Allocations (cost centres) give you more insight into costs and revenues by allocating them to products, departments, regions/areas, etc. You allocate costs and revenues by entering them while posting entries to a cost centre. Quantities can also be allocated.
Cost centres are an extension of the ledger: the ledger provides global information about the state of affairs within the organisation while cost centres refine this information.
You have a wholesale business dealing in computers and software and you enter your sales on the 'Hardware Turnover', 'Software Turnover' and 'Accessories Turnover' accounts. This gives you good insight into the turnover from your portfolio, but you will also want to know how that turnover breaks down by region. For this, you use the 'North Region', 'South Region', 'West Region' and 'East Region' cost centres.
While entering sales, fill in the correct cost centre for each turnover account. If applicable, you can also distribute a line amount over multiple cost centres.
You can retrieve account balances, etc., for each cost centre. With this, you can view the turnover distribution of the 'North Region' across the turnover accounts for each period.
You can budget ledger accounts and cost centres. In the above example, you would budget the ledger accounts and the cost centres. This way, the sales target is known for each ledger account (product group) and for each ledger account/cost centre (turnover from a product group in a particular region).