After Saving the Entry?
You can cancel or edit the cost center assigned to the manual journal entry at any time after saving it as follows:
To Edit at the Line Level: Go to the manual entries list, and next to the entry you want to edit, click the “View” option. After entering the entry, you’ll find the circular icon next to each line. Click on it and make the change you want. Here it’s important to note:
As for the project added at the line level, you can edit it and change it to another project, but you can’t completely delete it from the line. If you want to remove the project link entirely from a specific line, this is not available at the line level.
As for the additional field at the line level, it’s more flexible, as you can edit or delete it as needed.
To Edit at the Entry Level: From within the entry view, click on Additional Information. From there you can edit the project linked to the entire entry, and you can also completely delete it by clicking the icon that appears next to the project name. You can also edit the additional field at the entry level and then save the changes.
Sixth: Where Do You Find the Entries Linked to a Specific Project?
This is a point that often causes confusion, so pay close attention.
When you open the manual accounting entries list, you won’t find a separate column showing the project linked to each entry. In other words, the list doesn’t display this information directly.
To access the entries linked to a specific project, follow this path: Go to the Tasks and Projects list, search for the project you want, then click View next to it. After entering the project page, you’ll find several tabs, click on the Business Documents tab, and there you’ll find all manual entries linked to this project.
Seventh: Automatic Entries, How Are They Linked to Cost Centers?
Automatic entries are those created automatically by the system as a result of other operations, such as invoice entries that are created when registering a sales or purchase invoice.
These entries are not linked to a cost center directly through the entry itself. Instead, the linking is done at the level of the original document. This means if you want to link a sales invoice entry to a specific project, you need to link the sales invoice itself to that project, and the entry will follow automatically.
Eighth: How Do You Use Reports with Cost Centers?
After linking entries to cost centers, you can use them in several important reports:
Income Statement: You can analyze expenses and revenues using advanced analysis, and filter them by the additional field, project, or location you want to see. This gives you a clear picture of the profitability of each project or location individually.
Balance Sheet: You can analyze assets, liabilities, and equity based on the specified additional field, project, or location.
Account Statement: You can analyze account details and filter them based on their association with the additional field, project, or location.
Trial Balance: You can analyze accounts by cost center, but pay attention to one very important point: when filtering by a specific project, the debit and credit balances may not match. This is normal and not an error in the system. The reason is that some entry operations relate to the project and some don’t, so when filtering, only the side related to the project will appear without the other side.
Cash Flow Statement: You can analyze cash flows using cost centers, with the same previous warning that the final balance may not match when filtering by a specific project or additional field, and this is also normal.
Important Notes:
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If the additional field, project, or location is selected at the line level, it doesn’t affect the other lines in the entry, only the line that was specified.
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If the additional field, project, or location is selected at the entry level, this selection will affect all lines of the entry that don’t have an additional field specified.
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If you edit the cost center in the manual entry or change the associated project, the modification is made to the same entry itself and no new entry is created.
Keywords for Inquiry:
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How do I add a cost center in the manual entry?
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Can I link a project to the manual entry?
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Where do I find the cost center icon in the entry?
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If I edit the entry, does the linked project change?
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If I select a project for one line in the entry, what happens to the rest?
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The entry didn’t affect the account statement, why?
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Where do I find the list of projects linked to manual entries?
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How do I link the manual entry to a project?
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If I have multiple items, can I select a cost center for each item?
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What does this blue icon mean?
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I loaded a manual journal entry to a cost center, how do I cancel loading it to the cost center?
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If I select a project at the entry level, will it affect all items?
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What’s the difference between linking the project in an item and linking it to the entire entry?
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The project doesn’t appear in the income statement, is something wrong?
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How do I link journal entries to a cost center?
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There is no linking of journal entries to a cost center
