Cost Centre

A cost center is a department or function within a business that incurs expenses, but does not directly generate revenue. The main purpose of a cost center is to track and allocate the expenses of a business to different departments or functions. By tracking costs in this way, businesses can better understand how much it costs to produce a product or provide a service, which can help them make more informed decisions about pricing, budgeting, and resource allocation.

Some common examples of cost centers include:

• IT departments: which incur expenses related to software, hardware, and maintenance.
• Human Resources departments: which incur expenses related to salaries, benefits, and training.
• Marketing departments: which incur expenses related to advertising, promotions, and market research.
• Accounting departments: which incur expenses related to bookkeeping, auditing, and tax preparation.

Each cost center typically has a budget allocated to it, which is determined by the business's overall budget and strategic objectives. The budget for each cost center may be broken down further into subcategories, such as salaries, equipment, and supplies. The expenses incurred by each cost center are tracked and recorded in the business's accounting system, which enables managers to monitor and control costs, and make informed decisions about resource allocation.