The following are the SAP Controlling Basics for beginners.
Controlling Area: An organizational unit within a company, used to represent a closed system for cost accounting purposes. A controlling area may include single or multiple company codes that may use different currencies. These company codes must use the same operative chart of accounts.
Cost center std Hierarchy : Indicated hierarchy of cost center groups in which all cost centers in a controlling area are gathered together.
Cost element : A cost element classifies the organization’s valuated consumption of production factors within a controlling area. A cost element corresponds to a cost-relevant item in the chart of accounts.
Primary cost element: A cost element whose costs originate outside of CO and accrual costs that are used only for controlling purposes
Secondary cost element: A cost element that is used to allocate costs for internal activities. Secondary cost elements do not correspond to any G/L account in Financial Accounting. They are used only in Controlling and consequently cannot be defined in FI as an account.
Cost element category: The classification of cost elements
according to their usage or origin.
Examples of cost element categories are:
- Material cost elements
- Settlement cost elements for orders
- Cost elements for allocating internal activities
The reconciliation ledger has the following functions:
- Reconciles Controlling with Financial Accounting: The reconciliation ledger provides reports for monitoring the reconciliation of Controlling with Financial Accounting by account.
- It can identify and display value flows in Controlling across company code, functional area, or business area boundaries
- Provides an overview of all costs incurred : Reconciliation ledger reports provide an overview of the costs and are therefore a useful starting point for cost analysis. For example, an item in the profit and loss statement from the Financial Information System (FIS) can be examined in the reconciliation ledger reports with respect to the relevant costs. For more detailed analysis, reports from other components within Controlling can be accessed from the reconciliation ledger reports.
The definition can be based on:
- Functional requirements
- Allocation criteria
- Physical location
- Responsibility for costs
Example
- F – Production cost center
- H – Service cost center
A controlling area may include single or multiple company codes that may use different currencies. These company codes must use the same operative chart of accounts.
All internal allocations refer exclusively to objects in the same controlling area.
Statistical key figure: The statistical values describing:
- Cost centers
- Orders
- Business processes
- Profit centers
- Fixed value – Fixed values are carried forward from the current posting period to all subsequent periods.
- Total value -
Activity type: A unit in a controlling area that classifies the activities performed in a cost center.
Example
Activity types in production cost centers are machine hours or finished units.
Allocation cost element: A cost element used to illustrate
activity allocation in terms of values. The allocation cost element is
a secondary cost element , under which the activity type or business process
is allocated.
The allocation cost element is the central characteristic
used in all CO postings. It is therefore also an important criterion for
reporting – for example, many reports are structured according to the posted
cost elements.
Assessment cost element: A secondary cost element for costs that are assessed between Controlling objects.
Reposting: A posting aid in which primary costs are posted
to a receiver object under the original cost element (the cost element
of the sender object).
Repostings are used to rectify incorrect postings. The
following methods are available:
- Transaction-based reposting - Each posting is made in real time during the current period.
- Periodic reposting - Produces the same results as transaction-based reposting. The costs being transferred are collected on a clearing cost center and then transferred at the end of the period according to allocation bases defined by the user.
- The original cost element is retained in the receiver cost center.
- Information about the sender and the receiver is documented in the Controlling document.
The SAP System supports the following:
- Hierarchical method (where the user determines the assessment sequence)
- Iterative method (where the SAP System determines the sequence of assessment using iteration).
The costs from the cafeteria cost center could be assessed based on the statistical key figure “employee”, which was set up on the receiver cost center.
Receiver cost center I has 10 employees, receiver cost center II has 90. The costs of the cafeteria cost center would be transferred (assessed) to receiver cost center I (10%) and receiver cost center II (90%). The credit on the cafeteria cost center and the debit of the two receiver cost centers are posted using an assessment cost element. Depending on the system setting, the total costs or some of the costs for the cafeteria cost center would be:
Internal order: An instrument used to monitor costs and, in some instances, the revenues of an organization.
Internal orders can be used for the following purposes:
- Monitoring the costs of short-term jobs
- Monitoring the costs and revenues of a specific service
- Ongoing cost control
- Overhead orders – For short-term monitoring of the indirect costs arising from jobs. They can also be used for continuous monitoring of subareas of indirect costs. Overhead orders can collect plan and actual costs independently of organizational cost center structures and business processes, enabling continous cost control in the enterprise.
- Investment orders – Monitor investment costs that can be capitalized and settled to fixed assets.
- Accrual orders – Monitor period-based accrual between expenses posted in Financial Accounting and accrual costs in Controlling.
- Orders with revenues – Monitor the costs and revenues arising from activities for partners outside the organization, or from activities not belonging to the core business of the organization.
The order type contains information which is necessary for managing orders. Order types are client-specific. The same order type can be used in all controlling areas in one client.
Example
- Production orders
- Maintenance orders
- Capital investment orders
- Marketing orders
The expenses are listed in functional areas such as:
- Manufacturing
- Management
- Sales and distribution
- Research and development
