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docs/docs.user.setup.cost_centers.md
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Your Chart of Accounts is mainly for reporting your information for governmental purposes and less for how your business actually performs. Though you can tweak it a bit to resemble your business. Your Chart of Accounts is mainly designed to provide reports to the government and tax authorities.
 
Most businesses have multiple activities like different product lines, market segments, areas of business that share some common overheads but should ideally have their own structure to report whether they are profitable or not. For this purpose, there is an alternate structure, called the Chart of Cost Centers. Most businesses have multiple activities like different product lines, market segments, areas of business, etc that share some common overheads.They should ideally have their own structure to report, whether they are profitable or not. For this purpose, there is an alternate structure, called the Chart of Cost Centers.
You can create a tree of Cost Centers to represent your business better. Each Income / Expense entry is also tagged against a Cost Center. You can create a tree of Cost Centers to represent your business better. Each Income / Expense entry is also tagged against a Cost Center.
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ERPNext will help you set and manage budgets on your Cost Centers. This is useful when, for example, you are doing online sales. You have a budget for search ads, and you want ERPNext to stop or warn you from over spending, based on that budget. ERPNext will help you set and manage budgets on your Cost Centers. This is useful when, for example, you are doing online sales. You have a budget for search ads, and you want ERPNext to stop or warn you from over spending, based on that budget.
Budgets are also great for planning purposes. When you are making your plans for the next financial year, you would typically target a revenue based on which you would set your expenses. Setting a budget will ensure that your expenses do not get out of hand, at any point,as per your plans. Budgets are also great for planning purposes. When you are making plans for the next financial year, you would typically target a revenue based on which you would set your expenses. Setting a budget will ensure that your expenses do not get out of hand, at any point, as per your plans.
You can define it in the Cost Center. If you have seasonal sales you can also define a budget distribution that the budget will follow. You can define it in the Cost Center. If you have seasonal sales you can also define a budget distribution that the budget will follow.