Cost center
In one sentenceAn organizational unit, such as a branch, department, warehouse or project, to which costs are collected to measure its performance and control its spending.
Simply put
Instead of recording all salaries and rents in one account, you add a cost center to each entry showing who the expense belongs to. That way you know how much each branch or department costs you separately.
The center's manager is accountable for its costs, and its actual costs are compared with its budget, revealing each center's variances.
Worked example
A pharmacy chain tracks the costs of its north branch for one month as a separate cost center.
Branch salaries40,000 SAR
Branch rent15,000 SAR
Electricity and water5,000 SAR
North branch cost center costs = 40,000 + 15,000 + 5,00060,000 SAR
Don't confuse it with
Profit centerA profit center is accountable for both its revenue and its costs, while a cost center is accountable for its costs only.
in FullScreen ERP
Cost centers in the general accounts show the profitability of each branch, project or department. General accounts